Day: October 31, 2018

On the background of Zhang Yikun

Michael Reddell China, NZ politics, Uncategorized

Last week the original Chinese version of the article below appeared in the Chinese-language magazine Beijing Spring.  It is about the background of Zhang Yikun the (non-English-speaking) Auckland businessmen who suddenly emerged into the public spotlight recently when Jami-Lee Ross released a tape of a conversation with National Party leader Simon Bridges.  Zhang Yikun had, it appeared, arranged/facilitated a set of donations to the National Party, totalling $100000, and had discussed with Bridges and Ross the possibility of another ethnic Chinese MP, apparently naming as a possible candidate one of his own employees/associates.  Once the spotlight fell on Zhang Yikun it turned out that he had had extensive associations with senior figures in both main New Zealand political parties.  And both he and his associate appear to have extensive involvement with the PRC’s United Front programme.

The article was written by Chen Weijian. The full version of his article, in Chinese, is here.  When it appeared Anne-Marie Brady described it as a “must read”.  The English translation below was done by Daisy Lee, an Auckland-based China researcher (with a few suggestions from me to improve the flow for an English-speaking readership).     The translated version omits some detail that is in the original article, and reorders some material (but from the fuller version I’ve seen, this version omits nothing that is central to his case).   I offered to make the translation available here.

I asked for some biographical material and this is what I received

Chen Weijian is Auckland-based prominent Chinese political commentator.

He is the chief editor of online pro-democracy magazine Beijing Spring. The magazine was established in the United States in 1982 and the current president is Wang Dan, one of the most visible student leaders in the Tiananmen Square protests of 1989.

Immigrating to New Zealand in 1991, Chen Weijian and his brother Chen Weiming  published the weekly Chinese newspaper “New Times” from 1996 to 2012.  Chen Weiming is a famous artist and sculptor known for his works of the 3-meter bronze statue of Edmund Hillary and 6.4 meters tall Goddess of Democracy.

In late 1970s when Chen Weijian lived in Hangzhou city of China,  he founded a private magazine Silent Bell which was banned by the Chinese government as illegal publication.

On my reading, the author’s key point is that the evidence of Zhang Yikun’s close association with the Chinese Communist Party, and the high regard in which he is held by the Party, is crystal clear.  Among that evidence is his very rapid ascent in various significant organisations that are part of the party-state’s overall United Front programme.

Chen Weijian’s article reinforces my view that New Zealand political parties and political leaders should steer well clear of those individuals like Zhang Yikun who are so closely associated with the Chinese Communist Party; a Party that is the source of so much evil at home in China, and which seeks to control the Chinese diaspora (and turn it towards Beijing, challenging the ability of migrants to become loyal to the country they’ve settled in) and to neutralise political opinion in countries around the world, including New Zealand.   There is no sign that such people –  and Zhang Yikun appears to be one of the most important of them in New Zealand –  have the interests of New Zealand and New Zealanders at heart in their interactions with, and donations to, our political parties.  And yet our politicians court him, and honour him.

If it is of use to anyone, I have put the text below in a separate document available here

State patriotism by Chen Weijian Oct 2018

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State patriotism 

By Chen Weijian

4 June 1989 was a bloody day that cannot be erased in Chinese history. The Chinese People’s Liberation Army (PLA) opened fire on unarmed students whose blood stained Tiananmen Square. 29 years later, on the same day, a New Zealand overseas Chinese leader, former PLA member Zhang Yikun, received the New Zealand Order of Merit.

On September 12th, Zhang Yikun was formally honoured at Government House. The news was even covered by China’s CCTV: a star in the overseas Chinese community was on the rise. But while awaiting his spectacular future,  Zhang Yikun this month burst into public view in New Zealand following his undeclared $100,000 donation to National Party.

The question of what political donations are legal and illegal is a matter for the relevant authorities. What I want to talk about is Zhang Yikun’s political background in China and the role he has been effectively playing in New Zealand as a “patriotic overseas Chinese” leader.

In his motherland, China, Zhang Yikun has held quite a few resounding political titles which distinguish him from all the other community leaders of the CCP’s United Front organisations in New Zealand.

In 2012, Zhang was elected as the vice chairman of Hainan Provincial Federation of Industry and Commerce.

The website’s home page says the Federation is a group of people’s organisations and chambers of commerce under the leadership of the CCP.  It is a bridge between the Party and the government to connect with the private sector.

That all members of the Federation must serve the party’s interest was explicitly addressed by Sun Chunlan, the minister of the United Front Department, when she spoke at a national training conference in July 2017 to the chairmen and party secretaries from all of the provincial Federations of Industry and Commerce.

She said then that “where the work of the Party and state is progressed, the Federation of Industry and Commerce should organize the  majority of people in the non-public economic organisations to follow”.

Zhang Yikun’s superior, the chairman of this Federation, is a famous businessman, Chen Feng, the co-founder and chairman of the Chinese conglomerate HNA Group.

HNA is known in New Zealand after the Overseas Investment Office declined its $660 million bid to acquire ANZ Bank’s UDC Finance last December.

Ranked No. 205 on Forbes 2017 China Rich List at $1.7 billion, Chen Feng is also a former PLA member.

It is unclear if Zhang Yikun’s wealth in China can be compared with Chen Feng’s holdings in HNA,  because on several Chinese websites Zhang is only declared as the chairman of Hainan Lian Sheng Fa Industrial Co., Ltd.  and there is no information about the company’s financial position.

However, one thing is certain: Zhang Yikun is not a normal business person, otherwise he would not have been able to become the vice chairman of the Hainan Provincial Federation of Industry and Commerce.

In Hainan province, Zhang Yikun plays an important role in another United Front Organisation, the Hainan Provincial CPPCC (Chinese People’s Political Consultative Conference ) where he was promoted to the Standing Committee in January 2013.

A Brief History of the CPPCC in its website explains that the CPPCC, established in 1949, is a creation of the CCP which combines the Marxist-Leninist theories on united front, political parties and democracy, with China’s concrete practice.  In its new century and new stage of development, China’s united front has further expanded and become the broadest possible patriotic united front composed of all socialist workers, builders of the socialist cause, and patriots who support socialism and the reunification of the motherland.

Five months after he was elected in the Standing Committee of the CPPCC, Zhang Yikun was nominated by the United Front Work Department of the Hainan Provincial Committee as a “ Builder of the Socialism with Chinese Characteristics.”

At the top of a list of criteria, any potential nominee is required to have good political quality, resolutely support the leadership of the CCP and the socialist system, the party’s line, and its principles and policies.

Chen 2Southland District Mayor Gary Tong says Zhang Yikun, posing here with John Key, is well known in central government.

While Zhang Yikun has been diligently fulfilling his political responsibility in China, he has also been highly committed to the United Front Work in New Zealand.

Although he has been in New Zealand for nearly 20 years and is still unable to speak English, it has not affected him networking with politicians.  Gary Tong, the mayor of Southland, who is currently travelling with Zhang in China, said that Zhang is well known in central government and has close links to high level ministers and MPs. They include National Party leader Simon Bridges, former PM John Key, party president Peter Goodfellow, Deputy Leader Paula Bennett, Auckland Mayor and former Labour leader Phil Goff , current Justice Minister and former Labour Party leader Andrew Little and other senior politicians.

Chen 3Auckland Mayor Phil Goff at Zhang Yikun’s house wearing a gifted Chinese costume.

Among them, Auckland Mayor Phil Goff, who was in Hong Kong on 4 June 1989, and saw the massacre on live broadcast TV. The experience had moved him and he has showed sympathy for activists in the past.  For example, when Wei Jingsheng, a famous Chinese democracy activist visited New Zealand, Goff invited him to lunch at Parliament. Times have changed, and though Goff is still particularly fond of China, his favour now seems to rest with interests associated with the CCP.

In New Zealand, Zhang appears to have been almost fated to succeed. He is admired by many immigrants who have been working hard for small achievement. Zhang talks of his own success quite modestly, as if “ I was not intending to pursue wealth, but prosperity just landed on me without my intention”.

Zhang Yikun was born in a village called Nigou in Puning County of Guangdong Province.   In 1990, at the age of 18, he joined the People’s Liberation Army in China. Joining the army was an opportunity for a rural youth to get out of the countryside. In his brief time in the army, Yikun was promoted to the headquarters.   In 1992, he was discharged, and started to work at the government of the Hainan Provincial Special Administrative Region. The fact that he was able to transfer positions implies that he was already well-regarded, since only those who were could get such transfers.

In 1996, Zhang Yikun was sent to the (prestigious) Chinese Academy of Social Sciences for postgraduate study. This in-service postgraduate program is specially designed by the CCP for the training of its officials. Having joined the army at age of 18, his education was at most an intermediate level. What led to him, an official with only an intermediate school education, being sent to an institution for higher education? We can only speculate.

Soon after his arrival to New Zealand in 2000, he ran his own restaurant called “China Yum Cha Restaurant”,  located at a premium location near Princes Wharf in Auckland. Unlike most Chinese immigrants who start washing dishes and cutting vegetables, Zhang directly became the boss of a large-scale restaurant (and subsequently opened another two restaurants). He had never run his own business in China nor apparently had any opportunity to make extra money. His monthly wage was just 800RMB in 1996. A large investment was required to finance this restaurant, so we can wonder where did the money came from?

Since then his business has becoming extremely successful. He has successively founded New Zealand Huanglian Group Ltd, HLG property Management Ltd, New Zealand Huanglian Natural Food Ltd and KCC Construction Ltd. The penthouse of 175 Queen St Auckland, the most expensive commercial building in New Zealand, has become the heart of his business empire. His business has developed to encompass multiple fields and multiple countries.  Activities include property development and management, export and import, commercial investment.  Several overseas offices have been set up in Hainan province, Guangdong province, Hong Kong and Thailand.

After establishing his business empire, Zhang Yikun began to build his career as an overseas Chinese community leader. Unlike Steven Wai Cheung Wong, the former head of the United Chinese Association in New Zealand,  who had to cultivate his relationship with the Chinese consulate for some years for his dreamed position, Zhang Yikun’s political promotion has been as astoundingly rapid as his commercial success.

In 2015, he formed the New Zealand Chaoshan General Association (CGSA),  for people from Chaozhou and Shantou district of Guangdong province, and has taken the role as the chair of the International Chaozhou Federation after two years.

Undoubtedly, Zhang Yikun is treasured by the senior Chinese politicians or he wouldn’t have been given this significant role to unite those wealthy ethnic Chinese who are valuable to the CCP in their attempts to expand China’s global influence.

As just one example of his connections, on 3 September 2015, Zhang Yikun was invited to Zhu Ri He military base in Inner Mongolia to watch the military parade. He stood on the viewing platform watching the armed forces marching, various new types of military vehicles and missiles in the parade, and the aerial display. He emotionally said, “as a military officer, seeing the country is strong, (my) feeling of pride is rising.”

In New Zealand, he has been frequently visited by high level Chinese delegations. On 8 June 2018, his former comrade, Luo Baoming, the former party secretary of Hainan province, now the vice chairman of OCAC (Overseas Chinese Affairs Office) was warmly hosted by Zhang Yikun and his CGSA in Auckland.

At the reception dinner party, the two Chinese MPs who have made such a contribution to the New Zealand-China relationship, Jian Yang and Raymond Huo, witnessed how this senior OCAC official praised Zhang Yikun.

“The fulfilment of China’s dream needs the overseas Chinese community leaders like president Zhang Yikun who has the strength and passion for the state patriotism”.

State Patriotism! Here we have Jian Yang, former officer lecturer of a PLA spying school, and his fellow PLA veteran, Zhang Yikun, both members of “New Zealand Veteran Association” (Zhang Yikun is the president of the association), standing together to welcome a high ranking Chinese communist official, is it a coincidence?

Chen 4Jian Jian Yang (far right) and Zhang Yikun (second from right ), the two former PLA members greet Luo Baoming, the vice chair of OCAC

If the above is not enough to set the scene, here is another photo. This one was taken on 30 August this year in Beijing. Zhang Yikun is staring at the display wall of propaganda and listening. The display wall is themed in communism red, titled “Always Go With the Party” and next to it is the symbol of communism, the hammer and sickle.

Chen 1 Zhang reading the “Always Go With The Party” display banner in Beijing on 30 Aug 2018

The New Zealand government granted him a high honour on 4 June, the day the whole world commemorates the young students whose lives were taken by the evil party. Zhang Yikun, the former PLA member, carried his honour back to Beijing to express his love to the party.

Is his beloved country New Zealand or China?  There is nothing wrong if he says he loves China.  But in reality, he loves the Communist Party and is following the steps of the party forever. Of course, we can’t simply conclude just from a photo that he wants to follow the party all the way. For that, we should see what he has done in the past and what he is doing now.

The revelation of Zhang’s donation has brought back to fore stories that had been dormant for a while. The National MP Jian Yang, exposed last year for his hidden past as a PLA intelligence officer and teacher in PLA spy school, and later sitting in the Foreign Affairs committee of Parliament.  And now, another (former) PLA member, Zhang Yikun has emerged on the stage.

New Zealand is the land of the long white cloud, often described as the last pure – uncorrupt – land in the world. Unfortunately, it has been polluted by CCP’s Human Common Destiny. The clean-up of the pollution may have begun, but completing it will take time.

Too few mortgagee sales?

Michael Reddell Housing, Uncategorized

This chart appeared in an article in yesterday’s Herald, heralding (so to speak) mortgagee sales of houses hitting the lowest level for more than a decade.

mortgagee sales

The chart isn’t clearly labelled, but it appears to be quarterly data.  Elsewhere in the article, it is noted that the peak in annual mortgage sales was 2616 in 2009 –  the trough of the last recession, when the unemployment rate had risen quite sharply and nominal houses had fallen quite a bit (down 9 per cent nationwide in the year to March 2009).

In many respects, one wouldn’t wish a mortgagee sale on anyone.  But one also wouldn’t wish any individual to find themselves overstretched and having to sell the house themselves (and thus not a mortgagee sale).

But, equally, risk is part of a market economy.  And the housing stock financed by mortgage isn’t just the (sympathetic) case of the first home buyer owner-occupier, but also investment properties, beach houses, and fancy houses (the Herald story includes a piece about a pending mortgagee sale of a $3 million house in St Heliers).   In a country of almost five million people (and more than 1.8 million dwellings) one might reasonably wonder whether a mere 250 to 300 mortgagee sales in an entire year is lower than might be, in some sense, entirely desirable.   After all, the nature of taking risk –  and both purchaser and financier do –  is that sometimes things will go wrong.   The optimal number of mortgagee sales is very unlikely to be anywhere near zero.

The key combination of factors that tends to drive the number of mortgagee sales sharply upwards is higher unemployment and falling nominal house prices occurring together.  If unemployment rises but house prices stay high then even if the borrower runs into servicing difficulties they can usually sell the house themselves, repay the mortgage, and move on, without the additional and humiliation of being sold up by the bank.   If nominal house prices fall but unemployment is still low, borrowers will typically still be able to service the debt, and banks are reluctant to sell up people with negative equity who are still servicing the debt, even though they are legally entitled to do so.

We had that combination in 2009 (although in neither case to extremes) and you can see the consequence in mortgagee sales in the chart.

What is often lost sight of is that in a properly functioning housing and urban land market, mark to market losses on houses shouldn’t be uncommon, even in nominal terms (with, say, a 2 per cent national inflation target).   In such markets, land use can readily be changed in favour of housing development, and new houses/apartments readily consented and built.  In such markets there is no reason to expect a trend increase in real house prices, even if the population is growing rapidly.  Across a full country, some areas will do well and some not.  So some localities will more often see, perhaps modest, trend falls even in nominal house prices.  And, of course, without ongoing maintenance individual properties would depreciate in most localities.

For those who doubt that such things are possible, I could bore you with charts from US cities where the markets function well, but instead I will use it as an excuse to reproduce what was for a long time one of my very favourite charts (written up here), showing prices for a street of houses in central Amsterdam from 1628.

herengracht11

There are ups and downs, but over several hundred years no strong trend.

And, of course, that is now what marks out housing markets in New Zealand (and Australia, and various other places, including parts of the US, where land use restrictions have become binding).   In recent decades there has been a strong upward (regulation-facilitated or induced trend) in real (and even more strongly in nominal terms) house prices.  As I noted yesterday, REINZ numbers show that over the last five years prices in Auckland and out of Auckland have averaged 8-9 per cent increases every year.  And that was on top of substantial increases in the 1990s and the 2000s.  It isn’t that easy (although not impossible) to get yourself into a position where the bank sells you up when house prices are rising that strongly.  But in a well-functioning market, we wouldn’t see such pervasive trend increases.

It is interesting that the number of mortgagee sales is now lower than it was in the mid 2000s (even though the housing stock is bigger now than it was then).      The unemployment rate has come down quite a long way, but is still about a full percentage point higher than it was in 2006/07 (and underemployment rates linger high).  For the sort of people –  a diminishing number –  who can afford a house anyway now, unemployment probably isn’t a big consideration now.  But, again, in a well-functioning housing market –  in which the Prime Minister wasn’t doing photo-ops with professional couples who’d won the lottery to buy a subsidised four bedroom house, but appearing with a working class couple of similar age able to buy their first house in one of our larger cities –  it might well matter more. Downturns hit harder people in less skilled jobs, and with more marginal attachments to the labour market.  In a better functioning system, more of those sorts of people would be buying houses, and some would end up unlucky and having to sell up later.   That is the “price” we pay for better access to the home ownership market.

The other relevant consideration is access to finance.   If a bank won’t lend more than, say, 40 per cent of the value of the property, it would be extremely difficult to ever see a mortgagee sale (only, say, idiosnycratic shocks such as the house burning down when the borrower had forgotten to pay the insurance bill or some such).     At the other extreme, of course, if banksare  lending 115 per cent of the value of the property –  in some over-exuberant mood in which everyone believes property values only ever go up, and where new buyers want to have extra cash for, say, fancy furniture, then it doesn’t take very much to go wrong for there to be lots of cases of negative equity, and potentially lots of mortgagee sales.  Mostly –  and to the credit of the banks –  we’ve avoided those sorts of excesses.

But for five years now we’ve had the unprecedented situation of the Reserve Bank limiting how much banks can lend to individual purchasers of residential properties (LVR limits).   We went through successive waves of these controls, and although they were eased somewhat last year binding restrictions are still in place.   The economic case for these controls was never robustly made (the Bank could never quite get round the fact that its own stress tests kept showing that banks were in fine health, or that mortgage lenders –  public and private –  had for decades been lending 90 per cent LVR loans in New Zealand and been able to managed the associated risks).

The Reserve Bank has been keen to boast about how effective these controls were in limiting the amount of high LVR lending banks were taking on.  They always presented this as “a good thing” even though they could never demonstrate (a) that banks were safer as a result (all else equal, banks need less capital when they have fewer risky loans),  or (b) that their judgement on prudent lending standards was better grounded than that of willing borrowers and willing lenders, with their own money at stake, or, incidentally (c) what other risks banks might have chosen to take on to keep up profits if prevented by regulation from lending to housing borrowers.

There wasn’t much doubt, though, that LVR controls applied tightly enough –  and the RB controls became increasingly tight – could restrict the amount of high LVR housing lending.  And high LVR loans will be disproportionately represented among those where a mortgagee sale eventually occurs.  So, even in a period of moderate unemployment, it is quite likely that LVR restrictions have reduced the number of mortgagee sales.

But it simply doesn’t follow that that is a good thing.  The other side of the same equation is that some people who would otherwise have been able to purchase a property using credit, whether owner-occupiers or investors, won’t have been able to do so.   Perhaps those people will have got into the market a few years later, but in the interim they will have missed out on the opportunities of home ownership –  and in most localities, being forced to wait means the entry price will be higher than it would have been if Reserve Bank controls had not intervened.   Those are real missed opportunities, while regulations skewed the playing field (cheaper entry levels) for cashed-up buyers.

In a well-functioning market, house prices rise and fall (although typically not that dramatically) and it is unlikely anyone will be much good at forecasting the movements that do happen.  With the best will in the world, and the best countercyclical monetary policy, economies will fluctuate, and some people who’ve taken on debt will find themselves unable to service the loan.  Painful as that no doubt it, it is only one of the many potential vicissitudes of life –  probably not the end of the world if you are in your 20s and have decades to get back in the market.  The alternative to expecting that a reasonable number of people will eventually have to sell up, in a world of uncertainty and unforecastability, is to have credit policies so tight that they also exclude substantial cohorts for much longer than necessary from being able to enter the housing market at all, whether as owner-occupiers or investors.

I don’t wish a mortgagee sale on anyone, any more than I’d wish a business failure or a redundancy on anyone. Even the transactions costs associated with any of these of events are often non-trivial.   But without them –  while still in a world where the future can’t be foreseen – we’d be living in an economy so cossetted that many opportunities –  for individuals and for the economy as a whole –  would be missed.  In the housing market, between regulatory restrictions on access to housing credit and other regulatory restrictions which impart a strong upward bias to real house prices, we are probably in that sort of situation now.  Too few people can get into the market at all, and too little risk may well mean we are in a position where a higher level of mortgagee sales might be desirable for the efficiency of the economy, the financial system, and the housing market itself.