Tuesday, November 29, 2022

Hong Kong Could Turn Covid Zero Into Money

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Hong Kong is stuck. Without Beijing’s permission, the city can’t call off its draconian anti-pandemic campaign even though it’s a drag on the economy. The world outside of China has downgraded the disease to a more infectious flu. But even if Hong Kong must stick with Covid Zero to keep its policies aligned with the mainland’s, surely a tech-savvy financial center could do a better job of it, getting a head start on a new digital currency in the process?

To that end, I propose turning the ubiquitous rapid antigen test, or RAT, into money. Proof of health, as measured by a single red line on a small, thin, plastic stick, is crying for elevation to the status of cash. Yes, this is a joke. But more than that, it’s a desperate plea to authorities to return Hong Kong to normal by scrapping polymerase chain reaction, or PCR, tests at government facilities, and by doing away with tracking bracelets, masks, surveillance orders and other irritants. It could perhaps even act as a laboratory of sorts for mainland China, as President Xi Jinping seeks to pivot away from costly lockdowns and global isolation.

Here’s the crux of my plan: A daily RAT result will replace the vaccine pass, currently the most crucial digital document in the Chinese special administrative region. The pass displays a blue QR code on smartphones of vaccinated residents above five years of age and visitors. Trouble is, the pass doesn’t work everywhere or for everyone. It isn’t enough for bars, which get raided for not asking patrons to show RAT results that aren’t more than a day old. Schools want students and staff tested every morning.

The pass also militates against openness, the bedrock of the city’s success. It’s painful for visitors and local travelers. Upon arrival in Hong Hong, the QR code automatically turns amber. It reverts to blue only after three days, restricting movement. Besides, people coming in from overseas have to self-administer a RAT everyday for a week and go to a community center for three more PCR tests in addition to the one they undergo after landing at the airport. Miss one of those? Pay a HK$10,000 penalty. Fail to comply with a compulsory testing notice slapped on your building door? Get ready to be fined again. 

The coercion embedded in testing makes people hate it. Which is why it’s a perfect candidate to act as cash. More on that  later. For now, suppose all 7.3 million residents self-administer a mandatory RAT each morning. The outcome posted to a central repository should be verifiable so that John doesn’t upload Jane’s test or pass off his negative result from the previous day. This is analogous to money: Nobody gets to spend someone else’s purchasing power or double-spend their own. Based on this, the government remits, say, 40 Hong Kong dollars ($8) digitally to each person. (1)When people get on a bus, go to the school cafeteria, or drop in at Starbucks, they could choose to pay with their e-HKD instead of Hong Kong dollars.

Hong Kong is separately contemplating a full-fledged central bank digital currency. By the time the monetary authority introduces it, users would be accustomed to a prototype version, which will expire at midnight for the next 24-hour cycle to begin. The system would sweep the balances in digital wallets into exchange traded fund accounts of all residents. However, during the day, people would be able to swap their e-HKD for cash, transfer them to a bank account, or send them to another person. 

Currently, venues where people drop their masks to eat, drink or get a facial read vaccine passes via a mobile app. They would continue to do so but now check for whether their mask-less customers were issued fresh e-HKD that day. After verification, the merchant’s system would offer to accept e-HKD before proceeding to take cash or card payment. Authorities who never really know what percentage of the population is infected — people have no incentive to report positive results — will have better data. 

You might ask why I’m advising Hong Kong’s freedom-loving society to institutionalize 24×7 state surveillance and deep intrusion into people’s daily lives. A simple answer is that the DNA of laissez faire may now be forever lost. All that an individual can expect from Covid Zero is that one day the population will be allowed to drop face coverings. That isn’t even a goalpost currently.

A second objection may be technical: The government has committed more than HK$100 billion on consumption vouchers to help residents cope with the pandemic (HK$36 billion last fiscal year, and  HK$66 billion this year). So what’s the big deal? Actually, e-HKD will offer three benefits over use-or-lose vouchers: One, it can be freely exchanged person-to-person. Two, it can be saved in a bank account or ETF. Finally, it will repurpose the coercive aspect of Covid Zero by turning it into a bargain.

According to the Chartalist theory of money, successful currencies arose in history when people stopped plundering one another’s cattle and crops and instead paid taxes to a central authority that had a monopoly on violence and could enforce rules. The authority chose if it wanted corn, gold or paper, and that made people work to obtain the commodity. Proof of being virus-free is also a tax. If, as a reward for paying it, the state permits me to meet other people mask-free, it’s giving me what must be the most precious exchange in the city today: to smile, and see others smile back. 

More from Bloomberg Opinion:

• Is the Great China Covid Reopening a Myth or a Must?: Shuli Ren

• My Isolation Feeds Hong Kong’s Viral Economy: Andy Mukherjee

• Masks Down, Singapore Smiles on High-Earners Again: Daniel Moss

(1) Assuming the test kit is made available for free.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.

More stories like this are available on bloomberg.com/opinion

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