Hong Kong: Global or Chinese Capital?

HONG KONG: Hong Kong is between a rock and a hard place. On the one hand, it is seen overseas and by most residents as a genuinely autonomous region characterized by free trade, free speech, free assembly and the separation of the executive from an independent judiciary. On the other, the government in Beijing and local acolytes regard Hong Kong’s citizens as insufficiently patriotic, prone to exaggerating their rights to autonomy and in need of rapid integration with the rest of China.

Tension between these perceptions has long existed, but a series of developments have made them far more pronounced and could eventually undermine Hong Kong’s international status, driving foreign companies and finance houses to Singapore or elsewhere. Hong Kong citizens could also find themselves deprived of benefits such as visa-free entry to dozens of countries that they enjoy – and other Chinese do not.

The roots of this enhanced tension go back to two events. One was installation of Xi Jinping, set on centralizing power and enhancing the singular role of the president in place of the more collective-style leadership practiced by his two predecessors. His policy centerpieces include anti-corruption at home and nationalism abroad, evidenced by actions ranging from militarily boosting claims to the whole South China Sea to the Belt and Road Initiative using Chinese money to build infrastructure and enhance China’s global commercial links.

The other event was the so-called Umbrella Movement, prolonged mass demonstrations disrupting the center of Hong Kong in 2014, in protest against Beijing’s imposition of rules snuffing out local hopes that autonomy would enable progress to a higher level of democracy. Protesters’ goals included direct election of the chief executive and all members of the Legislative Council. The Umbrella protests infuriated Beijing, and the Hong Kong government has since gradually taken revenge, with long prison terms for some leaders accused of rioting or incitement to riot. Democratically elected legislators have been removed on various legal grounds and other barred from standing for election.

Foreign reaction to Hong Kong’s problem was muted as countries prefer to chase China business or simply view Hong Kong as a useful place regardless of politics because of low taxes and commercial freedoms. However, tensions in recent months have increased as actions by the Hong Kong government against dissident voices coincide with the ramping up of US-China confrontation. What began as trade-focused moves by President Donald Trump have morphed into a broader US attempt, as evidenced by an October 4 speech by Vice President Mike Pence, to thwart China’s attempts to achieve technological and power parity if not ascendency: “Beijing is employing a whole-of-government approach to advance its influence and benefit its interests…. we will continue to stand strong for our security and our economy, even as we hope for improved relations with Beijing.”

Hong Kong itself has been subjected to a barrage of efforts by the local administration to prove its loyalty to Beijing, and its 7 million people are urged to see themselves as part of what is called the Greater Bay Area – perhaps with an eye to San Francisco’s prosperous Bay Area – where immense business opportunities are supposed to lie. The Greater Bay Area is a recent formulation that denotes a group of cities and municipalities in the Pearl River delta region, which lack an administrative framework but whose 65 million people dwarf those of Hong Kong. Other moves to reduce Hong Kong’s separate identity include a push to use more Mandarin, or Putonghua, at the expense of Cantonese, the ancient indigenous language of Guangdong used with pride in Hong Kong.

At the same time the Hong Kong government has made a full, frontal attack on those advocating greater autonomy, or even independence, reaching a pitch that has drawn protests and international attention. One spark was a speaker invitation by the Foreign Correspondents' Club of Hong Kong to Andy Chan, a leader of the Hong Kong National Party. Chan’s tiny party attracts minimal support, but the government and Beijing’s office in Hong Kong tried to stop the speech. The club went ahead anyway, saying it was perfectly legal and journalists had a right to hear Chan. In retaliation, the government declared the HK National Party illegal on grounds of sedition and proceeded to deny renewal of a work visa to the Asian editor of the Financial Times, Victor Mallet, a veteran of postings in Bangkok, Madrid, Delhi and elsewhere. His offence: presiding over the luncheon meeting in his official capacity as the club’s vice president.

This seemingly minor visa issue sent shockwaves through the legal, business and media communities. Hong Kong it seemed, is using administrative measures at the instigation of Beijing to suppress freedoms and the rule of law which were supposed to be a hallmark. The American and European Chambers of Commerce expressed concern, and the United States and the United Kingdom filed official complaints. If discussion of Hong Kong is shut down on grounds of doubting Chinese sovereignty, how long would it be before bans are applied to bigger issues – Taiwan, Tibet, the South China Sea and more – or mere discussion of such topics becomes treasonous and criticism of China’s one-party rule is seditious?

Despite the storm of criticism, the government pressed on with shutting down critics, barring a high-profile candidate from running in a by-election on the grounds that she had once called for “self-determination” for Hong Kong. Four elected legislators had already been disbarred and other aspirants prevented from standing.

Meanwhile, as the US-China tariff war heats up, there are worries that a “patriotic” Hong Kong may find it hard to avoid harm. Although Hong Kong manufactures little, the possibility emerges that its role as a re-exporter of mainland goods could come under scrutiny, with the administrative region accused of tariff avoidance in the same way it provides tax avoidance for many mainland companies. The government insists that it would be “unfair” to target Hong Kong, nonetheless lobbying Washington to sustain the region’s separate identity, even while its policies on freedom of speech at home have pointed otherwise.

The region for now is protected by the 1992 US-HK Policy Act, which provides for special and separate treatment for Hong Kong. In a May review, the US State Department concluded that although there had been some suppression of democratic rights by the central government “inconsistent with China’s commitment … to a high degree of autonomy,” Hong Kong’s differences were “more than sufficient to justify continued special treatment by the United States.”

That remains the case. The State Department realizes that the US runs a large trade surplus with Hong Kong, home to some 85,000 US citizens and regional headquarters for many US businesses.

But the mood is changing. Both the United States and China harbor doubts that Hong Kong can be both patriotic and entitled to special economic status. Even in Hong Kong, some voices call for the United States to use the HK Policy Act as a lever to try and reverse authoritarian trends. The US president has authority to interpret the act.

Hong Kong is too valuable to all parties to be relinquished. Erosion of its international status will reduce the city’s significance in a world where globalization everywhere is under threat from nationalism.