STORMTROOPERS (Bloomberg Photo)
UPDATE 15 SEPTEMBER: Political turmoil engulfing this global financial center showed no signs of abating as tens of thousands of pro-democracy demonstrators marched Sunday in defiance of a police ban, with many venting their anger at Beijing just two weeks before China celebrates the 70th anniversary of the People’s Republic.
Less than 7 days after police denied permits for demonstrations on the first weekend of September, Hong Kong’s CEO Carrie Lam formally withdrew the extradition bill that had sent people into the streets months before. Characterizing the move as ‘too little, too late’ and ‘trying to put out a hill fire with a garden hose,’ leaders in the legal community expressed their disappointment. The Hong Kong stock market surged on the news. However, the demonstrations on the street are now being regarded around the globe as a pro-democracy movement indicating among other things just how badly Beijing misjudged the situation.
As children returned to their schools in the northern hemisphere, US-China relations were thawing in advance of a return to trade talks. Yet, as Bloomberg reported, that doesn’t mean the US President is out of amo:
Under a U.S. law, Trump has the power to rescind Hong Kong’s status as a preferential trading partner — essentially turning the Asian financial hub into just another Chinese city. Such a seismic shift would be an almost unthinkable escalation of the U.S.-China trade war, but some lawmakers in Washington have been making supportive noises.
The change experienced in China over the last 40 years has been nothing short of remarkable. Each of the 20 super-cities brags postcard skylines straight out of a 1940s Flash Gordon movie. Yet, there remain serious problems over wealth distribution, civil rights, individual freedoms and—yes—life beyond communism. Added to these growing pains are new challenges facing every contemporary modernized country. This includes environmental pollution, economic development, and social security. Seen from this perspective, Beijing has been hampered over the last 30 years of development producing an architectural landscape that is pot-holed with incendiary mistakes.
The Hong Kong demonstrations open up this wound in particularly disturbing ways. The ‘China Miracle’ is exposed as having been purchased on the backs of western corporations too eager to play with despotic regimes, both sharing a too narrow focus on profits at all costs. The income disparity between the haves and have nots—growing in the West thanks to a Housing Crisis engorged by the trade deficit with China—is charging the Hong Kong protests. Also triggering the mass demonstrations is the call for suffrage—it appears that ‘taxation without representation’ is unpopular in China as it has been in the West. Then, there are the not too surprising echoes of support for Hong Kong coming from the Mainland, where aspirations are also rising along with the wealth dividend. Finally, there is a US President who is willing to cut through the posturing and the bureaucracies to call a deal a deal, and order US corporations back home. Trump may represent many things to many people, but he understands the facts behind the bargain better than anybody else in Washington. Beijing has not shown they know how to answer to this, or to reply to his tweets. He’s ‘locked-and-loaded’ on Saudi Arabia, we learned just a few days ago. Chances are his stance is similar in Hong Kong.
At the end of August, the US Council on Foreign Relations summarized the situation this way:
As protesters in Hong Kong use increasingly creative means to demand change, the possibility that Beijing will respond with force is growing.
Over the past ten weeks, the situation in Hong Kong has become increasingly tense. The broad protests, which on one occasion totaled roughly two million people, were sparked late this spring by the governmentʼs attempt to adopt a bill that would have enabled the Peopleʼs Republic of China (PRC) to request extradition of suspected criminals from Hong Kong. The cityʼs chief executive, Carrie Lam, eventually announced that the bill was dead, but she has refused to formally withdraw it. She has also refused to resign.
On the second weekend in September, the demonstrators were back their determination undaunted. As reported in the New York Times:
On Friday and Saturday the protests and clashes with the police continued in Hong Kong, even after the region’s embattled chief executive, Carrie Lam, made a major concession days earlier by withdrawing a bill that would have allowed the extradition of criminal suspects to the mainland, legislation that first incited the protests three months ago.
However, the reversal can also be seen as preamble for a state cracking down. By giving into two demands—an independent review was also ordered—the government has maneuvered into a position where it can now enforce and end to demonstrations. Basta! Hong Kong law limits government action to acts of violence and vandalism. However, reports of roving gangs attacking protestors, and police baiting the demonstrators, can be used to escalate the situation to the point where a government crack down can don the veil of the law.
Already on the last day of August the Globe and Mail reported China’s central news agency announcing that,
The end is coming for those attempting to disrupt Hong Kong and antagonize China… [the] rule of law, morality and basic humanity.
Of course, the single most telling signal that Beijing badly mishandled this sensitive situation, is that the demonstrations have morphed into an all out call for democracy. Is this to be seen as ‘antagonizing China,’ or challenging the rule of the four families who—according to locals—that more or less control real estate in Hong Kong? Certainly, Beijing is not measuring the ‘rule of law, morality and basic humanity’ by any universal standards. If they misread the Hong Kong situation, will they also stumble bringing to a sensible resolution the trade war with the Americans?
A progressive solution would recognize that a free Hong Kong could maintain its role as the clearing house for the West doing business with China. On the flip side, it is hard to assess today what the consequences would be if Hong Kong’s status as a preferential trading partner were pulled in response to an invasion by the People’s Liberation Army. Hong Kong under military occupation (United States-Hong Kong Policy Act, 1992).
Another development is the banding together of Japan, South Korea, Taiwan, and Vietnam to form a free trade zone ringing the South China Sea. Hong Kong and Macau could then try to negotiate terms with Beijing and join in. This could be seen as a deterioration of US-China trade, or simply as the most logical outcome of the trade war given further miss steps in Beijing. There is little doubt that the West would participate in an alignment that is already underway. Speaking in Paris on 7 September, US Secretary of Defense Mark Esper stated:
[T]he key thing is that all countries work together to defend these common values and rights, and defend them whether it is from Iran trying to violate them [in the Gulf], or from China in the South China Sea.”
Here, ‘the South China Sea’ is code-name for trading partners including Hong Kong. Japan is in the G7. NATO is not about to stand idle should Japan, South Korea or Taiwan come under threat from China.
While an alliance of the Asian Tigers would prove stiff competition to the Mainland, Beijing’s immediate headache is stopping the assault on the ‘China Miracle’ baked into the Trump Tariffs. At the same press conference Esper stated:
As countries increase their dependence on Chin[a] investment and trade they become more susceptible to coercion and retribution when they act outside Beijing’s wishes. It is essential that all countries make well-informed decisions about their relationship with the Chin[a].
Liberation for Hong Kong—if Trump were to win the trade war and with it re-election—would be the ‘second shoe to drop.’
Reports that Beijing denied Lam’s request for a retraction of the controversial legislation a few weeks into the demonstrations, exposes the Communist Party having ham-fisted ways. Meanwhile, the New York Times is reporting behind-the-scenes rumbling against ‘The Leader for Life’ in Beijing:
[F]ew in Beijing would dare blame Mr. Xi openly for the government’s handling of the turmoil, [yet] there is quiet grumbling that his imperious style and authoritarian concentration of power contributed to the government’s misreading of the scope of discontent in Hong Kong, which is only growing.
These are proving to be troubled times for China. The Hong Kong issue was badly blundered; negotiations over the Trump Tariffs are still not going well; economic indicators—as far as these can be believed—are in steep decline; and the Trump Tweet in late August calling U.S. manufacturers ‘out of China’ has not been countered from Beijing. With the celebrations of the 70th Anniversary of China’s Communist Revolution fast approaching, the troubles mounting could make it mark the beginning of the end of China’s Communist Party instead. Should it turn out to be this way, then Xi’s new ‘long march’ may well be a long march into exile.
Unless Beijing is born-again—by finding yet to be seen political nimbleness and imagination—the 75th Anniversary of China’s Communist Revolution will be celebrated under a new political regime—whatever that may turn out to be.
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Even the people in Hong Kong do not require permits from police, like the ones that were denied for a demonstration on Saturday 31 August. Their numbers are just too many. Should the people decide they want political change, all that is required from the 7.5 million residents is that they decide to go for a walk on the same day, at a predetermined hour—say, one hour before sunset. That kind of ‘demonstration’ would put the system under severe stress without putting folks in harm’s way. People could plan to walk for an hour before returning home. All this would require is a shopping bag, rather than a permit. Such a ‘demonstration’ would expose the system to be the servant of the population, rather than the other way around. That kind of message would ring clear all the way to Beijing.
Meanwhile, in the capital, better minds must prevail, and further mistakes must be avoided. The Communist leadership today finds itself exactly in the place they did not want to be. What they must defend now is advancing beyond the point of no return.
In Hong Kong it has become a fight for 民主 (democracy). The Politburo mishandled the opportunity to keep Hong Kong’s liberation on a low burner until 2047. Now the Communist hegemony over Hong Kong is on parade on the international stage.
Meanwhile, Trump keeps beating up Xi showing the Panda is no match for the American Grizzly. If China were to lose the US as a client for its manufacturing base and a trading partner, Beijing courting the third world with a Silk Road initiative will seem like a fool’s errand. If the US manages to get most of the EU to follow suit, Xi would have traded away economic exchanges with the richest economies in the world for dealing with the weakest and most problem ridden. Some bargain!
Twelve consecutive weekends of demonstrations put a very large question mark in the air asking: is government listening? The thirteenth, fourteenth and fifteenth have taken matters into a new plane: can the Communist System withstand a populist movement in one of the wealthiest cities in the world? The resolute answer is—No.
So far Hong Kong’s tycoons have been silent. Four families are said to exercise a monopoly over Hong Kong real estate. It is not difficult to sense which frequency they are tuned into. However, it is a different sort of power milling in the streets today, and massing on the borders. The tycoon’s strongest hand may be to stand on the sidelines until the smoke clears, then move in and try to grab as much of the action as possible among what is left standing on the ground. How Beijing deals with them will be as telling as how the Communist Government handles the people on the streets.