The Greater Bay Area’s masterplan is not yet a year old – it began on the auspicious date of 02/18/2018 – and yet it has become economic scripture, cited by officials and entrepreneurs throughout the region’s nine cities and two Special Administrative regions. This is not only because of the top-down way China is governed. It is also because the GBA plan is a well-researched and concisely written 60-page document. The vision it lays out for the region’s integration is clear, and the priorities it lays down for the governments of Guangdong, Hong Kong and Macau are coherent. As the GBA leaves behind a difficult 2019 and moves into an uncertain 2020, it would be fair to say that a good start has been made along the road to 2035, thanks to a clearly marked roadmap.
It is becoming clearer that something has shifted in Beijing’s approach to governing Hong Kong. We pointed out the beginnings of this shift last week, after CE Carrie Lam’s visit to Shanghai and Beijing, where she met President Xi Jinping and her direct report, Vice Premier Han Zheng. She came back more confident, less inclined to give middle-ground statements on the protests. We speculated that it was because the central government had reached a new consensus on Hong Kong, and a change of direction was needed: restrained passive-aggressive interventionism was out; active, overt policy guidance was in.
However, until late yesterday, it hadn’t seemed like the new approach was being timed on a stopwatch. The central government was upping the pressure to introduce national-security legislation, but no deadline had been hinted at.
Then President Xi Jinping interrupted a busy schedule on his overseas trip to comment on the situation in Hong Kong. He reiterated that he wants to see the Hong Kong government and police do whatever is necessary to put an end to the protests. It was no longer just the Hong Kong government’s most important task; it was now its most “urgent,” too.Continue reading Try harder, Xi tells Hong Kong govt
It is fitting that Fintech Week took place at the same time as Carrie Lam’s duty visit to Beijing last week. The three-day event, held at the AsiaWorld Expo Center, provided a reminder of Hong Kong’s enduring value for the Greater Bay Area. As the city’s tourism industry withers after 15-plus years of rich yields, Hong Kong needs a new Chinese export to sell. Financial technology is one of the most promising, and Fintech Week was done well. Its success supported the Chief Executive’s declaration, at the end of her Beijing trip, that Hong Kong’s role within the GBA was “completely unchanged”.
She is right. Selling Chinese goods and services to the world has always been Hong Kong’s strength. From textiles, to toys, to computers, and, yes, to the spending power of mainland tourists, Hong Kong has, to date, been the best place to get a deal done. Until China completely liberalizes the Renminbi, it will remain so. This is a major reason why the Greater Bay Area masterplan was drawn up in 2017 and launched in February of this year: the region needs Hong Kong to put its companies on the world stage. International marketing is Hong Kong’s forté.
Until Lam’s trip to Beijing this week, it had appeared that Hong Kong was playing another, unspoken role within the Greater Bay Area (and the country): as a salon for debating ideas about the future, and as a laboratory for testing their applications. This premise was established by the late Deng Xiaoping in his prescient 1984 agreement with the late Margaret Thatcher, which laid the foundation for the “One Country, Two Systems” principle that underpins the Basic Law. He clearly wanted to see what China could learn from a melting pot of East and West on its doorstep.Continue reading New direction set for Hong Kong
Reaction to Carrie Lam’s Policy Address has been largely predictable. In general, it has been called “too little” by a wide cross-section of the political spectrum, even supposedly staunch pro-establishment figures.
Most of this criticism is fair. Aside from the rabid yelps of legislators who think Lam only needs to step down and all will be well, and the mindless provocations of journalists, thoughtful commentators have put up plenty of logical objections. It isn’t only protesters who are angry, disappointed that Lam didn’t hand over a roadmap for the resumption of the political reform process. Plenty of others are miffed by her proposed solutions to economic challenges, too.
The Hong Kong Chief Executive’s speech was, indeed, underwhelming. Yet too much of the criticism has been focused on the details. That is not the speech’s biggest shortcoming.
Reaction to news of Macau’s plan to open a new stock exchange has been predictable. Hong Kong commentators, accustomed to looking down their noses at the other SAR, have been mostly pointing out blindingly obvious reasons why it will be difficult for Macau to build a RMB-denominated stock exchange. What they are not prepared to consider is that Macau’s plan is unlikely to be for next year, or even the year after that, but is a long-term proposal that is designed to cater to a structural shift in the Chinese economy.
That shift is evident to anyone watching what is going on beyond the Lowu and Lok Ma Chau checkpoints. Or to anyone who may have read the speech by the key Guangdong official who let the cat out of the bag on Saturday.
It’s hard to see where Hong Kong is headed, now that the government has decided to invoke emergency powers to ban the use of face masks at protests. There are at least two evident certainties: that protesters will be energized, leading to a rise in violence levels; and that arrest numbers will climb. Beyond that, however, it remains to be seen whether the announcement will hasten a decision in Washington to restrict financial flows through Hong Kong or result in any other damage to the city’s economy caused by a loss of investor confidence.
Key to monitor is whether the decision can be effective in quelling the protests. This, too, is hard to guess at the moment. It will likely embolden the more radical protesters, and radicalize others who had previously been hesitant to commit acts of violence. Yet it will also likely result in violent protesters being taken out of action quicker, blunting the protests as their more charismatic leadership is neutralized. Whether this turns out to be net positive or negative will take time to ascertain.
In the meantime, and apologies if this sounds Cyclopian, but the Greater Bay Area is not likely to be able to chug along as normal and pretend that what’s happening in Hong Kong won’t affect the rest. Putting aside the damage inflicted on the region by plunging international tourism – especially business tourism – it is important to be realistic about the effects of the Hong Kong crisis on the pace and scope of reforms being implemented in the GBA.
American scholar Andrew Nathan has an interesting piece in Foreign Affairs summarizing what “insiders” say is Beijing’s approach to the crisis in Hong Kong. Though the presentation of this analysis fits too neatly into a US-centric worldview, it helps explain why the Hong Kong government is moving quickly to address the city’s dire shortage of housing: Because the central government believes the protests are being driven primarily by intolerable socio-economic conditions. Fix those, and the rest will take care of itself.
The logic has appeal. While Nathan’s sources are almost certainly wrong to suggest that the country’s senior leadership isn’t worried about addressing the political dimension of the protests, it makes sense to train attention and resources on fixing first what can be fixed easiest. Any capable government would be taking this approach.
This doesn’t necessarily mean that Beijing misunderstands where the protesters’ rage is coming from. The country’s leadership probably knows all too well that the crisis is not going to be fixed with bread alone. But it also likely understands that without a commitment to deep socio-economic reform, no other grievances can be addressed in a sustainable way. Fixing the land issue is about much more than bringing down the cost of living. It’s about changing the way people live.Continue reading Hong Kong gets reform agenda rolling
It is a depressing day today in Hong Kong. The incessant September rains have been dampening moods and hampering travel, but they are not dousing the flames of the protest movement. Judging from widespread reaction to CE Carrie Lam’s speech yesterday, and her press conference today, it seems most protesters are unlikely to respond in a constructive way to the government’s decision to accede to the first of their five demands by withdrawing the Extradition Bill.
Rather, despite much media focus on the demand for an independent police enquiry, it looks increasingly like the only way the protests might end is if Hong Kong has an electoral system that allows a candidate to be elected on a platform of de facto independence, or “free elections”, as one young, charismatic student leader calls them. That isn’t likely to happen before 2047, unless China undergoes a societal change that is unimaginable at present. And so, even though some kind of road to reconciliation is starting to be laid by the government, it is likely to be a long walk to social harmony in Hong Kong.
The Greater Bay Area’s third-biggest city is increasingly seen by the central government’s propaganda organs as being in the throes of a “Colour Revolution”. This might turn out to be a strategic mistake, as the nametag could motivate protesters to behave more radically. Those protests in Europe, which became known by the color of the protesters’ symbols – Ukraine got it going with the Orange Revolution – were focused, committed and widely seen as being on the right side of history: popular uprisings against corrupt dictators masquerading as democrats. And, most important, they largely succeeded. Is this what Beijing wants Hong Kong’s youth to look up to?
The situation in Hong Kong is not the same. This is a city within a country. Here, the protesters’ aims are set against the vast majority of the rest of China, their demands are incongruent, and the ranks of the extremists are dwindling as they engage in senselessly violent acts that turn off the mainstream. By comparing them to a movement that toppled unpopular leaders – often fleeing by helicopter in the middle of the night – Xinhua is, perhaps unwittingly, painting the protesters as revolutionary heroes and emboldening them.
In any case, investors fretting about what comes next for China’s dominant international hub (still) should not pay these official commentaries much notice. They are aimed at a mass audience. Better to consider the potential scenarios of what lies ahead now that the protests appear to have passed into a more radical stage.
It is possible that these protests continue to become more violent. As efficient as the Hong Kong police may be, this is a tough city to keep orderly against protesters adopting guerrilla tactics. The lack of firearms available here is a godsend, but there are many other ways that small, well-funded groups could wage a campaign of extreme violence against the government. In other words, brace for things to get worse. Declining numbers among these hard-core protesters are reassuring; but intensity levels are rising.
Moreover, as was seen this week at the start of two days of strike action, schoolkids and office workers are joining peaceful protests, which are showing little sign of flagging. This is not likely to run out of steam as classes resume and summer holidays end, which is what had previously been hoped for by the authorities. In other words, brace for further disruptions to daily life.
Shenzhen has been tapped to be a pioneer of “socialism with Chinese characteristics”. Which basically means it will be allowed to experiment with reforms while the rest of the country watches from a safe distance before deciding to follow suit. Commentators have seized on this announcement to foresee Hong Kong’s doom – finally – as its neighbour erodes its remaining competitive advantages. Parent-child metaphors are all the rage again, as commentators with little grasp of history or experience of policymaking portray Beijing’s decision as having been driven purely by exasperation at the audacity of Hong Kong’s youthful protesters. Others say that Hong Kong, “as we know it”, is over.
Perhaps perversely, such commentary is helping to achieve what Hong Kong’s bureaucrats have been unable to. It is necessarily dampening investor sentiment. This is reining in housing prices and releasing air from the stock market. So thank you, doomsayers. Much appreciated. Expectations for never-ending growth in asset prices had gotten out of whack. Now, Hong Kong stock valuations are among the cheapest in the region, and absurdly high property prices are wobbling. Some see this as cause for gloom, because IPOs are being delayed. It’s not. It’s a health check. Continue reading Hong KONG and Shenzhen: better together