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.
Deng was dealing with historical circumstance. He didn’t create Hong Kong, but he allowed it to keep churning its blend of mostly Western economic and political theories. Although he didn’t explicitly say so, the wily old bridge-player obviously wanted to see what Hong Kong was capable of and thought that 50 years would be long enough to judge.
Ambiguity was necessary for Deng’s hunch to be tested. Unsurprisingly, from July 1, 1997, not a day has passed without someone arguing the appropriate relative weighting of One Country or Two Systems.
Deng’s establishment of a restrained approach to governing Hong Kong has lasted this far, nearly to the midpoint of its term. Whatever might be said about interference behind the scenes in Hong Kong for the past 22 years, the central government has exercised its rights under the Basic Law on just a handful of occasions. The most memorable was the National People’s Congress Standing Committee interpretation in 2016, which required an oath of office by elected lawmakers. Prior to that the NPCSC had intervened only four times, most importantly in 2004 with a decision that effectively took away the Hong Kong government’s ability to pursue electoral system reform.
The Hong Kong and Macao Affairs Office, meanwhile, has acted largely as an observer of affairs in the two SARs, issuing non-binding commentaries now and then, but primarily facilitating two-way communication rather than making and executing policy.
Unofficially, there have been many incidents over the years that enabled observers to declare that the official policy of restraint had come to an end. Booksellers. Financiers with blankets. Media buyouts. Even though their circumstances were usually sketchy enough to warrant skepticism as to whether they were the result of official policymaking, or conducted by rogue elements of the security establishment, it hasn’t mattered to observers in search of a simple narrative. Headlines such as “the gloves are coming off”, or “now, Beijing is getting hands-on” have been commonplace. Jamil Anderlini’s recent pronouncement that Beijing will “have its revenge” on Hong Kong is only the most rabid of a long line of commentaries which have been depicting the central government as hell-bent on tearing up the Deng-Thatcher agreement.
It would suit these commentators if the PLA were to march onto the streets of Hong Kong and start shooting protesters, regardless of whether they were empowered to do so by the Basic Law. Which is probably why it hasn’t happened. The country’s current leadership has not yet shown itself to be of a mindset that reacts impulsively to provocation. For evidence of this outside of the Hong Kong situation there are the US-China trade talks, in which Beijing’s representatives have been the epitome of cool, swallowing tariffs and indignities for nearly two years while working to get Sino-American relations back on track.
A tried-and-tested Stoic approach to crisis management is surely the main reason that Hong Kong’s hapless Chief Executive still has her job. The central government has seen no reason to rush through change in the way Hong Kong is governed.
Enough of all that
Stoicism should not be mistaken for a lack of will to act, however. Signs have been emerging over the past four months that a shift is under way in Beijing’s approach to Hong Kong’s governance. Lam’s visit to the capital this past week produced further indications that a turning point is coming soon, if it is not yet already here.
Although Lam chose to focus comments at the end of the trip on Hong Kong’s traditional role within the Greater Bay Area, announcing 16 new integration measures, it was the city’s secondary role, as a petri dish for Western ideologies, that appeared to be the focus of the country’s senior leadership in their discussions with her. This was made clear by President Xi Jinping during their chat in Shanghai, Vice Premier Han Zheng during their official meeting in Beijing, and Wang Zhenmin, whose comments Lam responded to while in Beijing. Although not explicitly stated, it was hard to miss the message: Hong Kong needs to start getting aligned with the country’s game plan for development. It’s time for a reset.
The past 22 years, but especially the past four months, have given the central government enough time to make an assessment, and the verdict, it seems, is in. Although 2047 is still a long way off, preparations for absorption cannot begin soon enough.
There are many facets and dimensions to this judgment, which, with hindsight, have been communicated at various levels and through speeches by different spokespersons in the apparatus overseeing Hong Kong affairs. Each appears to have been motivated by a need to convey China’s resounding rejection of foreign ideologies. Milton Friedman and his love of Hong Kong’s free market? No, thanks. Political development with the end-goal of universal suffrage? Not a chance. Liberalism and freedom of speech, association, and thought? The need for national security legislation trumps all of these Westernized notions.
It has obviously come to a head. Lam got to keep her job last week, but she also appears to have been given fresh marching orders. Xi said it in the way he called her to Shanghai for an unscheduled meeting, where he reminded her that stopping the protests was priority No. 1. Han said it in Beijing, where he told her that the judiciary had a role to play in restoring order. And Wang could not have made it clearer: Article 23 needed to be dusted off and national-security laws pushed through.
The changes launched by these instructions might not become evident immediately. There are still 27.5 years left on the Basic Law’s clock. But it seems highly likely that history will look back on this past week as the beginning of a new beginning for the city, the start of a re-engineering process in which One Country overtly takes precedence over Two Systems.
What it means
This is not to pass judgment. History will record whether such an approach to managing Hong Kong is in China’s best interests. It is only to acknowledge the significance of what happened this week during Lam’s meetings. The path forward for Hong Kong, it seems, is to: start shifting from the Washington Consensus to the Beijing Consensus in economic policymaking; institute national security legislation that would likely make the Fugitives Bill seem like an appetizer at a state banquet; and bring an end to the protests as soon as possible. The reward is GBA integration.
None of this should necessarily be pronounced draconian, although CNN almost certainly will, once realization starts to sink in of what these senior officials said. If what Beijing is doing to Hong Kong is going to be labeled draconian, reference should at least be made to alternatives playing out in Santiago and Baghdad.
The people of Hong Kong have every right to be upset that change may be coming to their lives that they didn’t seek. They can cry out that promises may have been broken. But they cannot say that Beijing doesn’t have the right to decide their futures. After 256 months of ambiguity, that right was forcefully declared this past week. What comes next will be the details.
What does any of this have to do with Hong Kong’s role in the Greater Bay Area? Everything, actually. Hong Kong’s role, henceforth, will be to serve, not to debate how best to lead. Although the central government is making it look like the GBA has been designed for Hong Kong’s benefit, it’s really the other way around. Order needs to be restored in Hong Kong so that promising tech companies will be less likely to pursue listings on Nasdaq. The city needs calm so that shows like Fintech Week can bring in global investors without concern for disruption. The judiciary needs to continue to be impartial in commercial cases, so that the GBA can offer robust solutions for international dispute settlements, but not in political ones, where sovereignty can be challenged.
Hong Kong is going to change, radically. The GBA will continue to climb the ranks of the world’s advanced economies, and Hong Kong will be sculpted into a more efficient, less unpredictable, supporting role in this endeavor. That much seems evident now.
What does this mean for those with an interest in Hong Kong and the GBA? First and foremost, it means that now is not the time to speculate about who is running the show. Lam might not be the most rousing of motivational speakers, but she is the one who will raise Hong Kong’s torch in the GBA for the next eight years, until her term is up. Everyone needs to ignore the gossip about her nemesis, Henry Tang, making a comeback, and get used to her. She will likely be less hesitant, and certainly less ambiguous, in her decision-making from now on, because she has been given, and has accepted, a clearer direction.
Second, it means that although Hong Kong is a great place to hang out, the future of business here lies across the border in the GBA. If Hong Kong’s role is to serve this region, investors based here need to stop tut-tutting about declining standards of English and start brushing up their Chinese so they can go exploring. Shenzhen, Guangzhou, Dongguan, Foshan, Huizhou, Zhaoqing, Zhongshan, Jiangmen and Zhuhai are collectively the world’s tenth-largest economy. They need to be seen to be appreciated.
And third, but not least, it means that where situations are encountered which require doing things differently from the way Western textbooks say they ought to be done, it will pay to keep an open mind. The old entitled swagger simply isn’t going to cut it here anymore.
Lament the end of Deng’s great experiment, by all means. But be clear about the challenges and opportunities to come.