Temperatures rise dangerously in HK

Hong Kong’s extradition bill protests entered new territory over the weekend – literally and figuratively. Protests in the New Territories towns of Sheung Shui and Sha Tin erupted into violence marked by police incompetence and protester xenophobia. Videos running across social media and TV stations today show scenes of chaos as police seem to be often uncoordinated and undisciplined, while crazed mobs encircle and beat lone police officers separated from their colleagues inside a shopping mall. 

To say Hong Kong has not seen anything like this in 50 years, since the waning days of the Cultural Revolution in 1976-77, would not be hyperbolic. Commentators are trying valiantly to get their head around its causes, and suggest solutions. One of the more thoughtful is from veteran SCMP reporter Gary Cheung, who looks back at Hong Kong’s colonial history and asks political commentators and former government officials to pontificate about what the current government could learn from the old days. 

Unfortunately, the situation seems to be moving potentially beyond the government’s control. This is partly because of the relative lack of experience of its leadership  – Britain had a seasoned class of colonial administrators who were accustomed to putting down revolts throughout its colonies – but also undoubtedly because political discourse has moved into a realm where negotiating styles are fueled by deep-seated emotions rather than strategic considerations. The government seems increasingly in a no-win, no-way-out situation. 

Foreign observers might be forgiven for wondering what all the angst is about. “A regular night after a football game in a small English town,” is how one wag described the New Town Mall scenes to us. If only we could be so sanguine. China has a long – and recent – history of violent protests moving to scale quicker than can be imagined. It was why the late former Chairman Mao was fond of repeating the ancient saying to his cadres, “One spark can start a prairie fire.” 

In Hong Kong’s case, the spark was the bill, but rather than starting a prairie fire, it seems to have lit a fuse which is wending its way toward a powderkeg that Beijing could reasonably believe would start a much bigger prairie fire. The fuse has turned a corner that shows how little distance is left to reach the explosives. 

In our view, it is becoming increasingly clear that these protests are no longer about a proposed extradition bill. They have become anti-mainland and, worse, anti-mainlanders. If they continue this way, it is plausible that Beijing will intervene to prevent such sentiment from spreading. The consequences of that would go beyond anything currently envisaged by protesters and their sympathizers in the wider community. 

It is hard to say what could happen next. The task force in Shenzhen must be weighing some difficult choices. We would not be surprised if one of those is the imposition of a state of emergency in Hong Kong. This may not require putting the army on the streets. But it may result in perceptions of an “endgame” being formulated as central government intervention becomes more overt. Indeed, it is not unthinkable that if TV and smartphone screens continue to be filled with scenes like those over the weekend, Beijing will accelerate its plans for Hong Kong’s integration into the Greater Bay Area – in a way that no one could have envisaged days ago, let alone when the masterplan was being formulated a few years ago. 

To be clear, there is no other endgame. Full integration with the mainland is currently scheduled for 2047. It would be tragic if this had to be brought forward due to the current protests, because neither side is ready for it and much of the progress already made would be lost. But anyone who thinks that Hong Kong has an alternate future ahead of it is guilty of delusional thinking at best. How we get there requires debate. Whether we are going to get there does not.

There is still time and space for cool heads to prevail. The majority of the protests have been peaceful and orderly. If further restraint can be imposed – on both sides – it is still possible this crisis can be defused. But the fuse is not going to wait. It needs to be put out ASAP, before bruises and concussions and chopped fingertips become fatalities. Rumors today of protesters planning to surround the PLA barracks at Tamar remain that – rumors – yet they do not augur well for what could happen. 

Investors who think Hong Kong and the Greater Bay Area’s economic trajectory will not be affected by the realisation of such a worst-case scenario need to start reading more history books. The rise of the GBA to the world’s top 10 economies within the next decade will not likely be stopped, but it will surely splutter. Hong Kong does need to play its role as an international gateway, especially in finance and legal standards, for the GBA to realise its full potential. 

We do not currently agree with the worst-case scenarios bandied about by people such as hedge fund manager Kyle Bass. The Hong Kong dollar peg is in no danger while US$3 trillion of China’s forex reserves stand behind it. Hong Kong is a challenge the central government is capable of handling. But if the city has to manage, for example, the imposition of a state of emergency and any ensuing backlash from the international community, there will likely be serious short-term disruption of capital markets that are essential to the GBA’s growth.

In the long run, we remain confident in the GBA’s future, come what may in Hong Kong. China is not turning back the clock on its economic development strategy, which has lifted more than 400 million people out of poverty since 1979, no matter what London, Washington, Paris, Berlin and any other world capitals might have to say about the erosion of Hong Kong’s autonomy under Chinese sovereignty. Hong Kong’s role in the GBA is not irreplaceable, only difficult to imagine right now for Shenzhen and Guangzhou. We just hope and pray that in the meantime we won’t have to tell this remarkable story with a chapter on the blood that was spilled along the way.

One thought on “Temperatures rise dangerously in HK”

Tell us what you think