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China’s Hong Kong Endgame

Hong Kong protest flag in foreground, with protesters in background.
Hong Kong, Jan. 1, 2020. Photo by Etan Liam.

China’s supreme leader could hardly have been blunter about the fragility of Hong Kong’s way of life when he stated: “I could walk in and take the whole lot this afternoon.”

It sounds like something China’s President Xi Jinping might say today, but the remark came from his long-ago predecessor Deng Xiaoping. Deng addressed his statement to British Prime Minister Margaret Thatcher in 1982.

Even though a lot has changed since then, it makes little difference. The United Kingdom’s formal role in its onetime colony ended in 1997. British rule was succeeded by a joint declaration that promised Hong Kong considerable autonomy under Chinese sovereignty for another half-century, until 2047. But Hong Kong’s way of life was always subject to Beijing’s sufferance.

The only constraint on mainland China’s behavior in Hong Kong until now has been the price it has been willing to pay in its dealing with the rest of the world. This, too, has not changed significantly since Thatcher’s response to Deng in 1982. “There’s nothing I could do to stop you,” Thatcher replied to Deng’s suggestion that his Red Army could march into Hong Kong that same day. “But the eyes of the world would now know what China was like.”

Today, we know perfectly well what China is like. In 1982 it was a poor but ambitious country with a vast population; it now possesses world-class economic and (clear but untested) military strength to match its still-vast, if rapidly aging, population. It is also a one-party police state that brooks no internal opposition and displays fast-diminishing patience with criticism from any quarter. China is especially impatient with criticism from Hong Kong residents. Their prosperity in tandem with their attachment to free speech and democratic norms implicitly rebukes the Chinese Communist Party’s governing model.

China has a leader in Xi who has cleared the way to retain personal power beyond the 10-year limit that Deng established. China has not had a strongman leader like Xi since the days of Mao, but Xi’s real model appears to a contemporary: Russia’s Vladimir Putin.

With his forcible annexation of Crimea and proxy war in eastern Ukraine, Putin demonstrated that the price for violating norms of international behavior can be tolerably low. Xi has a more confrontational adversary in President Donald Trump than Putin faced in dealing with the Obama administration in 2014, but China’s role in the world economy today is far greater than Russia’s has ever been. Xi is likely making a similar calculation as he considers Hong Kong’s future. He even has an arguably better case for taking over than Putin did in Crimea, since the international community already recognizes Hong Kong as part of China.

All that stands in Xi’s way is the 1984 joint declaration that set the terms for the handover from the U.K., and the courage and tenacity of Hong Kong’s people. Neither pose any more of an obstacle to Xi than they did to Deng nearly four decades ago.

Beijing’s rubber-stamp legislature, the National People’s Congress, passed a new security law before wrapping up its annual session this week. In both its passage – without any involvement by Hong Kong’s government – and its terms, the law makes abundantly clear that the Joint Declaration is a virtual dead letter. The vaguely worded law will ban “treason, secession, sedition and subversion” when it takes force, likely in the next few months. The national security apparatus, rather than Hong Kong’s own law enforcement, will be able to enforce it. Most pro-democracy factions in the restive city see this law as the end of freedom of expression and migration. Beijing has already barred some Western journalists who were expelled from mainland China from entering Hong Kong.

As with most laws in China, the new law’s interpretation and enforcement will be subject to the whims of the political leadership. Hong Kong’s judicial independence – the bedrock of its place in the global system of commerce – will exist at the pleasure of the Beijing administration, and only to the extent it permits.

The outside world today is in no better position to stop Beijing’s designs in Hong Kong than Margaret Thatcher was in 1982. Nobody is going to physically oppose Beijing from exerting its will.

But while America and the rest of the world cannot stop Beijing’s moves, we can thwart their goals. We can also improve our own defenses against an increasingly adversarial China in the process.

The United States has already started to take the first step: limiting or removing Hong Kong’s special trade and immigration privileges. On Wednesday, the State Department notified Congress that the administration no longer regards Hong Kong as autonomous from mainland China. The announcement does not carry immediate consequences, but it puts Beijing on notice that the president, in consultation with Congress, could soon revoke Hong Kong’s special treatment. If the city is in practice an integral part of the Chinese legal and economic system, we should treat it as such. China will thus lose a valuable economic link between its partially closed economy and the wider financial world.

A second, and more significant, move would be to provide an avenue of escape for Hong Kong’s citizens. In the 1980s and 1990s, the U.K. acted to limit the city’s “brain drain” by restricting the number of British subjects in the territory who would hold a “right of abode” in the United Kingdom. Even so, after the planned reversion to Beijing’s sovereignty was announced, large numbers of expatriate Hong Kongers did move to Britain. Others established communities in the United States, Canada, Australia and elsewhere.

We can limit the utility of China’s accession to full power in Hong Kong by permitting large-scale emigration of the city’s populace, offering our own shores as a destination. Hong Kongers would bring their energy, economic dynamism and education. These qualities would enrich any community where we encourage them to settle. Let Beijing have Hong Kong’s real estate; the greater value is in its people and their enterprise.

Finally, it is long past time to develop a new, more secure and more isolated version of the global internet that would exclude malicious actors and any locations that offer them unsupervised entree to the networks that touch our critical infrastructure and valuable technology. Russia, China, Iran and North Korea are the obvious immediate targets for such exclusion. There would doubtless be many others. Some of our purported allies may be among them if they are unwilling to sacrifice commercial opportunities with miscreant nations in the name of security.

A new, parallel network would have to at least be regulated, if not actually operated, by our government and perhaps a few other trusted parties. The initial candidates could be the “Five Eyes” of English-speaking nations that coordinate most closely on intelligence matters: the United States, Canada, the United Kingdom, Australia and New Zealand. These are also the countries that have shown the most willingness to stand against threats emanating from adversarial states and other places where internet criminals operate with impunity.

Of course these democratic nations, including our own, have experienced intelligence and privacy abuses too. There will surely be more to come. But the threat from inside our shores and from our close friends is nothing like the threat posed by the hostile state actors who would be shut out of the new system, except through closely monitored gateways.

As Hong Kongers well know, China abides by agreements and respects the rule of law only to the extent it serves its purposes, or when the cost of doing otherwise is greater than the perceived benefit. Margaret Thatcher predicted that the world would know what China was like if it moved on Hong Kong. She was right. Now the question is how we will put that knowledge to good use.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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