Hong Kong’s mid-life existential crisis

Xi Jinping arrived in Hong Kong this week to praise Beijing’s version of “one country, two systems”. This is the formula that was supposed to guarantee the city’s autonomy for 50 years following its return to Chinese rule from the UK in July 1997. In doing so, China’s president also buried once and for all the city’s freedoms, as well as the hopes of the majority of its 7.4mn people for genuine democracy.

His visit was heavy in symbolism. On his first journey outside mainland China since the start of the pandemic, Xi marked the handover’s 25th anniversary by swearing in Hong Kong’s new chief executive, John Lee, a former senior policeman who oversaw the crushing of dissent in 2019 that prompted Beijing’s iron fist around the city to tighten. Protesters who greeted Xi last time he visited in 2017 were this week nowhere to be seen. They have fled, been arrested or cowed into silence.

It is clear that, halfway through the 50-year period when freedoms were meant to endure, Beijing has completely reneged on assurances given by Deng Xiaoping, the Chinese former leader who first proposed “one country two systems.

Change has not happened overnight. Over the years, differences between Beijing’s and Hong Kong’s interpretation of “one country, two systems” have found expression in demonstrations. Protest movements that halted a nationalist education push in 2012 and demanded greater democracy in 2014 tested Beijing’s patience. The 2019 movement for faster democratic development occasionally turned violent, giving Xi an opportunity to impose a national security law on Hong Kong.

This has been used to crush peaceful dissent, razing Hong Kong’s previously diverse political arena, as well as its rich civil society. An equally cynical election law, also forced on Hong Kong, has turned its once boisterous local elections into “patriots only” farces.

In a just world, the Chinese Communist party and officials who run Hong Kong would pay a price for this, with the erosion of the rule of law also degrading the city’s attractiveness as an international financial centre. There are some signs that this is under way: nearly half of European companies in Hong Kong are looking to move this year, according to a new survey. But it was the city’s tough pandemic controls rather than the erosion of democratic freedoms that has been the impetus.

Beijing may not care too much: in 1997, Hong Kong’s GDP was equivalent to 18.4 per cent of mainland China’s but this fell to 2.1 per cent last year. Hong Kong’s financial markets were unique in the Chinese context 25 years ago but are now challenged by thriving financial centres in both Shanghai and Shenzhen.

In the long term, banks and businesses may not be put off by political repression in a more China-focused Hong Kong. After all, trade flourishes in other regimes with questionable human rights records. The free movement of capital in and out of Hong Kong, its US dollar-pegged currency, low tax rates and common-law template for commercial contracts are what big business really values. Beijing should treasure these last vestiges of British rule, and safeguard them against corruption and political favouritism.

Ultimately, the crushing of dissent in Hong Kong and its tough Covid-19 restrictions emanate from the same source: the desire for control by the CCP, to which Hong Kong’s government has completely submitted. The city’s pandemic regulations will eventually be relaxed. The party’s iron grip on Hong Kong, alas, will not. If Beijing, in its zeal for control, ends up smothering what makes Hong Kong unique to a greater extent than it already has, then it will have forsaken something irreplaceable.