The New Crisis In Hong Kong Will Determine The Financial Future Of China And The Rest Of The World


After protests took place in late months of the year 2019, Hong Kong, started to get back to normal, but then on May 24, tension appeared again in the streets of the former British colony...China announced new security measures, including punishement of any secession or foreign mingling in Hong Kong. This means in other words, that for the first time, these measures, will allow China's security agencies, to establish permanent operations in Hong-Kong, instead of working there secretly.

China needs to gain back total control of Hong-Kong. That means among other things, that the former British colony, that up to now represents for years, a conduit between East and West, is about to lose much of the liberties it has been used to, including also exemptions on trading, customs and travel, as the U.S., is ready to revoke all of those.

In the past months, the relations between China and the U.S., deterioted as it is known. But what is really worth noticing, is that this deterioration, has now led to a long-term estrangement. This is shown also by the fact that at the end of May, Trump signed a paper concerning U.S. policy against China, which is actually a document arguing that 40 years of engagement with China failed to produce "citizen-centric, free and open rules-based order"...With a background like that, entrenching hostility, for who knows how long, Hong-Kong was easy to become a victim of this China-U.S. power struggle.

So now the 2 superpowers reached a point, where China is thinking of enforcing nationalism in order to distract Chinese people from the harm that has been caused to the economy by the Covid-19 pandemic, and the U.S. is turning to anti-China sentiment. Blaming China, seems to be the only way for Trump, in order to not focus to the fact he responded so irresponsibly when the outbreak started.

There have been observers, who have foreseen the end of Hong-Kong for more than half century. Hong-Kong, has been considered by the west as a "catalyst of democratic values" in that area. China gained many assets from Hong-Kong also, as many international and local Chinese companies, saw Hong-Kong as a way to avoid bureaucratic domestic controls in commerce. 

In order to gain these assets, China promised Hong-Kong, a high degree of political autonomy, for 50 years after the handover, until 2047. But that never actually happened, under the Communists' Party rule. Direct elections for the country's leader never realized, and many other projects, such as national education, were abandoned. In 2019, the extradition bill, meaning to hand authority to Beijing, led to massive protests, and those protests appeared again on May 24 of 2020. Xi Jinping, aimed to what is known as "the great rejuvenation of the Chinese nation", by threatening Hong-Kong's liberties. But, that is something Hong-Kongers totally dislike and cannot accept. 

The problem here is, that if China succeeds in its goals with Hong-Kong, then Hong-Kong, will be transformed into Chinese mainland, keeping only the shape of a former British colony as a reminder of its past, as a lost memory. But this would eventually mean, that China will lose many of its trading assets, as Hong-Kong will not be anymore the conduit between East and West. By 2001, according to statistics, almost a quarter of China's imports and 40% of its exports proceeded through Hong-Kong.

The problem is that U.S. policy against China, accelerates somehow Xi Jinping's ability to gain control over Hong Kong. And that is something, that even the U.S. Consulate in Hong Kong observed. They observed, that despite the fact Hong Kong citizens detest the idea of become Chinese mainland, the reducement of the special relationship of the West with Hong Kong (something that started to happen with Trump as a threat that would cause unrest of the city against China, and would thus, turn things to his favour), paradoxically, makes Hong Kong even more integrated to the Chinese system, and that is something, i explained well in a previous article of mine, as it has to do with cultural proximity, that dates back to centuries.

One thing is for sure, if Hong-Kong becomes Chinese mainland, it can no longer serve as a trusted intermediary between China and the rest of the world, as it was until now...

Hong Kong, was thriving due to its autonomy. But it was also China, that gained much with this condition. Chinese, viewed Hong Kong as a channel for shipping funds offshore, without Beijing's controls, taxation and corruption inspections. Many Chinese companies, pretended also to be Hong Kong companies during the trade war, so that they didnt lose their accessibility to global commerce. As long as Hong Kong loses its special status, China loses a serious access to the rest of the world. 

So, it is to the hands of Xi Jinping President, to decide wether he would act short-term, considering the fact he wants to gain control of Hong Kong, also as a means to threat the West, or long term, ensuring global commerce and China's future economy as well. If Beijing focuses on long term decisions, that means they would have won the trade war issued by Trump, who with his actions, completely ignored long run consequencies...

                                                  written by Themis Panagiotopoulou, PhD in Political Science

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