In 1997, Britain returned Hong Kong to China after some 150 years of colonial rule. In exchange, China agreed to a set of principles: Hong Kong would maintain its capitalist system for half a century, by which point its chief executive and members of the legislature would be elected by universal suffrage. As the thinking went, “one country, two systems” would suffice in the interim; Hong Kong and the Mainland would surely converge on democracy in the half-century to come.
Not so fast. Recently, Beijing has been systematically moving in the other direction. The decision on August 31 to rule out democratic elections for Hong Kong in 2017 was just the latest example. Chinese leader Xi Jinping’s transformational reform agenda is driving this shift — and it does not bode well for Hong Kong.
Xi’s reform agenda has two parts: the first is economic liberalization. The Chinese leadership recognizes that it cannot rely on state-driven investment and cheap labor to provide growth indefinitely. Xi wants to make China’s economy more sophisticated and competitive. He is overhauling inefficient state-owned enterprises and focusing on changes in the financial sector in particular. It’s a top priority of the new leadership, and a requirement for a sustainable and dynamic Chinese economy going forward.
But a prosperous economy is simply a means to an end-goal. Xi is opening up the economy because, above all else, he wants to ensure the long-term survival and stability of the Communist Party leadership. He thinks economic reforms are a good bet despite the risks they will usher in. Over time, reform will require an enormous transfer of wealth from large domestic companies to demanding citizens and it will threaten the vested interests of many powerful elites who have prospered off the status quo. It will inject necessary competition into the economy, which could put jobs, companies, and sectors at risk.
So as Xi opens the economy and the Pandora’s Box that comes along with it, he is simultaneously clamping down on political dissent and consolidating power. Some Chinese citizens may think (or hope) that economic reform will usher in moves toward democracy. Make no mistake: Xi is engaged in political reform…it just doesn’t resemble our Western notion of what that entails. Xi has absolutely no interest in domestic political competition; in a time of economic change, political unity needs to be at its absolute strongest. This is the basis for his anti-corruption campaign, which has already led to some 40 powerful officials with the rank of vice minister or above being detained or investigated. Xi wants to scare China’s political and commercial elite into falling in line with his economic reforms, all while building popular support for his initiatives by attacking perceived corruption.
Hong Kong finds itself on the wrong end of Xi’s reform plan: Hong Kong used to matter to Beijing economically, now it matters politically. That’s absolutely the wrong way around. To the extent that economic liberalization bears fruit, Hong Kong will no longer serve such a useful role as the Western face and gateway into China. As China pushes forward with a Free Trade Zone in Shanghai, it will cannibalize many of Hong Kong’s unique offerings for foreigners looking to do business. And Hong Kong is no longer as integral to the Chinese economy: in 1997, it accounted for 15.6 percent of China’s national GDP. Last year, it fell below 3 percent.
Of even greater importance, Hong Kong matters more to Beijing politically—for all the wrong reasons. In the context of Xi’s sweeping reforms where he needs all hands on the same deck politically, dissent in Hong Kong is more salient, dangerous, and intolerable. Xi will push back against a pro-democratic movement in Hong Kong for two main reasons.
First, Hong Kong’s Westernized nature makes it a threat. Xi is very concerned with the dangers of Western values and mores undermining his country’s political system, something he shares in common — and regularly discusses — with Vladimir Putin. Hong Kong’s citizens are globally connected, politically savvy, and have the ability to mobilize. They are geared for diversity of political opinion. Beijing will clamp down on that, with a willingness to use its surveillance capacities (and even the legal system or force as necessary).
Second, taking a hard line on Hong Kong meshes with both of Xi’s political consolidation goals. Like the politicians he has targeted in his anti-corruption campaign, Xi can make an example out of Hong Kong, demonstrating the consequences for voicing opposing views. And that hard line will be largely popular: Many Chinese mainlanders view Hong Kong citizens as widely discriminatory against them and actively campaigning to keep them out of Hong Kong. Xi has support for teaching Hong Kong a lesson.
What we are witnessing in Hong Kong will prove problematic for China as Xi’s reforms really begin to shake up the system. The risk is not as much that protests in Hong Kong could be contagious and spread to the Mainland (given the mainlanders’ general dislike for the citizens of Hong Kong). Rather, Beijing’s heavy-handed response is significant because it reveals just how far the leadership will go to root out any domestic instability that arises on the Mainland.
In the context of Britain’s 50-year bet on Chinese democracy, this is precisely the wrong moment for a pro-democracy movement in Hong Kong to flourish. The 50-year dream for “one country, one system” has not been entirely shattered, but it feels awfully remote. If reforms succeed over the long run, it will put all of China — Hong Kong included — in a great position. It would bring newfound prosperity and economic sustainability to China. But only then might the Chinese leadership even consider opening up the political system.
As with so many things in China, the situation will get worse before it could get better.
PHOTO: Pro-democracy activists brace themselves during a drill to simulate the scenario of being sprayed with a water cannon at the upcoming “Occupy Central” movement rally in Hong Kong September 7, 2014. REUTERS/Tyrone Siu