January 23, 2019
Our January American Consequences issue published this past weekend. Have you had a chance to read it?
It’s full of incredible content… And that’s not just our bias talking… including this boots-on-the-ground article by journalist Kim Iskyan about what’s really happening in Hong Kong.
Welcome to the End of Hong Kong
By Kim Iskyan
Pretend for a moment… In 27 years, Martians are going to take over your country.
The people in your country sort of look like Martians – so from the outside, it might not seem like a big deal. But your folk and the Martians have different cultures, languages, and outlooks on the world. Your economy is based on a global standard rule of law – theirs isn’t. You’re allowed to say what you think – while Martians have no such liberties.
But Martians outnumber your country by 187 times. Their economy is 36 times bigger. If they wanted to, they could crush your little country of 7.4 million like a gnat on their behind.
But they haven’t done that… Instead, as time ticks down (a 50-year clock started 23 years ago), the Martians are slowly Martian-izing your country. Tens of thousands of Martians move to your country every year. Martian-owned banks and businesses play an increasingly important role in the economy. Your children are learning the Martian language at school. And your country’s leaders answer to Martians – not to you.
You and your fellow citizens are like frogs in a pot that’s sitting on a lit stove burner… And the water’s getting hotter.
You – and every person in your country – have a lot of decisions to make, because 27 years isn’t that long. Where are you going to have a family? Build a career? Buy a place to live? Your home is changing every day by Martians intent on turning it into part of their country.
It’s Not Mars, But…
OK, Martians don’t exist… That was the “pretend” part. But China does. And for the past eight months, people in Hong Kong have been throwing Molotov cocktails, vandalizing malls, assaulting cops, and taking to the streets by the millions because they don’t want Hong Kong to become just another Chinese city in 27 years.
To outsiders, the status of Hong Kong – the world’s No. 3 financial center – might seem like an exercise in splitting hairs. After all, Hong Kong is already a part of China, isn’t it?
Yes, but mostly no. As a semi-autonomous Special Administrative Region (“SAR”), people in Hong Kong have a lot more freedom. Hong Kong follows the rule of law and has an independent judiciary. It’s ranked as the third-easiest place in the world to do business. Hong Kong is as corruption-free as Austria and Iceland… while China is as corrupt as Argentina and Benin.
Hongkongers may share an ethnic heritage with people from “the mainland,” but Texans and New Yorkers are separated at birth by comparison. One recent poll showed that just 17% of people in Hong Kong identified themselves first and foremost as “Chinese citizens,” which was a post-2000 low.
When I was in Hong Kong a few weeks ago, I visited Shenzhen in China. It’s just a 15-minute train ride away, but it feels like a different world. Hong Kong is Asia’s answer to New York. China is extraordinary and compelling but it’s also like Mars trying to take over Hong Kong.
Kicking the Can a Long Way Down the Road
Hong Kong used to be part of China. But from 1842 to 1997, it was a colony of the sprawling British empire. After World War II, colonies slowly peeled away from the empire – and in 1984, Great Britain and China decided that in 1997, Hong Kong would become a kind of close nephew of China, as a SAR. (Macau, which belonged to Portugal before, is the only other SAR.)
Under the terms of the deal, Hong Kong would be allowed to maintain the capitalist system and its way of life for 50 years – at which point Hong Kong would lose its special-ness to become just another part of China.
At the time, 2047 must have seemed like an unfathomably long time in the future (much like how 2070 – 50 years from now – feels to us today). The apparent attitude of Prime Minister Margaret Thatcher, who orchestrated the deal on the British side, had something in common with those of today’s U.S. congressional budget busters and climate-change deniers: Screw it, I won’t be around to deal with the fallout of this mess. Handing Hong Kong over to China in 2047 was like kicking the can down the road… elevated to an art form.
But China thinks in terms of centuries… not terms in office. So over the past few decades, China has been setting the table for 2047, by steadily turning the heat up on the frog in the pot that’s Hong Kong.
Kids in Hong Kong public schools are taught Mandarin, rather than the Cantonese that is spoken in Hong Kong. The 50,000 mainland Chinese immigrants who move to Hong Kong every year is a stealth takeover-by-demographics. (Worse, some of them jump the queue in front of Hongkongers for government-supported apartments.)
China’s plan to develop a massive Greater Bay Area megacity to integrate Hong Kong, Macau, and Guangdong into a big, urban, technology giant will dilute Hong Kong’s regional influence. And China’s role in dictating what happens in Hong Kong has steadily increased.
When the Frog Had Enough
China has weathered past challenges in Hong Kong. Most recently, during the so-called “Umbrella Movement” in Hong Kong in 2014, where protestors occupied the downtown business district to demand free elections for Hong Kong’s leader. But support waned, and the protests ended after a bit less than three months. And the clock continued to tick…
Protest artwork showing the Chinese Communist Party behind the Hong Kong government… which is stifling Hongkongers.
This time, in June 2019, the frog again said, “No más.” The match that lit the bonfire was a bill proposed by the Hong Kong government – which answers to Beijing – to allow the extradition of suspected Hong Kong criminals to mainland China.
As many as 2 million people (of a population of 7.4 million) hit the streets to protest the bill. Adjusted for population size, that’s like 86 million people in the U.S. (comparable to the entire Midwest, plus Florida). There were Hongkongers of every age and stage, from old people leaning on canes to families with kids in strollers, saying: Martians, you’re not going to boil us.
Almost everyone I met with when I was in Hong Kong last month had collected a small library of gruesome videos – distributed via social media app Telegram – of urban warfare on their phone.
For weeks on end, pillaged malls, debris-strewn streets, smashed metro stations, and shattered stores that people thought were linked to mainland Chinese businesses all became part of the new Hong Kong scenery. The steel skyscrapers and Rolex shops of cosmopolitan Hong Kong were shown to be just a façade.
In September, the Hong Kong government finally tabled the ill-conceived extradition measure. But that had long since become an afterthought. Then in November, scheduled elections for district councils – usually more focused on dull local issues – saw a resounding victory for pro-democracy parties, which was in stark contrast to their barely-there showing four years ago. Though the practical impact of the elections is limited, the message was clear.
What Ails Hong Kong?
People in Hong Kong want more democracy… And that’s become the shorthand of the international media’s explanation of the protests. But it’s a lot more than that…
If Hong Kong’s political leaders had been listening, they’d understand that China-ization is a big part of the story. Another dimension of it is that a lot of people in Hong Kong feel like the island’s prosperity has left them behind. In the world’s most expensive real estate market, the average home – a shoebox-sized apartment – costs $1.2 million. That’s more than anywhere else in the world and nearly double what it costs in New York City (according to real estate services and investment firm CBRE).
More immediately, protestors have demanded an investigation into the use of police force against protestors, amnesty for the thousands of protesters who have been arrested, and that officials not use the word “riot” to describe the protests. Protestors want the people of Hong Kong to be able to elect their own representatives who aren’t beholden to China. More broadly, protestors want Hong Kong to have greater independence from the increasingly heavy hand of China.
The only real achievement of the protests so far, though, has been the withdrawal of the extradition bill. And the chances that Hongkongers make any other headway are close to zero. No one I spoke with in Hong Kong – from ardent protestors to investors to political risk analysts to cops – could fathom a world where China agrees to any of these. And even if they did, nothing would really change.
It’s a Very Tricky Spot for China
China has to tread very carefully with Hong Kong. As China’s financial gateway to the world, Hong Kong has helped drive China’s incredible economic growth over the past few decades. That growth has helped reduce the importance of Hong Kong… In 1997, Hong Kong’s economy was one-fifth as big as China’s, and today, it’s less than 3% the size of China’s. But while the largest Chinese companies are less reliant than they used to be on Hong Kong to tap global capital markets, it’s still the only viable path for many smaller issuers.
The other signaling China has to be careful of is to the rest of the world. It took China years to wash the blood off its hands from the 1989 protests in Beijing’s Tiananmen Square. That was when protestors wanting a more democratic government were dispersed – following weeks of escalating demonstrations – with tanks and bullets, killing thousands.
That kind of heavy-handedness in Hong Kong, even as violence has escalated, would be impossible for the rest of the world to ignore. The consequences would be astronomically higher for the world’s second-largest economy. China’s efforts to take a seat at the head of the global table – potentially displacing the U.S. – would be set back by years.
So far – despite vociferous complaints and some very obvious exceptions – the Hong Kong police have showed remarkable restraint (and Chinese forces haven’t been sent in). Only a small handful of live rounds have been fired in the months of protests and only two deaths have been attributed to protest activities. (It helps that in Hong Kong, the rate of private gun ownership is 3.5 guns per 100 people… in the U.S., it’s an incredible 120 per 100 people. Violence would have escalated a whole lot faster, and been much more fatal, in the gun-friendly U.S. than it has in Hong Kong.)
According to the Economist, as of mid-November a total of about 6,000 rounds of tear gas had been fired by police in Hong Kong since the beginning of protests. That’s far fewer than used by police in a single day in France facing protestors in December 2018. While images of violence make for good copy, the reality is that what’s happened in Hong Kong is relatively restrained.
Also, there’s a lot more at stake for China than just Hong Kong. How Beijing handles Hong Kong’s protests is being very closely watched by minorities throughout China. For example, the predominantly Muslim Uyghur region of Xinjiang, in northwestern China, have long suffered under Chinese repression. According to the U.S. government, more than a million minority Muslim Chinese are in what it calls “concentration camps” to reduce extremism. Let’s not forget Tibet, which for decades has pushed for greater autonomy. And then there’s Taiwan, which has been independent since 1950 and is viewed by China as a rebel region that will need to return to the fold.
If China gives in, it may have a half dozen more serious Hong Kongs on its hands. For a government that prizes stability above all else, what’s happening in Hong Kong is poison.
This Is What Happens Next: The End of Hong Kong As We Know It
China can’t crack down on Hong Kong. It also can’t cave in to Hong Kong protestors’ demands. But this is what it can do: Let Hong Kong die on the vine.
As I mentioned, Hong Kong matters far more to the rest of the world than it does to China. It’s less than a third of the population of Shanghai and wouldn’t even make it into a list of five of the biggest Chinese cities. Its stock market is a handy way to raise capital – but Chinese companies can go to London or New York if they can’t find funds on the increasingly dynamic domestic (non-Hong Kong) exchanges.
But what China can do is let Hong Kong shoot itself in the foot. The increasing violence of a small group of radicalized protestors turned Hong Kong into an urban warzone for days. Most people I talked with in Hong Kong have an active Plan B. “We have a leave-now bag packed and ready,” one businessman told me. Almost everyone who has options is considering where else they might live if things get worse. Singapore is a popular option, and I talked with several people who were looking for a way to get EU citizenship.
And that – the hollowing out of the vast diversity of people who comprise the magic uniqueness of Hong Kong – would be the end of Hong Kong as we know it. And if things continue as they are now, it’s only a matter of time.
Now here are some of the stories we’re reading…
‘Hong Kong is at a crossroads’: inside prison with the student who took on Beijing
Political activist Joshua Wong was 20 when he was sentenced in 2017 to six months for his role in Hong Kong’s pro-democracy ‘umbrella movement.’
How White House photographers have shaped the image of the President
Official White House photographers – the image-makers who quietly author visual archives of America’s Commanders in Chief – craft these impressions, which become indelible in the public imagination.
11 self-made millionaires reveal the best advice they ever got
If you’re looking for the top advice on life and business, look no further… These millionaires have had some super-smart mentors, so we asked them for the best advice they’ve ever received. Here’s what they told us – and how it led to their success…
7 rules to reduce your risk of Alzheimer’s and keep your brain healthy
Research has homed in on seven pillars for living a brain-healthy lifestyle.
And let us know what you’re reading at [email protected] .
With P.J. O’Rourke and the Editorial Staff
January 23, 2020