Tear gas is fired in a pitched battle between protesters and riot police at the Chinese University of Hong Kong on November 12, 2019. Photo: AFP

The results of Hong Kong’s district council elections last November spoke for themselves. Out of 452 seats, what currently passes for the opposition got a significant majority of 389. Granted, the district councils are purely advisory bodies without any lawmaking power, but the metrics are beyond dispute: The Hong Kong authorities, with China’s central government in the background, suffered an unqualified rebuke.

And whatever the statements originating from the authorities, be they in Beijing or in Hong Kong, it is now a documented fact that a significant percentage of the Hong Kong population is both unhappy with the way its local authorities are administrating the city and deeply suspicious of the central government.

Compounding the issue is the lack of any organization or structure on the side of the opposition that would represent a credible interlocutor. Thus a semi-anarchical wave of discontent is confronted with a local authority that has visibly lost its grip on the situation while, in the background, is a central government whose proclivity by nature is to squash any opposition rather than to achieve any compromise. What both sides share is a disconnect from reality: for the pro-democracy demonstrators that, willing or not, they are part of China, and for the authorities that Hong Kong is not another “system” but rather another society that does not fit in any current Chinese mold.

To date, the central government has in essence reacted to the crisis in the special administrative region (SAR) with two rulings: It has reaffirmed its trust in Chief Executive Carrie Lam, and it has replaced the director of its Liaison Office in the city by a Communist Party stalwart, Luo Huining. While the two measures could appear contradictory, they are not. On the one hand the central government does not wish to be seen as giving in to the demonstrators. Thus having engineered the election of Carrie Lam, it has publicly stated that it will stand by her, at least for the present. Conversely, the choice of a new director of the Liaison Office does indicate that somewhere within the system something is moving. Exactly what however, remains unclear.

The handover, then and now

With the wisdom of hindsight it would have been far better for all concerned if, prior to 1997, Britain would have unilaterally abrogated the colonial status of Hong Kong, amalgamated it to the New Territories and negotiated with China an extension of the lease under the heading of a “Chinese Territory under Temporary British Management.” Whether the matter was ever realistically considered by both parties is unclear, but given the region’s colonial past it would have been psychologically difficult for Beijing to accept.

The end result was the 1997 “handover.” It proved a major misunderstanding. For Beijing it was perceived as a handover to the People’s Republic of China albeit under a special regime. For the Hong Kong population it was a handover from a British rule to a British-trained local authority that had nothing in common with the one exercising power on the mainland. The result was that, after the “handover,” Hong Kong was no more a Chinese-run territory than it had been under British colonial rule. In fact, the SAR remained British but without Britain.

One of the deficiencies of an unelected government is that, not being subject to the ballot box, it doesn’t need to be in tune with those it administers. Thus after the handover the Hong Kong authorities continued to manage the territory as they had done under British rule. But the environment had changed. A new generation of Hong Kong residents had emerged; and, last but not least, the relationship between Hong Kong and the mainland had changed.

During the British administration the Hong Kong police had a political department that dealt with the cases of Chinese from the mainland seeking asylum in the colony. Those identified as common-law criminals as well as run-of-the-mill migrants were speedily and discreetly returned to China. Conversely those identified as dissidents were discreetly resettled in third countries. Thus the British authorities ensured that the colony would not become a base for dissident activities directed against Beijing.

The issue of extradition, which had been handled by the British discreetly on case-by-case bases, only started to bedevil the relations between Hong Kong and the central government after the handover. Beijing perceived it as a security problem. Hong Kong saw it as a way to address common-law criminality. The matter would not have been so sensitive had it not related to the one issue that distinguished Hong Kong from the mainland more than any other: the rule of law. Thus any measure that might have appeared as eroding the rule of law by creating an avenue for extradition from the SAR would inevitably be perceived by many as a foot in the door leading to the end of Hong Kong’s special status.

It is probable that when the extradition law was being drafted early last year, Beijing did not realize how sensitive the issue was. It is also possible that the Hong Kong authorities didn’t either. And it is also possible that the Hong Kong authorities did realize that this was a highly toxic issue best left alone but either did not try, or did not succeed in persuading the central government to desist from the endeavor. Ultimately of course, by misreading the way the extradition bill would be perceived in Hong Kong, both the central government and the local administration also misread what the society that prevailed in the SAR had morphed into, 20 years after the handover.

To recall Mao Zedong’s words, the proposed extradition law was the spark that set the prairie on fire. But for the prairie to burn the grass must be dry. To say that it was downright parched is an understatement

To recall Mao Zedong’s words, the proposed extradition law was the spark that set the prairie on fire. But for the prairie to burn the grass must be dry. To say that it was downright parched is an understatement.

British rule had over the decades shielded Hong Kong from the turmoil prevailing on the mainland, and in doing so had created a social system based on the rule of law. This stability had given free rein to the Chinese entrepreneurial genius, which ultimately was responsible for the colony’s prosperity. As for the downside of colonial rule, this was so minor as to be overlooked as compared with its benefits, and the gap between the haves and the have-nots could be easily passed off as a collateral effect of the ongoing system, and even more so compared with the poverty then prevailing on the mainland.

However, what was an accepted given a generation ago is proving part of Hong Kong’s undoing. The result is that, whatever the appearances, the substratum of the current crisis in not “democracy.” It is the economy.

Hong Kong currently has an average per capita GDP that is higher than that of Germany or the UK. Conversely, some 20% of its 7.3 million inhabitants live below the poverty line and the top 10% of the population earns 44 times that of the bottom 10%. While the stress that this inequality imposes on society is real, it would not be so critical if it were not focalized on one basic need: housing.

Overlooked anxieties

Hong Kong currently has the world’s highest real-estate values. In practical term this means that for the average Hong Kong inhabitant housing is a major issue. Paradoxically, this situation is purely artificial. Land, which is all government-owned, is abundant, but the authorities only parcel it in small bits, thus keeping the market at heights that are beyond the reach of the average inhabitants. Thus in a regime ostensibly based on a free-market economy, the only commodity that is shielded from market forces is real estate.

It is difficult to underestimate the erosive effects of the housing crisis and its ripple effect throughout society and across generations. Ultimately it has eroded the relations between the government and the governed, with the former perceived as having been sensitive exclusively to the needs of the oligarchs and insensitive to those of the population at large. Granted these economic considerations have not appeared on the frontline of the disturbances that rocked the city for months and can be easily overlooked. However, below the call for “democracy” lies a pervasive feeling of anxiety: anxiety over housing, jobs, economic equality and social justice, and not only about the impact of the central government over everyday life in the SAR.

Addressing these anxieties will require more than technical measures of an administrative nature. It requires addressing the whole substratum that has polarized society to the point of leading to the current crisis. This in turn would require that both the central government and the Hong Kong administration share a common vision regarding the long-term prospects for the city. This long-term vision does exist, but with one caveat. It is not intended to reinforce the SAR as a self-standing entity but rather to dissolve it into a Hong Kong/Macau/Shenzhen Greater Bay Area.

Currently the four economic pillars that support Hong Kong are the financial market, tourism, retail trade and logistics. Tourism, of which some 80% comes from the mainland, plummeted during the protests, and with it retail trade. Logistics still survives albeit under the uncertainty created by periodic closures of the airport. Conversely the financial market has not yet been substantially affected mostly because of the reluctance of its main actors to move to a mainland destination that does not guarantee the rule of law. This might change, however, and private asset managers have already witnessed the beginning of an exodus to Singapore.

While both the central government and the Hong Kong authorities totter in their efforts to find a solution to the SAR’s present predicament, they are constrained by two overriding considerations. The first is the political will not to change the economic substratum that is the root cause of the disturbances. The second is to ensure that the “one country, two systems” myth be kept within a manageable dimension. It is clear that if “one country, two systems” is ever to be applied to Taiwan, Hong Kong is not a working model. It is, and will always be, too small, too dependent on the mainland, and too lacking of an identity of its own. And trying to make it into a working model is not in the cards.

What is, however, is the slow attrition of the SAR. Indeed, everything that made Hong Kong different and thus more prosperous than the mainland is being eroded; to whit Shenzhen. Twenty years ago it had an average per capita income that was one-eighth that of Hong Kong. Today it is, on paper, only half of that of Hong Kong, but probably the same if one considers the disposable income of the middle classes.

While the shrinking of the income gap between Hong Kong and the near-mainland is an ongoing phenomenon, it has been accelerated by the stress the recent disturbances put on the economy. Thus the combination of the mainland’s development on one hand and Hong Kong slumping into a recession on the other has the potential of becoming a major contributing force to the leveling of the economic chasm between the two. The result can only contribute to further accelerating the time when Hong Kong will have become irrelevant to the central government.

After the handover, Hong Kong had some 20 years to reinvent itself. Not only did it fail to do so but the powers concerned even failed to recognize that such a need existed and that the formula inherited from the British was in need of revision. Having for all practical purposes missed the first transition, Hong Kong, or at least what it stands for, is not in a particularly good position to face its second one, namely 2047, when the status of the SAR stands to be terminated.

Granted a lot can happen during the coming 27 years, but barring the unexpected, it is clear that the central government has no interest in consolidating the autonomy of an appendage that, if anything, is proving troublesome. And as for Hong Kong reinventing itself as an industrial and information-technology hub in the hope that in 2047 its current status might be prolonged, this would require the capacity to do so in addition to a political will and the end of the current disturbances. Neither appears to be in the cards.

What does is the project of the central government to create an integrated “Greater Bay Area” that would include Hong Kong, Macau, Guangzhou and Shenzhen as well as some adjoining counties. With a population of some 70 million inhabitants, the GBA aims to become a major hub, both at the national level and internationally, which would focus on advanced manufacturing, innovation, financial services, and transport and tourism.

How Hong Kong will fit into such a scheme is still an unknown. But what is certain is that it will bear little resemblance to the Hong Kong that Britain handed over to China.

Alexander Casella

Alexander Casella PhD has taught and worked as a journalist for the likes of Le Monde, The Times, The New York Times, Die Zeit, The Guardian, and Swiss radio and TV, writing primarily on China and Vietnam. In 1973 he joined the UNHCR, serving, among others, as head of the East Asia Section and director for Asia and Oceania. He then served 18 years as representative in Geneva of the International Center for Migration Policy Development.

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