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What will Hong Kong's demise mean for China?

  • Neither the trade war nor Hong Kong protests will bring down the government in Beijing any time soon.

By Michael Tai

Many Hongkongers hold the mainland and its people in contempt. Taking pride in their higher income and association with their former colonial master, they would rather be British than Chinese even as many of the city's wealthier residents already hold foreign passports.

As protests enter their 18th week and with no end in sight, the question is what should Beijing do?

Probably nothing.

With a deep sense of history, Chinese leaders play the long game and know not to be provoked. Beijing can patiently wait until the young protestors paint themselves into a corner and see that Hong Kong's future rests with the mainland and not the other way round.

Beijing is committed to 'one-country, two-systems' but Hong Kong with its 7.4 million people is just another second-tier Chinese city with diminishing status. While it once served as the gateway for trade and investments into China, that is no longer the case. Outside investors now head straight to Beijing, Shanghai, Shenzhen and even second- and third-tier cities such as Dalian, Suzhou or Zhuhai. Whereas in 1993, Hong Kong accounted for 27 percent of China's GDP, today it represents only 2.7 percent, falling behind its neighbor Shenzhen, a fishing village not so long ago.

Hong Kong's economy depends to a large degree on property speculation and its role as a tax haven. Apartments are tiny and real estate prices astronomical because 76 percent of the territory's land remains undeveloped, and only 7 percent is used for residential purposes. The city also serves as a money laundering hub for corporate profits, drug trade, human trafficking and corruption money.

According to a 2014 poll by PricewaterhouseCoopers, Hong Kong has the highest reported rate of money laundering in Asia and more than most parts of the world.

If protestors burn the city to the ground, Beijing can afford to leave it lying in ashes and rebuild after 2047.

And if anyone expects the protests in Hong Kong to embarrass Beijing or, better still, spark a popular uprising on the mainland, they will be disappointed.

Opinion polls by Western researchers show consistently a high level of satisfaction by the Chinese toward their government. Available since 2002, Pew surveys show a clear lead in Chinese satisfaction in their country's direction over the satisfaction expressed by Americans.

In the 2013 survey of 39 countries, Chinese expressed the highest satisfaction with their country's direction. The 85 percent satisfaction rate handily outstripped the 57 percent in Germany, 33 percent in Japan, 31 percent in the USA and 24 percent in South Korea.

In yet another poll of 28 countries and regions by Edelman Global Public Relations in 2017, the Chinese showed the highest trust (76 percent) whereas in several recent Gallup polls, Americans gave their president, Congress and executive branch an 'F.' In the 2017 poll, for instance, President Trump and Congress received an approval of 36.9 percent and 13 precent respectively while only 21 percent of Americans felt satisfied with the way their country was going.1

Even a slowing economy due to the trade war is unlikely to lead to unrest and regime change. China was poor for a long time, and despite rising living standards especially in the coastal provinces, most of the current generation of adults in their 30s and 40s still remember what it was like to afford meat just once a month. Visitors to the country in the 1990s were confronted with toilet stalls without doors (even at the Beijing Capital International Airport), streets teeming with bicycles, and few buses or cars in sight.

The per capita income in 1996 was about the same as that of India or Pakistan at $2,200 in purchasing power parity terms (today it stands at $19,520 or a nine-fold increase). Premier Zhu Rongji's reforms from 1998-2003 led to 35 percent of the workforce or about 40 million workers being laid off.2

It was a shock to those accustomed to the 'iron rice bowl' and one might have expected widespread unrest and even a revolution but everyone took it in stride and found alternative livelihood as carpenters, tailors, cobblers, plumbers, electricians and petty traders as the market opened up and new opportunities presented themselves.

As state-owned enterprises were shuttered, private businesses and factories of every description sprang up seemingly out of nowhere. It was a time of great risks and reward as cards were reshuffled (for a firsthand account, read Tim Clissold's Mr China).

What Western policymakers often fail to appreciate is the Chinese cultural character. The Chinese are a hardy people who have faced far worse than stock market turbulence. Anyone who has been to China, will not fail to notice the way the Chinese accept hardship as a normal part of life and that the ability to endure and overcome adversity is seen as a cardinal virtue. Malaysian tycoon Robert Kuok calls them “the most amazing economic ants on Earth.”

Neither the trade war nor Hong Kong protests will bring down the government in Beijing any time soon.

1 Weihua Chen, Chinese trust government more than Americans do, China Daily, October 27, 2017.
2 John Foley, Zhu Rongji merits China’s admiration not imitation, Reuters Blogs (blog), August 14, 2013.

(Michael Tai is the author of China and her Neighbors: Asian Politics and Diplomacy from Ancient History to the Present Day.)


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