The People’s Liberation Army headquarters in Hong Kong is a drab, Soviet-style building resembling a brutalist fortress. At 28 stories, it’s easily overshadowed by the neon-draped bank towers, glitzy waterfront shopping malls and giant Ferris wheel flanking it. Yet, located at the confluence of Hong Kong’s busiest ferry and train lines, and with its imposing red star – the PLA emblem – conspicuous from across Victoria Harbor in Kowloon, it’s nearly impossible to miss. It’s as if it was designed to communicate to Hongkongers: You can have your fun, your capitalism, your opulence. Just don’t forget who’s really in charge.

Last week, as many as 130,000 Hongkongers took to the streets to protest Beijing’s latest attempt to extend its reach into the “special administrative region.” This particular fight is over a proposed extradition law that could shrink Hong Kong’s role as a haven for anti-Communist Party dissidents, intellectuals and entrepreneurs ever further. Beijing will win this round, just as it has succeeded nearly every time it has decided to flex its authority in the city over the past decade. But this doesn’t mean the days of self-rule in Hong Kong will disappear altogether.


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Creeping Control

Under the handover agreement negotiated with the United Kingdom prior to the former colony’s return to China in 1997, Beijing was supposed to refrain from intervening in Hong Kong’s political and economic affairs for 50 years. But the strength of the “one country, two systems” model supposedly guaranteeing Hong Kong’s autonomy was always going to hinge on Beijing’s interest in upholding it. The city-state is just too strategically important, and potentially too big of a risk to the fragile political landscape on the mainland, for Beijing to keep its distance.

As a result, concurrent with its tilt back toward authoritarianism on the mainland under current President Xi Jinping, Beijing has been quietly but inexorably asserting its authority over Hong Kong ever since reunification. This is driven, in some small part, by China’s long memory of the humiliation that came with losing Hong Kong, with its naturally protected deep-water ports and location astride critical sea lanes in the South China Sea. But Beijing’s main concern today is that the city-state could be used to destabilize China. This can mean dissidents seeking to inspire (and fundraise for) mainland political movements or muckrakers circumventing Chinese media controls to make public the Communist Party leadership’s dirty laundry. It can mean Chinese political rivals and tycoons hiding ill-gotten wealth from the long arm of the Central Commission for Discipline Inspection. It can mean firms using the Hong Kong financial system to undermine Beijing’s endless game of economic reform whack-a-mole. With China facing ever-intensifying competition with outside powers, its ability to snuff out potential foreign backing for its internal enemies via Hong Kong will become all the more important.

Naturally, it’s in these areas where Beijing has been most assertive. In 2014, for example, it demanded the right to prescreen candidates running for Hong Kong’s legislature. In 2015, Chinese authorities began abducting booksellers who were publishing (and smuggling into the mainland) books containing lurid claims about Xi and his cronies. In 2016, it intervened to remove two newly elected pro-independence lawmakers from their seats in the legislature. In 2017, Chinese-Canadian billionaire Xiao Jianhua was abducted from the Four Seasons and whisked to the mainland to await trial on corruption charges. Over the past year, Communist Party critics and foreign journalists have lost their visas, anti-Communist Party lectures have been shut down, and the legislature approved a plan ceding to Chinese authorities the right to enforce Chinese criminal laws at certain rail stations in the heart of Hong Kong.

Several of these moves spawned mass protests in Hong Kong. Only once, following a 2013 attempt to insert communist propaganda into Hong Kong textbooks, did Beijing back down after concluding it had overreached by attempting to indoctrinate Hongkongers with the blunt tools it uses on the mainland. Every other time – even in 2014, when as many as 500,000 protesters joined a monthslong occupation of central Hong Kong – Beijing basically shrugged and waited for the movement to peter out, conceding nary an inch. And though the latest flare-up over the proposed extradition law may spawn yet another wave of demonstrations on a scale approaching 2014, the result is quite likely to be the same.

Just Another Chinese City?

Hong Kong’s autonomy has long been an irritant, at minimum, to Beijing. For half a century after the communist takeover in Beijing, there wasn’t much China could do about it – and not just because the Royal Navy was camped out in Victoria Harbor for most of that time. The other problem for Beijing was how much it relied on Hong Kong as a gateway for trade, an indispensable source of finance, technology and institutional expertise, and as a sort of halfway house for foreign investors wary of the complications of doing business on the mainland. This gave Hong Kong considerable leverage over the terms of its relationship with Beijing and reason to believe during the handover negotiations that its autonomy would be respected, lest Beijing spook investors and erode international faith in the trajectory of China’s opening. Meanwhile, Beijing also hoped that the success of “one country, two systems” would help coax Taiwan back into the fold.

But today, Beijing just doesn’t rely on the special administrative region as much as it once did. Chinese cities like Shanghai and Shenzhen – the latter’s forest of skyscrapers now visible from the Hong Kong airport – have grown to rival or even surpass Hong Kong in economic importance. In 1993, Hong Kong’s economy was equal to 27 percent of China’s gross domestic product. By 2017, this had shrunk to less than 3 percent. Last year, Shenzhen’s GDP alone surpassed that of Hong Kong. At handover, meanwhile, China accounted for around 36 percent of Hong Kong’s trade; by 2016, it had surpassed 50 percent. China is hardly an easy place to do business, but thousands of foreign firms and investors in the country have found ways to get fabulously wealthy without Hong Kong anyway. Peaceful reunification with Taiwan, meanwhile, has become a pipe dream.


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This has had two implications: First, Beijing has had to worry somewhat less about sustaining the international perception that Hong Kong operates by rule of law and is immune to party interference, giving Beijing less to lose by doing in Hong Kong whatever it deems necessary to preserve political stability at home. Second, China’s economic rise has tied the fortunes of much of Hong Kong’s business elite to financial interests on the mainland, giving them ample incentives to stay in the party’s good graces. As a result, the Hong Kong legislature is dominated by pro-Beijing lawmakers – or at least ones who prioritize sustaining the status quo. And the protests, though at times robust, have struggled to attract financial and political backing from large swathes of Hong Kong society.

The fact of the matter is, Hong Kong’s fate is largely out of its hands. It has little power of its own to wield against Beijing. It has its own laws and police force, but unlike Taiwan, no military force or promises of outside support. The Royal Navy is never coming back. How much of Hong Kong’s autonomy survives will hinge almost solely on how much Beijing finds this autonomy threatening, and how much risk of international condemnation, loss of investment, and so forth Beijing thinks it can tolerate by curbing it.

This doesn’t mean that China intends to ever transform Hong Kong into “just another Chinese city.” The special administrative region’s reputation as a stable, law-based gateway to China will always be valuable to some extent. And with foreign firms getting spooked by the Communist Party’s authoritarianism at home, by the threats of new foreign tariffs, and by the trade abuses put in the spotlight by the U.S. trade war, Hong Kong’s importance to the Chinese economy may soon be revived. Already, its role facilitating transshipments of Chinese exports is proving useful for those seeking to circumvent U.S. tariffs and import restrictions.

Where the Communist Party feels threatened enough to push further – to snuff out political threats emanating from Hong Kong or to crush any major independence movement (particularly one with foreign backing) – Beijing can and will. At some point, for example, Beijing is going to have to weather another round of mass protests and extend parts of its “Great Firewall” to Hong Kong. But it doesn’t need to micromanage Hong Kong in the way it does the mainland to feel secure. And picking its battles sparingly will likely be deemed good for business.

Phillip Orchard
Phillip Orchard is an analyst at Geopolitical Futures. Prior to joining the company, Mr. Orchard spent nearly six years at Stratfor, working as an editor and writing about East Asian geopolitics. He’s spent more than six years abroad, primarily in Southeast Asia and Latin America, where he’s had formative, immersive experiences with the problems arising from mass political upheaval, civil conflict and human migration. Mr. Orchard holds a master’s degree in Security, Law and Diplomacy from the Lyndon B. Johnson School of Public Affairs, where he focused on energy and national security, Chinese foreign policy, intelligence analysis, and institutional pathologies. He also earned a bachelor’s degree in journalism from the University of Texas. He speaks Spanish and some Thai and Lao.