Massive demonstrations have erupted in Hong Kong, triggered by a proposed new law that would make it much easier to transfer residents of Hong Kong to Chinese custody. Hong Kong is part of China, but it has a different legal system, derived from its past as a British colony, and many Hongkongers see the law as intended to short-circuit their rights from the colonial period and make them subject to Chinese laws, which limit the rights of the accused. The extradition law would therefore place in jeopardy all in Hong Kong that Beijing might see as a threat.

The law was proposed by the Hong Kong government, which is heavily influenced or, perhaps better said, controlled by Beijing. Since the handover from the U.K., many believe Beijing has been encroaching on Hong Kong’s autonomy, even though, under the handover agreement, Beijing was supposed to avoid interfering in Hong Kong’s affairs. That agreement is being whittled away, but Britain has little say on the matter. Beijing and the Hong Kong leadership should have expected the intensity and breadth of the resistance that arose. Since the Chinese have a good sense of the mood in Hong Kong and certainly realized the radical nature of the extradition law, it is hard to imagine they didn’t expect resistance, although perhaps not as much as there was. Thus the interesting question is: What was Beijing thinking?


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Hong Kong’s Value

Hong Kong is an invaluable asset to China. It is also an extraordinary threat. Hong Kong’s economic importance has declined somewhat as mainland cities have become integrated into the global economy, but it serves a critical economic role for China. It is an unmatched avenue for economic relations with the rest of the world that operates under its own laws, distinct from those in China. It can trade under more flexible rules, it can raise foreign capital in different ways, and it permits the movement of essential foreign nationals with greater openness than China. It’s part of China, yet it’s far more integrated with the international economic system than China is. It is a needed interface between China and the world, and losing it would mean losing a critical channel for interacting with the global economy. Things can be done in Hong Kong that can’t be done in China itself, and that is invaluable to Beijing. It would be irrational for the Chinese to make any significant changes there, and Beijing is not irrational.

But the very thing that makes Hong Kong invaluable to China is what makes it so dangerous. Hong Kong faces the world. It also faces China. Chinese citizens are fully aware of the difference between China and Hong Kong. It is more than economics, although economic envy certainly matters. It is also the fact that ideas that are generated in Hong Kong diffuse into China as a whole, particularly the coastal region. Residents of Hong Kong derive their values largely from the British. They expect the right to criticize, to innovate (not only economically), and to adopt hybrid social styles that are part Chinese and part Western.

For a great deal of the post-Deng era, this is precisely what Beijing wanted from Hong Kong. It was a time of innovation – with limits – in China, and the innovative ferment in Hong Kong was welcomed in China. At a time when an economy is surging and transforming, a society needs social and intellectual transformation, too. Hong Kong was one of the more valuable channels for this process of transformation.

China today is in a very different position than it was a decade ago. The 2008 financial crisis weakened China’s position as an exporter. Since then, it has been striving to increase domestic consumption, bring its financial system under control and manage slower growth without creating political and social crisis. President Xi Jinping is seen as having more power and a greater ability to impose his will on China than any leader since Deng Xiaoping. He has changed the rules of succession, making it possible for him to govern indefinitely, and has carried out systematic purges of opponents and those not aligned with his plans as part of his anti-corruption campaign. It wouldn’t be a stretch to call him a dictator. China’s Central Committee did not appoint a dictator because China was doing well; it appointed one because it was not doing well. It needed radical change, and entrenched interests resisted measures that would introduce such change. Dictators arise in times of crisis, not in times of glorious vistas.

Paying a Political Price

As the Chinese economy tries to rebalance itself, even while facing international pressures from the United States, a key consumer of Chinese goods, doubts about Xi and resistance to his edicts are inevitable. Beijing has imposed significant security measures in China, including facial recognition software that identifies wrongdoers in crowds. Whether such technology works is less important than the fact that people know it is there and dread it. It symbolizes the lengths to which Beijing will go to maintain Chinese stability.

And this is why Hong Kong is so dangerous. It is not fully under Beijing’s control and, therefore, not subject to China’s political and social restrictions. Hong Kong’s advantage is that it is China’s interface with the outside world. But with that comes the possibility that outside values can seep into Hong Kong and, from there, can flow into China itself, particularly that part of China that is the heart of the industrial economy and would like to emulate Hong Kong’s success and values.

China’s imperative is to retain Hong Kong’s economic and commercial value, while limiting the political price. Hence the law on extraditions. It sends a message that Hong Kong can retain its favored economic and commercial status, but that Beijing can still reach in and shut down any political tendency that might increase disaffection in China. It is not a move a secure and confident China would make; it is one an insecure China would make, because it endangers Hong Kong’s economic value, as foreigners may avoid doing business there to avoid being subjected to the new law, to reduce its threat.

The response was too intense to withstand, and Hong Kong’s chief executive, Carrie Lam, backed down, suspending the bill on Saturday, only to see as many as two million people return to the streets again on Sunday anyway. The extradition law is an existential event. Xi is trying to parse the economic and political dimensions of Hong Kong, preserving one and limiting the other. Hong Kong refuses to accept that division both because it values the political dimension and because the dynamism of Hong Kong would disappear without it.

Xi wants the economic value, but he cannot risk the political price. In the not-too-distant future, he will sacrifice much of the former to limit the latter. He can’t afford mass arrests now, but he can’t afford the spread of Hong Kong’s resistance to the rest of China. Dictators live by the sense of their irresistible power. If Hong Kong resists successfully, Xi will be weakened. And he can’t let that happen.

George Friedman
George Friedman is an internationally recognized geopolitical forecaster and strategist on international affairs and the founder and chairman of Geopolitical Futures. Dr. Friedman is a New York Times bestselling author and his most popular book, The Next 100 Years, is kept alive by the prescience of its predictions. Other best-selling books include Flashpoints: The Emerging Crisis in Europe, The Next Decade, America’s Secret War, The Future of War and The Intelligence Edge. His books have been translated into more than 20 languages. Dr. Friedman has briefed numerous military and government organizations in the United States and overseas and appears regularly as an expert on international affairs, foreign policy and intelligence in major media. For almost 20 years before resigning in May 2015, Dr. Friedman was CEO and then chairman of Stratfor, a company he founded in 1996. Friedman received his bachelor’s degree from the City College of the City University of New York and holds a doctorate in government from Cornell University.