Hong Kong’s long history as an independent entity is being systematically squeezed by China, which experts contend is lashing out at challenges to its global ambitions — as well as the coronavirus crisis spawned within its borders, which remains shrouded in suspicion.
Roiled for over a year by anti-government protests, Hong Kong is now in the crosshairs of a Chinese government that’s increasingly on the defensive as it moves to entrench its status as a superpower.
By enacting the Security Act of Hong Kong this week, the Chinese government effectively put the world on notice that decades of Hong Kong semi-autonomy — and a raucous independence movement — are coming to an end. It also raises the possibility that the dispute may end in a violent confrontation between Hong Kong’s pro-freedom movement and an authoritarian power determined to maintain the status quo.
According to experts, China’s move against Hong Kong’s independence has dovetailed with a wide-ranging campaign of intimidation and “wolf-warrior” influence-projection across the world. The evolving conflict has imperiled Hong Kong’s special trading status with the U.S., which has locked horns with China over everything from trade to a perceived lack of transparency during the COVID-19 pandemic.
The Security Act “pretty much put through the shredder” any ambitions Hong Kong may have harbored over maintaining the autonomy it's enjoyed since 1997, when Great Britain handed Hong Kong back to China, according to Arthur Dong, professor at Georgetown University’s McDonough School of Business.
China is “sending a message to not only Hong Kong but the rest of the world that they are going to …[consider] actual martial law as well as the imposition of greater military authority over Hong Kong,” Dong told Yahoo Finance in an interview. It’s also a major impetus behind why President Donald Trump moved on Friday to end Hong Kong’s trade preferences, as part of a multi-pronged pushback against Beijing’s influence.
“Now up until this point, China was rather restrained in terms of what it was going to do, although it sent an implied message that if things fall apart, we're going to roll the tanks,” Dong warned, in a veiled reference to the 1989 pro-freedom protests in Tiannamen Square that ended with a bloody government crackdown.
“And now it's become very clear that that possibility and that prospect is going to be a very, very real option that's being put on the table,” he added.
The mounting challenges to preserving decades of U.S.-China-Hong Kong status quo are likely to make American multinational companies nervous, while also unsettling global investors.
With bipartisan support growing in Washington for reprisals against Beijing, Goldman Sachs said this week that “legislation related to the U.S.-China relationship looks increasingly likely to become law.” A bill that passed the Senate on May 20 to delist Chinese companies from U.S. stock exchanges received overwhelming support, and may get Trump’s signature, the bank suggested.
“China-focused legislation specifically related to COVID-19 could also become law, but is farther behind in the legislative process and appears to have somewhat less support in Congress, but it is not out of the question,” Goldman added.
Meanwhile, the U.S. is hardly the only country reacting to China’s provocations. Rodger Baker, vice president of strategic analysis at Stratfor, told Yahoo Finance this week that countries around the world are growing more concerned about Beijing’s “heavy handed use of economic tools to stop political commentary. They’re starting to shift their vision of China as well.”
The Security Act “clearly empowers Hong Kong security forces, under the direction of Beijing, to increase the arrest, detentions and shutting down of protests and demonstrations,” Baker said. He also said that U.S. businesses are “re-weighing” their position in Hong Kong, as questions are raised over its status, and China’s policies grow more revanchist.
“Beijing has been very vocal and active over the past several months...from rising backlash against the questions around the origins of COVID,” Baker said. With China feeling “fairly embattled,” the government may renege on U.S. trade deal commitments, or make multinationals feel the heat, he added.
Eurasia Group Founder and CEO Ian Bremmer, who believes that the U.S. and China are heading towards a new “cold war,” told Yahoo Finance this week that the world’s largest economy should avoid inflicting damage on an ally just to spite China.
“We don't want to hurt Hong Kong more than we hurt mainland China,” Bremmer said, adding: “I expect we will put sanctions on a bunch of mid-level Chinese officials that have been involved in the crackdown … [and] we might say that Hong Kong will have export tariffs that are similar to mainland China.”
Javier David is an editor for Yahoo Finance. Follow him on Twitter: @TeflonGeek