The Hong Kong Security Law

                                                 "The times, they are a changin"   

                                                                                         --- Bob Dylan
               
Recently, China passed a security law as related to Hong Kong. Basically,  China asserts the right to prosecute under the following crimes "treason, secession, sedition, subversion against the central government, theft of state secrets, the hosting of political activities by foreign political organisations or bodies, and the establishment of ties between local and foreign political organisations."

Hong Kong has always had elements that are staunchly anti-CCP. The founder of Apple Magazine, Jimmy Lai, for example was very vocal against the Chinese government. As in the previous post of my blog here, the Chinese government tolerated this for more favorable trading and financial conditions in Hong Kong. The Chinese did not act more swiftly against the riots in Hong Kong for the same reason. They wanted to keep the special privilege for Hong Kong as long as possible.

Since they have not acted thus far against the rioters, one wonders why the timing of the move. Recently, with the new restrictions enacted to forbid TSMC selling to Huawei and the additional twenty four Chinese companies added to the entity list, it seems the U.S. China rivalry has reached a new height. Since the U.S. China relationship has already deteriorated, there would be less to lose by the Chinese enacting this law.

Reportedly, Jimmy Lai, who had been caught intimidating reporters as well as organizing illegal assemby, is looking to get out of Dodge quick, but was denied by the courts.

It seems, Hong Kong will undergo a big titanic shift.

PS, the initial response from the Trump administration is interesting. Since Trump had been talking about decoupling from China, this would be a perfect opportunity for him to declare Hong Kong as no longer a special and distinct place apart from the rest of China and cut off the trade that way. Instead, we see calls to sanction individuals who carry out this law. This is less than a slap on the wrist. This will have no impact at all to the Chinese. If this is all that will transpire, it would seem that American interest in Hong Kong trumped the ideology. This will also have implication for Taiwan.

The Hong Kong Riots, Part 2, My interpretation of the events.

 Our policies with regard to Hong Kong will remain unchanged for 50 years,

                                                                                                      --- Deng Xiaoping

Before we go into understanding the Hong Kong events, we must first understand the bigger picture. The Chinese see the role of Hong Kong as a window to trade with the world. Back when Deng had his reform, China was opening up to the world. Even as the British were handing back Hong Kong, China must ensure the British has a stake in Hong Kong to ensure that the trades to the West go smoothly. Today, Hong Kong still serve mainly these roles, though trading is no longer as important as it used to be, there are other areas that rose up and took its place. The economy of Hong Kong is in finance, trade, transportation hub, and real estate. To protect the interest of the British (and later on, the Americans), China allowed Hong Kong Tycoons and the government they control to continue to govern Hong Kong. The system was designed to serve the interest of the British and American multi-nationals. An odd by-product of this was that the judges in Hong Kong were not drawn from the native population, they were mostly imported from abroad. Most of these judges hold foreign  citizenship. The education and media is mostly controlled at the behest of the interests of the tycoon and foreign interests, though the Chinese added their own control of some part of the media. Hong Kong, thus, was founded as a joined partnership of the three interest groups; the Chinese, the tycoons, and  foreign interests, mainly American and British.

Since July 1 1997, when Hong Kong reverted back to China, until recently, Hong Kong has been peaceful. Under the faucet, however, titanic plates are moving. The tycoons were all in real estate. Gradually, they also moved to control every aspect of the Hong Kong economy, from malls to ports, from power to garbage, any sizable business are all now owned by these handful of tycoons. Hong Kong does not have much land to begin with. Singapore, with even less land, was able to provide affordable housing for its population through government interference. Unfortunately, in Hong Kong, the tycoons are in control of the government. This is like the fox guarding the hen house. They, along with the smaller property owners, have derailed every attempt by the government to increase the housing stock. What was much more egregious was that the tycoons have bought up all the land that could be developed and just sit on it. Every year, a small sliver of the already precious land was sliced out for development. The result was a skyrocketing real estate market that eat up all the earning from the residents. The high cost of real estate also prevented development into other areas. It was said that many giants of China like Alibaba and Huawei could have called Hong Kong home, but high cost and lack of foresight by the tycoons meant that they instead operate just a stone throw away in Shenzhen. Wage stagnation ensued for the last few decades as Hong Kong defends its last few industries.

On the other side, in China, development have given rise to many metropolis like Shanghai and Shenzhen. To the wealthy Chinese, Hong Kong was a tourist destination, a place to launder their money out of China, and a place to invest. The tourists brought with them some remnants of their developing world issues. For example, the tainted baby formula issue with China caused many Mainland Chinese to rush to Hong Kong to buy their baby formula there, causing shortages for the native Hong Kong people. The money laundering helped the financial institutions, but few local Hong Kong natives benefit. The investment happened at the same time the tycoons were tightly controlling the supply of housing stock, driving the price higher. While this benefited the home owners, the rest of the population suffered.

I was in China in the seventies. At that time, the disparity between what a Hong Konger earned and what a typical Chinese earned was huge. Hong Kong was like this light tower in the land of darkness. In the eighties, when China opened up, even the menial laborer in Hong Kong were able to find a beautiful mainland girl as his mistress with his salary. In fact, there was a whole village full of people who were mistresses. Their Hong Kong sponsor bought them homes in the village and would come in to visit them from time to time. Since money was how Hong Kong society value people, and they have way more money then their Mainland counterparts, they look down on their Mainland cousins. As the Mainland got wealthier, Hong Kong people increasingly feel insecure about their status as superior beings due to the place of their residence. In a society like Hong Kong, status is very important. The wealthy look down on the masses. The masses look down at the menial laborers. At least in the past, they would all feel secured about being superior to the Mainland Chinese. They will fight tooth and nail to defend this sense of superiority. This is why you see people waiving British and American flags during the riot. This would also explain why there were so much anti-mainland sentiments, to the point that many were beaten for just speaking mandarin. This include many from Singapore and Taiwan. The tycoons were eager to deflect the fact that they were taking all the money out of the working class. They were also unhappy that the Mainlanders were taking part of their businesses away while sending investment to buy up all the best properties. Since the tycoon also controlled the media, they skillfully directed the anger of the population against the Mainland government and Mainland people in general. As a result, you will never hear about Hong Kongers complain that the tycoons were taking a disproportionate cut from their  salaries. All the problems in Hong Kong were caused by the Mainland Chinese.

The British and the Americans were making money hand over fist. However, America increasingly viewed China as a competitor. As the Trump administration ratchet up the trade war, Hong Kong became a negotiating chip. As many of the colored revolutions in the world have the signature of the CIA, so do the Hong Kong riots. The Ukrainians, who were controlled by the CIA, suddenly showed up on the streets of Hong Kong directing the rioters. CIA operatives were filmed on the streets of Hong Kong, showing people how to burn down the city. Money suddenly became available for protester. People were offered money just to show up in protests. They were offered more money to burn up and destroy the city. Tens of thousands of umbrellas of the same make and color suddenly showed up on the street on the same day. Some powers were doing organizing behind the scenes. The police are now also being targeted by the mob.

At the end, the tycoons and the CIA skillfully manipulated the anger in the masses to create the riots. The angst of Hong Kong masses can only be fixed if more housing were available. The Mainland Chinese could step in to force the local government into action and make more houses available, but I am doubtful that this will happen. The Chinese only care about guarding their interest and ensuring that Hong Kong fulfill at least the function that could not be replaced, money smuggling and a place to have a stock market for Mainland companies. Given how the citizens of Hong Kong behaved towards Mainland, they are not too keen to step in to help them. Hong Kong still have a useful role to play for the Chinese so for now, things will stay as status quo. The future of Hong Kong is bleak, as its many roles are now actively being replaced by other Mainland Chinese cities. The only role that seems to be irreplaceable is to launder Chinese money. It does not take a city of six million to launder money, so the average Hong Konger will continue to stagnate until it is surpassed by its neighboring towns. Like many cities such as Venice that once had their meteoric rise to the top, Hong Kong will fall back to a less remarkable city that it once was.