Tension in Hong Kong

Giancarlo Elia Valori

After about three months of riots, often particularly violent and destructive, on October 23, 2019 the Chief Executive of Hong Kong, Carrie Lam, alias Chen Yuet-Ngor, withdrew the bill on mandatory extradition to China, which had sparked protests in the former British colony.

Never evaluate a mass protest on the basis of the reason triggering it, which can often be irrelevant.

The extradition bill, announced in September, was withdrawn a few days after the resumption of works in Hong Kong’s Parliament.

With a view to partially repressing the insurgency, the now former Chief Executive of the city-state resorted to emergency legislation, by mainly using the colonial law of 1922, which prohibits the use of masks and disguises during public demonstrations.

The protesters were and still are approximately one million, out of about eight million inhabitants.

The subsequent riots, designed to last well beyond the bill withdrawal, strained the always tense relations between the former British colony and China, with the result of throwing into crisis also the Chinese governance of the city-State and, in particular, the traditional Chinese model of “One Nation, Two Systems”.

If this model fails, the formula devised by Deng Xiaoping will not even apply to Taiwan, or possibly to the North Pacific islands, and it will anyway undermine the current Chinese idea of peaceful expansion and win-win collaboration between the Chinese motherland and all the bordering areas both in the Pacific and in Central Asia.

Since 1977 – when the Fragrant Harbour came under Chinese control – all riots in Hong Kong have been triggered by strong dissatisfaction with the Chinese motherland.

The deep economic and social dissatisfaction has always been targeted against China and never towards local power elites. In psychoanalysis, this phenomenon is called transference.

In 2003 many thousands of people living in the former British colony had protested against a law that, in their opinion, would make it difficult to express opinions and feelings defined as “anti-Chinese” and the law was postponed indefinitely.

Further riots broke out in 2012, when a clearly pro-Chinese school program was proposed and once again the local authorities (upon direct instructions from the national government) avoided implementing that law.

In 2014, there were the sit-in street protests of the Occupy Central movement, the so-called “Umbrella Revolution”, which lasted three months to ask – this time unsuccessfully – for the Chief Executive of Hong Kong to be elected by universal suffrage.

Currently, however, the real reason underlying the protests in Hong Kong is not so much the request for implementing  – in the former British colony – democratic mechanisms typical of the Western culture, but rather the tension resulting from great economic inequalities.

Not to mention the broken social elevator, which is  probably the real trigger of the youth rebellion in the Fragrant Harbour.

People, especially the skilled workers, cannot be ensured acceptable wages and salaries. This is the reason why many inhabitants of the old city-state migrate to Canada or Taiwan. Another blow to China.

Young graduates’ wages and salaries have dropped by at least 10% compared to 25 years ago. There is a very severe housing crisis, but anyway the choice to create a local oligarchy that tries to convince the other inhabitants is an old British idea.

In Hong Kong an oligarchy of very few families dominates the local economic system, which is worth a GDP of 343.5 billion US dollars.

The five most powerful families are still those led by Li Ka-shing, Kwong Siu-hing, Lee Shau-kee, Henry Cheng and Joseph Lau.

These five families alone control 70% of the entire Hong Kong market, including real estate and telecommunications, as well as TV channels.

The 21 leading families in Hong Kong control a wealth equal to 1,893 billion US dollars.

Obviously in China no family controls such a huge amount of wealth. In the People’s Republic of China the five major real estate operators put together control only 9% of the entire Chinese construction market.

China, however, has tried to gain support in Hong Kong,  especially among entrepreneurs, with the Greater Bay Area plan, i.e. the new megalopolis on the Pearl River Delta between Hong Kong, Guangdong and Macao.

This is, in fact, Hong Kong’s infrastructure aggregation to the  Autonomous Economic Zone of the Pearl River Delta, between Guangzou, Shenzhen, Zhuhai, Foshan, Zhongshan amd Jiangmen, which are the most dynamic economic areas in China.

Taxes are very low in Hong Kong, as in all business-friendly countries but, coincidentally, there is no inheritance tax.

The administrative machinery is therefore very simple: Hong Kong’s government does not gain sufficient revenue from taxation and hence has no funds to invest in schools, hospitals and infrastructure.

A city like Hong Kong, with over seven million inhabitants, provides for a statutory minimum wage of 4.82 US dollars per hour.  Almost all flats are illegal and, considering the cost of rents and properties, they are so small that they are about half of the “tiny apartments” in large U.S. cities, which are already very small.

The average size of Hong Kong flats per inhabitant is 16 square metres, while in Shanghai the average size per inhabitant is 36 square metres.

45% of Hong Kong’s inhabitants live in state-owned or subsidised apartments, while 90% of the Chinese people own at least their own houses.

Hong Kong’s tax reserves are at least 147 billion US dollars, but the local political system is too fragmented – even from the viewpoint of the complex electoral system – to mediate between different interests and to really solve the main problems of the city-state, namely housing, health and education costs.

Those who are ill must wait an average of 150 weeks before being examined, with 43 public hospitals that, however, employ  40% of the doctors available, since the private sector attracts many of the best professionals.

The solution of employing doctors from abroad is not very practicable, considering the low attractiveness of Hong Kong’s wages and salaries and the poor quality of health facilities.

One in six people living in Hong Kong suffers from mental disorders due to social, economic and health conditions.

The graduates’ average wages and salaries in the former British colony have fallen by over 10% compared to a decade ago. Nowadays graduates are easily paid the best salaries and wages of workers without university qualifications.

As already said, there is no social elevator.

The cost per square metre is much higher in Hong Kong than the average price in a central neighbourhood of  New York.

As happens also in the West, the career prospects of young graduates in Hong Kong are very limited. They never have a house of their own and their prospects are much worse than those of their colleagues who lived in Hong Kong a few decades ago.

In Hong Kong the Gini Index, which is used as a gauge of economic inequality, is 5+, one of the highest and most unequal indexes in the world.

This is the real political core of the issue: for those who protested in Hong Kong – as currently happens everywhere in the world – “democracy” in the Euro-American sense means above all greater social equality, many opportunities and efficient public services.

This is obviously not true, but it is the model that took to the streets the crowds of the Arab Spring, the Euromaidan citizens in Ukraine and the “colourful” rebellions in Georgia.

Paradoxically, just when Western democracies are turned into  States based on unearned income and the extent and quality of their Welfare diminish, they are mythicized as efficient and open.

In this case, Vilfredo Pareto would have spoken of “residues”, i.e. memories of a time that no longer exists, but that are still in action in the crowds’ deep psyche.

In 1997, at the time of unification based on the “One Country, Two Systems” model, Hong Kong’s GDP accounted for 18% of  whole China’s GDP.

Currently, after China’s fast growth, the importance of the Fragrant Harbour is the same as the relevance of Guangdong or Shenzhen.

The current protests, however, have also put Hong Kong’s business community in severe difficulty.

The majority of Hong Kong’s leading companies do most of their  business with China. It is not by chance that last August the Chinese authorities gathered 500 of the most important businessmen and political leaders in Shenzen to support the Hong Kong government and, possibly, sufficiently improve the social situation of the city-state, which, however, remains explosive.

Hong Kong’s financial market has suffered the greatest damage.

The Chinese company Alibaba has postponed its listing on the local Stock Exchange until the uprising has finally abated, while Fitch has lowered Hong Kong’s rating.

Pending a systemic integration with the regulatory network of  mainland China.

Another problem that the riots in the Flagrant Harbour may cause  is migration.

Last year 24,300 highly-skilled young people left the country and the rate of  migration requests has risen by 15% per year.

Where do they go? To Canada, Australia, New Zealand and Taiwan.

On the other hand, the number of Chinese people migrating to Hong Kong has decreased by 14,000 per year.

Furthermore, this November there will be the Hong Kong District Council elections and it is very likely that youth discontent will find a way to assert itself in the polls.

A fragmented society under crisis creates many problems for those planning business cycles and Hong Kong is likely to see its growth rate decrease by at least 3%.

Where will capital go? Obviously in the Chinese area bordering on Hong Kong, with an expected investment growth of almost 6.5%, largely consisting of capital outflows from Hong Kong.

The differences between Hong Kong and China, however, are much wider than those shown with violence during the recent long protests, which often followed the same tactics of the color revolutions organized by the US Services, according to the old model developed by the Einstein Institute.

For China, Deng Xiaoping’s criterion “One Country, Two Systems” means that China takes over Hong Kong despite the differences in political and economic systems, which will eventually tend to overlap. Conversely, for Hong Kong leaders the “Country” is just lip service paid in view of maintaining the separation from China, both from a cultural as well as an economic and political viewpoint.

China has so far controlled Hong Kong with the same logic with which it has supervised its “dangerous” territories, namely Tibet, Xinjiang and Manchuria.

The current Chinese centralization stems from the analysis of the inglorious collapse of the almost federalist Soviet Union. In this regard, suffice to recall the ironic smiles that welcomed Gorbachev on his visit to China, just when the Tiananmen Square protests had reached their climax.

It does not matter that the right to secession was established in Lenin’s Sacred Texts. The fact is that, for the Chinese leadership, the unity of the Country and the repression of every regionalist secession is fundamental to the permanence of the State – and of  the Party.

China, however, still depends on the financial hub of Hong Kong, the only one completely open to the world capital flows.

According to 2018 data, the Hong Kong Stock Exchange capitalizes 29.9 trillion local dollars.

Shenzhen and Shanghai cannot replace Hong Kong in this respect.

Therefore, China could not intervene in Hong Kong because otherwise it would have destroyed on its own the way connecting China to international capital flows.

Furthermore, the repression of the Hong Kong movements would have destroyed the model “One Country, Two Systems”, which is exactly the one that will be applied to Taiwan, at the right time.

Nor should we forget that, pending the New Silk Road promoted by China, the Western Powers are conceiving political mechanisms for disrupting and possibly stopping the “Road”, by organizing rebellions and anti-Chinese parties and movements in the various countries where the passage of the Chinese One Belt One Road (OBOR) is planned.

Obviously China does not stand by and wait to see.

From this viewpoint, the Hong Kong uprising is a model that will soon be imitated and that China will oppose exactly with the same political tactics.

As is recommended in the Thirty-Six Stratagems, “Befriend a distant State and strikes a neighbouring one”.

 

GIANCARLO ELIA VALORI

Honorable de l’Académie des Sciences de l’Institut de France

President of International World Group