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What National Security Law means for Hong Kong

Jun 07, 2020
  • Zhou Xiaoming

    Former Deputy Permanent Representative of China’s Mission to the UN Office in Geneva

China’s move to enact a national security law for Hong Kong triggered rage in Washington. U.S. President Donald Trump pledged to take action to revoke Hong Kong’s treatment with regard to customs and travel. He described the action of the National People’s Congress as a “tragedy.”

Secretary of State Mike Pompeo was quoted as saying that the United States was considering accepting immigrants from Hong Kong, fueling speculation that the legislation would spur residents of the special administrative region to move overseas — similar to what happened just before China regained sovereignty over Hong Kong in 1997. All told, an estimated 300,000 Hong Kongers left the territory between 1990 and 1994.

The recent news awakens memories of my conversation with a cab driver in London in the early 1990s. He told me that he had left his job as a securities trader in Hong Kong to pursue a better life in Britain a few years earlier. In spite of repeated attempts, however, he was unable to land a desirable job and so was compelled to drive a cab to make a living. He said that many of his friends had sold their apartments in the SAR to move to the United Kingdom, only to find themselves having to go back for personal financial reasons.

These days, as the current job market in the developed world is as bleak as ever, securing a decent job will not be any easier. In addition, given the sentiment of a large proportion of American and British voters toward immigration, it seems impractical to open the door to a large influx of people fleeing Hong Kong. Any offer to accept migrants from Hong Kong is more of a ploy to fan opposition to the legislation rather than a reflection of genuine concern for those people.

The security law is intended to outlaw secession, subversion, terrorism and other acts that endanger national security. It will target — as Carrie Lam Cheng Yuet-ngor, chief executive of the SAR, put it — “an extremely small minority of criminal acts.” She added that the “life and property, basic rights and freedoms of the overwhelming majority of citizens will be protected.”

Some Hong Kongers are concerned that the legislation will chip away at their freedom of speech, press and assembly, as well as undermine the SAR’s independent judiciary. We have been here before. Just as the prediction has not materialized that Hong Kong would shrivel and die after its handover in 1997, worries over personal freedoms will eventually prove unfounded. But if worries were the sole reason for contemplating an exit, most Hong Kong residents would not find leaving justifiable. In truth, based on the analysis of both supply and demand for migration, it would be fair to conclude that a large exodus is unlikely.

Will U.S. trade restrictions undercut Hong Kong's advantages? The Hong Kong government does not appear to be particularly worried. SAR officials believe that Hong Kong's trade status is guaranteed by multiple international agreements. As a result, its role as an international financial hub will not be compromised by the revocation of preferential treatment by the U.S, and the overall economy of Hong Kong will be affected only to a limited extent.

The future of the SAR depends on its own efforts, supported by the mainland, not on anyone else, including the United States. The mainland has served, and will continue to serve, as the bulwark for Hong Kong in times of great stress and crisis. In August 1998, when the Heng Shang Index fell by more than 60 percent and the SAR’s GDP shrank 5.5 percent, the mainland came to the rescue, beating back felonious attacks on the Hong Kong dollar and the stock exchange led by George Soros, who had amassed many billions by wreaking havoc around Asia.

The Chinese mainland is the major source of growth for Hong Kong. Take the stock exchange for example: Private sector companies from across the SAR’s northern border account for more than 70 percent of the total market capitalization of the Hong Kong Stock Exchange. According to Jefferies investment bank in the U.S., another $557 billion could join the exchange over the next three years, increasing its combined market capitalization by 12 percent if Chinese companies are forced to delist from U.S. stock exchanges.

More important, the Greater Bay Area development plan, which links Hong Kong with the Pearl River Delta area in neighboring Guangdong province and Macau, will enable the city to achieve accelerated and sustained growth. It provides Hong Kong with improved access to a vast market with enormous development potential, giving full play to its strengths in areas such as finance, while capitalizing on the advantages of its partners in production capacity and R&D capability.

Shrugging off Trump’s threat, the Hang Seng Index rose by 3.36 percent on June 1, the first trading day after the U.S. announcement and the best day in more than two months. The market optimism, analysts say, was also partly the result of funds from across its northern border. Waves of mainland capital have flooded into equities listed in Hong Kong.

Hong Kong will only get better as order returns to the city in the wake of the national security law. It would then be able to emulate Macau, its one-time poorer and more disadvantaged neighbor. Since 1999, when China reclaimed sovereignty, Macau, the other special administrative region of China that has enjoyed a stable and growth-friendly political environment, has experienced rapid economic development.

During the period between 1999 to 2018, Macau’s GDP per capita jumped by a factor of 4.8, from US$15,000 to $87,000, the highest in Asia. By contrast, per capita GDP in Hong Kong rose less than 40 percent to US$48,000 in the 22 years since the handover. 

The threatened move by the United States is likely to hurt the U.S. more than Hong Kong. The U.S. has huge interests in the SAR. Two-way trade between Hong Kong and the U.S. last year accounted for just 6.2 percent of the Hong Kong’s total imports and exports. The export to the U.S. of goods made in Hong Kong is insignificant, making up less than 0.1 percent of Hong Kong’s total exports.

Economically, Hong Kong is much more important to the U.S. than the reverse. The U.S. trade surplus with Hong Kong exceeds US$20 billion a year, making the SAR its largest source of trade surplus. Hong Kong is also among the top 10 U.S. trading partners in many products, such as beef, wine and farm products. As such, Hong Kong would be highly valuable to the Trump administration, which is obsessed with finding a solution to its huge trade deficit with the rest of the world.

The interests of U.S. enterprises and investors in Hong Kong will be undermined by the White House move. All told, more than 1,300 U.S. companies operate in the SAR, with more than half of them locating their regional headquarters or offices there. Hong Kong literally serves as the springboard for commercial activities and investment in the Chinese mainland, Southeast Asia and beyond. The position of the U.S companies will likely become precarious if Hong Kong is compelled to reciprocate against an ill-advised move by the U.S. government. They will find themselves at a disadvantage against their competitors. U.S. exporters, for instance, may have to pay higher tariffs on their products sent to Hong Kong than exporters from other countries or regions.

The U.S. fire and fury in response to the national security legislation can be seen as Washington’s moan over the loss of Hong Kong as a bridgehead for secession, subversion, infiltration and sabotage against the Chinese mainland.

Pompeo admitted as much: “While the U.S. once hoped that a free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself.” 

It is no secret that Washington has been heavily involved in the anti-China and anti-government protests over the past year. The U.S. maintains one of its largest overseas missions in Hong Kong, with its staff numbering around 1,000 for approximately 80,000 expatriates. U.S. consular officials were caught meeting with leaders of the anti-China protestors at the peak of the rioting last year.

The plan to enact a national security law must hit Washington where it hurts most. It will fill a void in Hong Kong’s legal framework, which Washington has been taking advantage of for decades. It will thus make it more difficult for Washington to operate in the SAR the way it has in the past. China’s clampdown on criminals is particularly painful for Washington at a time when Hong Kong has moved to the front line in Washington’s push to contain China.

However, the legislation is increasingly winning support both in Hong Kong and the mainland. In Hong Kong, nearly 3 million people signed their names to indicate approval of the legislation in just eight days in a city of approximately 8 million residents. The yearlong protests, sometimes violent, had inflicted much pain on the economy and residents at large.

Increasingly, Hong Kongers have come to realize that national security is of paramount importance to any country in the world — it is the prerequisite for a stable and peaceful environment. On the Chinese mainland, people were outraged by Washington’s reaction. What right does the U.S. have to object to China enacting a national security law for its own land, they demand to know, when the U.S. itself has dozens of laws in the area of national security?

The journey to a more stable and prosperous Hong Kong has begun. Challenging as it may be, the making and enforcement of a national security law for Hong Kong deserves the support from all of us who wish the best for SAR. 

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