Killing the Golden Goose: China’s Mismanagement of Hong Kong
Robert Cole
Beijing’s modern relationship with Hong Kong has always been complex. Its possession by the British prior to 1997 served as an embarrassing reminder to the mainland government of its domination by colonial powers during the “century of humiliation” running from the mid-19th to the mid-20th century. Once the People’s Republic regained control over the territory however, it was faced with another problem. The single-party communist state could brook no serious alternatives to its authority and chosen economic model, but simultaneously considered Hong Kong a tremendously valuable prize as a center of international business. Beijing, bound as it was by international treaties about the autonomy of Hong Kong and fearing a mass exodus of business from the region, largely opted to allow continued autonomy for the region.
This changed in 2019 and 2020 with the passage of a series of laws restricting freedoms and allowing for dissidents to be extradited to the mainland. A massive protest movement ensued, leading to harsh responses from the police, which eventually succeeded in quelling the protests and enacting the new security measures. The protests were swiftly followed by the beginning of the covid-19 pandemic, which led to harsh shutdown measures by mainland China. Given that Hong Kong has lost much of its autonomy and its government takes orders from Beijing, it has prioritized reopening its border with the mainland over international travel. This has proven problematic for the international business community in the city, particularly expats, who are faced with lengthy entry quarantines and long periods away from their families.
Between brutal crushing of democratic institutions and draconian covid measures, it would seem obvious that businesses would be looking for ways out. The problem, at least from a business perspective, is that Hong Kong became a business epicenter for a reason, namely that no other location in East Asia possesses the capacity to serve as a home for so many companies and expats. Locations in Japan such as Tokyo are under even tighter covid measures of their own, while cities like Seoul and Bangkok are undesirable due to factors such as linguistic barriers and limited capacity to house businesses and their employees. The wide favorite among expats leaving Hong Kong is Singapore, which is in many ways similar to Hong Kong. However, the city has created new barriers to obtaining visas during the pandemic, both in order to limit its infection risk but also likely a measure to protect its domestic labor force from competition with expats. Taipei has become a dark horse favorite in some circles, given that it has a favorable business climate, a high degree of English proficiency, and a generally more favorable attitude toward expats. This could be a valuable asset for the island nation of Taiwan as it seeks to combat efforts by China to isolate it from the world and force a reunification with the mainland.
Through a complex series of events, China is at serious risk of losing one of its economic crown jewels and a key element of its soft power arsenal. The more Hong Kong is assimilated into the mainland, the more its unique advantages slip away. This is arguably a symptom of one of China’s larger looming issues: when faced with a choice between maintaining the iron grip of the Communist Party and maintaining economic prosperity, the CCP will choose power every time.