Hong Kong is in turmoil not seen in more than half a century. The image of militant protesters with goggles, helmets, and gas masks smashing into Hong Kong’s parliament building, clashing with heavily armed police, or engaging in hit and run urban guerilla battles amidst tear gas and rubber bullets is out of line with the stereotypically non-confrontational, middle-class character of Hong Kong’s oppositional movement. The protests were triggered by an extradition bill that would allow the Hong Kong authorities to transfer Hong Kong residents to mainland Chinese courts. The bill was perceived to be a grave violation of the One Country, Two Systems guarantee, bringing an extension of the Chinese legal system to Hong Kong. But the protest has grown far beyond this issue. Police brutality against protesters has provoked widespread resentment against the hardening authoritarianism of the Hong Kong government and Beijing behind it. Hong Kong will never be the same after this long summer of discontent. No matter how this round of conflict ends—either a partial victory with the further back-down of the authorities to protesters’ demands, natural exhaustion of the protest, or a bloody crackdown—Hong Kong has seen the rise of a long resistance against Chinese rule. It will have its ups and downs, but it will never die. Hong Kong may be heading toward a protracted conflict like those in Northern Ireland, Palestine, and Catalonia.
It is difficult to miss the Hong Kong nationalist sentiments among many protesters. They defaced the emblem of the Hong Kong Special Administrative Region during their flash occupation of the chamber of the Legislative Council on July 1. They also defaced the emblem of the People’s Republic of China with a dirt bomb when they were protesting outside the Liaison Office of the Central Government of the People’s Republic of China later that month. Protesters took down the Chinese national flags in many highly symbolic places, like the Golden Bauhinia Square, built to commemorate the sovereignty handover in 1997. Some even threw the Chinese flag into the sea. They chanted and paint-sprayed the slogan “Liberate Hong Kong, Revolution of Our Times” on public spaces during the protest. This slogan may be vague, but it originated in a young separatist group whose hugely popular candidates and electoral allies were disqualified before or after they were elected to the Legislative Council in the 2016 election. After the group was involved in a violent clash with the police in Spring 2016, dozens of their leaders and members were convicted of rioting. Two are now in exile in Germany, and many more are in jail with long sentences. A survey among protesters shows that the actions and slogans of the more radical factions are not bothering the more moderate ones, though the Chinese authorities have explicitly put a "separatism" label on the slogan.
The relatively moderate demand of self-determination for Hong Kong is undoubtedly the only demand linking most of the protestors. Self-determination was the main slogan of the 2014 Umbrella Revolution that sought genuine universal suffrage beyond the Beijing bottom line proposal, which only allows façade elections with CCP-endorsed candidates running for the highest office. Many young candidates also ran on a self-determination platform in the 2016 Legislative Council election. They won some of the most substantial popular votes in the election, only to be disqualified by the government accusing them of “violating the spirit of the Basic Law.” The calls for self-determination are echoed in popular feeling in Hong Kong. In the most respected public opinion poll, those who identified themselves as Hong Kongese vis-à-vis Chinese reached an all-time high of 53 percent vs. 11 percent in 2019.
What precipitated this rise of separatist ideology among the youthful protesters is, on the one hand, the ever more oppressive direct intervention by Beijing into Hong Kong's local affairs that infringed the political freedoms guaranteed by the One Country, Two Systems arrangement. After all, one of the most sophisticated and outspoken theoreticians of China’s Hong Kong policy, Jiang Shigong—law professor in Beijing, keen advocator of Carl Schmitt’s Nazi legal philosophy, and a significant author of the 2014 Beijing's hardline Hong Kong White Paper that helped trigger the Umbrella Revolution—is not shy of discussing Hong Kong as a laboratory where Beijing could master “the art of empire” left by the British. He also compares the expansion of Beijing’s direct rule in Hong Kong to the shift from indirect to direct rule in newly incorporated ethnic frontiers during the Qing Empire. Jiang, echoing many Chinese leaders, hinted that after Beijing completely resolves the Hong Kong question it can move on to apply the experiences to elsewhere, presumably Taiwan. In such light, the resistance in Hong Kong today is resistance against an emerging Chinese Empire. No wonder this resistance has great resonance in Taiwan.
Besides being defiant to the increasingly aggressive rule by the Chinese imperial state, the protest is also a resistance to the expansion of Chinese capital in Hong Kong, which has become an offshore financial center for Chinese capitalism. It is without any doubt that the Chinese economy has been driven by the imperative of capital accumulation since the market reform. Even its most prominent state-owned enterprises have shed themselves of the many social welfare functions they used to assume in the Mao era and are now run under profit motivation. Officially speaking, the CCP still does not recognize China as a capitalist economy, but rather characterizes it as a “socialist market economy with Chinese characteristics.” This characterization is not just an ideological make-belief. What distinguishes China’s capitalist economy from elsewhere is that private property right is not yet fully established in China. In China, the state owns all property. Individuals and private enterprises can only own temporary use rights of the property they acquire. At the same time, the commanding height of the Chinese financial system is still isolated from the global economy. The RMB is not yet fully convertible, and the CCP fully controls the creation and circulation of credits through the monopoly by the state banks.
Hong Kong, as the only territory under Chinese sovereignty where private property right is fully institutionalized, its financial system fully open to the global economy, and its USD-pegged local currency is nearly freely convertible to the RMB, has become a nodal point linking the Chinese and global financial circuits. It provides a way that the financially closed Chinese economy can operate smoothly in a global financial system still dominated by the USD. Hong Kong becomes an indispensable offshore market that makes RMB internationalization possible while Beijing still prevents the currency from being freely convertible in the RMB’s onshore market on the mainland. Even though Hong Kong’s GDP as a share of China’s GDP has shrunk significantly over the last two decades, its role as the gateway of global capital into China and Chinese capital to the world has been expanding. Today, 70 percent of foreign direct investments (FDIs) going into China is from Hong Kong (or more accurately, entering through Hong Kong), while 60 percent of China’s outward FDIs goes to Hong Kong (or going out to the world through Hong Kong). USD-denominated external debt of Chinese enterprises have been mounting and constitutes 75 percent of all USD debt raised in Asia today, and most of the Chinese debt has been raised in Hong Kong. The stock market in Hong Kong, the fourth largest in the world, has been dominated by Chinese corporations, which account for more than 60 percent of all capital raised in the Hong Kong Stock Exchange.
Hong Kong’s status as a Chinese offshore financial center attracts an influx of Chinese capital and the wealthy Chinese elite, as well as global financial capital eager to do business with Chinese enterprises and elite. The invasion of the local economy by global and Chinese high finance drives up property prices and generates enormous income inequality in the city. Between 1997 and today, average real estate property prices in the city soared by more than three times, while median household income rose by less than twice. Chinese settlers displaced locals in many sectors, the financial sector in particular. This displacement and the subsequent cultural repercussions are a repeat of Han settler colonization in Tibet and Xinjiang, where the local populations are being displaced from the booming economic sector. This displacement, compounded with Beijing’s deliberate policy of stifling local languages and cultures, accelerates local cultural erosion.
While Hong Kong’s status helps aggravate the popular grievances against Chinese rule, it also ties Beijing’s hands. Hong Kong can become China’s offshore financial center primarily because of a US legal recognition of Hong Kong’s independent custom territory status separate from China under the US-Hong Kong Policy Act. The US sets an example of how other countries treat Hong Kong as a separate legal and economic entity. Under this recognition, the US allows Hong Kong’s financial institutions to have full access to the supply of USD, enables Hong Kong to import sensitive high-tech equipment barred from China under the global export control regime, allows Hong Kong to maintain its separate WTO membership with terms different from Chinese membership, and puts capital and visitors/immigrants from Hong Kong under much more relaxed national security scrutiny compared with those from mainland China. Without these international recognitions, other free trade zones that the Chinese authorities have attempted to build over the years—like the Qianhai free trade zone in Shenzhen and the Shanghai free trade zone—all failed.
The US and others' recognition of Hong Kong’s special trading status, nevertheless, has a limit. Such recognitions hinge on regular certification of Hong Kong’s autonomous self- governance without Beijing’s direct intervention. Under the US-Hong Kong Policy Act, the US State Department needs to regularly publish a report on whether Hong Kong is sufficiently autonomous to justify US continuous recognition of its special trading status. During the times of US-China communion between 2001-2010, Washington had reason to turn a blind eye to the erosion of Hong Kong's autonomy. But, amidst the escalation of US-Chinese rivalry, that is no more. Any direct military crackdown of Hong Kong by the Chinese army would almost certainly spell the end of such recognition, thereby destroying China's offshore financial market in Hong Kong. When that happens, Chinese and global capital will need to find another offshore financial center, and that is going to be somewhere farther away from Chinese sovereignty, not closer.
What will take Hong Kong's place will not be Shanghai or Shenzhen, but Singapore or Taipei, or London. With the turmoil around the extradition bill unfolding, there are already reports about capital flight from Hong Kong and the relocation of wealth to Singapore and London. The replacement of an offshore financial center to somewhere outside its sovereignty will be a significant loss to China. It is why China has so far avoided employing its army to quell the unrest in Hong Kong, creating room for the resistance to grow—a room that many protests on the Chinese mainland do not enjoy.
The current unrest in Hong Kong amounts to a volcanic eruption that has been building for years. Beneath the tranquil surface in the semi-autonomous city-state since 1997 has been rising tension precipitated by the expansion of the Chinese empire and Chinese capital, as well as the tension between China’s authoritarian-capitalist empire and the Anglo-Saxon liberal-capitalist one. Hong Kong’s long resistance has grown in the cracks between these rival empires and capital. How that resistance will develop will have dramatic and systemic consequences that will shape today’s emerging inter-imperial rivalry.
Ho-fung Hung is Henry M. and Elizabeth P. Wiesenfeld Professor in Political Economy at Johns Hopkins University[book-strip index="1" style="display"]