Beijing’s Plan for a Post-National Security Law Hong Kong

Hong Kong’s National Security Law – passed by the Standing Committee of the National People’s Congress at the end of June – came into effect on July 1, 23 years after the city’s handover to China.

The lightning speed at which the law was publicized, legislated, and implemented alarmed many international observers while inevitably engendering a certain level of uneasiness among Hong Kong residents. While Beijing saw the law as a necessary response to the year-long civil strife, political instability, and socioeconomic downturn, many in Hong Kong – even those with conventionally pro-establishment sympathies – found the move unsettling and jarring.

Yet in interpreting Beijing’s upcoming plans for Hong Kong, it behooves analysts to steer clear of ideologically preoccupied extrapolations. Here’s my view — contra its ardent proponents, the law is unlikely to instantaneously restore the much-venerated “law and order” to Hong Kong, yet given its resilient character and robust financial-legal infrastructure, the passage of the law also does not spell the end for the city. The short-term outlook may be rocky, but the city’s fate is far from bleak.

The means and implications of the law’s passing offer critical insights into Beijing’s short- to medium-term plans for Hong Kong – with three prongs particularly worth highlighting: i) socioeconomic amelioration; ii) moratorium on large-scale political reforms; and iii) continued assimilation of Hong Kong into the Greater Bay Area metropolis.

Socioeconomic Reform

Ironically, there is perhaps one core issue on which many in the ailing social movement and Beijing would agree: Hong Kong is afflicted by socioeconomic inequality, on a scale that is infrequently seen elsewhere within the “developed world.” The city’s Gini coefficient stood at 0.54 in 2016, and had remained at that level for two decades post-handover. Hong Kong’s exorbitant housing prices – induced by an alarming disparity between the city’s total land mass and the volume of land that is available for affordable housing development, as well as ill-thought-out urban (mis)planning and persistent intransigence from the landed gentry – have left many in the city convinced that they have nothing to lose or gain from the city’s ostensible prosperity. Capture by powerful oligarchs and prominent businesses made the city’s economy precariously dependent upon its real estate and financial sectors – which, as the repeated busts over the past two decades have indicated, are neither sustainable nor equitable in the growth they spur.

It is likely that Beijing – disillusioned by the local administration’s seeming fixation upon short-term fixes and remedies (e.g. cash handouts and one-off tax rebates) – would press for significantly more redistributive policies that directly target the poorest and most vulnerable. With one in seven individuals living below the poverty line, only through trenchant reforms (e.g. a less stratified and more equitable education system, more affordable housing, and targeted health support for the mentally ill and disabled) could both Beijing and the Hong Kong government regain buy-in and support from the city’s underbelly.

Concurrently, with its Common Law jurisdiction, low tax rates, and continually unrivalled access to low-tariff trade (despite moves from the United States), Hong Kong is unlikely to experience substantial capital flight from its upper echelons. Thus Beijing has braced itself for the plausibly inevitable exodus of middle-class households. So long as mainland Chinese households and workers could move freely into the city, mainland bureaucrats view the concerns over brain drain as largely over-stated and manageable risks.

There are two mutually complementary yet distinct sets of matrices that render any city a highly palatable site for foreign investment – the first constitutes transparency and accountability; the second constitutes stability and certainty. As the mass influx of foreign investment into China – since its opening up and liberalization in the 1980s – has demonstrated, international investors often prioritize the latter over the former. Indeed, despite the purported tightening over civil and political liberties, Shanghai’s competitiveness as an international financial center has steadily increased over the years, despite its deficiency in the areas of Hong Kong’s hitherto unrivalled comparative advantages (e.g. Common Law jurisdiction, low tax rates, and the city’s unique semi-democratic political institutions). Therefore – contrary to skeptics who suggest that Beijing’s move in Hong Kong would jeopardize a critical gateway for the country in accessing the international community – mainland Chinese bureaucrats seem to believe that through preserving stability via toeing critical national security baselines and substantial fixes for the city’s socioeconomic inequalities, such “de-politicized” reforms would suffice in maintaining the city’s viability as a global financial hub.

Whether such logic in fact pans out in reality, of course, remains an entirely different matter. Given the city’s unique electoral institutions (where real-estate property developers and hegemonic corporations control a significant number of the 1,200 electors for the city’s chief executive), and quasi-revolving door (where corporate interests often play a critical role in determining the composition of each cabinet), whether the strategy of mollifying the poor in fact succeeds remains to be seen.

Political Transformation or Stagnation?

Some posit that the post-National Security Law Hong Kong would “backslide” into becoming “just another Chinese city.” No one knows for sure what the future holds – especially in a country with politics as enigmatic and opaque as China’s. Setting aside the observation that Chinese metropolises such as Shanghai and Shenzhen are seemingly flourishing with broadly responsive governance structures (despite the absence of formal democracy), there are more substantive reasons making this hypothesis improbable. As direct beneficiaries and participants of China’s waves of political and economic liberalization in the 1980s, those governing China today are well aware of the need for risk diversification and hedging their bets. Hong Kong’s civil liberties and legal infrastructure remain instrumental for the city’s attractiveness to foreign and local talents, but also serve as a crucial outward-facing “buffer zone” for the rest of China. As the New Cold War escalates, Beijing has every incentive to keep Hong Kong the nexus for strategic business-to-government negotiations, inter-civil society collaboration, and (perhaps more pressingly) legally supported IPOs.

Yet political liberalization remains unlikely in the short to medium term. To Beijing, their supporting Carrie Lam in the 2017 chief executive elections, coupled with the administration’s thawing of relations with the pan-democratic camp, have been explicit olive branches that they expected their opposition to take up.

Pan-democrats, however, saw these “concessions” as both perfunctory and inadequate. 

For hard-liners in Beijing, the events of 2019-2020 (ranging from the surge in xenophobic, secessionist rhetoric among fringes in the protest movement to the complete breakdown in governmental efficiency) have affirmed their convictions that Hong Kong could only be governed through staunch and high-strung measures enforcing maximal compliance and upholding the critical “baselines” that demarcate boundaries of acceptable political behaviors. 

Moderates within the system, on the other hand, have been side-lined by the past year’s events, which – if anything – have seemingly demonstrated the futility of the conciliatory approach that had previously been on the table from 2017-2019. Given that the anti-extradition bill movement appeared to be a damning indictment of such rapprochement efforts, Beijing views itself as left with little choice but to implement the stop-gap measure of introducing the National Security Law.

Notwithstanding its reluctance to undertake seismic concessions over the city’s path toward universal suffrage and democratization, Beijing is not oblivious to Hong Kong’s governance problems. Poor governance undermines Beijing’s pitch that the post-colonial era Hong Kong has been a success, as well as discredits “one country, two systems” as a purportedly transferable model of governance that could be, in Beijing’s eyes, applied to Taiwan. The central administration, in theory, has every interest in transforming the city’s governance into one that is responsive without democracy, and partially accountable without formal accountability mechanisms – particularly in areas that do not jeopardize Beijing’s ultimate jurisdiction over Hong Kong.

Yet any prospective political reforms that rock the boat too much will indubitably be ruled out by legal and informal constraints. For two decades, pan-democrats in the city have sought to put forward radical measures of political liberalization, ranging from the near-instantaneous introduction of universal suffrage and elimination of Functional Constituencies, to greater decoupling of Hong Kong from mainland China. While their supporters view these demands as natural extensions of the rights enshrined by the “two systems” principle, Beijing views such advocacy as fundamentally antithetical to the intactness and stability of “one country” – especially in light of the surging localist sentiments, now rampant amongst the city’s youth.

Political transformations are unlikely to materialize until Beijing feels that such reforms a) will not promulgate secessionist tendencies, b) will not be successfully spun by its enemies into ostensible signs of weakness or capitulation, and c) do not come at the expense of national security. Thus it behooves moderate democrats in the city to make the calculated and well-reasoned pitch to Beijing, in highlighting why democratization may be to the mutual benefit of Hong Kong and mainland China at large. The pitch for democratization here must decouple itself explicitly and openly from calls for secession or independence, and instead be founded upon concerns shared by Beijing and the city’s denizens alike – e.g. problematic corporate capture and leaders’ lack of political resolve to govern effectively.

Sociocultural Integration

The Greater Bay Area (a good overview can be found in Professor Yun-wing Sung’s research) is one of Xi Jinping’s flagship projects, featuring the holistic integration of cities clustered around the Pearl River Delta. Yet what is perhaps overlooked is the project’s cultural significance – as the cradle for Cantonese culture, the Greater Bay Area is populated by more Cantonese-speaking peoples than Mandarin-speakers, a rarity in the increasingly linguistically monolithic country.

Beijing views the “Hong Kong issue” as the culmination of a plethora of factors. Yet what conspicuously juts out is the seeming incompatibility between Hong Kong’s distinctive local culture and mainland Chinese culture – which is perceived by many locals as alien, even inimical to the city’s ethos. Despite 23 years of attempts at regaining the “hearts and minds” of Hong Kongers via the offering of economic perks (e.g. the post-2003 SARS influx of mainland Chinese tourists, or the Closer Economic Partnership Arrangement passed in 2008), Beijing sees in Hong Kong an obstinate popular ethos that resists integration into the rest of China.

Through “carrots” such as cross-border exchange programs and greater migrant flows from neighboring Guangdong province, the central administration seeks to imbue within Hong Kong practices and values more resemblant of those espoused by mainland denizens. While some view these changes as innately destructive toward the city’s rich and diverse cultural contours, others may find themselves amenable to a Hong Kong that more closely resembles the mainland. Those who yearn for a Hong Kong with distinctive cultural values and political structures – divergent from mainland China’s – may well find themselves distressed and disappointed by the city’s transformations. Locals and recent migrants who self-identify as net beneficiaries of China’s rapid economic metamorphosis and growth over the past decades may well be more receptive.

Conclusion

At its core, China’s ruling party remains savvily pragmatic and adaptive. Beijing prioritizes, and with good reason from the Party’s point of view, the upholding of national security – even despite the international backlash over the events unfolding in Hong Kong. Yet Beijing also recognizes that for it to completely uproot Hong Kong’s legal infrastructure, unrivalled access to international capital, and unique attractiveness for prospective human capital would be self-undermining and benefits no one.

The National Security Law was passed by Beijing as a measure of last resort, but is by no means the coda for the “Pearl of the Orient.” Hong Kong is likely to undergo a continued period of “Singaporeanization” — with persistent stagnation over or curtailing of particular political liberties, accompanied nevertheless by a broad upholding of citizens’ and corporations’ economic liberties, and progress over nonpolitical issues.

Hong Kong has always been one of China’s more eminent gateways to the world, but by no means is its only one. This status is unlikely to change, even under Beijing’s latest plans for the city. Hence it may be unwise to write off Hong Kong just yet.