Editor’s Note: The following is a preview of the latest edition of the APAC Risk Newsletter, presented by Diplomat Risk Intelligence. To read the full newsletter, click here to subscribe for free.
Breaking: As this edition of the newsletter went to print, U.S. President Donald J. Trump at a Friday press conference announced new measures pertaining to China. This included plans to revoke Hong Kong’s special customs and travel status; sanction certain Chinese and Hong Kong officials; and suspend travel rights to the United States for certain Chinese individuals (including some students). The press conference also included an announcement that the United States would withdraw from the World Health Organization. Details remain unclear.
On Thursday, China’s National People’s Congress voted 2,878-to-1 in favor of a decision that authorizes a process to draft a national security law that will directly be imposed on the semiautonomous Hong Kong region. The vote itself (specifically on “Decision on Establishing and Improving the Legal System and Enforcement Mechanisms for the Hong Kong Special Administrative Region to Safeguard National Security”) does not result in a law right away, but starts the process, which will likely conclude by late August. When all is said and done, Beijing will have established the means to directly crack down on activities it considers undesirable in the city, including what it interprets as terrorism, separatism, or secessionism.
The NPC’s vote has confirmed the worst fears among Hong Kong’s democrats, who see this as the final nail in the coffin for “one country, two system.” Chinese Premier Li Keqiang defended the law by saying that it would amount to the “steady implementation of the ‘one country, two systems.’” Li’s wording echoed a pledge made by Xi Jinping himself during a 2017 visit to Hong Kong—long before last year’s unrest over an extradition bill spiraled into a broader movement about the city’s destiny itself.
Aside from the ramifications on political and civic life in Hong Kong—which will be severe—the NPC’s move raises serious questions about the future viability of Hong Kong’s exceptional status as a global city and financial hub. The Hang Seng Index (HSI) reacted negatively, as was to be expected, but what’s still notable is the relatively modest downward move. Investors and businesses with substantial Hong Kong exposure have gotten used to a certain degree of volatility amid last year’s substantial protests against the extradition bill, but the latest moves—on top of the pandemic crunch that hit earlier in the spring—suggest that this dramatic turn of events may not have been entirely unexpected.
Much will depend on how major international players, including the United States, react. On Wednesday, a day before the NPC vote, Mike Pompeo, the U.S. secretary of state released a statement noting that he had officially certified “that Hong Kong does not continue to warrant treatment under United States laws in the same manner as U.S. laws were applied to Hong Kong before July 1997.”
The Diplomat’s Shannon Tiezzi takes a closer look at what may come ahead:
The implication is that Hong Kong’s separate agreements and arrangements with the United States could be revoked, meaning Hong Kong, from the U.S. perspective, would be treated no differently from any other Chinese city. For example, Hong Kong would no longer be exempt – as it currently is – from the Trump administration’s tariffs on Chinese goods.
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It’s even possible that the United States could withdraw its support for Hong Kong holding a separate seat from the PRC in international organizations like the World Trade Organization and Asia-Pacific Economic Cooperation (APEC) forum.
Hong Kong has been a flashpoint in U.S.-China ties for some time now and that’s not about to change, either.
The clash spilled over into the United Nations, where China shot down a U.S. bid to have Hong Kong brought up at the Security Council, calling it a “a matter of urgent global concern that implicates international peace and security.”
Shortly after the passage of the draft decision by the NPC, the governments of the United States, Australia, Canada, and the United Kingdom released a joint statement saying that:
Hong Kong has flourished as a bastion of freedom. The international community has a significant and long-standing stake in Hong Kong’s prosperity and stability. Direct imposition of national security legislation on Hong Kong by the Beijing authorities, rather than through Hong Kong’s own institutions as provided for under Article 23 of the Basic Law, would curtail the Hong Kong people’s liberties, and in doing so, dramatically erode Hong Kong’s autonomy and the system that made it so prosperous.
The relatively quick turnaround on the release of this joint statement speaks to the high degree of concordance and coordination among the four anglophone nations on the matter. The content of the statement largely puts these countries on board with the U.S. assessment that Hong Kong no longer has sufficient autonomy. What that will mean for each of these countries’ relationships with the city remains to be seen. The joint statement does propose a solution, however: “Rebuilding trust across Hong Kong society by allowing the people of Hong Kong to enjoy the rights and freedoms they were promised can be the only way back from the tensions and unrest that the territory has seen over the last year.”
Alongside the four anglophone states, the European Union’s high representative for foreign affairs and security policy, Josep Borrell Fontelles, said in a statement that the EU was following developments in Hong Kong closely. His statement came after the vote on the draft decision came to be part of the agenda of the NPC. “The European Union has a strong stake in the continued stability and prosperity of Hong Kong under the ‘One Country Two Systems’ principle,” Borrell said. “It attaches great importance to the preservation of Hong Kong’s high degree of autonomy, in line with the Basic Law and with international commitments,” he continued. Japan, meanwhile, noted it was “seriously concerned” by the NPC’s decision—a somewhat rare statement from Tokyo at a time when relations between it and Beijing have been broadly improving.
Despite the considerable international backlash and pressure, it appears that Xi and the Chinese leadership are determined to press on, calculating that allowing Hong Kong to persist as a bastion of free expression and criticism of Beijing is detrimental over the long run. In short, the calculation here seems to be that, for China’s national interests, bringing Hong Kong under the iron-fisted control of Beijing is worthwhile, even if it bears costs.
For a deeper dive, have a listen to the latest episode of the Asia Geopolitics podcast. Shannon Tiezzi joins me to discuss the NPC’s decision and what the future might hold for Hong Kong.
Editor’s Note: The following is a preview of the latest edition of the APAC Risk Newsletter, presented by Diplomat Risk Intelligence. To read the full newsletter, click here to subscribe for free.