In mid-November last year, I spent a month in Hong Kong catching up with my relatives and friends.
During this time I wrote two articles. One was on the rising living costs in Hong Kong and my awakening to gold. The other explored how gold could help locals retain their purchasing power and build their wealth.
Like many, I’ve been concerned about the recent developments and wonder what destiny lies ahead for my homeland.
Last Saturday’s Taiwanese election resulted in the incumbent pro-independence Democratic Progress Party retaining power. Many believe China will not shift from its desire to unify Taiwan and Hong Kong under its rule, even if it means with force that would cost countless lives.
Now the world is expecting the Mainland Chinese government will intensify its harsh rhetoric against its neighbour and even escalate it to a hot war.
My read of the recent developments within and outside this region gives me another perspective.
It’s not a commonly held view, but I hope you’ll indulge me.
Sliding down the slope of authoritarian rule
Since the 1997 handover, Hong Kong transitioned to the ‘One Country, Two Systems’ policy. Overseeing this is the Government of the Hong Kong Special Administrative Region (HKSAR) that operates under the influence of the Chinese Communist Party.
In the last 10 years, there’s no doubt that the Chinese government has overtly accelerated the pace to integrate Hong Kong into the mainland. The path of integrating Hong Kong into China became political, economic and social as President Xi took power in 2013.
Effectively, China was reneging on the original agreement.
Even before that, business leaders and public figures including entertainers courted the CCP to win benefits for themselves. The media agencies similarly leaned to the winds of change while the government stepped up to censor.
In turn, the HKSAR government policies shifted to become more pro-Mainland, at the expense of the Hong Kong populace.
All this inevitably led to growing public dissatisfaction that gradually boiled over. We saw the mass demonstrations in 2003, 2014 and 2019.
Each demonstration became increasingly fierce. In 2019, the world watched on their TV screens footages of armed clashes between the more radical factions of the populist protests with the police and white-clad thugs.
The response from the HKSAR government arising from each protest was more severe. We’ve seen the introduction of the National Security Law, the draconian lockdowns and suppression during the Wuhan virus outbreak, and the closure of dissenting media outlets.
All of these measures were supposed to send this message to the world.
This is China’s domestic business. They won’t tolerate dissent within and everyone else should stay out of it.
You’d think that it’s game over for those in Hong Kong who value liberty, human rights and freedom of speech.
The Pearl of the East has sunk.
Or has it?
The Hong Kong spirit — Unpredictable, adaptable and unyielding
Prior to my latest trip to Hong Kong, I felt some despair that Hong Kong’s fate was sealed.
In my recent articles, you could sense that my tone wasn’t as cheery. It wasn’t the same as talking gold’s prospects or the hope I have for the downfall of globalism.
That’s because I felt life in Hong Kong currently is tough for the vast majority of the people. They’re enduring rising living costs, poor housing affordability and a governing body whose interests aren’t aligned with theirs.
However, talking to the locals and listening to the commentary from local key opinion leaders (KOLs), you could sense a fight inside them.
They don’t like the ruling class.
They’re struggling with making ends meet.
But they’re going to quietly give them the finger and make them pay.
You won’t believe how they’ll fight back. But I’ll show you an example.
Oh the irony!
One of the most amusing things I witnessed among the Hong Kong locals was their mass exodus across the border to Shenzhen and the Greater Bay Area on weekends.
Hong Kong fully reopened last March, one of the last in the world. This meant free travel to and from China.
The draconian lockdowns and mask mandates in Hong Kong left many businesses broke. Resentment towards the government soared.
Those who aren’t aware of politics in Hong Kong won’t know that one of the pride and joy of the HKSAR government is their fiscal position. Hong Kong is one of the few places in the world with a current account surplus and a strong US dollar reserve.
As the gateway for international businesses to trade with China and the legacy of being one of Asia’s financial centres, the government enjoyed massive inflows from taxes and duties.
All this while keeping the income tax rate low.
As policymakers tried to make up for lost time to restore the crippled local economy, it sought to introduce policies to spur spending. This included another round of stimulus checks, reduced public transport fares for the elderly and setting up night markets in designated areas.
The Hong Kong locals responded by giving the government the finger.
With the cost of living much lower across the border, they hopped on the train and headed north.
This included many who rallied against Mainland China in 2014 and 2019.
I remember seeing a meme that showed the same multitude of people marching the streets in 2019 were marching through the border into China in 2023.
The irony was humorous, in a dank way.
I’m not saying that the Hong Kong people have forgiven Mainland China by crossing the border to indulge in eating, shopping and pampering themselves.
For some, this is their payback. 10 years ago the Mainland Chinese travellers came to Hong Kong to splurge on their goods, carting goods back home and made life uncomfortable for the locals. They were going to show the Mainland Chinese people what it’s like in their city.
Moreover, some said that they’d rather tank the Hong Kong economy to stick it to the HKSAR officials seeking to meet the KPIs set by their CCP overlords!
An autocracy without representation
I know that from the perspective of the West that has enjoyed democratic governments, the people in Hong Kong are in a terminal spiral.
But it’s not as ominous as we’d think.
For one, Chinese people aren’t as craving for liberty as their western brethren. What matters more for them are social stability and economic security. The Confucian philosophy and countless dynastic rule have permeated the culture. It’s ingrained people with a more submissive spirit.
Take away the stability and security and they’ll fight tooth and nail.
Meanwhile, the HKSAR government is feeling uneasy about their control of the region. This is despite last month’s district election that saw the ruling coalition win in a near clean sweep. But that was only through disqualifying almost all opposition candidates from running! Only 27% of the eligible voters participated.
The silence of the majority is deafening.
Plus, the world is watching this. No doubt business leaders will likely factor this into their decisions to expand in Hong Kong or go elsewhere. This would further hurt the local economy and the HKSAR government.
The failure of the government to win back the people through economic reform policies certainly leaves them in a tight position.
Bigger problem in not-so-little China
In normal times, the current predicament wouldn’t worry the HKSAR officials.
But there are bigger problems north of the border that means they can’t afford to fight back with an iron fist.
The Chinese economy itself is in dire straits.
And this is not an understatement.
For one, the government has recently enacted measures to censor anyone who posts on social media or other platforms suggesting that its economy is suffering.
Secondly, the amount of bank and property developer collapses skyrocketed last year. These usually lead to protests, some turning violent, as people who have nothing to lose clash with the authorities.
Recall that in late 2022, there was a ‘blank paper’ (baizhi) movement where people petitioned the government to stop random lockdowns to revive the economy.
The response was somewhat surprising. President Xi and other officials relented and the country finally reopened for good.
That move shows clearly the fragility of the regime. Beneath the exterior of harshness and ‘my way or the highway’ is a regime plagued by economic turmoil, uneasy alliances and people who are at the brink.
Make or break for President Xi
President Xi may have secured a lifelong appointment as the top official in China in the 2022 plenary session.
However, he’s walking the tight rope.
His position depends on whether he can retain support from his allies in the government and military.
To do this, he needs to keep the economy from collapsing. A collapse in the economy will lead to social breakdown and even his military allies will turn against him.
In foreign policy, President Xi needs to succeed in reunifying Taiwan and Hong Kong. This is apparently one of his key goals. The latest election results in both regions suggest resistance is growing, even if it’s less overt in Hong Kong.
A hot war to take over Taiwan is almost certainly out of the question.
This is notwithstanding a change in government in the US with the election due in November. A Trump administration will put President Xi in a tighter bind.
Speaking of Trump, he has on several occasions remarked how President Xi is ‘smart and a great leader’.
But don’t take that literally!
What I interpret is that Trump is giving President Xi veiled advice rather than praising him.
Faced with the delicate balance inside and outside China, he’s got a lot of compromise and deal-making ahead of him. The cards are not in his favour.
I believe President Xi knows that and he’ll think carefully before acting.
As for certainty in a reunified China in President Xi’s terms, I don’t see it.
What will it be? A thick plot with many twists and turns.
God bless,
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Brian Chu,
Editor, The Australian Gold Report and Gold Stock Pro
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