The History of Hong Kong as a British colony dates back to the first opium wars. But in 1997, Hong Kong was handed by to China under the “One Country Two Systems” declaration that would allow Hong Kong to remain independent from Beijing until 2047. However, it is 2019, and China doesn’t want to wait until then.
If you’ve followed the news, you’ll know that in the past few months, we’ve seen several demonstrations by Hong Kong people in opposition of a recent China Extradition Bill that would give Beijing more power over Hong Kong people, who see this Bill as another act by China to slowly strip away the Island’s independence.
So What Exactly is this Bill?
It all started when a Hong Kong couple last year in February 2018 went to Taiwan for vacation. However, Chan Tong-Kai allegedly killed his pregnant girlfriend, Poon Hiu-Wing, in Taiwan, and then fled back to Hong Kong. Chan admitted to the murder of his girlfriend, but Hong Kong police were unable to charge him for murder (because it occurred in Taiwan and HK has no jurisdiction there), but they were neither able to extradite him to Taiwan because no agreement between HK-Taiwan is in place.
So now we have this legal loophole.
Thus, in February 2019, Hong Kong government proposed this formal extradition bill. But the issue is Taiwan is also considered part of China, and the same bill would allow extradition to mainland China, giving Beijing even more power over Hong Kong.
Because in mainland China, if the government doesn’t like you, they can essentially create up any excuse and have you tried and found guilty for anything. The authoritarian state has all the power.
“The bill is widely seen as the next step in China’s encroachment on Hong Kong’s autonomy” — Vox
Although this isn’t the first Hong Kong protest against China, this has been the largest.
On June 16th, the largest protest, over 2 million of the 7.3 million population showed up in demonstration. We’ve seen over 7 demonstrations since June, and after such large demonstrations, the bill was paused by Carrie Lam, Hong Kong’s Chief Executive (who is selected by Beijing). However, Hong Kong people are also asking Lam to step down as Chief Executive and want the bill to be completely eliminated rather than amended.
At the forefront of these protests are young people, who are fighting for their own future, and are the first generations born under the “One Country Two Systems” decree post-1997.
Hong Kong vs. China
Prior to the handover of Hong Kong from Britain to Mainland China, Hong Kong’s GDP was 17% of China in 1997. Now it is down to 3%, competing against a rising Shanghai and Shenzhen.
Hong Kong has long been seen as a global city that is strategically one of the best locations for a Western company to enter the China-Asia market. This is because Hong Kong is part of China but has free markets and democracy, allowing businesses to more easily access China markets without the heavy oversight of the Chinese state.
But now Hong Kong is losing its dominant position to other Chinese port cities.
Shanghai’s nominal GDP has surpassed Hong Kong, with Shenzhen quickly catching up (See Figure 1). While Hong Kong’s GDP per capita (per person) is still relatively higher than the rest of China, the three important China ports, Shanghai, Shenzhen, and Ningbo are catching up in that race too (See Figure 2).
People often say that Shanghai is modeled after Hong Kong, and they’re not far off. If you visit both cities, you’ll see that both have beautiful skylines of tall skyscrapers.
But you’ll notice one thing right away. Shanghai is much newer.
The Shanghai Bund looks like something out of a movie, with tall shopping malls, the Oriental Pearl Tower (Needle), The Shanghai Tower which is the 2nd largest building in the world, and beautiful hotels.
Shanghai is a direct challenge against Hong Kong as a global financial hub in Asia. At one point, the contest was between Singapore and Hong Kong as British colonies with access to China markets. But China is making it quite clear that if Western countries are looking for a global financial hub city to access Chinese markets, then you simply need to look at mainland China.
On the global stage, mainland China’s two stock exchanges in Shanghai and Shenzhen both rank in the top 10, with Shanghai recently surpassing the Hong Kong stock exchange in total market cap.
The Future of Hong Kong
Hong Kongers will continue to fight against the influence of China, and my support is with them.
Taiwan is equally in the same independence fight, as are many other regions of China.
On the most recent protest on July 1st, Hong Kong’s Independence day, I had seen both Taiwan flags and Hong Kong flags raised in the march. Although many of the protests have been peaceful, on the July 1st protest, individuals broke into the Legislative Council building in Hong Kong.
Just today [July 9th, 2019], reports came out that Chief Executive Carrie Lam has said the government’s controversial extradition law proposal is “dead,” but she stopped short of withdrawing it entirely.
China will not back down easily. The state is known for demonstrating their power based on how strong and far of a reach their influence is. And Xi Jinping will not hesitate to assert his dominance.
I am fortunate enough to be in Hong Kong in such a historically important time, as well as witness the gathering of hundreds of thousands of people who have a common shared goal to fight for their collective freedom. As this is not my fight, I have remained on the sidelines and reflected on this through my writing.
I can only hope that the future of Hong Kong is bright for the sake of its people.
Written July 9th, 2019
Originally published on Down to Finance, a finance and economics blog