Author : Manoj Joshi

Expert Speak Raisina Debates
Published on Aug 12, 2019
Hong Kong: Headed for a crash?

Last week, Hong Kong protestors launched their fiercest protests. There were attacks on police stations with bricks and petrol bombs hurled at the riot police. The Chinese flag was torn down and thrown into the sea.

In her first appearance in two weeks Carrie Lam, Chief Executive of the Hong Kong Special Administrative Region (HKSAR) addressed a press conference along with members of her government. She declared that she would not accept any of the demands of the agitators who had dragged Hong Kong into “a very dangerous situation.”

The protests have now been going on for ten-weeks or so and there is no indication that the protestors are about to abandon their protests and go home despite dire warnings from Beijing. In a commentary on August 8, the People’s Daily said that many citizens of Hong Kong  were themselves feeling that the recent events “had a distinct ‘color revolution’ feature.” However, it asserted that if the situation slipped out of the control of the Hong Kong Government, the central authorities would not sit by idly.

The initial spark for the current movement were protests against an extradition bill that would allow the people of Hong Kong to be sent to mainland China for trial. The bill was proposed in February 2019, but protests took off on June 9th when a million protestors took to the streets and as many as 2 million participated in a demonstration on June 16th, the day after Carrie Lam said that the bill had been “suspended”. But it has not been withdrawn from the legislature. Opponents of the bill see it as a means of extending Chinese law to Hong Kong.

Over the weeks, the demands have escalated to five inter-linked issues.  First, the withdrawal of the bill and Lam’s resignation, the need to drop the characterisation of the protests as a riot, a full inquiry into the functioning of the police functioning, and the release of every one held for the protests without a charge. Note that the protests are not against the Central government of China, as such, but the local government in Hong Kong.

On August 6, Yang Guang spokesman of Hong Kong and Macau Affairs office of the State Council (HKMAOSC) warned the youth protestors by saying that the protests had now gone beyond freedom of assembly, demonstration or protest, “and had escalated into extremely violent acts.” Yet, in his assessment, as of now there were only a small number of violent radicals in front, while in the middle “there were some kind-hearted citizens who have been misguided or coerced to join.” He said that Beijing was firmly behind Chief Executive Carrie Lam, but if things went out of control the PLA would not stand by idly. As of now, however, he said that “the city’s government and police are completely capable of crushing violent crimes, and restoring order and peace.”

On August 7,  Zhang Xiaoming, Yang’s boss and the Director of the HKMAOSC told a specially convened symposium in nearby Shenzhen that the most pressing need right now was “to stop violence, end the chaos and restore order” to prevent Hong Kong from sinking into an abyss. Zhang said that over the past weeks, the issue of the ordinance amendments had changed and now bore “the features of a colour revolution,” as such there could be no compromise with the protestors.

Wang Zhimin, the head of the Liaison Office of the Central People’s Government in HKSAR said that Zhang’s remarks were the authoritative voice of the government and that it was now a “’life or death fight’ for the very future of Hong Kong.”

Though the warnings from Beijing are becoming stronger, they have so far not directly invoked the possibility of PLA intervention. Beijing continues to focus on the need to tackle the “small group of radicals” who are creating the problem and in this situation, they are seeking the cooperation of residents of Hong Kong at large. They are still hoping that the instances of destruction of public property and their damage will drive a wedge between the student radicals and the large mass of middle-class citizens who are new to the tenets of the law and are uncomfortable with the situation.

Hong Kong and China

Hong Kong has long prided itself as being one of the world’s freest economies with the service sector accounting  for 90 per cent of the GDP. 57 per cent of its re-exports are from the mainland, while 55 per cent directed to the mainland. It is the largest source of overseas direct investment in mainland China. By 2018, 46.3 per cent of ODI approved by the mainland, had Hong Kong interests. It is also the leading destination for mainland China’s FDI outflow. By 2017, the stock of FDI going to Hong Kong was some $981.3 billion (54.2 per cent of the total).

Hong Kong is also the key offshore capital raising centre for Chinese enterprises. By the end of 2018, 1,146 mainland companies were listed in the Hong Kong exchange, the fifth largest in the world, with a total market capitalisation of $2.62 trillion. Since 1993, mainland companies have raised $ 800 billion via stock offerings. The mainland is also the leading investor in Hong Kong accounting for some 25 per cent of the market value.

Hong Kong is also one of the most important banking and financial centres of the world. It is the second largest foreign exchange market in Asia and  the fourth largest in the world. It is also the world’s largest centre for clearing RMB payments.

As such Hong Kong is a key lynch-pin of China’s ambitious plans for the Guangdong-Hong Kong-Macao Greater Bay Area. Hong Kong will be the lynch pin of China’s future economic plans which aims at trying its financial prowess with the innovation, and manufacturing capabilities  of the Shenzhen and Guangzhou region.

The unrest has already affected Hong Kong’s economy and the events of recent months are signaling the multi-national companies, that it may not be the best option for them for long. If the PLA enters the fray, it could see a flight of MNCs to other centres, especially Singapore and it could also see an exodus of its more prosperous residents as well.  In short, it would be a major setback to China’s future plans.

US  intervention?

China has accused the US and Taiwan of interfering in the city’s protests. The US has denied this and Beijing has not cited any evidence for its charge. On July 23, the foreign ministry spokeswoman, Hua Chunying  declared that US officials were behind the protests and said “We advise the US to withdraw their black hands.”

On August 6, US Congress Speaker Nancy Pelosi expressed deep concern over Hong Kong’s extradition plans. In a meeting with a delegation of pro-democracy Hong Kong politicians, she said that the House of Representatives would keep a watch on developments in the city. This move was criticised by the Chinese Ministry of Foreign Affairs office in Hong Kong who said that Pelosi had supported violence in Hong Kong and intervened in China’s internal affairs.

The pro-Beijing Wenweipao uploaded a photo of pro-democracy activists Joshua Wong and Nathan Law meeting with an alleged US diplomat, Julie Eadeh who is the political unit chief of the US consulate at the JW Marriott hotel on Tuesday. The article claimed that their “secret meeting”, which is clearly in the public area of the hotel, was about the protests and showed the “US black hand” behind the protests. Later the Commissioner’s Office of the Chinese Foreign Ministry lodged a complaint at the US Consulate over Eadeh’s meeting with the activists.

A bipartisan group of senators have introduced a Hong Kong Human Rights and Democracy Act which if passed could require an annual certification for Hong Kong’s autonomous status to enable it to use the special privileges it has under US law. This could bring into question the MFN status that the US granted to the city in the 1990s.

However,  President Trump went out of his way in early August to designate the disturbances as “riots”, saying that China would have to deal with these itself. Perhaps he is still hoping that he can reach a trade deal with Xi.


Any crackdown on the protests, especially one involving the PLA or the People’s Armed Police will have severe consequence for China, and, of course, Hong Kong.  Beijing’s biggest fear, of course, is that the protests spread to the mainland. That would indeed be a nightmare scenario for the CPC.

Given the trend of political developments in China under Xi Jinping, if push comes to shove, the CPC will be ready to pay the price and not hesitate to use force to suppress the Hong Kong protests if they escalate.

While the protests may be aimed at the Hong Kong Government run by Carrie Lam , their underlying driver are Beijing’s attempts to unilaterally re-define what “one country, two systems” means.

From the legal point of view, China will be in its rights to crush the protests if they gain further momentum. But that will almost certainly be the end of Hong Kong as we know today. Winning the hearts and minds of the people of the city through propaganda, psy-ops etc, now look like an unlikely proposition given the scale of the protests and the participation of various sections of society in them.

Adding to Beijing’s difficulties is the fact that there is no clearly identified leader of the movement, or even a set of them. The protests are decentralised and as difficult to measure as to control. That they have widespread support is also evident from the recent protests of Hong Kong civil servants and lawyers who came out against the extradition bill.

Is there foreign intervention in the protests in Hong Kong? Without doubt there will be some, given past US modus operandi. Further, having called China a strategic competitor, the US is unlikely to forego an opportunity to undermine its rival. But this does not mean that the crude allegations featured by the Hong Kong press against American diplomats are true.

As of now the situation is headed for a crash for which both the citizens of Hong Kong and the Central government will have to pay a heavy price. Both sides would therefore be advised to take a simultaneous step back and work out at an agreement which may be unsatisfactory to both parties, but better than the place they are headed for right now.

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Manoj Joshi

Manoj Joshi

Manoj Joshi is a Distinguished Fellow at the ORF. He has been a journalist specialising on national and international politics and is a commentator and ...

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