Peter Fitzhugh | Hong Kong
When it rains in Hong Kong, even the solid ground works against you. During the monsoon season, it breaks out the low clouds in grey sheets and rushes down the streets from Victoria Peak, dropping 1,000 feet into the Central district in less than a mile. Imagine Venice re-engineered as a log ride. It has kept Hong Kongers on their toes for generations and it made them some of the richest people on the planet. In 1997, when the British were handing the colony over to communist China, it’s GDP lagged behind only the US, Luxemburg and Switzerland. And well ahead of Great Britain. People who work that hard, play hard as well: reportedly in the Lan Kwai Fong Bar district, people would occasionally be crushed to death during happy hour.
Beijing’s new security law that went into effect last month – harsher than even the pessimists had guessed – is causing a different kind of rush. President Xi does not like dissent, and he is coming down hard on the pro-democracy “umbrella movements” of the last years. The one where, last summer, the children of the same Hong Kongers who cheered the exit of the British, hung the old colonial flag up in city hall. This summer, anyone who can is trying to get out – and that is a lot of people – the Shan Shui district of Kowloon has a population density about 18 times that of New York.
IN THE TWENTY YEARS before the handover, 1977-1997, Hong Kong averaged 7.5% economic growth per annum. With a tiny population, it was the eighth largest international trader in the world. It’s Kai Tak Airport – always a terrifying approach and take-off – the third largest passenger airport in the world, and second largest in air-cargo. As well as the world’s largest cargo container port.
In 1997, China was an economic backwater. A huge one but a backwater nonetheless. Beijing needed Hong Kong – effectively British – banking system to open it up to the rest of the world. That the epitome of a laissez-faire state could be handed over to the epitome of a socialist authoritarian regime was always a little far-fetched, but not implausible.
Hong Kong, though, what always a bit implausible. Hong Kong Island is basically just the tip of a mountain and Kowloon peninsula and the New Territories don’t have much of a footprint and no natural resources. The British Empire used it as a hub when it got into the drug trafficking business. Then, in the most audacious coordinated naval attack in modern history, Hong Kong was hit by the Japanese on the same morning as Pearl Harbor. Unlike Hawaii, the colony was occupied until the end of the war.
In 1945, London sent a young civil servant named John Cowperthwaite to Hong Kong to oversee the recovery, and he decided the recovery was coming along just fine. This, perversely, can be credited to the Communists who ran every entrepreneur and underworld crook (always an entrepreneurial bunch) out of Shanghai in the 1949 take-over. They decamped to Hong Kong and, after that, the place was a different creature altogether. Its post-war boom was some the stuff of legend – during Cowperthwaite’s tenure as financial secretary (1961-1971) the economy grew by 13.5% per annum and cut poverty in half (to a grim 16%). Still, the Brits were snobs about it and the locals hated them for it.
Ahead of expiration of the 99 year lease the UK held on the New Territories, the Margaret Thatcher’s government negotiated a handover with the Communist regime in 1984 wherein the British Colony would become, for all intents, a Chinese Colony joined at the hip under a policy called: One Country, Two Systems. This led to a mass exodus between 1987-1996, when the tanks of the People’s Army rolled across the border into Kowloon and the British sailed out of Victoria Harbor for the last time.
As John La Carré wrote in The Honourable Schoolboy “When you leave Hong Kong, it ceases to exist.” Hong Kong, it seams, has ceased to exist.
TWENTY YEARS ON, the world is a different story. China’s economy has boomed, on paper at least. By 2020 China was rich without Hong Kong and had the bank statements to prove it. Beijing erased the unique freedoms that Hong Kongers have enjoyed under the old arrangement. Still, China’s massive economy is tied to the earth whether they want to admit it or not. And it should be pointed out that so did Lehman Brothers had similarly strong buts until they didn’t.
Politically, Beijing has bought influence abroad with its Road and Belt initiative, and bullied its smaller neighbors into submission closer to home. Never a country to believe its own BS, the Chinese Communist Party adopted “Capitalism with Chinese Characteristics.” Characteristics that are increasing becoming problematic – even to the EU, there is a feeling that China must be reigned in.
The degree to which Beijing is baking its economic numbers is unknowable. The fact remains that the country has not worn itself or its military out with two decades of never-ending wars. With the United States distracted by its own domestic problems as well as unable to let go the ears of the wolf of jihadist extremism, China is becoming the bully of the region, aggressive and nationalistic. But to what end?
Stateside, President Trump may not have though it through, but its inconceivable that President Xi is also shooting from the hip. It’s not his style. With Hong Kong no longer the link between Beijing and the outside world, they have pulled the ideological thorn from their side and are waiting to see what the world does.
Chances are it won’t be much and we might want to rethink that strategy. Since last year, China’s People’s Liberation Army have been crossing the median line in the strait of Taiwan on a fairly regular basis on what the PLA refers to as exercises, but which a cynical correspondent might call reconnaissance or just casing a target. President Xi has a hard target in mind, which is to complete the 1949 revolution with a unification with Taiwan.
Those who understand the I Ching notwithstanding, war games run from both Beijing and Washington have China winning a naval conflict in the straits of Taiwan. The trick there is to keep such a war in the straits. No one, not even Xi thinks that China will come out ahead of a wider naval war with the United States – not at this point at any rate. And losing a wider war very well lose Beijing its uncontested bullying rights in the South China Sea.
And that may be the key to deescalating the crisis. Nationalism and desk pounding are just part of the autocrat’s tool-box: take them seriously at your own peril. President Xi is engineering a third term as Secretary General, something that he can’t do with a wider Pacific war he isn’t winning. His calculus needs to include that math, without pushing him into a corner. What the man really wants is to keep his job.
Peter Fitzhugh has covered geopolitics of business in Latin America, Africa and Asia. His first novel, Weatherby, is available this fall.
Photo: Mitch Altman