Macro Battleship with Christopher Wood

The demonstrations in Hong Kong have been making global headlines in recent weeks and months. Hong Kong Chief Executive Carrie Lam finally announced on Sept. 4 that the controversial extradition bill would be formally withdrawn, which was the original trigger for the demonstrations. But it is still far from clear if this move is sufficient to appease the demonstrators, though it may be.

 

Demonstrators Defy Ban on Protesting

The risk of a full-scale confrontation between Beijing and the Hong Kong demonstrators had been growing over the past week as the mostly youthful demonstrators defied a ban on demonstrations on Aug. 31 and still came out in force, in open defiance of both the Hong Kong Government and Beijing. That in turn paved the way for the Hong Kong authorities to make a further 159 arrests that weekend and to talk openly about the potential need to use the colonial-era emergency law, the Emergency Regulations Ordinance, which was last implemented by the then British colonial authorities to put down pro-Communist riots in 1967.

While the potential irony of using colonial-era laws to address the current 13-week long demonstrations was not lost on some of the activists, the risk of a more explicit Beijing intervention has grown as the message has been sent that Beijing will want to see order restored before the official celebration of the 70th anniversary of the founding of the People’s Republic of China on Oct. 1.

In this respect, hopes have been dashed that students would quietly go back to school and university when term officially resumed on Sept. 2. Indeed, tens of thousands of students boycotted classes on that day. Meanwhile, rumours have been rife that mainland Chinese were among some of the police forces taking on the demonstrators in the violent clashes last weekend.

 

Will China Intervene?

Polling shows that a growing number of people in Hong Kong, particularly younger people, view themselves primarily as Hongkongers rather than as Chinese.

Whether true or false, such talk has served to highlight the growing tensions. If the People’s Liberation Army (PLA) remains an observer from its neighbouring Shenzhen barracks, the risk of formal intervention grows as the October deadline draws nearer, when China celebrates the 70th anniversary of the end of the Communist Revolution. It should be noted that such intervention is allowed under the 1990 Basic Law if requested by the Hong Kong Government to restore order.

Meanwhile, the good news from a Beijing standpoint is that the Hong Kong demonstrators have almost no support in mainland China. As a result, the increasingly overt agitation for universal suffrage, and even in some cases independence, does not threaten China’s political status quo.

Rather the Hong Kong agitators are viewed as “separatists”, to use the term employed by the official China Daily, who deny their own Chinese identity. And indeed polling shows that a growing number of people in Hong Kong, particularly younger people, view themselves primarily as Hongkongers rather than as Chinese (see following chart). The same phenomenon has been visible in Taiwan for many years.

HKU Survey: Hong Kong People’s Ethnic Identity

Source: Public Opinion Programme, The University of Hong Kong (HKU)

Most Hongkongers, like Taiwanese No Longer Identify as Chinese

Thus, a record 52.9% of people identified themselves as “Hongkonger” in the latest survey conducted in late June by the Public Opinion Programme at the University of Hong Kong, up from 40% in December, while only 10.8% identified themselves as “Chinese”. This compares with the 18% who viewed themselves as Hongkongers back in 2008. Moreover, among those aged between 18 and 29, a huge 75% identified themselves as “Hongkongers” and only 2.7% as “Chinese”.

As for Taiwan, the latest annual poll conducted in June by the Election Study Center of the National Chengchi University shows that 56.9% of respondents identify themselves as Taiwanese while only 3.6% identify as being only Chinese and 36.5% as being both Taiwanese and Chinese. The share of respondents identified as Taiwanese has been above 50% since 2009.

The latest official data shows that retail sales declined by 11.4% YoY in value terms in July.

The calculation, or hope, on the part of the authorities, has been that the negative impact on the economy will gradually cause the demonstrators to lose support from the mainstream given the impact on the economy.

Tourist arrivals were down around 40% YoY in August (see following chart) while hotel occupancy in some cases has declined to 40% against a more normal 70-80% at this time of the year. With tourism accounting for 35-40% of Hong Kong retail sales and 78% of inbound tourists last year from mainland China, the negative gearing of the protests into the economy will be particularly bad for the retail sector. Some members of the Hong Kong Retail Management Association experienced 50% YoY or more decline in sales value in August for shops located in tourist areas and a range of 20-30% decline in other areas. Meanwhile, the latest official data shows that retail sales declined by 11.4% YoY in value terms in July (see following chart).

Hong Kong Growth in Tourist Arrivals

Note: August data based on figures reported in recent speeches by Secretary for Commerce and Economic Development Edward Yau. Source: Hong Kong Tourism Board, Commerce and Economic Development Bureau

Hong Kong Retail Sales Growth

Note: Data up to July 2019. January-February data adjusted to show average growth of the two months. Source: Census and Statistics Department

Protesters’ Demands Unlikely to Be Met

The hope now must be that cooler heads will prevail and that some sort of dialogue will commence between protestors and the government. Still, the problem is that the demands of the demonstrators have long since evolved from the original cause, namely the controversial amendments to the extradition bill. Some of these demands can probably be met, for example, an independent inquiry into alleged “police brutality”. But one demand is probably non-negotiable from a Beijing standpoint. That is universal suffrage for the Chief Executive and Legislative Council elections, with more radical elements even calling for independence.

If universal suffrage is non-negotiable, it is also the case that the last thing Beijing wants to do is to intervene directly. First, such an intervention will trigger a global media frenzy since Hong Kong is Asia’s main media centre as well as its main financial centre. Second, Taiwan’s presidential election is now only four months away.

Meanwhile, the problem for the mostly youthful demonstrators is that the time to agitate for Hong Kong independence, or at least much greater autonomy from Beijing than it enjoys today, was back in the early 1980s during the Sino-British negotiations on Hong Kong’s future that culminated in the 1984 agreement. Unfortunately, many of them were not born then. The late British Prime Minister Margaret Thatcher originally adopted a tough line with Beijing but lost interest when she did not get sufficient support from the local Hong Kong elite. As a result, the Sinologists in Britain’s Foreign Office were given a largely free hand to agree a deal on Hong Kong’s future mostly on Beijing’s terms.