On June 15, in response to recent protests in Hong Kong, Chief Executive Carrie Lam announced that the government of Special Administrative Region had decided to suspend a controversial legislative amendment to Hong Kong’s extradition law.
A spokesperson for the Chinese Ministry of Foreign Affairs said that the Chinese central government supports the Hong Kong administration’s efforts to safeguard prosperity and stability.
Hong Kong is certainly a part of China, but it is not just any ordinary Chinese coastal city. As a special international financial hub and freeport under China’s sovereignty, Hong Kong’s prosperity is closely tied to not only its own citizens, but also foreign investors and mainland China.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
There is a view, particularly among some Chinese, that when the economy of China is strong enough, the mainland’s market will be sufficient to support Hong Kong’s development. According to this view, the city could then ignore the interventions of the U.K. and the United States.
Nothing can be further from the truth. Without recognition and support from the international community, Hong Kong’s economic development will be severely undermined. Hong Kong is currently implementing a linked exchange rate system; this means the Hong Kong dollar exchange rate and its monetary policy are tied to the U.S. dollar and the Federal Reserve’s monetary policy. Without this system, Hong Kong’s economy will be tumultuous, and its status as an international financial center will be shaken.
On the other hand, the U.S. Congress conducts an annual policy assessment on Hong Kong based on the Hong Kong Policy Act to determine whether to treat the city as a separate customs territory. The status of a separate customs territory is extremely important for Hong Kong’s prosperity. If this important niche is abolished, it would cause the international communities to reassess Hong Kong’s freeport status, tariff costs, business environment, and its status as an international financial center. If such a scenario happens, the Pearl of the Orient would then be degraded into an ordinary Chinese coastal city, constantly in need of financial assistance from the central government.
Changes in Hong Kong affect other regions in China as well. The most direct impact will be on the Guangdong-Hong Kong-Macau Greater Bay Area, an area that China intends to fashion into a driving force for the nation’s economy. Hence, if the economy of Hong Kong collapses, it would trigger a domino effect that would hit the economy of the entire Guangdong province hard, which in turn would affect the economic development of al of south China, subsequently impacting China as a whole.
For China, the best option is maintaining the overall stability of Hong Kong. China should see the value of Hong Kong from a bigger picture, and ensure its continuous prosperity. This of course, should take into account of what really makes Hong Kong prosperous.
He Jun is Partner, Director of China Macro-Economic Research Team, and Senior Researcher at Anbound Consulting, an independent think tank with headquarters in Beijing. Established in 1993, Anbound specializes in public policy research. He holds a master’s degree in scientific & technological philosophy from the China Academy of Sciences.