"The Hong Kong-Mainland conflict reflects a huge gap in national identity. This can be explained in part on how the nationality of most Hong Kong people was changed in 1997 from British to Chinese.
From China’s standpoint, Hong Kong had always been Chinese soil. Through 150 years of British rule, its people remained Chinese, regardless of British law.
This fitted nicely with Britain’s policy, which was to see to it that the millions of Chinese “British citizens” in Hong Kong could not move to the United Kingdom. Nationality and immigration laws were changed.
Britain created a new category of citizens, called British Dependent Territory Citizens, in the 1980s. This transformed United Kingdom citizens into Hong Kong citizens. When Hong Kong was no longer a British dependent territory, yet another new category was created, British National (Overseas). The holder has no right to live in Britain and the citizenship cannot be passed on to the next generation.
China, too, changed its nationality law to deal with Hong Kong. The Standing Committee of its National People’s Congress in 1996 – the year before the handover – issued “Explanations” of how China’s Nationality Law would be applied in Hong Kong. That is to say, the law would mean different things in different parts of the country, a highly unusual legal situation.
The “Explanations” introduce a concept missing in the nationality law itself, that of “Chinese descent.” Thus, any Hong Kong resident of Chinese descent who was born in Hong Kong or China is a Chinese national, regardless of whether he possesses Canadian, Australian, British or other nationality. That means people who were foreign nationals were transformed into Chinese nationals in 1997.
China – and Britain – wanted the people as well as the territory to be transferred wholesale. The millions of people in Hong Kong were considered nothing but chattel.
Actually, the idea of giving the inhabitants a choice of nationality when the ownership of land is transferred is by no means novel. In fact, it happened on Chinese territory when the Qing dynasty ceded Taiwan to Japan in 1895 in the Treaty of Shimonoseki."
The news from HK this morning is such that I think CCP/China government mass intervention is near. pl
Another hotspot erupting – India has declared Kashmir’s special status issued under Article 370 rescinded. Kashmir is no longer a separate state & constitution but now a union territory under India’s constitution.
It is inevitable as we’ve noted from the very beginning that CCP will be ruthless to protect their monopoly on power. They fear their own people more than anyone else and they don’t want these protests to escalate to the mainland. But it is also inevitable IMO that all the repression in the world will not allow them to maintain political power forever. The change of power will naturally be violent as the CCP will go to the maximum extreme to preserve it knowing they’ll be hanging from lamppost when they lose out.
Hedge fund manager who forecast the breakdown in the HKD currency board peg last May.
Well his predictions of doom and gloom on China were always going to be right at some point given the nature of economic cycles.
Here is an article in deeper detail written by Chaohua Wang.
She was at Tiananmen in 1989, and on the short list of students wanted by the Government, but managed to escape, eventually getting a PhD at UCLA.
Jack, it doesn’t matter that it’s the CCP doing this. It could be a nationalist/catholic/buddhist whatever government.
The point is that China is ungovernable without strong central control. If HK wins, China doesn’t turn into a democratic paradise, it splits into dozens of warring city states.
This is not good for the rest of the world because the central government exercises some beneficial control. For example, do you want one city to specialize in the manufacture and selling of fentanyl and amphetamines? Another has nuclear materials for sale to anyone with a dollar? Another sells fake prescription drugs? Fake goods? Malware? The possibilities for international crime in a fragmented China are endless.
“…China is ungovernable without strong central control.”
What is inherent and different about China that it requires authoritarian central control? I don’t get why China would break into warring fiefdoms without a repressive central government. The Soviet Union dissolved without much anarchy and Russia has become a modern, pluralistic society.
Yes. Kyle Bass was on the right side of trade in the mortgage credit crisis. Got the Japan trade wrong and has been bearish on the yuan for sometime. One of the problems with macro is getting timing and position sizing right.
While most of the media narrative on the yuan devaluation is centered around the trade dispute, my own personal view is different. IMO, they were forced to devalue as holding the yuan fx rate was draining reserves as capital is fleeing. Now with Mnuchin designating China as a currency manipulator it will be interesting to see what action the Trump administration takes and how this escalates next. The bond market globally has been signaling something is wrong for over a year.
I agree with this hypothesis. That’s why they can’t but intervene to prevent a free fall in yuan. But that comes with the cost of draining reserves.
This looks to escalate as the Trump administration wants to devalue USD.
A lot depends on how poular these protests are in Hong Kong as a whole.
China will not intervene. There is little evidence that the protests will affect the mainland. In fact, 5 million mainland tourists visit Hong Kong every month. Wouldn’t the Chinese government issue a traveling ban to Hong Kong if they are really worried?
Without China’s intervention, a “success” of the Hong Kong protest will destroy the city, setting a negative example for generations to come. The last thing it will achieve is to cause a fragmentation of China. Today’s China is a nuclear power with a GDP more than 25% bigger than the U.S. in PPP terms. It’s no longer the “sick man of Asia” ruled by warlords like those in the 1920s and 1930s.
Kyle Bass had lost his bet against the Chinese yuan after 4-5 years. So he ended his short against the yuan and started his short against the Hong Kong dollar a few months ago. His view point is by no means impartial.
If the CCP **DOES NOT** crack down, they likely have a problem.
The big advantage of authoritarian regimes is that they have fewer constraints. the big disadvantage is that if they exercise restraint, it is seen as weakness rather than wisdom.
The protest rallies and marches have featured huge turnouts. A sort of “red line” has been established certainly, even if the terms of the extradition bill itself did not exactly represent the worst fears of the protesters. The more militant factions – the ones willing to participate in running street battles – are surprisingly cohesive, and are clearly not “leaderless” as portrayed. The video evidence shows training and discipline, and well thought-out adaptable techniques both offensive and defensive for success in non-lethal urban combat.
However, by focussing their ire on the local police force, which has no real track record of repressive activity, engaging in massive vandalism, preventing freedom of movement, and exposing a complete misunderstanding of local politics (i.e. the absence of direct voting in HK is result of the local establishment not the CCP), the militant faction is demanding too much and will lose much of their support through their fanatic attacks on government buildings and particularly the targeting of family members of the police. The latter actions are just stupid, and tend to reinforce the concept that the militant leadership is not interested in achieving political goals, but are rather focussed solely on provoking a massive repressive response. Though it’s likely very tempting, giving them exactly that response would be a mistake.
A few observations in support of the arguments made by our ‘tusked’ colleague.
It is of interest to look at comparisons between the GDP figures for China and Russia from 1990 to 2013. In the early ‘Nineties, China is hovering around an annual increase of 10%, Russia a decline of a similar amount. Since the ‘KGB thug’ Putin came to power, his country’s performance has still been very markedly inferior, but it is a great deal better than it was in the days when Westernising ‘liberals’ had been given their head.
(See https://www.researchgate.net/figure/GDP-growth-Russia-vs-China-1990-2013_fig1_270215450 .)
If one wants to know why the Russian ‘deplorables’ are unlikely to allow the kind of people who demonstrate in Moscow, and are taken as authoritative in the Western media, anywhere near power, at least until the memories of the ‘Nineties are well dead, which may take a long time, those figures give a major part of the answer.
It is also interesting to revisit the article ‘Russia at the Turn of the Millennium’ which Putin published in December 1999, shortly before becoming Acting President. It is noteworthy that he laid primary blame for the fact that his country was in the gravest danger of falling into an irretrievable backwardness on the fact that ‘Communism vividly demonstrated its inaptitude for sound self-development, dooming our country to a steady lag behind economically advanced countries.’
(See https://pages.uoregon.edu/kimball/Putin.htm .)
The criticism of his predecessor, and of Russian ‘liberals’ is muted, but clear in the suggestion that: ‘The experience of the 90s vividly shows that our country’s genuine renewal without any excessive costs cannot be assured by a mere experimentation in Russian conditions with abstract models and schemes taken from foreign text-books. The mechanical copying of other nations’ experience will not guarantee success, either.’
A key part of the argument was, I think, designed to counter an historically common propensity of Russian ‘liberals’. In reacting against the patent brutalities of their country’s authorities, such people commonly forgot that any effective programme of economic ‘modernisation’ depended upon what one might describe as a state which was strong, but not ‘totalitarian.’
Here, Putin was simply restating a familiar argument made, before 1917, by Russian ‘conservative liberals.’
Implacably opposed to revolutionary socialists, such people commonly thought that premature political liberalisation in Russian conditions would produce anarchy. If this happened, the ‘totalitarian’ visions of precisely those revolutionary socialists would be accepted, partly because, to those who have experienced anarchy, almost anything else seems better.
It also becomes interesting to look at the changing views of a group whom I am often tempted to describe as ‘liberals mugged by reality’ – including, the experience of anarchy. One place where these appear is in the journal ‘Russia in Global Affairs’ which has been published, with the participation of ‘Foreign Affairs’ whose design it imitates, in English only, since 2002.
Among contributions I have found particularly interesting are those by Alexander Lukin, who among other things is ‘Director, Center for East Asian and SCO Studies, Moscow State Institute of International Relations of the Russian Ministry of Foreign Affairs’. So, he may be a figure of some moment in his country’s shift towards a ‘Eurasian’ orientation – a rather major threat to the United States.
(See https://eng.globalaffairs.ru/person/Alexander_Lukin .)
The most recent entry on the site reprints an article Lukin wrote for the ‘National Interest, entitled, ‘How the United States Got Russia Wrong: The West today is paying for its collusion with Russia in the 1990s’.
Published in February, it is a chillingly contemptuous response to an article by Strobe Talbott. Also of particular interest is Lukin’s response, in June 2014, to the crisis in Ukraine, which is entitled ‘Chauvinism or Chaos? A Vicious Choice for Russia.’
In these and other pieces, Lukin does not merely argue that post-Cold War Western thinking has come to be dominated by a neo-Bolshevik utopian ideological universalism, which is incapable of coming to terms with the fact that the practical results were inherently bound to be chaos.
Harking back to the same arguments which, I have suggested, shaped Putin’s ‘manifesto’ back in 1999, Lukin argues that the intense hostility of very many Western liberals to the ‘totalitarian’ Soviet state led them to endorse, and go on endorsing, ideas and whose natural result is chaos and national humiliation.
As a consequence, he writes:
‘The current situation puts Russians before a vicious choice: either they support democratization but oppose Russia’s growing role in the international arena to become a junior and subordinated partner of the West, or they support Russia’s strengthening to be inevitably accompanied by dictatorship, nationalism and threats to everyone around; either Dugin and Prokhanov or Nemtsov and Kasparov. On one hand, there are new idols of society represented by thievish oligarchs, glossy TV presenters and party girls engaging in sexual intercourse with chickens in supermarkets and doing pranks in churches; on the other hand, there are aggressive and possessed nationalists who wear one and the same uniform and match in columns along the streets of Moscow; and there is nothing in-between.’
Against this background, it becomes even more interesting to look at what another disillusioned ‘liberal’ the Publisher of ‘Russia in Global Affairs’, Sergei Karaganov, had to say four years later.
Usually, I would hesitate have the temerity to disagree with Stephen F. Cohen, a great scholar of Soviet and post-Soviet Russia. And much of what he had to say in his article back in January entitled ‘The End of Russia’s ‘Democratic Illusions’ About America; How Russiagate has impacted a vital struggle in Russia’ is I think cogent.
(See https://www.thenation.com/article/the-end-of-russias-democratic-illusions-about-america/ )
But Cohen’s reading of an interview with Karaganov in ‘Ogonyok’ magazine, which appeared in translation in ‘Russia in Global Affairs’ in September last year under the title ‘We Have Used Up the European Treasure Trove’, seems to me flat-out wrong.
(For the interview, see https://eng.globalaffairs.ru/pubcol/We-Have-Used-Up-the-European-Treasure-Trove-19769 .)
Commenting that ‘Russiagate’ has revealed the ‘low esteem’ that many in the American political and media has revealed for the ability of voters to make ‘discerning, rational electoral decisions,’ Cohen writes:
‘It is worth noting that this disdain for rank-and-file citizens echoes a longstanding attitude of the Russian political intelligentsia, as recently expressed in the argument by a prominent Moscow policy intellectual that Russian authoritarianism springs not from the nation’s elites but from the “genetic code” of its people.’
What Karaganov’s article actually represents, I think, is a seismic shift. Historically, a strong strand among ‘conservative liberalism’ in Russia has defended ‘authoritarian’ solutions on the basis that the cultural backwardness of the population made a Western-style ‘liberal’ politics unworkable.
Implicit in this position was the conclusion that, if an ‘authoritarian’ government could successfully ‘modernise’ Russia, such a politics might become possible. And indeed, this position used to be echoed in Putin’s writings.
The argument of Karaganov’s article represents a total repudiation of this position.
Contrary to what Cohen suggests, he is telling his fellow intellectuals that that the deep-seated preference of the Russian ‘deplorables’ for authoritarian rule is a perfectly rational response to the harsh imperatives of survival in the ‘heartlands’ of Eurasia.
Rather than being held captive by a sense of inferiority in relation to ‘Western’ culture, Karaganov is arguing, the Russian ‘intelligentsia’ need to realise that their culture is, as he puts it, ‘a rather odd and original mixture of European, Byzantine, and Asian civilizations.’
There is a familiar saying, ‘Scratch a Russian and you’ll find a Tatar.’ What Karaganov is saying is that it is time that his fellow intellectuals stopped being ashamed of this situation. They need to, as it were, rediscover their inner Mongol, and realise not only that is he nothing to be ashamed of, but in the world into which we are moving, he may be a key to survival and success.
For those of us blocked by Nation’s paywall, try this link to Cohen’s article, The End of Russia’s Democratic Illusions About America,
I thought I explained that Jack. In China, there is no loyalty to anything outside the extended family. There is no westphalian or religious tradition that demands national cohesion. This is the defining difference between China and the West. Without a strong central Government, China as a nation will fragment very quickly.
To put that another way; in what country on the planet other than China do you think a businessman would think it OK to manufacture and market poisoned baby formula? That happened!
I agree wholeheartedly with your understandings of Karaganov ideas.
Years ago, I too, discovered my inner barbarian and never looked back since.
I so very much your writing.
Thanks for clarifying. If your thesis is correct then there is no loyalty to CCP too. That’s a dangerous situation for the apparatchiks.
My primary direct experience with mainland Chinese is with two young immigrant tech entrepreneurs who I have backed and sit on their board. Both these guys are immensely bright and educated at the best schools in China. I asked both of them on separate occasions why did they choose to immigrate to the US when they could have written their own ticket in China. Both their responses were identical. And it boiled down to the arbitrary capriciousness, cult-like requirement for adulation of CCP strongman and the overt repression. What they said is since there is no rule of law, if they were successful CCP could essentially commandeer their business. So here we have two of the “best & brightest” leaving their families and friends and their country because they fear a midnight knock and don’t trust the CCP.
My other experience is being on the boards of companies who have tried to penetrate the Chinese market. It is not a 2-way street.
IMO, authoritarianism only works for so long. The more the CCP monopolizes power at the end of a barrel of a gun, the more likely the end will be violent. If the probability is high as you believe that the country will fragment if CCP is challenged beyond its capacity to repress then that is a significant risk that I don’t believe is given the attention it deserves.
A very interesting piece, thank you.
I think you are spot on in part because Hong Kong is in a use it or lose it situation – their importance – i.e., leverage – to mainland China is steadily decreasing as other cities surpass economically HK. Of course if HK overplays its hand (likely) then they will lose almost everything (except a face savings). Of course China will not tolerate because of the precedent and China historically has been a balance between centralized authority and provincial power – with the latter leading to civil war and vast population decreases
Worth noting the contrary view of Pepe Escobar, who has lived in Hong Kong:
“Much to the distress of neocons and humanitarian imperialists, there won’t be a bloody mainland China crackdown on protesters in Hong Kong – a Tiananmen 2.0. Why? Because it’s not worth it.
. . .
What these protests have accelerated is Beijing’s conviction that Hong Kong is not worth its trust as a key node in China’s massive integration/development project.
. . .
The big story in Hong Kong is not even the savage, counter-productive protests (imagine if this was in France, where Macron’s army is actually maiming and even killing Gilets Jaunes/Yellow Vests). The big story is the rot consuming HSBC – which has all the makings of the new Deutsche Bank scandal.”
A disclaimer – I have never been there, and do not speak the language(s). But I am very curious about HSBC.
Escobar goes on the compare/contrast Kashmir.
David Habakkuk, thank you very much for your insightful work. I think there are some parallels with China.
My very brief understanding is that the CCP saw what was happening to the USSR, diagnosed the proximate economic cause – a lack of price signals in a non market based economy, and proceeded to dodge the same bullet.
They did this by “releasing the inner businessman” in all Chinese. They did this slowly and in stages, gradually relaxing the strictures of five year plans and other forms of economic regulation.
As a result, they are now in a difficult balancing act between maintaining control and economic freedom. Hong Kong is the aberration they just don’t need right now and I therefore fear for HK and it’s people. I’ve been there twice in the last Three years and I would hate to see it destroyed. I hope a creative solution can be found that preserves it for the good of China as well as HK.
High tea at the Peninsula is something to behold – Chinese couples queued around the block to get in.
sundance gives an interesting perspective here:
“U.S. Intelligence Positions Hong Kong as Proxy Conflict With China – Thankfully President Trump Sees Trap…”, by sundance, 2019-08-13
A sample of his take:
Sounds to me like the ultimate realist perspective.
We (the U.S.) want so many things from China
[Uighurs? South China Sea? how about freedom for Tibet? democratic reforms in China? how about some arms limitation treaties? persuading Kim to give up his nukes? stopping Chinese theft of U.S. economic secrets? and what would be my personal #1 priority: persuading China to reduce its contribution to global warming],
but how many of them can we actually expect to get?
We mustn’t exaggerate our ability to influence events in East Asia, China’s backyard.
We must pick and choose very carefully what we ask for.
In this regard, the Washington Post editorial page is completely insane IMO.
They think we have far more ability to influence China than we actually do.
Yes, the idiot neocons (Bolton, Pompom, etc.) want is to fight China over Hong Kong in the belief that the CCP is about to fall, but, the same idiots think that Iran’s government is about to fall. But, then they are deeply impressed with their own genius and the “arc of history.” We should remember that the neocons are descended intellectually from the Trots through the Frankfurt School.