Money, Liberty and Security: What is behind China’s Hong Kong National Security Law?

(Photo: Financial Times)

By James Pitt – Contributor

On 1st July, a new National Security Law (NSL) for Hong Kong came into effect, which aims to prohibit secession, subversion, terrorism and foreign collusion. In addition to effectively outlawing the democracy and independence movements, this NSL also gives China a tighter grip over Hong Kong’s affairs and legal system. This is done by giving Chinese officials more powers in Hong Kong, through a new Office for Safeguarding National Security, staffed by Chinese Community Party officials, and by allowing the extradition of suspects to mainland China under certain circumstances, with the media and public banned from observing the trials.

Two months on and there have been huge international responses to the NSL, most notably from the US, UK and Australia. US-China tensions have never been worse. Countries critical of the NSL claim that it breaches the 1984 Sino-British Joint Declaration which set out the rules for Hong Kong’s governance following the 1997 handover from British to Chinese sovereignty. The declaration was supposed to guarantee for Hong Kong a continuation of the free, transparent legal system, separate from China’s and the freedoms enjoyed by Hong Kongers under British rule, including freedom of speech, assembly and association. These appear to have been undermined by China’s recent decision to introduce the NSL.

What is becoming apparent is just how consequential this is for the world. Hong Kong’s future as a business hub, the new conditions facing Hong Kongers, Asia-Pacific geopolitics and the West’s relationship with China are all major questions going forward.

First of all, though, it is important to look at why China chose to implement the NSL in Hong Kong, especially at a time like this, since the backlash was fairly predictable.

Why has China decided now to assert more power over Hong Kong?

It would seem an odd time for China to be making itself more unpopular around the world, with its heavy-handedness in Hong Kong. It comes after Western governments, along with Japan have, with American nudges, become more sceptical of the Chinese tech company Huawei, damaging the reputation and trust for one of China’s most important brands. In addition, the clampdown which met protestors in 2014 and 2019 led to international criticism of China, mostly in the West. More recently, the Coronavirus has turned eyes scornfully in China’s direction, as it failed to contain an initial outbreak in Wuhan in clumsy and authoritarian fashion, reminiscent of Soviet crisis management. The introduction of the NSL in Hong Kong has seen tensions worsen drastically with key international governments including the US, UK, Australia and Japan, potentially risking China’s trade and strategic relationship with these countries going forward. So why on Earth would China want to do this, when such a reaction was rather predictable?

On the face of it, it is a very simple question as to why China has introduced the new National Security Law in Hong Kong. Hong Kong has faced years of large scale, destabilising pro-democracy protests. It wants to restore order to the most important business and finance hub in Asia following a period of increasing unease among businesses. Indeed, a number of foreign businesses and banks have reluctantly supported the NSL, including the British banks, HSBC and Standard Chartered, who wish to see a return of social and economic stability, a lack of which has caused their profits to take a hit and the Hang Seng Index to waver. The unrest had caused many Japanese businesses, which have a sizeable presence in Hong Kong, to reconsider whether they would continue in the territory, with many employees being sent back home to Japan. The Chinese government may have been hoping that Western powers would listen to their businesses and banks with interests in Hong Kong, limiting their actual response to China’s move. This has not been the case, however.

The pro-democracy protests in Hong Kong have been globally high-profile, undermining the governing Communist Party of China (CPC) and its authoritarian style of governance, potentially among Chinese citizens. The CPC must uphold its legitimacy, especially if it is to successfully continue with its strong drive for power and wealth. The rapid economic rise of China has been largely possible thanks to the CPC’s authoritarianism, which has allowed it to ruthlessly allocate resources (people and money) to wherever they are needed, doing whatever is required to drive growth. As China’s economy has strengthened and its people have found themselves wealthier, the CPC’s legitimacy has come from its competency in running China. The CPC of today now finds itself with a much more complex economy and society to manage and its people are not as happy to rapidly adapt as they were 40 years ago. Nonetheless, there are still important changes that China must make economically to continue its growth, such as scaling back state owned enterprises, which carry huge debt and prevent competition, meaning millions of jobs will be lost. Therefore, maintaining party support is crucial so as to prevent a drop in party support as reform in China continues, or the CPC could face more dissent in the mainland and possibly even uprisings if things worsen even further.

The new NSL in Hong Kong is thus a means for the CPC to increase support at a time of reform in two ways. Firstly, by being seen to suppress dissent as well as bring Hong Kong further under Chinese control, the CPC can present itself as a strong leader of China. The fact that Hong Kong functions under different rules to the mainland, decided in part by the UK when China was weaker, has been a sore point for a strengthening China. Its show of force in Hong Kong is to say to the world and to the people of China how strong it has become, highlighting a changing balance of power, which has an effect of increasing national and CPC support domestically.

Secondly, it is conceivable that China not only expected the response from Western governments but actually wanted it. Whilst angering and estranging Western states seems like a self-defeating move on China’s part, it may be a sound strategic play intended to stoke nationalist mood among its people, thereby bolstering support for the CPC. By forcing the West to retaliate, a scenario is created in which the CPC can easily create an ‘us and them’ rhetoric and portray itself as defenders and champions of China and its people. The CPC wishes to paint the Americans and the British as interfering states in the affairs of Hong Kong and China. Pushing them to react to the NSL has allowed them to do so. Whether they expected such a response, especially from the UK which is at a crucial and vulnerable moment itself with post-Brexit trade arrangements, is uncertain.

Finally, China wants to send a message to the world. It is here and it means business. Gone are the days of imperial powers pushing China around. Through the 19th and early 20th centuries China was ravaged by foreign powers. Portugal, Britain, France, the US, Russia and Japan all had outposts and influence in China at one time or another and Hong Kong was the last Western colony in China. The 1997 handover represented the end of a long period of embarrassment for China, and of Western governments controlling what they see as Chinese territory, although the Basic Law, Hong Kong’s quasi-constitution which was half decided by Britain has dictated its governance since then. China wishes to establish itself as a superpower rivalling the United States, eventually becoming the most powerful state in the world, with an ability to shape global institutions and practices to its liking. Ridding itself of colonial shackles and defying Western rules is a key step in achieving this.

The Consequences for Hong Kong

The effects of the NSL for Hong Kong were visible from the outset of the law, on 1st July. Nearly 400 protestors were arrested for breaching the NSL, the first of whom simply for waving a flag. Street shops and food stalls used to bear tokens of the pro-democracy movement, such as post-it notes with messages written in them. On 1st July, they were replaced with blank ones. Their freedom of speech, in addition to the transparent legal system which Hong Kongers have enjoyed, relative to those in the mainland, has been suppressed. Ethics and ideology aside, this is seen by the West as a direct breach of the 1984 Joint Declaration and the principle of ‘one country, two systems’. Hong Kong as its citizens know it may now be well and truly gone.

In August, Jimmy Lai, an anti-Beijing media mogul, and Agnes Chow, a well-known activist, were among a group arrested for breaching the new law, although they were later released. It’s possible that Beijing is simply using early, high-profile arrests to scare Hong Kongers into full compliance, as the law and its consequences become more tangible in their minds. Nonetheless, it seems to confirm the West’s fears and the targeting of a popular news outlet was to many a worrying sign.

This came after it was announced in July that the 6th September elections for Hong Kong’s legislature would be delayed by a year, which signals a further undermining of ‘one country, two systems’ outside of the NSL and has provoked yet more reactions abroad.

Despite Beijing’s claim that the NSL will provide stability for Hong Kong as a business hub, the long-term prospects for Hong Kong and business have in fact been called into question. For a place to thrive as an international business hub, there needs to be trust and transparency. Companies and investors rely on an unconstrained flow of information and must be able to trust in the institutions there, including legal and regulatory systems. Hong Kong has thrived precisely because these systems were separate from China’s. Whilst the NSL does not explicitly affect business in Hong Kong – ties between the HK Chief Executive and business are extremely strong – perception and a lack of trust regarding what Beijing may do next will quite possibly harm Hong Kong’s business friendly reputation in the long run. Singapore has seen an increase in business over the last few years due to both the unrest in Hong Kong and the ominous shadow of Beijing. Further to this, American sanctions on Chinese business in response to the NSL, and Chinese sanctions on American business in response to those, may be hugely detrimental to businesses of all nationalities that have important operations in Hong Kong. British banks with many Chinese clients, such as HSBC for example are set to be affected by this.

The Consequences for the Asia-Pacific

Recent events in Hong Kong have undoubtedly been quite alarming for China’s neighbours with whom relations have not been overly friendly, notably Japan and Taiwan. Although both are strong allies of the US, China’s aggressive recent behaviour and disdain for Western opinion are more than a little concerning for them.

As previously mentioned, Japan has a high number of businesses operating in Hong Kong which have been put at risk by the NSL and the ensuing American and Chinese sanctions. On top of this, the Japanese are likely now more worried of the prospects of a Chinese show of force concerning the contested (though uninhabited) Senkaku/Diaoyu Islands which are currently under Japan’s ownership, which could then escalate into something larger and more dangerous. The historical relationship between Japan and China, particularly during and just prior to the Second World War but which also goes back centuries, also provides context to modern Sino-Japanese relations. Japan humiliated and devastated China perhaps more than any other state, invading China in the 1930s, with tens of millions of Chinese civilians dying as a result of the conflict. It is quite conceivable that China would wish to get at back at Japan and demonstrate its power over its former invader.

Taiwan will be even more worried by the developments in Hong Kong. It is semi-independent from China, not officially recognised internationally as a state (although informally it is), and has a similar ‘one country, two systems’ relationship with China to that which Hong Kong is supposed to have, actually going further than Hong Kong in many ways. Taiwan is more protected from such Chinese power grabbing than Hong Kong, as the US will by law come to its rescue in the event. This does not remove all worry though. Taiwan has, in response to the NSL, made it easier for Hong Kongers to migrate to and settle in Taiwan, which, suffice to say, has not been well received in Beijing. Cross-straits relations have been recognised for years as a flashpoint, having dangerous potential for causing an escalation, leading to war between the US and China, given China’s insistence that Taiwan is a part of China. Its growing aggression and strength will surely have led many in Taiwan to wonder if they are next. This, however, is much less likely than was China’s crackdown in Hong Kong, thanks to the US’s dedication to protecting Taiwan and the extreme risks therefore attached. China, whilst strong, is not yet ready for that confrontation.

There are implications for the rest of the Asia-Pacific too. We could well see states deciding, rather like in Western Europe, which side they are on, America’s or China’s, albeit more slowly and reluctantly given the increased complexity of the matter due to geography and trade. Soon after implementation of the NSL, for example, Australia formally refused to recognise China’s contestation of territory in the South China Sea, a significant change from the previous policy of impartiality in the matter, although ASEAN has so far stuck to its policy of neutrality between the two superpowers.

The Consequences for the West’s relations with China

The NSL in Hong Kong has also had more broad global geopolitical implications which will be playing out for some time to come. The global response to the NSL has marked a crescendo in teetering relations between the West and China. The Trump administration has never publicly been shy of its hostility towards China, starting a trade war with them in 2018, with the aim of curbing Chinese growth and power, but this summer has seen the largest and quickest rise in tensions between the two superpowers. Since 1st July, the US has announced new sanctions on individuals in Hong Kong and China related to the new law and US Secretary of State, Mike Pompeo, has spoken of the US no longer treating Hong Kong as separate from China in its foreign policy and trade arrangements – a huge step for them to take. The latest in American responses is the suspension of the extradition treaty with Hong Kong, a move already taken by the UK and Australia

In addition to increasing tension between China and the US, the NSL and apparent breach of the Joint Declaration has had significant repercussions in Western Europe. The UK has been brought off the fence on its China policy, offering up to 3 million Hong Kongers (those with or eligible for British National Overseas Passports and their children) a chance to come to Britain, making it easier for them to gain citizenship, as well as completely axing Huawei from future UK 5G infrastructure. Previously the UK courted China, with then-Prime Minister David Cameron and Chancellor George Osborne telling China that they wanted the UK to be its ‘best friend in the West’, announcing a new ‘golden age’ of Sino-British relations. This is no longer true. Whilst the UK probably won’t go as far as America on cutting ties, it is now much warier of China and relations will remain frosty for some time.

The EU Commission has condemned the NSL and seem to be taking a slightly more cautious approach than they have done previously. Germany stood alone in Western Europe initially in its lack of criticism for the CPC and the NSL due to the huge amount of trade it does with China. Crucially though, Germany’s unquestioning friendliness towards China seems now to be unsustainable and the hawks are circling in Berlin. Germany did go on to suspend its extradition treaty with Hong Kong and Foreign Minister Heiko Maas publicly rebuked the NSL and Chinese treatment of the Uighurs in Xinjiang on 1st September. Interestingly France has recently kept a low profile on China, also deciding to allow Huawei to be a part of its 5G infrastructure, despite openly opposing the NSL back in June.

Although a cold war to the extent of last century’s is not so likely given unchangeable (or at least expensive to change) realities in trade, geography and geopolitics, there is certainly a decoupling taking place, more so among a coalition of anglophone countries (the US, UK, Australia and Canada). The West has been acutely aware of underhand Chinese actions and policies for a while. It is well known that China has been stealing Western intellectual property and trade secrets for some years, as well as conducting other forms of espionage. The West has also been aware of illiberal Chinese policies in Tibet and Xinjiang, which are incompatible with core Western principles. However, the West accepted these things in a vain hope that China would liberalise and because of the benefits that trade with soon-to-be the world’s biggest economy brought. The Hong Kong National Security Law seems to have brought us to a critical juncture in world politics, where certain realisations have been made about China and so a re-evaluation of relations has gotten underway. This is by no means a simple matter as policy must balance ethics and Western ideals on the one hand, and geopolitical and economic reality on the other.

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