Anyone who lived in Hong Kong during the handover period in 1997 and remembers all the predictions about the demise of the city will be experiencing a strong sense of deja vu given the torrent of reports about its impending death due to the passing of the new national security law. It has been 23 years since the handover, and most of the predictions have proven to be wrong. Hong Kong did not die but has instead thrived as a free society – although arguably that very success perversely brought it to the current crossroads. Hong Kong has thrived economically, with the GDP per capita doubling during this period, despite its share of China’s overall GDP shrinking from 27 percent to 2.7 percent.
Since the new security law was passed, stock market turnover in early July was about $30 billion a day, about 40 percent higher than Japan. The IPO pipeline is very healthy and the city has absorbed $14 billion of net capital flow since April. Although economic data alone should not be relied on to tell the whole story about a society, there is no running away from the fact that Hong Kong is a global financial center, and its future is aligned to it continuing to play this role. It would appear that smart money knows China is still the big play and Hong Kong is the conduit.
Despite these fundamental strengths, China and the Hong Kong government made a huge miscalculation by not understanding the politics of the handover. The authorities assumed that economic performance is everything: As long as the pie grew – irrespective of fair distribution – then Hong Kong would continue to be stable. Sadly, the politics got worse and the disparities got wider. There is an argument to be made that much of the root cause of the unrest lies in a rampant capitalist laissez-faire system that grew the pie but left only the crumbs for the majority. The politics was left to people who — it would be fair to say looking at where we are now — were not up to the task and quite simply failed the people of the city. The current generation of young people are the first who do not believe that hard work will result in a better tomorrow. They are rightfully angry and there are various reasons that they see greater democracy as the panacea to their woes, with China as the cause of all the ills facing the city.
Yet at the same time there are a great many in Hong Kong who see things differently and were also swept along in the storm that ensued last year. The passing of the new law is beginning to make things clearer and hopefully will lead to more responsible and meaningful politics.
But this clarity will be hard won. The last few weeks in Hong Kong have been a good reminder of the power of social media, as the citizens of this city have been bombarded from all corners with stories about its demise. But the people of Hong Kong play their cards well and are anything but naïve. They are very practical and opportunistic. Thus, while the news has been negative, the feeling on the ground seems very different and the green shoots of a new era seem to be taking root. This is not 1993, when many left for greener pastures in the West, only to return for economic opportunities. Many Hong Kongers are very aware that the real opportunities are still in China and increasingly in ASEAN. They know the future lies not in the United States, Europe, or Australia, especially given the economic realities of a post-COVID world, the global shock at the poor handling of the pandemic in the U.S. and U.K. – Hong Kong citizens are obsessive about masks and sanitization and demand discipline from fellow citizens – and all the reports about rising racism against Asians overseas.
In conversation with businesses leaders in Hong Kong, there is a very different sense of the impact of the law and how people seem to changing their view about the city and its future. There is a view that after having sent a strong message to the government and China through the protests, they also realize that the city they love cannot be allowed to self-destruct and has to recover. That is the pragmatism and resilience built into the DNA of this society. There is a sense that perhaps many got caught up in the protests, which took on a life of its own — but that was then, and there is now a need to hunker down and find solutions.
So what does it feel like in Hong Kong today? For the first time in a year, it feels like a city that is getting back to being normal. The fear of violence that gripped many, irrespective of which side you were on, has mostly disappeared, though there is some anxiety about the new law. The streets are full even if there are still signs of shops that have closed as a result of the economic downturn arising from the protests and the pandemic.
Restaurants are full and in many one has to wait or make a reservation. The traffic is back; taxi drivers report being busy and it is difficult to get a taxi. The major concern now is the spike in COVID-19 cases and new restrictions on social gathering. But the numbers would be brushed aside in any other city – just over 130 per day for a week, the equivalent of 6,000 case per day in the United States (by comparison, the U.S. has been adding over 20,000 cases a day since June 16, with a record high of 78,000-plus cases on July 25). It just points to the extraordinary sense of caution and awareness of collective welfare and responsibility that people here have.
Business leaders and those in the financial industry may have some concerns about the implementation of the new law, but most do not expect it to be abused by the government given the checks and balance in the legal system. Many have lived and worked here and in China and do not believe that China has any interest in undermining the rule of law – the common law – which is what makes the city unique and of value to China as an international finance center. They have faith in the independence of the judiciary, and this is a view shared by many lawyers who are not engaged in the political struggle.
A common view is that it is too early to judge and time will tell, but the hope is that law will prove to be one that serves the city well and will not be abused. A key guarantor of this is the court of final appeal and its judges. There is no indication that this will be tampered with. Although leading apolitical legal minds have been reluctant to speak, the chief justice did a few weeks ago say that he did not see the new law as undermining the judicial system and laid out key principles to ensure its independence. Few may be aware that the court of final appeal was established in July 1, 1997 and currently has 15 overseas judges, some of whom held the highest offices in their respective countries and will not tolerate interference. Understandably, none of them have commented about the new law but we will know things are not going well when they start leaving or are replaced, both of which appear very unlikely. And it is not something Beijing or the local government want to see.
The new national security law is a work in progress, given that we will only know how it is being interpreted when it is actually used and we see how the Hong Kong courts rule. That will be the test. But the people of Hong Kong know the rule of law – in its many manifestations – is central to the city’s economic future and tied to the city being the gateway to China and one of China’s gateway’s to the world. It is in China’s interest to have national security laws to ensure that city is seen as a safe place to live, work, bring up families, and visit, thereby at the same time allowing Hong Kong to also play its unique role for China.