It is easy to forget that while Hong Kong is slightly drugged up prior to Christmas and New Year, China is still hard at work. As I learned during my time as a spin-doctor, this is the best time to “bury the bad news”.
The twist in the dragon’s tail last week was the announcement that the Chinese will be permitted full sovereign authority over not just a quarter of the massive new West Kowloon rail terminal but also the trains on the 26km line to the border. To add twists to the contortions, the Chinese will sub-lease the land from a territory held under a head lease over which the Chinese landlord has complete sovereign powers anyway.
Now, this should not be big news at all. Co-location of immigration controls is practised all over the world. The Channel Tunnel co-locates French and UK immigration officers on each other’s borders and this will not change with Brexit. However, the twisting tail begins to flail if you consider that the acquisition of sovereignty is completely unnecessary – co-location has nothing to do with territory swapping.
The move allows China to acquire a bridgehead of sovereign territory within Hong Kong, like a sword through its heart. It could only have been initiated by Beijing. The tail of the dragon is curling around Hong Kong and squeezing it like a boa constrictor. The autonomy of the Special Administrative Region is being subjected to a death by a thousand cuts.
If business assumes that the tail will only squeeze tighter, it is important to plan ahead. A good analogy might be to look at Hong Kong converging with the Shanghai Free Trade Zone.
Alas, this zone has promised much but delivered little since its very public commencement in 2013. It is not hard to see why. Most FTZ’s around the world are artificial politico-economic constructs – and in China it is especially difficult for politicians to keep their hands off.
Shanghai’s reputation is not helped by policy mis-micromanagement and broken promises. Nothing has been done about the hoped-for freeing up of the yuan’s convertibility. Indeed, when the currency weakened, restrictions to convertibility increased. Capricious regulation is anathema to the free Hong Kong business environment.