Hong Kong’s role in the trade war should be to explain to the world how far China has come

  • Christine Loh says Hong Kong firms with mainland operations will be seriously hit by further US tariffs and the city has nothing to gain from demonising China
  • Instead, Hong Kong should use its unique position to explain the history of China’s development and the progress it has made in opening up
PUBLISHED : Tuesday, 13 November, 2018, 9:49pm
UPDATED : Tuesday, 13 November, 2018, 9:54pm

How US-China relations evolve will set the tone of international discourse for years to come. The glimmer of hope of a speedy resolution to current trade tensions is probably unrealistic. Nevertheless, a lot is riding on the possibility of a respite soon, with the US midterm elections now over. 

US President Donald Trump spoke to Chinese President Xi Jinping on November 1 and then tweeted that progress had been made. Then, at a public forum in Singapore, Chinese Vice-President Wang Qishan said China was ready for discussion. Officials from both sides will negotiate ahead of a meeting between Trump and Xi in Buenos Aires later this month on the sidelines of the G20 summit.

If that meeting leads to an easing of trade tensions, it will help Hong Kong for sure, at least in the short term. The Hong Kong Trade Development Council warned that a full-blown trade war would harm Hong Kong’s small and medium-sized enterprises with operations on the mainland should the 25 per cent tariff be imposed on US$200 billion worth of goods made in China from January 1, 2019. That would affect some 5,700 items, ranging from textiles and garments to footwear, car parts, vehicles, batteries, furniture and food.

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The message should be clear. Hong Kong companies will need to diversity their export markets and/or take advantage of the growing mainland domestic market in the longer term to survive. They cannot ignore geopolitical shifts any more.

Watch: How the US-China trade war affects Hong Kong

US-China relations are being reset as a result of big power competition. Trump’s national security strategy described China as a strategic competitor in economic and military terms, with the China problem being cast as a conflict between opposing systems.

One of China’s top diplomats, Fu Ying, explained what this means: “The causes for these tensions are many and various. Competition among the new drivers of growth, industry and technology is a source of unease. So, too, are the seismic political realignments in liberal democracies. It also seems that the US and other Western countries, driven by their suspicion of different political systems, have become more wary or even fearful of China's success under the leadership of the Communist Party of China.”

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There are two strands to this. The first is the American narrative that the multilateral systems it helped build after the second world war, including the globalisation of trade and commerce, no longer benefit the US today, which is why it has pressed the reset button on all sorts of agreements with the rest of the world.

China sees things differently. It argues that the US should not worry as it is still top dog and globalisation has benefited America greatly: US gross domestic product grew from US$5.98 trillion in 1990 to US$19.39 trillion in 2017, an increase of US$35,577 per capita. Meanwhile, China’s GDP per capita over the same period grew by US$8,509. It would be fairer to say America and China grew together but the US is still a very long way ahead.

The second strand has to do with China’s constitutional and political system, which Western liberal democracies see as a competing system because it has succeeded in pulling the country out of dire poverty and helped it develop steadily.

There’s no doubt Hong Kong should want the mainland to continue to develop. Yet, within the context of a “systems conflict”, the special administrative region is in a real bind.

There is likely to be growing negative rhetoric not only over trade but about the nature of China’s political system as a socialist state with a ruling Communist Party. The purpose of this rhetoric is to show the Chinese system in the worst light possible. Hong Kong should have no interest in jumping on that bandwagon.

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From a day-to-day perspective, the national authorities have performance legitimacy on their side. This is a time when Hong Kong can make an active choice to learn more about the mainland from the vantage point of contributing to national betterment and not get dragged into the big power “systems conflict”.

It would take enormous wisdom for Hong Kong to stake out a path that enables its electoral development to evolve. If it could do so, Beijing might be able to see it as not a threat to national security but as a sign of its confidence to experiment in a controlled manner with such reform.

After all, Beijing was willing to allow Hong Kong to directly elect its chief executive in 2017 with a nomination-cum-screening process. Modest steps can lead to dramatic directional changes, so there is no need to reject adjustments to the current system.

Hong Kong made a grave error in rejecting that offer in 2015. It failed to recognise what a significant step it would have been for China to enable diverse candidates, although not the “opposition”, to compete in direct elections at a high level within the national hierarchy.

Time to sit down with Beijing and discuss a vote for all in Hong Kong

Moreover, Hong Kong should support better China-US relations. Hong Kong derives no benefit from demonising China. There is much about China’s development history and experience in the past four decades that Hong Kong can help explain, including China’s new policies to further open up its financial services sector, reduce overall trade tariffs and protect intellectual property. Hong Kong remains an excellent place for exchanging professional expertise on how to address specific problems that the US and the West say they are concerned about and where they want to see China step up.

Christine Loh, a former undersecretary for the environment, is an adjunct professor at Hong Kong University of Science and Technology