Hat in hand, Carrie Lam Cheng Yuet-ngor flew to Beijing this week to consult China’s commissions for securities regulation, development and health to ask for measures to boost the city’s pandemic-battered economy. Hong Kong may still be indispensable to the mainland, but it will not be on its own terms. During the first decade after the handover, there was a tacit understanding on both sides that the city should be left alone. If not, the argument went, the city would lose its competitive advantages. It needed civil liberties, rule of law and independent courts as a semi-autonomous region to function and thrive. Don’t kill the goose that lays the golden eggs, or foreign investors wouldn’t come. But in what ways, exactly, is Hong Kong indispensable still? The answer seems obvious, that is, it’s mostly in the financial and economic role it plays. The city’s currency, stock and debt markets help the mainland attract foreign funds. Global companies use Hong Kong as a launch pad into the mainland. The bulk of foreign direct investment in China is still channelled through the city. The various stock and bond “Connect” schemes linking the Hong Kong bourse with those in Shanghai and Shenzhen provide a key channel for foreign investors to buy mainland stocks. Chinese businesses have also tapped Hong Kong’s debt market in offshore US dollar funding. Meanwhile, the city plays a key role in helping Beijing’s long-term goal of internationalising the yuan. But since the last decade, the country has grown to be the world’s largest or second-largest economy, depending on your measures; foreign businesses and investors have no choice but to go to China. The reality is that Hong Kong’s comparative advantages don’t require unrestrained civil liberties, quite the contrary. What they do need is a decent or “good enough” judiciary, a stable society and a functioning government, all of which – at least from Beijing’s viewpoint – have been threatened by a local movement that is anti-Chinese, anti-government and pro-American/Western. This was precisely the threat made by some leaders of the movement – “we will wreck Hong Kong if Beijing doesn’t back off”. The threat was carried out last year. To maintain Hong Kong’s indispensable role, the Chinese policy now means greater political control from Beijing and economic integration with the southern growth engine of the Greater Bay Area. Like it or not, this is the inescapable future of Hong Kong.
