Police clash with anti-government protesters at the airport in Hong Kong, China August 13, 2019. REUTERS/Thomas Peter
Thomas Peter | Reuters
The Hong Kong protest movement is about democracy, pushing back on police power, and preserving the city’s quasi-autonomy.
But like the American Revolution, it’s also about money.
More than 20 years of relative decline in Hong Kong’s economic strength, combined with an increase in the cost of living, helped spark this protest movement just as much as the controversial mainland extradition bill that caused such a stir.
In recent months, Hong Kong’s middle class saw their economic output being threatened and siphoned even more by mainland China’s tariff war with the U.S. That’s very much like America’s Founding Fathers, who balked at Britain’s mercantilist squeezing of the colonies’ economic output to help fund Great Britain’s wars and empire building.
Hong Kong is experiencing an economic squeeze that has developed over time. David Dodwell, executive director at HK-APEC Trade Policy Group and former Financial Times Asia correspondent, told CNBC last week that Hong Kong’s population has seen wealth stagnation and a higher cost of living for the last 30 years. Not all of that is mainland China’s fault, but Beijing does rely heavily on Hong Kong for the accounting, legal, and financial services for its state-run or mostly state-controlled businesses.
As a result, Hong Kong’s workers see themselves as providing much of what makes the Chinese economy move. But they’re not getting the political clout or autonomy commensurate with the key role they play.
That’s what makes the airport such a logical and important flashpoint of the protest movement right now. It’s the international business leaders who come in and out of that airport that the protesters are trying to win over.
Think of the airport protests as a modern day Boston Tea Party, as the demonstrators want to disrupt the business-as-usual arrangement that otherwise allows Beijing to use Hong Kong as a conduit to freer market economies. The Hong Kong protesters are essentially saying: “no commerce without more autonomy!” It doesn’t quite have the same ring as, “no taxation without representation,” but the sentiments are very similar.
The common argument we heard in 1997, when Great Britain handed over Hong Kong’s sovereignty to Beijing, was that mainland’s China’s increased exposure to Hong Kong’s freer society and economic model would surely bring a wave of democratic reforms to the entire country. The same argument was often used to promote favorable trade deals for China with the U.S. and other western nations.
But there’s also a strong argument that Hong Kong’s status and those previous trade deals have only enabled China’s regime to become more repressive. Perhaps no scenario exemplifies the more than the cozy relationship Beijing has with America’s big tech companies, who have done less to open China open to the world and more to help it spy and crack down on its own people.
China is clearly taking the path of absorbing more pain in hopes of waiting out the Trump administration’s tariffs and other trade moves. So it is no coincidence that the Hong Kong protest movement really came to life just as it became clear that Beijing was going to keep devaluing the yuan and eating costs in response to the Trump tariffs. American colonists didn’t want to bear the brunt of King George III’s wars against France, and Hong Kong doesn’t want to bear the costs of President Xi Jinping’s trade war strategy against the U.S.
It will be easier for Beijing to force mainland China’s people to swallow the pain of the trade war, because the people aren’t as used to economic prosperity over multiple generations. Hong Kong’s people can’t be made to forget their history of prosperity, so that leaves only suppression from Beijing as an option.
That is, unless Xi realizes a better deal can be made with the White House without giving up China’s enduring labor and scale of production advantages over most of the world. More prosperity on both sides of the globe would be easier to attain if the Xi regime chose to follow something closer to Hong Kong’s more open economic system. But it looks like more suppression is on the way.
In 1776, King George chose to respond to the colonists’ demands with war. It turned out to be much to his nation’s economic detriment. In 2019, based on what we’re hearing from Beijing, Xi seems likely to make a similar mistake in Hong Kong.
Jake Novak is a political and economic analyst at Jake Novak News and former CNBC TV producer. You can follow him on Twitter @jakejakeny.