The most likely outcome for HK
3 September 2019
In October 2014, during the tail end of the Occupy movement, we published an analysis titled "One HK, two possible outcomes". In a simplified 2x2 grid with/without democracy and with/without civic freedoms, we noted that HK exists on its own in one corner, combining civic freedoms without democracy. Maybe other places have occupied that corner in the past, but it is an inherently unstable equilibrium, precariously balanced on top of a hill rather than rolling around the bottom of a valley. It has to fall one way or the other - towards democracy or authoritarianism. Here's that grid again:
|Most of the developed world & much of the developing world||
No civic freedoms
|China, North Korea, Iran, Cuba, Syria, absolute monarchies and other dictatorships|
The direction HK takes was and is ultimately a choice for the Central People's Government (CPG) to make, not for the HKSAR Government (HKSARG). All that the HKSARG could hope to do was to prolong the delicate balance and avoid disturbing it too much with poor policy moves - something which it has spectacularly failed to do with the Extradition Bill, catalysing a crisis. This perturbation has caused more than the wobbles of past crises. In our view, it has likely ended the unstable equilibrium and will push us down the hill to the authoritarian valley below.
The great hope since 1984 had been that the HK system would survive long enough for China's system to evolve towards liberal democracy, delivering the same to HK, but Chairman Xi Jinping has been taking China in the other direction towards stricter controls, and as he does, the CPG has increasingly interfered in HK affairs.
Some on the pro-Beijing side ask you to believe that the protests are purely a matter of economics, and that the people, young and old, could be pacified with cash handouts or new housing subsidies. That's a let-them-eat-cake insult to their intelligence. On each occasion of mass protest since 1997, and in economic circumstances ranging from a housing crash to a housing bubble, and from low to higher unemployment, people have stood up to defend basic freedoms and civil liberties. It's not about economics. The root issue has always been the lack of democratic accountability for proposals which strike at the heart of HK's core values. These proposals were, in summary:
- 2003: the draconian National Security Bill under Article 23 of the Basic Law. Suspended and lapsed.
- 2012: the proposed "Moral and National Education" syllabus for schools, an attempt to brainwash HK's youth into loving the mainland Government. Withdrawn on the eve of the 2012 LegCo election.
- 2014: the proposals for Iranian-style democracy in HK, whereby a carefully-controlled Election Committee would nominate, with a 50% threshold rather than the current 12.5%, candidates for the HK people to choose from (assuming more than 1 candidate passed the filter). This followed the National People's Congress Standing Committee (NPCSC) decision of 31-Aug-2014. This triggered the Occupy movement, and the proposals failed when they did not reach the 2/3 majority in LegCo.
- 2019: the Extradition and Mutual Legal Assistance bill, to allow extradition of suspects to the Mainland and the freezing of their assets in Hong Kong. This would breach the firewall between the two judicial systems under the "One Country, Two Systems" model. The Bill is now suspended but has not yet lapsed.
The current protests
While reasonable observers can disagree on the number of people who participated in the peaceful demonstration on 16-Jun, it was undoubtedly the largest turnout that HK has seen since at least Jun-1989, packing multiple parallel streets from Causeway Bay to Admiralty. It followed Chief Executive (CE) Carrie Lam's denial that there was anything wrong with the Extradition Bill, asserting merely that her Government had failed to explain it properly, an assertion that she still holds and a line that comes straight out of the National Security playbook of 2003.
What followed was the continuation of protests, some of which have remained peaceful, and others which have ended with violence in which a small minority of protesters, perhaps including agents provocateurs, have clashed with police and vandalized public property. Most notably, this included the 1-Jul invasion of the Legislative Council building, after police mysteriously failed to use tear smoke to disperse protesters while they were still outside, despite having done so on 12-Jun. On 1-Jul, tear smoke would still have worked - but in recent weeks, the extremist protesters have moved on from surgical masks and obtained readily-available respirators to immunize themselves, resulting in somewhat farcical scenes where the police fire tear smoke canisters and the protesters throw them back, along with other missiles.
The violent scenes have played into the hands of those who seek to minimize the underlying issue and the grievances of the majority of the population against the Government. It would be wrong to conflate the violent behaviour of a small minority with the demands of the vast majority.
Similarly, it would be wrong to believe that all police are as bad as the small minority who lose their temper and use unreasonable force against protesters or against those caught in the crossfire. The police are human too, they make errors, and they occasionally hire rogues or people who just don't work well under pressure. The force has been unfairly politicised by the Government's failure to respond to the demands of millions of peaceful citizens. Still, it would help if they and their boss did not come up with farcical claims such as the notion that there is insufficient room on uniforms to display police ID numbers, or the claim that it was pure coincidence that so many opposition politicians (including 3 legislators) were charged with alleged public order offences on the same day last week.
The vast and peaceful majority of HK people simply want to freely and fairly elect their own leader in a competition for policies, within this very special administrative region of China, and not to have authoritarian policies thrust down their throat. But that isn't going to happen. A proposed demonstration on the 5th anniversary of the NPCSC decision, 31-Aug, was banned, and large numbers took to the rainy streets despite knowing that they were participating in an illegal assembly. In response, the Government issued a statement that "rashly embarking on political reform again" would be "an irresponsible act", and that in any event, such discussion would have to conform with the NPCSC decision. So what they really meant was "we have nothing new to offer, so let's not repeat a pointless exercise".
However, there is at least one thing the HKSARG could do entirely within its autonomy. It could table a bill to abolish corporate voting for the Functional Constituencies in LegCo and for the seats on the CE Election Committee, instead handing the vote to any Permanent Resident (PR) who is licensed or works in the relevant sector. For example, in the so-called "Financial Services Sector", currently only a few hundred companies (stock and bullion brokers), many with common ownership, have 1 vote each. All the PRs among the 41,000 SFC-licensed professionals could be given that vote instead. In the real estate sector, instead of 1 vote per development company (again, many with common ownership), there would be a vote for each licensed Estate Agent and each Registered Construction Worker. Similarly for Banking, Insurance and other sectors. That would put them in the same position as current broad-based FCs such as the Accounting, Education, Legal and Medical sectors, all currently occupied by pan-democrats. In a nutshell: "One Job, One Vote".
Now, you might think that the existing corporate-FC legislators would try to veto that legislation, but if the alternative is continued protests and a crackdown in HK that would harm their economic interests, then perhaps they would finally surrender, in their own self-interest, the excessive influence that they have on Government policy. Carrie Lam would at least get popular support for trying, and the CPG, seeking a way to avoid a crackdown, would likely mobilise local support for the proposal.
Yes, if it seems familiar, it is similar to what Chris Patten did for the 1995 LegCo elections, a system which Beijing repealed via the Provisional Legislative Council in 1998. However, 24 years later, circumstances have changed and this would bring HK people much closer to electing their own choice of CE (via a more representative Election Committee) and a much more representative LegCo. This would bring a reasonable level of accountability to our CE and legislature without changing any of the Basic Law provisions and without needing NPCSC approval. It's not full democracy, but it would eliminate the plutocracy.
Much as we would hope for that kind of innovation, recent leaks tend to confirm what many suspect: the CE has surrendered HK's "high degree of autonomy" to the CPG. A Reuters report on 30-Aug-2019, which she has not denied, states that before a CPG meeting in Shenzhen on 7-Aug, she submitted a report which (correctly) found that fully withdrawing the Bill and appointing an independent Commission of Inquiry could help calm the crisis, but she was "ordered" by the CPG not to make any concessions, even though many of her usual supporters have called for these two minor steps.
Such actions are matters entirely within the HKSARG's autonomy, but if the report is true then she refuses to exercise that autonomy. Basic Law Article 48(8) does require her to implement the CPG's directives "in respect of the relevant matters provided for in this Law", but the only policy matters reserved to the CPG are foreign affairs (Article 13) and defence (Article 14). Clearly the two concessions do not relate to defence or foreign affairs.
When you have constitutional autonomy, and fail by act or omission to exercise your best judgment, that is arguably the Common Law offence of Misconduct in Public Office, a failure of her duty. Don't hold your breath for prosecution though, even after she and her Justice Secretary leave office. Mrs Lam would probably claim that she merely took "advice" from the CPG and then made a decision to do nothing.
Mrs Lam is also adamant, in this morning's media session (3-Sep, jump to 11:20 and 24:00), that she has "not even contemplated to discuss my resignation" with the CPG, walking back yesterday's leaked audio recording from a "totally private exclusive session" in which she said to a lunch with business people:
"If I have a choice, the first thing is to quit, having made a deep apology".
She now says:
"In a private session I just attempted to explain that as an individual, given the very difficult circumstances, might be it was an easy choice to leave. But I told myself repeatedly in the last 3 months that I and my team should stay on, to help Hong Kong, and to help Hong Kong in a very difficult situation, and to serve the people of Hong Kong."
We believe the latter statement. Her claim in the lunch was merely a plea for sympathy when in reality she had no intention of resigning. Well, if she wants to serve the people of HK, then she should withdraw the Bill and appoint a Commission of Inquiry, and let the CPG decide whether to remove her if it dares. After all, what would they do, charge her with exercising a high degree of autonomy? Extradite her to the mainland for treason? Oh wait, no extradition law!
The Basic Law is actually silent on the power of removal by the CPG. It states that the CPG shall "appoint the Chief Executive" (Articles 15 and 45) and that she shall be "accountable to the [CPG]" (Article 43). In practice though, the NPCSC would probably interpret that to include the power of removal. Local legislation (section 4(c) of the Chief Executive Ordinance) states that the office becomes vacant if the CPG "removes the [CE] from office in accordance with the Basic Law", despite the lack of a direct provision in the Basic Law for removal.
If she just announces her resignation and walks out the door, then there is an order of precedence in Article 53 for her duties to be assumed by the "Administrative Secretary" (known locally as the Chief Secretary), the Financial Secretary and the Secretary for Justice in that order, pending a new selection in 6 months. Apart from that, Article 52(1) states that the CE must resign:
"When he or she loses the ability to discharge his or her duties as a result of serious illness or other reasons."
In the circumstances, a medical note for Post-Traumatic Stress Disorder should not be difficult to obtain from the nearest Chinese Medicine Practitioner.
So what this comes down to is:
- If the Reuters report of 30-Aug is true, then she did tell the CPG that she should withdraw the Bill and appoint a Commission of Inquiry, but she will not exercise her autonomy to do so, which may be misconduct in public office;
- If the Reuters report of 30-Aug is false, then it's not the CPG that directed her, it's her decision not to respond to protesters' demands; and
- She hasn't resigned because she still hopes, somehow, to salvage the situation and enjoy political resurrection. The recording also contains her pitiful claim that "for a Chief Executive to have caused this huge havoc to Hong Kong is unforgiveable" and then a moment later "I make a plea to you for your forgiveness". This is unlikely to elicit any public sympathy.
The most likely outcome
Clearly, both the CPG and HKSARG hope that this storm blows over without any concessions, protests die down, and HK can return to its systemically-unstable equilibrium, kicking all the issues down the road, whereupon the CE can quietly resign for unrelated reasons before her term expires on 30-Jun-2022. We regard that outcome as still possible, but now less likely than the alternative, which is a hard crackdown. The depth of sentiment, and the scale of protests, is far greater than the National Security episode of 2003, and the issues have been accumulating since then.
The CE could perhaps defuse the time bomb by proposing the abolition of corporate voting and the broad franchise for those seats as outlined above, but if she does nothing, the protests will continue, injunction-defying disruptions such as last weekend's airport blockade will become more frequent (hopefully without the violence), and there will be a massive turnout on the 1-Oct holiday march in HK. The summer rains will abate, the temperature will drop, and a winter of discontent will be upon us. It's hard to see "doing nothing" as a viable strategy, nor is the CE's "dialogue" with tycoons likely to help.
There's a reason why there have been no substantial protests in Beijing since 4-Jun-1989. Although people will stand up for their rights, few will do so if they risk being shot, because that permanently ends the rights of the individual in question. Long minimum jail terms for coordinating or participating in unauthorised assemblies or publishing anti-government materials would also have a chilling effect. A few months in the slammer and the celebrity status it brings will not.
There are in essence 3 possible methods for a crackdown. One involves archaic colonial legislation; the other two involve invoking powers under the Basic Law. They are not mutually exclusive. In our view, China would not admit that the "One Country Two Systems" model has failed, so it would be careful to claim that any crackdown and bloodshed was unfortunate, necessary and within the parameters of the Two Systems Model.
- Basic Law Article 14 allows the HKSARG to ask the CPG for assistance from the local PLA garrison in the maintenance of public order. The garrison can be replenished or enlarged as needed, so that puts virtually unlimited troops into HK.
Basic Law Article 18 allows the NPCSC to decide that the SAR is in a state of emergency "by reason of turmoil within the [HKSAR] which endangers national unity or security and is beyond the control of the Region" and then to apply "relevant national laws" to the SAR. That's a somewhat clumsy option but it allows for introduction of other forces such as the People's Armed Police (PAP) which, like the PLA, reports to the Central Military Commission chaired by Xi Jinping.
Using the PLA or PAP has the advantage that, being brainwashed mainlanders and not Hong Kongers, they are more likely than HK police to obey an order to shoot. Disobeying would also risk a court martial and death themselves.
The HKSARG has also refused to rule out using the Emergency Regulations Ordinance (ERO), which allows the CE to rule by decree, making regulations with virtually unlimited scope unless and until the Legislative Council (with its pro-Beijing majority) steps in to stop her. Although we knew about it, the ERO remained obscure and unmentioned this year, until last week when the media (starting with the pro-government Sing Tao) suddenly lit up with speculation, several quoting the learned opinions of at least 3 non-official Executive Councillors including convener Bernard Chan, who are unlikely to have had opinions on it if they had not been briefed. So this is almost certainly under discussion as an option.
The original ERO was passed in a single sitting on 28-Feb-1922, in response to the seamen's strike which impacted food, coal and firewood supplies and was threatening to evolve into a general strike. The Hansard of that day contains familiar arguments - it blames foreign forces, or what today would be called a "colour revolution":
"At all events it is essential for the safety of the Colony that steps should be taken, as early as possible, to confer upon the Executive the most drastic powers for dealing with a situation which may at any moment result in disorder owing to the misguided efforts of persons who are under the influence of Bolshevist doctrine."
On the same day, Governor Reginald Stubbs (yes, as in Stubbs Road) used the ERO to pass his first set of Regulations. Amongst other things, it allowed him to authorise a person to censor or block telegrams. 97 years later, it's a different Telegram that protesters are using to coordinate, and blocking it would involve imposing a Great Firewall of Hong Kong and blocking Virtual Private Networks that could tunnel underneath - in short, adopting mainland-style controls on the internet.
More regulations were made 2 days later, but they were all repealed on 9-Mar-1922 when the strike was settled. The only other time the ERO was used was in 1967, ironically during the pro-Communist riots.
The ERO could also be used to order censorship and reporting restrictions, internment without trial (in HK or even in the mainland, deporting the protesters) and other draconian measures, with or without the support of the PLA or PAP.
After a crackdown
The scale and bloodiness (or not) of a crackdown would have a bearing on the international reaction. If there were large-scale and unjustified bloodshed then democracies would face pressure from their electorates to pass sanctions against China and potentially withdraw recognition of HK as a separate customs and immigration territory. China could choose to carry on with the facade of the Basic Law, in which case there would still be no import duties or capital controls in the HKSAR and the capital markets would continue to function. However, there would likely be capital withdrawal, possibly by state-directed sanctions as we outlined in the Trump Dump (2-Jun-2019, before the protests).
There would also be an intensification of the persecution of those deemed sympathetic to the pro-democracy movement. If you thought the forced resignation of Cathay Pacific's CEO and a few staff was bad, then imagine that applied to the civil service, all public sector employers such as the Hospital Authority, Housing Authority and state-funded schools, all contractors who service them, and virtually every large-scale employer. It would be like McCarthyism in reverse - those loyal to the Communist Party could remain. Social media accounts would be scoured for signs of support for protesters - and if your accounts were open to the public, then it is too late - they have already been scraped and stored by the state for future examination. You already have a social credit score, you just don't know what it is yet. This chilling effect on freedom of speech and association would accelerate the brain drain that is now underway and deter skilled professionals from bringing their talents to HK.
If the international reaction were sufficiently negative to widely derecognise HK, then China would have lost most of the benefits of the SAR and may just accelerate the retirement of the Basic Law, which promised no changes before 2047. HK would become just another city within mainland China, and subject to all of its controls.
On a more optimistic note, a bloodless but draconian crackdown may just allow HK to escape long-term sanctions, maintain the Basic Law and the capital markets, and continue to muddle along until China eventually faces the reality that its own system will have to liberalise if it is to continue to improve the livelihoods of its people. HK would never be the same again, talent and vitality would drain, but it could, in these circumstances, survive in a modified, authoritarian form.
The countdown to 2047
One unavoidable truth is that we are now 27 years and 10 months away from that key date of 30-Jun-2047. Younger HK citizens are making plans for their future, and increasingly, the uncertainty will draw them away from HK, not just because of a potential crackdown, but because when they reach the peak of their professional careers, the HK system may expire. What 21-year-old graduate, for example, wants to train as a HK lawyer if HK Law may cease to exist when he is 48? That question will become increasingly pertinent as the clock ticks away. Our brightest brains will seek their first or second degrees overseas, obtain a foreign passport if they don't already have one, and may not return until HK is in a better place.
A new promise from the CPG to give at least 50 years' notice of any expiry of HK's system, or a fixed-term extension, would cost the CPG little and do wonders for HK confidence at this point.
© Webb-site.com, 2019