China has stamped on Hong Kong’s democratic aspirations even as it embraces financial liberalisation, moves that secure the city’s future as the financial highway into mainland China and limit its political significance as a semi-autonomous region.
China said on August 31 it would allow Hong Kong residents to vote for their leader from 2017 but only from a shortlist vetted by Beijing loyalists. Pro-democracy groups have vowed civil disobedience but increasingly acknowledged that this was as much flexibility as they could win.
The clash comes as China speeds up the opening of its capital account. China’s leadership wants a stable Hong Kong to achieve the delicate and complex feat of opening up the world’s second-largest economy to the vicissitudes of global capital markets.
The Hong Kong-Shanghai Stock Connect, dubbed the Through Train, launches in October. It will offer foreign investors greater access to select China A shares as well as mainland investors the ability to trade shares on the Hong Kong stock exchange and is the latest cross-border programme in a long list of financial reforms.
For Beijing, stability partly means backing Hong Kong tycoons, many of whom feature in FinanceAsia’s 2014 Asia Rich List, against a redistribution of power and wealth.
“Universal suffrage means the redistribution of economic interests amongst society,” said mainland legal scholar Wang Zhenmin. “If we just ignore their [Hong Kong tycoons’] interests, Hong Kong capitalism will stop,” he added.
Beijing had promised universal suffrage — one person one vote — by 2017. Technically it has delivered but the catch is that any candidate for Hong Kong’s top political job would first have to win support from a majority of a 1,200-strong committee stuffed with pro-Beijing business interests.
In China's utilitarian outlook democracy is subordinate to the greater good which right now means maintaining stability as its capital markets open up. The features that make up Hong Kong's identity are of less importance to China: Taiwan and dissatisfied minorities on the mainland such as the Uighur's will be watching.
The road to democracy inevitable?
Recent events in Hong Kong may confound Western politicians and diplomats, who have long held that China’s growing wealth and financial reform would eventually lead naturally to democratic capitalism.
"The United States supports universal suffrage in Hong Kong, in accordance with the basic law and the aspirations of the Hong Kong people. We believe that an open society with the highest possible degree of autonomy and governed by rule of law is essential for Hong Kong's stability," State Department spokeswoman Jen Psaki said at a press briefing in Washington.
Chris Patten, the last governor of Hong Kong before it was handed back to China in 1997 echoed the sentiment: "We have a huge stake in the wellbeing of Hong Kong, with a political system in balance with its economic freedom," in a letter to the Financial Times.
Patten wrote in his book East and West, first published in 1998, that: “It was particularly difficult to believe that senior Chinese officials could have much comprehension of the relationship between Hong Kong’s hardware — a capitalist economy — and its software — a pluralist society — and yet it was the latter that enabled the former to function so well.”
Instead the Chinese Communist Party has maintained a monopoly on political power, burnished its brand of authoritarian capitalism and continues to take a utilitarian approach rather than one based on inalienable rights of the individual. Hong Kong’s importance to Beijing has always been as a financial petri dish, not a political experimentation zone.
China is undermining institutions in Hong Kong, such as the judiciary, which it demanded should be “patriotic” in June.
As China subjugates other interests in Hong Kong to stability, Hong Kong-based financial intermediaries will flourish in the financial gateway into and out of mainland China as they handle greater flows of trade finance to stock trading.
Other cities, such as Tokyo, are looking to make hay out of civil unrest in Hong Kong. However they are likely to be disappointed if they think firms will up sticks. The world's four biggest accounting firms in a June ad said they were worried about protests in Hong Kong's business centre disturbing stability.
