Hong Kong: The Fall of ‘One Country, Two Systems’

Hong Kong harbour and skyline, seen from Victoria Peak (Credits: Benh LIEU SONG (Flickr), CC BY-SA 4.0, via Wikimedia Commons)

Geopolitical Report ISSN 2785-2598 Volume 20 Issue 11
Author: Riccardo Rossi

On June 30th, 2020, the Standing Committee of the National People’s Congress of China (NPCSC) approved the National Security Law (NSL) for the Hong Kong Special Administrative Region (HKSAR). On the same day, Hong Kong Chief Executive Carrie Lam (2017-in-office), under the Basic Law[1], promulgated and published the NSL in the official gazette of the HKSAR.

The People’s Republic of China (PRC), by enacting the NSL, violated the Basic Law and the 1984 Hong Kong Declaration signed with the United Kingdom, increasing the economic-diplomatic influence in the institutional set-up of the Perfumed Harbour.

Immediately, the United States and its main partners (UK, Canada, Japan and Australia) declared the Chinese political manoeuvre illegitimate and adopted soft power countermeasures.[2]

In the course of the analysis, an attempt will be made to understand the Xi Jinping administration’s geopolitical vision for HKSAR by examining the National security law and the economic-financial interaction between the PRC economy and Fragrant Harbour. Furthermore, this paper will discuss the geopolitical importance that Hong Kong has for Washington’s foreign policy in Asia-Pacific.

Hong Kong under Beijing’s control

On June 30th, 2022, the People’s Republic of China, interpreting Article twenty-three of the Basic Law,[3] enacted the National Security Law (NSL), violating the Hong Kong Declaration ratified in 1984 with the United Kingdom. The declaration provided for the transfer of jurisdiction over the Perfumed Harbour from London to Beijing in 1997, but at the same time gave Hong Kong the status of a Special Administrative Region (HKSAR) from the Communist Party of China (CPC) government for the next 50 years (2047). This constraint led the People’s Republic of China to promulgate the Basic Law in 1990:

 «[…] “mini-constitution” that the Hong Kong government describes as legally enshrining “the important concepts of ‘One Country, Two Systems, a high degree of autonomy,’ and ‘Hong Kong People administering Hong Kong ».[4]

In 2020, the Xi Jinping presidency, by enacting the National Security Law, immediately implemented by the pro-Chinese government led by Carrie Lam, increased its political-diplomatic influence on the Perfumed Harbour. Beijing designed the law to target acts of subversion and terrorism against Lam’s executive, providing equal punishment for Hong Kong residents and foreign nationals. In addition to this sanctioning element, the National security law establishes a new PRC security bureau in the HKSAR and empowers the Carrie Lam government to appoint suitable judges to hear national security cases.[5]

The Xi Jinping presidency sees the NSL as an essential part of a strategy to speed up the process of Hong Kong’s incorporation into the PRC to use its financial hub as a platform to speed up the growth of the domestic market and the interaction between its own and foreign capital.[6] In this regard, Beijing pushed its multinationals to increase investment in the HKSAR stock exchange, a decision that, according to the 2020 report of the U.S.-China economic and security review commission, led to:

«At the end of 2019, 1,241 mainland firms had listed on Hong Kong exchanges, about half of all listed companies. Hong Kong listings add about $2.9 trillion in additional market capitalisation to Chinese companies. As of June 2020, around 60 percent of lending from banks in Hong Kong was put towards mainland Chinese business activity. About 19 percent was channeled to Chinese state-owned enterprises, which the Hong Kong Monetary Authority defined as central or local government-owned entities, their subsidiaries, and their majority-owned joint ventures. […] Finally, Hong Kong remains the largest offshore clearing centre and trading location for RMB. According to the SWIFT global payments processing service, in October 2020 about 74.7 percent of offshore RMB-denominated payments were cleared in Hong Kong. Hong Kong also accounted for the highest share of offshore RMB trading in 2019 at 41 percent, nearly double that of the UK (22 percent), which ranked second.»[7]

The People’s Republic of China has strengthened its diplomatic-military presence in the HKSAR in recent years to protect Hong Kong’s economic-financial importance, carrying out investigations and crackdowns against opponents of Executive Carrie Lam. To carry out this policy, Beijing established the Security Bureau and deployed around 4,000 People’s Armed Police and 10,000-12,000 People Liberation Army (PLA) units. However, this has not been officialised by the Ministry of Defence.[8] The Xi Jinping presidency, to increase resources on the ground in 2020, conducted an effective police exercise in Victoria Harbor (Hong Kong), involving about 1,000 men from the army, navy, air force and special forces.[9]

In September 2020, increased military and police resources and investigative and repressive operations led to more than 10,000 arrests, according to the U.S.-China Economic and Security Review Commission report. Of these, 1,650 democracy activists faced criminal prosecution.[10]

The Western international community has assessed this assertive Chinese imposition on the Hong Kong Autonomous Region as an illegitimate and potentially damaging act to the geopolitical balance in the Asia-Pacific region and the global economic-financial system.[11]

The United States, following its Asia-Pacific foreign policy line called Pivot to Asia,[12] developed a soft power manoeuvre to limit Chinese influence in the HKSAR to avoid a future annexation of Hong Kong to the PRC.

On July 14th, 2020, the Trump presidency (2017-2021) responded to the enactment of the National security law by signing the Hong Kong Autonomy Act (passed unanimously in the House and Senate) and issuing Executive Order 13936.

The Hong Kong Autonomy Act allowed the Trump administration to impose economic and financial sanctions against persons deemed responsible for the Chinese violation of their obligations to the Hong Kong Special Administrative Region (HKSAR) enshrined in the 1984 Declaration.

President Trump promulgated Executive Order 13936, so he recognised the importance of the Hong Kong issue to U.S. national security and geopolitical stability in the Asia-Pacific region by taking the following measures:[13]

«(1) states that, “It shall be the policy of the United States to suspend or eliminate different and preferential treatment for Hong Kong to the extent permitted by law”;

2) authorises the imposition of visa restrictions and economic sanctions on “any foreign person” that the Secretary of State and the Secretary of the Treasury, in joint consultation, determine was involved in or responsible for actions that undermine Hong Kong’s autonomy, “undermine democratic processes or institutions” in Hong Kong or limit the rights of Hong Kong residents,[…]

3) orders the executive branch to suspend the Agreement with Hong Kong for the Surrender of Fugitive Offenders and the Agreement with Hong Kong for the Transfer of Sentenced Persons and ‘take steps to end the provision of training to members of the Hong Kong Police Force or other Hong Kong security services at the Department of State’s International Law Enforcement Academies […].

4) suspends differential treatment for Hong Kong under the Export Control Reform Act of 2018 (P.L. 115-232; 50 U.S.C. 4801 et seq.) and the Arms Export Control Act (P.L. 94-329; 22 U.S.C. 2751 et seq.)[…]».[14]

In adopting this measure, the Trump administration reduced dialogue with the Hong Kong government and partly succeeded in reducing Western capital flows into the HKSAR.[15] A manoeuvre that burdens the People’s Republic of China’s economic and financial system must use the Hong Kong Stock Exchange as an interconnection platform between its own and foreign capital. [16]

Conclusions

President Xi Jinping sees the Hong Kong Special Administrative Region (HKSAR) as a key piece in the China Dream project to restore the People’s Republic of China’s political and strategic centrality in the Asia-Pacific region.[17] By enacting the National Security Law, Beijing violated the Hong Kong Declaration and the Basic Law, increasing its economic-diplomatic influence in Hong Kong and raising tensions with the United States and its partners.

During its five years in office, the Trump presidency (2017-2021) has implemented two significant measures aimed at cracking down on Chinese multinationals’ financial investments in Hong Kong’s business location and reducing dialogue and diplomatic cooperation with Executive Carrie Lam.[18]

Overall, this Sino-U.S. opposition on the issue of Hong Kong’s independence is unlikely to be resolved through diplomatic channels. An explanation in support of this assessment can be traced back to the economic-financial indispensability attributed by Beijing to the Perfumed Harbour business location to facilitate the development of its domestic market and the interaction of its own capital with foreign capital.[19]

Based on what has been discussed, it is realistic to assume that in the coming years, the Xi Jinping presidency will enact increasingly stringent laws towards the Hong Kong Special Administrative Region (HKSAR), depriving it of basic law to subordinate it to Beijing.

Sources

[1] The Basic Law can be defined as: ‘[…] a “mini-constitution” that the Hong Kong government describes as legally enshrining “the important concepts of ‘One Country, Two Systems,’ ‘a high degree of autonomy,’ and ‘Hong Kong People administering Hong Kong'”. Cf. Congressional Research Service, (2020) China’s National Security Law for Hong Kong: Issues for Congress, p.2. Retrieved from: https://sgp.fas.org/crs/row/R46473.pdf.

[2] Neye. J. S, (2008), Leadership and Power. Hard, Soft, Smart Power, Editori Laterza, Bari, p.34

[3]Article 23 of the Basic Law defines: ‘The Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organisations or bodies from conducting political activities in the Region, and to prohibit political organisations or bodies of the Region from establishing ties with foreign political organisations or bodies’. Cf. The Government of the Hong Kong Special Administrative Region of the People’s Republic of China, Basic Law, https://www.basiclaw.gov.hk/en/basiclaw/chapter2.html

[4] Congressional Research Service, (2020), China’s National Security Law for Hong Kong: Issues for Congress Ivi,p.2

[5]U.S.-China economic and security review commission (2020) Report to Congress, pp. 496-497. Retrieved from: https://www.uscc.gov/annual-report/2020-annual-report-congress.

[6] Kwok. D, Donkervoort. E, (2021) The Risks for International Business under the Hong Kong National Security Law, Ash Center for Democratic Governance and Innovation, Harvard

[7]U.S.-China economic and security review commission (2020), Report to Congress, pp. 510-511. Retrieved from: https://www.uscc.gov/annual-report/2020-annual-report-congress.

[8]Torode. G (2020). Exclusive: China’s Internal Security Force on Frontlines of Hong Kong Protests, Reuters. Retrieved from: https://www.reuters.com/article/uk-hongkong-protests-military-exclusive-idUKKBN2150JP.

[9] Chen. F, (2019) PLA Staged New Drill Last Week in Hong Kong, Asia Times. Retrieved from: https://asiatimes.com/2019/12/pla-staged-new-drill-last-week-in-hong-kong/

[10]U.S.-China economic and security review commission (2020), Report to Congress,p.498

[11]Kwok. D, Donkervoort. E, (2021), The Risks for International Business under the Hong Kong National Security Law, Ash Center for Democratic Governance and Innovation, Harvard.

[12] Riccardo Rossi (2021) Geostrategy and military competition in the Pacific, Geopolitical Report ISSN 2785-2598, Vol 10 (1). Retrieved from: https://www.specialeurasia.com/it/2021/08/06/geostrategy-pacific-competition/

[13] Congressional Research Service (2020) China’s National Security Law for Hong Kong: Issues for Congress, Washington

[14] Ibid, p. 35

[15]U.S.-China economic and security review commission (2020), Report to Congress, Retrieved from: https://www.uscc.gov/annual-report/2020-annual-report-congress.

[16] Ibid.

[17] Riccardo Rossi (2021) Geostrategy and military competition in the Pacific, Geopolitical Report ISSN 2785-2598, Vol 10 (1), Retrieved from: https://www.specialeurasia.com/it/2021/08/06/geostrategy-pacific-competition/.

[18] Congressional Research Service, (2020), China’s National Security Law for Hong Kong: Issues for Congress, Washington

[19] Ibidem