AS we argue whether or not the Philippines is in the throes of the first wave of the Covid-19 pandemic, developments in Hong Kong can make even the staunchest China apologist cringe. But it is unlikely that they would ever be embarrassed since government propagandists—particularly those in the press—are extremely dedicated to their “cause.”
Any half-wit in geopolitics knew that “one country, two systems” was nothing more than a diplomatic ploy by the UK and China. Britain had no intention of engaging in an international dispute with China. The rest of Asia did not care at all as the Asian Financial Crisis was beginning to explode. China had no leverage on the UK, and both nations wanted a face-saving way to end Hong Kong’s 99-year life as a European colony.
Everyone needed Hong Kong to keep its status quo charm and yet be legally “China” once again, as it had been more or less since the Qin Dynasty in the third century B.C.
The primarily British-controlled banks remained in Hong Kong being the ‘Financial Capital of Asia”, which was good for mainland China. Western companies could now take better advantage of “Socialism with Chinese characteristics” started by Deng Xiaoping without getting their hands dirty with mainland public and private corruption.
Beijing demanded a declaration of citizenship and allegiance to the People’s Republic of China. But “Hongkongers” and everyone else knew that a person carrying a “Hong Kong Special Administrative Region Passport” was not really one of those “Chinese” types.
Time Magazine: “Chinese authorities announced on Thursday plans to bypass Hong Kong’s legislature to enact a national security.” BBC: “Any law would make criminal any act of: secession—breaking away from the country, subversion—undermining the power or authority of the central government, terrorism—using violence or intimidation against people, and activities by foreign forces that interfere in Hong Kong.” Another “is a suggestion that China could set up institutions in Hong Kong that are responsible for defending national security.”
In 1997, the headlines read: “How Hong Kong can change China?” and “Hong Kong—The Place to Connect and Excel in Asia.” Now they read: “Beijing Has Lit Hong Kong’s Funeral Pyre” and “The End of Hong Kong.”
The Beijing government cares very little about what the rest of the world thinks, but is always desperate to keep its 1.4 billion people if not happy at least under control. China’s total military and police per capita is half that of Spain and one-third of Thailand.
This move on Hong Kong is the opportunity to show its people that Beijing is powerful and in control.
But note this: The Hong Kong dollar (HKD) is “pegged” or artificially fixed to the US dollar. Hong Kong has been able to keep the peg, thanks to the US Federal Reserve cutting rates. Now with this political move and the pandemic killing economies, the clock is ticking on the peg.
Under current economic conditions, the Hong Kong Monetary Authority will have to print HKD to support the economy while keeping interest rates steady. That cannot be done with the “peg.” And a free-floating HKD is not good for China, Asia, or world trade since a good portion of China’s trade goes through Hong Kong and the HKD.
The Philippines has a relatively neutral trade balance with Hong Kong but remittances are about $850 million. If the HKD drops the US dollar peg, Asian currency rates will be affected and will have to adjust to another “new normal” condition.