The security law covers “subversion, terrorism, splittism, and interference by foreign countries or foreign influences”, the same categories that are routinely used within mainland China to crush the slightest flicker of civil dissent. Apologists claiming that this is a minor breach of Hong Kong’s autonomy – and this seems to include the EU’s foreign policy chief – are really saying that nothing should stand in the way of making money.
Hong Kong’s success is built on the rule of law and an independent judiciary, but that is precisely what the Communist leadership cannot abide. They are incensed that just 60 of the 8,500 pro-democracy protestors arrested last year have been convicted. The courts are the problem. “The city represents everything Xi’s regime hates about liberal democracy,” said Chris Patten, ex- Governor of Hong Kong.
This could hardly have hit at a worse time for Hong Kong. The enclave is coming off the biggest lending bubble in the world (BIS data), with hyperinflated property prices and a banking system with assets of 8.3 times GDP, comparable to Iceland and Ireland before their trouble began. The economy has already been hit by multiple shocks.
Nor is China recovering fully from the pandemic. A fifth of migrant workers have yet to return from their villages. Disguised unemployment is running at 15pc. The rebound has partially stalled as China’s export sector – employing 60 million people – feels the full blowback of the global lockdown.
The latest stimulus package pushed the augmented fiscal deficit (IMF definition) to 15pc of GDP but the credit expansion packs just a quarter of punch seen in the uber-stimulus of 2008-2009. The reason is that China can no longer risk promiscuous loan creation.
It was one thing to borrow with abandon when trend growth was running at 10pc a decade ago and the world economy was your oyster: it is quite another when your growth rate (the true rate) is nearer 4pc and heading for 2pc by the mid-2020s, your debt ratio has reached 330pc of GDP, and when you are already burdened with the legacy of epic malinvestments.
I stick to my long held view that China’s GDP at market prices will not overtake American GDP this decade, or in the 2030s, or this century. There is a lot of ruin in the old republic yet, to borrow from Adam Smith, and nor is Pax Americana as dead as it looks.
Xi Jinping has taken a fateful step in walking away from the Sino-British Declaration and so brazenly flouting an international treaty law lodged at the UN.
The US is now reacting in earnest to Xi’s wolf warrior diplomacy. Others will follow. China is not quite strong enough to pull off this bid for global power – this Griff Nach Der Weltmacht. It jumped the gun.