For a glorious dictatorship, sensing and seizing the opportunity to push your luck is vital. The modern master of exploiting crises and distractions is, of course, Vladimir Putin. Most famously, in 2008, as he applauded the opening ceremony of the Beijing Olympics, Russian forces were launching a large-scale land, air and sea invasion of Georgia. While global attention was drawn by sport and by the spectacle laid on by Xi Jinping, China’s vice-president, Putin waged a war of expansion and, broadly speaking, got away with it.
The timing of Xi’s imposition of Chinese totalitarianism on Hong Kong stokes suspicion of similar cynicism. There can be no greater distraction for the West than coronavirus and its accompanying economic collapse. The fact that the pandemic is Chinese in origin is irrelevant to Hong Kong’s impending loss of freedom. What matters is that Beijing has chosen a point of maximum distraction to test its opponents’ resolve. Yet the international reaction is, thus far, encouraging. Britain, obliged to the people of Hong Kong and confronted by China’s breach of the Sino-British joint declaration, has suggested it could offer a path to citizenship for nearly three million holders of British National Overseas passports. Donald Trump, in inimitable style, has begun dismantling Hong Kong’s special trade status.
Trump’s approach to China has at times been clumsy beyond belief. Last year, as democracy protesters defended their freedoms on the streets of Hong Kong, the contribution of the US president was to back Xi to “make a deal” with them and praise him as “a good man” in a “tough business”. Nevertheless, his firm intervention now is welcome and it is notable that Joe Biden’s campaign has called for sanctions too.
Just as in Britain, those in US politics who were keen to give the Chinese government the benefit of the doubt are quickly falling away. Beliefs that Beijing attitudes towards human rights would be improved by engagement with free societies and resulting economic growth have proven woefully optimistic. Such hopes are interned in Xinjiang with one million Uighurs.
The “national security” laws under which Hong Kong is now expected to live are not nearly as horrific but still a calamity for its people and businesses. At this point, China seems highly unlikely to back away from what it sees as its long-awaited opportunity for greater control of a global financial centre. The West cannot fail to react to such an obvious undermining of the freedoms and laws on which international markets depend. Significant damage to a precious link in the global economy is a near certainty.
This is consequently a dangerous moment for the financial institutions that have been built on Hong Kong’s special status, especially HSBC. It owes its existence to the territory’s success as a meeting point for two cultures.
Understandably, HSBC executives have always sought to stay out of Hong Kong’s pivotal political controversy. This weekend, despite sympathy and appeals to remain on the sidelines from City investors, the bank’s pose as a neutral party is under mounting pressure.
On Friday, Leung Chun-ying, the pro-Beijing former chief executive of Hong Kong, issued an unsubtle warning to Mark Tucker, HSBC’s chairman, and Noel Quinn, its chief executive. Leung lashed out on Facebook, one assumes with approval if not a commission from China, demanding that HSBC state a position on the “national security” law. He didn’t mean the bank should come out against it.
“HSBC has been enjoying unique privileges in Hong Kong which should not be taken for granted,” Leung wrote, adding that “HSBC’s profits come mainly from China” and “HSBC’s China business can be replaced by banks from China or other countries overnight”.
It is a clear threat of the type used by despots down the ages. Businesses must kiss the ring or face retribution.
The assertion HSBC could be replaced “overnight” is absurd. If it were true China would not take the trouble to attempt to bully the bank into line.
Likewise, authorities in Hong Kong would not continue their long campaign for HSBC to redomicile in the territory if it did not matter. Only last month Hong Hong’s financial services minister noted (again) that “a substantial portion of [HSBC] profitability also comes from the region” as he said the bank would be welcome to relocate.
HSBC conducted a full review in 2016 and concluded that it was best to keep its base in the City of London. At the time, short-sighted and politically naive fund managers grumbled about UK taxes. HSBC said it was taking “a generational view”about the direction of global finance. We can safely assume the direction of Xi’s increasingly autocratic government played a role in what now looks a very sensible decision by HSBC to keep its feet planted in a free country.