Hong Kong – Forex Academy

Has the West got it right regarding the China & Hong Kong National Security Law? Part 2 of 2

Societies are complex and ever-evolving organisms, and if China is to successfully govern Hong Kong then surely it has a right to implement changes to laws if when it feels the need to do so, after all, other countries do this all the time, and mostly without criticism and especially from China, who is fairly agnostic with regards to the governance of other countries.
While 27 countries in the West have openly criticized China’s new Hong Kong law, 53 other countries have come out in support of the new legislation. This is largely gone unreported.

What’s more, 2.9 million people in Hong Kong signed a petition supporting the new law, some 38% of the population in which case you can comfortably assume some people did not bother, in which case it could be as even as a 50/50 split of the population agreed.
Certainly, investors were happy as the Hong Kong stock market surged 1.7% as the bill was introduced.

One question which came out was that several accusations from media outlets – including Ming Pao, RTHK, ATV, TVB, Now TV, Oriental Daily News, and Apple Daily – that organizers had hired protestors, and that many had been paid between HK$200 ($26, £15) to HK$800 for turning up and protesting.

And while in the United States black lives matter’s protesters were called terrorists by Donald Trump, the protesters who were causing disruption, mayhem, wanton criminal damage and almost financial ruin for some businesses in Hong Kong, were called heroes by the West.

And so the question is, has the West got this wrong, and do they have the right to tell China how to handle its affairs and make threats of sanctions and tariffs without any real foundation that the new security law in Hong Kong is such a bad thing, especially as a high proportion of residents actually support it. Wouldn’t it be more advisable to sit back and watch how the new law is implemented and look at it from the point of view that action should only be taken should there be proven breaches of human rights and miscarriages of justice amounting from the new law? After all, how could anybody, with any common sense, expect that China will change the law, now that it’s actually been implemented? Is it worth risking an economic fallout with China, especially as we are still in the midst of a global pandemic that is crippling economies around the world?

Perhaps we need to further analyze some more lessons from history and further statistics before we start trying to push China around: –

China’s percentage of the world’s gross domestic product in 1980 was 1%, which is quite staggering when we realize that it had grown to 15% in 2015, and currently in 2020, pre-pandemic, the figure was 18.5%.

If growth rates return as expected, by the end of 2021, the post-pandemic picture for China’s growth path could see it with 30% of world’s GDP between 2030 to 2035 according to economic modeling by Tsinghua University, Beijing. That is twice as much as the United States and almost identical to the United States and Europe combined. And, incidentally, that is the same as the percentage of global GDP China enjoyed in 1820.

Some Might argue that China expanded so incredibly because of reverse engineering and copying other countries’ products and stealing intellectual property rights. However, China has moved on, and the West has certainly enjoyed buying cheaper products as manufactured in China. But, China has now become a powerhouse of innovation and is clearly able to hold it so on that front, from cars, white goods, phones, computer systems, software, medicine, communications technology, as produced by Huawei and other Chinese tech firms. They are also leading designers of infrastructure projects, with the best rail system in the world. They own huge banking corporations and leading companies such as Alibaba, JD.com, NetEase; the danger is that China is about to leave the West in its shadow. And all this happened since the Chinese communist party abandoned a large part of its ideology in order to embrace capitalism.

China’s growth is simply disproportionate and while it’s most important relationship is with the USA, it is also highly focused on its relationships with the developing world, where it sees itself as having an affinity and especially with African nations which have enjoyed growth and wealth having sold natural resources to China and been able to benefit from infrastructure projects as designed and provided by China. Some 65% of Africans have a favorable attitude to China and where some African countries are growing solely on the basis of their relationship with China.

Perhaps another lesson for the West is that in 1970 two thirds of global GDP was with the western world, where 15% of the world’s population lives, and only one third in the developing world where 85% of the population lived.

In 2015, 59% of the world’s GDP was accounted for by the developing world, and only 39% by the developed world. And of course, China has its tentacles in all the far-reaching corners of the developing world.

The West cannot stop China, and if it forces China into a situation where tensions become so bad and trust so failing between both sides, the result could be an economic fallout of unprecedented magnitude.

And while China is leaning towards becoming the biggest economic powerhouse on the planet, we should be working with them and not against them if we want to continue to reap the rewards of economic prosperity.

Further alienation by the West to China by forcing them into a corner over the issue of the Hong Kong security law could cause extremely harmful repercussions, which could see pandemonium in the financial markets should sanctions and tariffs be implemented and all while the world is still reeling from the Covid pandemic. The timing of all this could not be worse. Long-term prosperity can only be met by stopping the rhetoric and working together under an umbrella of economic and political harmony.

Finally, what will the future hold for Hong Kong as a trading hub? Certainly, there is no imminent risk that the West will abandon the trading opportunities with regard to its important finance center, tourism, and import and exports should there be a full-scale trading crisis with China. The people of Hong Kong are largely seen as victims in the dispute over the new law.

Has the west got it right regarding the China & Hong Kong National Security Law? Part 1 of 2

Tensions are building between the west and the Chinese government over the recent introduction of China’s National Security Law, but is the west right or wrong on this issue? Threats of tariffs and sanctions are firing in both directions, and some are being implemented while strongly worded threats are being bandied by both sides. To get a clearer picture, perhaps we need to go back in time a little to try and better understand this complex issue, which threatens to further destabilize global trade, where both sides will suffer economically.

Great Britain acquired Hong Kong Island from China in 1842, at the end of the 3-year Opium war, when the so-called Treaty of Nanking was signed. Hong Kong returned to Chinese rule at midnight on July 1, 1997. The ceremony was attended by the then British Prime Minister Tony Blair, Prince Charles of Wales, Chinese President Jiang Zemin, and U.S. Secretary of State Madeleine Albright. The only caveat in the arrangement was that there would be one country and two systems, whereby Hong Kong would retain its own economic and administrative systems.

However cracks began to emerge when the Chinese government attempted to introduce a fugitive offenders amendment bill that would have seen the introduction of an extradition treaty between Hong Kong and the mainland and where offenders from Hong Kong, or those on the run from China, could then be sent to mainland China for processing and prosecution, and if found guilty, there were the implications of jail time being spent on mainland China, thus eroding a fundamental section of the one country two systems arrangement.

There was an outcry by some members of the community in Hong Kong, and immediate objections and protests began there when the proposal for the new bill was presented in 2019 because this was seen as opening up the possibility of Hongkongers to perceived unfair trials and violent treatment in China. The protestors said the new bill would give China a bigger stronghold in the judicial system in Hong Kong, and it could be used to target activists and journalists.

The bill was withdrawn after violent protests in Hong Kong and after an 18-year old was shot in the chest with a live bullet as protesters fought police officers with bricks, petrol bombs, sticks, poles, and anything they could get their hands on. Buildings were torched and vandalized, residents were terrorized as the violence escalated out of control, people were stabbed, and protestors tried to remain incognito by wearing black masks. The activists set up roadblocks, barricades and had standoffs with the police. Hong Kong had never seen violence on this scale in its modern history. The local economy and stock market suffered losses as a result.

The protesters had demanded an end to the bill, and that the stigma and possible risk of criminalization having been characterized as rioters be withdrawn, they also demanded an amnesty for arrested protesters and an independent inquiry into alleged police brutality, plus the implementation of complete universal suffrage, or the right to vote in political elections. They also demanded the resignation of Carrie Lam as Chief Executive.

Although the bill was withdrawn, China did not relent entirely and has now introduced a new Hong Kong national security law, which came into effect on June 30, 2020, and where the law’s key provisions include that: Crimes of secession, subversion, terrorism, and collusion with foreign forces are punishable by a maximum sentence of life in prison. Beijing will establish a new security office in Hong Kong, with its own law enforcement personnel – neither of which would come under the local authority’s jurisdiction and where some cases could be sent back to mainland China to be tried.

This has largely been met with consternation and criticism by the west where 27 countries have protested against the new bill and where Australia has immediately canceled its extradition treaty with Hong Kong by way of protest and offered what equates to a sanctuary to people who wish to flee Hong Kong and where the British government has said that it will offer U.K. residency to 3 1/2 million Hong Kong nationals with overseas British passports, should they wish to leave Hong Kong. The United States government has come out very strongly against the new law and says there will be consequences for China.

The European Union has also issued a strongly worded complaint to the Chinese government. And whereby President Xi Jinping has counter issued strongly worded advice to all of those speaking out against the new security law to stay out of its affairs, while suggesting there will be consequences for those countries taking action such as Australia and where these actions are likely to be financial in nature, perhaps such as extra tariffs, sanctions or even a reduction in trade.

The market has begun to sit up and take note of the extraordinary exchanges and threats coming from both sides. The Australian dollar has come under pressure, and President Trump has said that he has no interest in currently pursuing Phase 2 of the China / U.S. trade deal. The rhetoric has caused spikes and troughs in the U.S. equities market and the U.S. dollar, with implications to counter traded currencies as the fallout between China and its trading counterparts worsens.