June 19, 2019 / 5:03 AM / a year ago

Breakingviews - Hadas: Hong Kong teaches lessons on taming China

LONDON (Reuters Breakingviews) - Some 2 million people in Hong Kong have forced China into a political retreat. The experience teaches lessons for another billion folks living in developed economies.

Protesters hold placards as they attend a demonstration demanding Hong Kong's leaders to step down and withdraw the extradition bill, in Hong Kong, China, June 16, 2019. REUTERS/Thomas Peter

A decision to put on hold indefinitely a proposal to allow extraditions from the Asian financial hub to the mainland makes clear that the world’s second largest economy is vulnerable to the right kind of pressure. Hong Kong’s relationship with China is unique, but protesters relied on five globally replicable steps.

First, set specific and realistic goals. Hong Kong residents would prefer much greater autonomy, but many of them also recognise that China is not about to discuss a broad structural change. Carrie Lam, the city’s reeling chief executive, faced only a simple demand, one her political masters in the People’s Republic could conceivably accept.

Second, unify popular resistance. The autocratic Chinese authorities learned from Lenin about the fearsome power of the masses. That is why they dedicate so many resources to squelching seditious thoughts and to stirring up politically expedient popular resentment. Government cannot override the strong desires of too many of their people.

Third, use economic leverage. As my colleague Pete Sweeney pointed out, the Hong Kong economy would suffer greatly if foreign governments decided to classify it as fully Chinese. The realistic prospect of a painful reprisal probably encouraged Xi Jinping, China’s leader, to give Lam his blessing on a compromise.

Fourth, reasonably balance disruption and destruction. There were some blockages in Hong Kong’s central business district, and the police used tear gas and rubber bullets in response to some rock-throwing. Demonstrators, however, were largely peaceful and careful not to give authorities an excuse to respond violently.

Finally, minimise propaganda. Apart from a small radical minority, Hong Kong’s protesters did not insult China’s ruling Communist Party or mock “Xi Jinping thought”. On the contrary, they gave the Chinese authorities an opportunity to show they are constructive actors who respect legitimate requests. The Party can turn its retreat into a narrative of pragmatic success.

The traditional power elites outside China, corporate as well as political, should study this playbook carefully. They will have to learn how to deal with the country from a position of relative weakness. After all, by 2030, China’s population will be 11% higher than all developed economies put together, the UN Population Division estimates. Barring a miracle elsewhere or a disaster in China, whoever is in power in Beijing will be in position to set the global economic agenda.

That will be a sea change from the China of a generation ago, a country whose leaders were almost desperate for foreign markets, technology and expertise. The transition has already started, and it looks like the United States, the soon-to-be-former global hegemon, has a lot to learn.

President Donald Trump’s administration at least seems aware of the challenge. Indeed, it is so concerned that it has ignored the first Hong Kong lesson, by developing a diffuse and unrealistic agenda. It wants China to reduce its trade deficit with the United States by buying American goods; to stop stealing U.S. technology; to hang onto a huge portfolio of low-yielding U.S. government debt; and to accept the outdated regional balance of military and political power. Worse, there seem to be no rewards on offer for bending to the American will.

Moving down the list, Trump’s team has roused only limited popular animosity against anything Chinese. The Western internet is not overloaded with indignation about the country’s malpractice, genuine or imagined. These torpid feelings show up in the polls. While 57% of Americans expressed an overall negative view of China in a February 2019 Gallup survey, that was only 6 percentage points higher than the average over the previous decade.

As for economic leverage, China’s trading partners have a big supply, but seem unable to deploy it well. The American blitz of random tariffs and corporate controls is counterproductive. It only encourages greater Chinese efforts at self-reliance. Tough sanctions on Huawei, for example, will slow down Chinese development in telephony, but a likely result will be more intellectual property theft and a stronger company emerging a decade or so from the world’s largest market.

And although the Hong Kong protesters have worked to keep their opponents from overreacting, the Trump trade campaign seems aimed at eliciting an aggressive Chinese response. The combination of sharp economic pressure, vague demands for change and military bluster gives the rulers in Beijing every reason to respond belligerently to all American moves.

Indeed, Washington’s rhetoric indicates that there is nothing the Chinese Communist Party could ever do to earn American respect. Partly out of fear of Trump, few Western corporate chieftains speak loudly in Beijing’s favour, further reducing Sino-American trust.

It is not too late, however, to engage more constructively with China. Business leaders, who bring prosperity rather than weapons, have a head start over governments, but they need to learn how to make the best use of their limited strengths. A study of Hong Kong’s non-violent resistance is a good place to start.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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