HK Gap with Mainland Wider than Imagined

The Occupy Central movement in Hong Kong is not only proving more durable than anyone imagined. It is uncovering all kinds of aspects of both mainland and local politics and attitudes that have long lain buried under platitudes and wishful thinking.

Take for example the treatment of James Tien, a pillar of the establishment and leader of the pro-business Liberal Party, a party mainly represented in the Legislative Council through the “rotten borough” commercial sector constituencies. Tien was summarily dismissed from the mainland’s Chinese People’s Political Consultative Conference (CPPCC) for suggesting that chief executive CY Leung should step down. That was hardly a revolutionary statement given that Leung’s unpopularity and reputation for incompetence extend far beyond the students and pro-democracy groups to encompass a large section of the business and professional community.

Yet membership of the CPPCC now apparently demands public backing for its positions. Even though it is supposedly only an advisory body it has been acting as if it were a policy-making instrument of the state. For many in Hong Kong, membership of the CPPCC and other mainland bodies (and their provincial equivalents) has been viewed as a kind of award or decoration, a demonstration that the person is sufficiently supportive of the government in Hong Kong to be viewed as “patriotic.”

But by demanding total adherence to the CPPCC’s decisions, it effectively makes it impossible for Hong Kong members to show any independence at all when it comes to Hong Kong affairs. This puts CPPCC members of the Legislative Council in the position of being unable to have their own opinions on issues which are supposed to be reserved for Hong Kong under the One Country Two Systems principle – all issues except defense, foreign affairs and final interpretation of the Basic Law governing Hong Kong.

The treatment of Tien by Beijing was another setback for the Hong Kong government, already reeling from Leung’s remarks the previous week suggesting that giving the majority of people the vote would lead to a welfare state and economic disaster. Tien himself had to resign as head of the Liberal party, leaving its leadership in the hands of a little-known 71-year-old commercial sector legislator. Worse it again showed the cracks that exist between the old elite which adapted from colonial to Chinese sovereignty but mostly backed Henry Tang in the contest for chief executive in 2012 and the harder edged pro-Beijing people represented by Leung and others long assumed to be close to the Communist Party.

Meanwhile Beijing has been quietly exhorting the Hong Kong tycoons, who had recently been feted by Xi Jinping in Beijing, to step up and attack the Occupy Central movement and the pro-democracy groups in general. Wisely, they have been keeping their heads down knowing that the vast wealth of themselves and their offspring though land and utility monopolies and oligopolies is one of the factors behind the protests, one which provides support among many in the lower income groups who have limited interest in the constitutional issues per se.

Early on some big foreign business interests headed by HSBC and Standard Chartered Bank and including the major accountancy and tax avoidance firms PwC and E&Y endeavored to ingratiate themselves with Beijing by attacking the Occupy movement as a major threat to Hong Kong prosperity and stability. The local reaction was caustic and they have since taken a lower profile. However, HSBC then ruffled other feathers when the chief executive of its Asian operations, Peter Wong Tung-shun, suggested that Hong Kong should switch from a US dollar to a Yuan or currency basket peg.

This is of course quite contrary to official policy of maintaining the dollar peg, established in 1983, for the foreseeable future. Wong’s surprise statement in the middle of the Occupy drama was seen by some as a display of patriotism to impress Beijing. If so it is unlikely to go down well in Vietnam, Philippines, Malaysia, India etc., nations where HSBC has an important presence and would rightfully resent the bank’s policies in Asia reflecting Chinese “patriotism”.

Beijing itself meanwhile remains stubbornly reluctant to face other facts. Those close to official thinking continue to insist that Hong Kong is all about business and as the tycoons represent business they must be backed – and in return they must speak out. In reality the tycoons almost without exception made their money from a domestic economy characterized by lack of competition while Hong Kong’a actual wealth was being created by the myriad small businesses here, and by the foreign companies and banks which use Hong Kong as a China, regional or even global hub.

The tycoons, in cahoots with the government, could well be seen as leeches on the broader business community, as well as the poorer classes. So too could the top officials. Only last week a panel headed by a former bureaucrat turned business insider proposed a 3 percent pay increase for top civil servants – and nothing for the rest. This was supposedly to keep their salaries in line with the private sector. It omitted to take account of the near impossibility of being fired from the civil service administrative grades and the many non-salary benefits that they enjoy.

Breaking this tycoon/bureaucrat nexus is crucial for change in Hong Kong but probably cannot happen unless Beijing wakes to the dangers of maintaining the status quo. Unfortunately, Beijing under Xi Jinping has become significantly more authoritarian. The party rules, its pronouncements are not to be questioned and flexibility is not an option. The latter seems to explain the apparent inability of the Hong Kong government to show any flexibility in dealing with the demonstrations.

The word has gone out: “No compromise but no bloodshed”. So while some members of the government, and even traditional Beijing allies such as former head of the pro-Beijing Democratic Alliance for the Betterment of Hong Kong (DAB) and now President of the Legislative Council Tsang Yok-sing, favor flexibility, Leung has been a model of immobility and lack of leadership.

By now after a month of traffic and other disruptions affecting a large minority of Hong Kong people and shopkeepers, one might have expected support for the demonstrations to have withered. But even if the numbers of occupiers has fallen significantly and there is disapproval of refusal to obey courts orders to remove barricades, government and Beijing actions have combined to keep underlying sympathy for the students remarkably strong. The Federation of Students has gained a high rating in opinion polls at the expense of all the formal political parties with admiration for their tenacity if not their methods.

The establishment response has been remarkable for its lack of understanding of popular sentiment. First, it wheeled out Tung Chee-hwa, removed in 2004 as chief executive for incompetence, to appeal for the students to behave. This might have sounded fine to Tung’s age group – the late 70s cohort -- but was striking for its backward looking mentality. Tung, himself a business failure, had earlier led the tycoons delegation to Beijing and since has helped create the Our Hong Kong Foundation to “take Hong Kong forward”. But membership of this group consists mostly of retired senior officials and businessmen with close government connections who want to get back to a past they view as glorious for themselves.

So, while Hong Kong popular sympathies remain focused on changing a system which is unrepresentative and made the territory the most unequal developed society in the world, Beijing has been moving to tighten party control of most things. Thus while it has set a goal of more professional and less politicized legal and justice system, the recent Plenum insisted that party control remain paramount. The same applies to the military. Its role as servant of the party – rather than of the nation as a whole – was emphasized. Patriotism and the national interests are as defined by the party. The organs of state are mere instruments.

The increased gap between Hong Kong (and Taiwan) and Beijing need not lead to disaster. Hong Kong’s instinct for self-preservation remains strong. Even the students mostly know the limits. Beijing itself has bigger concerns than intransigence in the territory. But the Occupy movement has not just created a domestic divide. More significantly it has revealed the depth of antagonism to the status quo, and the inability of the administration to address fundamental issues of housing, pollution and social deprivation.

Leung himself is at best a lame duck. Worse, the system of selection ensures that there is scant prospect of a new leader emerging who had a strong political base and popular following in Hong Kong, and is acceptable to a Beijing less willing than ever to tolerate deviation from the party line.

None of this need effect the Hong Kong economy in the short term at least. Occupy appears to have had scant impact so far either on tourism or retail sales. Listing of mainland stocks is going ahead and the limited “through-train” for trading between Shanghai and Hong Kong has been postponed for technical, not political reasons. But there is plenty of anecdotal evidence of increased migration of skilled people and of efforts by other cities to step up their own efforts to present themselves as alternatives.

Singapore is not only much cleaner but partly is internationalizing itself by enabling appointment of foreign judges to commercial cases. While Hong Kong’s judiciary has been a strong bastion against political interference, there are fears that the party has its sights set on removing “unpatriotic” elements in due course.

It remains a moot point whether the Occupy experience will provide strong, long-term reinforcement of Hong Kong’s identity and autonomy, or whether it will make Beijing determined to speed up integration whatever the cost to the mainland or Hong Kong.