Hong Kong Law Enforcement Does it Beijing's Way

In the aftermath of the Occupy movement, the government is giving out clear signals that it will use sledgehammers to crack nuts.

In the process it may well keep stirring resentments, particularly among the younger generation who spearheaded Occupy but also among the many less committed people who are uncomfortable with the authoritarian drift of a political leadership taking its cue from the Communist Party.

It is not merely in the political sphere that the cost of dissent is rising, at least if it involves criticism of mainland enterprises. This trend will ultimately threaten Hong Kong’s position as an open society where opinions can be freely aired about financial matters as well as political and social ones.

The police sledgehammer was in action between the Christmas and New Year holidays with the arrest of a 14-year-old girl for a chalk drawing of flowers on a wall already covered with Occupy graffiti. Normal practice for the police dealing with a very minor and one-off offense by a juvenile would be a caution. At most it would be a charge before a juvenile court which would most likely be dismissed or the subject of the mildest punishment.

But eager to issue threats to the young, and to their parents, in this case the police took the girl to a magistrate with the demand that she be held without trial in juvenile detention center supposedly for her own protection. The magistrate, apparently on the look-out for official approval and possibly judicial promotion, agreed with the police that the parents were unfit to look after the girl. Not a shred of evidence was produced to show that her parents were in any way neglectful of her or that she needed the protection of the state. Nor was she formally charged.

She was thus carted off to a facility for girls aged between eight and 18 who were there either because of their own serious misbehavior or because they had been victims of parental neglect or abuse. This police move smacked of the way Communist and other authoritarian systems send political dissidents to psychiatric hospitals to imply they are mad.

But liberalism and the rule of law are still, despite official behavior, strong enough to kick back against official thuggery. There was an immediate public outcry against this arbitrary imprisonment of the girl. Intervention by lawyers and pro-democracy political figures, including highly respected former leader of the Democratic Party, Martin Lee, managed to get an emergency high court hearing of the case late on New Year’s Eve. There, the judge countermanded the magistrate and ordered the girl’s release on bail and return to her family.

In the end she spent only two nights in the closed facility but the case has further embittered democracy activists. New Year’s Day saw a group of them in full sight of the police write chalk slogans on a public wall. None were arrested.

Whilst these are undoubtedly minor offences, the failure of the police to enforce laws with any degree of impartiality is among the many grievances smoldering in Hong Kong. Daily, owners of luxury cars are routinely allowed to ignore parking restrictions, to the great inconvenience of the vast majority who use public transport. In the New Territories land use laws are constantly violated without any sanction because the authorities are in the pocket of the Heung Yee Kuk, a feudal body which purports to represent so-called indigenous inhabitants – actually a small minority of the population.

Concerns about freedom of comment on financial issues have also been raised by the zeal with which the Securities and Futures Commission, a bureaucracy which purports to regulate financial markets, is going after some critics of mainland firms.

In the firing line at present is the rating agency Moodys, a company which, like its fellow agencies, has normally been criticized for insufficiently alert to corporate malpractice and risk-taking. Moodys has been fined HK$23 million for a 2011 report entitled: “Red Flags for Emerging Market Companies: A Focus on China”. It put warning flags against a number of companies, which caused their share prices to fall and borrowing costs to rise. Details of the allegations are not available but the SFC is supposed to show not only that facts and analysis were wrong but they were either deliberately distorted or seriously negligent.

The irony here is that it is the SFC that has been repeatedly guilty of failure to police new issues by mainland companies in Hong Kong, or ensure that they meet local reporting requirements. Nor has it ever been known to take action against broker and investment banks which routinely churn out “Buy” recommendations based on obvious nonsense or in support of a issuer with which the bank or broker has an interest. The SFC is a bureaucracy which gives the illusion of ensuring walls between the advisory and trading roles of financial institutions.

Moodys has been foolish in asking that that its appeal against the SFC be held in private. This was rejected by the head of the Appeals Tribunal. An open hearing is badly needed. However, it remains the case that the SFC is a law unto itself. While it can bring actions against those it wishes, the public has no recourse against its own failure to do a proper job, particularly where mainland companies are concerned.

Indeed it seems increasingly to see its role in life as pandering to mainland interests despite the mass of evidence of poor accounting practices, if not outright fraud, found there. In another case it is taking action against the head of US research firm Citron Research for trading on what it alleges were inaccurate statements in a report on Evergrande Real Estate.

The SFC appears intent on creating a one-way street for news and views. As in authoritarian societies, that favorable to the government is allowable, however inaccurate, while critical voices are quickly accused of promoting “false news.” In response to official and SFC actions, there have been reports of banks firing analysts who have delivered negative opinions on China or Hong Kong markets, or specific companies.

The behavior of the police and the SFC in these cases shows how Hong Kong’s institutions, its reputation for free expression and apolitical law enforcement, are on a slippery slope as leaders and bureaucrats alike cozy up to mainland interests. In the process however they are alerting and angering a public which, confronted with repeated examples of high-level sleaze and corruption, can easily read their motives.