Assumptablog

China President Xi Jinping’s balancing act over Hong Kong

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Hong Kong’s summer of discontent has spilled over into fall, bringing with it tear gas, petrol bombs and widespread transport disruptions — all the elements that have divided the city during four months of unrest.

Observers had looked to China’s National Day on October 1 as a potential turning point for the protests, and since then they’ve escalated withprotesters targeting businesses linked to mainland China.

The vandalism and violence poses a direct challenge to Chinese President Xi Jinping, who is not known for his tolerance of views that differ from the ruling Communist Party.

However, it is not clear if Beijing has a red line, and what it would take for protesters to cross itbefore provoking a Chinese military response.

Chinese military intervention in Hong Kong is still believed to be the last resort, as it would carry disastrous consequences for both the territory and mainland China.

But experts say the Hong Kong government’s failed efforts to stop the protests by evoking emergency powers could move Hong Kong closer to a more aggressive response from Beijing.

Riot police shine lights at protesters outside Ma On Shan police station in the New Territories of Hong Kong on October 9.

Balancing act

Xi, who effectively made himself “president for life” by dropping presidential term limits in 2018, is China’s most powerful leader since Mao Zedong.

He is set to convene a high-level Communist Party meeting later this month and will want to protect his image of atough nationalistleader that’s driving China to a more prosperous future.

“He faces potentially embarrassing questions over Hong Kong as the situation is not under control after four months,” said Willie Lam, adjunct professor at the Chinese University of Hong Kong. “He cannot be appear to be weak, otherwise he will lose face.”

For a few months,China embarked on a propaganda campaign and social media blitz todemonize the Hong Kong protesters. Now, all mention of the protests are blocked once again as a topic on social media in the mainland.

Chinese state media continuously reinforces its message that they are dangerous, out-of-control separatists influenced by foreign forces, and that the Chinese military or armed police could be sent in at a moment’s notice to crush them.

In reality, such a response could destabilize Hong Kong and China’s economy, destroy Xi’s global reputation and disrupt long-term plans for political and social assimilation of Hong Kong with the mainland.

“You can send in the troops but unless you suppress the protesters with overwhelming force then you’re just going to require continued occupation,” said Adam Ni, a China researcher at Macquarie University in Sydney.

Experts say armed intervention in Hong Kong would also provide political leverage for Xi’s factional

“There are political forces within the Chinese Communist Party that would like to see him slip up as a way to justify removing him as president for life,”saidMalcolm Davis, senior analyst in Defense Strategy and Capability at the Australian Strategic Policy Institute.

Xi will also be thinking of cross-strait relations with Taiwan, which have only worsened since the Hong Kong protests began in June. While Taiwan has been self-ruled since the end of the Chinese civil war in 1949, Beijing has not given up its desire for reunification through political negotiations.

“There’s no way that they are going to sign up to any peaceful negotiation with the Chinese, given what’s happening in Hong Kong. So ultimately, Xi may be forced into a bigger risk with Taiwan as a result of what’s happening,”said Davis.

Economy

Analysts say if People’s Liberation Army (PLA) troops or the paramilitary People’s Armed Police cracked down in Hong Kong, the stock market and housing market would crash and a mass exodus would likely follow.

Hong Kong is an important global financial and business center, with foreign companies and investors seeing the city as a stable gateway to Asia.

Already, the protests are having an impact on Hong Kong’s economy, but Chinese boots on the ground would seriously damage its image as a safe and open place to do business. Such instability caused by an armed intervention could prompt corporations to reconsider their investment in the city.

“It’s possible that multinational companies, or companies listed on the Hong Kong stock market may think of moving to Singapore or another financial center in Asia Pacific,” Lam said.

Chinese companies use the Hong Kong stock market to raise capital and many powerful Chinese elites who have invested heavily in Hong Kong would stand to lose huge amounts of money in the event of an economic collapse, Lam added.

About half of all the foreign direct investment into China last year came through Hong Kong. And a similar percentage of investment from China flowed into Hong Kong, according to the Hong Kong Trade Development Council. The figures are in the hundreds of billions of dollars .

China is also fighting a bitter trade war with the US, dealing with a slowing economy, and the strains of building the Belt and Road Initiative — Xi’s signature global infrastructure policy that aims to build new trade routes linking China to Asia, Africa and Europe.

“Hong Kong is still the major place where the Chinese economy raises cash to finance its modernization programs,” Lam said. “They want to raise more money and they need Hong Kong actually more than ever.”

A bloody crackdown akin to the 1989 Tiananmen massacre would also damage China’s image in the eyes of many in the region. Xi is risking sanctions and important diplomatic and economic relations being severed.

“Armed intervention in Hong Kong just adds to the narrative of a threatening China,” Ni said.

Playing into Beijing’s hand, however, is the power it holds over multinational companies afraid of losing lucrative business on the mainland. And Beijing has been quick to take punitive measures against companies that show support for the protests.

Hong Kong’s flagship aircraft carrier Cathay Pacific has borne the brunt of Chinese pressure, which has even extended to US entities like the NBA and video game company Blizzard Entertainment who have become embroiled in disputesover Hong Kong.

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