Hong Kong, a barren island with a population of ~7,300 in 1841 ceded to the British as part of the settlement for the first Opium War, was handed back to China in 1997. Hong Kong’s unique success story can be attributed to its role as an entrepôt and because the island remained largely apolitical throughout its entire history its people were able to focus their energies on commerce. Endowed with a sound legal structure, an anti-corruption watchdog setup in the 70s called ICAC, efficient banking system, the geopolitical advantage and an excellent law enforcement department coupled with the hard-working nature of its people Hong Kong became an undisputed success on an international scale.

Due to Hong Kong’s fair and impartial legal system, sound banking system, low tax structure and efficient government departments businesses around the world treat Hong Kong differently to the rest of China – which does not have a fair and impartial legal system, sound banking, low tax nor an efficient government departments. To this day almost 90% of the Foreign Direct Investment (FDI) into China still flows through Hong Kong and mainland Chinese companies still prefer to IPO (Initial Public Offering) in Hong Kong.

It can be argued that Deng Xiaoping single-handedly made China the economic juggernaut over the last 40 years and when Xi Jinping who took over in 2012 as the chairman of the Chinese Communist Party (CCP) he has dismantled systematically all of the policies put in place by Deng. Term limits was introduced by Deng who wanted to prevent another strong man like Mao Zedong – in 2018 Xi turned the clock backwards and made himself emperor for life by removing term limits. Under Xi, Hong Kong’s legal system has suffered immensely – with the abduction of the Causeway bay booksellers, Xiao Jianhua and others on Hong Kong soil by mainland agents. The arrest of those critical of the government such as Martin Lee, Jimmy Lai et al and selectively charging them with the nebulous charge of illegal assembly is further testament to his aspiration to completely wipe out any voice of dissent. In 2019, Carrie Lam tried to bulldoze through an “extradition law” which resulted in 1 million taking to the streets on 9 June 2019 and then 2 million the following week. Even after 1 million in Hong Kong showed up in peaceful demonstration against the law Carrie Lam decided to go ahead which sparked off months of protests. It can be argued that the Hong Kong populous remained largely apolitical hitherto and Carrie Lam’s recalitrance awakened the political awareness of the Hong Kong people and sent our entire society into a political tailspin.

The CCP on 21 May 2020 announced that it will force through a National Security Law in Hong Kong without due consultation or process whilst bypassing the legislative council (LEGCO) the body that vets, discusses and votes on all laws that are passed in Hong Kong. It is very unfortunate that the CCP has resorted to this politically amateurish path of trying to bulldoze through this law. It highlights CCP’s insecurity, desperation and vulnerability. The stock market has given its opinion on the matter with an immediate 5% one day drop – the largest drop since 2015. The appraisal of history will hopefully give us a glimpse of what may happen going forward. Immediately ensuing the news of Hong Kong being handed back to China in 1983 there was capital flight out of Hong Kong and the then government had to peg the Hong Kong dollar to the US dollar to calm nerves and stem the outflow. Property prices were hit dramatically and there was a phenomenon called the brain drain where all those who could leave did leave. For those could not leave the application for overseas citizenhip surged exponentially.

The notion of this National Security Law lacks political astuteness because not only would it not stop the protests it would add fuel to the movement. Hong Kong will be destabilised further. Capital flight has already started and will accelerate. Most business sectors will be negatively affected except those offering emmigration services. Property prices will likely drop up to 30-50% as a result. FDIs flowing into China would be diminished. Talent will leave Hong Kong. Everybody in Hong Kong will be negatively impacted.

It is all important and noteworthy that the proposed National Security Law has the retroactivity of 10 years so anyone can be arrested and charged for any act committed up to 10 years ago.

The author believes that this National Security Law will be remembered in years to come as one of the major follies that accelerated of the inexorable demise of the CCP.

24 May 2020