Thread by @davidfickling

The Chinese Communist Party made modern Hong Kong. They could break it too (thread):

bloomberg.com/graphics/2019-…

I spent a couple of weeks recently travelling around major cities in Asia trying to answer a key question: Could Hong Kong's financial sector be driven away, and if so where would they go?

I think people may be underestimating the chances of a larger retreat.

The common assumption is that Hong Kong has lived through the 1997 handover, the 1967 riots, SARS in 2003, Tiananmen in 1989, and just kept on growing -- so surely the same will keep on happening?

Shanghai's history suggests otherwise.

In the 1920s and 1930s, Shanghai was a “great cosmopolitan center” compared to the “small village” of Hong Kong.

That ended with Japanese occupation and the communist victory in the civil war in 1949. Modern Hong Kong's story began with a post-war flood of Shanghainese refugees.

So we've seen the phenomenon before where Asia's financial capital shifts. As recently as 1997, Hong Kong was thought to be playing second fiddle to Tokyo.

Financial centres don't have a perpetual guarantee of significance!

Venice, Bruges, and Antwerp were all pre-eminent financial centres in their day, and now are mostly picturesque backwaters.

If Hong Kong loses its special status under U.S. law, to a lot of foreign companies it becomes "just another port in China", as one lawyer told me.

The thing that guarantees its dominance is its strange symbiotic relationship with China.

Through most of China's modern history it's been an importer of capital, and Hong Kong was the port. As China boomed, that meant no city was able to touch Hong Kong.

The key ingredients of this are a common-law legal system like those in the UK and US, plus the rule of law; a record of being treated as different to mainland China; and the presence of a large community of white-collar professionals.

The rule of law is under constant attack from the mainland, and from the impunity with which Hong Kong's police have acted and have apparently allowed pro-Beijing gangs to act: nytimes.com/2019/11/20/wor…

As for "special status", Donald Trump signed a law last week putting a sword of Damocles over it:

cnn.com/2019/11/27/pol…

Because removing that status would be so disruptive, a lot of people are betting it could never happen.

But it's worth recognizing the extent to which China and America have put loaded guns in each others' hands here.

A savage enough crackdown in Hong Kong would make it almost impossible for a US government to argue Hong Kong was still deserving of special status.

But Beijing is behaving as if it's in control of whether Hong Kong continues to be its entrepot financial centre, when in truth the most important decision could be the one made in Washington.

As for those white-collar professionals, particularly the foreign-born: They're a tiny sliver of the population, defined by their footloose cosmopolitanism as much as anything else.

Many have been passionate supporters of the protests. Far more have kept their heads down.

Most have a foreign passport and a plan to leave when the bonus becomes too small or when the kids have finished at their international school.

Many have had a pretty transactional relationship with a city they've loved, but will drop if things get too hard.

When that happens, I guess you'll see companies moving their "expats" to Singapore.

I will bet you'll see the same offshore HQs blithely trying to move "local hires" to Shanghai, and people quitting as a result.

Foreigners have always taken Hongkong Chinese for granted.

I'm not a Hongkonger, but I've spent a lot of time there and have many friends there. I've found the bravery and spirit of the protest movement inspiring, but bittersweet because I dread what Beijing may do.

And it saddens me that this city full of wonderful people treats those people so badly. (ends)