More from the Battle of Hong Kong

Clearly, what is or is not happening in Hong Kong matters. The events are a flashpoint in the current clash of civilizations, the clash between Western liberal democracy and Eastern authoritarian capitalism. Admittedly, it is not as dramatic as military clashes, but still, it certainly matters. As of now, the Hong Kong protesters have won the hearts and minds of Westerners. But they seem to be losing ground in other ways.

And, let's be clear. The leadership in Beijing will not allow itself to lose. It will not allow itself to lose face. It cannot. Besides, as of now, most Chinese people are on its side. You might consider that they have been brainwashed, but you must also consider that their lives are not going so badly after all.

Even American politicians are weighing in, generally in firm support of the Hong Kong demonstrators. President Donald Trump has stated that he does not want to see another Tiananmen Square massacre. In truth, and beginning with the people running China, no one does.

And yet, in today’s interconnected world, China does not have to run down demonstrators with tanks. The Middle Kingdom has many other ways to deal with the problem. And, dare we notice, people living in Hong Kong also have options, among them, moving out of the city state or taking their money out of it.

So, let us review some recent developments, those that have less dramatic intensity than visions of millions of people marching in the rain. 

The first issue is whether what is happening in Hong Kong will spread throughout China. Will the desire for freedom cross the border and light a fire under those who have been living under authoritarian pressure? As you perhaps recall, the protests in Tienanmen Square three decade ago resonated throughout China. Before the regime crushed them they had elicited a highly sympathetic reaction throughout the nation. Soldiers stationed around Beijing had refused to put down the demonstrations. In more conventional terms, this means that they were in mutiny.

Thus, the situation now and the situation then are at variance. Since China, as noted in my last post on the topic, has achieved a goodly measure of prosperity and now commands respect on the world stage, most of its citizens are not about to risk it in order to protest a criminal justice law.

How do we know? Well, the Wall Street Journal reports about attitudes in Shenzhen, which is across from Hong Kong. Allow its reporters to explain:

Every day, three quarters of a million people traverse more than a dozen border crossings linking Shenzhen and Hong Kong, a symbol of the intertwined economies and fortunes of China’s mainland and its prosperous territory.

But on the hot-button political issue of the day—the anti-government protests that have swept Hong Kong this summer, sparking violence and raising the possibility that Beijing will respond with force—the two cities offer a split-screen perspective.

It is difficult to know what people in Shenzhen think, because information flows are strictly controlled by the government. So, one takes these interviews with a few grains of doubt:

Dozens of residents interviewed in recent days in Shenzhen, widely viewed as the mainland’s most open city, generally echoed Beijing’s official line, which has been assiduously promoted in state media.

Many said the protests risked damaging the economy and that demonstrators in the former British colony had gone too far in challenging the Chinese government’s authority.

And yet, people in Shenzhen do have access to Hong Kong news sources:

“It’s so chaotic in Hong Kong,” said one resident of Shenzhen, expressing a widespread view here that Hong Kong’s protesters have abused the special liberties conferred on them under the terms of the territory’s return to Chinese rule. “The government should do something.”

Wang Junqi, a 21-year-old student shopping in Shenzhen’s massive electronics district on Friday, dismissed the possibility that Chinese people outside Hong Kong would be inspired by the activism there. “Shenzhen and Hong Kong are close, but not that close,” she said.

People along the border in Shenzhen can tune into Hong Kong television news, where a lively debate is playing out, but many say they prefer mainstream Chinese sources of information, like the ubiquitous smartphone app WeChat , created by Shenzhen-based giant Tencent Holdings Ltd.

Hong Kong still matters, but it matters less than it used to matter. China and the people of Shenzhen need Hong Kong less than they used to need it. This means that the people of Hong Kong have less leverage:

Hong Kong remains the region’s foremost global gateway and financial center, thanks to a legal system that commands international respect. But Shenzhen, a small fishing village as recently as the late 1970s, has in some ways outpaced its wealthy neighbor to the south.

Four decades after Chinese leader Deng Xiaoping made the city a laboratory for economic reforms, Shenzhen’s population now tops that of Hong Kong. Shenzhen has largely thrown off its onetime reputation for sweatshop wages and crime, now boasting manicured parkways and direct flights to London, Zurich and Johannesburg.

It is home to several of China’s best-known companies, including Tencent and telecommunications giant Huawei Technologies Co., drone maker SZ DJI Technology Co., financial behemoth Ping An Insurance (Group) Co. of China and China Vanke Co. , the nation’s largest home builder.

Hong Kong’s waning cultural and economic influence with China has helped Beijing guide the narrative during the turmoil so “most Chinese people understand the movement as radical and violent,” said Xi Chen , an expert on social movements at Chinese University of Hong Kong. “Censorship is only part of it.”

Among the problems the protesters are facing is a simple one: their activities are seriously damaging the Hong Kong economy. In another article the Wall Street Journal reported:

Money is leaking out of Hong Kong as months of protests raise concerns about the city’s future.

The local currency has weakened rapidly since early July, a move analysts attribute partly to outflows. Some businesses say they are seeing money move abroad, and several individuals who spoke to The Wall Street Journal said they have either swapped money into other currencies or are considering doing so.

And,

Retail, tourism and business confidence have all suffered, and the city’s stock and property markets are under pressure. The extradition bill that sparked the unrest, and the months of clashes that have followed, have together raised questions about the city’s future as one of the world’s largest international financial hubs, and how much autonomy it can maintain in its dealings with Beijing.

For now, it’s a trickle, not a flood. But, it’s easier to control a trickle than a flood:

TransferWise—a London-based company that facilitates international bank transfers, primarily for individuals and small businesses—said it has seen a significant pickup in outbound flows from Hong Kong since the protests began.

The ratio of money moving into and out of Hong Kong was fairly consistent until a few months ago but has climbed as protests in the city intensified. TransferWise said that for every $1 that customers moved into Hong Kong in August, about $2.64 left the city.

And then there is the movement of people. Most especially, Tyler Durden reports, people have been leaving Hong Kong for Taiwan. The movement has been accelerating of late:

Hong Kong was already one of the world's most unaffordable cities before the unrest over the extradition bill started 11 weeks ago. But now, it's both unaffordable and not particularly safe, more residents are looking to maybe find somewhere less expensive, that's not quite such a political powder keg.

Given that most people in the region would probably like to live somewhere local where they speak the language, the top beneficiary of HK's recent wave of emigration has been Taiwan.

According to the Taipei Times and Bloomberg, the number of people moving to Taiwan from Hong Kong has risen rapidly - it's up 28% over the first seven months of this year compared with the same period a year earlier - driven in part by the anti-government protests that have rocked the city-state over the past three months.

More and more people are thinking that it’s just too dangerous to stay in Hong Kong today. Stay tuned. And stay informed.