New US law may trigger both intervention and transformative changes for HK

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In a rare display of national consensus, the US Congress speedily passed the Hong Kong Human Rights and Democracy Act on November 20. The US Senate unanimously passed its version of the bill on November 19 and the House of Representative endorsed the Senate version by 417-1 votes the following day. The bill is moving to the White House, and President Trump is expected to sign it into law once the bill reaches his desk.

The bill includes a requirement that the Secretary of State provides an annual certification that the city has retained enough autonomy from China to continue enjoying its distinct trading status under the Hong Kong Policy Act of 1992. Said distinction protects Hong Kong from the punitive tariffs Washington placed on goods from China last year.

The bill also sanctions against any individuals or entities deemed to have violated freedoms guaranteed under Hong Kong’s Basic Law and directs the State Department not to deny visas to those subjected to “politically motivated” arrests or detention.

The proposed law presents the most severe external challenge to the city’s economic, social and political life since the turbulent 1982-84 Sino-British negotiation on the 1997 return of sovereignty over Hong Kong to China.

The US is the second most important partner of Hong Kong in trade and the city’s financial center status links it inextricably to the US dollar-centric global financial system. Hong Kong now must transform its economy the third time to lessen its linkages with the US given the annual vetting of Hong Kong that makes its external business relationships run on a short-term basis. Henceforth, any medium and long-term business planning between the city and the US is subject to political uncertainty and is getting difficult.

Hong Kong economy started as an entrepot following the annexation of the city by the British under the Nanking Treaty. The first transformation into a light industrial manufacturing hub followed the influx of immigrants from China post-communist ascendancy in 1949. The second transformation from manufacturing to service started in the 1980s following the opening-up of China and the migration of Hong Kong industries to the mainland. Both changes were successful beyond expectations.

In both cases, the US market played a crucial role in the transformations, and the deep integration of Hong Kong to the American system and market reinforces the position of Hong Kong as a trans-formation window of China. The proposed law now threatens to shut the window. The city administration now must be bolder and imaginative in guiding the city’s continued economic development with one of its success pillars taken away. There are doubts that its efficient bureaucrats could transform its erstwhile laissez-faire approach to economic management to one, which involves active government advocacy of economic direction. It may have to rely on its creative and resourceful private sector to take the city to its new phase of development and economic success, with the government providing the necessary soft and hard infrastructure. Regardless, developing alternative financial anchors from the US dollar-based network will be a particularly challenging task.

On the social front, American schools are a favorite destination of many Hong Kong students. The family and social ties between the Hong Kong elites and America is extensive and in-depth. Hong Kong business people are active in many Ivy League Universities’ alumni associations, and they are counted among the most prominent and generous Asian donors to American universities. The threat of sanction against Hong Kong elites that is deemed to be hurting their rights guaranteed under the Basic Law is tantamount to asking the Hong Kong elites to take sides, a problematic proposition when one notes that the city is a territory of China and the Chinese government is also likely to require its citizens, in particular the elites, to support its policies even when other coun-tries might not agree on its rationale.

In the political arena, the Hong Kong Basic Law only requires citizenship and residency conditions on a few selected leadership positions. The city placed minimal restrictions on the vast majority of the public officeholders. The administrative vetting of civil servants is even less stringent than that of the loyalty check under the colonial administration. The de-facto vetting of persons who want to keep a link with the US by the US government on their acts affecting rights under the Basic Law could change the current liberal attitude toward civil service requirement and recruitment.Hong Kong faces daunting challenges in the ongoing civil unrest, and the looming imposition of the Hong Kong Human Rights and Democracy Act will further roil its current unprecedented political and social turmoil. Confronted in a positive manner, the Act may prove to be a catalyst for constructive change not just in the Hong Kong Special Administrative Region (HKSAR) Government ‘s composition, but how it faces up to its multifarious challenges. Above all else, it needs a new gen-eration of creative thinking officials with political skills, and a creative vision of Hong Kong’s place in the new world order.

Henry Chan is an internationally recognized development economist based in Singapore. He is also a senior visiting research fellow at the Cambodia Institute for Cooperation and Peace and adjunct research fellow at the Integrated Development Studies Institute (IDSI). His primary research inter-est includes global economic development, Asean-China relations and the Fourth Industrial Revolution.

New Worlds by IDSI aims to present frameworks based on a balance of economic theory, historical realities, ground success in real business and communities, and attempt for common good, culture, and spirituality. We welcome logical feedback and possibly working together with compatible frameworks (idsicenter@gmail.com).

**Also published in: https://www.manilatimes.net/2019/11/24/opinion/columnists/new-us-law-may-trigger-both-intervention-and-transformative-changes-for-hk/658353/

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