Hong Kong’s share of Chinese gdp

HongKongshare

That is from Ian Bremmer on Twitter.

The game-theoretic dynamic of such situations is of course not always a happy one.  Pro-semi-autonomy views in Hong Kong feel desperate and are losing leverage.  China feels it can play tough, because it sees it is gaining influence.  And the equilibrium is…?

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HK neither contributes to nor receives funding from the Chinese government.

A better indicator would be the amount of capital raised by Chinese companies through HK, which would show a very different picture. The city still plays an important role, not only economically but also symbolically. The people of China and Taiwan are watching with great interest. Remember, social stability matters to the Communist Party more than anything else — and that's why it matters a great deal that China handles this sensitively.

If you're a Chinese person who dreams of a democratic future, what message does this send? If HK isn't ready for democracy, how long will it take for China? 50 years? 100? How long are people willing to wait? How much more corruption can they tolerate?

These are much more important issues than whether China can afford to live without HK's GDP. China is on the back foot here. It won't back down, of course, but it knows it must tread carefully.

Right, it's not the GDP share that's the issue. It's that Hong Kong acts as an airlock for Chinese capital markets. It allows the CCP to maintain capital controls, but still access global financial markets. China feels that there's much more stability and sense o control in this arrangement. For their, part Western counter-parties are much more comfortable going through Hong Kong intermediaries where the rule of law is excellent. Many more international players would be hesitant to touch anything if they weren't insulated from Chinese corruption. The arrangement also allows party members to freely launder their embezzled funds in banks that are out of reach of Mainland authorities.

In that sense even though Hong Kong's a smaller share of Chinese GDP, it's much more secure. Mainland China is way more economically intertwined with it than it was immediately after the handover. Consider the unthinkable, what if the CCP announced the end of one country two systems tomorrow? Total financial panic. Chinese equity indices would collapse by more than 50%. Real estate would tumble by almost the same. Banks would fail across the mainland. Most of the corrupt officials (which is probably near all of them) would be at risk of being exposed and executed. Blood in the streets, inter-party coups. If you're a party bureaucrat in 2014, this is exactly the kind of scenario that you've been indoctrinated to stay as far away from at all costs. That's why touching Hong Kong is unthinkable.

Hong Kong is almost certainly ready for democracy. The CCP, however, isn't ready for Hong Kong to show that it is.

Taiwan is watching.

Oblivia upthread nails it.

Apparently the ChiComms are less in thrall with their investment banking and shadow banking sector than their DC counterparts [a classic, five years on]:

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/

False equivalence

Globalization has not exported American values. If anything, the opposite has occurred. The globalization of the past 20 years has taught America a lot of totalitarian values. We have a huge trade deficit in values.

Maybe the driving influence is not money but an autocracy slowly taking away freedom and representative government?

It is likely that there is nothing special about "now"; the gradual assumption of control by the Chinese government was likely always the plan. It has just reached a point where people are getting mad.

"It has just reached a point where people are getting mad."

Or is this more like putting a frog in a pot of water and slowly turning up the heat?

If Hong Kong is less important economically to China, what is China's interest in it?

Making sure China does not go the way of the Soviet Union.

HK’s GDP might be a smaller share of China's than before, but a lot of China's economic successes (Lenovo, Haier, etc.) have depended on HK's capital and its financial/legal institutions.

Unfortunately, neither GDP nor the welfare of the Chinese people are the Party's primary concern. The ultimate goal is to maintain the Party's supremacy, which may or may not be aligned with China's economic interests at a given point in time.

The protesters in HK are demanding the right to vote for people not approved by the Party, and that's why the government is so eager to suppress the movement.

So why don't China let it go?

The idea that the Chinese would allow an island filled with millions of wealthy, ethnically Chinese inhabitants to become independent, -- especially at a time when China is risking international confrontations for islands and waters in SE Asia and the Senkakus that they have much weaker claims on -- seems so amusingly far fetched that it seems like a pure troll. What's next, letting Taiwan officially vote to become independent? I suspect there's a higher probability that Arabic becomes Israel's official language.

Point of information, wiki - Arabic *is* an official language of Israel. http://en.wikipedia.org/wiki/Languages_of_Israel

Not so, of course, with Hebrew anywhere outside of Israel.

At the end of the day Beijing has to decide just how badly HK democracy would hurt them. Given that all most HK people want is a modicum of control over issues like education, housing, etc. and the CCP has proven its ability to control the message on mainland China, I don't think it would hurt as badly as many imagine.

What effect would the ongoing freedom differential have on mainland China?

Yes, I think that's the standard they are judging it against. They are probably afraid of what a more democratic Hong Kong would lead to among the interior population.

Sections of China with discriminated ethnic groups would want the same autonomy.

But more important, the wealthier "Catalonia's" of China would want autonomy to become more important than Taiwan.

Pretty soon you have China as Yugoslavia - what a fantastic result in Yugoslavia!

I don't know what's going to happen, but I suspect it will end badly.

"Given that all most HK people want is a modicum of control over issues like education, housing, etc."

Are you sure? could all demands for democracy be managed by ceding "a modicum of control over issues like education, housing, etc"?

The government knows it has to sway the "practical" middle class to its side in the negotiation or face increasingly frequent & disruptive protests. The best way to do that is to give more power to the people to resolve some of their more prioritized issues, including absurdly high property prices in part due to strict control of construction of non-luxury housing, an absurd education system that favors the rich and creates a split in the workforce based on English speaking ability, and a plan to increase mainland tourist numbers to 10x the HK population annually when current levels are already highly disruptive in certain areas. Alternatively, the government could have done a lot more to resolve this issues in the past, but by now they've lost the public's trust and so it's likely that permanent political rights will have to be granted to appease people.

None of those concessions will be granted without pain to those in power. Housing/property has always been a sticky issue in Hong Kong, and both government revenue and tycoon revenue depend on high property prices at this point. Whoever controls education controls the message - the communists have known that from the start and they won't give up long-term control on a whim. And tourism brings big cash for tycoons as well - a small slowdown hits retail numbers hard. Hence the perceived need for more drastic action than protesting in a park - you have to make the alternative worse for those in power.

"Beijing to Hong Kong: Drop Dead"

word on the street is that this generation of leaders thinks Shanghai can already perform all the functions of HK without the headaches, so they don't care at all what HK thinks. The official narrative for the past decade has been that everytime HK gets mad at Chinese incompetence, it's because they are bitter and jealous of the mainland's rise. So don't expect a lot of mainland sympathizers once Facebook and Twitter get blocked in HK.

Interesting.

Even mainland Chinese diaspora generally think of Taiwan, Hong Kong, Tibet etc as 'China'. This would be to an American like Florida wanting more independence from the US. (I'm generalizing here from anecdotal experience, but I think a lot of non-Chinese underestimate how different the knowledge framework is - I still do, & I spent a year in a Chinese elementary school reciting passages about how Comrade Wang solved a railroad engineering issue foreigners couldn't etc etc)

"A poll last week by the Chinese University of Hong Kong showed that 46.3% of the city's residents opposed Occupy Central while 31.3% supported it."

How much does Chinese Philosophy play a role on people's views about those protests?

I'd think the majority of people would stick with the party, since anything that is disturbing the peace would be considered a threat to the nations success.

The reason China does not crack down is that it carries a reputation and intl relation cost.

This is the main issue here. Otherwise, China can crack down and get what it wants.

I honestly cannot understand why China went for it at all. They can just let go (one country, two systems with suffrage).

The risk for China is to rouse democratic passions within China. I think the risk for China from a face off in HK is way higher than if they had not started it. To me, HK is psychologically distinct enouge not to cause significant pressure within China for democracy. But the more the issue is raised. Demonstrations. Crackdown, or long dems. intl media unending talk. People within China hearing more about 1989 etc. There is only losing here for China.

Looks like they are irrational.

China is still fairly dependent on Hong Kong's financial markets. That might change in the next 5 years, but it hasn't yet.

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