Media  Global Economy  2020.08.17

The Hong Kong Problem’s Grave Risk to the China Economy -If this problem is left unsolved, the global economy may also be seriously affected. The breakthrough solution is “sympathy.”-

The article was originally posted on JBpress on July 17, 2020

International Politics/Diplomacy Chinese Economy China

Hong Kong problem: Criticism of advanced countries and divisions worldwide

On June 30, the Chinese Standing Committee of the National People’s Congress (NPC, corresponding to the Diet of Japan) passed a bill relating to the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (hereinafter referred to as the Hong Kong national security law) and enforced the law the same day.

On the next day, July 1, it was reported that a protest movement against this law had spread in Hong Kong, 370 people had been arrested and 10 people were suspected of violating the Hong Kong national security law.

Earlier, on June 18, the foreign ministers of the Group of Seven (G7), including Japan, the United States and Europe, issued the following joint statement (extract from the website of the Ministry of Foreign Affairs) urging the Chinese government to reconsider the Hong Kong national security law:

“The proposed national security law would risk seriously undermining the ‘One Country, Two Systems’ principle and the territory’s high degree of autonomy.”

“(omitted) We are also extremely concerned that this action would curtail and threaten the fundamental rights and freedoms of all the population protected by the rule of law and the existence of an independent justice system.”

“We strongly urge the Government of China to re-consider this decision.”

On July 1, next to the day when the Chinese government enforced the Hong Kong national security law, 27 countries including Japan, the United Kingdom, Germany and France issued a joint statement that requested China to review the Hong Kong national security law, at the meeting of the United Nations Human Rights Council.

At the meeting, however, 53 countries including Cuba voiced support for China regarding the Hong Kong national security law. International society has been divided in its reaction to the Hong Kong problem.

On June 29, Mike Pompeo, Secretary of State in the US Trump administration, announced partial suspension of the preferential treatment that had been given to Hong Kong.

There were conflicting views even in advanced countries including Japan, the United States and Europe

As is obvious in light of the above, advanced countries including Japan, the United States and Europe agree on a critical position against China in regard to the enactment and enforcement of the Hong Kong national security law, however China is not globally isolated.

Also, among the advanced countries including Japan, the United States and Europe, there is some difference in views.

The diplomatic positions of the United States, the United Kingdom, Canada, and Australia clearly adopt a harsh and tough stance toward China.

On the other hand, European countries including Germany, France and Italy have growing complaints about China’s attitude toward the novel coronavirus infection, but maintain a certain distance from the harsh and tough stance of the four countries above. Though being vigilant of China, they continue to regard cooperation with China as important.

From the economic perspective, of those leading companies which are highly competitive in the global market, even the US companies have maintained an active investment stance in the Chinese market while the European, Japanese and Korean companies have also adopted the same position.

From the perspective of global society as a whole, the United States’ tough stance against China stands out, and most European countries do not come into line with this tough stance.

On the contrary, European countries are critical of the US Trump administration’s diplomatic attitude based on their America First policy such as withdrawal from the Paris Agreement, belittlement of the World Trade Organization (WTO) and halting funding to the World Health Organization (WHO).

Even the United Kingdom, which initially fell into line with the United States with its harsh critical statement against China having enforced the Hong Kong national security law, announced at the end of this January that it would allow UK companies to sign contracts for 5G base stations with Huawei, resisting strong pressure from the United States.

Afterwards, backlash against China surfaced in the United Kingdom, through increased complaints about China’s attitude toward the novel coronavirus infection and the Hong Kong problem, and the decision to approve the contracts was reviewed. However, UK companies are highly dissatisfied with this situation.

Incidentally, European countries including Germany, France and Italy are also expected to continue 5G contracts with Huawei.

Zero-sum game versus win-win relationship

Thus, the latest international relations are complex. In many different fields, one policy produces conflicting policy effects and each country is faced with the contradictions arising from such effects.

Most of them are caused by incompatible contradictions that can easily arise between political/diplomatic needs and economic/cultural needs.

When international relations are thought of in terms of politics/diplomacy, the zero-sum game logic becomes dominant and it’s more likely to think that the other country’s advantage will lead to the home country’s disadvantage.

On the other hand, when international relations are thought of in terms of economy/culture, the home country and the other country have common interests, or a win-win relationship can often be built.

To take the Hong Kong national security law as an example, China seems to have hurried to establish and enforce the law based on a political/diplomatic judgement, in fear that the deterioration of order and the democratization movement in Hong Kong would spread through mainland China.

However, there are concerns that the law may provide China with economic/cultural disadvantages as a side effect.

If the Chinese government strictly restricts freedom of speech or freedom of the press while focusing on controlling the deterioration of order and the rise of democratization in Hong Kong, foreign business people either from or residing in Hong Kong would feel anxious about information restrictions and the precarious democratic legal system, being keenly aware of their own and their family’s danger.

Then, even if the Chinese government ensures freedom of economic activities in Hong Kong, the best of the business people would be more likely to leave Hong Kong and move overseas.

This would cause a decline in the financial functions of Hong Kong.

Hong Kong is an important foreign fund procurement base for Chinese companies even now. The United States has strengthened the financial pressure on Chinese companies, and fund procurement in the United States is expected to be extremely difficult. In this situation, the financial functions of Hong Kong will be increasingly important for Chinese companies.

At the time of the return of Hong Kong in 1997, the economic scale of Hong Kong accounted for 18% of China as a whole, but now it has also lost the lead to the neighboring city of Shenzhen, and now accounts for less than 3% of China as a whole.

In this way, there is also the view that the economic value of Hong Kong has been reduced, but this is an underestimate.

From a long-term perspective, a further serious problem may arise.

The important appeal of the neighboring city of Shenzhen is free access to Hong Kong, where the free and open atmosphere of Western advanced countries that cannot be obtained on the Chinese mainland can be enjoyed.

This appeal attracted a lot of young excellent engineers, producing a cluster of advanced IT-related startups which attracted attention from around the world.

If the free and open atmosphere of Hong Kong is lost and its financial functions also decline, damage to the Shenzhen economy would be unavoidable, and not only Hong Kong but also Shenzhen would be headed for a decline in power.

Hong Kong and Shenzhen as well as Guangzhou are core cities of the Greater Bay Area at the center of Guangdong Province. Any decline of Hong Kong and Shenzhen would damage the Greater Bay Area as a whole.

The Greater Bay Area at the center of Guangdong Province functions together with the “Yangtze Delta” (lower reaches of the Yangtze River covering Jiangsu Province, Zhejiang Province and Anhui Province) with Shanghai at its core, as the two major engines of the China economy. This is the basic structure of the future China economy development base.

If one of these two major engines fails to function properly, negative impacts on the China economy as a whole would be unavoidable.

In this way, from the perspective of a medium- to long-term outlook on the China economy, the significance of Hong Kong is by no means small.

As is obvious in light of the above, the Hong Kong national security law can contribute to securing the stability of Chinese society by strictly administering this law from the political/diplomatic perspective of a zero-sum game.

From the perspective of economic policy, however, the law carries a risk of undermining the win-win relationship that both Hong Kong and China have enjoyed.

Since both political/diplomatic stability and the securing of a sustainable economic development base are critically important national policy objectives for China, it is impossible to take either one alone.

Both are indispensable.

Having enacted and enforced the Hong Kong national security law, the Chinese government has no choice but to aim for the realization of these two important objectives on the premise of this law. The only way to do that is to devise a way to apply the law.

The Chinese government needs to apply difficult policies or continue to ensure a good balance between politics/diplomacy and economy/culture by carefully applying the Hong Kong national security law while considering the different elements.

“Sympathy” that can cover the limits of democracy

As described above, contradictions always exist between political/diplomatic policies with a zero-sum concept and economic/cultural policies with a win-win relationship.

Therefore, the government of every country has to continue to take up the challenge of ensuring a good balance between the two.

As can also be seen with the latest novel coronavirus infection problem, although international cooperation is essential to prevent the infection from spreading through global society, the United States and China are opposed in regard to political/diplomatic interests.

The impacts have extended to a decline in the functionality of the WHO.

Moreover, as also seen with the global environment problem, although the cooperation of global society as a whole is extremely important, the United States withdrew from the Paris Agreement, and more than a few countries have made claims against the interests of global society as a whole in order to pursue their own interests.

Furthermore, there are many cases in which the interests of global society as a whole and the interests of individual nations contradict each other.

With the progress in globalization, relations between countries have become closer, meaning the contradictions seen between global society’s problems and individual nations’ problems also tend to become deepened.

It’s almost impossible to resolve these contradictions using conventional rules based on democracy.

With democratic rules, politicians who make the policies are elected by voters, and voters usually prioritize the interests of their own countries rather than solutions to global society’s problems.

Therefore, although they have been recognized, global society’s problems are left unsolved.

With globalization, as the need to coordinate policies between countries has increased, the malfunction of our democratic systems has surfaced.

To overcome this problem, in addition to forming a world order based on conventional nation-led rules, we need to expand and complement this order formation based on the morals of private organizations.

This means an attitude of “harmonization” in which countries and private organizations understand each other’s different ways of thinking based on differences in stance or the environment, respect each other, and cooperate with each other.

The basic principle to realize this is “sympathy.”

In Buddhism, there is the idea of Kegon or Avatamsa.

According to the Kegon idea, this world has no center, and each person or organization both emits light and illuminates each other. As a result, the whole world produces a great brightness.

It does not matter whether that means a nation, a private organization, or an individual. When one acts and emits light, one’s surroundings also work together and give off their own brightness. Beyond individual nations, if you act, people who sympathize with you worldwide will also act.

If private organizations work together on the basis of morals, the formation of a world order based on nation-led rules can be complemented. The Kegon idea explains the origin.

Let’s think again about how Japan-China relations should be in the future.

Some members of the Diet have insisted on cancelling President Xi Jinping’s visit to Japan in opposition to the Hong Kong national security law. This means insisting that a precious opportunity for the heads of Japan and China to deepen their mutual understanding should be wasted.

What is now necessary for global society is to contribute to the stability of world order with the help of morals, by recognizing and respecting each other’s differences, and cooperating with each other.

“Sympathy”, the basic principle for realizing this comes from the oriental schools of thought including Buddhism, Confucianism, Taoism and Zen, rooted in the foundation of culture common to both Japan and China.

Now is the time for the heads of Japan and China to harmonize their moral-based stance through “sympathy” so as to perfectly balance out the contradictions between politics/diplomacy and economy/culture.

President Xi Jinping’s visit to Japan will be an excellent opportunity for this.

This is an opportunity for Japan and China to show the direction needed to overcome the challenges facing global society, not only through conventional zero-sum diplomacy based on clear rules, but also through the concept of “sympathy” based on morals.