HK Protests Appeal for U.S. Help, Markets Ignore Risky Turn

Sep 10--Hong Kong protesters implored the U.S. Congress and President to intervene on their behalf, including by passing a new bill that would pressure the governments of HK and China, during yet another weekend of violence, reflected in headlines in The Washington Post, “Hong Kong protesters sing ‘Star-Spangled Banner,’ call on Trump to ‘liberate’ the city,” see above photo from the article, and The WSJ, “Hong Kong Protesters Flood Streets to Call for U.S. Support.”

HK is an emotionally charged issue for those involved, which should and can only be resolved by its residents and China, of which it is part. I hope that I accurately report below on the viewpoints of both the protesters and China and HK governments, including by quoting them, and that I don’t come across as too insensitive to any side in this difficult situation, my apology in advance if I fail to do so.

So, on the one hand, despite Hong Kong being part of China, the focus of the protesters this weekend, whose numbers were far smaller than previous demonstrations, was on beseeching the support of the U.S. government, which is waging a tech/trade economic war against China and Huawei, China’s leading technology company, based just over the Hong Kong border in Shenzhen.

Needless to say, that didn't sit well in China, not only with hardliners in the China Communist Party (CCP), but probably also with the average mainlander, with whom HK’s future is inexorably linked, as both Carrie Lam, HK’s embattled Chief Executive, and the CCP made clear immediately after this weekend’s protests.

From a Sep 10 CNN story: “"The Hong Kong government completely disagrees and expresses deep regret that foreign parliaments are interfering in our internal affairs through legislation," she [Lam] said during her weekly news conference. "We will never allow them to be stakeholders in Hong Kong's internal affairs."”

From a Sept 8 Reuters story: “Hong Kong is an inseparable part of China and any form of secessionism “will be crushed”, state media said on Monday, a day after demonstrators rallied at the U.S. consulate to ask for help in bringing democracy to city. The China Daily newspaper said Sunday’s rally in Hong Kong was proof that foreign forces were behind the protests.”

On the other hand, to try to balance that, I’ll suggest something the CCP does not support. I feel that Lam should have considered some offer of time-limited amnesty or other forms of judicial leniency for many of the nearly 1,200 arrested so far, when she finally “withdrew” her extradition bill last week, with a time limit of no more amnesty/leniency after last weekend, to finally try to separate out the ultra-hard core violent protesters from everyone else.

Instead Lam said the other four of the protesters non-negotiable "five demands" are not open for negotiation, and the protesters predictably responded with the proverbial "too little, late."

(From my Aug 29 article, which has 2,571 likes, thanks very much: "The "five demands" are: The complete withdrawal of the proposed extradition bill; The government to withdraw the use of the word “riot” in relation to protests; The unconditional release of arrested protesters and charges against them dropped; An independent inquiry into police behaviour; Implementation of genuine universal suffrage.”)

After all, Lam said in the leaked transcript of her remarks to HK business leaders that “for a chief executive to have caused this huge havoc to Hong Kong is unforgivable. It’s just unforgivable.” If she truly believes that, then why not forgive those who protested against her “unforgivable” mistakes. Perhaps Lam, a devout Catholic, might want to act on the line about forgiveness in "The Lord’s Prayer," "forgive us our trespasses, as we forgive those who trespass against us."

As was seen in the 2007-09 Great Financial Crisis (GFC), elites usually get off scot-free, while others pay the price, which ultimately leads to a “populist” backlash, in the U.S. in Trump, in HK’s case from perhaps overly idealistic youth whose entire adult lives may be ruined if they are prosecuted, which will also impact their much larger extended families and networks of friends.

Lam self-admittedly is between a rock and a hard place, as she said in the leaked transcript, “the room, the political room for the chief executive who, unfortunately, has to serve two masters by constitution, that is the central people’s government and the people of Hong Kong, that political room for maneuvering is very, very, very limited,” which might help explain her wooden video appearances.

Lam’s approval ratings are even lower than Trump’s, so at this point, what does she have to lose by considering some amnesty or other forms of judicial leniency? But in return those idealistic HK youth whom she can split off from the ultra-hard core violent ones must become much more realistic in a hurry.

The simple fact is that China citizens have far more trust in their government than U.S. citizens do in theirs, so the protesters would seem to be barking up the wrong tree in appealing to the U.S. government to intervene against HK and China.

Given the potentially disastrous outcomes were the U.S. to actually try to intervene in HK, which might range from Trump escalating his tech/trade war against China even further, which might crash global financial markets, all the way to a military standoff between the two superpowers, the protesters’ actions seem desperate, even nihilist, as expressed in the very first words of an Aug 31 NYT op-ed by Joshua Wong, a public face of the “leaderless” protests, ““If we burn, you burn with us.””

At this point, both the CCP and perhaps Lam may seem to think that they have done enough, by withdrawing the extradition bill, to win a war attrition with the remaining hard-core violent protesters, for months Lam has neglected opportunities to defuse the crisis, whether or not due to pressure from Beijing is unclear.

As an American citizen, the one group that I can legitimately try to suggest advice to is the U.S. Congress. Anyone in Congress who supports the bill that Wong and this weekend's protesters want passed, the Hong Kong Human Rights and Democracy Act, including Pelosi, McConnell, and Rubio (who has nominated Wong for a Nobel peace prize), will be giving false hope to thousands of HK’s idealistic youth, with perhaps dire consequences, for both the youth and global stability.

For despite the impression given by the American liberal media, which before going after China dragged the U.S. public through Russiagate for over two years, how did that work out, China, from its viewpoint, seems to be trying to adhere to its “one country, two systems” policy on Hong Kong. The weekly violence by a minuscule fraction of the protesters would seem to be prima facie evidence of that.

The very first signs of such violence would have been stamped out long ago on the mainland, if it ever even got started in the first place, yet it’s gone on for three months in Hong Kong, impacting its economy, now on the verge of recession, and long-term reputation as a global financial center. For Americans, how long would such street violence and vandalism have been tolerated by New York’s finest during Occupy Wall Street?

So if the U.S. Congress gives hope to the openly expressed nihilistic sentiments of the radical hard-core desperate HK protestors, if that seems like an exaggeration then see this new article in The Atlantic on “The Darkening of Hong Kong’s Protests,” who knows how far they might go, what would be China’s response, and the U.S. response to that?

Financial markets continue to completely ignore this HK risk, rather last week celebrating news that the U.S. and China will resume negotiations in Oct in Trump’s tech/trade war. Despite no sign that the fundamental differences on the tech/trade issues between the two were any closer to being resolved.

Presumably the prospects of major central banks turning the money spigots back on even further was more than enough to overlook the ongoing slowdown in the global real economy, despite no sign that even more free money would have much positive effect, on financial markets, much less the real world.

Granted, a recession in the U.S. still does not appear imminent, see this latest and other useful charts from Advisor Perpectives.

And granted the HK “tail risk” scenario that I’m concerned about currently seems very low probability, that’s why it’s a “tail risk.” But one shouldn’t underestimate the ability of the hard-core Hong Kong protesters to further escalate the situation, many of whom are veterans of the 2014 Occupy Central/Umbrella Movement, who so far have been running circles around Lam.

This includes Wong, who somehow managed to have op-eds posted in both the NYT and “The Economist,” based in the two countries he is appealing to, on the very next day after he was arrested, not many very youthful-looking 22 year-olds can pull off that feat. Wong made explicitly clear the goals of the radical faction of protesters in his NYT op-ed:

“the massive, leaderless resistance movement here [HK] is a critical front-line battle against the authoritarian Chinese Communist Party in Beijing…The massive resistance movement in Hong Kong is a crisis of legitimacy for the Chinese government.”

To Wong and the radical group of HK protesters, whose violence and seemingly senseless public vandalism and ensuing police response dominate western media coverage, with the focus usually on the latter without the context of the former, it is not just about the finally withdrawn extradition bill, nor even just about the rest of their non-negotiable “five demands,” and perhaps never really was. If that sounds cynical, Wong was even explicit about that in yet another op-ed on Sep 6:

“The movement against the extradition bill was simply a manifestation of Hong Kongers’ frustrations…Hong Kong, at the forefront of fighting against the spread of authoritarianism, desperately needs a helping hand from the international community, especially our former metropole United Kingdom.”

Wong is directly appealing there to the UK, Hong Kong’s former ruler of 66 million people, which never gave HK democracy over its 155 years of colonial rule and can barely govern itself over Brexit, let along exert influence on a nation of 1.4 billion people which the U.S. has labeled its “strategic competitor.”

How do you think the average citizen in mainland China views that? Again, Wong is appealing to governments in the U.K. and the U.S. where citizen trust is abysmally low, per the Pew Research Center below.

So far Lam’s response to the HK protests, presumably with China’s backing, has been try to win a drawn-out war of attrition by the HK police, despite the repeated Tiananmen allusions of the western media. As Lam said in her interview transcript:

“Another thing I want to assure you, that is my own feeling the pulse and through discussions, CPG (Central People’s Government) has absolutely no plan to send in the PLA...Because they know that the price would be too huge to pay. Maybe they don’t care about Hong Kong, but they care about ‘one country, two systems.’ They care about the country’s international profile. It has taken China a long time to build up to that sort of international profile and to have some say, not only being a big economy but a responsible big economy, so to forsake all those positive developments is clearly not on their agenda. But they’re willing to play long, they are willing to play long, so you have no short-term solution.”

Last Tue, at a press conference by the Hong Kong and Macao Affairs Office of the State Council, China’s cabinet, its spokesperson said the following, I will quote it at length from its source since it was mostly ignored by the western media:

“I hope people could distinguish the acts of peaceful demonstrations and assemblies to express people's demands from those violent crimes or behavior aiming to challenge the bottom line of the "one county, two systems" principle. Staging an assembly or demonstration is a right that the Basic Law of the Hong Kong Special Administrative Region (HKSAR) has granted to residents. Most citizens participating in the demonstrations and assemblies, including young students, no matter what their reasons or demands are, as long as they act in a peaceful way in accordance with the law and the "one country, two systems" principle, enjoy this legal right.”

That has been the policy that China seems to have been following, so far. But China has also very clearly drawn its red lines on the HK protests, and it would be wise for the U.S. government not to ignore them. From a Sep 8 Bloomberg article:

““Protesting is not the issue,” Bernard Chan, convener of the city’s Executive Council and a top Lam adviser, said in an interview on Friday before the latest demonstrations. “The issue is those violent acts.” Chan said China has outlined “three bottom lines”: any moves that harm China’s security of [sic] national sovereignty, challenge the power of the central government and the Basic Law, or take advantage of Hong Kong to infiltrate and damage the mainland.”

The U.S. Congress Hong Kong bill seems to threaten to cross China’s red lines. It also threatens to destroy the well-being of Hong Kongers themselves. From a Sep 8 SCMP article:

“according to the president of the National Committee on US-China Relations. Stephen Orlins...the proposed legislation “risks being counterproductive”. “China has an overwhelming interest in not using force. If Hong Kong loses its separate customs status, that would be the death knell for Hong Kong”...Orlins, a former US diplomat and Hong Kong banker, said trade and Hong Kong were separate issues.“The Hong Kong issue should be viewed independently from the trade deal [and other issues in US-China relations] because it’s an issue about China’s relations with Hong Kong as opposed to China’s relations with the US,” Orlins said.””

For a novel twist on the economic consequences of the HK protests, see this Sep 9 Bloomberg article: “The longer Hong Kong protests drag on, the less likely China will be to unleash the trillion-dollar stimulus markets seem to want. Beijing has become painfully aware that its easy-money policies of the past inflated asset bubbles and widened the wealth gap. Any repeat endeavors could risk stoking social unrest on the mainland….China increasingly sees Hong Kong’s sky-high home prices as the root cause of city’s turmoil, which has continued for 14 consecutive weeks.”

In an Aug 31 op-ed in the U.K.'s Economist, Wong wrote “we roundly condemn this [CCP] cynical campaign of fear and the ossified Soviet-era rhetoric that brands us as being “paid agents of foreign powers.”" I won’t go into the "paid agents" issue here, there is no need to do so, as I said in my Aug 21 article, which has 2,453 likes, thanks very much:

“Beijing and its propaganda arms might tone down their rhetoric about shadowy U.S. operatives in an attempted “color revolution.” There may be American officials and NGO links to some of the HK protest sympathizers, but if China is seeking evidence of U.S. meddling in its internal affairs, it’s fully out in the open on the Internet in public comments by Pence, Rubio, etc. and in tweets by Wong and others which I have cited.”

Wong's subsequent op-eds that I have quoted here today should make clear where he and the radical HK protesters are coming from, with no need to invoke conspiracies, it's all out in the open.

Regardless of how you feel about China’s charges of “color revolution,” if China does not intervene militarily in HK, in the face of all the violence there, then that will be a very significant event in 21st century history, probably to China’s long-term advantage. As Lam said, China is playing the long game, a large advantage it has over the U.S., including in Trump’s tech/trade war, which Trump probably knows, for all his bluster about winning it otherwise.

Just compare how the CCP has dealt with HK violence so far with how Cheney/Bush dealt with 9/11, fabricating charges of weapons of mass destruction and ties with Al-Qaeda to invade Iraq. Of course, if something as heinous as 9/11 were to happen in HK, all bets are off. Let’s just hope it never comes to that.

I also hope America’s leaders and people will be realistic about what can and can’t be done, that it has finally learned the lessons of its seemingly never-ending wars. HK is part of China, it was stolen by the British in their highly immoral Opium Wars. I hope the U.S. Congress and Democratic presidential candidates are realistic about that. So far, Trump has been, something they probably don’t want to hear.

To the geriatric trio in their seventies in D.C. running the U.S. government, 2019 is not the 1968 of their long-ago youth, when China was being torn apart by its Cultural Revolution. Btw the ‘68ers in the U.S. and Europe ultimately helped lead to the triumph of Thatcher/Reagan neoliberalism, whose unresolved global crises HK is but a part of.

And China of today is not Iran or Venezuela, both of which Trump is bullying with sanctions, so Congress should be very careful before pulling the tail of the China tiger with its new Hong Kong bill.

Finally, for those who may object to my writing for the past year about Trump’s tech/trade war against China and lately on Hong Kong, financial risks have become tied to political risks, I didn’t do that, central banks and national governments in developed nations did, especially starting with the 2007-12 unresolved crisis of neoliberalism, nor did I start Trump's tech/trade war, I'm simply commenting on these developments.

To those who have viewed and liked my articles, and to LinkedIn, thanks very much for your continued support.

MAWA, Make America and World Awesome

John Furlan