Hong Kong move exposes China's superpower fail

He may not realise it, but Xi Jinping’s bulldozing of Hong Kong’s autonomy is actually humiliating for China. For all its superpower pretensions, the Chinese state has proved completely unable to manage the people of a sophisticated and free global city that is also a major world financial centre. That failure, and what it says about China’s future, should worry the rest of the world.

China has overturned the spirit, if not the letter, of the "one country, two systems" arrangement under which this unique territory returned to Chinese rule in 1997, by imposing sedition laws over the heads of Hong Kong’s governing bodies.

Though Hong Kong is now only a small fraction of China’s GDP, its markets are still China’s gateway to the world’s investors. Businesses now operating freely in Hong Kong have to wonder if they will get caught up in China’s sweeping definitions of national security.

And Beijing’s move turns up the dial again on a series of ill-tempered clashes over COVID-19, not just with the China-baiting Trump administration but with Australia as well. Canberra has in recent weeks felt the force of China’s aggressive "wolf warrior" diplomacy, which is meant to convey power but looks more like petulance. After joining Britain and Canada in condemning China’s actions, Australia can probably expect more.

Britain bequeathed Hong Kong with the most open society and economy in Asia. Multinationals and China’s own corporate elites alike flocked to its open markets and independent judiciary and courts.

The implicit hope in Hong Kong in 1997 was that over the agreed 50 years of one country, two systems, Hong Kong and a reforming China would converge. Except history has not turned out that way.

Few ever expected multi-party democracy in China – though China’s sacked premier Zhao Ziyang grasped its connection to market economics before he died under house arrest in 2005. But most assumed that Asia’s economic liberalisation at least would accelerate through China too. Under President Xi, China is modernising instead as a techno-autocracy, with party-led and state-owned companies still controlling the commanding heights of its economy.

President Xi, the most powerful Chinese leader since Mao Zedong, is overreaching, to China’s detriment.

China’s 1978 reforms and the end of the Cold War were the most positive global change since 1945. Together they made a stable platform for poverty reduction, positive globalisation, and four decades of Sino-US integration. The economic and financial imbalances they brought also helped to trigger the global financial crisis, the populist backlash in the West, and rising economic tensions.

But that did not mean that the Sino-optimists, like those who drove Australia’s economic engagement with China, got it wrong. By choosing prosperity, China made itself a willing customer for Australia’s rich resources supply, which has not flagged even now.

Deng Xiaoping who both opened China’s door, and created the one country, two systems formula for Hong Kong, was a conservative reformer, not a radical. He wanted a return to China's earlier focus on economic efficiency and development, before the madnesses of Maoism blew the country off course for decades.

Yet now President Xi, the most powerful Chinese leader since Mao Zedong, is overreaching, to China’s detriment. He has overplayed his hand in territorial grabs in the South China Sea, awakening the Washington hawks. The Belt and Road Initiative may only produce friction as its high-risk lending blows up. After Hong Kong’s experience, reunification will be a difficult sell in Taiwan.

Mr Xi’s great push into high technology is a way out of China’s middle-income trap, but its dependence on US technology will be ended only with difficulty: just ask Huawei. And the US cannot just snap its own China supply chains. The pair will have to grate together for a while.

The politics are more volatile. President Xi has decided that China will not play by US-created global rules – at the same time as the grievance-laden administration of President Donald Trump is tearing them up. That has left them both competing for the same low ground of trade warfare and zero-sum diplomacy.

China had the opportunity to rise to something better in its behaviour as a candidate superpower, but in crushing Hong Kong in full view of the world, it has not taken it. In November, the US might change. The question is, can President Xi’s China?