◎ Carrie Lam has technically not made any concessions yet to the protesters.
On Sept. 4, Hong Kong leader Carrie Lam announced that her government will “formally withdraw” the proposed extradition bill that sparked thirteen straight weeks of protests in the city. Hong Kong’s Hang Seng Index rose 4 percent on news of the extradition bill’s withdrawal. However, many in Hong Kong have expressed skepticism about Lam’s announcement and vow to keep on protesting.
Lam’s move affirms our earlier analysis that the Chinese Communist Party is planning to “advance to retreat” on Hong Kong. In other words, neither the CCP nor Lam has made any real concession. Market optimism over the Hong Kong situation is premature, and we believe that the worst is yet to come in the extradition bill saga.
The backdrop:
Sept. 2
- School reopened in Hong Kong after the summer break, but many students carried out a class boycott, formed human chains, and held rallies to protest the extradition bill and other related concerns. Some workers also went on strike. In the evening, residents in several districts held mini-rallies and shouted protest slogans.
- Reuters published a special report on and released an audio recording of a recent closed-door meeting between Carrie Lam and a group of businesspeople. In the recording, Lam said that she would resign and apologize if she had a choice, and said that China had “absolutely no plan” to deploy the People’s Liberation Army in Hong Kong.
Sept. 3
- Beijing’s Hong Kong and Macau Affairs Office held another press conference on the Hong Kong situation. In his opening remarks, HKMAO spokesperson Yang Guang said that while the situation in Hong Kong is still “grim and complex,” things are “taking a positive turn.” Later on, Yang criticized “violent rioters” and “black hands,” and noted that there was a “smell of terrorism” in Hong Kong and clear signs of a “color revolution.”
- In a response to a reporter’s question, HKMAO spokesperson Xu Luying said that Beijing can unilaterally declare a state of emergency in Hong Kong if the situation calls for it.
- Carrie Lam denied having offered to resign during a press conference. However, she also did not deny the authenticity of the recording obtained by Reuters.
Sept. 4
- In a televised address, Carrie Lam announced that the Hong Kong government will “formally withdraw” the extradition bill. Later in her address, she says that the government will propose withdrawing the bill when the city’s Legislative Council convenes in October.
- Lam proposed having meetings with people from “all walks of life,” as well as “community leaders, professionals and academics,” to discuss solutions to resolving societal unrest.
- Lam said that her government supports the work of the city’s Independent Police Complaints Council, but will not form an independent commission to investigate complaints of police brutality. Forming an independent commission is one of five key demands made by Hong Kong protesters.
Our take:
1. While it is being widely reported that Carrie Lam has withdrawn the extradition bill and met one of five key protester demands, she had in fact only announced that the Hong Kong government will propose withdrawing the bill when LegCo reopens in October. Lam’s latest announcement does hold more weight than her “the bill is dead” declaration on July 9, but she has not technically made the concession yet to the protesters.
Lam’s Sept. 4 announcement indicates that the Hong Kong government and the CCP are planning to wait things out until October before re-evaluating the situation in Hong Kong and deciding on a course of action. Her refusal to set up an independent commission to investigate the Hong Kong police also bodes ill for protesters.
2. In reading between the lines, Carrie Lam is likely signaling to the protesters with her move to get the Hong Kong government to propose withdrawing the extradition bill when LegCo is reopened in October that they are also bear responsibility for the current situation in Hong Kong by crippling regular government function with the LegCo break-in in early July. In other words, Lam is hinting to the protesters that they should stop demonstrating to allow government to work in their favor.
Lam could be hoping that the protesters will see things from her perspective and cooperate to calm things down in the city. If this is indeed part of her plan in announcing the withdrawal of the extradition bill, then it will almost certainly backfire. The protesters will likely instead believe that their demonstrations are working and will move to ramp up their protests.
3. On Aug. 21, we wrote that the CCP is likely “advancing to retreat” on Hong Kong. Carrie Lam’s announcement to withdraw the extradition bill and HKMAO spokesperson Yang Guang’s “setting the tone” (定調) by claiming at the start of a press conference that things in Hong Kong are “taking a positive turn” are in line with the CCP’s strategy.
From our earlier analysis: “The ‘advancing’ part of the strategy is convincing the world that the PRC will deploy troops into Hong Kong for another Tiananmen-style crackdown at a moment’s notice. The ‘retreat’ involves ‘meeting’ the demands of the Hong Kong protesters in a backhanded way in the hopes that public anger will die down and the city will return to normalcy. The CCP’s goal of ‘advancing to retreat’ is to calm things down in the city and focus its energies instead on other pressing matters, such as the Sino-U.S. trade war and the 2020 Taiwan presidential election.”
The CCP is willing to beat a “strategic retreat” in Hong Kong so as not to ruin its celebrations to mark the 70th anniversary of the founding of the People’s Republic of China, focus on resolving Sino-U.S. tensions, devote greater energies into rescuing the rapidly worsening Chinese economy, and shift resources to influencing the upcoming Taiwan presidential election. Also, protests in Hong Kong are bad for business and ruin the city’s reputation as an international trading hub, while suppressing protests are not cheap (for the Hong Kong government and the CCP) and will sap the morale of the Hong Kong police force overtime. Thus, the Hong Kong government and the CCP can ill-afford to fight an endless war of attrition with the protesters.
A “strategic retreat” is a form of CCP delaying tactic. To survive and dominate, the CCP can make all sorts of compromises and promise virtually anything; the Kuomintang’s experience with the CCP post-WWII, however, shows that the CCP’s concessions and compromises are ultimately false. Once danger has passed, the CCP will almost certainly revert to form. For Hong Kong, that means tightening CCP control over the city, reduced freedoms, the promotion of “patriotic education” to brainwash the younger generation into “loving China,” and further erosion of the “one country, two systems” model to ensure a seamless transition to “one country” in 2047.
4. As seen from the point above, the CCP needs to calm things down in Hong Kong to focus on other external matters.
From the CCP’s perspective, it must influence the 2020 Taiwan presidential election and seat its proxy in Taipei to advance its goal of “reunifying” Taiwan with the mainland via nonmilitary means and gain a decisive advantage in the “strategic competition” with the United States.
Meanwhile, the CCP will not want the Hong Kong issue to become an excuse for President Donald Trump to call off the trade talks and impose additional tariffs on Chinese goods.
5. As seen from the delayed Fourth Plenum, the factional struggle in the CCP is now very intense and represents a severe political crisis for the communist regime. Xi Jinping has strong incentive to calm things down in Hong Kong before the PRC’s 70th anniversary celebrations and tighten the Party’s control over cadres and society on the mainland to deny his political rivals any opportunity to undermine his leadership and guard against regime-ending political Black Swans.
What’s next:
1. We believe that the Hong Kong government could resort to hardline measures to curb the protests over the next 10 to 20 days. The Hong Kong police could continue to use brutal and ruthless tactics to crackdown on protesters, and protesters could be arrested on a large scale (particularly the so-called “brave martial clique,” or 勇武派) and sentenced quickly in court.
2. From our observation, the people of Hong Kong are becoming more incensed with the Hong Kong government and the CCP over their brutal handling of protesters and unwillingness to meet their demands. We believe that the CCP will not enjoy much success in driving a wedge between the younger protesters who utilize radical methods of protest and those who demonstrate peacefully. If anything, the Hong Kong police’s hardline suppression tactics will only serve to unify and bolster the protest movement.
3. Barring unexpected developments in Hong Kong, the Sino-U.S. trade war, and in Taiwan, the CCP will likely continue to “advance to retreat” on Hong Kong until at least a period closer to the U.S. presidential election in 2020.
To “appease” the protesters, the CCP could sacrifice Carrie Lam, the Hong Kong police force, pro-establishment legislator Junius Ho, the Hong Kong triads that support the police, and even HKMAO head Zhang Xiaoming.
Get smart:
The situation in Hong Kong and with the CCP is vastly more complicated than reported in the international press. Recent developments have shown that SinoInsider has an accurate pulse of what is actually going on with Hong Kong and on the mainland. Businesses, investors, and governments that act on our unrivaled analysis and forecasting can sidestep risks, seize opportunities, and benefit from Black Swan events in Hong Kong and China.
