Since its handover, until recently, Hong Kong with its independent judiciary, free markets, free press, and semblance of democracy, served as a model for how China might one day transition towards a more liberal and open society. “One country, two systems” was an experiment that was always destined to lead eventually to one system, but the hope was that it would last until 2047 and that the system that would ultimately prevail would be Hong Kong’s, rather than the Chinese Communist Party (CCP)’s. The question was always whether Hong Kong would change China, or China would change Hong Kong.

Perhaps that is why since coming to office, Xi Jinping has championed the creation of a Greater Bay Area (GBA) and pushed for Hong Kong’s steady integration into it – not as a way to boost Hong Kong’s economy, which prior to 2019 had a steady surplus for 15 years, but as a way of stripping away its uniqueness and bringing it further under Beijing’s control.

The question of Hong Kong’s economic integration into the mainland economy has long plagued the debate about the city’s autonomy and gone hand in hand with questions of national security. This is no coincidence, given that the large-scale protests in 2003 which fuelled the pro-democracy movement in Hong Kong and halted early attempts by Beijing to introduce national security legislation were backed by an alliance of local tycoons.

As illustrated in a new report launched tomorrow – titled Red Capital in Hong Kong: The invisible hand transforming the city’s politics, following this defeat the CCP reformed its strategy to focus on speeding up the integration of Hong Kong’s economy as a precursor to dismantling its autonomy. Through the introduction of the ‘Closer Economic Partnership Agreement’, Beijing ensured that it could guarantee the increasing involvement of ‘red capital’ and growing mainland investment as a way to neutralize local tycoons. First, by co-opting them to fuse their personal economic interests with that of Beijing and then by slowly replacing them with a large influx of mainland investors.

The Great Recession of 2008 sped up this trend with mainland firms buying up key sectors from media, real estate, to life insurance. Yet it wasn’t until the ascendency of Xi Jinping that the rules in Hong Kong were rewritten and slanted firmly in Beijing’s favor.

Hong Kong’s financial sector, under the watchful gaze of the Securities and Futures Commission, previously had a reputation for strong regulations and financial rigor. But the Securities and Futures Commission is no longer immune to pressure from Beijing. In 2017, it acquiesced to political pressure and re-wrote the rules for companies listing, following a directive from Beijing that it would make it easier for infrastructure companies linked to the Belt and Road Initiative to list on the Hong Kong Stock Exchange. Audits in Hong Kong have been compromised. At Beijing’s direction, mainland auditors now audit mainland incorporated companies listed on the exchange despite widespread reservations about the quality and ethics of their auditors.

Under Xi, Hong Kong’s chief executives – namely CY Leung and Carrie Lam – have dropped economic development of Hong Kong as a priority in itself, in favor of promoting the city’s integration and participation in the GBA.

This has come in the form of a series of ‘White Elephant’ infrastructure projects which are designed to link Hong Kong to the mainland, are funded by the Hong Kong taxpayer, but primarily benefit mainland businesses who receive the lion share of the contracts.

Whether it is the construction of the Kowloon West high-speed terminal, the Hong Kong-Macau-Zhuhai bridge, the Hong Kong- Shenzhen Technology Park, or the third runaway at Hong Kong International Airport, the majority of construction projects have gone to Chinese state-owned enterprises, while this spending has increasingly by-passed the scrutiny of Hong Kong’s Legislative Council.

When it comes to unemployment, the Chief Executive no longer talks about job creation in Hong Kong. Instead, Carrie Lam tells young Hong Kongers to move to the mainland if they want job and educational opportunities as part of a number of cross-border pilot programs designed to remove the regulatory and legal barriers between Hong Kong and its neighbouring cities.

On the subjects of housing, opening up a bank account, or finding internships, increasingly the message to Hong Kongers is to choose the mainland. Even when it comes to wealth management and the legal profession, sectors that Hong Kong has historically led in, Beijing is intent on ensuring that distinctions between the two no longer exist.

It is therefore unsurprising that the current debate around national security in Hong Kong comes full-circle back to economic integration. Beijing is now energetically promoting cultural exchanges and student trips as part of a new curriculum teaching national security and allegiance to the party.

And this reveals the CCP’s real not-so-hidden agenda: the desire for absolute political control, and total loyalty to the party. Beijing’s drive for economic integration has always been undercut by a desire to undermine Hong Kong’s freedom and autonomy, as a way of clamping down on the city’s pro-democracy movement.

Xi’s regime pursues this firstly by dismantling Hong Kong’s free press, through advertiser boycotts and takeovers by mainland firms, and secondly, by eroding the integrity and independence of the courts, bringing them into line with the party-controlled courts in the mainland. A key strategy is to co-opt not only local tycoons but foreign businesses such as HSBC and the SwireGroup, who have been sold on the notion that the economic cost of dismantling Hong Kong’s autonomy will be made up for by the riches of investing in the GBA.

Since the imposition of the National Security Law, Beijing has clung onto the desperate narrative that investment and support for the GBA will be worth the demise of Hong Kong as we know it.

Yet this convenient lie misses an uncomfortable truth: that while Hong Kong presents a viable model for democracy, freedom, the rule of law, and economic success, it stands as a bulwark against the authoritarian control of one man and one party. That is why we will all be sorry when Hong Kong as we know it is finally gone, killed as much by red capital as by police brutality or repressive laws.

(Benedict Rogers is co-founder and Chief Executive of Hong Kong Watch. Sam Goodman is Senior Policy Adviser at Hong Kong Watch.)

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