In 1997, Britain returned Hong Kong to China after some 150 years of colonial rule. In exchange, China agreed to a set of principles: Hong Kong would maintain its capitalist system for half a century, by which point its chief executive and members of the legislature would be elected by universal suffrage. As the thinking went, “one country, two systems” would suffice in the interim; Hong Kong and the Mainland would surely converge on democracy in the half-century to come.
Not so fast. Recently, Beijing has been systematically moving in the other direction. The decision on August 31 to rule out democratic elections for Hong Kong in 2017 was just the latest example. Chinese leader Xi Jinping’s transformational reform agenda is driving this shift—and it does not bode well for Hong Kong.
Xi’s reform agenda has two parts: the first is economic liberalization. The Chinese leadership recognizes that it cannot rely on state-driven investment and cheap labor to provide growth indefinitely. Xi wants to make China’s economy more sophisticated and competitive. He is overhauling inefficient state-owned enterprises and focusing on changes in the financial sector in particular. It’s a top priority of the new leadership, and a requirement for a sustainable and dynamic Chinese economy going forward.
But a prosperous economy is simply a means to an end-goal. Xi is opening up the economy because, above all else, he wants to ensure the long-term survival and stability of the Communist Party leadership. He thinks economic reforms are a good bet despite the risks they will usher in. Over time, reform will require an enormous transfer of wealth from large domestic companies to demanding citizens and it will threaten the vested interests of many powerful elites who have prospered off the status quo. It will inject necessary competition into the economy, which could put jobs, companies, and sectors at risk.
So as Xi opens the economy and the Pandora’s Box that comes along with it, he is simultaneously clamping down on political dissent and consolidating power. Some Chinese citizens may think (or hope) that economic reform will usher in moves toward democracy. Make no mistake: Xi is engaged in political reform...it just doesn’t resemble our Western notion of what that entails. Xi has absolutely no interest in domestic political competition; in a time of economic change, political unity needs to be at its absolute strongest. This is the basis for his anti-corruption campaign, which has already led to some 40 powerful officials with the rank of vice minister or above being detained or investigated. Xi wants to scare China’s political and commercial elite into falling in line with his economic reforms, all while building popular support for his initiatives by attacking perceived corruption.