In December 1950, after Chinese troops had crossed the Yalu River to support the North Korean regime, the US Department of Commerce banned exports to and imports from China and froze Chinese assets in the United States. It only lifted the trade ban in 1971.
During those 21 years, Hong Kong and Macau played a vital role. Western goods could be shipped to them. While Britain supported the embargo, it could not be totally enforced and China was able to obtain many items that it wanted.
This collective memory rests in the minds of policy makers in Beijing as they witness the public relations disaster which Carrie Lam has unleashed in the city; one side-effect is to hand votes to President Tsai Ing-wen, candidate of the Democratic Progressive Party in the Taiwan election next January.
Television stations around the world have carried dramatic footage of the largest protests in Hong Kong – or China – since Beijing in spring 1989. The key complaint is the inequity of the mainland’s legal system.
The leaders in Beijing know this very well. That is why since 1997 they have not asked for an extradition law. This was entirely the initiative of Carrie Lam herself, according to what Lam and pro-Beijing commentators have said. This allows Beijing to hold her solely responsible for what has happened.
Following the June 9 march and the student-police clash on June 12, Beijing was shocked and sent Vice Premier Han Zheng in Shenzhen. He is the Politburo member in charge of Hong Kong affairs. He ordered a halt to the crisis, probably at a meeting with Lam on Friday. She announced the suspension of the bill the next day.
The decisive factor for Beijing’s decision is likely to be the Hong Kong Democracy and Human Rights Act, introduced in the US Congress on June 14. It would require an annual assessment of Hong Kong’s political autonomy to determine whether it still qualifies for special trade status with the US. It would also threaten sanctions and travel restrictions against individuals found to be involved in disappearances in the SAR.
In the growing global protectionist environment,, Beijing wants Hong Kong to retain a legal and commercial status separate to that of the rest of the country. This will allow China to contain to obtain crucial technology and information via the free city of Hong Kong.
It is getting harder for many Chinese scholars, specialists and officials to obtain visas for the US. Instead, they can use Hong Kong to hold meetings and work on their projects.
Trump is also likely to restrict access by Chinese firms, especially state ones, to US capital markets. That makes Hong Kong even more important as a place to raise funds.
So the priority for Beijing is to get the protestors off the streets and return to normality.
For President Xi Jinping and his colleagues, there are many matters so much more urgent than the extradition bill. Should he meet Donald Trump in Osaka, Japan on the sidelines of the G20 summit later this month? If so, what should the two talk about?
The conflict with the US is worsening each month: how should China respond? An agreement on trade looks increasingly unlikely, so how should Beijing deal with tariffs?
The global oil market is another major concern. In 2017, China overtook the US as the world’s biggest oil importer, with 8.4 million barrels a day. A war between Iran and its enemies in the Middle East is possible; that – and talk of such a war – push up global prices.
The domestic economy is slowing down. How should Beijing promote growth, without raising levels of debt and building properties and infrastructure that nobody will use?
Taiwan is another headache. In January this year, President Xi proposed again the ‘one country, two systems’ formula. This was rejected by the vast majority of Taiwan people and President Tsai. Her approval ratings rose sharply as a result.
Beijing wants the Kuomintang candidate, preferably Han Kuo-yu or Terry Gou, to win in January. Taiwan people have good reasons to vote for the KMT, to have more peaceful relations across the straits and a more normal business relation with the mainland. How can Beijing help bring this about? This requires sophisticated decisions and public relations, to persuade the Taiwan electorate.
At such a difficult and complex moment, the last thing Beijing needs is a ‘self-inflicted’ political crisis in Hong Kong. Its wording on the bill has been careful and polite, saying that it ‘supports’ and ‘respects’ the Hong Kong chief executive and her agenda.
What it wants is to defuse the crisis in Hong Kong over an issue which has got worldwide attention it does not need and is not its priority.
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