Since the 1997 handover, Hong Kong has encountered a dramatic transformation in its international political and economic environment.
Specifically, the changes and shocks in the international environment that Hong Kong faces are mainly concentrated in “deglobalization”, the emergence of regional economies, geopolitical rivalries, geopolitics trumping the market, and attempted containment of Hong Kong by the United States and the West.
Hong Kong is a highly open international metropolis with a vast global network, free flow of capital, and overwhelming reliance on trade. It is also a bridge between the Chinese mainland and Western economies. Hong Kong is a beneficiary and staunch supporter of economic globalization. China, after implementing reform and opening-up in 1978, also actively participated in economic globalization. In the early 1990s, Eastern European countries and Russia joined the tide of economic globalization. Many developing and less developed countries followed suit. China, after implementing reform and opening up in 1978, also actively participated in economic globalization. In addition, financial globalization also developed rapidly after the US decoupled the dollar from gold in 1971. In economic thought, neoliberalism supplanted Keynesianism and provides a solid “theoretical” basis for economic globalization.
However, in the almost 30 years since Hong Kong’s return to the motherland, economic globalization has plummeted from its peak. Today, Hong Kong is encountering waves of deglobalization. Several factors make economic globalization unsustainable. First, economic globalization has not benefited everyone; instead, it has created significant economic inequality and deindustrialization in the West. As a result, waves of opposition to economic globalization erupted in the West.
Second, the US and some of its allies allege that economic globalization has facilitated China’s rapid rise, which they see as the source of serious economic, social, and livelihood problems for the US and its Western allies. This has led to protectionism and trade wars with China. Western nations hope that deglobalization will hinder China’s development and contain its rise. Third, the COVID-19 pandemic, which broke out at the end of 2019, has led many nations to rethink the advantages and disadvantages of economic globalization and reliance on global supply chains.
The trend of deglobalization is not only reflected in trade in goods and services. It is also increasingly apparent in the financial sector, resulting in “financial deglobalization” and diminishing international capital flows.
As economic globalization recedes, economic regionalization has flourished. Driven by their own economic development needs, many countries have established or joined different regional economies. Some existing regional economies have also deepened and strengthened. Regional economies are scattered across the globe, including the European Union, the Regional Comprehensive Economic Partnership, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the 10-member BRICS grouping. Consequently, the global trading system has become increasingly fragmented.
With China’s rapid rise and the US’ persistent attempted containment of China, geopolitical rivalries have returned. In the early stages of China’s reform and opening up, the US actively improved relations with China, believing that Beijing’s reform and opening-up and participation in economic globalization would ultimately lead the country down a path of “Westernization” in politics and economics. However, history has unfolded contrary to American intentions. Between 2010 and 2016, a fierce debate erupted within the US regarding its policy toward China. The debate led to the dominance of those advocating containment of China’s rise and economic “decoupling”. The economic war between China and the US subsequently broke out and seems unlikely to end anytime soon.
As geopolitical rivalries intensify and encompass more interests and security, countries inevitably prioritize national interests, security, and geopolitical benefits. The rise of political and economic ideologies such as protectionism, nationalism, populism, and xenophobia has prompted governments worldwide to intervene more in economic affairs, especially in international trade, foreign investment, export controls, import restrictions, infrastructure construction, and technological cooperation. International free trade has suffered collateral damage.
Many countries have reckoned that driving national development through foreign trade will be tough in the future. For their own economic interests and security, they have to adjust their economic development strategies, relying more on their own resources and markets, or building economic and trade ties with reliable partners. The result is a more fragmented and fragile global economic and trade system.
For Hong Kong, the most significant change in the international environment after its return to the motherland was the weakening and deterioration of its relationship with the West. After the 1997 handover, the US gradually realized that Hong Kong could not play a role in promoting the Chinese mainland’s “peaceful evolution”. Instead, it increasingly became a force contributing to the nation’s rise. Since then, the US has shown a strong preference for the “anti-China insurgents” in the SAR and has supported them in orchestrating a series of struggles in the city to turn it into a source of trouble for China. Hostility from the US and its Western allies toward Hong Kong intensified after the central government enacted the Hong Kong SAR National Security Law. To contain Hong Kong and weaken its strategic value to the Chinese mainland, the US has repeatedly smeared and sanctioned Hong Kong. More seriously, it has effectively backtracked on its past recognition of Hong Kong’s “one country, two systems” principle. In effect, the relationship between Hong Kong and the West, which has been under constant friction, can no longer be restored to its previous pre-handover state. Hong Kong can no longer rely on the West as a driving force for development as it did in the past.
These drastic changes in Hong Kong’s international environment were unforeseen when the Basic Law was drafted in the mid-to-late 1980s. In future, the central government and Hong Kong will have to work closely together to succeed in the new turbulent international environment and gain new development opportunities and momentum. Hong Kong will continue to strive to maintain ties with the US and the West. Still, it will use its extensive connections as an international metropolis to serve the country’s global strategy, especially by assisting the central government in promoting the Belt and Road Initiative, the internationalization of the renminbi, and the development of the Guangdong-Hong Kong-Macao Greater Bay Area. To a considerable extent, Hong Kong’s first five-year plan can be seen as an important strategic deployment to help it cope with the new international environment, and accelerating integration into the country’s overall development is the top priority of Hong Kong’s own development strategy.
The author is a professor emeritus of sociology at the Chinese University of Hong Kong and a consultant to the Chinese Association of Hong Kong & Macao Studies.
The views do not necessarily reflect those of China Daily.
