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FTR #1092 The Destabilization of China, Part 3

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This pro­gram was record­ed in one, 60-minute seg­ment.

Intro­duc­tion: We begin with review of an arti­cle that was promi­nent­ly fea­tured in our last pro­gram.

In this arti­cle we note: the involve­ment of the NED with the lead­ing indi­vid­u­als and insti­tu­tions involved with the tur­moil in Hong Kong; the net­work­ing between oth­er U.S. “soft-pow­er” intel­li­gence fronts with the Hong Kong activists; the net­work­ing between top Trump admin­is­tra­tion offi­cials and the Hong Kong activists; the use of anti-Chi­nese slurs dat­ing to the fight­ing between Japan and Chi­na pri­or to, and dur­ing, World War II; U.S. “Alt-right” involve­ment with the Hong Kong unrest; the meet­ing of a U.S. diplo­mat with Hong Kong activists; the use of what–if it were used by peo­ple act­ing in the U.S.–rioting and ter­ror­ism by the crowds in Hong Kong; the vio­lence used in Hong Kong includes throw­ing gaso­line bombs at the police, set­ting fire to sub­way sta­tions, attack­ing passers-by and assault­ing counter-pro­test­ers.

Under­ly­ing the tur­moil in Hong Kong, the pro­gram sets forth the con­flict between the finan­cial­ized, lais­sez-faire econ­o­my of Hong Kong with the “state cap­i­tal­ist” sys­tem of Chi­na.

The for­mer has led to an rent increase of rough­ly 300% over the last ten years, while wages stag­nat­ed. This has made Hong Kong the most expen­sive city in the world and led to a pover­ty rate of 20% of the island’s rough­ly 7 mil­lion cit­i­zens.

For all of its short­com­ings, the “state cap­i­tal­ist” sys­tem of Chi­na has led to a decrease in the pover­ty rate from 88% in 1981 to 0.7% in 2015. (The fig­ure comes from the World Bank, hard­ly a bas­tion of inter­na­tion­al Com­mu­nist ide­ol­o­gy.)

In that same con­text, the per­cent­age of Chi­nese in the mid­dle class has gone from 4% in 2002 to 31% today. (Again, the fig­ures come from the World Bank, as well as the IMF and that well-known bas­tion of Marx­ist ide­ol­o­gy and promulgation–the CIA’s analy­sis divi­sion.)

The eco­nom­ic plight of many in Hong Kong–the young in particular–has made them easy tar­gets for regime-change tac­tics.

Of para­mount sig­nif­i­cance in under­stand­ing the unrest in Hong Kong is the island’s role as an epi­cen­ter of eco­nom­ic crime. The extra­di­tion law which was the ini­tial focus of the unrest would have enabled the extra­di­tion of male­fac­tors for eco­nom­ic crim­i­nal activ­i­ty. For that rea­son, it was vig­or­ous­ly opposed by the Hong Kong busi­ness com­mu­ni­ty and its U.S. allies.

“Hong Kong in Crosshairs of Glob­al Pow­er Strug­gle” by Kevin Zeese and Mar­garet Flow­ers; Con­sor­tium News; 8/19/2019.

Hong Kong is one of the most extreme exam­ples of big finance, neolib­er­al cap­i­tal­ism in the world. As a result, many peo­ple in Hong Kong are suf­fer­ing from great eco­nom­ic inse­cu­ri­ty in a city with 93 bil­lion­aires, sec­ond-most of any city.

Hong Kong is suf­fer­ing the effects of being col­o­nized by Britain for more than 150 years fol­low­ing the Opi­um Wars. The British put in place a cap­i­tal­ist eco­nom­ic sys­tem and Hong Kong has had no his­to­ry of self-rule. When Britain left, it nego­ti­at­ed an agree­ment that pre­vents Chi­na from chang­ing Hong Kong’s polit­i­cal and eco­nom­ic sys­tems for 50 years by mak­ing Hong Kong a Spe­cial Admin­is­tra­tive Region (SAR).

Chi­na can­not solve the suf­fer­ing of the peo­ple of Hong Kong. This “One Coun­try, Two Sys­tems” approach means the extreme cap­i­tal­ism of Hong Kong exists along­side, but sep­a­rate from, China’s social­ized sys­tem. Hong Kong has an unusu­al polit­i­cal sys­tem. For exam­ple, half the seats in the leg­is­la­ture are required to rep­re­sent busi­ness inter­ests mean­ing cor­po­rate inter­ests vote on leg­is­la­tion.

Hong Kong is a cen­ter for big finance and also a cen­ter of finan­cial crimes. Between 2013 and 2017, the num­ber of sus­pi­cious trans­ac­tions report­ed to law enforce­ment agen­cies rock­et­ed from 32,907 to 92,115. There has been a small num­ber of pros­e­cu­tions, which dropped from a high of 167 in 2014 to 103 in 2017. Con­vic­tions dropped to only one per­son sen­tenced to more than six years behind bars in 2017.

The prob­lem is nei­ther the extra­di­tion bill that was used to ignite protests nor Chi­na, the prob­lems are Hong Kong’s econ­o­my and gov­er­nance.

The Extra­di­tion Bill

The stat­ed cause of the recent protests is an extra­di­tion bill pro­posed because there is no legal way to pre­vent crim­i­nals from escap­ing charges when they flee to Hong Kong. The bill was pro­posed by the Hong Kong gov­ern­ment in Feb­ru­ary 2019 to estab­lish a mech­a­nism to trans­fer fugi­tives in Hong Kong to Tai­wan, Macau or Main­land Chi­na. 

Extra­di­tion laws are a legal norm between coun­tries and with­in coun­tries (e.g. between states), and since Hong Kong is part of Chi­na, it is pret­ty basic. In fact, in 1998, a pro-democ­ra­cy leg­is­la­tor, Mar­tin Lee, pro­posed a law sim­i­lar to the one he now oppos­es to ensure a per­son is pros­e­cut­ed and tried at the place of the offense.

The push for the bill came in 2018 when a Hong Kong res­i­dent Chan Tong-kai alleged­ly killed his preg­nant girl­friend, Poon Hiu-wing, in Tai­wan, then returned to Hong Kong. Chan admit­ted he killed Poon to Hong Kong police, but the police were unable to charge him for mur­der or extra­dite him to Tai­wan because no agree­ment was in place.

The pro­posed law cov­ered  46 types of crimes that are rec­og­nized as seri­ous offens­es across the globe. These include mur­der, rape, and sex­u­al offens­es, assaults, kid­nap­ping, immi­gra­tion vio­la­tions, and drug offens­es as well as prop­er­ty offens­es like rob­bery, bur­glary and arson and oth­er tra­di­tion­al crim­i­nal offens­es. It also includ­ed busi­ness and finan­cial crimes.

Months before the street protests, the busi­ness com­mu­ni­ty expressed oppo­si­tion to the law. Hong Kong’s two pro-busi­ness par­ties urged the gov­ern­ment to exempt white-col­lar crimes from the list of offens­es cov­ered by any future extra­di­tion agree­ment. There was esca­lat­ing pres­sure from the city’s busi­ness heavy­weights.  The Amer­i­can Cham­ber of Com­merce, AmCham, a 50-year-old orga­ni­za­tion that rep­re­sents over 1,200 U.S. com­pa­nies doing busi­ness in Hong Kong, opposed the pro­pos­al.

AmCham said it would dam­age the city’s rep­u­ta­tion: “Any change in extra­di­tion arrange­ments that sub­stan­tial­ly expands the pos­si­bil­i­ty of arrest and ren­di­tion … of inter­na­tion­al busi­ness exec­u­tives resid­ing in or tran­sit­ing through Hong Kong as a result of alle­ga­tions of eco­nom­ic crime made by the main­land gov­ern­ment … would under­mine per­cep­tions of Hong Kong as a safe and secure haven for inter­na­tion­al busi­ness oper­a­tions.”

Kurt Tong, the top U.S. diplo­mat in Hong Kong, said in March that the pro­pos­al could com­pli­cate rela­tions between Wash­ing­ton and Hong Kong. Indeed, the Cen­ter for Inter­na­tion­al Pri­vate Enter­prise, an arm of the Nation­al Endow­ment for Democ­ra­cy, said the pro­posed law would under­mine eco­nom­ic free­dom, cause cap­i­tal flight and threat­en Hong Kong’s sta­tus as a hub for glob­al com­merce. They point­ed to a bipar­ti­san let­ter signed by eight mem­bers of Con­gress, includ­ing Sen­a­tors Mar­co Rubio, Tom Cot­ton, and Steve Daines and Mem­bers of the House of Rep­re­sen­ta­tives, Jim McGov­ern, Ben McAdams, Chris Smith, Tom Suozzi, and Bri­an Mast oppos­ing the bill.

Pro­po­nents of the bill respond­ed by exempt­ing nine of the eco­nom­ic crimes and made extra­di­tion only for crimes pun­ish­able by at least sev­en years in prison. These changes did not sat­is­fy big busi­ness advo­cates.

The Mass Protests and U.S. Role

From this atten­tion to the law, oppo­si­tion grew with the for­ma­tion of a coali­tion to orga­nize protests. As Alexan­der Rubin­stein reports, “the coali­tion cit­ed by Hong Kong media, includ­ing the South Chi­na Morn­ing Post and the Hong Kong Free Press, as orga­niz­ers of the anti-extra­di­tion law demon­stra­tions is called the Civ­il Human Rights Front. That organization’s web­site lists the NED-fund­ed HKHRM [Human Rights Mon­i­tor], Hong Kong Con­fed­er­a­tion of Trade Unions, the Hong Kong Jour­nal­ists Asso­ci­a­tion, the Civic Par­ty, the Labour Par­ty, and the Demo­c­ra­t­ic Par­ty as mem­bers of the coali­tion.” HKHRM alone received more than $1.9 mil­lion in funds from the NED between 1995 and 2013. Major protests began in June.

Build­ing the anti-Chi­na move­ment in Hong Kong has been a long-term, NED project since 1996. In 2012, NED invest­ed $460,000 through its Nation­al Demo­c­ra­t­ic Insti­tute, to build the anti-Chi­na move­ment (aka pro-democ­ra­cy move­ment), par­tic­u­lar­ly among uni­ver­si­ty stu­dents. Two years lat­er, the mass protests of Occu­py Cen­tral occurred. In a 2016 Open Let­ter to Kurt Tong, these NED grants and oth­ers were point­ed out and Tong was asked if the U.S. was fund­ing a Hong Kong inde­pen­dence move­ment.

Dur­ing the cur­rent protests, orga­niz­ers were pho­tographed meet­ing with Julie Ead­eh, the polit­i­cal unit chief of U.S. Con­sulate Gen­er­al, in a Hong Kong hotel. They also met with Chi­na Hawks in Wash­ing­ton, D.C., includ­ing Vice Pres­i­dent Mike Pence, Sec­re­tary of State Mike Pom­peo, Nation­al Secu­ri­ty Advi­sor John Bolton, Sen. Mar­co Rubio and Rep. Eliot Engel, chair­man of the House For­eign Affairs Com­mit­tee. Lar­ry Dia­mond, a co‑editor of the NED’s pub­li­ca­tion and a co-chair of research, has been open­ly encour­ag­ing the pro­test­ers. He deliv­ered a video mes­sage of sup­port dur­ing their ral­ly this week­end.

Protests have includ­ed many ele­ments of U.S. col­or rev­o­lu­tions with tac­tics such as vio­lence — attacks on bystanders, media, police and emer­gency per­son­nel. Sim­i­lar tac­tics were used in UkraineNicaragua, and Venezuela, e.g. vio­lent street bar­ri­cades. U.S.  offi­cials and media crit­i­cized the government’s response to the vio­lent protests, even though they have been silent on the extreme police vio­lence against the Yel­low Vests in France. Demon­stra­tors also use swarm­ing tech­niques and sophis­ti­cat­ed social media mes­sag­ing tar­get­ing peo­ple in the U.S..

Mass protests have con­tin­ued. On July 9, Chief Exec­u­tive Car­rie Lam pro­nounced the bill dead and sus­pend­ed it. Pro­test­ers are now call­ing for the bill to be with­drawn, Lam to resign and police to be inves­ti­gat­ed. For more on the protests and U.S. involve­ment, lis­ten to our inter­view with K. J. Noh on Clear­ing the FOG.

What Is Dri­ving Dis­con­tent in Hong Kong?

The source of unrest in Hong Kong is the eco­nom­ic inse­cu­ri­ty stem­ming from cap­i­tal­ism. In 1997, Britain and Chi­na agreed to leave “the pre­vi­ous cap­i­tal­ist sys­tem” in place for 50 years.

Hong Kong has been ranked as the world’s freest econ­o­my in the Heritage’s Index of Eco­nom­ic Free­dom since 1995 when the index began. In 1990, Mil­ton Fried­man described Hong Kong as the best exam­ple of a free-mar­ket econ­o­my. Its rank­ing is based on low tax­es, light reg­u­la­tions, strong prop­er­ty rights, busi­ness free­dom, and open­ness to glob­al com­merce.

Graeme Max­ton writes in the South Chi­na Morn­ing Post:

“The only way to restore order is through a rad­i­cal change in Hong Kong’s eco­nom­ic poli­cies. After decades of doing almost noth­ing, and let­ting the free mar­ket rule, it is time for the Hong Kong gov­ern­ment to do what it is there for; to gov­ern in the inter­ests of the major­i­ty.”

The issue is not the extra­di­tion pro­pos­al, Car­rie Lam or Chi­na. What we are wit­ness­ing is an unre­strict­ed neo-lib­er­al econ­o­my, described as a free mar­ket on steroids. Hong Kong’s econ­o­my rel­a­tive to China’s gross domes­tic prod­uct (GDP) has fall­en from a peak of 27 per­cent in 1993 to less than 3 per­cent in 2017. Dur­ing this time, Chi­na has had tremen­dous growth, includ­ing in near­by mar­ket-friend­ly Shen­zen, while Hong Kong has not.

As Sara Floun­ders writes, “For the last 10 years wages have been stag­nant in Hong Kong while rents have increased 300 per­cent; it is the most expen­sive city in the world. In Shen­zhen, wages have increased 8 per­cent every year, and more than 1 mil­lion new, pub­lic, green hous­ing units at low rates are near­ing com­ple­tion.”

Hong Kong has the world’s high­est rents, a widen­ing wealth gap and a pover­ty rate of 20 per­cent. In Chi­na, the pover­ty rate fell from 88 per­cent in 1981 to 0.7 per­cent in 2015, accord­ing to the World Bank.

Hong Kong in Chi­nese Con­text

Ellen Brown writes in “Neolib­er­al­ism Has Met Its Match in Chi­na,” that the Chi­nese gov­ern­ment owns 80 per­cent of banks, which make favor­able loans to busi­ness­es, and sub­si­dizes work­er costs. The U.S.  views Chi­na sub­si­diz­ing its econ­o­my as an unfair trade advan­tage, while Chi­na sees long-term, planned growth as smarter than short-term prof­its for share­hold­ers.

The Chi­nese mod­el of state-con­trolled cap­i­tal­ism (some call it a form of social­ism) has lift­ed 800 mil­lion peo­ple out of pover­ty and built a mid­dle class of over 420 mil­lion peo­ple, grow­ing from four per­cent in 2002, to 31 per­cent. The top 12 Chi­nese com­pa­nies on the For­tune 500 are all state-owned and state-sub­si­dized includ­ing oil, solar ener­gy, telecom­mu­ni­ca­tions, engi­neer­ing, con­struc­tion com­pa­nies, banks, and the auto indus­try. Chi­na has the sec­ond-largest GDP, and the largest econ­o­my based on Pur­chas­ing Pow­er Par­i­ty GDP, accord­ing to the CIAIMF and World Bank.

Chi­na does have sig­nif­i­cant prob­lems. There are thou­sands of doc­u­ment­ed demon­stra­tions, strikes and labor actions in Chi­na annu­al­ly, seri­ous envi­ron­men­tal chal­lenges, inequal­i­ty and social con­trol through the use of sur­veil­lance tech­nol­o­gy. How Chi­na responds to these chal­lenges is a test for their gov­er­nance.

Chi­na describes itself as hav­ing an intra­party democ­ra­cy. The eight oth­er legal “demo­c­ra­t­ic par­ties” that are allowed to par­tic­i­pate in the polit­i­cal sys­tem coop­er­ate with but do not com­pete with the Com­mu­nist Par­ty. There are also local elec­tions for can­di­dates focused on grass­roots issues. Chi­na views West­ern democ­ra­cy and eco­nom­ics as flawed and does not try to emu­late them but is cre­at­ing its own sys­tem.

Chi­na is led by engi­neers and sci­en­tists, not by lawyers and busi­ness peo­ple. It approach­es pol­i­cy deci­sions through research and exper­i­men­ta­tion. Every city and every dis­trict is involved in some sort of exper­i­men­ta­tion includ­ing free trade zones, pover­ty reduc­tion and edu­ca­tion reform. “There are pilot schools, pilot cities, pilot hos­pi­tals, pilot mar­kets, pilot every­thing under the sun, the whole Chi­na is basi­cal­ly a giant port­fo­lio of exper­i­ments, with may­ors and provin­cial gov­er­nors as Pri­ma­ry Inves­ti­ga­tors.” In this sys­tem, Hong Kong could be viewed as an exper­i­ment in neolib­er­al cap­i­tal­ism.

The Com­mu­nist Par­ty knows that to keep its hold on pow­er, it must com­bat inequal­i­ties and shift the econ­o­my towards a more effi­cient and more eco­log­i­cal mod­el. Bei­jing has set a date of 2050 to become a “social­ist soci­ety” and to achieve that, it seeks improve­ments in sociallabor and envi­ron­men­tal fields.

Where does Hong Kong fit into these long-term plans? With 2047 as the year for the end of the agree­ment with the U.K., U.S. and West­ern pow­ers are work­ing toward pre­serv­ing their cap­i­tal­ist dystopia of Hong Kong and man­u­fac­tur­ing con­sen­sus for long-term con­flict with Chi­na.

How this con­flict of eco­nom­ic and polit­i­cal sys­tems turns out depends on whether Chi­na can con­front its con­tra­dic­tions, whether Hong Kongers can address the source of their prob­lems and whether US empire can con­tin­ue its dol­lar, polit­i­cal and mil­i­tary dom­i­nance. Today’s con­flicts in Hong Kong are root­ed in all of these real­i­ties.


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