 Welcome to Agent and Review on ThinkTech. I'm your host, Jay Fidel. Our show today is called the 20th anniversary of the turnover of Hong Kong. We're going to talk about taking a look at the future of Hong Kong and China's long plan for Hong Kong, which is still unfolding. If you want to ask a question or participate in a discussion, you can tweet us at ThinkTechHI or call us at 808-437-2014. Our guest for the show is Frank Ching, a family of the Wall Street Journal who joins us by Skype. June 30th marks the 20th anniversary of the handowner of Hong Kong to China by Britain, and President Xi Jinping came to preside over the celebrations he delivered a major speech. Frank Ching can tell us about this. He was with the Wall Street Journal in the 1970s and 80s, then in 1979 he opened the Wall Street Journal Bureau in Beijing, staying there for four years. Before that he worked for the New York Times in New York, and after that in Beijing, after Beijing he was with the Far Eastern Economic Review, which is another Dow Jones publication from 1992 to 2001. Currently he's a syndicated columnist. His columns appear in English language newspapers in Japan, South Korea, Singapore, Malaysia, the Philippines, Taiwan, and Hong Kong. He's also an adjunct associate professor in the Business School of the Hong Kong University of Science and Technologies, where he teaches MBA students a course about China and its external relations. Welcome to the show, Frank Ching. It's an honor to have you here. Thank you, Jay. Good to be here. Well, let's talk about what happened. A lot happened June 20th, and I want to know what happened exactly and why was it important? Well, the Chinese President, Xi Jinping, came to Hong Kong for the 20th anniversary, and he delivered a major speech while he was here. In his speech he said, and I'm quoting him, any attempts to endanger China's sovereignty and security, challenge the power of the central government and the authority of the basic law, or use Hong Kong to carry out infiltration and sabotage activities against mainland is an act that crosses the red line and is absolutely impermissible. So that sums up basically what he was trying to say that there are certain things that Hong Kong cannot do. It cannot challenge China's sovereignty, and this means that it cannot say that it wants to be independent of China. It's a direct reflection on the umbrella movement, isn't it? Well, I think it's a direct response to some young people in Hong Kong who have been calling for independence or localism. Actually, localism should not be that unacceptable, because in Shanghai people say, oh, we're Chinese, and in other cities they have certain minorities in their own city. But in Hong Kong, the concept of localism has sort of become linked to the concept of independence, and Xi Jinping made it very clear that independence of Hong Kong cannot be tolerated. Well, you know, if I were to look at Hong Kong, say in the year, what, 1998 or 7, and sort of project forward, would I have expected this? It sounds like to me that the sense of independence, if you will, a hold over from, you know, the British territorialization of Hong Kong would have led to a more independent state of mind right now. It sounds to me like China's long plan is to wrap around Hong Kong and not to consider any kind of independence. Is that the same as it was in 1997 or 2008, or have we evolved into a more control by China of Hong Kong? Well, I think China, as never said that Hong Kong can have any degree of independence. The word used was autonomy, whereas Hong Kong is meant to enjoy what is called a high degree of autonomy. So Hong Kong issues its own passports. Hong Kong has its own membership in international organizations. Hong Kong issues its own stats, its own currency. These are all things that other parts of the country would not normally do. So Hong Kong has a high degree of autonomy, but no idea of independence is included in this. So I think President Xi Jinping was saying that Hong Kong can enjoy autonomy, but we can never think about independence or sovereignty on its own. That all of Hong Kong's powers are delegated by China, and if China doesn't get any power, Hong Kong will not have any power. So that's the message from the government. What level of autonomy does that allow? I mean, I certainly appreciate that there's a big distinction between autonomy and independence, but what level of autonomy would he permit? Would Beijing government permit? Well, the Beijing government has permitted, I think, a great deal of autonomy from 1997 to now. The problem is that this is under the concept of one country, two systems. And in the beginning, 20 years ago, the Chinese government emphasized two systems. Now increasingly, it's emphasizing one country. So one country is what's necessary before you can have two systems. Now, I think some people in Hong Kong think that China is so unhappy with Hong Kong that it would do away with one country, two systems entirely. I personally don't think that would happen. I think China will redefine this concept of one country, two systems, so that it will have more authority than it has had or has exercised so far. The contact of mine in Beijing has told me that they have studied the basic law, which is Hong Kong's constitutional document, and discovered that there are many areas where the central government can actually play a role. And they had so far refrained from doing anything. But in the future, they may exercise that authority. One example is that all Hong Kong legislation is sent to Beijing, and Beijing, if Beijing does not reject it, then it becomes law and Hong Kong Autonomy. So far for 20 years, Beijing has never rejected a piece of Hong Kong legislation. But maybe in the future, they will start doing this. They will start exercising the power that they have. Yeah. Well, it sounds like the long plan. I mean, of course, I'm not there and I'm not an expert on this, but I would have predicted this. Wouldn't you predict that over time, the long plan for China is to keep a short leash on Hong Kong, because ultimately they want to control it, and they don't want any talk about independence, and whatever autonomy there is, it's a limited autonomy. And it's irrevocable even, don't you think? Well, I think Beijing certainly wants control over Hong Kong. And I think we look back over the last 20 years. The best period was really the first term of a CHC, the first chief executive in 1997 to 2002, when China really did not interfere in Hong Kong's internal affairs. And Mr. Tan, very interestingly, gave an interview last week, and he disclosed that at one point, when the Hong Kong dollar was under attack by speculators in the United States, he called up Beijing and asked for help, asked them to send a couple of people to Hong Kong to help deal with this financial problem. And Beijing told him, no, this is your problem. This is one country, two systems. You're not going to send anyone to Hong Kong, you have this problem for you. And actually Hong Kong does everything itself, and I think it handled the situation very well. But it does show that the chief executive in Hong Kong, thought it was proper to ask Beijing for help under one country, two systems. And Beijing was the one who said, no, no, you do it yourself. So I think a lot of what the two systems is really defined by the amount of self-restraints on the part of China. China has to restrain itself from coming to Hong Kong and exercising powers and interfering in local affairs. China doesn't restrain itself, it's not going to work. It's interesting because it's not terribly consistent between control and not helping. You'd think there'd be a more avuncular kind of relationship, and that China would see a role, a value, if you will, in helping just as the federal government would help the states. But I guess this is not exactly that kind of relationship. That's right. And I think that China wants really control of Hong Kong, even in the past, and you know that under the Basic Law, the Chinese National Humanist Congress interprets the Basic Law. It's not interpreted by Hong Kong. So the most recent interpretation was about the taking of hopes. Now, last October, after the last legislative election, a number of pan-democratic legislators put the oath in a very funny way that they deliberately mispronounced the name of China, ejected phrases that were not in the oath into the oath, and added things at the beginning and the end and did things. And the Chinese National Humanist Congress issued an interpretation of the oath ordinance in Hong Kong, sorry, of the Basic Law, saying that these things mean that the oath was not validly taken, and people are not legitimate members of the legislature. So two members in the public, two members were in fact expelled from the legislature. And yesterday, the High Court in Hong Kong said that four other members did not take the oath properly and should leave the legislature. Now, that means that six members were to leave the legislature, and that means that the balance in the legislature is changing. The pan-democrats used to have the power of reason. See, a major legislation, reading two-thirds majority. So as long as the pan-democrats have, say, a little over one-third, they can block major legislation. Now, they've lost six seats, they can no longer block it. And we'll see what happens in the by-elections. The government have to hold by-elections and throw those seats. And the Democrats, I think, have said that if they are individual seats, they can retain them. They can fight to keep seats. But a lot of these constituencies have two seats. So if they win one seat, and then they out of camp, and you think of the other seat, which means overall that the Democrats are going to lose sub-seats. The plan is still unfolding, isn't it? But you start to get the idea that there's not a lot of slack here. And I wonder if freedom of speech is somehow ultimately going to be impinged. Because as I get it, the press has been quite free in Hong Kong, and maybe still is free. But do you think there's going to be a limitation of that going forward? I think that, I'm not sure I understood your question properly. But I think in Hong Kong, from the very beginning, that is before 1997, the great fear among the people has been that they would lose their rights and their freedoms. And over the last few years, I must say that rights and freedoms have largely been respected. People can continue to hold candlelight vigils in honor of the Tiananmen Square victims every June 4th in Hong Kong. They can continue to demonstrate. In fact, there are more protests in Hong Kong today than there were before 1997. But the thing is, now the question is democracy. Now, the British never allowed democracy in Hong Kong. Up to the time, the British agreed to return Hong Kong to China. Every seat in the legislature was appointed by the governor. There were no elections through the legislature. Now, every seat is elected in one way or another. So I think to the extent that Hong Kong has some democracy now, it's really due to China, to China's credit. But the people in Hong Kong want to see the top person, the chief executive, elected by universal suffrage. And China has promised that that would happen. But then China announced in 2014 the conditions ever were still to happen. And the candidates would have to be nominated by nominating committee. The nominating committee would more or less be under Beijing's control. I should emphasize it's more or less under Beijing's control. So people feel that they will probably be able to choose between ten ways to have been voted by Beijing and approved by Beijing. And that this is not a genuine election. So this is the main point. And under the rules of the Chinese government, the Senate Committee of the National People's Congress of China, it may be impossible for a Democrat to ever become a candidate. That is, that the nominating committee may never nominate a Democrat to be a candidate. Therefore, the Democrats are very much against this package from the central government. And if this comes up again as an issue, and it's very well made, then it will create a great new attention in society again. And I think that Kerry Lam, the new chief executive, doesn't really want political issues to be brought up. She won't talk about livelihood issues, housing and so forth, where she makes some progress. Whereas if we talk about political issues, there will never be any progress. There will be turmoil in the legislature. Now, the democracy issue, of course, is pushed by the Democrats. On the other hand, there are political forces, including the central government, who want to see Article 23 legislation in the United States and Hong Kong. Article 23 and the Basic Law says Hong Kong should make legislation against versions, sessions, initiatives, treason, theft of state secrets, all kinds of illegal crimes. And we tried to do this back in 2003, and half a million people came out and protested. And it's never been enacted. Now, under the Basic Law, Hong Kong has a lifetime of 50 years of one country, two systems. And 20 of those 50 years have gone by, and Hong Kong still hasn't carried out this obligation to enact such laws. And Beijing is putting pressure on Hong Kong, pointing out that Macau has already done it. He said Macau did it some time ago. And I think that Terry Lam will have to start the process of enacting this legislation. And this, again, will be very controversial. I think one way of reducing the controversy is not to use a big package called the Natum Security Bill, but enacted in small and distant pieces. So some of these laws are already under books. Under the British, there are laws against treason, for instance. So we don't need to do it all over again. So I think if we do one thing at a time, it may create less controversy in society, rather than having a huge package and have a lot of people who would disagree with one or another element within that package. So you talked about issues around livelihood. I guess that's economics. And I just wonder if we could get a handle on it from you about the whole notion of taxation. I imagine that part of the tax that's collected in Hong Kong goes to Beijing. And I also imagine that there's a representative from Hong Kong, or more than one perhaps, that serve on the Politburo or serve in some legislative representative capacity in the Beijing government. Is that true? That's what we have in the U.S. Does that happen in China, too? I'm sorry. Hong Kong does not pay taxes to the Beijing government. This was announced very early on that Hong Kong would not have any obligation to pay taxes to the central government. And Hong Kong people do not have to serve in the Chinese military. They don't have the military obligation either. And they do not have to pay for defense. Under the bridge, Hong Kong people pay for their soldiers being stationed in Hong Kong. And China then said, they will have, they will station troops in Hong Kong. They will pay for them. Hong Kong people do not pay for defense costs. They would not have to pay taxes to the central government. What about the representation? Is Hong Kong represented in the Politburo? Is it represented in Beijing? Sorry, the Politburo is a party body. You have to be a Communist Party member. So the Communist Party elects people to be the Central Committee and the Central Committee members elect all of you members. Nothing to do with Hong Kong and China is speaking. The Hong Kong does have members serving in the National People's Congress. And in the advisory body, the CPBCC, it's the Chinese People's Political Consultative Conference. That's a high-level advisory body. And on that advisory body, there are now two Hong Kong Red Shedmen. The first Hong Kong Chief Executive, after he stepped down as Chief Executive in Hong Kong, he was appointed as Red Shedmen to the CPBCC. And now, CYL, who just stepped down as Chief Executive in Hong Kong, he too was appointed a Vice Chairman of the CPBCC. So the Vice Chairman of the CPBCC are considered leaders of the party in the States. In China, we are above a certain level. We are head of the Vice Chairman of the National People's Congress, or Vice Chairman of the CPBCC. We are considered to be a leader of the party in the States. So now there are two Hong Kong people in that elite group. Okay, well, that is something. So going back to Xi Jinping, this was an important speech he gave, because it was an important event. Is it the 20th anniversary, more important than the 10th, or other anniversaries? Is his appearance, his speech in June, an important political event for him? What exactly drives him to make this speech? Well, he made this speech because of the 20th anniversary, and I think he wanted to lay down certain new ground rules to help him understand what it's supposed to do and what it's not supposed to do. And of course, he did not talk about political reform that is leading to universal suffrage and so forth. But I thought it was interesting that throughout his speech, he talked about economic development. And he said that development can help cure a total of Hong Kong's other problems. And I thought about this. And actually, Hong Kong every year, every July 1st, has a protest against China. This is ironic because July 1st is a public holiday in Hong Kong, because that marks the day of China, Hong Kong's return to China by Britain. So it's a public holiday to celebrate return. But actually, every July 1st, there's a protest against China in Hong Kong, and people build in March because they don't have to work for the holiday. Now, I mentioned that in 2003, half a million people protested. This year was the smallest protest in 14 years. And I think that this is because of economic development. The economy grew, I think, in the first quarter of this year by about half a cent. This is very good for a developed economy. 12% growth is very high. And Hong Kong today is very different from what it was in 2003. In 2003, it was very high in employment. The self-market poverty crisis was plummeted, and there was negative equity. The government had five years of budget deficits. Today, it's the opposite. The economy is doing very well. There is literally no unemployment. There are problems. Young people are difficulty getting housing. Getting a job is not that difficult, but getting a good job with cost banks is difficult. So I think that when things are going well, people don't feel like going out and marching on the streets. So this time, China was the smallest in 14 years. So I think that Xi Jinping had a fight that if you focus on economic development, some of your political problems will recede also. Well, a few years ago, we read that Shanghai had been designated a special zone of commerce with the idea that it might be a portal, perhaps another portal, different than Hong Kong, but nevertheless a portal for China to deal with the world. And I suppose that's made Shanghai even more prosperous than it was before. But how does the Shanghai business portal compare with Hong Kong as a business portal? Because Hong Kong has been responsible for providing capital to China, doing deals with China, acting as an investment portal for all of China, and maybe other places in Asia. But I wonder how you would compare Hong Kong now and Shanghai and how you would see them both going into the future. Are they going to compete? Is one going to be more advantageous than the other? Well, this is something people have been talking about for Asia. The competition between Shanghai and Hong Kong and whether Shanghai will overtake Hong Kong and Hong Kong will become a backwater. I think over the last 20 years, since Hong Kong became called China, Hong Kong has been China's international financial center. Shanghai has been China's domestic financial center. And I think that this situation will probably continue as to be an international financial center. You have to have certain things that the rest of the world will take advantage of, but have freedom of information to be an international financial center. Well, I guess this is based on the fact that Hong Kong has a long 100-year tradition of being a global business center. And that gives it an advantage, or at least it gives it a special characteristic that puts it ahead of Shanghai, which is within the lap of the Chinese government. Well, I think the special characteristic is really rule of law. That is, if you don't have rule of law, other companies are not going to trust you all over. They're not going to allow you to adjudicate Hong Kong, turning yourself to the head over a serious rule of law. It has been an independent judiciary. And I don't think Shanghai has that. I think nobody has argued that China has that. And if Shanghai doesn't have these things, it cannot aspire to be an international financial center. So unless China changes, I think Hong Kong will continue to have this advantage over Shanghai. Well, you mentioned that he made it clear that he was not going to tolerate independence. And I think that probably has a profound effect on people because I think they take that as a kind of threat. Anyone interested in independence would take that as a kind of threat. But if that happened, if there were, say, a movement for independence and people nevertheless reacted by encouraging and participating in activism for independence, what would happen? What would China do? Do you think China would become more aggressive about dealing with individual activists? Oh, China would crack down on Hong Kong if it sees Hong Kong as being a hotbed for independence, even though it is impossible for Hong Kong to be independent. But if we look at Tibet, for instance, it's impossible for Tibet to be independent. And yet China is so fearful of Tibetan independence. And in Xinjiang, the Uyghurs, it's impossible for them to be independent. Yet China is cracking down constantly and cracking down very, very hard. So if China should deal with Hong Kong through the length of separatism, that Hong Kong is in place where separatists are strong, Hong Kong will pay a very heavy price. And I hope that it does not have to happen. I hope it will feel like that. And it's not becoming it. I wonder how, you know, how do people react, how did the market react? How did the news media react? How did you react to the speech and through the comments about independence, to the, you know, the historical significance of the event? And Xi Jinping's remarks, I mean, how do people feel? If you went out on the street, what would they say? And what did you say in your writings? Well, I thought it was a very firm speech that he made it very clear what China's position was. And I think that people in general have accepted this knowledge that this is China's position, that this is a line that China does not wish Hong Kong to cross. I think people have accepted this. And I think that they probably will be a change in behavior on some of the Democrats. That is, I don't think they will come out openly and call for it, it depends on, as far as taking office is concerned, I think in the future, they will be more serious about taking the oath of office. You know, it strikes me that we see now sort of the continuing expression of stand up China. What I mean is China realizing its destiny, a kind of manifest destiny in Asia. I mean, that's expressed by the, you know, the aggressive steps in the South China Sea and other geopolitical maneuvering. And, you know, it strikes me that that represents a new kind of expansionistic attitude in Beijing and that its attitude toward Hong Kong would be along the same lines. It would be part of that expansionistic manifest destiny, stand up China, have influence really all over Asia. Do you agree? Yes, I agree. Except for first Hong Kong is part of China. From the standpoint, it's not expansionist, but China has adopted a very hard-line position vis-à-vis the South China Sea, for instance. And the countries in Southeast Asia individually cannot stand up to China. And the United States under Donald Trump has thought of receding. And as the U.S. recedes, China very naturally moves into the vacuum. And Chinese power, I think, is now greater than ever. But I think China is also susceptible, because you see that you shall all just die. And China has come under very heavy criticism from all around the world. And I think that from a moral standpoint, the Chinese leadership realizes that it has seen a stacking moral legitimacy. And it refuses to change that, but I don't think that it can change unless it changes its behavior. Yeah. One last question, Frank, and you mentioned it in passing a minute ago, is Donald Trump and the United States. The United States has seen sort of a decline of its influence in the area. It's just as China has risen, the United States has declined. And now Donald Trump is trying to figure out options, of which there are very few, to deal with North Korea. And for that matter, to get China to help him deal with North Korea. How do the events and Xi Jinping speech in Hong Kong, what does that tell us about relations between the United States and China, and for that matter, the United States and Hong Kong? Well, is this a barometer of where we're going here? Well, I think as far as the relations between the U.S. and China are concerned, you can look at what Donald Trump said yesterday and the day that Lu Xiaobo died. Donald Trump was asked what he thought of Xi Jinping, and he said, oh, we're good friends, he's a great man, he does what's good for China, and all these things. And it was left to the Secretary of State to make a statement about Lu Xiaobo, our staff, and that China and China was ready to go overseas. So I think that we don't have to look at how China is in Hong Kong to understand the U.S.-China relationship, because that's very much in the open. As far as the U.S.-Hong Kong relationship is concerned, I think that China is very sensitive to foreign interference, to what it considers to be foreign interference in China, especially in Hong Kong. And it believes, it seems to believe that a lot of these protests and so forth are somehow being supported by foreign governments, specifically the United States. I don't believe that that is the case, but the Chinese government is pushing that line and saying that the U.S. was behind, well, behind the 2003 protests and again behind the 2014 protests. And I think that the U.S. is being very circumspect to make sure that its officials are not seen to be involved in any of these things. In fact, the last U.S. country general told me about the communist newspaper publishing his photograph and saying that here he is meeting with Stephen leaders, and of course it was not him. It's not his photograph. And he pointed this out to Chinese officials who were very embarrassed. You know, we live in changing times. I mean, and especially in Asia. A couple, three years ago, a fellow named Simon Winchester wrote a book called Pacific here at the East West Center. And he spoke of the emergence of China and the fact that the United States had less influence and would continue to decline in influence in the area. And that was just the way it is. It is just the way it is, the way history turns. And I wonder if you could just offer us some words on how you think it will go in the future. What is it going to be like not only in the relationship between Hong Kong and China, but in the influence of China around Asia? Is it going to be a continuing increase in influence? What do you see accelerating that or standing in a way? Well, I think China's influence in Asia is going to increase. And in the South China Sea, and China in fact has already won. China has total control over the South China Sea. The U.S. can send in a freedom of navigation, can conduct a freedom of navigation exercise. If one super, then its ships come and then they leave. And things go practically where you are, that is under Chinese control. And it's not just Asia. I think China increasingly is influential all around the world. Look at Norway, for instance. The country that gave U.S. support the Nobel Peace Prize. The Nobel Peace Prize committee issued a statement. I'll just say that the region government said nothing. Even though China had punished the Norwegian government, and because of the U.S. support nomination, U.S. government would do with the government as a committee, still China punished Norway for years and years. And now U.S. support Norway is totally silent. And I think if you look around the world, very few governments have spoken up. So I think that China's influence is increasing, and it's likely to continue to increase. And U.S. and the Donald Trump, I think, is virtually committing national suicide. And the problem is already going to decrease and allow China's influence to move in. Yeah. And in the paper yesterday, today and at times, I think there was a report that China was now sending a fleet to man a new base, a military base, that it was establishing in East Africa. Now, that is really holding to Africa, lots of activities, lots of projects and developments. But this is more than just business. This is military geopolitical power. I think that's going to happen elsewhere, don't you? Yeah. China, for a long time, most that it had no military basis around the world. And now it does. And this is the first one in a military basis elsewhere. It will become more and more like the United States. China wants to become a superpower, and its model is the United States. Whatever the U.S. does, China wants to do. And what it will be as it's capable of doing, China wants the same capability. So I think China realizes that in order to project power, it cannot rely on its navy to project power. It doesn't have basis. So now it's starting to have military basis. Although it's calling this, I think, logistics facility. But it's really a military base. It's learned a lot. It's learned a lot from us. It's doing the same kinds of things we have been doing. Anyway, Frank, it's been wonderful to talk with you. You've seen it all. You've covered it for decades and decades. What an interesting journalistic situation you've been in. I admire that so much. And I hope we can continue to check in with you from time to time to find out how this all evolves. It's the most exciting part of the world right now, I think. And the most profound changes are happening. Very true. And I'll be happy to chat with you from time to time about these issues. And I think there will be more interesting issues coming up in the months, years to come. Yeah, thank you. Thank you, Frank Ching, a journalist, formerly with the Wall Street Journal. And now a journalist with Think Tech, don't you think? Thank you, James. You know, I also grew up in the Wall Street Journal many years ago, but I'm no longer with it. Yeah, I understand. Thank you so much. Yeah, thank you so much.