 For a very long time we thought we could leave China alone and China would leave the world alone. But 2019 showed the world that they want the world to accept the fact that China has a better system, a better way of doing things. Simon Lee is a co-founder of the Hong Kong-based free market think tank the Lion Rock Institute and a former columnist for Apple Daily. Daily was the voice of Hong Kong and we speak what Hong Kong people talked about. Apple Daily was the second most-read news site in Hong Kong until the police raided its offices, seized its assets, and arrested and imprisoned its founder Jimmy Lai. He was eventually charged with committing foreign collusion, organizing unlawful assemblies, aiding a dissident in an attempted escape to Taiwan, and for committing fraud by subleasing the newspaper's office space. The site has stopped publishing and its archives are now only accessible via the Internet Archive's Wayback Machine. Meanwhile, the 74-year-old Lai, an entrepreneur and activist who points to Friedrich Hayek's The Road to Serfdom as the inspiration for his fight, remains in prison where he might stay for the rest of his life. Lee sat down with reason to discuss his ex-boss's legacy, the history of Apple Daily, the future of Hong Kong's pro-democracy movement, and the increasingly strained relations between China and the U.S. He started by telling us about Lai's warning to him in the weeks preceding the raid of Apple Daily's offices, that he should leave Hong Kong immediately. Jimmy taxed me, and he said it is not safe anymore. You better go. He knew it very well. Hong Kong was not safe. He knew that he is in danger, but he chose to stay. You mentioned Jimmy Lai, who started Apple Daily, the founder of Apple Daily. Who is he and what does he mean to you? Jimmy Lai is firstly my former boss and he is also my mentor. We met in 2004 when I started a think tank. I went to him and I knew he is a libertarian, and I asked Jimmy if he could support us, and Jimmy said, if you want to be successful in promoting ideas, you should work for me. So I worked with him, I worked for him in the newspaper company since then. He is a very interesting character, always have new ideas for his business, too many of them. I was the person who tried to experiment with his ideas. I was like his experimental kind of, he has one idea, and then he says, Simon, can you try to come up with a prototype or something like that? He started a media company in the late 80s after the Tiananmen Square. He thought he could put his business acumen into defending Hong Kong, giving Hong Kong a voice. He's sitting in prison right now. Do you think that he's going to be getting out anytime in the foreseeable future? He might not get out from the prison, but he is still a free person, spiritually speaking. Describe what Apple Daily represented in the media landscape in Hong Kong. A lot of my colleagues stayed and a few of the management were still in prison. They were arrested for printing the newspaper. But I still know people like our newspaper subscribers. They still have the Apple Daily apps on the phone, hoping one day we will come back into operation. Of course, everyone knows it is not possible, right? But having the apps on the phone was kind of a symbol reminding them what it was once like. We started in the 90s, right before the handover. The founder, Jimmy Lai, believed that Hong Kong needs a newspaper that speaks the language of its people. For a very long time, if you are in Hong Kong and you refer to the Apple people, we are not talking about the phone, like the iPhone people. We are talking about us, the newspaper. Apple people means Apple Daily newspaper. It was the most dominant newspaper in Hong Kong and actually for some time in Taiwan as well. When people had grievances with anything, the biggest achievement they can get is to get reported in Apple Daily. So that was how Apple Daily was positioned as the people's paper in Hong Kong. And why was that such a problem for the government there in Hong Kong and presumably the government in Beijing? These oppositions in Hong Kong were tolerated because Beijing wants to show the world that Hong Kong was highly autonomous. In some way, Apple Daily was there to show to the world that, look, Hong Kong is still a free city. There's nothing to be afraid about. So if you have a demonstration that an oppositional press could exist. Could exist, right? But it was not necessarily perceived as a threat until more recent years. But they hated Apple Daily. They don't like the fact that we are still running as a business. Lee says that Beijing rallied business leaders to boycott the newspaper starting in 2008 in an attempt to cancel Apple Daily. And in the newspaper business, if you do not have a lot of advertising, it would be very difficult. However, we still, we survive. And in the, since 2018, we pretty much went totally onto the subscription business. In a matter of few months, we started paid subscription online and with a phone, we had 600,000 subscribers, which is pretty good. Which is pretty good if you consider like it took the New York Times many years to achieve what we have done in a few months. So Apple Daily was supported by the readers, by the market. The government couldn't do anything against us until they passed the national security law. And then they say Apple Daily is a subversive organization. China's central government in Beijing voted to impose a new national security law on Hong Kong on June 30th, 2020, just 41 days before police raided Apple Daily's offices for the first time. The law significantly expanded the Chinese government's reach into Hong Kong by creating a new committee and office within the city, headed by a Chinese central government official with the authority to enforce the law against anyone who commits the broadly defined crimes of secession, subversion, terrorist activities, or collusion with a foreign country or with external elements to endanger national security. The government accused Jimmy Lai of having engaged in foreign collusion when he called for foreign sanctions on China over its treatment of Hong Kong. It later added sedition charges accusing the paper of disseminating inflammatory publications. What is your response to the charges that the Chinese government leveled against the Apple Daily accusing you of being illegal subversives? As a newspaper, we have news reporting. And if you look at what we wrote, sometimes it was just stating the fact. If something happened, like the U.S. imposed certain sanctions on certain people, we just translate pretty much the State Department's statement and the reaction of different parties. It was like fair and balanced reporting. We do have opinion pieces, right? And if I look at all those opinion articles about the sanction, I am 100% sure all the writers actually just talked about the sanction without advocating for or against such a thing. Sometimes they write about what the consequences might be in a speculative way. So I don't think that is an act of calling for more sanctions or anything that is against the national security of the country. At the end of the day, I think it was Beijing being very emotional and agitated. And in a way, they feel very fragile about their control over Hong Kong. When I was there in September of 2019, in the middle days of the demonstrations, but before the national security law had been imposed, and it seems like what Beijing was trying to portray is that these are all insurrectionists or separatists. To be sure, there were some people calling for independence, but most of the people that I heard and certainly the highest-profile people in the movement seemed to be asking for the right to elect people to the legislature, investigations into police misconduct. These seem to be the demands. How well grounded do you think that their fears of that turning into something that would threaten their control over the territorial together were? Most people just want to maintain the status quo, so to speak. And eventually history to systems, eventually history proves that we were right. China was indeed trying to change Hong Kong. There's a backstory about the extradition law, which triggered all these resistance movements. Eventually, more and more Hong Kong people realized, hey, maybe that is the last thing that would change Hong Kong. If we couldn't resist the extradition law, there would be no more freedom in Hong Kong because basically everyone doing anything in Hong Kong would be subjected to mainland law. Following a murder case in Taiwan in which a man killed his girlfriend on vacation before returning to Hong Kong, the city's chief executive Carrie Lam introduced a new bill in 2019 that would allow automatic extradition from Hong Kong to Taiwan and also to mainland China. This ignited demonstrations that lit up the streets of Hong Kong for months. The legislature eventually withdrew the bill, but by that time the demonstrators were also demanding Lam's resignation and an independent investigation into police brutality. They were also demanding the right to directly elect all of their representatives on the grounds that the current legislature, partially appointed by a business leader as cozy with the Chinese Communist Party, had become beholden to Beijing. Li says the extradition law was the latest in a series of escalations by the Chinese government targeting dissidents, including Operation Fox Hunt, a 2015 program to hunt down, arrest, and extradite Chinese foreign nationals whom the Chinese Communist Party had deemed corrupt. This basically Chinese government sending their secret service all over the world to go after people who are against the Communist regime, especially former Communist Party member. There was the Cosway Bay Bookstore's instance. There are a few bookstores, people who they published books about Communist Party in China, and actually those books sometimes are almost conspiratorial, I would say, but Hong Kong being Hong Kong, you have these people publishing these books and then they sell it. Some of the bookstores, people, the publishers, they've been kidnapped and sent to China. So Operation Fox Hunt actually took place in Hong Kong as well. So this was already a problem that people were aware of? So the extradition law, I think, was the Hong Kong government's response to Beijing's request to rectify the situation so that mainland secret service or the police can properly extradite people from Hong Kong back to China, and that was the purpose. And the Taiwan murder case was just a pretense. It was like the excuse for introducing the legislation. One thing that is striking to maybe an interested outside observer is how quickly this all seemed to transpire, how Hong Kong went from being consistently ranked at least one of the freest places in the world to having its autonomy more or less stripped away, a lot of the political liberties stripped away. It seemed to happen in a span of a couple of years, at least from the outsider's perspective, once you start looking more closely, that erosion seems to have been happening for quite a while. Could you explain how did Hong Kong's freedoms and liberties begin becoming eroded? For a very long time, Beijing claims Hong Kong is protected by the one country, two systems arrangement. But after these few years, my reflection on the arrangement was one country, two systems was a firewall that protect China from changing itself to become a capitalist nation. So China can remain to be a closed system, whereas Hong Kong served as the access to global capital market for China. So that China does not need to change anything from within. China industrialized, China grew the export oriented market, China did a lot of things, people call that economic reform. But we have to remember China is a totalitarian nation, in a totalitarian nation and everything serves the ultimate function of the state. In the past 30 years, instead of reforming the market, Beijing actually just enhanced the capacity of its economy so that when it needed to weaponize the economy, they could have to do it at wish. And this is what happened in the world in the past few years. Everyone sees how China weaponizes influence, economic power. I'm curious how this happened because something that you would hear often was that first you get economic liberalization and then the civil liberties and political liberties would follow after getting economic freedom. That was Milton Friedman's famous trip to Hong Kong. But you're saying that the reality is that Hong Kong acted as this firewall for China. And we've all seen that the political and civil liberties have certainly not followed on mainland China and now are receding in Hong Kong. What do you think was wrong with that original analysis? What did they get wrong? For a very long time, people think the change will eventually percolate from Hong Kong to mainland. You talked about Friedman's visit to Hong Kong. It was 1978. The Mount Perlin Society meeting in Hong Kong, not only Friedman was there, Hayek was there as well. So it was like a huge thing. But think about the timing wise. 1978, it was right before the economic reform introduced by Deng Xiaoping. From 1978 all the way to the end of the 1980s, for about 10 years, China experienced not only economic reform, but also opening up the minds of a lot of people. There was a very narrow window, a narrow corridor for reform, possible in the 80s. What happened was Tiananmen Square. Tiananmen Square was the event that pretty much told the world that China would not change. What follows the 89 Tiananmen Square was the collapse of the Soviet Union. And the Communist Party of China had the conclusion that Soviet failed because they did not make use of the economy, the power. They did not enhance their productivity enough so that they could survive the challenge of the West. So what happened after the 80s was China introduced its own version of new nationalism together with equipping the state's control over the economy. It opens up, but at the same time it extended, it controls to different sectors. So it totally reconfigured up to that point of the time. We pretty much lost all the hope that China will change from within. So it established a fairly stable structure with all these rent seekers having influence in the government and at the same time in the economy. So this is a kind of new age 21st century kind of planned economy. So if this is a kind of 21st century rebooting of the planned economy, how sustainable do you think that is? Like what is China's economic position right now? Because it can be kind of hard to tell from the outside what is real and what is being propped up. What is your big picture view of your macro view of China's economy right now and how well this 21st century planned economy is actually working? They even have a name for it. They call it the Beijing Consensus. So the Beijing Consensus worked for a few years. Okay in a way, but around 2012-2013 you see the growth rate falling off. It is still growing, but slowing. And at the same time a lot of the growth actually came from fixed capital investment in particular real estate. So in China you have this very peculiar relationship. You have real estate developers working with local government. So real estate developers buy the land and then they build residential units. They sell the residential units to people. Local government gets the money. Okay the reason why people are so big on real estate investment in China is because they don't have any other choices. When the central government keeps running deficit budget printing money, so the purchasing power of money in China erodes like the rest of the world, but they don't have other financial instruments for people to choose. So people buy real estate, money goes to local government, and central government runs a deficit by printing money. Effectively that was the situation where local government is actually taking advantage of the central government's policy. Two years ago Chinese government started to crack down on this relationship. So you see beginning from last year a lot of major real estate developers are failing and a few of them will run into bankruptcy fairly soon and the local government has to take care of those unfinished real estate property business. So local governments are running into severe deficit now, but at the same time the central government is also running a fiscal deficit. I don't know how they can sustain such a massive bleeding kind of fiscal policy for in the long run. It cannot sustain. So and Chinese government is so bloated in a way that it is extremely inefficient. I really think they have a governance issue from within. Where does that go? Because you've said before that you don't think there's going to be change from within. We know what happened to the Soviet Union. That's one way things possibly could go. I don't know if you expect that it's going to happen to China where you know it kind of like breaks up into smaller components or will it be some sort of revolution? Most people think that economic crisis cannot happen in China, but who knows? It takes only one economic crisis to test the resilience of the Chinese Communist Party and maybe it's just my speculation that COVID provided the Chinese Communist Party a golden opportunity to test run how to manage a crisis in a Chinese manner. So if something goes wrong in China, you will expect that there will be lockdowns. They will send in police to keep everyone in the house. There will be rationing of food and other daily necessities and things like that. So COVID lockdowns were actually a rehearsal for that kind of crisis management, whatever that crisis be. Speaking of COVID, obviously the outbreak started there and they locked down Wuhan and then a lot of other countries around the world sort of followed that model and early on they were getting a lot of praise from places like the World Health Organization saying like this is how you handle a pandemic. Now it's looking a lot shakier especially with what's going on in Shanghai where they're still trying to maintain zero COVID. They haven't gotten a lot of vaccines out and they are locking down people and there's apparently food shortages. So what is your evaluation of how the Chinese government, the Chinese Communist Party has come out of this at the end of the day? I think for some time the Chinese Communist Party was so paranoid about the discussion on the origin of the virus because they don't want to take the blame for causing such a massive problem to the world. So instead of like trying to argue away where the virus came from they actually quite proactively said you know what we do have our Chinese way of managing a crisis. We built a hospital in a week. We can test 30 millions people in two days and this is what we call China's efficiency. China can be extremely efficient in dealing with things and this is the institutional advantage of China compared to the West, the proverbial West, the liberal democracies cannot impose all these efficient measures. So at the end of the day if people die in your country this is your problem because your government is too weak. Look at us, China. We have a strong government. We can deal with things. That worked until 2022 when Omicron broke and China went into this spinning out of control and I think the timing of this lockdown in China is very interesting as well given in the later half of this year there will be a new Politburo setup arrangement. Although most people expect Xi Jinping will remain as the president of the nation but you don't know who will be the general secretary of the Communist Party. You don't know who will be the central committee chairman of the People's Liberation Army. You don't know the composition of the Politburo. There are still a lot of uncertainty in China. So you're saying you think that the lockdown in Shanghai is just throwing more uncertainty into the mix? Definitely. If you look at what happened in Shanghai it is a crisis that comes from the lockdown itself, not the virus, the infection rate and how many people die really from the Covid. It doesn't worth the effort to lockdown the entire city of multi-million people just because you think it is the status policy of the nation. So people were angry about it even in China and there was like there was so unprepared for it as well. Was there any use of Covid policy or lockdowns to you know further their encroachment in Hong Kong? When Covid broke and in 2020 there was supposed to be a memorial event for Tiananmen Square in June. The police said no it was because of the Covid we couldn't allow you guys to do that. So a few people got arrested for that because of Covid but we all know it has nothing to do with Covid. That was when Joshua Wong was arrested, right? Hong Kong has over 90% of the population below 60 and below 18 to 60 being vaccinated, fully vaccinated, like highest in the world. Yet they still locked down Hong Kong because there were like a thousands of cases every day but if you look at the death rate it was high but not like at a crisis level. The efficacy of lockdown is dubious but at least the lockdown serves a lot of social control purpose and people are really getting used to this arbitrary government order from time to time. So if government says today you guys would have to stay home then everyone stay home and I think that was the kind of social control they want to achieve. It is a habitual thing. I mean the protest movement in Hong Kong was all about getting massive numbers of people outside onto the streets and I'm not saying that the lockdowns were specifically to stop that but certainly it didn't help in terms of the pro-democracy movement in Hong Kong I imagine. I would even say there's no longer any pro-democracy movement in Hong Kong. I'm not saying that Hong Kong people no longer look for that but I would describe Hong Kong people sentiment more like a passive aggressive now. A lot of people they're not happy with the government but they were just like okay you know what you ask us to stay home we do that and now look at what you have achieved and it was like kind of bitch face to the government's like look at what you have done passive aggressive look Carrie Lam look at what you have done to yourself congratulations now you have no bank accounts and you have no jobs you have nowhere to live. After what happened to Hong Kong everyone started wondering what is next a lot of eyes shifted to Taiwan and that's a big question mark right now because obviously if China was to do anything make any moves on Taiwan that would be a huge geopolitical event what do you think that the people in Taiwan have taken what lessons do you think they might have taken from what transpired in Hong Kong and do you have any thoughts as to the likelihood of China taking some sort of action there? I think what happened in Ukraine gives Taiwan people more inspiration really. Taiwan has a democratically elected government so in a way they were protected institutionally from being interfered by China but having said that there are a few places in Taiwan there has a high probability of breaking away from the Taiwan government. I give you one example there's a place called Jinmen which is very close to the coastal province of Fujian of China is water supply and electricity comes from China so what happened was the mayor of Jinmen is he is very pro-China he wants to he wants to have more integration with mainland rather than the island so I would not be surprised if down the road in five six years or maybe even sooner there will be a constitutional crisis to Taiwan if some people on Taiwan wants to be integrated to China but of course as a whole on the whole I think Taiwan is moving away politically from China so is there a possibility that China will more or less follow kind of the playbook that Russia has in you know Russia kind of picked off Crimea some of the you know the Donbass region these pro-Russia regions and kind of slowly pick away until they're ready to make a bigger move that is going on yeah and I think for Taiwan it has to go beyond the issue of getting independent or not because de facto Taiwan is already an autonomous so to speak nation what it needs is to open up itself to the world so there are more global interest on Taiwan and Taiwan has more global interest all over the world I think that is what Taiwan can do especially the private sector and civil society don't rely on the government if you rely on the government at the end of the day you will end up having two government fighting each other and that eventually will lead to something like Ukraine and Russia these questions are all very tricky for anyone to think about but libertarians in particular were very sympathetic to any any society that is pro-markets and civil liberties and so there's a natural sympathy for Hong Kongers and even you know Taiwan against authoritarian regime like the Chinese Communist Party on the other hand libertarians tend to be very dovish on foreign policy and you don't want the US military getting you know in skirmishes with anyone but especially you know a major power like China you know free trade is obviously a concern we want people in places like Hong Kong to be empowered but you know putting tariffs is something that we don't necessarily like so I guess my big question there is how do you think libertarians should think about these questions about Hong Kong Taiwan China and the role of the US in all of that number one self-defense is always justifiable right so whenever it comes to the issue of self-defense I think libertarians has a very clear answer it is justifiable I think secondly if a nation weaponizes economy weaponizes power in whatever manner economic cultural you name it what we can do is at least make it transparent to tell people okay these are Chinese state-owned operations these are state companies in China they if they engage in boycotts and things like that at least we know okay these are the Chinese state-owned companies are doing something same on the cultural and educational front if China is trying to influence the rest of the world at least we have to know that oh that is a state-owned media company I think those are the basic necessary stuff and then the rest I think we should leave it to the people to choose how they would like to respond to that if some people choose to block the you know block those Chinese propaganda machines they should have the right to do so if some people like me I intentionally set up a Twitter list of all Chinese propagandas because I want to have somewhere I can read about the propagandas you wrote a column for Apple Daily which is no longer available on the internet but you can find it on the Wayback machine which is what I did and it is called if there was no Hong Kong what would China look like today what is the answer to that question probably what would happen in the 80s what was China couldn't afford to close its economy and maybe changes in the 80s would lead to something like the fall of the Soviet Union to take place in China or thanks to Hong Kong China averted one political crisis in that same column you wrote that Hong Kong's resistance movement in 2019 came at the right time as the wake-up call for the world what did you mean by that for a very long time we thought China we could have leave China alone and China would leave the world alone but 2019 shows the world that China's cannot just be itself in that middle kingdom surrounded by walls China has to assert its own institutional arrangement to all over the world just to tell the world that they have a better system that was why they have to totally change Hong Kong and COVID is another example of how China became assertive of how it do different things like China's ways of doing things is what they want the world to follow they want the world to accept the fact that China has a better system a better way of doing things but of course by doing that at the end of the day they just want to tell their own people in China that they already have the best government don't look elsewhere don't ask for any change we are already the best but in order to do that they're doing a lot of silly things around the world what are the lessons that you hope that people who watched with this with interest and sympathy watched it all unfold what lessons do you hope that they draw from what happened in Hong Kong I think we should be realistic about what China will be down the road China do not see the United States or anyone as a competitor China sees everything everybody as a threat Hong Kong included even Hong Kong being almost totally controlled by China is still considered by Beijing as a threat and if you're American think about what China look at you China does not think America is a competitor China thinks America is an enemy so when I see the narrative about oh engaging China we have a healthy competition with China those are wishful thinking China do not see you as a competitor they don't have that kind of mentality so Hong Kong was a prime example at that point of time Hong Kong thought oh we are competing with Shanghai and Shenzhen no they see you as a threat you are different you're within our domain and you're different we have to change you so as China's influence grows all for the world they will want to change more and more when China says oh we are not looking for regime change in other places it is a lie they want to change the world they want to be able to command this ideological battle all over the world it is a battle of ideas I I mean it looks pretty bleak especially when you put it that way I just wonder what is the best outcome here like what would you like to see in the best of all worlds let's say over the next five years the rest of the world learned from covid that they did silly things by learning how to lock down like China do not do that again do not do what China does and thought that is a better way of doing things it is not don't look to China as a model don't look at China as a model cherish freedom at the end of the day society depends not only on government but also on the people and the civil society on the market if you do not have a vibrant civil society if you do not have a market you cannot survive and that is the lesson we learn look at what happened in China if the state failed everything failed so we have to cherish freedom Simon Lee thank you very much for talking to reason my pleasure