Seventy years ago, the Korean nation was divided into two separate states. On August 15, 1948, the Republic of Korea was founded in the south of the Korean Peninsula, and on September 9, 1948 the Democratic People’s Republic of Korea was founded in the north.
A Longstanding Confrontation
The Korean War of 1950–1953, which saw the United States fighting on the side of the South under the UN flag, was the bloodiest and most destructive conflict since World War II. De jure, the two Korean states are still at war. This is because the Korean Armistice Agreement signed on July 27, 1953 to stop the war is nothing but an agreement between the commanders-in-chief of the two armies to suspend military hostilities. Two powerful military contingents with cutting-edge weapons and equipment are still at the ready on both sides of the 38th parallel that divides North and South Korea. And these contingents are not just made up of Korean troops. Under the Mutual Defense Treaty Between the United States and the Republic of Korea, U.S. contingent of 28,500 troops is deployed in South Korea. When Pyongyang started to develop nuclear weapons and missiles to prevent the United States from intervening in the inter-Korean military conflict, this further exacerbated the situation.
“The Asian Tiger” and a “Rogue State”
Today, South Korea is referred to as the “Asian Tiger.” It is a highly developed and prosperous state: it is the world’s second-largest shipbuilder; the third-largest manufacturer of semi-conductors and displays; the fifth-largest automobile manufacturer; and the six-largest producer of steel. South Korea invests 4 per cent of its GDP into research, more than any other OECD member, and it has the fourth-largest number of patent applications for inventions, behind the United States, Japan and China. Seoul has its own space programme and has plans to send its first probe to the Moon’s orbit by 2020 and another to its surface by 2025.
North Korea certainly lags behind South Korea in its economic development; however, statements about the country’s cultural and technological backwardness are largely the work of western media. And we are not only talking about the fact that Pyongyang would not have been able to develop its own nuclear programme that the world is so concerned about if it did not have a high level of scientific and industrial development. No one can deny that the new blocks of high-rise buildings in Pyongyang are practically indistinguishable from those in Seoul, that Pyongyang’s metro is a year older than Seoul’s, and that North Korea launched its artificial satellite before South Korea did.
Since North Korea has its own nuclear programme, the United States has declared it a “rogue state” and has not only imposed its own sanctions on the country, but has also managed to have very harsh sanctions imposed on it by the UN Security Council. It is curious, however, that the timing of the sanctions against North Korea (after the country carried out its first nuclear test) coincided with the North Korean economy emerging from the very severe economic crisis of 1995–2000, after it had overcome famine and started to show signs of economic growth. Even more paradoxically, economic growth in North Korea picked up pace significantly in 2012–2013, when the sanctions were tightened. This was primarily due to the fact that when Kim Jong-un came to power, he launched active, albeit quiet, market reforms in the country.
From Confrontation to Dialogue
The tension around Korea has been one of the greatest threats to international security in recent years. Today, the global community is focused on forcing Pyongyang to abolish its nuclear programme. However, this alone will not eliminate the threat of a new Korean war involving the United States, South Korea’s military ally. Shutting down North Korea’s nuclear programme requires, first, a reconciliation between the two Koreas and, second, solid guarantees to Pyongyang that the United States will not take aggressive measures.
2018 was marked by important positive events in Korean affairs. On April 27, President of South Korea Moon Jae-in met with the leader of North Korea Kim Jong-un in Panmunjom. Naturally, this summit between the heads of two Koreas (only the third ever) did not resolve all the problems that had accumulated in the bilateral relations over the decades of confrontation. However, it did open the way to move on to specific talks on trade and economic cooperation and a military and political détente.
We also saw the first ever U.S.–North Korea dialogue on the North Korean nuclear programme, with a summit between Donald Trump and Kim Jong-un being held in Singapore on June 12, 2018. Even though the summit’s declaration contains nothing more than generic phrases, one thing is without doubt: no nuclear or conventional war will take place in Korea in the near future. The handshake between Donald Trump and Kim Jong-un is a real contribution to the cause of peace in Korea and throughout the world.
A Complex Knot of Problems
The North Korean leadership is clearly interested in a détente on the Korean Peninsula. While the Byungjin line proclaimed by Kim Jong-un several years ago entailed building a powerful nuclear potential and creating a prosperous economy, in April 2018 the Plenum of the Central Committee of the Workers’ Party of Korea said that success in building the nuclear potential allowed North Korea to focus all efforts on building a socialist economy.
The proof of Pyongyang’s words is contained in its actions. Not a single nuclear test has been carried out for almost a year now, and missile tests have not been held for over six months. North Korea’s Punggye-ri Nuclear Test Site has been shut down.
Pyongyang appears to have a precise step-by-step programme of possible bargaining with both Seoul and Washington on mutual security commitments. Kim Jong-un, however, is clearly dragging his feet in developing the positive work started at the summits with Moon and Trump. The reason appears to be that he is not confident that both his opponents will stick to the deals. Back in the day, the conservative President of South Korea Lee Myung-bak had no qualms about abolishing his predecessor’s “sunshine policy” in the country’s relations with North Korea, while George W. Bush did not hesitate to get rid of Bill Clinton’s “North Korea Appeasement Policy.” Is there any guarantee that in a couple of years, peace-loving Moon will not be replaced with some North Korea hater, or that Trump, Kim’s counterpart in Singapore, will not be impeached?
The nuclear disarmament of North Korea and the provision of security guarantees to Pyongyang is too complicated a knot of problems to be cut in a single stoke, and by the sole hands of the United States. The solution requires multilateral international efforts, and this cannot be done without the involvement of China and Russia, two countries that have historical and geographical ties with Korea. It would appear that both the Koreas are counting on the participation of Russia and China. This much is clear from the fact that Kim Jong-un has visited China twice over the past two months, and President of the Presidium of the Supreme People’s Assembly of North Korea Kim Yong-nam and President of South Korea Moon Jae-in have both paid official visits to Moscow.
The optimal way would be to go back to the six-party talks on the Korean nuclear programme: the two Koreas, the United States, China, Russia and Japan. The talks should be structured as step-by-step negotiations using the principle of “action in exchange for action.” It would be wise at the initial stage to propose that North Korea’s nuclear programme be separated from its missile programme. North Korea’s nuclear status is set forth in the country’s Constitution, and this subject currently appears non-negotiable for Pyongyang. At the same time, a freeze on the missile programme and guarantees of non-proliferation of missile and nuclear technologies can be negotiated. Given that Pyongyang has essentially introduced a moratorium on missile launches and nuclear tests, the issue of lifting some sanctions from North Korea may be raised at the UN Security Council to stimulate Pyongyang to further roll back on its nuclear and missile programme. For instance, to get North Korea to stop developing ICBMs, freeze the production of nuclear materials and open its nuclear facilities for international inspections.
Several purely political steps would also be useful. For instance, it would be good to correct the entirely unnatural situation in which the United Nations, as a party to the Korean War (in that war, Pyongyang’s enemy fought under the UN flag), is still officially at war with North Korea, one of its members. For that purpose, the upcoming session of the UN General Assembly could adopt a UN Security Council declaration stating that the Korean War is in the past and that the UN Security Council is putting an end to that chapter and, therefore, the UN Command is no longer needed in Korea.
To further promote the inter-Korean détente, it would probably be useful for North Korea and South Korea to conclude an agreement between commanders-in-chief of the two countries on preventing dangerous military activities; such an agreement could serve as a landmark on the road to concluding a Peace Treaty to replace the 1953 Armistice Agreement. This would mean that any incidents that may arise due to dangerous military activities would be promptly stopped and settled through peaceful means without resorting to the threat or use of force. The document could be based on provisions of the 2015 Agreement between the Government of the Russian Federation and the Government of the Democratic People’s Republic of Korea.
Korean Affairs and Russia
The best way to diffuse tensions between neighbouring states and establish relations based on mutual trust is to run joint, long-term and mutually profitable economic or scientific and technological projects in. Russia could play a prominent part in such work on the Korean Peninsula.
The two Korean states are immediate neighbours of Russia, and Russia is interested in having good and mutually beneficial relations with both. And there is a good basis for this to happen. Historically, Russia has never had any disputes with either of the Koreas. Russians have never set foot in Korea as an aggressor. On the contrary, the country has always welcomed Korean people into its territory: 2014 marked the 150th anniversary of Korean resettlement in Russia. In 1945, it was the Soviet Army that liberated Korea from the colonial power.
There are no disputes between Russia and either of the Koreas today either. The leadership of South Korea, for instance, stresses its interest in taking its relations with Russia to the level of “strategic partnership.” It is noteworthy that, despite the persistent pressure of the Unites States, South Korea did not join the sanctions against Russia imposed after the events in Ukraine.
During his three meetings with Vladimir Putin over the past year, Moon Jae-in has unfailingly stressed collaboration with Moscow on denuclearizing the Korean Peninsula, establishing peace there and developing Eurasia. Economically, South Korea that has virtually no mineral or other resources and is highly interested in exploring the natural wealth of Siberia and the Far East. At the same time, Russia is a promising market for South Korea’s industrial products.
South Korea is also ready to collaborate with Russia in those areas where Russia has globally competitive technologies. This much is evident from the participation of Roscosmos in the construction of South Korea’s Naro Space Center, the flight of a South Korean astronaut with two Russian cosmonauts in a Russian spacecraft, the launch of the Russia–South Korea Naro-1 (KSLV-1) launch vehicle, and the fact that South Korea imports Russian uranium for its nuclear power plants to meet over a third of its needs. Bilateral humanitarian ties are also being developed. South Korea is the only country in Northeast Asia that has a visa-free travel agreement with Russia.
During President Moon Jae-in’s state visit to Moscow in June 2018, the parties agreed to expand bilateral cooperation in the areas of civil aircraft building, automobile manufacturing, shipbuilding and the construction and modernization of shipyards in Russia. The parties intend to expand cooperation in space research, the exploration of the Northern Sea Route and the joint development of oil and gas fields. Concluding a Free Trade Agreement would be a landmark moment in the development of trade and economic cooperation.
As regards North Korea, Russia’s relations with the country were on a downturn in the 1990s. Vladimir Putin’s visit to Pyongyang in 2000, the signing of the Treaty on Friendship, Good-Neighbourly Relations and Cooperation in February 2000, and settling the issue of North Korea’s debt to Russia in 2012 all paved the way for the restoration a full-fledged partnership between Russia and North Korea. Such a development was intended to give a powerful impetus to trade and economic relations both in the Russia–North Korea bilateral format, and in a trilateral format with the participation of South Korea, thus contributing to building bridges in inter-Korean cooperation.
During the Russia–South Korea summit held in Moscow this past June, the two parties expressed interest in trilateral projects between Russia, South Korea and North Korea, such as: linking the Trans-Korean Main Line to the Trans-Siberian Railway; building a pipeline between Russia and North and South Korea; and connecting the power grids of the three countries. The problem is, however, that implementing these trilateral projects is currently hampered by sanctions imposed on Pyongyang due to its nuclear programme, as is the development of bilateral trade and economic cooperation between Russia and North Korea.
Further dialogue on the matter is expected at the Eastern Economic Forum in Vladivostok in September 2018, to which Vladimir Putin has invited the leaders of both Korean states.
The two Korean states are celebrating their 70 th anniversaries while gradually retreating from confrontation algorithms formed by the Cold War. It is in the interests of everyone that a reconciliation of the two Koreas is achieved and a solution to the nuclear problem on the Korean Peninsula is developed.
North and South Korea should become full-fledged members of the comprehensive security system in Northeast Asia.
First published in our partner RIAC
It’s when not if China’s Middle Eastern tightrope snaps
China is manoeuvring to avoid being sucked into the Middle East’s numerous disputes amid mounting debate in Beijing on whether the People’s Republic will be able to remain aloof yet ensure the safety and security of its mushrooming interests and sizeable Diaspora community.
China’s challenge is starkest in the Gulf. It was compounded when US President Donald J. Trump effectively put China on the spot by implicitly opening the door to China sharing the burden of guaranteeing the security of the free flow of energy from the region.
It’s a challenge that has sparked debate in Beijing amid fears that US efforts to isolate Iran internationally and cripple it economically could lead to the collapse of the 2015 international agreement that curbed Iran’s nuclear program, accelerate Iran’s gradual breaching of the agreement in way that would significantly increase its ability to build a nuclear weapon, and potentially spark an unwanted military confrontation.
All of which are nightmare scenarios for China. However, Chinese efforts so far to reduce its exposure to risk are at best temporary band aid solutions. They do little to address the underlying dilemma: it is only a matter of time before China will have no choice but to engage politically and militarily at the risk of surrendering its ability to remain neutral in regional conflicts.
Israeli intelligence reportedly predicted last year that Iran’s gradual withdrawal from an agreement that Mr. Trump abandoned in May 2018 would ultimately take Iran to a point where it could create a nuclear military facility within a matter of months. That in turn could provoke a regional nuclear arms race and/or a pre-emptive military strike.
That is precisely the assessment that Iran hopes will persuade China alongside Russia and the European Union to put their money where their mouth is in countering US sanctions and make it worth Iran’s while to remain committed to the nuclear accord.
The problem is that controversy over the agreement is only one of multiple regional problems. Those problems require a far more comprehensive approach for which China is currently ill-equipped even if it is gradually abandoning its belief that economics alone offers solutions as well as its principle of no foreign military bases.
China’s effort to reduce its exposure to the Gulf’s energy supply risks by increasing imports from Russia and Central Asia doesn’t eliminate the risk. The Gulf will for the foreseeable future remain a major energy supplier to China, the region’s foremost trading partner and foreign investor.
Even so, China is expected to next month take its first delivery of Russian gas delivered through a new pipeline, part of a US$50 billion gas field development and pipeline construction project dubbed Power of Siberia.
Initially delivering approximately 500 million cubic feet of gas per day or about 1.6 percent of China’s total estimated gas requirement in 2019, the project is expected to account with an increased daily flow of 3.6 billion cubic feet for 9.5 percent of China’s supply needs by 2022.
The Russian pipeline kicks in as China drastically cuts back on its import of Iranian liquified petroleum gas (LPG) because of the US sanctions and is seeking to diversify its supply as a result of Chinese tariffs on US LPG imports imposed as part of the two countries’ trade war.
China is likely hoping that United Arab Emirates efforts to stimulate regional talks with Iran and signs that Saudi Arabia is softening its hard-line rejection of an unconditional negotiation with the Islamic republic will either help it significantly delay engagement or create an environment in which the risk of being sucked into the Saudi-Iranian rivalry is substantially reduced.
Following months of quietly reaching out to Iran, UAE minister of state for foreign affairs Anwar Gargash told a recent security dialogue in Abu Dhabi that there was “room for collective diplomacy to succeed.”
Mr. Gargash went on to say that “for such a process to work, it is essential that the international community is on the same page, especially the US and the EU, as well as the Arab Gulf states.” Pointedly, Mr. Gargash did not put Russia and China on par with Western powers in that process.
The UAE official said the UAE envisions a regional order undergirded by “strong regional multilateralism” that would provide security for all.
Mr. Gargash made his remarks against the backdrop of a Chinese-backed Russian proposal for a multilateral security arrangement in the Gulf that would incorporate the US defense umbrella as well as an Iranian proposal for a regional security pact that would exclude external players.
Presumably aware that Gulf states were unlikely to engage with Iran without involvement of external powers, Iran appeared to keep its options open by also endorsing the Russian proposal.
The various manoeuvres to reduce tension and break the stalemate in the Gulf put Mr. Trump’s little noticed assertion in June that energy buyers should protect their own ships rather than rely on US protection in a perspective that goes beyond the president’s repeated rant that US allies were taking advantage of the United States and failing to shoulder their share of the burden.
Potentially, Mr. Trump opened the door to an arrangement in which the United States would share with others the responsibility for ensuring the region’s free flow of energy even if he has given no indication of what that would mean in practice beyond demanding that the United States be paid for its services.
“China gets 91 percent of its oil from the Straight, Japan 62 percent, & many other countries likewise. So why are we protecting the shipping lanes for other countries (many years) for zero compensation. All of these countries should be protecting their own ships…,” Mr. Trump tweeted.
China has not rejected Mr. Trump’s position out of hand. Beyond hinting that China could escort Chinese-flagged commercial vessels in the Gulf, Chinese officials have said that they would consider joining a US-backed maritime security framework in the region that would create a security umbrella for national navy vessels to accompany ships flying their flag.
Chinese participation would lay the groundwork for a more comprehensive regional security arrangement in the longer term.
China’s maritime strategy, involving the development of a blue water navy, suggests that China already de facto envisions a greater role at some point in the future.
Scholars Julia Gurol and Parisa Shahmohammadi noted in a recent study that China has already “decided to take security concerns in the (Indian Ocean) into its own hands, instead of relying on the USA and its allies, who have long served as the main security providers in this maritime region… If tensions continue to escalate in the Persian Gulf, Beijing may find it has no other choice but to provide a security presence in the Middle East.”
Implications of French President’s Visit to China on the International Arena
French President Emmanuel Macron pursues a policy of opening up to China and solving problems that may arise peacefully and diplomatically. France and Germany are the main pillars of the European Union, and the French opening to China is a European recognition of the importance of China’s role internationally.
Last Monday, the French president paid a three-day official visit to China amidst the US-China trade war. The French president has previously promised to visit China once a year throughout his term. These official exchanges between China and France strengthen China’s international standing, and prove the theory that China is a peaceful country seeking cooperation and opening up to the world.
Fifty-five years after the establishment of diplomatic relations between China and France, a bilateral relationship based on respect and friendship despite some differences in regimes or strategic alliances. The Chinese model is mainly based on people-to-people communication and peaceful cooperation, and these are the main pillars of the Belt and Road Initiative launched by Chinese President Xi Jinping in 2013.
Despite Washington’s withdrawal from the Paris climate agreement in 2015, Beijing and Paris have kept their promises to contain global warming, a positive point in the bilateral relationship. The French president considered that China and France should lead the climate agreement. Cooperation between the two countries has emerged considerably in the industrial sector, such as the development of nuclear energy, aerospace, and the automotive industry. Academic cooperation between the two countries has also been boosted through student exchange programs and the high demand for Chinese language learning in France, which was previously rare.
Commenting on the importance of trade exchanges between China and the EU, the Chinese Ministry of Commerce showed that trade between China and the EU exceeded 322.5 billion US dollars in the first half of 2018, up 13 percent year on year. Chinese Ambassador to France Zhai Jun recently expressed that China and France are to expand cooperation in agriculture, energy, advanced manufacturing and artificial intelligence.
From the ancient city of Xi’an, the French president announced that an alliance between Beijing, Europe and Paris should be established for a better future for the world, and Macron stressed the need for a balanced relationship between China and Europe. The French president praised the Belt and Road Initiative and called for its activation in order to enhance the trade role of Asia and Europe.
France was the first Western country to recognize the People’s Republic of China. In a meeting with French ambassadors, the French president stressed that the West is in a moment of decline and China is progressing at a tremendous speed. During his visit to China, the French president took advantage of the trade war between the United States and China and worked to develop France-China trade relations, increase French trade partners to China, and promoting the French tourism, agriculture and services sectors.
France is seeking to strengthen Sino-European relations because of its great benefit to the European economy, but it is contrary to the Western orientation. China is also a beneficiary of good relations with France, because France has influence in Africa and many regions in the world and is a permanent member of the Security Council and it is a developed country at the military, technological and technical levels. China’s cooperation with a powerful country like France will bring many benefits and opportunities.
China’s great economic, technological and military progress indicates that China has become an important country in international relations, and it is in the interest of any country in the world to establish good relations with China. The best evidence is that France is seeking to establish good relations with China, as well as the European Union countries to make their relationship with China distinctive.
Tension in Hong Kong
After about three months of riots, often particularly violent and destructive, on October 23, 2019 the Chief Executive of Hong Kong, Carrie Lam, aliasChen Yuet-Ngor, withdrew the bill on mandatory extradition to China, which had sparked protests in the former British colony.
Never evaluate a mass protest on the basis of the reason triggering it, which can often be irrelevant.
The extradition bill, announced in September, was withdrawn a few days after the resumption of works in Hong Kong’s Parliament.
With a view to partially repressing the insurgency, the now former Chief Executive of the city-state resorted to emergency legislation, by mainly using the colonial law of 1922, which prohibits the use of masks and disguises during public demonstrations.
The protesters were and still are approximately one million, out of about eight million inhabitants.
The subsequent riots, designed to last well beyond the bill withdrawal, strained the always tense relations between the former British colony and China, with the result of throwing into crisis also the Chinese governance of the city-State and, in particular, the traditional Chinese model of “One Nation, Two Systems”.
If this model fails, the formula devised by Deng Xiaoping will not even apply to Taiwan, or possibly to the North Pacific islands, and it will anyway undermine the current Chinese idea of peaceful expansion and win-win collaboration between the Chinese motherland and all the bordering areas both in the Pacific and in Central Asia.
Since 1977 – when the Fragrant Harbour came under Chinese control – all riots in Hong Kong have been triggered by strong dissatisfaction with the Chinese motherland.
The deep economic and social dissatisfaction has always been targeted against China and never towards local power elites. In psychoanalysis, this phenomenon is called transference.
In 2003 many thousands of people living in the former British colony had protested against a law that, in their opinion, would make it difficult to express opinions and feelings defined as “anti-Chinese” and the law was postponed indefinitely.
Further riots broke out in 2012, when a clearly pro-Chinese school program was proposed and once again the local authorities (upon direct instructions from the national government) avoided implementing that law.
In 2014, there were the sit-in street protests of the Occupy Central movement, the so-called “Umbrella Revolution”, which lasted three months to ask – this time unsuccessfully – for the Chief Executive of Hong Kong to be elected by universal suffrage.
Currently, however, the real reason underlying the protests in Hong Kong is not so much the request for implementing – in the former British colony – democratic mechanisms typical of the Western culture, but rather the tension resulting from great economic inequalities.
Not to mention the broken social elevator, which is probably the real trigger of the youth rebellion in the Fragrant Harbour.
People, especially the skilled workers, cannot be ensured acceptable wages and salaries. This is the reason why many inhabitants of the old city-state migrate to Canada or Taiwan. Another blow to China.
Young graduates’ wages and salaries have dropped by at least 10% compared to 25 years ago. There is a very severe housing crisis, but anyway the choice to create a local oligarchy that tries to convince the other inhabitants is an old British idea.
In Hong Kong an oligarchy of very few families dominates the local economic system, which is worth a GDP of 343.5 billion US dollars.
The five most powerful families are still those led by Li Ka-shing, Kwong Siu-hing, Lee Shau-kee, Henry Cheng and Joseph Lau.
These five families alone control 70% of the entire Hong Kong market, including real estate and telecommunications, as well as TV channels.
The 21 leading families in Hong Kong control a wealth equal to 1,893 billion US dollars.
Obviously in China no family controls such a huge amount of wealth. In the People’s Republic of China the five major real estate operators put together control only 9% of the entire Chinese construction market.
China, however, has tried to gain support in Hong Kong, especially among entrepreneurs, with the Greater Bay Area plan, i.e. the new megalopolis on the Pearl River Delta between Hong Kong, Guangdong and Macao.
This is, in fact, Hong Kong’s infrastructure aggregation to the Autonomous Economic Zone of the Pearl River Delta, between Guangzou, Shenzhen, Zhuhai, Foshan, Zhongshan amd Jiangmen, which are the most dynamic economic areas in China.
Taxes are very low in Hong Kong, as in all business-friendly countries but, coincidentally, there is no inheritance tax.
The administrative machinery is therefore very simple: Hong Kong’sgovernment does not gain sufficient revenue from taxation and hence has no funds to invest in schools, hospitals and infrastructure.
A city like Hong Kong, with over seven million inhabitants, provides for a statutory minimum wage of 4.82 US dollars per hour. Almost all flats are illegal and, considering the cost of rents and properties, they are so small that they are about half of the “tiny apartments” in large U.S. cities, which are already very small.
The average size of Hong Kong flats per inhabitant is 16 square metres, while in Shanghai the average size per inhabitant is 36 square metres.
45% of Hong Kong’s inhabitants live in state-owned or subsidised apartments, while 90% of the Chinese people own at least their own houses.
Hong Kong’s tax reserves are at least 147 billion US dollars, but the local political system is too fragmented – even from the viewpoint of the complex electoral system – to mediate between different interests and to really solve the main problems of the city-state, namely housing, health and education costs.
Those who are ill must wait an average of 150 weeks before being examined, with 43 public hospitals that, however, employ 40% of the doctors available, since the private sector attracts many of the best professionals.
The solution of employing doctors from abroad is not very practicable, considering the low attractiveness of Hong Kong’s wages and salaries and the poor quality of health facilities.
One in six people living in Hong Kong suffers from mental disorders due to social, economic and health conditions.
The graduates’ average wages and salaries in the former British colony have fallen by over 10% compared to a decade ago. Nowadays graduates are easily paid the best salaries and wages of workers without university qualifications.
As already said, there is no social elevator.
The cost per square metre is much higher in Hong Kong than the average price in a central neighbourhood of New York.
As happens also in the West, the career prospects of young graduates in Hong Kong are very limited. They never have a house of their own and their prospects are much worse than those of their colleagues who lived in Hong Kong a few decades ago.
In Hong Kong the Gini Index, which is used as a gauge of economic inequality, is 5+, one of the highest and most unequal indexes in the world.
This is the real political core of the issue: for those who protested in Hong Kong – as currently happens everywhere in the world – “democracy” in the Euro-American sense means above all greater social equality, many opportunities and efficient public services.
This is obviously not true, but it is the model that took to the streets the crowds of the Arab Spring, the Euromaidan citizens in Ukraine and the “colourful” rebellions in Georgia.
Paradoxically, just when Western democracies are turned into States based on unearned income and the extent and quality of their Welfare diminish, they are mythicized as efficient and open.
In this case, Vilfredo Pareto would have spoken of “residues”, i.e. memories of a time that no longer exists, but that are still in action in the crowds’ deep psyche.
In 1997, at the time of unification based on the “One Country, Two Systems” model, Hong Kong’s GDP accounted for 18% of whole China’s GDP.
Currently, after China’s fast growth, the importance of the Fragrant Harbour is the same as the relevance of Guangdong or Shenzhen.
The current protests, however, have also put Hong Kong’s business community in severe difficulty.
The majority of Hong Kong’s leading companies do most of their business with China. It is not by chance that last August the Chinese authorities gathered 500 of the most important businessmen and political leaders in Shenzen to support the Hong Kong government and, possibly, sufficiently improve the social situation of the city-state, which, however, remains explosive.
Hong Kong’s financial market has suffered the greatest damage.
The Chinese company Alibaba has postponed its listing on the local Stock Exchange until the uprising has finally abated, while Fitch has lowered Hong Kong’s rating.
Pending a systemic integration with the regulatory network of mainland China.
Another problem that the riots in the Flagrant Harbour may cause is migration.
Last year 24,300 highly-skilled young people left the country and the rate of migration requests has risen by 15% per year.
Where do they go? To Canada, Australia, New Zealand and Taiwan.
On the other hand, the number of Chinese people migrating to Hong Kong has decreased by 14,000 per year.
Furthermore, this November there will be the Hong Kong District Council elections and it is very likely that youth discontent will find a way to assert itself in the polls.
A fragmented society under crisis creates many problems for those planning business cycles and Hong Kong is likely to see its growth rate decrease by at least 3%.
Where will capital go? Obviously in the Chinese area bordering on Hong Kong, with an expected investment growth of almost 6.5%, largely consisting of capital outflows from Hong Kong.
The differences between Hong Kong and China, however, are much wider than those shown with violence during the recent long protests, which often followed the same tactics of the color revolutions organized by the US Services, according to the old model developed by the Einstein Institute.
For China, Deng Xiaoping’s criterion “One Country, Two Systems” means that China takes over Hong Kong despite the differences in political and economic systems, which will eventually tend to overlap. Conversely, for Hong Kong leaders the “Country” is just lip service paid in view of maintaining the separation from China, both from a cultural as well as an economic and political viewpoint.
China has so far controlled Hong Kong with the same logic with which it has supervised its “dangerous” territories, namely Tibet, Xinjiang and Manchuria.
The current Chinese centralization stems from the analysis of the inglorious collapse of the almost federalist Soviet Union. In this regard, suffice to recall the ironic smiles that welcomed Gorbachev on his visit to China, just when the Tiananmen Square protests had reached their climax.
It does not matter that the right to secession was established in Lenin’s Sacred Texts. The fact is that, for the Chinese leadership, the unity of the Country and the repression of every regionalist secession is fundamental to the permanence of the State – and of the Party.
China, however, still depends on the financial hub of Hong Kong, the only one completely open to the world capital flows.
According to 2018 data, the Hong Kong Stock Exchange capitalizes 29.9 trillion local dollars.
Shenzhen and Shanghai cannot replace Hong Kong in this respect.
Therefore, China could not intervene in Hong Kong because otherwise it would have destroyed on its own the way connecting China to international capital flows.
Furthermore, the repression of the Hong Kong movements would have destroyed the model “One Country, Two Systems”, which is exactly the one that will be applied to Taiwan, at the right time.
Nor should we forget that, pending the New Silk Road promoted by China, the Western Powers are conceiving political mechanisms for disrupting and possibly stopping the “Road”, by organizing rebellions and anti-Chinese parties and movements in the various countries where the passage of the Chinese One Belt One Road (OBOR) is planned.
Obviously China does not stand by and wait to see.
From this viewpoint, the Hong Kong uprising is a model that will soon be imitated and that China will oppose exactly with the same political tactics.
As is recommended in the Thirty-Six Stratagems, “Befriend a distant State and strikes a neighbouring one”.
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