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The equilibrium between the Russian Federation and North Korea

Giancarlo Elia Valori

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Russia has never disregarded the North Korean nuclear and missile issue nor its support for North Korea.

Russia will never relinquish its safety belt against the US forces stationed in South Korea and, above all, Kim Jong-Un’s possible military shield towards the USA and its allies in Southeast Asia. If anything, the issue lies in  replacing this shield with an equally effective economic or strategic and conventional delimitation.

On August 15, 2018, Kim Jong-Un sent an important telegram for congratulating Vladimir Putin on the occasion of the 73rd anniversary of Korea’s liberation from the Japanese domination.

It should be recalled that the united Korean empire ended in 1910, but the Japanese-Korean Treaty of 1876 integrated the peninsula in the Meji Empire, the historical and cultural phase in which Japan acquired the Western technologies and cultures to expand its “co-prosperity area” throughout Southeast Asia and the Pacific Islands.

An area bound to naturally lap upon the US area of influence – at that time as now.

It is worth remembering, however, that Korea’s  industrialization began precisely in its phase of independence from Japan, while the subordination to the  Japanese Empire led not only to a massive exploitation of the Korean labour force for the Japanese purposes, but also to a radical cultural and psychological dispossession of the people in that peninsula and of their traditions.

There is no geopolitics without a geo-cultural analysis.

As Aristotle said, “Even God cannot change the past”- and the old 20th century balances of power still draw the limits of the possible strategies which can be implemented both in Korea and in the rest of maritime South Asia.

Currently the United States can also aspire to excessively expand its power to the myriad of Pacific islands, thus conquering them all to keep none, just to encircle Japan.

Or it can hold the security coordinates of the Straits of Malacca, in order to keep on controlling those areas of world trade.

However, let us revert to the telegram recently sent by Kim Jong-Un.

In the telegram he wished Russian President Vladimir Putin good luck with his plans for “building a powerful Russia” and recalled that “the peoples of the two countries struggled shoulder to shoulder against the common enemy in the arduous anti-Japanese war”.

This paves the way for renewed friendship between the Russian Federation and North Korea, which will “serve as driving force to continuously develop bilateral relations as required by a new era”.

In other words, Kim Jong-Un wants to renew the traditional ties with Russia to rebalance those with China – which are certainly equally important – without excluding them.

Thanks to the Western superficiality, North Korea has  excellent relations with both Russia and China and it does not want to lose them or to create preferential relations with one country or the other.

In particular, the North Korean Leader does not intend to currently neglect the old and timeless Russian ally, which is  now redesigning and reshaping the Greater Middle East – the terrestrial defensive outpost of his North Korea and, in any case, a guarantee for his land security to the North and to the West.

An important security for North Korea, at least as much as the maritime one that mainly pertains to its alliance with China.

In the almost immediate reply to the North Korean leader, Vladimir Vladimirovic Putin wrote he was ready to meet with him in the near future in Moscow.

In recent years many promises have been made to organize a Summit between Kim Jong-Un and Vladimir Putin, but they have never come true.

It is mainly the fault of the unpredictable adjustment of equilibria in the Pacific after 2006, the year of North Korea’s military and official nuclearization.

There were many secret meetings, especially in the acute phases of the 2017 missile crisis, and sometimes simultaneously with President Trump’s visits to Moscow.

Most likely, in these very confidential meetings, the discussion was also focused on the possibility of moving significant parts of the Russian Armed Forces on the border with North Korea.

At that time, the significance of these historical operations of the Russian Armed Forces in the Primorsky area was  evident: to show to the United States that the Russian Federation did not accept any threat to North Korea and that, in any case, Russia would significantly defend the North Korean territory from a joint US-South Korean action.

It was quite obvious: even today neither the Russian Federation nor the People’s Republic of China are interested  in having a country linked only to the USA, but defeated or weak,on its borders.

Moreover, while defending North Korea, Russia can currently play the role of broker and mediator between the two Koreas and control the strategic triangle between the two post-Cold War nations of the Korean peninsula with Japan.

Another centre of primary strategic interest of the Russian Federation.

In fact, in January 2017 Putin stated that Kim Jong-Un’s nuclear-missile program was “a threat to security in North-East Asia”, but he also asked South Korea to reject the anti-missile structure THAAD (Terminal High Altitude Area Defence) offered to it by the United States.

Weakening of the entire peninsula and maintenance of North Korea’s margin of attack. This is the simple, but lucid Russian strategic formula.

Moreover, since the very beginning, Russia has accepted the UN sanctions against North Korea under evident suspicion and some Russian companies have been hit just because they have not avoided trading “sensitive” goods and services with North Korea.

It is even more obvious that currently Russia does not want a North Korean State, on its land border of only eleven miles, that can accumulate potentials capable of threatening the terrestrial and Asian area to the Middle East with threats tous azimuts.

Or a State that can create – in an extremely important area for Russia – a sequence of regional crises drawing the attention of the major global strategic actors.

The strategy is to make the Korean peninsula a peripheral area and weakening its global irritant thorns.

This is the same policy of China in North Korea. In the future, however, China will also try to integrate North Korea into its Central Asian project to control the Turkmen jihad and into its policy of economic and military expansion to the Pacific region.

Moreover, it cannot be ruled out that China does not want a military contribution from North Korea in its protection of the Belt and Road Initiative to the South.

Furthermore Russia has always had a strong strategic interest in the whole Asian maritime region, in general, and in the Southern one, in particular.

In fact, Putin has always maintained that Russia’s active policy vis-à-vis the Asia-Pacific Economic Cooperation (APEC) – the 21 economies and the Korean peninsula – is essential for all the Asian projects of the Russian Federation.

Projects that, as can be easily understood, tend to offset and replace the sanctions imposed on Russia by Western countries.

Currently Russia has these primary interests in the Asian-Pacific region: to develop the Siberian area well and quickly; to integrate the Asian region into its system of trade  relations with the old Asian-Southern countries of the former USSR; to increase the Russian presence in the Asian economies, especially in medium and high-tech goods, with a view to avoiding the penetration of others into those markets and finally avoiding the jihadist radicalization of internal conflicts, especially in the framework of the confrontation between the United States and China.

Hence with these moves, which also include the Russian economic policy vis-à-vis North Korea, the Russian Federation stands as a necessary “third power” throughout the Asian-Pacific region.

Here the preferential relationship with North Korea is essential.

Therefore it is not strange that, for the next Summit between Putin and Kim Jong-Un, the possibility was considered of the next Eastern Economic Forum scheduled in Vladivostok in September.

This would have been the occasion for a series of meetings also with the Chinese and Japanese leaders, but it is exactly in September that Kim Jong-Un shall follow all the preparatory work for the 70th anniversary of the Democratic People’s Republic of Korea.

Indeed, Russia wants to meet Kim Jong-Un alone. Currently it has no interest in a friendly internationalization of the North-Korean issue.

The 70th anniversary is a date that will mark a new condition for North Korea – and this is the meaning that Kim Jong-Un wants to give to the celebrations. It is a condition of reaffirmation of the regime’s solitary power  and of new and positive openness to the world.

Furthermore the North Korean leader wants to well prepare  the bilateral meeting with Putin that will mean, above all, that North Korea does not depend on China’s interests only. Hence a tactical delay is better.

In fact, as he has already been doing for some time, Kim Jong-Un wants to implement an opportunistic policy, but without really betraying any of the two Asian and Eurasian players.

In particular, North Korea wants a share of national strategic autonomy in the future context of its admission to the Shanghai Cooperation Organization (SCO).

Hence, apart from India which, together with Pakistan, has recently followed the works of what China finds it difficult to define as the “NATO of the East”, SCO will have a vertical strategic axis between the Indian Ocean and South East Asia to the Pacific region. And it will certainly  depend on North Korea’s future military policy.

This vertical axis, however, will be the whole Korea – with the autonomous North Korea which, in Putin’s and Xi Jinping’s designs, will be partially integrated into the SCO together with South Korea.

At least Putin alone will grant to North Korea as much geopolitical autonomy as it will be necessary to the Russian Federation in order to: a) avoid any regional hegemony of the United States and its primary allies in the region; b) preserve the security of the its sea borders with North Korea; c) avoid giving a clear field to China.

China has mainly an oceanic interest in Kim Jong-Un’s Korea.

Russia, however, possibly want to create a strategic continuum between its Central Asian terrestrial region, which has its stronghold in the new Syria, and the Vietnamese coasts. Like the Krak of the Knights which, in the Syrian desert was an offensive rather than a defensive castle, as Lawrence of Arabia told us, currently Assad’ Syria is the Western bulwark of every “colour revolution” or jihad that can penetrate the post-Soviet Central Asia or the maritime corridor leading this area to the North-West borders of North Korea.

There is also the possibility – theorized by some analysts, especially from the North American school – that Vladimir Putin wants to oppose the US peripheral expansion everywhere, especially in Southeast Asia, where the US strategic defeat of the twentieth century began, so as to  eventually replace the United States as a global player.

And currently the axis mundi is in Asia, not in Europe or in other parts of the West.

We are not sure that Vladimir Vladimirovic Putin really wants to create a US global dissymmetry with respect to the China-Russia’s axis.

If this happens, it shall only be USA’s fault.

The long-term diverging interests between Russia and China are still there – and precisely in a region that closely affects  the Asian geopolitical choices vis-à-vis North Korea, namely Russia’s terrestrial Far East and Siberia.

There is the economic contrast – inevitable in the future – between the Eurasian Economic Union, organized by Russia in 2014 between Russia, Belarus, Kazakhstan, Armenia and, currently, also Kyrgyzstan, and the Chinese network of the Belt and Road Initiative. This is another  problem that Kim Jong-Un shall resolve, at least apparently, once ceased the US (and Japanese) pressure on North Korea.

With a credible project, the United States could open part of its markets to North Korean products and create –just in the territory of North Korea – a network of Foreign Direct Investments that would shield the fledgling industry from Chinese or Russian pressures.

However, this is probably a vain hope.

Moreover Chinese investment in the Russian Far East is not as much as that which had been predicted and hoped for by Russia: China has no particular interest in Russia’s Arctic North and it is rather interested in the central axis of the Belt and Road Initiative.

Furthermore, if China continues to invest in the Arctic infrastructure, together with Russia, this will only be in view of a de facto or de jure transfer of the Russian sovereignty over the North Pole areas in which currently both countries work together.

Also this balance between China and Russia is bound to greatly influence North Korea’s external political developments.

Hence, in terms of North Korea’s nuclear power, as early as 2006 – the year of the first true North Korean test -it was China that integrated North Korea into its Asian strategic project and proposed a bilateral dialogue with the United States for the solution of the North Korean issue.

This has de facto excluded the Russian Federation from the Korean games.

Russia reacted almost immediately with its support to the sanctions against North Korea within the UN Security Council, thus creating an equal-footing balance with the United States on the issue.

An opportunity that the United States did not grasp at the right time.

Sanctions, however, have not really been accepted by the Russian economic system: North Korean coal exports to Russia continue; many Asian workers have long been migrating to Russian factories near the border; the new railway networks, which should shortly connect Russia with North Korea and always end up in South Korea, are being called into question.

Currently trade between Russia and North Korea  is worth approximately 110 million US dollars a year.

Moreover, despite the letter and the spirit of the UN sanctions, Russia has not repatriated the thousands of North Korean workers it still hosts.

Furthermore, Russia still organizes many North Korean international financial and trade relations, thus supporting the operations for circumventing sanctions.

The railway line between Russia and the North Korean port of Razon is essential, but currently – also in tacit competition with China – it is the Russian Federation that provides North Korea with some Internet networks.

Incidentally, it would be good if the UN sanction mechanism – which, as some UN sources maintain, is scarcely transparent and often irrational – were radically revised: it keeps the US financial hegemony well beyond its rational limits, with dangers also for America; it unbalances financial markets that should be – at least officially – “free” and finally creates the opportunity, for the country on which sanctions are applied, to move directly to the adverse camp.

What would have happened to Italy if the sanctions of the League of Nations following the conquest of Abyssinia had not found in Nazi Germany the only, but certainly very interested adversary?

Nevertheless, in all likelihood, the turning point of the new relationship between Russia and North Korea will be the new pipeline that is supposed to transfer natural gas from the Russian Federation to both Koreas.

We will never understand the Russian strategic logic if we think it will accept the partition of the Korean peninsula as a fait accompli: Russia always thinks of both Koreas. And it would be crazy not to do so.

In the North, Russia operates to make North Korea “loyal” to the Russian strategic project while, in the South, it endeavors to curb the US and Japanese influence as much as possible.

Furthermore, there will soon be concrete signs of the  Russian interest in the large group of industries in  Kaesong, as well as the possible penetration of the Russian economy into the future North Korean automotive and mechanical industries, and finally the possible creation of an ad hoc Bank for the globalization of the Korean economy to the East and eventually to Europe.

Along the Southern flank of the Russian geo-economic security which is parallel to, but different from the Chinese Belt and Road Initiative.

North Korea’s future geopolitical choice will be between the Chinese Belt and Road lines and those provided by the Russian maritime and terrestrial continuity on its borders.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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East Asia

It’s when not if China’s Middle Eastern tightrope snaps

Dr. James M. Dorsey

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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.”

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Implications of French President’s Visit to China on the International Arena

Mohamad Zreik

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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.

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Tension in Hong Kong

Giancarlo Elia Valori

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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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