Monday, 23 September 2019


By George Magnus

China’s celebration of the 70th anniversary of the founding of the People’s Republic on October 1 is an important milestone for the Communist party and, in some ways, a dress-rehearsal for its own centenary in 2021. Behind the fanfare, though, party officials are keeping a wary eye on other, more troublesome, developments that threaten the order and stability so prized by the government in Beijing. Anniversaries in China have a special function and are an essential part of the party’s narrative of success and legitimacy. Some, like this year’s centenary of the May Fourth Movement, from which the CCP emerged, are manicured to fit the party’s messaging. Others, such as the 30th anniversary of the 1989 Tiananmen Square crackdown, are outlawed. They are not even taught, let alone remembered, except in Hong Kong.

 There is no question, therefore, that Beijing will do its best to ensure nothing rains on China’s 70th birthday parade. But sometimes events get in the way, with unpredictable consequences. Here are three examples. First, the protest movement in Hong Kong, now in its fourth month, represents a significant crisis for the party and the most important backlash experienced so far by President Xi Jinping. There is no question that it would be an embarrassment for Beijing if Hong Kongers were still protesting as China was celebrating. There are fears of possible direct intervention, but the party’s reticence about this speaks to Hong Kong’s 7.4m population, its geography, and concerns about the reactions of America and others. Moreover, Hong Kong is still important to the mainland as Asia’s premier city and financial centre. It hosts more than 60 consulates and over 8,500 multinational corporate regional headquarters or offices, is a rule-of-law entity in which local and global companies run their Chinese arms, and acts as China’s portal to global financial services and vice versa. Yet the recent build-up of Chinese troops in Shenzhen, across the border from Hong Kong, suggests that reticence would probably give way to resolve if the party felt its ultimate authority, and China’s sovereignty, were at risk.

Whether or not this happens, events in Hong Kong may have already passed a critical point. China’s organisational and institutional control there will increase more or less abruptly, diminishing Hong Kong’s status and exacting a considerable economic toll. Second, the Hong Kong protests are already shaping events in Taiwan, where presidential elections will be held in January 2020. Opinion polls suggest that the main beneficiary has been the incumbent president, Tsai Ing-wen. Her advocacy of Taiwanese sovereignty suggests a further distancing from the mainland if she is returned to power. Mr Xi would then have to reconsider options for peaceful reunification of the mainland with the “renegade province” of Taiwan, believed to be one of his most cherished ambitions. Third, conflict with the US over trade has already spread into other areas such as technology and industrial policies, and has led to the targeting of individual companies. The likely consequences for investment, business and consumer confidence and supply chains are serious.

 Even though both the US and China seem once again ready to reach a limited agreement on some trade matters, deep undercurrents of tension persist, including over a potentially damaging currency war. Last month, China allowed the renminbi to weaken past the psychologically important level of Rmb7 to the US dollar, and President Donald Trump argued for an end to a longstanding strong dollar policy. If the US and China locked horns over competitive currency depreciation, negative consequences for the world economy would surely follow. The threat to Chinese stability would be considerable, just as China is trying to manage an economic and productivity slowdown along with corporate and financial deleveraging. In spite of earlier stimulus measures, growth in output is now at its weakest for more than a decade. Trouble in Hong Kong and commercial and financial conflict with the US are both untimely from an economic perspective. But they also cast a shadow over the Communist party’s craving for obedience and control. They could yet reveal a brittleness in Chinese politics that is not part of the narrative that will be propagated during and after next week’s anniversary. As a new decade dawns, few things matter more for China’s rulers than events over which they cannot exert complete control.

 The writer is the author of ‘Red Flags: Why Xi’s China is in Jeopardy’


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