In Macau, Xi Aims to Supplant Hong Kong’s Autonomy

By Marco Rubio | December 20, 2019

Chinese leader Xi Jinping’s recent trip to Macau was ostensibly to commemorate the twentieth anniversary of its handover to Beijing. But its real purpose was to send a message to authorities in Hong Kong. By holding up Macau as an exemplary model of the “one country, two systems” arrangement, he sent a clear message that Macau is what he expects Hong Kong to become.

During his visit, Xi made clear that a formal separation of systems was no barrier to China’s power, asserting that “[t]he government and people from all walks of life understand that Macau’s future and fate are connected with that of the motherland.”

Indeed, Macau’s incoming chief executive, Ho Lat-Seng, was selected through a CCP-controlled committee and has indicated his willingness to advance efforts to strengthen local security laws in accordance with Beijing’s wishes. In return for playing nice, Xi announced a series of economic initiatives aimed at boosting and diversifying the island’s gambling-based economy. At the same time, Beijing appears to have restricted travel of Hong Kong journalists and diplomats entering Macau.

Some have viewed Xi’s visit through the narrow lens of the CCP attempting to change the behavior of the people of Hong Kong. And while a more compliant Hong Kong is certainly welcome by Beijing, Xi’s ultimate audience was not the population, but rather the leaders of Hong Kong. His goal is even more ambitious: to create an alternative to Hong Kong that offers similar financial benefits, while remaining submissively under the thumb of the CCP.

Currently, more than two-thirds of China’s foreign direct investment flows through Hong Kong, giving the island a level of autonomy, as Beijing needs access to U.S. dollars to fund its initiatives at home and abroad. The Communist Party can exploit Hong Kong’s wealth and unique financial position, but so far it has been unable to replicate the city’s critical role in guaranteeing capital flows on the mainland.

By building up Macau, Xi and the CCP are seeking to create an alternative path for foreign direct investment into China. Until now, Macau’s casino-based economy merely served to bring in and launder foreign currency, even as the CCP cracked down on Chinese citizens with strict currency controls. By diversifying the economy and building in more traditional financing industries, Beijing intends to siphon money out of Hong Kong and away from those who do not view their future as shared with the “motherland.” Just the threat of creating a new and more compliant financial gateway gives Beijing tremendous leverage over Hong Kong’s leaders and economy. And it gives Xi increasing latitude to undertake increasingly draconian actions.

The leaders and people of Macau should also realize that Xi’s CCP will demand more of them too. They will increasingly pressure them to surrender more of its already eroded autonomy in return for the benefits of becoming an alternative financial gateway. The CCP’s end goal is a single, homogeneous China. What the CCP calls the “great rejuvenation of the Chinese nation” is in fact an effort to erase ancient cultures, traditions, and religions and force everyone under their rule to “sinicize” under the narrow cultural, ideological, and religious norms they allow to exist.

Before rushing to move direct investment from Hong Kong to Macau, those outside of China should remember that what has made Hong Kong attractive, productive, and prosperous is its freedoms, established civic institutions, and robust legal system. No matter how many advantages Beijing tries to confer on Macau, it will never have the freedoms, judiciary, or institutions that Beijing is seeking to destroy in Hong Kong. And even if they tried, Beijing would never allow it. Moving business from Hong Kong to Macau would expose companies to the arbitrary, capricious nature of the CCP, whose state-owned and state-directed firms regularly steal technology, intellectual property, and trade secrets from foreign companies.

Unfortunately, if the experience of trade normalization with China is at all indicative, many international businesses drawn to the promise of short-term windfalls will suffer exactly those indignities before they realize it’s too late. Due to neglect and financial incentives or coercion, for years now, both governments and businesses outside of China have long ignored the Chinese Communist Party’s broad ambitions to alter global norms and rules to their benefit and the rest of the world’s detriment.

But we can no longer afford to do so.