Western governments should reduce trade with China so they won’t be bullied by Beijing, a new report that cites Hong Kong as an example warns.
The report by the advocacy group Hong Kong Watch found that investment from mainland China has steadily increased in Hong Kong over the past two decades, helping Beijing realize its political ambitions in the city, the Daily Telegraph reported March 3.
The influx of red capital explains why Beijing failed to pass national security legislation in 2003, but succeeded in 2020,” said Johnny Patterson, policy director of Hong Kong Watch. State capitalism dictates that the interests of the Communist Party are the first priority of every business.”
Employees of Chinese-owned companies in Hong Kong, for example, were barred from participating in the pro-democracy protests that roiled the streets in 2019.
Thirty-five percent of Hong Kong media outlets also have major stakes from mainland China, which allows Beijing to “shape the media environment through censorship and editorial control,” according to the report.
Chinese companies have been banned from advertising in Hong Kong media outlets deemed by Beijing to have unfavorable coverage – a move that has squeezed the commercial lifeblood of news outlets.
One of the targets of the ad boycott is Apple Daily, a Hong Kong tabloid owned by tycoon Lai Chi-ying, who was arrested and charged with vaguely defined national security crimes last December.
Western policymakers and financial firms, the report recommends, should steer foreign capital away from China, where it may be complicit in human rights abuses, and enact legislation to allow economic sanctions.
Governments could ensure that state pension funds do not invest in Chinese companies involved in human rights abuses. Index providers should also consider, the report recommends, removing these companies from major market indices, which are often used as benchmarks for investors.
The report stresses that Western governments should be concerned given the “dependence on Beijing” of both Chinese state-owned and private companies.
According to the report, “[The CCP’s] continued control of the mainland’s capital markets means that the ‘national champions’ thrive under the CCP’s patronage while outsiders flounder. The elites foolish enough to challenge the status quo are likely to find themselves facing corruption charges in court.”
According to Wikipedia, national champions are companies that are technically private businesses, large corporations that seek not only to make a profit, but also to “promote the national interest.”
For private companies to succeed in China, they must follow the guidance of the Communist Party and be accountable for advancing national goals – a flashpoint in the debate over Chinese telecommunications company huawei, which the United States, Britain and other countries have banned from future mobile network infrastructure for security reasons.
It’s Time to wake up,” Patterson said. We need to keep an eye on where Western institutions are investing, and where China is targeting its investments. Hong Kong is the canary in the coal mine.”
“If we allow Beijing’s strategic red capital investments in Africa and Europe, Latin America and across Asia to continue unchallenged for another decade, then we should not be surprised if – when the inevitable geopolitical hotspots arise – we will see Beijing’s domination of Hong Kong repeated in other strategic geopolitical theaters or indeed on our own doorstep, when We should not be surprised.”
“The cover of Hong Kong Watch’s latest report. Click here to see the full report.
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