All Eyes Should Be on Hong Kong | Opinion

In international politics, few things are certain during these uncertain times. But I can predict one: the relationship between America and Hong Kong is in the throes of major change.

On May 22, China's leaders will convene for their annual People's Congress, during which they will discuss the status of Hong Kong and whether to push forward with their rebuffed attempts to impose upon that special jurisdiction the laws and circumscribed rights of mainland China. If they do so, America and Britain will push back—with lasting consequence.

Hong Kong has become ground zero for the ideological clash between democracy and heavy-handed Chinese communism. This tug-of-war was on global display last summer, when over two million Hong Kongers—26 percent of the entire population—peacefully took to the streets of Hong Kong, in sweltering 100-degree heat, to protest Beijing's overreach with a proposed extradition bill that would impose China's laws on Hong Kong. The people of Hong Kong have completely lost faith in their embattled leader, Carrie Lam, and their police force. Peaceful protestors have been brutalized, pro-democracy figures have been illegally arrested and the Hong Kong Legislative Council's day-to-day operations have been tampered with by the Chinese government. During the most recent attempt to conduct a Legislative Council meeting in Hong Kong, in a scene that is reminiscent of an event that might take place in a failed state, fist fights broke out between the pro-China members and the pro-democracy members.

Unfortunately, the rapt global attention and support that greeted Hong Kongers last year at the start of their protests has been sidetracked by other news. But this week, the world should again pay attention to Hong Kong.

At the People's Congress, the Chinese Communist Party is likely to push forward with having Hong Kong implement a full set of laws with "Chinese characteristics" that give Beijing the right to essentially do whatever it pleases. This will shatter the Sino-British Joint Declaration of 1984, in which China agreed to allow Hong Kong to continue to operate "autonomously" until 2047. After 156 years of Hong Kongers experiencing British rule and all the freedoms and rights that accompanied it, expect larger and more dynamic protests and (hopefully) more global action from politicians. Recently, Secretary of State Mike Pompeo has said that he would not renew Hong Kong's special trade status until he had seen the outcome of the People's Congress.

But absent a complete about-face on that, it is unclear how Pompeo could possibly validate Hong Kong's continued "autonomy" after the blood-letting the world has witnessed firsthand. In late 2019, Amnesty International titled a piece, "Hong Kong: Arbitrary arrests, brutal beatings and torture in police detention revealed." Suffice it to say this is not something any responsible autonomous nation would do to peaceful protestors.

Unfortunately for citizens, at the same time that Hong Kong is experiencing the worst political destabilization since the Opium Wars, the special jurisdiction is already in the throes of the worst economic depression it has ever faced: GDP is down 24 percent quarter-over-quarter annualized. I have been studying the Chinese banking system and Hong Kong closely for the last decade, and I think that Hong Kong is living on borrowed time. (In full disclosure, I run global investment funds investing in this macroeconomic outcome.)

Hong Kong
Hong Kong DALE DE LA REY/AFP via Getty Images

What happens in Hong Kong will not stay in Hong Kong. The battle between an expansionist, increasingly repressive Chinese communist government, on the one hand, and a Western rule of law-based democracy, on the other, will spill over into Taiwan. Already, the battle in Hong Kong has affected Taiwanese politics: watching China's Communist Party try to assert control in Hong Kong is the primary reason that a historic number of Taiwanese voters took to the polls to rebuke the pro-Beijing candidate and elect a president, Tsai Ing-wen, who campaigned with the promise of protecting Taiwan's democracy and sovereignty. Taiwanese voters will continue to be enthralled by every development in Hong Kong, because they know that an aggressive and emboldened Chinese Communist Party is bad news for them, too.

The world should focus on Hong Kong. This is not just about the fate of millions of peaceful protesters, but about democracy, reneged promises and a global order that is shifting as the Chinese Communist Party continues to change its terms of engagement.

Kyle Bass is the founder and chief investment officer of Hayman Capital Management, L.P., a Dallas-based investment firm.

The views expressed in this article are the writer's own.