Hong Kong Hostile Turf as It 'Celebrates' 20 Years of Communist Oversight

 | Jun 29, 2017 | 10:00 AM EDT
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With Hong Kong celebrating the 20th anniversary of its handover from the British to China on July 1, it's a tumultuous time. July 1 is as much a time for demonstration as celebration in my adopted hometown, and the tension is only heightened given the significance of this particular milestone.

Hong Kong is almost half-way along its 50-year path to 2047, when it ceases to be a Special Administrative Region of China, with its own currency, police, courts and border guards. On July 1, 2047, Hong Kong will become just another Chinese city. It'll be a financial hub, of that I'm sure, but I can't promise a lot else.

The clock is ticking, and that is making Hong Kongers antsy. The majority are not happy with the changes they've seen since 1997, which have intensified in the last few years.

Hong Kong's stock market is on a bull run. The Hang Seng has risen 20.4% so far this year, one of the best performances in Asia, the market encouraged by the closer links generated by the trading tie-ups between Hong Kong and the mainland markets in Shanghai and Shenzhen.

U.S. investors can gain access through the iShares MSCI Hong Kong ETF (EWH) , up 22% in 2017. There's also the First Trust Hong Kong AlphaDex Fund (FHK) , which looks to target growth stocks on the Hong Kong market. It is up 18.6% so far this year. 

Most recently, MSCI approved mainland A-shares for inclusion in its indexes, a symbolic move showing global acceptance of Chinese equities and market standards, although international investors have long been able to play the mainland market via Hong Kong. Let's ignore that the secondary GEM market is at an all-time low due to a series of dodgy-trading scandals, shall we?!

The short-term prospects for Hong Kong stocks look good. China looks poised to overshoot on the official target of 6.5% economic growth for the year. This is good news for the money managers, accountants, lawyers and the like that manage the country's money from their base here in the "Fragrant Harbour." But the long-term outlook for the city and its citizens is as murky as the thick pollution that sometimes graces us in springtime, funnels of brown clouds working their way down the Pearl River Delta from the factories of Guangdong Province.

I moved to Hong Kong in 2001, not long after it became part-of-China but not-part-of China, its own little entity. Macau returned to China from the Portuguese at the end of 1999, and has the same Special Administrative Region status, with its own rules -- hence it's the only part of China that allows casino gambling.

One of the first questions newcomers passing through Hong Kong would ask me was, "What's changed since the handover?" And for the bulk of my time here, I could say very little. Hong Kong, the only part of China to have a Chinese dialect, in this case Cantonese, as an official language alongside English, was its own walled-off little world.

That's no longer true. Since the current Chief Executive, C.Y. Leung, took office, we've seen freedom of the press assaulted, sometimes literally in the case of the Ming Pao editor stabbed close to death by a couple of men with meat cleavers. We've experienced a steady flow of mainland Chinese coming to town to buy up property and strip the shelves of the bare essentials, decried as "locusts" by the most-critical Hong Kongers.

There are more and more, I have to admit well-qualified, mainlanders working here. And lastly, we've seen an erosion of the independence of Hong Kong's courts and authorities, with the Chinese police apparently free to hop into town and apprehend troublesome booksellers, whisking them back to mainland detention. Hong Kong has a constitution, the Basic Law, but it's useless because Beijing keeps making "interpretations" of the Basic Law that somehow always allow the communists to do whatever they want to do on that particular day.

C.Y. Leung, nicknamed "the fox" for his cunning and deviousness, will be stepping down on July 1. Another of his monikers was 689, bestowed on him because that's the total number of people who actually voted to elect him. Leung was a picture of inaction when the "Umbrella movement" shut down the city in late 2014 in the quest for democracy. He has seen his job as to kowtow to Beijing and, rather than represent Hong Kong, tell Hong Kong what Beijing wants them to do.

But his successor, Carrie Lam, is cut from the same cloth. Picked by just 777 Beijing loyalists from a list of suitable candidates whittled down to just three, she hardly has a mandate from the people for her "rule," elected by precisely 0.0108% of the population. The flight of her leadership, known for her stubborn style, will likely lead to plenty of "crashing and burning" in her dealings with the democrats elected to the Legislative Council.

Democracy, Tiananmen Square and Hong Kong's colonial history are still very touchy subjects. Ahead of the 20-year celebrations, a pro-Beijing group put up screens and a banner around a statue of Britain's Queen Victoria that sits in Victoria Park, the city's version of Central Park. The group had booked the nearby soccer pitches for a science expo, and clearly didn't want any inconvenient history looming over the knowledge it was going to preach.

Criticized as "petty" for doing so, the group finally relented and took down the banners. But not after some fuss.

Chinese President Xi Jinping will be rolling into town to celebrate the handover. There will be the usual beatific smiles from the big man, waving his wand of largesse over the capital of capital for greater China. Beijing has been keen to prove it can manage Hong Kong well, with eyes on Taiwan, and wanting to get a seat at the adult table on international trade and diplomacy.

Xi's diplomatic contingent will be working hard behind the scenes to ensure there aren't any ugly scenes while he's here. The communist party will hold a vital five-year planning meeting this fall, at which the leadership for the next half decade will be sorted out. It wants a steady economy and as little inflammatory rhetoric as possible before that event.

With Xi in town, Hong Kong's Grand Hyatt, which the local press notes has bulletproof windows, will be closed to all guests. So, too, will the neighboring Renaissance Hong Kong Harbour View Hotel -- which has the advantage of allowing the head of state to climb into a bulletproof limousine under the cover of a roof.

Get the feeling that Xi isn't entirely welcome? The 20th anniversary of Hong Kong's handover will only serve to remind Hong Kongers how much say they have over the city's future. The answer, on this biggest of questions, is virtually none.

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