Hong Kong stocks posted the best performance in Asia on Monday. They were up 1.35% at the close, twice the gains in mainland markets.
Yet morale is down. It's down among demonstrators fighting pitched battles with police. It's down within the police. It's down within the government, which has seen Hong Kong's High Court rule that a ban against face masks is unconstitutional.
The movement of the markets is at odds with what's going on in this city. There has been a two-day stand-off between protestors and riot police at the Hong Kong Polytechnic University, in the heart of Kowloon. It grew very heated Sunday night and is sure to again on Monday night. Hundreds of students are trapped in the campus, and they lit two huge fires to repel a police assault at 5:30 a.m. They've staged various breakouts, to varying degrees of success, to try and escape the campus and arrest.
I'm angry. That's because the Chinese army, which is not supposed to operate in Hong Kong, suddenly took it on themselves on Saturday to emerge from their barracks. As you can see here, around 50 troops jogged out in formation, dressed in their PT olive T-shirts and black shorts, carrying brooms and red plastic buckets, to remove bricks and other roadblocks that protestors had left near their base.
The soldiers said they hadn't been invited out by the Hong Kong government. "We initiated this," their commanding officer told a reporter who started filming the event, which was also recorded by a military cameraman in fatigues. The officer declined to give his name, stating instead, "I am the Hong Kong garrison of the People's Liberation Army."
That's a clear violation of the "One Country, Two Systems" scheme that Beijing always touts as the answer to Hong Kong's affairs. By law, mainland China's People's Liberation Army must not interfere in autonomous Hong Kong's affairs. The soldiers can be called out to help with disaster relief, but only if requested by the Hong Kong government.
For the very first time, the Hong Kong government did exactly that in September 2018 after Typhoon Mangkhut, the fiercest storm I've ever experienced in Hong Kong. Even then, it was a publicity stunt because the troops went into the forests in the Country Parks and cleaned up trees in the forest.
It was a mistake, made on purpose by a government that's now under so much pressure. That set the precedent for Chinese troops to operate in the city.
An emboldened army
Now they appear emboldened enough to deploy themselves without any government request. A subset of the troops sent out on Saturday wore bright orange or bright blue basketball singlets, standing out amid all the drab olive T-shirts, the lettering above the shirt numbers indicating they are from the Xuefeng Special Operations Brigade -- counterterrorism special forces.
What's next? An armed Chinese soldier "cleaning up" each street corner? One of the main causes of this six-month summer of conflict has been the increased interference of the Communist Party and Chinese government in Hong Kong. Is this helping matters?
The commanding officer was asked if this stunt would create a bad impression or cause further disputes. He seemed irritated by the question, saying the applause of a small stage-managed crowd was the best impression. "What else is there to ask? Bad impressions? No more questions!"
Volunteer work? Not hardly
The central government's mouthpiece on foreign policy, the Global Times, says there's nothing to see here, please move along ...
"Sources close to the PLA told the Global Times that there is no need to read too much into the clean-up efforts by the soldiers as such activities outside the camp only requires the permission of their commander instead of higher-level command," the newspaper claims.
Ludicrously, the publication claims that the soldiers running out in ranks, all dressed in matching sports uniforms, were in "casual clothes" and on their "break." They weren't exactly sipping mai tais in Hawaiian shirts down at the beach.
This is exactly the problem with how China operates in Hong Kong. The Communist Party has been whittling away at each tenet of Hong Kong's constitution, the Basic Law, creating an "interpretation" when it doesn't say what the party wants. In this instance, we're told the army can just decide to deploy, in contravention of the Basic Law, as long as they do it under the guise of some kind of volunteerism.
The PLA can also be called on to help "in the maintenance of public order" as well as "disaster relief," and maintaining public order can be very broadly construed. After all, China keeps public order within the mainland through an armed iron fist, with a porcupine's back of security cameras at every conceivable intersection.
Market rallies despite protests
Why is the Hong Kong market up? The Hang Seng gained because China's central bank on Monday unexpectedly cut the short-term seven-day interest rate to 2.50%, from 2.55%. That matched a cut in medium-term, one-year rates announced two weeks ago.
The step is a small one. However, markets have taken encouragement that the Beijing government is not totally backing off stimulus for the economy despite rising inflation generated by spectacularly high pork prices.
I doubt the Hong Kong rally will continue on Tuesday given the intensity of the fighting here. The police have surrounded several hundred protestors at the Polytechnic University, in the heart of Kowloon. That's their last bastion after the demonstrators left other campuses, suddenly withdrawing from the Chinese University of Hong Kong near my home.
The PolyU campus is right next to the central Cross-Harbour Tunnel to Hong Kong Island, which has been closed for days, its toll booths torched. Armed with petrol bombs, the demonstrators are dug in while the police have sealed off the exits and are arresting those who leave. The protestors repelled an armed car with Molotov cocktails Sunday night and have even used bows and arrows, with one officer heading to hospital with a bolt through his calf.
Police have used live fire twice in the last day and warn they'll continue to use such force if protestors continue to attack them. Honestly, it seems at this stage like many of the protestors want to leave and a group of about 100 made a break for it early on Monday afternoon. I see more climbing down a makeshift escape rope now, like a prison break. It is, in a way. Those who remain have been told they'll be classified as taking part in a riot, which carries a sentence of up to 10 years in prison.
Tiananmen Square of a sort
David Alton, a British baron and member of parliament, calls what's going on a "slow-motion Tiananmen Square." The police are acting with greater and greater impunity and force, on camera crashing batons into the skulls of subdued protestors. I know of hardly any who have been reprimanded for any of their behavior. The government continues to do nothing to resolve the situation.
Hong Kong's local economy is suffering. The city's recession, flagged by preliminary figures, was confirmed by the final readout on Friday to have shrunk 3.2% in the September quarter compared with the previous three months. That's the second straight down quarter, with the government predicting a full-year drop of 1.3% in the economy. That would be the first full-year shrinkage in the economy since 2009, and frankly looks like a very optimistic forecast right now.
The financial crisis in the West spilled over to the Hong Kong stock market and economy 10 years ago. This time, the crisis is home-grown. We need local leadership, true leaders, to resolve it, not the help of the Chinese army.