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A nation must think before it acts.
Normally, the annual meeting of China’s National People’s Congress (NPC) is a dull affair. Theoretically, the People’s Republic of China’s (PRC) highest law-making group, its nearly 3,000 members constitute the largest parliament in the world. At the same time, the 2,200-odd members of its less prestigious sister group, the Chinese People’s Political Consultative Conference (CPPCC), are in session elsewhere in Beijing’s Great Hall of the People. Under the best of circumstances, these meetings are not conducive to meaningful debate on issues, and are even less so under authoritarian governments. Both meetings are highly scripted. Brilliant red silk flags provide a backdrop for the huge rooms; the stirring national anthem Qilai (“Rise Up”) is played. Apart from a few pops of color from the relatively few female and minority group members, attendees in dark blue suits, white shirts, and tasteful—some would say boring—ties sit in front of identical teacups and listen, whether passively or raptly is difficult to tell, to their leaders drone on about impressive growth rates and the even brighter future ahead. They clap dutifully as each speech ends; teacups are refilled by young women in identical red jackets, and the next speech begins. Votes are taken and, apart from a rare no or a few spoiled ballots, all measures are approved. Symbolic of the great unity of the Chinese people, the affair normally lasts for two weeks.
This year would be different. The conferences, normally held in early March, did not open until late May due to the coronavirus pandemic, and were shortened to a week. More than just time and timing were different, with the salient issues being the futures of the economy and of Hong Kong, respectively.
The Chinese economy—already slowing before the impact of a trade war with the United States, an outbreak of African swine fever that had reduced the production of the country’s favorite meat by 60 percent, and the disruptions of the pandemic—contracted by 6.8 percent in the first quarter year-on-year, the first such contraction since 1979. At the same time, the country’s universities were turning out the largest graduating class in the PRC’s history, with a shrinking job market to absorb them. In common with many countries that have experienced rapid industrialization, China’s economic miracle had sharpened the differences between rich and poor, causing party and government concern with the potential for what they delicately refer to as social instability. Having a larger number of young people among the unemployed could be expected to exacerbate the existing potential for violence.
Premier Li Keqiang’s work report again broke with precedent, announcing that there would be no target for Gross Domestic Product (GDP) growth in 2020, the first time this happened since the practice of setting targets began in 1994. Instead, Li stated, the emphasis was to be on stability and security, as if those factors had never appeared in previous work reports. College graduates unable to find jobs were encouraged to pursue graduate degrees. For others, the civil service would be hiring additional people, as would the People’s Liberation Army (PLA). Such measures are no panacea: there is no guarantee that those who opt to pursue advanced degrees will find a more welcoming job market when they graduate, and all of the measures have costs. The Finance Ministry has targeted a fiscal budget deficit for 2020 of over 3.6 percent of projected GDP, higher than last year’s 2.8 percent and above the traditional upper limit of three percent.
China, where the pandemic originated, also managed to bring the disease under control earlier than most other countries, and Li’s expectation seems to be that a modest stimulus will allow the economy to recover. Perhaps learning from the experience of a decade before, when a large stimulus package had encouraged local governments to front-load investments in infrastructure projects that were often less than wise and raised their debts to alarming levels, Li’s plans appear more modest. The proceeds of local government special purpose bonds and treasury bonds are to be transferred to local governments to stimulate consumption and raise employment rates. National rail capital funds are to be raised; electricity rebates and tax breaks for small businesses will continue until the end of 2020; and the country’s largest state banks have been told to increase lending to small firms by 40 percent from 2019.
Economic plans, no matter how well thought through, always run the risk of falling athwart reality. If, for example, Chinese production regains pre-pandemic levels but its principal foreign consumers—also suffering pandemic-induced economic contractions—are not buying, over-capacity will cause other problems: prices will be driven down, and efforts to create more jobs thwarted. No matter what happens, one important target will almost certainly fall short of fulfillment: General Secretary Xi Jinping had previously vowed to end absolute poverty and double the size of the economy in 2020 compared to 2010. For that to happen, the economy will have to grow 5.5 percent this year, which now seems overly ambitious. Still, given the state’s ability to manipulate statistics, it is possible that next year’s report will announce they have been reached. At least on paper.
After protracted negotiations between London and Beijing, the Sino-British Joint Declaration provided for the return of Hong Kong to Chinese control under a one country, two systems principle: Hong Kong’s capitalist system and way of life would remain unchanged for a period of 50 years, i.e., until 2047. To the annoyance of many Hong Kong citizens, they were excluded from the negotiations at Beijing’s insistence. In the years after assuming sovereignty over the territory, Beijing sought in various ways to constrict the promised freedoms, causing resistance that sometimes achieved modifications in Beijing’s plans. In 2003, for example, an estimated 500,000 people successfully demonstrated against an attempt to pass a national security bill that the protestors felt would infringe on their right to protest injustice; in 2012, a smaller but still substantial number rallied against planned attempts to include topics on Chinese history and culture in the Hong Kong curriculum on grounds they constituted brainwashing. The 2014 Umbrella Movement, the largest of its kind to that date, was sparked by a proposed election law that would allow citizens to vote for the area’s leader but only from a slate of candidates approved by Beijing. Police ended it after 79 days. The demonstrators, having achieved no concessions, vowed to be back.
And so they were in 2019, with numbers estimated to reach a million, to protest an extradition bill that would allow China to prosecute Hong Kong citizens according to the PRC’s highly arbitrary legal system. That bill was withdrawn, but another protest against a bill criminalizing disrespect for the Chinese flag soon followed. Since Hong Kong’s election laws mean that pro-China candidates hold a disproportionate number of seats regardless of the popular vote, this protest was doomed ab initio. Violations are punishable with fines of up to $6,500 and three years in jail.
In essence, a stimulus-response cycle has been created, with each attempt to tighten control met with resistance, followed by Beijing’s attempt to impose more stringent measures to control behavior it terms illegal and terrorist. Already in 2017, the Chinese Ministry of Foreign Affairs had stated that the U.K.-Chinese joint declaration was a historical document that no longer had any practical significance, with Britain pointing out that the document, as a legally valid treaty deposited with the United Nations, remained in force and that Her Majesty’s Government was committed to upholding—but did nothing to enforce.
In 2020, Beijing’s Liaison Office in Hong Kong reiterated the claim, prompting constitutional scholars to protest that the statements had threatened the scaffolding of the one country, two systems agreement. Perhaps reasoning that the reaction would be muted since the rest of the world was focused on dealing with the pandemic and that social distancing would minimize demonstrations against it, the Hong Kong government arrested over a dozen pro-democracy figures for their role in demonstrations the previous year. Democracy advocates charged that Beijing’s intent was to influence the elections for Hong Kong’s Legislative Council (LegCo), scheduled for September 2020. PRC officials in Hong Kong then claimed the right to exercise “supervisory” powers over the city’s affairs, although such powers appear nowhere in the laws governing Hong Kong’s relations with China. A pro-Beijing legislator has suggested postponing the elections due to the pandemic, even though the territory has recovered quickly from it, adding to pro-democracy advocates’ concerns about other overt and covert efforts to influence the election results.
Adding another incendiary element to this already combustible mix was Beijing’s announcement that the NPC would introduce a new national security law. This 2020 iteration had two differences from the 2003 version: it was stronger, and it would be imposed directly by the NPC, bypassing LegCo. The law criminalizes subversion, separatism, terrorism, and foreign interference in language so broad that almost any form of dissent can be interpreted as actionable within it. Supporters of Beijing have argued that the law will protect Hong Kong from terrorism and subversion. They maintain that very few people will be affected and that there is not a shred of evidence that mainland authorities will descend on Hong Kong to arrest people arbitrarily and send them back to China for trial. This statement is, however, logically untenable, since there can be no evidence that a law has been misused before the law is passed. Pro-democracy people also point out that proprietors of stores that sell books that the central authorities object to have already “disappeared” into China and that the new law will provide legal cover to what has been occurring illegally. Another argument by Beijing’s supporters is that, while democracy advocates have concentrated on the “two systems” part of the agreement for reversion of Hong Kong to China’s control, Beijing has placed emphasis on the “one country” part and that some democracy advocates’ calls for independence plus the number of American and British flags that they carry give ample justification that they are incentivized by foreign powers.
Be that as it may, the National Security Bill is now law by a vote of 2,878 in favor, one vote against, six abstentions, and one failure to cast a ballot. It will take effect in September. So, the question becomes what comes next. At the time of reversion, the United States agreed to extend favorable trading privileges to the territory on condition that Hong Kong retain its autonomy. On May 27, Secretary of State Mike Pompeo certified to Congress that Hong Kong no longer warrants that treatment given that it no longer has “high degree of autonomy from China,” which would enable President Donald Trump to revoke those trade privileges. However, doing so risks hurting Hong Kong, and many American businesses as well, more than China. According to Reuters, U.S. foreign direct investment in Hong Kong was $82.5 billion as of the end of 2018, and more than 1,300 American companies, including nearly every U.S. financial firm, has business operations there. Should visa-free access to Hong Kong be replaced with cumbersome and often arbitrary Chinese rules, business travel and work visa approvals would be adversely affected. Trump has threatened action, and China has vowed retaliation.
Other unanswered questions include that of Taiwan. Departing from its three-decades-old standard formula calling for peaceful “re”unification with China, the 2019 report omitted “peaceful,” causing anxieties about whether Xi Jinping has a timetable in mind for forcible integration, and what methods would be employed to bring it about. The overwhelming majority of Taiwan’s citizens were opposed to becoming part of the PRC even before the coronavirus pandemic started there and before China’s repression in Hong Kong provided fresh evidence of Beijing’ disdain for the “two systems” part of the one country, two systems mantra that Beijing has promised to Taiwan. Unexpectedly, however, in response to a question in the press conference held at the closing of the conference, Li again referred to peaceful unification. Beijing will not be pleased at Taiwan’s proposed easing on restrictions for Hong Kong citizens to move to Taiwan.
Since the work report has a primarily domestic focus, there was relatively little in it on foreign relations. Li noted that the Belt and Road Initiative (BRI) would emphasize high-quality construction for the mutual benefit of China and its partner states while “resolutely safeguard[ing] the multilateral trading regime and actively participat[ing] in the reform of the World Trade Organization.” Foreign direct investment would continue to be welcomed, with plans to relax some current restrictions on it. The premier declared that the first China International Import Expo had been a success, and pointed to the establishment of new pilot free trade zones and integrated bonded areas in central and western China as indicative of the PRC’s continued commitment to opening up to the world.
Deconstructed from its stock phrases and plans for a bright future, the 2020 Work Report shows a clear commitment to move forward with the leadership’s economic agenda despite recognition of the uncertainties in the international economy, and also to warn the international community that it will not waver in its commitment to gain control of entities that it feels entitled to. Given a continuation of the tepid resistance of the international community to counter these moves, the Beijing authorities will be convinced that they have chosen the correct course.
The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.