Sign up for a daily newsletter defining what matters in business and markets

Stories

China's Hong Kong checkmate

Illustration: Sarah Grillo/Axios

Images of Chinese troops massing near Hong Kong have led to fears of an impending crackdown on pro-democracy protesters — but China's next move will be dangerous, no matter what it is.

The big picture: Allowing Hong Kong's dramatic displays of dissent to rage on is intolerable for the Communist Party. But if China attempts another crackdown on the scale of Tiananmen Square 30 years ago, it would prompt a global backlash and risk steep economic repercussions.

The latest: Protests sparked by a controversial extradition bill have intensified over 10 weeks into a rebellion against Chinese control over the former British colony and global finance hub.

  • Riot police swarmed into Hong Kong's international airport Tuesday night and dispersed protesters who caused 2 days of chaos and cancellations at the world’s 8th busiest airport.

What they’re saying:

  • Carrie Lam, Hong Kong’s Beijing-approved chief executive, said the city was being “smashed to pieces” and on “the brink of no return.”
  • President Trump, whose hands-off approach had been read by some as tacit approval for a crackdown, tweeted: “Our Intelligence has informed us that the Chinese Government is moving troops to the Border with Hong Kong. Everyone should be calm and safe!”
  • China’s propaganda machine has raged against the protesters, and officials have claimed the protests contain "sprouts of terrorism" and the "black hand" of foreign intervention.

Between the lines: "They're certainly putting down rhetorical markers that would justify a heavy-handed intervention," says Dan Kliman of the Center for a New American Security.

For now, China's message is that it’s up to local authorities to quash the unrest — and quickly. Images of Hong Kong police roughing up demonstrators have spread around the world, but a cataclysmic clash with Beijing has yet to materialize.

  • "Leaders in Beijing worry that a triumphant protest movement in Hong Kong could embolden calls on the mainland for freedom of expression and the rights to assemble and strike," Richard Haass, president of the Council on Foreign Relations, writes for Axios Expert Voices.
  • "These risks suggest Chinese authorities will use force if needed, although they may first seek to control the protests by applying economic pressure on Hong Kong, sowing disinformation, arresting protest leaders and threatening military escalation."

What to watch: Bill Bishop of Sinocism emails that the Chinese government is unwilling to countenance the demands of the protesters, who in turn are “becoming increasingly radicalized.”

  • “No crackdown and no concessions means more disruptions like we are seeing. And more disruptions, especially of places like the airport, increase the likelihood of violent suppression. I do believe Beijing would prefer the Hong Kong authorities handle it but so far they have not shown they can.”
  • “Letting things run will hurt the Hong Kong economy but may not have a sudden effect on markets. Cracking down could set off market crashes in Hong Kong and Asia, if not throughout the world.”

Zoom out: President Xi Jinping has spent 6 years systematically clamping down on dissent and attempting to solidify Beijing's control over all of China.

  • "The biggest risk is for Xi himself," Kliman says. "If he shows himself unable to manage a protest in Hong Kong, it could potentially be useful ammunition for his critics. For that reason alone, Xi can't let this fester indefinitely."
  • "If he's in a position of having exhausted his alternatives, then they would move forward with a crackdown."

The bottom line: That would provoke international outrage and could harden China's divide with the West. But as Bishop writes, "No one should ever underestimate what the Chinese Communist Party will do when it feels threatened."