The Erosion of Hong Kong’s Autonomy is Damaging to Hong Kong, Canada and Western-Asian Diplomacy

Part 1

Canada – Hong Kong relations have been mutually beneficial over the past eighty years. It could be said that this partnership began during World War II, when Canadians defended Hong Kong, which was a British Crown Colony, against Imperial Japanese attack. This battle saw Canadians staring defeat in the eyes, however, despite the overwhelming odds, the Canadians stood with their commonwealth Hongkongers, refusing to surrender until they were overrun by Japanese troops. Those who survived the onslaught were taken as prisoners of war and went on to experience further atrocities. The relationship formed during this ordeal has transcended into one of mutual affection and prosperous trade in the modern era (Veteran Affairs Canada [VAC], 2019).

You can see this high degree of mutual affection when looking at demographics. In the 1990s, during the period of time when the ‘Handover of Hong Kong’ occurred, many Hongkongers were worried about an entire Chinese annexation. These fears lead them to seek emigration, and their chosen destination at the time was Canada. This saw Canada’s population of Hongkongers swell to nearly 620,000 before gradually receding towards a more stable population of nearly 220,000. The peak level of Hongkongers in Canada had Canada listed as the largest host to Hongkongers in the world (Wikipedia, 2020). The current population of Hongkongers in Canada makes it the third-largest host to Hongkongers living abroad after China and the United States. Now that the Communist Party of China (CPC) has implemented the new ‘Hong Kong Security Law’, we may be witnessing what is known as ‘reverse migration’. This is denoted by the influx of Hongkongers during the 1990s, the subsequent outflow of Hongkongers as the ‘One country, two systems’ rule was respected, and the current inflow of Hongkongers due to the fear of the CPC, which was the similar rationale in the 1990s. The reverse migration was recognized in 2016 following the initial Umbrella Movement protests, which were held in Hong Kong in opposition to the CPC (Young, Ian, 2019). This shows affection to Canada by Hongkongers, as Canada is seen as the ideal territory for emigration. In talking about affection and mutual affection, the opposite metric, Canadians living in Hong Kong, is just as interesting. There are nearly 300,000 Canadians living in Hong Kong, this makes Hong Kong host to the second-largest number of Canadians after the United States. It is suspected that this number could grow to nearly 550,000 if underage minors are accounted for, which makes Hong Kong the most Canadian city in Asia (Keung, Nicholas, 2011).

Hong Kong is host to a Canadian consulate, that handles consular services such as immigration, emigration and trade, amongst other diplomatic activities. This consulate is separate from its Embassy in Mainland China which signifies mutual Canada - Hong Kong interests and respect for the ‘One country, two systems’ treaty. In reciprocation, Canada is host to Hong Kong diplomatic and trade offices in cities such as Montreal, Vancouver and Ottawa which handle similar activities. These types of diplomatic relations are the product of mutual affection shared by Canadians and Hongkongers and the increased business activities both countries benefit from.

Part 2

The high degree of mutual affection between Canada and Hong Kong, when coupled with experienced diplomatic ties has defined itself in the modern globalized world through immigration and emigration, but also in terms of business and trade. Despite being roughly 2.5 times smaller than Rhode Island, which is the smallest state in the United States, Hong Kong is Canadas 6th largest export partner and 13th largest trade partner, placing it ahead of countries such as Belgium, Spain, Australia and Norway. These trade operations represent roughly $6.5B in 2016. In 2017, Hong Kong had $12.4B invested in Canada, while Canada had $10.6B invested in Hong Kong, making Hong Kong Canada’s second most popular destination for foreign investment. One of the main reasons for Canadian investment in Hong Kong is that it gives investors exposure to the Chinese market without investing directly in the Chinese market. Many businesses stationed in Mainland China will do their Initial Public Offering (IPO) using the Hong Kong Stock Exchange (HKEX), which is the world’s second-largest IPO center. They do this because of Hong Kong’s open capital markets, an aspect of Hong Kong’s economy that is not often attributed to Mainland China which is known for having a more conservative and restrictive economy that is more difficult for foreigners to operate in (Bajpai, Prableen, 2020). This type of high calibre trade and investment between Hong Kong and Canada bolsters Canada’s footprint in Asia, as Hong Kong is the third-largest financial market in Asia. It also denotes Hong Kong as one of Canada's primary economic ‘allies’ in Asia. Currently, around 200 Canadian companies are working in Hong Kong (Hong Kong Economic and Trade Office, 2019, HK & Canada page). These businesses operate in Hong Kong because of unique benefits such as access to the Chinese markets, existing relationships with Canadian businesses and efficient diplomacy, amongst various other assorted benefits.

Under Hong Kong’s Basic Law, Hong Kong is able to conclude its own non-military bilateral agreements with foreign countries (Hong Kong Basic Law, Articles 151, 153 and 155). This has allowed Canada and Hong Kong to capitalize on their mutual affinity and respect for the benefit of one another through foreign policy diplomacy. There are two pieces of legislature that bolster and promote business and investment activities between Hong Kong and Canada: The Canada-Hong Kong Avoidance of Double-Taxation and the bilateral Foreign Investment Promotion and Protection Agreement. These important treaties and agreements further solidify the bilateral trade and investment relationship between Canada and Hong Kong and demonstrate the benefit of this pragmatic diplomacy (Government of Canada [GC], 2018, para 9&10). These agreements also give Canadians who do or are seeking to do business in Hong Kong a competitive advantage over other Asian financial markets and provides the same competitive advantage when Hongkongers seek to do business in Canada.

Part 3

Hong Kong’s designation as a Special Administrative Region (SAR) means that it is ultimately under Chinese governance, and while having a separate currency, government and economy, it is still under Beijing’s control. This gives rise to complex diplomacy within Hong Kong as it differs from that of diplomacy with the ruling CPC in Beijing. While Canada is on good terms in relations with Hong Kong, it does not have such excellent relations with China due, markedly, to the Meng Wanzhou extradition (Russel, Andrew, 2020). China is also not on good terms with Hong Kong, ever since the CPC attempted to pass an array of security legislation that was seen as erosive to Hong Kong’s autonomy and led to the second wave of the Umbrella Movement. Despite these protests, the CPC passed legislation in June of 2020 that further eroded the autonomy of Hong Kong. This legislation, known as the Hong Kong National Security Law (HKNSL), seeks to combat succession, subversion, terrorism and collusion, which is all determined by the CPC (Hong Kong National Security Law, Part 1, 2, 3 &4). This legislature allows for the establishment of a CPC Secret Police force in Hong Kong to enforce the legislation. This law makes it legal to persecute or detain certain individuals who are seen as breaking the law as the CPC is now able to be legally involved in Hong Kong’s affairs. This incursion by the CPC has been met with widespread criticism from countries of the world, especially the United States, who will no longer be treating Hong Kong as separate from Mainland China (Donati, Jessica, 2020).

The actions taken by the CPC will have a negative impact on Canadian business and diplomacy with Hong Kong. Canada has already ceased the shipment of military equipment to Hong Kong and has halted extraditions (Chase, Steven, 2020). The actions taken by the CPC also damage the business capabilities of many other countries with Hong Kong, making it a less attractive place of investment and operation. This assault on the freedom of Hong Kong will point many businesses towards other Asian financial hubs such as Singapore, Tokyo and even Shanghai. As Canada already has a strong foothold in Hong Kong, this will be detrimental to the unique business relationship shared between the two countries and will substantially decrease Canada's ability to exert influence in Asia.

Canada has made its disapproval of these actions taken by the CPC very public. The Canadian Minister of Foreign Affairs, Francois-Philippe Champagne issued a strong statement including quotes such as:

• Canada joins the international community in reiterating its serious concern at the passage of national security legislation for Hong Kong by the Standing Committee of the National People’s Congress of China.

• This legislation was enacted in a secretive process, without the participation of Hong Kong’s legislature, judiciary or people, and in violation of international obligations.

• This process demonstrated disregard for Hong Kong’s Basic Law and the high degree of autonomy promised for Hong Kong under the ‘one country, two systems’ framework. Hong Kong’s role as a global hub was built on that foundation. Without it, Canada is forced to reassess existing arrangements.

(Global Affairs Canada: Statement of July 3, 2020, para 2, 3 &4)

Mr. Champagne also said that Canada would have ‘a lot more to say’ about the implementation of the erosive legislation, suggesting the possibility of additional measures (Goodyear, Sheena, 2020). In a subtle but assertive way, Canada is expressing its discontent over the CPC’s intrusion into Hong Kong’s autonomy. The government understands Hong Kong’s importance to Canada as well as Canada’s importance to Hong Kong and is dedicating resources to the matter. While the historic relationship between Canadians and Hongkongers will continue, the business relationship may decrease or stagnate in favour of more hospitable locations that still give access to Asian markets. This reaction will be worsened as the businesses of other territories follow suit, further decreasing the appeal of Hong Kong for international business. Foreign investment will slowly seek out of Hong Kong, as Hong Kong’s value to the international business community loses its significance.

However, one-way Canada can capitalize on this situation would be to operate in a similar way the United Kingdom is and offer expedited citizenship procedures to Hongkongers. The citizens of Hong Kong in many cases already have deep ties with Canadians and to Canada. As the world’s second-largest financial hub Hong Kong has a heavy concentration of some of the world's best financial talent. Much like New York and Wall Street, Hong Kong has Bank Street in Central Hong Kong Island. If Canada were to open its doors to Hongkongers seeking to once again flee CPC suppression, Canada would gain valuable financial expertise from some of the world’s top financial experts who are specifically knowledgeable in international banking and the Asian markets.

The question now becomes: Will Canada and the west be able to salvage their business interests and diplomatic relationship with Hong Kong in the face of increased CPC aggression?