Ever since the enactment of the Hong Kong National Security Law, the city has changed beyond recognition. While hardcore pro-Beijing supporters cheered this development as a “victory,” they may not fully grasp the irreplaceable value of Hong Kong to China. There is, after all, a reason why China has not attempted to seize control of the city by force in the past.
Despite accounting for less than 3 percent of China’s GDP, Hong Kong, with its unparalleled institutional advantages, has always played a crucial role as a financial buffer between China and the rest of the world. On one hand, it channels Chinese capital outward to the world. On the other hand, it attracts international investments into China. Without this gateway, China runs the risk of excessive capital outflow and/or hot money inflow, either of which would destabilize the Chinese economy. With no end in sight to the new Cold War with the United States Hong Kong and its own system will become more important than before, financially and strategically, for China.