Victor Shih on the Two Sessions: Hong Kong

Young China Watchers

On May 30, we invited Dr Victor Shih, UC San Diego professor and expert on China’s political economy, to discuss the outcome of the Two Sessions of the 2020 National People's Congress (NPC). Dr Shih shared three takeaways.

Part 2 of this double episode captures a lively debate with YCW members on the controversial National Security Legislation (NSL) that was introduced for Hong Kong. Dr Shih started by explaining why the most concerning aspect of the NSL is the unrestricted operation of Mainland Chinese offices in the territory. He described the potential impact on civil society and the investment climate in the city, in particular the lack of recourse and the legal repercussions of shorting state-owned enterprises. On potential further sanctions by the U.S., Dr Shih analyzed several options, from visa restrictions and sanctions on individuals, to a ceiling on the borrowing by Chinese companies on the international market. Asked what the timeline for implementation of the NSL looks like, Victor was pessimistic and compared the situation to the dismantling of civil society in mainland China in the late '50s, only at a much faster pace.

Dr Shih next commented on the remarks by the Chairman of the Hong Kong Exchange (HKEX) that the NSL will preserve the long term economic stability of the city, and the underlying appeal to the financial world. He debunked the narrative that Hong Kong’s unrest has hurt its financial market but believes that the NSL will have a much larger negative impact.

He then discussed the phenomenon of China’s 'wolf warrior diplomacy' and the decline of Beijing's political factions into irrelevance. Both of which he described as a sign of an emerging Xi Jinping dictatorship. Dr Shih ended the episode with an introduction of his upcoming book 'Coalition of the Weak,' which is about senior-level appointments in the late Mao period and what that tells us about Xi's motivation to elevate officials with narrow political networks and other weaknesses onto the national stage.

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Victor Shih is an associate professor of political economy and has published widely on the politics of Chinese banking policies, fiscal policies and exchange rates. He was the first analyst to identify the risk of massive local government debt, and is the author of “Factions and Finance in China: Elite Conflict and Inflation.” Prior to joining UC San Diego, Shih was a professor of political science at Northwestern University and former principal for The Carlyle Group. Shih is currently engaged in a study of how the coalition-formation strategies of founding leaders had a profound impact on the evolution of the Chinese Communist Party. He is also constructing a large database on biographical information of elites in China.

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The YCW Podcast is a monthly podcast series by Young China Watchers. We’re a global community of young professionals, providing a platform to discuss the most pressing issues emerging from China today. We organize events with China experts in our 10 chapters across Asia, Europe and the U.S., fostering the next generation of China thought leaders.

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Produced by Sam Colombie, with support from Johanna Costigan and Joshua Cartwright. Music: ‘We Build With Rubber Bands’, ‘Dirty Wallpaper’ by Blue Dot Sessions.

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