🔴 Will The Hong Kong Protests Result In Civil War? (w/ TL Tsim) | Real Vision Classics

TL Tsim: In the West, you’re used to a lot
of mass media information. In the case of China, although the economic
data is now readily available, the political machinations behind the scenes is something
else. I’m TL Tsim. I’m a political analyst. And my company is called TL Tsim and Associates
Limited. My background is very mixed. My first job was with the BBC External Service
in the Chinese section. We broadcast radio programs primarily for
a Chinese audience in the Far East. And then I became an administrator at the
Chinese University of Hong Kong. And then I started writing for the South China
Morning Post and the Hong Kong Economic Journal. For the Post, I wrote in English. For the Journal, I wrote in Chinese. So I started up my– well, if you could call
it a career– doing political analysis for the mass media. And then, in 1994, I started my own company
called TL Tsim and Associates. In the 1980s, just as China was opening up,
I had the great opportunity to be working for a man who was then the leading financial
guru in Hong Kong, a man called Fung King Hey. And with him, we went into China to talk about
projects, investments, and the opening up of the market and so on. And in the course of those few years, I got
to see a lot in China. And that got me interested in starting to
concentrate on the Chinese political scene. Well, the Hong Kong people’s relationship
with the motherland, the sovereign power China, is, I would say, very mixed, because on the
one hand, everybody can see the economic benefits. Hong Kong’s Hang Seng Index, for instance,
would not be where it is without the Chinese money coming in. Hong Kong’s property market would not be where
it is without the Chinese investments. And the entrepot trade, import-export trade,
the tourism– we are very dependent on China now. We have been for the last 20 years. But then the political dimension is something
else, because people in Hong Kong want to keep their way of life. And their way of life is very different from
the way of life which is in China today. For instance, we have free access to the internet,
Google. We have press freedom. We have the rule of law. We are not subject to authoritarian diktats’
instructions. We enjoy these freedoms. We always have. And we would like to keep them as they are. So there is starting to be now a lot of trepidation
about what might happen in the year 2047 because the Sino-British Joint Declaration between
Britain and China only covers 50 years from 1997. And 20 of those 50 years are now behind us. And looking forward, you’ve got a problem
with mortgages. 30-year mortgages are the norm. You’ve got a problem with the laws. The laws of Hong Kong are essentially English
laws– common law tradition, British-trained barristers, lawyers, judges, and so on, and
so forth. If, in the year 2047, we have an abrupt change
and we close the chapter on all that and we switch to Chinese laws, Chinese judges, Chinese
lawyers, that would create a real problem. So we are now in the process of looking at
this seriously. And therefore, this has created the kind of
unsettled, restless feeling among, especially, the young people of Hong Kong. Now if you believe in the polls that universities
and other organizations in Hong Kong conduct periodically, you would probably know that
the level of support among young people for the current chief executive of Hong Kong,
who is very pro-Beijing, is 4%. He has a support rate of 4% among young people. 96% of the youth in Hong Kong are against
Mr. Leung staying on. This is a very damning conclusion for people
to have reached. They probably did not realize that the problem
would arrive so soon– 30 years before the year 2047. I think they were probably caught unaware. And I think they appointed the wrong person
to be in charge at this particular moment in time, because he rather stoked the fire
and hatched the problem, as it were, when it could have laid dormant for a few more
years. Now, the problem having surfaced, Beijing
would have to deal with it. And of course, as you put it, there is the
possibility of what I call the sledgehammer approach. And the other alternative, which is the softly,
softly approach. At this point in time, we don’t know which
way it’s going to go. Of course, we’re hoping that Beijing would
talk, communicate, have a dialogue with the young politicians of Hong Kong and the not
so young politicians of Hong Kong so that something which is supported by the community
will eventually emerge. The economic situation is, until very recently,
until the Lehman Brothers debacle, China’s economy had been going very well. It averaged 9.6% GDP growth a year over the
last 25 years or 30 years. And with that sort of growth, of course, some
of that wealth would be filtering down. And if you go into any Chinese city today,
you will notice a huge difference between China now and China as it then was 30 years
ago. People’s standard of living has improved. A lot of Chinese people can now travel outside
of China and see the world, buy beautiful consumer goods. But since 2008, that
economy has been gradually losing momentum. It’s now, if you believe in official statistics,
6.7% GDP growth. That still makes China the fastest growing
economy of any size in the world today. And so it is not really a problem that China
cannot deal with. Chinese officials have said again and again
that they have the tools. They have a toolbox with a lot of possibilities
to deal with the problems at hand. So that does not really worry me. What we are looking at is, capital flight
is something that concerns a lot of people in the investment world. But when you look at it, you have to understand
that a lot of that has to do with the fact that the borrowing in US dollars had to be
repaid. If a company has taken out US dollar loans,
and if the US dollar is as strong as it is and the expectation of the RMB is that it
will go down further, of course you would want to convert now and repay your loans. So that is one reason why the RMB has been
weak and why there is capital flight out of China. The other reason is this anti-corruption campaign. It’s scared the wits out of a lot of people. And so when the opportunity is there, a lot
of the money has been coming out. I’m not saying all of it is corrupt money. I’m sure it is not. But when a country is in that sort of situation,
the smart money will want out. The third reason for capital flight is because
you have a government in Beijing now which is actually encouraging, actively promoting,
encouraging outward investment. They’re buying up the Astoria. They are investing in a lot of companies in
Europe. I don’t even have to name them. And when you do that sort of investment–
and this is all official and lawful, legal, and so on– money will be coming out of China. So for the first time, I think, last year,
foreign direct investments going into China and China outward-bound investments– leaving
China to invest in different parts of the world– they are roughly about equal. In fact, more money has been coming out than
going in. I can only quote you what Premier Li Keqiang
said. He said– and these are his exact words- – “China
will not start a currency war.” Notice he didn’t say China would not participate
in one. So if you’re a Chinese official, you must
be watching the yen, the yuan, and other currencies which will have an effect on China. And that is where we are at now. I think the G20 meetings will probably have
discussed this. I think the consensus is we shouldn’t have
a currency war because this is no good for anybody. And the Chinese will go along with that. But if you have a reversal of the trade surplus,
for instance– if you are exporting less and importing more– at some point, of course,
the RMB will go down and will continue to go down. Then you have the official from the PBOC,
the People’s Bank of China, saying the basis, in the long-term, for a continuing devaluation
of the RMB does not exist. Again, notice he said, “in the long-term.” So in the short-term, I think we’re looking
at continuing weakness of the Chinese currency. I think even Chinese people, like myself,
who just read Chinese history books and don’t really care about what happens in other parts
of the world, have probably come to the same mistaken conclusion that I did that Chinese
dynasties are super stable structures. They last a long time. And that in between two long Chinese dynasties,
you have a short period of civil war. Well, I’m sorry to disappoint my Chinese friends
and students. But this is really not the case. If you talk about the length of these dynasties,
I don’t think any of them lasted longer than the Habsburgs in Austria, who ruled for over
800 years. Chinese dynasties– the last one, called the
Qing dynasty, started in 1644 and ended in 1911. So let’s say 260 years. That’s not long compared to the Habsburgs. And the second surprise is the civil war period
in between two dynasties can be very long. It can be over 100 years, 150 years, and so
on. In fact, some people might argue that even
today, Taiwan is still outside of the Chinese orbit. It is governed by the DPP. It is not yet de facto a part of China. So that is something most Chinese people do
not understand. And it has a bearing on the way we go forward. And it is this. In spite of all of the intelligence, the learning,
and the experience of the Chinese people over 5,000 years, they have not come up with a
system of government which can deal with the effective and peaceful transfer of power. In the West, you do it through the ballot
box. So Brexit is Brexit. You accept it. But in China, the fight goes on. And eventually– eventually dynasties fall
for one of two major reasons. One, a popular uprising. Two, a fight among the generals. So it’s a coup d’etat scenario or the Spartacus
scenario. I call it Spartacus and Brutus. And that is no good for the country. My nightmare is not waking up on a Monday
morning and being told by my assistant that there was a coup d’etat in Turkey. My nightmare, because I live in Hong Kong,
is that I get told on a Monday morning that there had been a coup d’etat in Beijing and
that it was not conclusive and the two sides are fighting it out. That is my worst nightmare. I’m not concerned about popular uprisings,
although there are about 10,000 cases of peasants throwing stones at public security officers
and strikes and people gathering at traffic accidents, and then this erupted into social
disturbance. There are a lot of those incidents. Why am I not concerned? Well, first of all, the country’s gone from
300 US dollars per capita GDP to now about $7,000, or whatever it is. So it’s become very rich. The standard of living has improved. We went through all that. But more importantly, these are isolated,
localized individual incidents. It’s very easy to control these. You have 3,000 people gathering outside a
police station for two, three days. What does it matter in a country with 1.4
trillion people and spread over 9.6 million square kilometers of land? It’s peanuts. It’s not consequential. But what really concerns me and the Chinese
leaders as well– because they did study the breakup of the former Soviet Union. They went to great lengths to understand why
that happened. And they reached the same conclusion as I
did. The problem was internal. The problem arose out of disagreements within
the center of the party itself. And this is what they need to guard against. This is why you’ve seen the arrest of Bo Xilai,
the arrest of Zhou Yongkang, who was the former security czar, a member of the Politburo Standing
Committee. Then you have the arrests of the two generals,
General Xu and General Guo. Those are the players that could have toppled
a government because they are strong. They have the backing of armed forces behind
them. It’s not an incident in Guangzhou over the
sale of land or over the construction of a water treatment plant, or chemical, and so
on and so forth. Those things will not topple this government. We are in the age of nuclear warfare. Peasant uprisings are a thing of the past. The shortest dynasty of any size and power
in Chinese history was the Yuan dynasty. I think they lasted just less than 100 years. This government, this administration, the
Chinese Communist Party, came to power in 1949. And so it’s been around for 67 years. We don’t know when something like the Russian
collapse, the implosion of the former Soviet Union might take place. We don’t know whether this is going to be
the Yugoslavian model, when the country broke up into 6 or 7 parts. So to speculate on the timing of it is something
I do not do. I have no handle on this at all. I would be the first to admit I don’t know
it. But I don’t think anybody else knows it either. But it is not idle to speculate on the how–
how this is going to happen. The most likely scenario is a power struggle
over-spilling into a coup d’etat and then over-spilling into civil war. That would be the trajectory. And when that happens, I would say this. I don’t think, in Chinese history, you can
find an example of the Russian model of break-up. You know, when Gorbachev simply accepted the
fact– or Yeltsin– that Russia will be Russia, Ukraine will be Ukraine. Latvia, Lithuania, Estonia, all those will
be breaking away, and all these “stans” in the Middle East, and so on. That peaceful disintegration of what was the
former USSR is very, very unlikely to happen in China because they will fight. They would not have sat down and talked about
it and then take the decision to simply allow this to happen. This is not the Chinese model. And sadly, I think we’re not going to see
a Yugoslavian model either, because there they did have a civil war. But the civil war– the war was small, in
terms of size and scale, and didn’t last very long. That is not the Chinese model either. The Chinese model is a bitter, long-standing
civil war– very destructive, very divisive. This is the real black swan.

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