China views the fate of Hong Kong as a purely internal affair. But how its leaders resolve the ongoing confrontation on the streets of the former British colony will determine China's external reputation for years to come.
The world sees two Chinas. One represents all that is hopeful and ambitious about Asia: boundless economic growth, 1.3 billion consumers of tomorrow and Alibabas as far as the eye can see. The other reflects a repressive regime that's more bully than global stakeholder. For a week now, as the shadow of Tiananmen has hung over Hong Kong's protests, that second China has once again dominated the headlines.
Chinese President Xi Jinping may think this doesn't matter. For the past quarter-century, the Chinese Communist Party has believed it got away with its violent crackdown in 1989, when tanks rolled through Beijing. The world's horror and condemnation quickly faded, replaced by an eagerness to benefit from the mainland's 7 percent-plus growth and emerging middle class.
This narrative is delusional, however. Even China's Asian neighbors -- many of whom, like Vietnam, don't spend much time worrying about human rights -- haven't forgotten 1989. That legacy explains why China's strengthening economic relationships aren't translating into genuine soft power across the region. In one recent survey of elites in 11 Asia-Pacific nations, more than 60 percent thought China was having a negative impact on regional stability.
This has much to do with China's territorial aggressiveness, which has spread fears and riled up nationalist passions from Japan to Vietnam to India. But how China handles this latest crisis will be equally crucial to relationships with its neighbors as well as the West. If the Beijing regime shows itself to be patient, pragmatic and mature in the coming days and weeks, it would raise its global standing and soothe some of the anxieties it's been causing along its periphery. A harsh crackdown on students would only confirm what many fear: China's rise will likely destabilize all of Asia.
In this sense, China has more to lose from another Tiananmen than Hong Kong's 7 million people do. Any move by Xi to crack down on students would be carried live on BBC, CNN and networks in Taiwan, where the mainland is trying to curry favor. It would have the vast majority of Asian governments edging closer to Washington as the U.S. seeks to shore up its position in Asia.
What's more, even if the protests wind down peacefully, Xi must show that he can grapple with the widening inequality that has frustrated so many citizens in Hong Kong. The mostly middle-class demonstrators are fighting for democratic rights, but they're also aggrieved by skyrocketing living costs, a soft labor market and a widening rich-poor divide. At the very least, Hong Kong must broaden social safety nets, increase access to affordable housing and help first-time home buyers bridge the gap between the city's frothy property market and stagnant wages.
Xi faces very similar challenges on the mainland, of course, and success there will be no less critical to China's standing. Barring a massive debt crisis, China could become the largest economy on a purchasing-power-parity basis within five years. With that status comes great responsibility to the global financial system and the community of Asian nations. Will China spread its wings with finesse or wield them like blunt instruments? How Xi handles Hong Kong will say much about the kind of power his country aims to be.
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