HK market finds hope in Xi Jinping’s tea leaves

China’s leaders recognise the importance of symbolism. Decisions such as the positioning of officials at public events, even the order in which names are read out on news bulletins, delineate relative power relationships. Those who can interpret the arcane signals of communist protocol have built careers out of it. The discipline even has a name: tea-leaf reading.
In this light, the postponement of Hong Kong Chief Executive Carrie Lam’s annual policy address looks anything but a random scheduling clash. Lam cancelled the city’s equivalent of the US State of the Union to attend festivities with China’s President Xi Jinping for the 40th anniversary of the Shenzhen special economic zone. The chief executive said she now aims to deliver the speech by late November, after travelling to
Beijing to brief Communist Party officials on her plans.
Chinese officials had to know how this would look. Whatever Lam’s protestations, it has the appearance of a calculated act. The impression it leaves is of an obedient provincial leader abandoning the most important day in her calendar — an occasion when she speaks directly and uninterrupted to the city’s people for hours — after being summoned by her bosses. After all, the Shenzhen
celebration is hardly a spur-of-the-moment event: The 40th anniversary has been coming for, well,
40 years. Why did Lam’s cancellation arrive only two days before her address?
The presumption must be that the Beijing government is sending a message. This can be summarised as: Hong Kong is subordinate to the central government, and the autonomy bestowed by the “One Country, Two Systems” framework under which the former British colony returned to Chinese sovereignty in 1997 exists only by permission of Beijing. China has been advancing this argument since the publication of a white paper on Hong Kong in 2014; the policy acquired a visceral level of reality for the city’s people after the passing of a national security law at the end of June this year.
The significance of the Shenzhen event doesn’t end here, though. Big things may be afoot just across the border. State media have billed Xi’s address in the city on Wednesday as an “important” speech. Communist Party leaders gather later this month for a meeting that will set economic strategy for the coming five years, and the Greater Bay Area — a plan to knit together nine mainland cities with Hong Kong and Macau into a regional powerhouse — may have a key role.
China has issued a pilot reform plan to build Shenzhen into a “demonstration area of socialism with Chinese characteristics,” the state-run Xinhua news agency
reported. The country will push forward cooperation between Shenzhen and Hong Kong to a higher level, it said.
The Greater Bay Area may appear quixotic; it hasn’t been explained how Shenzhen and the other mainland cities can deepen integration with an economy as different as Hong Kong’s, which maintains its own customs controls, currency and legal system. But it may be premature to dismiss the fanfare out of hand. Hong Kong’s Hang Seng Index rose the most in more than two months, buoyed by hopes of what Xi may say in Shenzhen.
There are two reasons to expect some largesse to flow Hong Kong’s way. For one thing, the Communist Party likes to use the carrot as well as the stick. Hong Kong has had little but stick for the past three months.

—Bloomberg