Hong Kong: China long depended on Hong Kong to be everything it was not. The city's freewheeling capitalism and personal freedoms, both absent from the mainland, made it one of the world's premier financial hubs. Together, they flourished for decades.
Now China is doing what was once unthinkable: Imposing its will on Hong Kong in a way that could permanently damage the former British colony economically and politically. In pushing for a new national security law that many fear will curtail the city's liberties, the Chinese Communist Party is calculating that control and stability outweigh the benefits the city has long provided.
Other countries are threatening to retaliate in ways that could leave Hong Kong a shadow of its former self. The United States has vowed to end the special economic treatment it has long granted the territory. Britain has said it could open its doors to three million Hong Kongers, laying the groundwork for a severe brain drain.
But Beijing sees its position as strong while the rest of the world is divided and still recovering from the coronavirus pandemic. The United States will hurt itself more by coming down hard against Hong Kong, officials believe. Hong Kong's protest movement, at least for the moment, seems demoralised.
And when it comes to the global economy, the Communist Party is wagering that the world needs China, with or without Hong Kong. The response of the business community has been muted so far. Even if it protested, business has always come back to China, whether in the wake of the 1989 Tiananmen Square crackdown or the British handover of Hong Kong back to China in 1997.
"There will be some unhappy people for some time," said John L Thornton, a former president of Goldman Sachs who has long-standing ties with China's leadership. "But the drum rolls, the dogs bark, and the caravan moves on. That's the political judgment. They have had a fair amount of empirical evidence that the concerns will disappear."
On Wednesday, HSBC said Peter Wong, its Asia-Pacific chief, had signed a petition supporting the national security law.
Unquestionably, Hong Kong has declined in importance to China as the mainland economy has surged. In 1997, Hong Kong's economic output was nearly one-fifth the mainland's, making it a necessary growth engine for Beijing. Deng Xiaoping, then China's top leader, had agreed to allow Hong Kong to keep its business and personal freedoms for decades to come, saying years earlier that "there was no other possible solution."
Today, Hong Kong's output is less than three percent of the mainland's. While investors still prize Hong Kong's rule of law, low taxes and transparent business environment, they have grown more accustomed to doing business in mainland cities like Shanghai, where the stock market is bigger than Hong Kong's by value.
Nevertheless, Washington believes Hong Kong is still too valuable for China to jeopardise.
President Donald Trump said last week that he would strip Hong Kong of the special status granted to it by Washington. Depending on what he does, it could subject Hong Kong to the same tariffs and trade restrictions imposed on mainland China.
If the United States wants to raise the stakes sharply, it could harness one of its major strengths: Its vital role over the global financial system.
China relies heavily on Hong Kong's unlimited access to US dollars, the world's de facto currency. China tightly limits the amount of its currency that flows past its borders, making the Chinese renminbi less useful in making global payments and loans, striking deals or participating in international finance. About three-quarters of all renminbi payments flow through Hong Kong, according to data from the Society for Worldwide Interbank Financial Telecommunication, a network that facilitates global financial transactions.
US retaliation may be enough to get many businesses to leave. In a survey released on Wednesday by the American Chamber of Commerce in Hong Kong, more than one-quarter of companies questioned said they were considering moving elsewhere.
Individuals may leave, too. The British government, which says the national security law violates the handover agreement, said it would offer a path to citizenship to nearly three million Hong Kong residents " almost half the city's population " if China proceeded.
"This would amount to one of the biggest changes in our visa system in British history," Britain's prime minister, Boris Johnson, wrote in an opinion piece in the South China Morning Post, a Hong Kong newspaper, on Wednesday. "If it proves necessary, the British government will take this step and take it willingly."
Firms that help Hong Kong residents apply for British visas have seen a surge in interest. One firm, British Connections, said 120 people had applied for British travel documents between May 22 and 31 May, up from 67 in the same period last year.
Hong Kong residents have also explored other options, including Canada, Australia and Ireland. Those departures could deprive the city of talent and embarrass Beijing to boot, which is perhaps why China reacted furiously to Britain's announcement.
"All Chinese compatriots residing in Hong Kong are Chinese nationals," Zhao Lijian, a spokesman for China's foreign ministry, said at a news conference, adding that China could take unspecified countermeasures.
China's response has suggested Beijing is willing to sacrifice Hong Kong to get its way. Other Chinese cities, like Shanghai and Shenzhen, have pledged to make investor-friendly legal and financial changes to fight for Hong Kong's business. The resort island of Hainan has promised to turn itself into a free trade port like Hong Kong.
More broadly, China sees the risk as limited.
In the face of Trump's threat, for example, China is calculating that he is bluffing. US business interests in Hong Kong are extensive. If the White House takes the more drastic route of limiting Hong Kong's access to US dollars, Chinese banks have other ways to maintain access to the global financial system, said Victor Shih, an expert on the Chinese financial system at the University of California, San Diego.
China also holds more than $1 trillion in US Treasury bills, which accounts for more than four percent of the US' total debt. While China cannot quickly sell that debt without making major problems for itself, such a move could cause disruptions globally.
Chinese officials also believe that Hong Kong's business elite, historically a moderating force on Beijing, has been successfully persuaded or pressed to go along. Many have extensive business holdings in the mainland.
"We probably need not overinterpret it," Li Ka-shing, Hong Kong's richest man, said of the law in a statement.
Some of Hong Kong's biggest investors contend that business will continue as usual.
Weijian Shan, a major private equity investor in Hong Kong, recently wrote a memoir detailing recollections of his difficult childhood under the harsh policies of Mao Zedong. In a letter to his clients this week, he expressed little concern about Beijing's new security law for Hong Kong.
"There will not be any change in the rule of law, independent judicial system or freedom of expression," he said.
China is also acting at a time of political strength. It has contained the coronavirus within its borders, a feat few other countries have managed. The moment may have emboldened China's top leader, Xi Jinping, to take steps that his predecessors dared not.
Other rivals have been weakened. Trump is struggling to pass the blame for US missteps in dealing with the outbreak and is increasingly consumed with unrest at home.
Other Western democracies, historically allies of the pro-democracy movement in Hong Kong, are preoccupied with their own crises. The United States, with its steady retreat from global leadership under Trump, is in no position to rally them, say supporters of both the protesters and Beijing.
"'We expect foreign condemnation for everything we do' basically is their attitude," said Andrew Nathan, a professor of political science at Columbia University. "'You guys can bark all you want, but you can't bite, so what do we care?'"
Beijing's gamble has already yielded gains in one key arena: Suppressing the protests that inspired it to act in the first place. While some protesters have vowed an even more determined fight against the new security push, others acknowledged that the movement was fractured, tired and pessimistic.
Peaceful mass protests have been barred by laws aimed at containing the coronavirus. Those who join anyway are arrested en masse by an increasingly aggressive police force. Many of the front-line protesters who clashed, often violently, with police have fled Hong Kong or have been arrested.
A few activists have clung to hope that China still needs and wants the world's approval.
"If the rest of the world doesn't trust China at all, they would have to gang up against China. Is this a way forward for China and for Xi Jinping?" Martin Lee, a prominent veteran democracy supporter, said. "We have to persuade them that it is ultimately and eminently in the interest of China that they win the confidence of the rest of the world."
It is not clear that Beijing agrees. Lee, 81, who is sometimes called the "Father of Democracy" in Hong Kong, was arrested in April for his participation in protests last year.
Alexandra Stevenson and Vivian Wang c.2020 The New York Times Company