On October 1, China’s National Day, president Xi Jinping will have much to celebrate. The country looks starkly different from the war-torn and impoverished nation the Chinese Communist Party took leadership of seventy-five years ago when Mao Zedong stood in Tiananmen Square to declare the founding of the People’s Republic of China. It is stable, people’s material well-being has massively improved, life expectancy and literacy are on par with developed nations, and by most measures, China is the second most powerful country in the world.
The revolution has, nonetheless, failed to secure some of its most sacred aims. China’s growing wealth and power derive not from smashing American imperialism and realizing permanent revolution, as Mao had initially demanded, but by accommodating American-led capitalism and offering up its farmers as an industrial army for the world’s largest corporations. Today, the average CCP member cannot explain the theory or practice of socialism beyond gesturing to the importance of a powerful state.
But for Xi, this is hardly a problem. After all, the Chinese people are not clamoring for the abolition of capitalism. Many citizens feel a deep sense of patriotic pride as China’s corporate champions—among them Huawei, BYD, and ByteDance—unveil dazzling new commodities and conquer new markets. State and society alike, it seems, have not only accepted the collapse of the communist dream but embraced the extirpation of revolutionary excess. The revolution, however, has always been as much about national renewal as social liberation. And on the former count, the party and the public will not be so accepting of defeat.
Central for the CCP’s “great rejuvenation of the Chinese nation,” the key slogan of Xi Jinping’s rule, is harmoniously incorporating Hong Kong and Taiwan. A British colony until 1997, Hong Kong has been governed under the principle of “one country two systems,” a setup intended to allow the city to maintain its own political, legal, and economic system until 2047. Taiwan, no longer a Japanese colony, is a de facto independent country but has little official international recognition. For both, Beijing believes that political uniformity under its leadership is necessary to fully eradicate the humiliation of colonial subjugation.
The challenge, however, is that Hong Kong and Taiwan’s people have increasingly come to see Beijing as a threat—or even as a new colonizer. In 2014 students and civic groups with the Sunflower Movement occupied the legislature in Taiwan to protest a free trade bill with China that many feared would undermine their sovereignty. That same year, tens of thousands occupied multiple sites in Hong Kong to demand the universal suffrage that had been promised ahead of the 1997 inter-imperial transfer of sovereignty from London to Beijing. In 2019, Hong Kong was rocked by generalized social revolt against a China extradition bill, which by the end of the summer had grown into an organized mass movement against police brutality and for electoral democracy. This year, amid a sharp increase of Chinese military activity around the island, Taiwan elected Lai Ching-te to the presidency, marking the third consecutive time the pro-Taiwanese sovereignty Democratic Progressive Party (DPP) has captured the office.
Why has the PRC failed to convince the Hong Kong and Taiwanese people to voluntarily join its political system? Most answers focus on the intensification of authoritarianism under Xi. Much has been made about how Hong Kong’s 2019 protests were preceded by Beijing whittling away at the foundations of the city’s autonomy, with many fearing that they would soon become “just another Chinese city.” In a 2022 article on Taiwanese identity, the New York Times interviewed a woman who explained her shift in sentiments by referencing events within China: “After Xi Jinping took office, he oversaw the regression of democracy. . . . [after Xi abolished term limits in 2018] I felt then that unification would be impossible.” And nearly all analyses of DPP candidate Tsai Ing-wen’s 2020 campaign noted that she was bolstered by images of police brutality in Hong Kong. The picture that emerges from these accounts is a black-and-white one of freedom versus authoritarianism: for the citizens of Hong Kong and Taiwan, the prospect of merging with China was a threat to the rights they had long struggled for, and they decided to resist on the streets and at the ballot box.
This narrative is factually correct, and indeed reflects the experience of many citizens since the 2010s. Look back ten more years, though, and the story becomes more complicated. For a time in the 2000s, there was growing goodwill in Taiwan and Hong Kong toward China, and Beijing was initially tolerant of greater political autonomy. By leaving out this history, mainstream narratives obscure the deeper forces that produced the current violent conjuncture: first, the goodwill in Hong Kong and Taiwan brought on by neoliberalism’s rising tides and later, the socioeconomic stagnation of their workers and youth brought about by its falling ones. China’s embrace of the market opened possibilities for overcoming historical enmities. But it also generated social stresses the state has found impossible to absorb peacefully.
Accelerated by China’s entry into the World Trade Organization in 2001, global corporations increasingly abandoned unionized manufacturing jobs in the North for cheaper and more pliable workers in the PRC. The “China Shock,” as it came to be known, had a huge impact on established patterns of working-class life in the United States, eliminating good jobs in the industrial heartland while creating new, highly compensated positions for college-educated people in coastal areas. Images of shuttered factories and Chinese firms undercutting American jobs became the symbolic foundations of Trumpism.
But the shock of China’s incorporation into capitalism hit earliest—and hardest—on its own doorstep. Starting in the 1950s, Hong Kong’s economy rapidly shifted from its traditional role as an entrepot for Chinese trade to a focus on export-oriented manufacturing. Although the British colony continued to buy food and water from China, its economy was organized around producing garments, electronics, plastics, and other small commodities for sale in the developed economies of the West and Japan. Unions remained weak and labor protections nearly nonexistent under colonial rule, but manufacturing allowed large swathes of Hong Kong’s population to escape poverty.
By the 1980s, business costs had gone up due to increased wages and Hong Kong’s limited land supply. As a result, the city’s manufacturers began looking to greener pastures to the north. It was a dramatic historical reversal: the core of Hong Kong’s manufacturing capitalist class had fled from Shanghai and other locales in China just a generation earlier to escape impending Communist rule. Now, those very Communists were welcoming the old exploiting class back home, offering up a seemingly limitless supply of available proletarians and expansive land.
The impact on Hong Kong’s industrial working class was swift and devastating. In the early 1980s there were nearly one million workers in manufacturing, making up 48 percent of the workforce. By 2000 those numbers had collapsed to 200,000, and today only two percent work in manufacture. Meanwhile, the city, already suffering from dangerously high inequality in 1981, became what is now one of the world’s most unequal societies.
One might expect that this shock would generate anti-China hostility. It did not. When they were left in the lurch, workers expressed justified anger at their former employers. The familiar American discourse of Chinese people stealing jobs did not gain traction in Hong Kong, even within its prodemocracy, independent labor movement that maintained great suspicion toward Beijing’s politics.
Instead, Hong Kongers increasingly embraced China. Although many had been apprehensive about the 1997 handover to PRC rule, by the 2000s people were increasingly at ease with their newfound niche as the premier financial center within the emerging superpower. Survey data shows that while the city’s residents felt greater affinity with being a “Hong Konger” than “Chinese” in the 1990s, in the 2000s, the gap closed and at times, preferences even flipped. In 2007, nearly 60 percent of survey respondents said they trusted the central government.
That trust was not unfounded. At the time, the Chinese state was becoming more tolerant of dissent. In 2003, the government backtracked on the Article 23 antisubversion legislation after hundreds of thousands took to the streets against it. Beijing also took a relaxed approach to civil society and the media, as freedom of assembly and speech continued to be upheld.
For many, times were good. True, Hong Kong’s old industrial working class was being cast aside. But their children were to be integrated into an expanding higher education system and given the skills to work in the city’s command centers of finance, marketing, logistics, law, and accounting. This new generation would reap the benefits of Hong Kong’s strategic nexus between the West and China, while China’s anonymous millions would continue sweating away in the factories Hong Kongers had once inhabited.
This rapid expansion of China’s economy helped Hong Kong back on its feet after the 1997 Asian financial crisis and the 2003 SARS outbreak. By the mid-2000s, the city was booming again, and unemployment was low. In 2003, Hong Kong and Beijing finalized the Closer Economic Partnership Arrangement, a free trade deal between the two economies. While Hong Kong’s trade with the United States, its second-largest partner, flatlined, trade with China increased by nearly 150 percent. Enough of the wealth being extracted from China’s workers was up for grabs in the money booths of Hong Kong’s financial district to keep people content.
But beneath the gauzy stock market returns, skyscraper construction, and ever-expanding luxury stores, a grimmer social reality was taking shape. Good jobs were growing scarcer—especially after the 2008 economic crisis—and Hong Kong’s manufacturers who had relocated to China were increasingly squeezed by rising wages. A growing share of white-collar employment in the city was going to people from the mainland, many of whom were adorned with degrees from elite anglophone universities. Most employment growth was in the service industries—tourism, retail, and food and beverage—as the city encouraged visits from the swelling ranks of China’s wealthy. Hong Kong’s youth faced a labor market overwhelmingly stocked with menial, poorly paid jobs.
The housing crisis compounded the situation still further. Owners of wealth in China have few good outlets for their investments, and many chose to park their money in real estate. Given its proximity and strong private property protections, Hong Kong became a preferred destination for real estate speculation. Over the 2000s and 2010s, the cost of housing in Hong Kong spiraled uncontrollably, and it came to be the most expensive place in the world.
If in the 2000s Hong Kongers could imagine a future in which they lived in the wealthiest, most cosmopolitan, and most liberal metropolis of the world’s preeminent superpower, by the 2010s the city’s youth were facing a very different reality: cutthroat competition in the labor market and the prospect of living in their parents’ shoebox apartment indefinitely. Although civil liberties were still in place, the city’s political reforms had stalled, and the state was proving unresponsive to all manner of social demands. The older generation of prodemocracy activists had continued to engage the system, but with little to show for their efforts.
In 2014, that cautious approach was superseded by a generation willing to risk much more. Thus commenced the most dramatic five-year cycle of revolt witnessed in the city’s history. Hong Kongers were shocked by increasing police brutality including indiscriminate use of tear gas and pepper spray and beatings of nonviolent protestors and onlookers. By February 2020, this violence and the government’s intransigence in its face caused Hong Kongers’ support of Beijing to collapse, with less than 20 percent reporting that they trusted the central government. The government understood then that persuasion was no longer an option, and resorted to the liquidation of the opposition and civil society. Since 2020, opposition political parties, trade unions, and media outlets that held critical views of Beijing have disbanded en masse.
Unlike Hong Kong’s experience, industrial relocation from Taiwan to China would not be nearly so smooth. In the mid-1980s Taiwan was still ruled by Chiang Kai-shek’s son, Chiang Ching-kuo. Although military tensions between it and China were at a lull, the two countries had no official communication, no direct transportation or trade, and no legal mechanisms for adjudicating commercial disputes. Capital and people alike wishing to travel from Taiwan to China had to pass through a third jurisdiction, usually Hong Kong. When Ching-kuo brought an end to martial law in 1987, capitalists were emboldened to cross the strait, following the enterprises that had entered China in a legal gray zone during the mid-1980s. From then on, China’s lax regulatory environment, low costs, lack of unions, and common language made it the preferred destination by far for Taiwanese capital.
With the end of martial law, workers had just won the right to form independent unions, even though they were restricted to single enterprises and were severely strained for resources. And by the late 1980s, sporadic struggles against factory closure and relocation became relatively common, although it was not until factory closures ramped up in the 1990s that broader-based mobilization emerged. The most notable of these formations was The National Front for Closed Factory Workers, which was able to pressure the government to subsidize them for their unpaid wages and pensions (although many of the unscrupulous bosses who had stolen their wages escaped legal repercussions).
Like in Hong Kong, workers and their organizations expressed fury at their duplicitous employers and their enablers in government, not at China. Despite the fact that one might plausibly expect anti-China sentiment at this time—the PRC had repeatedly shot missiles toward the island in 1995 and 1996 in a failed bid to intimidate voters ahead of their first democratic presidential election—workers who had just had their livelihoods destroyed were clear-eyed that Chinese workers were not to blame.
Instead, the structural conditions of the twenty-first century brought Taiwan inexorably closer to China. In the 2000 election, pro-independence Chen Shui-bian’s DPP captured power from the Kuomintang (KMT) for the first time in Taiwanese history. Having won less than 40 percent of the vote in the three-way contest, Chen felt pressure to respond to industry’s main demand of gaining better access to China, making “actively open up and manage effectively” a key slogan of his presidency. And open up he did: his eight years in office resulted in China going from being a bit player in Taiwan’s trade (ranking below Singapore) to becoming far and away its biggest trade partner. By the end of his term in 2008, investment bound for China had more than tripled as the PRC came to absorb 70 percent of Taiwan’s overseas investments.
Access to China’s favorable environment supercharged corporate Taiwan. The best-known example is Foxconn, a relatively small manufacturer in 1988 whose fortunes would shift dramatically when it began to invest across the strait, employing 1.2 million workers in China in 2012. Its then-CEO Terry Gou became the richest person in Taiwan, and by 2023 his company was ranked twenty-seventh on the Fortunate Global 500. Countless other Taiwanese corporations such as Pou Chen, the world’s largest footwear manufacturer, and Taiwan Semiconductor Manufacturing Corporation, have benefitted immensely from access to China’s land, workers, and consumers.
Throughout the 2000s, Taiwanese attitudes toward China—and Chinese identity—softened. Chineseness has long been a contentious issue in Taiwan, due in large part to the influx of mainlanders in the late 1940s and the KMT’s brutal rule on the island. For several decades, fewer and fewer people living in Taiwan have identified as Chinese, with young people more likely to identify as only Taiwanese. Nonetheless, surveys from the heyday of the China boom in the early-mid 2000s show that while those choosing only “Chinese” as their identity continued to decline, the share of respondents choosing “Both Taiwanese and Chinese” stayed steady. At a minimum, many were willing to consider a kind of hybrid identity, if not a hybrid polity.
Ma Ying-jeou’s resounding presidential victory in 2008 that brought the KMT back to power was the clearest sign of this growing openness. Ma had campaigned on enhanced ties with China, and his vice-presidential running mate, Vincent Siew, had long been associated with advocating for the “One China Market” (later revised to the less controversial “Cross-Strait Common Market”). In the heyday of neoliberalism, putting aside politics to get rich had become common sense on both sides of the strait.
That spirit of pragmatism would soon end. The 2008 economic crisis and subsequent slowing growth in China hit Taiwanese businesses—which are concentrated in export-oriented and wage-sensitive sectors of the manufacturing economy—particularly hard. As demand from wealthy countries slowed and the end of China’s rural surplus labor drove up the cost of labor, these firms were squeezed, with many decamping for Southeast Asia. The hundreds of thousands of “taigan”—Taiwanese workers who had sought employment in China—also faced more labor market competition from an increasingly skilled domestic workforce.
Back in Taiwan, the benefits of economic integration were coming under greater scrutiny as class divides continued to sharpen. While many of the island’s companies had boomed, the labor market was becoming segmented for young people, with intense competition for a relatively small number of jobs in the high-performing tech sector. Although famous semiconductor companies like TSMC and UMC paid their engineers relatively well, most Taiwanese youth, like their counterparts in Hong Kong, would be relegated to unglamorous service sector work. Wages stagnated badly; the minimum wage nearly flatlined.
Although President Ma was reelected in 2012, his margin of victory was far narrower than in 2008. Suspicion was growing over the Economic Cooperation Framework Agreement (ECFA), a trade agreement between China and Taiwan that Ma’s challenger (and future president) Tsai Ing-wen had hammered him on during the election. But with China hoping to win over the Taiwanese public by offering favorable trade conditions, Ma pushed forward an ECFA sub-agreement known as the Cross Strait Service Trade Agreement.
By then, however, the common sense of separating trade from politics was no longer tenable. Led by a group of militant youth and supported by a coalition of human rights organizations, government watchdogs, and labor groups (among others), 2014’s Sunflower Movement rejected free trade with China and focused outrage on the “black box” political tactics employed by the KMT to avoid public scrutiny. Opposing free trade or neoliberalism in general was not a central current of the movement; rather, Taiwan’s young people feared that free trade specifically with China would threaten their democratic rights which had been arduously wrested from dictatorship just a generation prior. The movement had widespread support, including from the DPP and its presidential candidate, Tsai Ing-wen. In the 2016 election, Tsai trounced her opponents, receiving over 25 percent more of the vote than the runner-up, Eric Chu. Since then, the pro-China camp has failed to recapture the presidency.
The neoliberal moment and China’s sustained economic expansion had made it appear as if peaceful coexistence, perhaps with gradual social and even political integration, was not out of the question. But successive DPP governments and the increasingly negative views of China indicate a major shift. Taiwanese investment in China peaked in 2010 and declined thereafter. Taiwan now sends more investment to Southeast Asia than to China. In contrast to 2000, when Chen Shui-bian had little choice but to manage the outflow of capital to China, the structural conditions today are pushing in a remarkably different direction. China will remain an important trade partner for Taiwan, but the two economies have not become sutured.
Nor, of course, have the two governments. By 2019, even pro-China KMT presidential candidate Han Kuo-yu responded “over my dead body” when asked if he would accept a Hong Kong-inspired “one country two systems” arrangement with Beijing. Following Hong Kong’s violent crushing of dissent that summer, proposing closer ties with Beijing had become increasingly fraught. Since then, China has resorted to militarization of the strait, with airspace incursions and frequent full-scale military drills. Beijing is increasingly open to risking a mutually and globally destructive war to fulfill its revanchist destiny.
China has become markedly more repressive internally as well as externally over the past fifteen years. This has led many observers to puzzle over how the country could be so politically regressive even while experiencing such massive socioeconomic changes. Why was China becoming more autocratic toward its society, they wondered, at the same time as it was opening up its markets? The answer was right under their noses: it is not despite but because of these social and economic changes that China became more authoritarian. If, as many have argued, the social dissolution wrought by neoliberal capitalism has revitalized fascism in the West, it has been similarly important in the rise of ethnonationalist dictatorship in China.
Marketization produced growing social unrest among minorities, workers, and dispossessed farmers, which in turn reinforced the drive to enhance state repressive capacity years before Xi came to power. This political regression is thrown into sharper relief when viewed from the perspective of Hong Kong and Taiwan. The long boom created the possibility of PRC-centered hegemony, with many Hong Kongers and Taiwanese willingly drawn to Beijing’s national project. But after 2008 that ephemeral moment was dissipated by a cycle of growing inequality, stagnating economic opportunity, resistance, and repression. Beijing had implicitly proposed that Hong Kong and Taiwan could enjoy prosperity in exchange for sacrificing political autonomy. As that prosperity became increasingly illusory, fewer were willing to make the tradeoff.
Distinct political trajectories emerged out of this conjuncture in each place. Youth movements in Taiwan were channeled into a durable electoral constituency for the DPP, who, enjoying structural tailwinds, has prioritized redirecting the country’s economic relations away from China. Social revolt in Hong Kong could not find expression in a political system already captured by Beijing, so police violence and eradication of the opposition was the result. And within China itself, the state found renewed motivation to continue to develop ferocious surveillance and repressive capacity—only reinforcing the view of those in Hong Kong and Taiwan that the CCP will crush their democratic rights as soon as possible. A political system denuded of any aspirations toward participatory politics, material equality, or cultural self-determination could not contain the social contradictions generated by the neoliberal boom. The PRC may one day capture all its desired land, but it has already lost those societies.
The CCP of the early and mid-twentieth century made anticolonial and anticapitalist appeals to their compatriots in Hong Kong and Taiwan, societies that had suffered racially stratified exploitation under British and Japanese rule, promising them economic and political liberation. But under Deng Xiaoping and Xi alike, the latter was not only demoted but fully excised from the state’s agenda in service of building national wealth and power via the market. This shift shaped Beijing’s approach to Hong Kong and Taiwan accordingly, as it tried to divert economic opportunities to them in exchange for political submission. For a moment, that outcome seemed within grasp. But the market, as the CCP knows, is a fickle tool.
Independent and nonprofit, Boston Review relies on reader funding. To support work like this, please donate here.
