HONG KONG’s status as a British colony ended in 1997, when China regained sovereignty over the territory. Since then, Beijing has exercised its rule over Hong Kong through a special arrangement known as “one country, two systems,” providing autonomy to Hong Kong, which is allowed its own currency and its own administrative and legal systems.

       The problem is that Hong Kong itself is a deeply divided society. Local Hong Kong politics is often described as a contest between the blue and yellow forces. On the blue side are the conservative, pro-Establishment forces, a growing number of whom are people disillusioned by the West because of what they see as its growing bias against China and the Chinese.

       Across the divide is the other Hong Kong, consisting of people who identify with what they perceive to be Western values, with some retaining an emotional bond with the territory’s British heritage and wishing for more separation for Hong Kong from the mainland.

       This situation is all wrong. Dug into their trenches, both sides are missing the key point about Hong Kong. This is that from here on, there are only two directions left for Hong Kong to travel.

       The first direction will see Hong Kong people continuing to rule Hong Kong to a large extent. Cantonese remains as the main language, and the territory retains its distinctive culture and systems, thus maintaining the local way of life.

       If however Hong Kong ends up heading towards the second direction, its identity will become blurred. Putonghua will increasingly displace Cantonese as the key language, as has happened already in Shanghai and Shenzhen, and the behavior of local society will increasingly resemble that on the mainland, as Beijing’s influence becomes deep rooted.

       In other words, “One Country, Two Systems,” which is what Direction One is all about, will become “One Country, One-and-a-Half Systems,” which is how Direction Two is going to be.

       Obviously, the first path is much better for Hong Kong. The central government itself wants “one country, two systems” to succeed, as Hong Kong is more valuable to China as a showcase city that connects the mainland with the rest of the world. And successful autonomy for Hong Kong could also improve China’s ability to settle the Taiwan issue.

       So why is there a growing risk that Hong Kong will end up going in the second direction? To a significant degree, both the blue and yellow camps must take responsibility.

       The street violence of 2019, in which some protestors waved United States and British flags, forced the central government to ask whether Hong Kong might abuse its freedoms. Beijing’s clearly stated position was that Hong Kong is part of China, and cannot be separated or used as a base to subvert the rest of the nation. So Beijing had to rush through the National Security Law, which helped to restore stability but also pushed the territory closer to Direction Two. The trust deficit also caused Beijing to review some civil liberties, such as the content of local school books.

       When will the yellow camp learn that politics is the art of the possible? It is unrealistic for Hong Kongers to challenge today’s powerful and confident China on such fundamental issues as subversion and separatism; even during the 1980s, when the country was much weaker, Britain could not push China to accept anything short of a return of Hong Kong to Chinese sovereignty.

       Playing hard ball makes even less sense since central government policy was to use a light touch in Hong Kong affairs, preferring largely to let Hong Kong people rule Hong Kong. Fundamental issues of life, liberty and dignity were not at stake for Hong Kong people.

       In hindsight, widespread frustration in Hong Kong society, caused by unaffordable housing and other livelihood issues, were channeled into an unreasoning blame game that targeted the People’s Republic of China. It is only fair to point out that these social and economic ills were not caused by Beijing but by Hong Kong’s own system of extreme capitalism.

       Here is where the blue camp must be held accountable. The conservatives -- in politics, business, the civil service and the professions – simply lack the courage and vision to push for changes.

       Hong Kong’s laissez faire system, focused on a blind pursuit of corporate profits, benefits a privileged few but leaves out ordinary people. As argued by this writer previously (see The Star, June 15, 2021), the system needs to evolve towards “stakeholder capitalism,” which takes responsibility for shareholders, employees, the overall community and the environment. (Such an initiative would also align Hong Kong with efforts all over the world, including mainland China, to make society more inclusive.)

       If Hong Kong doesn’t act, social tensions will stay high, so will the risk of renewed turmoil in future. Again, Beijing may intervene, for example to sort out the housing crisis. And again, such intervention would nudge the territory away from the first direction to the second.

       In other words, to stay on the first path, Hong Kong needs a refresh of its own system to make it more sustainable. If this doesn’t happen, it becomes increasingly difficult for the central government to avoid intervention because of the problem of “moral hazard.” What this means is that if Hong Kong gets into serious difficulty, Beijing is expected to come to the rescue, yet wealth creation in the territory, to a large extent, benefits only a small local elite.

       Clearly, Hong Kong’s politicians, whether blue or yellow, are a failed breed, with just a few exceptions. Their defining characteristic is a lack of situational awareness. No leader has emerged who can rally the people and create a sense of community. Achievable goals, such as universal suffrage, were allowed to wither away.

       But having said all that, history is likely to be kind to Hong Kong itself. This is because Hong Kong will remain useful to the mainland, regardless of whether it exists on the basis of One Country, Two Systems -- or One-and-a-half Systems.

       With China on track to become the world’s largest economy within this decade, Hong Kong should still have a prosperous role to play as a “connector” city. Beijing is committed to the stability and prosperity of Hong Kong, even using different assumptions.

       The question is, will the Hong Kong way survive and which language, Cantonese or Putonghua, will become the key language?

       Datuk Seri Cheah Cheng Hye is the co-chairman and co-chief investment officer of Value Partners Group, an asset management firm in Hong Kong. He also serves on the Board of Hong Kong Exchanges and Clearing Ltd as an independent non-executive director. He was previously a journalist in The Star, Far Eastern Economic Review and The Asian Wall Street Journal.