Download China and Hong Kong - Faculty Directory | Berkeley-Haas

China and Hong Kong
Game Theory in a One Country, Two Systems Policy
Morgan’s Money Grabbers
Miran Ahmad | Somit Guha | Kurt Sheline | Hiu Yu
Fast Facts
Hong Kong (HK)
➔
➔
➔
➔
Ethnic Groups
◆ 94% Chinese
Population
◆ 7.2 million
GDP (nominal)
◆ $303 billion
◆ Per Capita: $41,000
Economic Activity
◆ Services: 59.7%
◆ Trade: 26.4%
◆ Industry/Other: 13.9%
➔ Stock Exchange
◆ Hang Seng: 6th
China
➔
➔
➔
➔
➔
Ethnic Groups
◆ 99.9% Chinese
Population
◆ 1,400 million
GDP (nominal)
◆ $9,500 billion
◆ Per Capita: $7,000
Economic Activity
◆ Services: 46.1%
◆ Industry: 43.9%
◆ Agriculture: 10.0%
Stock Exchange
◆ Shanghai: 7th
◆ Shenzhen: 11th
HK % of China
0.5%
3.2%
78.5%
“One Country, Two Systems”
Chapter 1, Article 5 - Hong Kong’s constitutional document following reunification with China in 1997:
“China’s socialist system and policies shall not be practised in the Hong Kong Special Administrative Region
(SAR), and the previous capitalist system and way of life shall remain unchanged for 50 years”
Following reunification Hong Kong is responsible for its own domestic affairs including:
●
Maintaining its own currency and responsible for independent monetary and financial
policies
●
Implemented through the Basic Law of Hong Kong. A high degree of autonomy with
executive, legislative and independent judicial power
●
Formulate own policies on education, culture, sports and social welfare
China will hold control over Hong Kong’s Foreign Affairs and provide the country with defense services
Civil Disobedience History
1842 - China
cedes HK to
Britain following
First Opium War
1898 - China leases
HK to Britain for 99
years.
1984 - Britain and
China sign "one
country, two
systems" formula.
1992 – Britain announces
proposals for democratic
reform in HK. China is
outraged.
1997 - Hong Kong is
handed back to the
Chinese.
1998 - First posthandover elections
held.
1989 – Tiananmen Square
protests in 400 Chinese cities.
7 months of martial law.
2001 - Deputy CE
Anson Chan, resigns
under pressure from
Beijing.
2002 – Article 23
Pro-democracy
protests. 500,000
protest.
2004 - China rules
that its approval must
be sought for any
changes to Hong
Kong's election laws.
200,000 protest.
2007 – July 1
protests.
58,000. Beijing
says it will
allow HK to
elect own
leader in 2017.
2011 – July 1
protests. 218,000
protest.
2011 – Pro-democracy
protests in China
across 13 cities.
2009 – Tiananmen
Square 20th
anniversary
protests.
2013 – July
1 protests.
430,000
protest.
2014 - Chinese government
rules out a fully democratic
election for Hong Kong
leader in 2017. 500,000
protest.
Chinese Gov.
HK
Protesters
Competitor Analysis (Isolated)
Assumptions
Strategy
Goals
Capabilities
ShortTerm
Negotiations
possible
Non-violent demonstrations, scale,
solidarity
Social media
Negotiations
Protests
Long-Term
Give up
Non-violent/violent demonstrations
Social media
Universal
Suffrage
Scale
Tech savvy
ShortTerm
PRC want increased
influence in HK,
Status quo
Containment via police
Stop protests
Police,
political
Long-Term
Communism in HK
Fear democratic
uprising in PRC
Negotiations
Containment via police/other means
(e.g.triads)
Political and
economic
stability
Military, 3rd party
groups,
censorship,
technology
Initial Ordinal Payoffs
(2) HK: Protests to gain universal suffrage
(1) HK: Spreads message to gain universal
suffrage
(3) PRC: Crackdown on HK will affect economy
and reputation of HK
Protesters
PRC
(2) PRC: Crackdown on HK will affect economy
and reputation, but assume it will end soon
Fight
Not
Fight
Fight
the law
2,3
1,2
Not
Fight
3,4
4,1
(3) HK: Do not want status quo, but this helps to
spread their message
(4) PRC: Crackdown on HK if there are no protests
will have a major effect on the business and
reputation of HK Government
(4) HK: Status quo is unacceptable
(1) PRC: Happy with the status quo
Refining the Game
Hong Kong Protesters
1
Loss Aversion
Chinese Government
1
Already have certain freedoms and they are
averse to having them taken away
2
Commitment
Overconfidence Bias
The Chinese Central Government did not expect
the protests to continue very long
2
The protestors have already committed to
continue the protests
National Security
Continued social and traditional media
censorship
3
Hindsight Bias
Expect HK protesters to behave like both
mainland and HK protesters have in the past
LOCAL
GLOBAL
Chinese Gov.
HK Protesters
Competitor Analysis (Global)
Assumptions
Strategy
Goals
Capabilities
ShortTerm
Negotiations
possible
Non-violent demonstrations,
scale, solidarity
Social media
Negotiations
Protests
LongTerm
Give up
Non-violent/violent
demonstrations
Social media
Universal Suffrage
Scale
Tech savvy
ShortTerm
Increased
influence, Status
quo
Containment via police
Stop protests
Police,
political
LongTerm
Communism in
HK
Fear democratic
uprising in PRC
Negotiations
Containment via police/other
means (e.g.triads)
More to lose, more willing to
fight
Political and Economic stability
Shanghai as financial hub
RMB as world’s reserve
currency
International reputation
Internal security
Military, 3rd party
groups,
censorship,
technology
Refined Ordinal Payoffs
(2) HK: Protests to gain universal suffrage
(1) HK: Fighting w/o response spreads
message
(2) PRC: National security risk of allowing
protests to continue outweigh reputation
Protesters
PRC
(3) PRC: Reputation + risk of spreading
makes not fighting harder to justify
Fight
Not
Fight
Fight
the law
2,2
1,3
Not
Fight
3,4
4,1
(3) HK: Doesn’t want status quo, wants universal
suffrage
(4) PRC: Crackdown on HK if there are no protests
will affect business and reputation of HK
(4) HK: Status quo is unacceptable
(1) PRC: Happy with the status quo
Game Theory - Recap
(Original)
Fight
Not
Fight
Fight
the law
2,3
1,2
Not
Fight
3,4
4,1
Dominance
Hong Kong protestors have a dominant strategy in fighting proposed
legislation regardless of whether we view the situation as and isolated
game (Original) or as a global game (Refined).
Same Game?
Both competitors understand they are playing an “I Go You Go Game”
but have different payoffs because…
(Refined)
Fight
Not
Fight
Fight
the law
2,2
1,3
Not
Fight
3,4
4,1
●
●
Playing a one-shot, isolated
game
Dominant Strategy
●
Playing a repeated game,
with a global focus
Changing the Game
Hong Kong Protesters
Raising the Stakes
1
Chinese Government
1
Using non-state actors to punish HK
protesters without official sanction
Financially: Sustained disruption of
$$$
Hong Kong’s economic activity
Socially: Continued use of social and
traditional media to portray struggle
2
Partnerships with corporations that would
leave HK if it became more like China
Appearing Irrational
Use or threatening use of excessive
force or enforcing massive martial law
Demonstrating the ‘Value of Commitment’
2
Avoiding Detectability
3
Limiting Protesters Potential Moves
Censorship, hampering communication
HK protesters committing to further
strikes in advance
Fight On?
Fight
Not
Fight
Fight
the law
2,2
1,3
Not
Fight
3,4
4,1
Fight / Fight is
unsustainable in the
long-term
Betrayal
Nice
Cooperation
Fight
Forgiveness
Solution? Explore new ways to cooperate, coordinate or
compromise.
For Example: Allow Hong Kong citizens to pick
and elect their own candidates but establish PRC
Senior Advisor to HK Chief Executive
Summary
Game
Theory
● Evaluation from an isolated to a global game, likely equilibria and
options how participants can change the game
Behavioral
Analysis
Competitor Analysis
Data
● Overview of potential biases effecting behaviors and how they
may impact the game
● Detailed competitor analysis and how parties view one another’s
capabilities and strategies in the short and long run
● Summarized the Hong Kong landscape and its past and current
relationship with China