The situation in Hong Kong today is eerily reminiscent of the days leading up to the Tiananmen Square massacre on June 3–4, 1989. In both cases, a particular cause for complaint gave rise to demonstrations that soon grew and led to wider demands for political liberty and justice.

Tiananmen started as a demonstration against inflation, which drew college students and housewives. At its height, over 1 million protesters were active in Beijing, and demonstrations in sympathy with the Tiananmen protesters appeared in over 400 Chinese cities. Tiananmen Square is immediately adjacent to the Forbidden City and the Chinese leadership compound, so the demonstrators posed a potential threat to the government itself.

Finally, hard-line Communist Party leaders ordered tanks and troops to attack the demonstrators. No one knows the exact number killed, but estimates range from the low hundreds to several thousand. The entire incident has been covered up and is never mentioned in official communications or taught in Chinese schools.

Likewise, the current Hong Kong demonstrations began on a small scale to protest a proposed law that would allow extradition of Hong Kong people to Beijing for trial on charges that arose in Hong Kong. This would deprive Hong Kong people of legal protections in local law and could subject prisoners to torture and summary execution.

The demonstrations grew exponentially and now involve hundreds of thousands of protesters. The list of demands has also grown to include more democracy and freedom and adherence to Hong Kong’s rule of law.

This article describes the state of the protests so far but also points to the unpleasant choice facing the Communist Party leadership. If Beijing tolerates the protests, they may lead to greater autonomy for Hong Kong at a time when Beijing is trying to strengthen and centralize its control.

If Beijing cracks down on the protesters, it will have another Tiananmen Square massacre on its hands, with two important differences. Hong Kong is a major city and will not be as easy to control as a confined square in Beijing. And the rise of social media, mobile devices and live streaming guarantee that Beijing will not be able to hide or cover up any atrocities.

The jury is out on which path the Communists will take. Whether the Communists offer concessions or proceed with a bloody crackdown, one thing that is certain is the decision will be made soon. Every day of continued protests makes the Communists’ hold on the situation more tenuous and difficult to maintain.

Investors should expect a resolution of this issue by late September at the latest. Unfortunately, the resolution may not be the peaceful one hoped for but rather another bloody massacre.

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