Beijing seeks broader control: 'The stick is getting bigger, but the carrots are getting sweeter' 

  • China is enticing Hong Kong, Macau and Taiwan with the prospects of residency benefits, but it also issued a vague warning that the privileges could be revoked on grounds of national security.
  • From September, people from the three locations can apply for the residence permits, China's cabinet announced last week.
  • Analysts say the program is part of mainland China's carrot and stick approach to the three regions.
Chinese President Xi Jinping and his wife Peng Liyuan arrive in Hong Kong, China, ahead of celebrations marking the city's handover from British to Chinese rule on June 29, 2017.
Bobby Yip | Reuters
Chinese President Xi Jinping and his wife Peng Liyuan arrive in Hong Kong, China, ahead of celebrations marking the city's handover from British to Chinese rule on June 29, 2017.

China is introducing a new system it says will improve the lives of people from Hong Kong, Macau and Taiwan — by allowing those who live, work or study in the mainland to obtain local residence permits.

But lurking in the details of the initiative is a warning: The status can be revoked through "harming national sovereignty, security, honor and interest." It is a stark reminder of the potential perils of life in the country for non-mainland Chinese.

It comes as analysts say China under President Xi Jinping is using a "carrot and stick" approach to further tighten links with the three regions through economic incentives and other inducements, while at the same time, driving home Beijing's position of power.

The clause on security "is a clear statement of a hardening attitude in China: If you want to make money from us, obey our rules (even the ones you don't agree with)," said Jonathan Sullivan, director of the China Policy Institute at the University of Nottingham.

"The qualifier is, as often in China, vague and open to interpretation, and could be used for any number of 'transgressions,'" he told CNBC in an email.

From September, people from the three locations can apply for the residence permits, the State Council, China's cabinet, announced last week.

Permit-holders can "enjoy public services and other conveniences similar to those of mainland residents" in areas such as employment, social security and legal services, the official Xinhua news agency said. The new permits will have the same 18-digit serial numbers as those used by mainland Chinese, Xinhua added.

Hong Kong Chief Executive Carrie Lam, the city's top official, welcomed the development.

"It fully reflects President Xi Jinping's people-centered development approach, as well as the central government's care and concern for the people of Hong Kong," she said in a press release on Aug. 16, when the regulation was announced.

Sullivan said he will be watching to see whether potential security violations would include activities that takes place outside China.

"For instance, would China monitor the social media of a Taiwanese card-holder while they are in Taiwan, and sanction transgressions," he said. While that may sound unlikely, it is already happening to celebrities and other public figures, he added.

Sweeter carrots, bigger sticks

Willy Lam, an expert in Chinese politics at the Chinese University of Hong Kong, said that those who should be concerned about running afoul of Beijing's security regime are young people going to the mainland to build a career.

"If you work as a lawyer or an accountant in Beijing and if in the course of your business you come across some so-called classified documents or state secrets, you might be held accountable for violating national security," he said.

In 1978, when China was starting to open up economically to the world, contacts with Hong Kong, Macau and Taiwan — considered more developed than the mainland at that time — were rare, and in some instances, even illegal.

Deep connections, however, have flourished in the ensuing 40 years. That's even as the central government pursues its policy of a single China ruled from Beijing — the idea that it holds ultimate authority over the residents of Hong Kong, Macau and Taiwan.

The residence program comes as some in Hong Kong worry that the central government wants more locals to move to the mainland, and for more mainland Chinese to migrate to Hong Kong, as a way to reduce opposition to its policies and control, said the Chinese University of Hong Kong's Lam.

Under such a future scenario, the central and local governments would "not need to worry about opposition demonstrations against what is happening, which is Beijing tightening its grip on Hong Kong or Beijing restricting freedoms in Hong Kong," he said.

Xi is pushing an ever harder line on Beijing's interests while using more economic and social incentives to draw in those from Taiwan and elsewhere, said Syaru Shirley Lin, the author of "Taiwan's China Dilemma" and an expert on China-Taiwan relations at the Chinese University of Hong Kong.

"The stick is getting bigger, but the carrots are getting sweeter," Lin told CNBC.

"It's never been as sweet as now," she said. "But the stick is also getting so big," she added, noting El Salvador's dropping of diplomatic relations with Taiwan on Tuesday in favor of China.