The polarisation of politics in the United States, where belief in the danger of coronavirus has become the latest partisan divide, has been fuelled by the impact of Chinese competition on traditional manufacturing districts.

The economic basis of US political polarisation has been demonstrated in a new paper from leading economist David Autor which shows how the middle political ground has disappeared in the districts most affected by Chinese competition. Non-Hispanic whites have veered to the right of the Republicans, while African Americans and Hispanics have swung to the left of the Democrats.

Autor’s latest paper, written with a group of co-authors, builds on his pioneering work showing that the economic principle that trade benefits everyone doesn’t hold true when individual districts are examined.

Economic theory going back to Adam Smith and David Ricardo in the 18th century contends that the jobs lost to import competition will be made up by new jobs generated elsewhere. However, Autor found that the inroads made by Chinese exporters into the US market following China’s accession to the World Trade Organization in 2000 were accompanied by rising unemployment, lower labour force participation and lower wages in US manufacturing districts.

His latest study shows that the economic shock has had major political effects. Although the gains in support to the right of the Republicans have broadly matched the gains to the left of the Democrats, the Republican gains have come from swing seats, whereas the Democrat gains have come in districts they already held.

The overall result has been an increase in the number of conservative Republican representatives in Congress. The study emphasises that ‘trade shocks appear to catalyze support for more extreme actors in both parties, at the expense of moderates, indicat[ing] that we are not simply capturing a general rightward shift in US politics’.

However, the electoral impact has been heavily in Republicans’ favour. Between 2002 and 2016, the probability of moderate Democrats getting elected more than halved, while the probability of a conservative Republican winning office rose by 85%.

There was also a statistically significant impact on US presidential elections, with trade-exposed districts more likely to vote Republican. The study found that voter turnout and political donations were both higher in the most trade-exposed districts, suggesting this phenomenon increases the intensity of election campaigns.

Although the Republicans have traditionally been the ‘free trade’ party, Republican representatives in trade-exposed areas tend to be protectionist. The protectionist sentiment was captured by Donald Trump’s ‘America first’ slogan in his successful 2016 election campaign.

While Chinese competition has been far from the only cause of structural change in US industry, the study argues that the impact of technology has been felt in both wealthy cities populated by white-collar professionals and factory towns populated by blue-collar workers, whereas only the latter group has been displaced by import competition. It’s in the factory towns that political polarisation has been most acute.

The primary indicator of the polarisation in US politics is partisanship: the extent to which people like their own party and dislike the opponent. A study by the Pew Research Center showed that US voters felt more warmly towards their own party in 2019 than they did at the time of the 2016 election and had become much more hostile towards the opposition.

The survey ranks how warmly people feel about a party on a scale of 1 to 100, and found that among Democrat voters, the score for their own party rose from 67 to 82 between 2016 and 2019. There was a smaller rise from 77 to 84 among Republicans.

The shift in views about the opposition, measured on a similar scale tracking ‘coldness’, is more extreme: Democrat views of Republicans went from 56 to 79, and Republican views of Democrats went from 58 to 83.

Around half the voters for both Republicans and Democrats say voters for the other side are more immoral than other Americans, and large majorities say the other side is more close-minded. The division is evident everywhere: recent surveys show Republicans think the worst of the coronavirus pandemic is now history, whereas Democrats believe it still lies ahead.

None of these trends is evident in Australia. A new study of political polarisation across nine countries found that the US had become much more polarised than other nations, though there was also an increase in polarisation in Canada, New Zealand and Switzerland. By contrast, the level of polarisation fell in Australia, Germany, Norway, Sweden and the United Kingdom.

The Australian result may surprise those who recall the bitterness of political division during the governments of Kevin Rudd, Julia Gillard and Tony Abbott. It draws on the findings of the Australian election study conducted by Australian National University researchers showing that voters have become less firmly committed to their own party and less hostile towards the opponent.

The big political trend in Australia over the past 20 years has been the growing share of the vote captured by minor parties, amid disaffection with the two major parties.

The manufacturing sector in Australia has not suffered the squeeze from Chinese competition to the same extent as in the US. The big hit to Australian manufacturing occurred in the 1980s and 1990s in response to the lowering of tariffs and the floating of the Australian dollar.

By the 2000s, much of the surviving Australian manufacturing industry was in subsectors where there was a comparative advantage, such as food or resource industry supplies, or where there was natural protection, such as building materials which are too bulky or heavy to ship.

Although areas of Australian manufacturing did suffer during the 2000s as the resources boom drove the Australian dollar to its 2011 peak of US$1.10, there was a clearer positive effect on the Australian economy from engagement with China, with the resources boom contributing to gains in household living standards across the income distribution.

While the latest Lowy Institute poll shows that Australians are increasingly disenchanted with China, this reflects what they learn from the media and political leadership, rather than being a visceral reaction to their own lived experience, as has been the case in the US manufacturing heartland.

The United Nations Human Rights Council recently voted on a resolution supporting China’s draconian national security law that has effectively crushed free speech and freedom of assembly in Hong Kong.

The resolution was carried with the support of 53 nations including Cuba, Iran, Venezuela and, of course, China. Many of the supportive nations have questionable human rights records.

The ‘yes’ votes included a mix of nations that always align with China and others, many from Africa, that were added to the list because they’re locked into infrastructure projects under Beijing’s Belt and Road Initiative.

Papua New Guinea voted ‘yes’. Sadly, that has not been reported in PNG’s daily media, or even on social media.

By voting to support the crushing of free speech and freedom of assembly, among other basic rights, PNG voted against the spirit of its own constitution, adopted at independence in 1975, which guarantees those rights for its citizens, along with a free press.

To its enduring credit, PNG’s Supreme Court has vigorously protected these constitutional freedoms against legislation and against regulations seeking to erode them or even put limits on them.

PNG’s vote in the Human Rights Council is a sad reflection of the state of foreign policy in our closest neighbour. Instead of pursuing an independent policy, also provided for in the constitution, PNG is increasingly aligning itself with the People’s Republic of China when it counts.

This has not been debated seriously in the national parliament or, I suspect, even by the National Executive Council, PNG’s cabinet.

There can be only two reasons why PNG voted as it did, and as it increasingly does in regional and international forums. Both present serious foreign policy challenges, and regional security and stability challenges, for Australia.

First, PNG acted in similar fashion to the African nations lined up behind China—the PNG government signed up to the BRI in 2018 and that program is gradually expanding across the South Pacific.

There can be no doubt that funding, principally via heavily conditional loans, under the BRI for developing nations—and jurisdictions in developed countries, such as the state of Victoria in Australia—depends on these countries and jurisdictions supporting the PRC line in bodies where it exerts considerable influence, such as the Human Rights Council and the World Health Organization.

PNG is now locked into that, though neither the parliament nor the people were told this would be the case when, with much fanfare, PNG signed up to the BRI.

The second reason is less certain, but more profoundly troubling if it is true.

PNG has yet to agree to an emergency support package led by the International Monetary Fund and the World Bank, which is probably worth at least $3 billion. Negotiations are believed to be continuing but, frankly, PNG is running out of time.

The PNG economy is deteriorating rapidly, a problem that’s hardly helped by the continued closure of the Porgera Gold Mine which the government is seeking to effectively nationalise.

The government is running out of cash, with the fortnightly payroll for the public service and parliamentarians being delayed regularly.

The problem the government clearly has with the IMF–World Bank package is the conditions that will come with it. Past experience indicates that those conditions will include a substantial currency devaluation, asset sales, and a substantial reduction in the size of the public service.

With national elections now less than two years away, such a package is hard for the government to embrace.

The real concern is that, out of sheer desperation, the government might do what it was clearly contemplating almost a year ago and accept a substantial rescue package funded by the PRC.

Australia intervened just in time and provided a $400 million soft loan (which is unlikely ever to be repaid) that effectively replaced emergency assistance from China, and put on hold a much larger package.

In desperate times—and these are the most desperate times in PNG’s history—governments surrender good fiscal policy and even national integrity and security. We can only hope that’s not what PNG will do in the coming months.

The question which now arises is how Australia should respond to this troubling reality.

The answer must not be to give PNG more cash handouts as we did a few weeks ago when we agreed to convert $20 million from the aid program to cash.

We have to encourage PNG to accept the IMF–World Bank package, to which we will no doubt contribute, without delay.

We must also encourage PNG to address investment policy issues that are impeding the development of major resource projects, especially those in which there is Australian equity, such as the Wafi-Golpu mine project and the Papua LNG project.

As I have written before, Australia must urgently and comprehensively review its generous aid program so that it reduces waste and bureaucracy and focuses on the real needs of the people of PNG.

Hundreds of programs that are poorly implemented and managed undermine our credibility in our closest neighbour. They must be urgently refocused on helping PNG reverse the real decline in the basic living standards of its people—people who value the friendship with Australia and are rightly suspicious of the growing lock China has on key areas, now clearly including foreign policy.

The Australian government’s ‘Pacific step-up’ program alone cannot do that if it means continuing the same aid programs and simply adding more dollars to them. Our relationship with our closest neighbour is vital for our national security and the stability of our region.

It needs urgent and robust repairing and refocusing.

Some of the Chinese government’s recent policies seem to make little practical sense and the decision to impose its national security law on Hong Kong is a prime example. The law’s rushed enactment by China’s rubber-stamp National People’s Congress on 30 June effectively ends the ‘one country, two systems’ model that has prevailed since 1997, when the city was returned from British to Chinese rule, and tensions between China and the West have increased sharply as a consequence.

Hong Kong’s future as an international financial centre is now in grave peril, while resistance by residents determined to defend their freedom will make the city even less stable. Moreover, China’s latest move will help the United States to persuade wavering European allies to join its nascent anti-China coalition. The long-term consequences for China are therefore likely to be dire.

It is tempting to see China’s major policy miscalculations as a consequence of over-concentration of power in the hands of President Xi Jinping: strongman rule inhibits internal debate and makes poor decisions more likely. This argument is not necessarily wrong, but it omits a more important reason for the Chinese government’s self-destructive policies: the mindset of the Chinese Communist Party.

The CCP sees the world as, first and foremost, a jungle. Having been shaped by its own bloody and brutal struggle for power against impossible odds between 1921 and 1949, the party is firmly convinced that the world is a Hobbesian place where long-term survival depends solely on raw power. When the balance of power is against it, the CCP must rely on cunning and caution to survive. The late Chinese leader Deng Xiaoping aptly summarised this strategic realism with his foreign-policy dictum: ‘hide your strength and bide your time.’

So, when China pledged in the 1984 joint declaration with the United Kingdom to maintain Hong Kong’s autonomy for 50 years after the 1997 handover, it was acting out of weakness rather than a belief in international law. As the balance of power has since shifted in its favour, China has consistently been willing to break its earlier commitments when doing so serves its interests. In addition to cracking down on Hong Kong, for example, China is attempting to solidify its claims in disputed areas of the South China Sea by building militarised artificial islands there.

The CCP’s worldview is also coloured by a cynical belief in the power of greed. Even before China became the world’s second-largest economy, the party was convinced that Western governments were mere lackeys of capitalist interests. Although these countries might profess fealty to human rights and democracy, the CCP believed that they could not afford to lose access to the Chinese market—especially if their capitalist rivals stood to profit as a result.

Such cynicism now permeates China’s strategy of asserting full control over Hong Kong. Chinese leaders expect the West’s anger at their actions to fade quickly, calculating that Western firms are too heavily vested in the city to let the perils of China’s police state be a deal-breaker.

Even when the CCP knows that it will incur serious penalties for its actions, it has seldom flinched from taking measures—such as the crackdown on Hong Kong—deemed essential to maintaining its hold on power. Western governments had expected that credible threats of sanctions against China would be a powerful deterrent to CCP aggression towards the city. But judging by how China has thumbed its nose at the West, and especially at the US and President Donald Trump, this has obviously not been the case.

These Western threats do not lack credibility or substance: comprehensive sanctions encompassing travel, trade, technology transfers and financial transactions could seriously undermine Hong Kong’s economic wellbeing and Chinese prestige. But sanctions imposed on a dictatorship typically hurt the regime’s victims more than its leaders, thus reducing their deterrent value.

Until recently, the West’s acquiescence in the face of Chinese assertiveness appeared to have vindicated the CCP’s Hobbesian worldview. Before the rise of Trumpism and the subsequent radical shift in US policy towards China, Chinese leaders had encountered practically no pushback, despite repeatedly overplaying their hand.

But in Trump and his national-security hawks, China has finally met its match. Like their counterparts in Beijing, the US president and his senior advisers not only believe in the law of the jungle, but are also unafraid to wield raw power against their foes.

Unfortunately for the CCP, it now has to contend with a far more determined adversary. Worse still, America’s willingness to absorb enormous short-term economic pain to gain a long-term strategic edge over China indicates that greed has lost its primacy. In particular, the US strategy of ‘decoupling’—severing the dense web of Sino-American economic ties—has caught China totally by surprise, because no CCP leader ever imagined that the US government would be willing to write off the Chinese market in pursuit of broader geopolitical objectives.

For the first time since the end of the Cultural Revolution, the CCP faces a genuine existential threat, mainly because its mindset has led it to commit a series of calamitous strategic errors. And its latest intervention in Hong Kong suggests that it has no intention of changing course.

Regional flashpoints are heating up, as we’ve seen with the fatal clash in Ladakh on the India–China border, the protests in Hong Kong and provocative sorties in the airspace over Taiwan and Japan. But the South China Sea may be the most dangerous of all.

Recent developments suggest that China is making even more decisive, and potentially long-lasting, moves to override other countries’ claims in this large and strategically crucial body of water.

Concern is growing that Beijing plans to declare an air defence identification zone over the Spratly, Paracel and Pratas islands. An ADIZ is a region of airspace over land or sea in which the identification, location and control of aircraft are ‘performed by a country in the interest of its national security’. This is not a new idea, of course; China unilaterally declared an ADIZ over the East China Sea in 2003.

Such a declaration would invite much criticism from Southeast Asian claimants, and would certainly be a great worry for Taiwan and Japan. It might also catalyse long-needed unity and solidarity in the regional response to China.

Over the past few months, Beijing has intensified its activities in the South China Sea, causing increased anxiety among its Southeast Asian neighbours.

In early April, a Vietnamese fishing boat was rammed and sunk by a Chinese coast guard ship near the Paracel Islands. That occurred after Vietnam sent a diplomatic note to the United Nations protesting China’s ‘nine-dash line claims’ in late March. There has since been speculation that Vietnam—which has been among the most vocal and active nations in standing up to China in the South China Sea—will pursue international legal action as the Philippines did in 2016.

China also unilaterally declared two new administrative regions in the South China Sea, indicating its desire to devote more manpower and resources to its artificial islands, build additional infrastructure, strengthen its military presence in the area, and permanently formalise its control over disputed waters. And while maritime conflicts are high on Hanoi’s agenda as this year’s ASEAN chair, the move makes clear that China has no intention of working towards a functional dispute management mechanism through ASEAN processes.

The Philippines was also subject to China’s increasingly bold actions in the South China Sea, when a People’s Liberation Army warship readied its weapons to target a Philippine Navy ship. While Manila appears to have forged closer relations with Beijing, there are still indications that it’s prepared to protect its sovereignty. The Philippine Department of Foreign Affairs released a statement in support of Vietnam, expressing ‘deep concern’ about the sinking of the Vietnamese vessel and noting ‘how much trust in a friendship’ can be lost following such incidents. The Philippines’ reversal of its decision to withdraw from the Visiting Forces Agreement with the US and its decision to restart oil and gas exploration in the South China Sea are further promising signs of Southeast Asian resolve.

Malaysia was involved in a months-long standoff with China after a Chinese survey ship entered its  exclusive economic zone. But Malaysia’s reaction has been relatively muted, in line with its traditional preference for a low-profile approach on South China Sea issues. At the time Malaysia was also preoccupied with abrupt changes within its government.

Indonesia, which is not a claimant state and has usually kept quiet on the issue, recently sent a diplomatic letter to the UN countering Beijing’s position on the South China Sea. It declared that China’s claims had no standing under the UN Convention on the Law of the Sea and referenced the 2016 ruling of the Permanent Court of Arbitration that rejected Beijing’s claim to ‘historic rights’ in the disputed waters. This response demonstrated Indonesia’s resolve in the face of repeated Chinese incursions into its waters and its seriousness about protecting its maritime boundaries.

Even the usually soft-spoken ASEAN has weighed in. At the recent summit, the association’s leaders issued a joint statement stressing the importance of resolving disputes ‘without resorting to the threat of use of force’ and reaffirming the importance of UNCLOS.

China’s stepped-up efforts to assert control over the South China Sea may prove counterproductive for Beijing. The shift to an explicitly offensive posture has already ramped up tensions with the US and increased the risk of miscalculation and escalation in the region. For the first time in years, the US sent three aircraft carriers to the Pacific Ocean. The timing of this show of force was no coincidence and, combined with an increase in freedom-of-navigation operations, indicates how dangerous the situation has become.

China’s relations with its Southeast Asian neighbours also stand to be damaged. Its aggressive behaviour is pushing some states closer to the US and other democratic allies in the region, and it may well prompt them to respond overtly, abandoning the hedging strategy they’ve pursued thus far.

Indeed, the intensification of China’s actions in the South China Sea and the increasing willingness of regional nations to defend against Beijing’s encroachments should motivate Southeast Asian states to act in a united and resolute way.

Hong Kong’s first handover to China, in 1997, came with fireworks, lion dances and a mood of cautious optimism that this former British colony would enjoy ‘a high degree of autonomy’ for at least the next 50 years.

Just 23 years later, Hong Kong’s second handover to China—punctuated by a draconian new national security law that proscribes much protest activity and free expression—has seen fearful citizens deleting their Twitter accounts, political parties disbanding, and some activists and ordinary people planning to flee abroad. The optimism of 1997 has been replaced by a sense of foreboding and dread.

In a fitting coda, Beijing’s Communist Party rulers chose the exact anniversary of the handover, midnight on 30 June, to impose their new security law on Hong Kong and unveil its strictures on an unwilling population. After 23 years, China seems to be publicly affirming that the ‘one country, two systems’ experiment has failed and that Hongkongers were not sufficiently imbued with a patriotic love of the motherland and its authoritarian communist one-party system.

Now Hongkongers who had enjoyed a wide range of freedoms and a tiny taste of democracy will be subjected to the same sweeping constraints on their liberties as any Chinese citizen living on the mainland.

Over the past month, the new national security law was drafted behind closed doors in Beijing with no input from Hong Kong officials or citizens, who were not even allowed to see the text until a few minutes before midnight on the day it took effect. There was still some small hope that the law might not be as sweeping as some here feared, perhaps tailor-made for Hong Kong owing to this city’s special history and common-law traditions. Various leaks in the media in recent days appeared designed to assure people that their daily lives would not be greatly affected.

But the final text of the law was more severe and more detailed than the most optimistic here envisaged. Many when they saw it were aghast—shocked, they said, but not surprised.

The law establishes an entirely new infrastructure in Hong Kong to enforce a national security regime. Beijing will set up a national security agency in Hong Kong which will operate independently as it sees fit. China’s agents operating here, with special ID cards, and their cars, ‘shall not be subject to inspection, search or detention’ by local Hong Kong police. They are above the law.

Hong Kong will set up its own separate national security committee, chaired by the chief executive and including a ‘national security adviser’ appointed by Beijing. Its work will remain secret and not subject to judicial review. The law specifies that Beijing’s national security adviser will attend meetings of the committee.

The Hong Kong Police Force will establish its own national security department to collect intelligence and conduct operations. The law gives police wide powers to conduct searches, eavesdropping and surveillance without court oversight and to order people to turn over their electronic communications, and it appears to suggest that internet service providers must cooperate with probes. The law compels suspects to ‘answer questions’ and turn over information, although Hong Kong law gives people a right to stay silent.

The law also says that when there’s a conflict between this new edict and Hong Kong’s existing laws, the national security law takes precedence.

The law sets up a new section in the Justice Department to prosecute national security cases, and trials can be conducted entirely in secret, without a jury, and without the presumption of bail. Serious or ‘complex’ cases can be tried in mainland China.

The law says the Hong Kong government will ‘strengthen public communication, guidance, supervision and regulation’ of national security matters, including those relating to ‘schools, universities, social organisations, the media, and the internet.’

The law vaguely defines four categories of national security offences—secession, subversion of state power, terrorism and collusion with a foreign country. Appearing in Washington DC to advocate for sanctions against Hong Kong or ‘provoking hatred towards the central government’ are all now considered national security law violations.

Penalties for national security offences range up to life imprisonment, although a person who ‘conspires’ with a foreign country ‘shall be liable to a more severe penalty’.’ The Hong Kong justice secretary told a press conference on 1 July that if a suspect were handed over to mainland authorities to face trial, Hong Kong would have no say in whether the death penalty was imposed.

In a sweeping claim of extraterritoriality, the law also says it will cover offences ‘from outside the region by a person who is not a permanent resident of the region’.

The vagaries of the law for now leave it to the local Hong Kong police to interpret and enforce it. Their actions on 1 July—the handover anniversary when activists traditionally stage mass protest rallies—showed the police are taking an expansive view, arresting people for carrying flags promoting Hong Kong independence.

Police raised banners warning demonstrators that chanting the slogans and displaying the flags that had become a staple of the last 12 months of protest could now be considered a national security violation.

‘The law is so broadly written it could include almost any form of behaviour, such as waving an independence-themed flag today’, one longtime resident told me.

This is not the end of Hong Kong. It remains a global financial centre, its stock market is still the world’s largest and more capital is set to flow in if Chinese ‘red chip’ companies forced to delist from the New York Stock Exchange decide to relocate here. Multinationals whose business operations focus mainly on China’s massive market would be reluctant to decamp for faraway Singapore. Taipei and Tokyo are making overtures to lure businesses and hedge funds, but neither is as attractive an international English-speaking base as Hong Kong.

But it is the end of Hong Kong as we knew it. I was recently reminded how when I would leave after a lengthy reporting trip in China and cross the border into Hong Kong, I would almost literally feel a breath of fresh air. Unlike the mainland, reporting here was easy. People were willing to talk and express their views strongly. They gave you their names to be quoted. You didn’t have to hide your notebooks or constantly be looking over your shoulder if you pulled out a camera for a photo. Here I did not have to use multiple sim cards and disposable ‘burner phones’ to meet with sources.

That is all now changing. With the new law and the new national security infrastructure, Hong Kong now is becoming like every other mainland city under an authoritarian police state. Citizens scrubbing their social media accounts and scraping pro-democracy stickers off their shops is a sad but telling sign.

The Hong Kong we knew is dead. This is the new normal.