The Hong Kong government has scrapped the extradition bill that’s been at the heart of mass public protests. The backdown on plans to allow criminal suspects to be turned over to Chinese courts might dissipate the size, but not the anger, of future crowds as Hong Kongers seek to cap their victory by pressing for a range of demands, including the resignation of chief executive Carrie Lam.

It also will allow foreign governments to heave a sigh of relief that they can avoid being drawn into another messy row with China. But this is likely to be only a temporary reprieve for both Hong Kongers and those governments with a stake in the territory’s prosperity and stability.

The cancellation of the extradition bill looks like a small tactical victory in the midst of a continual erosion of the freedoms conferred on Hong Kong in the handover from the UK in July 1997. The reason the extradition bill has caused the gravest crisis since then is that it’s emblematic of the existential threat Hong Kongers legitimately feel to their way of life.

The ‘one country, two systems’ guarantee negotiated to facilitate the handover of the former colony to China comes to an end in 2047. Uncertainty over what will happen next has been a strong undercurrent in the protests.

Planning for the ‘year 2047 problem ^[1]’ is on the minds of Honger Kongers and has the capacity to increasingly influence some basic financial decisions like whether to take out a mortgage. A survey ^[2] in January found that 51% of those aged 18 to 30 were thinking of leaving.

Tensions over the nature of future rule are likely to build the closer Hong Kong gets to that day of reckoning. And so too is the problem Hong Kong poses for Western governments.

The history of international relations is replete with examples of small places and small disputes stirring up big problems. Hong Kong, with a population of just 7.4 million, has the potential to cause outsized trouble for several countries. It could easily become another flashpoint with China in a region dotted with trouble spots.

So far, the reaction of Western governments to the protests has been muted. Although the police were accused of excessive force, no fatalities were recorded in the clashes. That has reduced the pressure for an outspoken response in foreign capitals. But the situation could quickly shift. The police, one of the most respected public institutions in Hong Kong, has lost a lot of credibility. Now, video spreading on social media shows bands of thugs beating young protestors on the way home from a demonstration on Sunday. The episode underscores the high risk of violence escalating and spilling over into the wider society.

London warned Beijing to abide by the terms of the 1984 Sino-British Joint Declaration. The declaration set the framework for Hong Kong’s Basic Law and has the status of an international treaty. But China, which has questioned ^[3] the declaration’s continuing relevance, accused ^[4] Britain of ‘gross interference’.

Britain is not the only Western country with a direct interest in what happens in Hong Kong. One hundred thousand Australians live there ^[5]. Close to the same number of Hong Kongers live in Australia. The territory hosts 120,000 alumni of Australian universities. With more than 600 Australian businesses maintaining a presence as part of a $170 billion bilateral investment relationship, the Australian Chamber of Commerce is the second largest international chamber in the so-called Special Administrative Region.

Canada has by far the biggest number ^[6] of foreign citizens living in Hong Kong—300,000. Hong Kongers have already started trickling back to Canada in the past couple of years.

The US has 85,000 Hong Kong–based citizens, but the main issue for Washington is its economic stake. The US ran its largest worldwide merchandise trade surplus ^[7] (US$31.1 billion) with Hong Kong in 2018, a fact that doesn’t figure in public discussion of the US–China trade dispute. The US Commerce Department estimated ^[8] that exports of goods and services to Hong Kong supported 188,000 US jobs as of 2015.

To understand what could go wrong in future years, one only has to appreciate what works well now. As the US State Department noted ^[9] in its latest annual review under the US–Hong Kong Policy Act, Hong Kong, in contrast to the mainland, operates an extraordinarily free and open economy. For 25 years running, the Heritage Foundation has ranked it the world’s freest.

It is unaffected by China’s tough cybersecurity law; it enjoys open access to the internet; it operates its own customs, immigration and law enforcement; it participates separately in multilateral organisations and agreements, including the World Trade Organisation and APEC; it is able to negotiate certain bilateral agreements, such as the 26 March free trade agreement ^[10] with Australia; and it has its own currency and monetary authority autonomous from the People’s Bank of China.

Most importantly, it has a separate judiciary based on the English common law. It appoints non-permanent foreign judges from common-law jurisdictions to the court of final appeal, which provides enormous confidence in the judicial system for local residents and foreign investors alike.

How much will survive before and after 2047 is a matter of conjecture. The Basic Law simply states ^[11] that the ‘previous capitalist system and way of life shall remain unchanged for 50 years’.

If those freedoms are substantially eroded, China risks sparking an exodus of businesses and people. In that event, the relationship between China and several foreign governments would be severely tested. How hard should those governments push human rights when they relate directly to the interests of their own (dual) citizens?

China demonstrated disdain for Hong Kong’s ‘independent’ judicial status even before the extradition law was proposed. Some who have offended Beijing have simply been kidnapped and dragged across the border. It’s clear China’s President Xi Jinping and the Chinese Communist Party place more weight on asserting central government authority than on avoiding any collateral damage to the Hong Kong economy.

The pugnacious attitude is already exacting a price on other Chinese priorities. Taiwan now believes that no dual-system formula with the mainland can be trusted.

The prospects of Taiwanese President Tsai Ing-wen, of the Democratic Progressive Party, winning national elections in January have been significantly boosted ^[12]. The revival of the party’s fortunes, with its strong record of asserting Taiwan’s separate identity, parallels growing concern about Hong Kong’s political freedom.

Tsai rejected ^[13] the idea of one country, two systems, pointedly referring to it as the ‘Taiwan consensus’. That puts her at odds with the opposition Kuomintang, which backs the ‘One China’ formula of the 1992 consensus ^[14].

The risk of heightened tensions between China and Taiwan is another way a deteriorating situation in Hong Kong can complicate the China policies of Western governments.

Yet any appeals to Beijing to exercise enlightened self-interest seem likely to be ignored. Western countries must plan for a scenario in which they have to absorb both the damage to a key economic relationship and a wave of escaping Hong Kong residents. Flight from mainland oppression is deeply embedded in Hong Kong’s DNA. The next wave of refugees could be on a larger scale than in the countdown to the handover.

The best prevention is to guarantee life beyond 2047 under one country, two systems. But Beijing shows little appetite for concessions. It has backtracked ^[15] on promises to eventually allow direct elections for the chief executive.

The erosion of political liberties is pronounced under Xi’s presidency; ‘red lines’ limit freedom of expression, with a series of actions in the past year against those advocating a separate Hong Kong identity.

The trend will be to curtail rather than enlarge political freedom. The stage is set for a growing divide between Hong Kongers and the mainland.

There are great risks of escalation if protestors radicalise by taking their demands beyond the boundaries of the one country framework.

On 3 July, Joshua Wong, a repeatedly jailed activist, sent a Twitter message to 228,000 followers, quoting John F. Kennedy: ‘Those who make peaceful revolution impossible will make violent revolution inevitable.’

Only compromise can make the one country, two systems formula work beyond 2047. But neither Beijing nor many of Hong Kong’s young pro-democracy activists appear capable of finding that middle ground.