Sharpening the Blade Against the Red Wall: From Hong Kong to Handong

April in Kyoto had shed its chill, and the Chinese scholar trees lining Chang'an Avenue were sprouting new green leaves, but Zhou Jin's study was still filled with the mingled smells of ink and coffee. Since finalizing the report framework in March, he had entered a state of near seclusion. The copy of the Basic Law of Hong Kong (note: in this fictional setting, it corresponds to the Hong Kong Basic Law) on the top shelf of his desk was worn out from frequent use. His grandfather, Zhou Jianguo, had specially retrieved an internal policy compilation from the Central Archives, and had circled key clauses in red pen—"Maintain Hong Kong's original capitalist system and way of life unchanged for fifty years," "The Central People's Government guarantees the legitimate rights and interests of Hong Kong residents," and "Provide necessary economic support to Hong Kong." These articles became the core policy basis for the report's "maintaining Hong Kong's prosperity and stability."

"Dad, this is the latest foreign exchange reserve details from the Hong Kong Monetary Authority (HKMA), along with the changes in holdings of the 33 constituent stocks of the Hang Seng Index. Could you see if you can verify the data on foreign ownership through the Planning Commission?" Zhou Jin pushed a stack of reports to her father, who had come to visit late at night, her eyes bloodshot. Her father took the documents, his fingertips tracing over data such as "Hong Kong's foreign exchange reserves in the first quarter of 1996 were US$890 billion" and "Foreign ownership of blue-chip stocks such as HSBC and Cheung Kong Holdings exceeded 40%." He frowned slightly: "These data involve cross-border capital flows, making verification difficult, but I will coordinate with the relevant departments to do my best." Before leaving, her father left behind a "Research Report on Hong Kong's Financial Regulatory System" marked "Internal Reference," which detailed the division of responsibilities between the Hong Kong Securities and Futures Commission (SFC) and the HKMA, becoming an important source of information for the first part of the report.

Meanwhile, Zhou Jin made a special trip to Peking University to visit her mentor, Shen Mingyuan. This professor, who had been deeply involved in international finance for thirty years, listened to Zhou Jin's risk assessment. After a long silence, he pulled out a thick stack of case studies from his bookshelf: "The Soros Quantum Fund you mentioned used a combination of 'leveraged short selling + media hype' when it attacked the British pound in 1992. This is a detailed analysis of their operation at the time." Shen Mingyuan opened the book, pointing to the charts and analyses within. "They first borrowed a large amount of British pounds, then concentrated on selling them to suppress the exchange rate, while simultaneously using derivatives to amplify their profits. Once the exchange rate fell below the bottom line, they bought it back at a low price to repay the debt, profiting from the difference." With Shen Mingyuan's assistance, Zhou Jin clarified the complete logic chain of international capital shorting Hong Kong: first, pushing up asset prices through hot money, then taking advantage of market panic before and after the handover to concentrate on selling Hong Kong dollars and Hong Kong stocks, while simultaneously hedging risks through the offshore derivatives market, ultimately breaking through the linked exchange rate system. Shen Mingyuan also added economic data from Southeast Asian countries, warning: "The crisis in Hong Kong will not be isolated. Southeast Asian countries have high foreign debt and fragile exchange rate systems, which may become the first fortresses to be breached. This is the perfect time to buy at the bottom."

For the next month, Zhou Jin practically slept at his desk. During the day, he meticulously calculated the financial data verified by his father, categorizing the Hang Seng Index constituent stocks by industry and identifying high-quality targets with strong risk resistance. Late at night, based on international cases provided by Shen Mingyuan, he deduced the loopholes in the Hong Kong dollar's linked exchange rate system—when the market anticipated devaluation, the Hong Kong Monetary Authority, to maintain exchange rate stability, had to sell US dollars and buy Hong Kong dollars, leading to tighter market liquidity, soaring interest rates, and ultimately a stock market crash, creating a vicious cycle of "exchange rate-stock market." In the second part of his report, he explicitly predicted: "The window for the crisis to erupt is most likely 3-6 months after Hong Kong's return to China in July 1997. International capital will first ignite the Southeast Asian financial crisis, and then concentrate its firepower on Hong Kong."

The core innovation of the report lies in Part Four, "Strategic Bottom-Fishing Plan." Zhou Jin repeatedly revised this section under the lamp, his pen scratching across the paper: "It is recommended to establish 'Huaxin Investment Co., Ltd.' (tentative name), with the Cayman Islands as the place of registration. The equity structure will conceal the state-owned background through a three-tiered trust structure. The Ministry of Finance and the Central Bank will allocate an initial capital of 50 billion yuan (equivalent to 6.2 million US dollars, drawn from foreign exchange reserves). The National Security system will be responsible for background checks and risk control, while the economic departments will coordinate investment decisions." He detailed the two phases of bottom-fishing: the first phase (second half of 1996 to first half of 1997), taking advantage of the fact that the Southeast Asian economy had not yet collapsed, to quietly acquire nickel mines in Indonesia, port equity in Malaysia, and high-quality manufacturing companies in Thailand; the second phase (during the Hong Kong financial crisis in 1998), to absorb commercial real estate, bank equity, and public utility assets in Hong Kong when the Hong Kong stock and property markets plummeted. "These assets can not only bring huge economic returns to the country, but also, at the strategic level, control the resource channels of Southeast Asia and the economic lifeline of Hong Kong, thus strengthening the country's power." Zhou Jin wrote this concluding remark in the report, pausing heavily on his pen.

By the end of May, as the final page of the report was dated "May 30, 1996," the first rays of dawn were breaking outside the window. The nearly 600-page report, bound together, had its cover printed in gold lettering as "Early Warning and Practical Response Plan for Financial Risks After Hong Kong's Return to China," and the title page read "Respectfully Presented to the Central Decision-Making Body." Each page of the report was meticulously documented with detailed data sources, ranging from internal statistics of the State Planning Commission to publicly available data from the Hong Kong Stock Exchange, from international cases provided by Shen Mingyuan to Zhou Jin's own deductive models; the logical chain was intricately linked, progressing from current situation analysis to risk prediction, and then to response plans and strategic bottom-fishing, layer by layer, possessing both theoretical depth and practical value. Zhou Jin stroked the weighty report, knowing in his heart that this document, embodying his memories of his past life and the fruits of his labor in this life, was about to open a door that would influence the fate of the nation—a financial chessboard for maintaining Hong Kong's stability and strengthening national power had already been quietly sketched out under his pen.