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It was an act of defiance broadcast live on Hong Kong TV: A lone lawmaker walks through the city’s legislative chamber, taking small Chinese and Hong Kong flags from his colleagues’ desks and returning them upside down.

Seven months later, Cheng Chung-tai faces a charge of flag desecration and as many as three years in jail. He might also lose his seat as part of an unprecedented purge of lawmakers that could remove key checks on China’s power for the first time since the former British colony’s return 20 years ago. The move was made possible by China’s decision to intervene in a court case and instruct judges on how to interpret Hong Kong law.

Lawmaker Cheng Chung-tai turns over Chinese and Hong Kong flags in the Legislative Council in October. Photographer: Vincent Yu/AP Photo

Such tactics show how far Beijing believes it can now go to impose its will on Hong Kong, despite the “high degree of autonomy” guaranteed by treaty with the U.K. for 50 years. Last year, when the British government criticized the abduction of local booksellers critical of Communist Party leaders, China simply told London to “stop interfering.” The city’s Beijing-appointed administration is also prosecuting demonstrators who protested China’s court intervention in November.

Hong Kong is emblematic of the growing confidence with which China has exercised power under President Xi Jinping -- whether disregarding an international tribunal ruling on its claims in the South China Sea or jailing human-rights advocates at home. The city, with its free speech, independent courts and capitalist financial system, provides a window on Xi’s approach to the institutions of Western democracy.

“China is challenging many of the basic norms of the international community,” said Jerome Cohen, a professor at New York University’s School of Law who has been studying China’s legal system since the 1960s. “It looks like they are people who just believe might is right, and they try to get away with whatever they can.”

One Country

While Chinese authorities routinely pledge to uphold Hong Kong’s “one country, two systems” framework, they have expressed alarm over the rise of a small but vocal independence movement, with members accused last year of inciting a riot that injured scores of police. They’ve denounced it as a threat to national security that must be stopped.

National People’s Congress Chairman Zhang Dejiang, China’s top official for Hong Kong affairs, warned the city last month against confronting Beijing over its autonomy, saying the relationship was based on a “delegation of power, not power-sharing.” The May 27 speech drew a line ahead of the July 1 anniversary of Hong Kong’s return, when Xi is expected to make his first visit as president.

Soldiers lower the Union Jack for the last time at the Cenotaph monument in Hong Kong on June 30, 1997. Photographer: Stephen Shaver/AFP via Getty Images

The risk for Hong Kong’s 7.3 million residents and the almost 1,400 multinational companies with regional headquarters there is that people lose faith in the Asian financial center’s guarantees of free expression and the rule of law. Besides banking, Hong Kong has become a hub for universities, media companies and advocacy groups that face tight restrictions on the mainland.

Anson Chan, who served as the city’s No. 2 official under both the British and Chinese, said Beijing has asserted control more quickly than expected. “Not even I predicted the steady determination on the part of the government to round up dissidents and to shut down anybody who may have different views,” said Chan, who became a prominent democracy advocate after leaving office.

Two Systems?

No episode illustrates China’s growing impatience with dissent more than the push to oust 10 opposition lawmakers from Hong Kong’s 70-seat Legislative Council after September elections. Two of the newcomers -- a pair of pro-independence “localists” -- sparked outraged when they altered their oaths of office to include insults against China.

The city’s Beijing-backed chief executive, Leung Chun-ying, quickly sued to oust them. As the case proceeded through Hong Kong’s courts, the National People’s Congress exercised a rarely used power to interpret the city’s law, saying those who voice separatist views can’t hold public office. Days later, the court affirmed the edict and removed the pair from office.

Similar lawsuits were then filed against six more pro-democracy lawmakers, including Cheng. Two others face criminal charges over their roles in the Occupy Central protests that shut down several city streets in 2014.

Police fire tear gas at demonstrators at the outset of the Occupy Central protests in September 2014. Photographer: Lam Yik Fei/Bloomberg

“This is a blatant attempt to use the courts and the National People’s Congress to issue an interpretation to alter the democratic legislative balance,” Cohen said. “The Hong Kong prosecution now seems to be increasingly politicized.”

Graphic: How China holds sway over who leads Hong Kong

Removing 10 lawmakers would temporarily shift the balance on the Legislative Council, potentially weakening the few procedural tools the opposition has to obstruct legislation. Before any elections, the pro-establishment side could gain control over the two-thirds of seats necessary to amend the city’s charter.

That could revive long-dormant proposals to revise national security laws or let Beijing vet chief executive candidates -- efforts that have previously brought hundreds of thousands of protesters into Hong Kong’s streets.

Carrie Lam Photographer: Anthony Kwan/Bloomberg

Beijing’s pick to replace Leung, former Chief Secretary Carrie Lam, has said she wouldn’t intervene in the cases now going through the courts. She’s promised to heal divisions and avoid controversial policies after taking office July 1. Hong Kong’s Justice Department has said the courts would handle the cases independently and professionally.

“The oath-taking saga is not simply about failing to take the oath properly, but more important, about wrongfully advocating Hong Kong independence and jeopardizing our ‘one country, two systems’ principle,” said Legislator Holden Chow, vice chairman of the largest pro-Beijing party, the Democratic Alliance for the Betterment and Progress of Hong Kong. “Territorial sovereignty is of utmost importance to China, and to every single country too.”

For now, most of the freedoms guaranteed Hong Kong until 2047 endure. Residents can protest freely and post what they want on social media. On Sunday, more than 100,000 people gathered for an annual vigil commemorating the 28th anniversary of the bloody Tiananmen Square crackdown in Beijing, a public display forbidden on the mainland.

Watchdog organization Reporters Without Borders ranks Hong Kong 73rd on its World Press Freedom Index, down from 18th in 2002. China is 176th, ahead of only four countries including North Korea.

Economic Ties

For many businesses, the high cost of operating in a place with the world’s most expensive housing, as well as pricey school tuition and high wages, is a more immediate concern than political freedom, said Tara Joseph, president of the American Chamber of Commerce in Hong Kong.

“Hong Kong is still a place valued by large and global businesses, because of rule of law,” Joseph said. “‘One country, two systems’ is crucial for Hong Kong. We are watching what’s going on.”

Economically, the city has grown even closer to the mainland. Hong Kong’s gross domestic product expanded almost 50 percent to $309 billion between 1997 and 2015, although its importance to China has diminished. Hundreds of international flights now serve the mainland and the yuan has global settlement centers outside of Hong Kong.

“If we want to have a piece of that action, we need to adapt,” said Vinod Mahtani, whose family has run import-and-export companies from the city since the 1950s.

Political upheavals in the West may embolden China to intervene more in Hong Kong’s affairs. In April, the mainland’s top legal affairs official in Hong Kong warned in a speech that the government would consider scrapping the concept of “one country, two systems” if it threatened China.

“The central government is interfering in ways that are very disturbing,” said Carole Petersen, a former University of Hong Kong law professor who now teaches at the University of Hawaii. “I’m not sure whether the central government even wants one country, two systems to work any more.”

( Updates with AmCham commnent under Economic Ties subheadline. )