In my first article for 2017, I am going to think about things beyond Hong Kong. The world is moving toward a turning point, and 2017 may well be the year when we move past that point and toward another phase of a long-term cycle, which is the combined outcome of a number of cycles.

First of all, the de-leveraging of the global economy has speeded up. The US resumes the cycle of tightening that was put on pause early in 2016 amid heightened financial market volatility. China's leaders are also pledging tougher policies to reduce risk in 2017. With "prudent and neutral monetary policy" rather than the previous "flexible" or expansionary stance being emphasized by the annual Central Economic Work Conference, what we are going to see in China will also be a de facto tightening.

With the world's two largest economies de-leveraging, a lot of the paper value will evaporate. The process is necessary but painful and risky.

Second, globalization is going into reverse. By many measures, globalization has been in full retreat since the financial crisis of 2008. For many decades up until 2008, global trade volumes have been increasing at a healthy rate. But the crisis and recession stopped trade growth in its tracks, and it hasn't recovered; 2008 was the all-time peak of world trade as a percentage of total output.

It took time for people to realize that globalization was not working as promised. This is why the European Union is falling apart, and Donald Trump has been elected president in the US. The global trend is against powerful centralized institutions and toward a decentralized local homogeneity. Separatist movements are everywhere - we can also feel this strongly in Hong Kong.

The last wave of growth is largely created by globalization, or what US journalist Thomas Friedman coined as the "flattening of the world". What will happen to the global economy when this process is stopped and reversed still remains to be seen.

Last, and perhaps most importantly, China is overtaking the US as the world's largest economy. While we all know this to be inevitable and the only question is when - some say it has already happened, some say it will take place in 2017 or 2018 - we have not yet fully considered all the implications.

Some political commentators claim that the US is embarking on a historic shift away from Pax Americana by electing Donald Trump. This is, of course, a very Western and American-centric point of view. We may well say the reverse is true - that Trump was elected precisely because Pax Americana is no longer tenable.

Anyway, it is naive to think that empires fall because of a lack of will to dominate. From "Pax Romana", the "Roman peace" established by the emperor Augustus, to "Pax Britannica", the name for the century of British global hegemony between the Napoleonic Wars and World War I, to "Pax Americana" and its subsequent fall, the logic and mechanisms are the same.

With all these cycles reaching a turning point at the same time, a completely different global order will soon unfold. Uncertainties remain, but Hong Kong may be especially vulnerable because of its status as the interface between a declining world order and an emerging new world order.

We often like to say that Hong Kong has many advantages because of "One Country, Two Systems", but we never heard of any disadvantages. It is almost too good to be true - having all the benefits without the risks. But we also know that every coin has two sides and that we cannot have our cake and eat it too.

The success of Hong Kong was based on many assumptions, among them that globalization was working and of the superiority of the US over China. These assumptions are now falling apart. When times are good, our double exposure to both systems brings in wealth at an accelerated rate. The leverage may work the other way round.

Viewed from this part of the world, Hong Kong has survived the transition from "Pax Britannica" to "Pax Americana" relatively smoothly. The next transition will be very different, for we will be at the center of the storm.

(HK Edition 01/04/2017 page10)