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By Bloomberg

If there's any likely winner from China's unprecedented clampdown on Hong Kong, it's Singapore.

All the tiny city-state needs to do to attract the giant banks, hedge funds and multinational firms currently clustered in Hong Kong is sit back quietly as Beijing's henchmen do their worst. The firing of teargas at peaceful demonstrators over the weekend marked a chilling assault not just on Hong Kong's civil liberties, but on the city's economic future.

Let's first dispense with the fiction that Hong Kong authorities aren't doing Beijing's bidding. The Communist Party set the stage for student-led demonstrations this week when it rejected any compromise to open up Hong Kong's political system in 2017, when voters are supposed to elect their Chief Executive directly for the first time. Chinese President Xi Jinping has taken a similarly hard-line stance toward every perceived challenge to his rule -- whether from disgruntled Uighurs in Xinjiang, former Party bigwigs or popular microbloggers. Hong Kong's top officials had every reason to assume their superiors in Beijing would want them to suppress initial student demonstrations quickly, before this Wednesday's National Day holiday.

All the Chinese regime is demonstrating, however, is why Shanghai will probably never replace Hong Kong as a global financial hub. The clampdown in Hong Kong comes just as Xi's government is tightening the screws on the global media on the mainland, investigating a fast-growing list of foreign companies and making it harder to discern which politicians' families own which assets. For all the talk of bold reforms and accepting a "new normal" of lower growth, Xi has tightened rather than loosened the government's hold over the economy and society.

As I've pointed out before, China should be learning from Hong Kong's first-world institutions. It should emulate the laissez-faire ethos, rule of law, open capital accounts and free-wheeling media environment that underpin Hong Kong's success -- not stamp them out. Instead, Xi's government appears to be intent on remaking Hong Kong in China's deteriorating image.

If Beijing continues to erode the liberties and institutions that have made Hong Kong such a great place to do business, multinationals aren't suddenly going to shift base to Shanghai. Indeed, by the time the mainland's favored hub reaches Hong Kong's current level of transparency and financial sophistication -- if it ever does -- all the banks and household corporate names would've already moved to Singapore, or elsewhere in the region.

Those asking what's next for China's "one country, two systems" doctrine are pondering the wrong question. This pipedream, one that seduced Margaret Thatcher into returning Britain's former colony to Beijing, is unraveling before our eyes. China's decision to renege on its promise to let Hong Kong pick its own leader by 2017 comes as political frustrations rise in Macau as well. One can only imagine how darkly Taiwanese now view the prospect of the mainland's embrace.

No, the real question is where Xi is taking the world's most populous nation. Rather than adapt to international standards, China is becoming even more of a black box. Meanwhile, investors can only fret about runaway debt, a growing shadow-banking system and official corruption. Xi's policies smack more of fear than strength. In the long run, it's China that will pay the price for them.