Hong Kong’s tycoons prospered these last 19 years in China’s financial green zone — the ultimate special enterprise district offering the transparency, first world banking system and rule of law the mainland sorely lacks.

Its 7.3 million people, not so much. Surging property prices — largely due to mainlanders hoarding flats — have increased inequality since the city returned to Chinese rule in 1997. Equally problematic, Beijing is reneging on pledges to allow Hong Kongers to pick their own leaders. On Sunday, a peaceful protest turned violent as police did Beijing’s bidding to silence voices of dissent.

The immediate flashpoint is China stopping pro-independence lawmakers from entering the legislature. Yesterday, Xi Jinping’s Communist Party “interpreted” the Basic Law separating Hong Kong and Beijing, declaring Yau Wai-ching and Sixtus Leung can’t be sworn in (expect much bigger demonstrations in the days ahead). The longer term crisis is China losing the plot on a place it should be learning from, not remaking in its own twisted image.

China is the economic equivalent of a fun house mirror. Extreme opacity and spin do for China what a convex surface does to human forms — obscure it into a thinner and taller entity. Beijing’s 6.7 percent growth rate and excessive stimulus hide the many sectors going pear shaped. For a reality-check on its true form, read my colleague Jonathan Laing’s piece headlined “China’s debt addiction could lead to a financial crisis.”

The irony is that the Hong Kong China wants to remake in its likeness shows Xi the direction in which he should be guiding the mainland. Granted, the mess of an election unfolding in the United States won’t enhance Xi’s affection for unfettered democracy. But as Xi endeavors to recalibrate growth engines, he should view Hong Kong as a blueprint for what China aims to be. China should aspire to the city’s laissez-faire philosophy, international banking and legal systems, open capital account, reasonably free media, access to global social-media conversations and official accountability, not stamping them out.

Sadly, Xi is working to export Beijing’s opacity to Hong Kong. His government is bullying the city’s media into self-censorship, prodding foreign companies headquartering Asian operations there to play nice, imposing Communist Party sensibilities on young Hong Kongers and muddying investors’ ability to figure out who owns this company, that property or who’s on the hook for which liabilities.

Consider the chilling effect on Wall Street icons angling for Chinese business. Executives at Goldman Sachs, JPMorgan and other investment banks are being shut out of giant mainland mergers and acquisitions deals. Might that prompt economists working in Hong Kong to avoid making bearish calls on China’s economy or investigate its true debt burden? Might stock analysts be reluctant to lower earnings estimates for Beijing-connected companies? Might Standard & Poor’s and Moody’s ignore China’s Japan-like trajectory to gain access to the massive mainland market?

International news organizations also are in an impossible situation. For all Xi’s talk about epochal change and tolerance of a “new normal,” China is becoming even more a black box. Journalists fear retribution via the work visa process as they struggle to investigate China’s shadow banking system, the government’s balance sheet and the state of play on anti-corruption efforts from Hong Kong. Might their freedom to police Xi’s government disappear soon? It’s anyone’s guess with pro-Beijing Leung Chun-ying holding the reins in Hong Kong.

China tried to eclipse the democracy story with cold hard cash. In November 2014, Xi sought to change the subject from Beijing’s clumsy diplomacy with a long-promised Shanghai-Hong Kong Stock Connect scheme. He did so amidst the biggest protests since Hong Kong’s return to Chinese rule. What Xi really did, though, was export China’s asset bubbles to the green zone. Hong Kong banks, investors and retirees are more exposed to China’s imbalances than even. Also, efforts to avoid mainland froth — including higher stamp duty — are too little, too late.

A similar dynamic is at play with China’s Asian Infrastructure Investment Bank overreach. It’s grand that China wants to help developing Asia, but it should get its domestic house in order before going global. Ditto for Beijing’s designs on stifling the sources of Hong Kong’s vibrancy at a moment when inequality is deepening. Today, the issue is young lawmakers suffering China’s wrath. Tomorrow, Xi’s meddling may cost China — and the world — an economy many long held up as an exemplar.

William Pesek, executive editor of Barron’s Asia, is based in Tokyo and writes on Asian economics. www.barronsasia.com

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