Honestly, I think those who threw molotov cocktails, doused people on fire, and stabbed others (police included) should be jailed for 10+ years. However, I don't think marginalizing the pan-democrat lawmakers (who are legitimate civil servants) would be a good idea because do so would only push moderate pan-democrats into the arms of the radicals, especially those who support a violent revolution. Therefore, my confusion is why can't Beijing just resort to divide and rule tactics as opposed to grouping all opposition (moderates and radicals alike) into one camp (like it is doing right now). Another issue is that the radicals have now been forced underground. Would this mean HK police and the PLA would have to engage in counter-insurgency operations for years to come?
The problem is there are no real "democrats".
First, you have to remember the basis of the "laam chau"/35-Plus plan. Both of these plans essentially call for direct confrontation with the central government in the hopes that they would be met with a violent response which would open the door for direct intervention by western forces ('peacekeeping' mission) or possibly indirect (arms supply).
Second, there was the famous interview by one of the student unions' president Joey Siu on DW where she proudly proclaimed that she was not a radical, but (self-described) moderates like herself will never "break ties or criticize" radicals. This was not an uncommon stance (at least on social media).
Finally, all the so-called "democratic" leadership, the joshua wongs, martin lees, etc. are all shaking hands and smiling with people like ted cruz, mike pigpeo, tom 'army ranger' KKKotton. They have all also received money from NED.
Even if we put aside the idea of American conspiracy. We can see how the whole ideas of "moderates" and "democracy" have been totally eroded into meaninglessness. If you are truly committed to being a moderate (and many of the self proclaimed democrats seem to conveniently neglect this point), then you have to condemn the violence. Very little of the violence was actually political in nature, most of it was juvenile attempts at score-settling/petty revenge against perceived grievances against mainlanders and HK supporters of PRC. I've repeatedly pointed out on this thread, there is nothing democratic about smashing up a Starbucks, Maxim's, or some other restaurants. If you are actually a moderate, you cannot pretend this is some sort of peaceful protest tactic.
Also, functional democracy requires compromise. The "pan-democrats" have repeatedly resisted any overtures from the central government as "not enough". One major proposed reform was universal election for Chief Executive, but the main compromise would be the candidates would need to go through a vetting process first. Obviously this is a way for the central government to stack the deck, but at the same time the other side should accept that the door was opened a crack. Imagine if Obama decided to kill ACA because it didn't go far enough, then what happens? You are just stuck with the same/worse system as before. This is what happens in HK.
So long-story short, I think the government made the simple conclusion that there are no moderates left to work with.