Hong Kong at a Crossroads

April, 2002: Cover Story

By Greg Rushford

Published in the Rushford Report

          HONG KONG—Five years ago, one of history’s greatest experiments was launched when this British colony — one of the world’s most vibrant bastions of economic and personal freedoms, if not political freedoms — was turned over to a China still controlled by the Communist Party. For more than a decade before July 1, 1997 , two key questions had been widely debated. First, would the mainland gradually smother Hong Kong ’s freedoms, turning China ’s Special Administrative Region into just another (overly regulated, corrupt) Chinese city? Or would Hong Kong and its nearly 7 million energetic and resourceful residents continue to be a shining model of the rule of law for a mainland China that has been struggling to modernize? While books were written by writers trying to answer the questions, nobody could really know.

            Now, five years after the handover, there is a real track record to measure. I came here last month to take a closer look at that record. It was my sixth visit since Hong Kong ’s 1997 reversion.

            I found that there are still no simple answers (what about China is ever without nuance?). Happily, there really is much good news to report. But there is also enough bad feng shui in the air, and hints of more to come, to cause serious concern. Five years into trying out Deng Xiaoping’s famous “one-country, two-systems” concept, Hong Kong today is at another crossroads. Important questions about the path to democracy and the future structure of the economy are hanging. 

            Furthermore, some concern should also be directed to U.S. foreign policy under President George W. Bush, which has been characterized mostly by neglect of Hong Kong . Considering how important Hong Kong’s considerable financial and legal expertise is to China’s aspirations as a member of the World Trade Organization to move to an economic system based on the rule of law — with political reforms that would inevitably follow the political freedoms, sooner or later — Bush’s inattention is lamentable.

            Unlike President Bill Clinton, who came here and also invited Hong Kong democracy advocates like Martin Lee to the White House, Bush has displayed little understanding of Hong Kong’s importance to China’s development. When Bush met with Chinese President Jiang Zemin in Beijing in February, he didn’t even mention Hong Kong , although U.S. interest in human rights and Taiwan were on the agenda. [When Bush met with Hong Kong’s chief executive in the White House in July 2001, the new president had been either poorly briefed, or he didn’t know the right questions to ask. See, Mr. Tung Comes to Washington , The Rushford Report, August 2001, Page One.]

            “I hope that President Bush will come here,” says Lee, who helped Clinton lobby the U.S. Congress on behalf of China ’s entry into the World Trade Organization. Frank Martin, president of the influential American Chamber of Commerce in Hong Kong , agrees with Lee. A Bush visit to Hong Kong , Martin says, “would send a very positive signal.”

            The good news about Hong Kong is that there really is much reason for optimism. It is interesting to re-read some of the doom-and-gloom books written before the handover, like “The End of Hong Kong,” or dire press accounts like a famous Fortune magazine article in June 1995 predicting that the handover two years hence would be “The Death of Hong Kong.” Hong Kong is still very much alive.

            The freewheeling energy of the place and its beguiling Eurasian charm hasn’t really changed since I first came here more than three decades ago. Hong Kong is still defined by its dedication to the rule of law, and to personal and economic freedoms. The Heritage Foundation continues to report that Hong Kong ’s is the world’s freest economy. (I even saw a yacht named Laissez-Faire tooling about Victoria Harbour .)

            The freedoms of association and of the press remain strong. Hong Kong newspapers like the South China Morning Post, the venerable English-language daily, continue routinely to run stories that would land reporters on the mainland in jail. The Falun Gong, whose members are routinely subjected to arbitrary arrest and beatings on the mainland, can often be seen near the exits of Hong Kong ’s Star Ferry, passing out literature protesting China ’s human rights situation without harassment from the authorities. And so far at least, Hong Kong officials have (wisely) resisted continuing pressures from mainland officials like Li Peng, one of the architects of the 1989 Tiananmen Square murders, to enact a tough anti-subversion law — even though Article 23 of Hong Kong’s Basic Law mandates that some such statute be passed.

             In 1984, the People’s Republic of China and the United Kingdom solemnly agreed in a Joint Declaration that when Hong Kong became a Special Administrative Region of China, “the

current social and economic systems in Hong Kong will remain unchanged, and so will the lifestyle.” That sounds like a fair description of life in Hong Kong today.

            But there’s far more to this Chinese puzzle.

            Probably the best short answer about Hong Kong ’s track record since the handover was summed up in a January 2002 report by Rep. Doug Bereuter (R-Nebraska), who watches Hong Kong closely. According to the congressman, so far the handover has been “a success,” although a “qualified” one. The jury is still out.

            The reason for the qualification is that there are serious concerns about where Hong Kong is headed in the next five years. Many of the concerns stem from the attitude of Hong Kong ’s chief executive, Tung Chee-hwa, who has just been tapped by Beijing to serve for a second five-year term beginning on July 1. Tung’s “election” was in accordance with the provisions of the Basic Law. But it was also widely perceived as an embarrassing, uncontested Chinese-style affair that lacked real credibility (not that the Brits ever bothered to consult Hong Kong people on their choice of masters, either).

            “The ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures,” says Article 45 of the Basic Law. In an annex, the document declares that Hong Kong may adopt universal suffrage after 2007 — but only with the “consent” of the chief executive, and a two-thirds majority of the Legislative Council, which shall then be “reported to the Standing Committee of the National People’s Congress [in Beijing] for approval.”

            The problem is that to date Tung has refused to even discuss the subject, much less say whether universal suffrage would have his consent. “The time for that debate has now come,” says the American Chamber’s Frank Martin. Martin and other knowledgeable  foreign business leaders understand what a powerful signal would be sent to the world if Hong Kong under Chinese rule would become — like Taiwan and, someday, China itself — a democracy. The British, for all their contributions to the civilized place Hong Kong became under colonial rule, never delivered on that.

            But what does Tung believe? Tung’s role models seem to be relatively benign authoritarian leaders like those in Singapore . My basic rule of thumb in these matters is, if a man has reached the age of 64 (Tung will turn 65 next month) and has never shown any serious interest in democracy in his entire life, worry.

            Another concern is that Hong Kong ’s press — part of the lifeblood of what makes Hong Kong special — is widely perceived to be in decline. The Hong Kong iMail doesn’t even bother to report political news these days. The iMail’s front page looks disconcertingly like Section 2, the business section. And Danny Gittings, who was the editorial pages editor of the South China Morning Post in 2000-01, recently wrote in China Brief, a publication of the Washington-based Jamestown Foundation, that he “repeatedly came under pressure to tone down coverage of politically sensitive issues.”          Gittings reports that in January 2001 he was ordered not to run extracts of the Tiananmen Papers, an order which was only reversed after “strenuous protests.” Gittings is now the Asian Wall Street Journal’s deputy editorial page editor. (Full disclosure: I have been contributing columns to the AWSJ since 1995.) The man who Gittings says pressured him is Thomas Abraham, who is now the SCMP’s editor.

            “The reason I was against publishing a series of extracts from the Tiananmen papers was that a) the book was freely available in every book shop in Hong Kong, b) we had run news stories quoting extracts, and c) we had reviewed the book,” Abraham says.

            In an appearance on a Hong Kong radio program last month, Abraham declared that “self-censorship is an appalling allegation to make…I don’t see a shred of evidence.” The editor added that it did a “great disservice to the journalists who work for us” for people to make such allegations.

            The worry isn’t that Hong Kong authorities would emulate their mainland colleagues by cracking down crudely on the press. It is difficult to imagine a Hong Kong reporter being arrested in Hong Kong .

            Nor is the worry that Hong Kong would even become like Thailand . Last month, Thai Prime Minister Thaksin Shinawatra threatened to expel two correspondents for the Hong Kong-based Far Eastern Economic Review, after they had reported that Thailand ’s king was dissatisfied with Thaksin. Then the Economist was forced to halt distribution of an issue that contained a special section on Thailand that contained tough criticism of a disturbing tolerance for corruption in Thaksin’s administration. As busy as he has been harassing foreign journalists and working on ways to discourage foreign investment in Thailand , Thaksin is an equal-opportunity oppressor; he has found the time to crack down on local media as well. While Thaksin apparently retains popular support in Thailand — he’s a billionaire who, naturally, runs as populist — in Hong Kong such conduct would be considered crude.

            [Last month Prime Minister Thaksin said that he had been “shocked” to learn that officials in his anti-money laundering office had been after the bank accounts of Thai journalists. It is hard to imagine any Hong Kong officials behaving like this. In fact, Clarie Lo, Hong Kong ’s narcotics commissioner, heads an OECD financial action task force based in Paris . Lo’s task force is currently providing significant support for the war against terrorism, by pressing countries to tighten up their anti-money laundering laws to dry up terrorists’ money holes. Hong Kong ’s own anti-money laundering regime offers one of the best models in the world, and is even more stringent in some respects than the United States ’. This alone is sufficient reason for an appreciative President Bush to come to Hong Kong .] 

            Nor is Hong Kong ’s attitude toward the free press that of Taiwan ’s. Hong Kong media entrepreneur Jimmy Lai has set up a Taipei edition of his popular Next magazine. Last month, Taiwanese authorities raided Next’s offices and confiscated 160,000 copies of an issue reporting on $100 million tucked away in two government secret slush funds for espionage being run out of the National Security Bureau. A violation of national security, Taiwanese officials claimed. Censorship, shot back the Committee to Protect Journalists, from New York . In Hong Kong , the idea of censorship remains scandalous. Jimmy Lai’s independence makes him persona non grata in Beijing and Taipei , not Hong Kong .

            However, the real worry in Hong Kong is that its press will lose its freedom in more subtle ways, gradually becoming as sterile as Singapore ’s or Malaysia ’s. There have been too many less-than-subtle hints from the Chinese mainland that Hong Kong journalists should tread carefully when it came to reporting on politics. One important reason that Singapore and Kuala Lumpur — by contrast to Hong Kong, New York, and London — aren’t world-class financial centers, is that no city can be a world-class financial hub without a free press and the free flow of information. That’s why the revelations by former SCMP editor Danny Gittings and the decline of the iMail should sound the alarm bells here.

            Another common worry here is that Hong Kong will be replaced by Shanghai as a financial center. Many people seem to believe this. This worry is so often voiced, in fact, that last month Chinese Premier Zhu Rongji took the unusual step of saying publicly that he didn’t believe it. “The Central Government will give its full support to anything that will bring tangible benefits to Hong Kong ,” Rongji declared.

            Of course, the most important thing that Beijing ’s government could do to help Hong Kong ’s economy would be to keep its opinions to itself. Since about half of China ’s state-owned banks are plagued with bad loans, mainland authorities have enough of their own problems to worry about. The last thing that Hong Kong needs is economic advice from a Communist Party that still thinks it can guide China ’s economy.

            It is difficult to see how Shanghai could displace Hong Kong . The Communist Party has guided Shanghai ’s development, even to the point of approving shopping malls in Pudong, a new, government-inspired city next to Shanghai , according to Hong Kong press reports. Shanghai does not have a strong business ethic, or a mature stock market, or an independent judiciary, or freedom of the press and the free flow of information, or a tradition where government refrains from interfering in the economy.

            “Until Shanghai can run down the same list and tick off all those same points too, Hong Kong will continue to have a comparative advantage over Shanghai and the rest of China ,” notes Joe Borich, who was U.S. Consul General in Shanghai from 1994-97 and is now executive director of the Seattle-based Washington State China Relations Council.

            Apart from universal suffrage, the other big issue that Hong Kong now faces is whether the government will resist the temptation to stick its fingers into the private economy, which is currently in recession (growth rate in 2001 was merely 0.1 percent) and is afflicted with a record-high unemployment level (more than 6 percent). Will Hong Kong turn away from its current role as a bastion of economic freedom and become more like overly regulated cities — again, like Singapore and Shanghai ? 

            Once again, most of the worries are traced to the chief executive’s attitude. Tung Chee-hwa seems to be an industrial policy type of guy — using

government money to promote a high-tech sector by building a Cyberport (with a no-bid contract awarded to Richard Li, the son of Li Ka-shing, Hong Kong’s biggest tycoon); a Disney project, plus various costly infrastructure projects that in Washington would be labeled pork.

            It didn’t help business confidence last month when Financial Secretary Antony Leung, a man who is reputedly a potential chief executive candidate, described the government’s role in the economy as “a pro-active market enabler.” This sign that Hong Kong was moving away from the economic principles that have made it such a standout, the Asian Wall Street Journal observed in an editorial, was “a dark day for Hong Kong.”

            Defending himself, Leung argued that he was not out to try to “pick winners” in the marketplace, and that he was committed to reducing public spending from 23 percent of gross domestic product to 20 percent, or even lower.

            Despite the assurances, not everyone here remains convinced. Hong Kong has “abandoned

fiscal discipline,” Mark Clifford and Frederik Balfour wrote in Business Week last month. Hong Kong has two choices, Clifford and Balfour declared: “It can abandon its small-government past in favor of a bigger state with higher taxes. Or it can look to its roots and reinvent itself as a world leader in small, effective government.”

            On this, as with other key issues regarding the “one-country, two-systems” experiment, the jury is still out.

            What’s the predicted verdict?

            I agree with democracy advocate Martin Lee, who told me last year and again last month: “I’m pessimistic in the short run, but optimistic in the long run.” Lee was referring not just to Hong Kong , but China ’s progress toward the rule of law in recent years. You’d have to be a fool (or a member of the U.S. Congress) not to see that. Like Lee, I hope that China ’s membership in the World Trade Organization — with all that entails for developing a rule of law system — will inexorably lead to political reforms.

            The views of Tsang Yok-sing, who heads the Democratic Alliance for the Betterment of Hong Kong, also deserve respect. The DAB has leftist roots and is commonly characterized as pro-Beijing. One can take issue with Tsang on economic issues. But the more important point is that even this “pro-Beijing” Hong Kong politician isn’t advocating that Hong Kong people exchange their lifestyle for that of the mainland. Tsang was out of town last month, so I didn’t get to see him this time. But last year he told me that he, too, advocated universal suffrage for Hong Kong .

            So, bet on Hong Kong ’s continued bright future. But don’t bet the bank, not yet.

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