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Hong Kong’s Return to China

by Dr A R Chowdhury
ON July 1. 1997 Britain will complete one of recent history's strangest bargains and surrender Hong Kong and its six-and-a-half million people to Chinese sovereignty. China will formally resume control of Hong Kong, ending its 156-year-old British colonial administration. As a watershed event marking the end of western colonial presence in Asia. Hong Kong's metamorphosis from British crown colony to Chinese special administrative region (SAR) has raised a number of questions around the world. What wilkhappen to Hong Kong after the reunification? Will mainland China cut back the free-market spirit of Hong Kong? Or will Hong Kong lead China further down the road toward market reforms?
China has promised to preserve the free-rnarket characteristic of Hong Kong for at least fifty years, within Communist Party-run China. A new term has been coined to describe the relationship between Hong Kong and China — one country, two systems. Tung Chee Hwa. replacing the territory's outgoing British Governor. Chris Patten, will still have the familiar sources of authority in the island — the judiciary, the police, and big business. But new Institutions from China will now step into the picture including Beijing's Foreign Ministry and the People's Liberation Army. The incoming institutions represent the 'one country' side of the famous rhetoric. They complement the existing structures, on which the 'two-systems’ part rests. Tung Chee Hwa's job is to hold them together.
A recent article in The Wall Street Journal suggests that the addition of Hong Kong will change China's statistical profile overnight; from the world’s 11th largest trader to the fourth-largest; from a distant-second to a close second behind Japan in total foreign exchange holdings, with nearly $200 billion; and from a nation of no significant financial markets to the world's fifth-largest banking and equity market.
During the last few decades. Hong Kong has served as China's back door to global markets. Before China launched its reform programme in 1978. Hong Kong gave China an indirect opening to International trade and finance markets. A large proportion of China's trade pass through Hong Kong; while China's state-owned enterprises have invested heavily in Hong Kong's real estate and financial markets.
Although the reunification
of Hong Kong further increases China's access to global markets. it also raises questions of political and economic integration. Hong Kong has long been touted as a showcase of free market, with private property rights, low trade barriers, market-determined prices, common-law system, and more open political process. Despite recent moves toward market reform, China’s economy, on the other hand, is still state-dominated. with only pockets of private free enterprises. A vast majority, ,of. China's, labour, force work in either the state-subsidised agricultural sector or in the. state-owned enterprises.
The challenge for China is to somehow assimilate Hong Kong without destroying its economic foundation. Were China to establish complete control of the real estate market, financial sector, or trade, labour and capital resources might leave the territory for other safer haven, notably, Singapore. On the other hand, the profound income Inequalities, nigh levels of conspicuous consumption. and considerable political freedom in Hong Kong might threaten China's socialist commitments, especially given the free movement of labour and capital across the Hong Kong-China border. China has to find a way for exploiting Hong Kong's free market stature without giving up its economic control.
Recent evidences suggest that the integration of Hong Kong with the mainland is going on full swing for some time now. About 80 per cent of Hong Kong’s manufacturers operate in China, employing about six million mainland workers, almost the size of Hong Kong's entire population. Investors from Hong Kong have funnelled more than $100 billion into China and own about $50 billion in Chinese-backed companies' stock. Although Cantonese is the main dialect in Hong Kong, the entertainment industry in the island are releasing movies, recordings, and other entertainments in Mandarin. the mainland's chief dialect.
Despite the rhetoric, China has always wanted to see Hong Kong as an economic city within China, not a political city outside its realm. Although the term 'one country, two systems' is used to describe the relationship between them, all indications are that Hong Kong is fast becoming an integral part of the mainland. It isn't Just one country, but, in thq economic sense, at least, mov-
ing towards one system.
The policies of the western governments as well as the media towards Hong Kong have been strongly guided by their concern with the violation of political rights in the territory. Instances.-such as. Tung Chee Hwa's plan to dismantle the territory’s existing legislature and introduce 'national security' provision into laws governing public demonstrations and political organisations have been used by the western media as examples of heavy-handedness by the Chinese authorities.
A largp number of Asian cOuiiti'fesrin the Yigibff.' hdU^' ever, view Hong Kong's reunification with much more optimism than does the West. The positive attitude demonstrated towards the hand over in most of the Asian capitals (Taipei is an exception) can be traced to a host of economic, political and strategic reasons.
China's dismantling of the last-minute democratic reforms introduced by Chris Patten is seen by most Asian nations as necessary in order to prevent the territory from being used as a pawn in the subversive campaign against the mainland. Economic factors also dictate their position. Hong Kong is one of the major source of venture capital in Asia. It has invested heavily in various countries in the region. In terms of trade flows, Hong Kong accounts for almost one-fifth of all trade within Asia. Asian companies, on the other hand, account for a large proportion of the island’s trade and Investment. In addition, the Asian nations have also been strongly guided by country-specific concerns in their policies towards Hong Kong.
Returning to the original questions raised at the beginning of this article, it can be said that China, in its own political and economic interest, would not significantly change the fundamental character of the Hong Kong economy. A flourishing economy in Hong Kong would help to rejuvenate the economies along the eastern coast of the mainland. Moreover. it would demonstrate to the outside world China’s commitment in keeping its part of the bargain as determined under the Sino-British deal signed in 1984. It would also enhance China's stature in the world community thereby gathering support for its various causes, e.g.. its membership in the World Trade Organization. China can only gain by trying to replicate, witnin the mainland. Hong Kong's economic success.