Hong Kong -- A 1997 deadline approaches

By , Special to The Christian Science Monitor

Hong Kong is an adopted child with an uncertain future.

Its geography, population, and its past are inexorably linked to mainland China. Its present economic strength flows from the rule and capitalist laissez faire of Britain.

Although this curious mix of East and West has benefited both China and Britain for 140 years, Hong Kong agonizes about its future. The thriving British colony faces a sticky question: Will China or Britain become its motherland?

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The meeting later this week between Chinese leader Deng Xiaoping and British Prime Minister Margaret Thatcher in China has already been greeted with a flurry of speculation over the sovereignty question. Hong Kong is not the central concern of the Thatcher visit, and the most that is likely to happen is that Britain and China will agree to institute formal consultations over Hong Kong, perhaps on the basis of some bland principles.

But the colony, the world's third most important financial center, is undergoing the psychological and political equivalent of an earthquake tremor. In 1997 most of its territory legally reverts to China - the end of a 99-year British lease.

Hong Kong continues to generate more global trade than China itself. The economy continues to grow at a rate well above the current worldwide average. But the stock market gyrates, the Hong Kong dollar exchange rate sinks, and recently a bank run threatened briefly to get out of hand.

The ultimate depressant consists of a simple calculation. If Hong Kong is to revert to Chinese sovereignty and jusrisdiction, there will be no waiting for 1997 to arrive. Once reversion was agreed or announced, business confidence in Hong Kong would plummet so rapidly that it is likely that the handover would take place well before the agreed date.

This extreme anxiety represents a volatile switch from optimism to pessimism. Until a few months ago the dominant, sometimes naive, conventional wisdom was that a way would be found to keep Hong Kong both capitalist and free.

There were many good reasons for optimism, most of which are still valid. Two-way Hong Kong-China trade has greatly increased. Chinese banks, trading companies, and other concerns that are communist-owned or influenced have been taking ever greater advantage of Hong Kong's free enterprise environment. Communist-backed property companies participated in the property boom, even to the point of paying inflated prices for land in tte New Territories, which, theoretically, would belong to China anyway on July 1, 1997.

Hong Kong has proved useful as China has tried to concentrate upon the ''four modernizations'' and on sustained economic growth. Hong Kong firms have helped build and staff new hotels for China's booming tourist trade as well as being the source, or jumping-off point, for 80 percent of China's tourists. Hong Kong investors have been the first to take advantage of China's new stress on joint ventures.

The colony also is a place where China can sell ever greater quantities of its consumer goods, water, pigs, vegetables, and so on. In the last two or three years China's direct earnings have tripled to between $6 billion and $7 billion, roughly 40 percent of China's foreign-exchange income.

There have been some disadvantages for China, such as the ''insidious'' influence of Hong Kong television and Hong Kong-derived smuggling of items as diverse as Chinese Bibles and pornographic magazines. But overall, the colony has assumed the very substantial benefits it provided China were so great that the Chinese would be bound to find some way of sustaining the status quo.

Now, amid current Hong Kong unease, there seem to be more reasons for doubt than hope.

First and last, China and Britain have, in their separate ways, undermined confidence in the entity that profits both of them. Regarding China, Hong Kong's optimism that economic rationality would prevail has given way to pessimism that China's political imperatives might dictate another solution. Regarding Britain, pessimism has grown as it has been realized that ''Little England'' might not want to stay on, although the Falklands episode briefly revived hopes that Great Britain might revive.

Doubts about Britain started gathering momentum when the new Nationality Bill last year reduced Hong Kong's 2.6 million British subjects to the rank of second-class citizens with no claim to British residence. Initially this was seen as unsettling. More recently, it has taken on the appearance here of an early British move toward divesting itself of its Hong Kong responsibilities.

Resentments and doubt have also accrued from Britain's placing the many Hong Kong students seeking higher education in Britain on a par with foreign students. The British tendency to view Hong Kong's economic achievements, particularly its textile exports, as a source of competition rather than as a source of pride also makes a negative impact.

Neither the government in London nor the British authorities in Hong Kong have shown much awareness of the plummeting confidence. The last time condifence was buffeted, during riots here in 1967, the British government staunchly reassured the citizenry that Britain would stand by Hong Kong. In the run-up to her visit, Mrs. Thatcher has found it impolitic to make the same noises about sovereignty over Hong Kong as she did recently over the Falklands.

The best illustration of the Hong Kong government's incompetence was a recent sale of prime Hong Kong Island land to the local branch of the Bank of China at about half the market price. The Hong Kong government handled the announcement badly, obviously thinking the deal would generate confidence. But in present circumstances many saw it as the kind of appeasement that precedes a retreat.

With Britain, Hong Kong fears a sellout. With China, Hong Kong fears suppression.

The doubts and gloom sown by China have come mainly in the last two to three months, though the Hong Kong press may be as much to blame as the Peking leadership. Officially, China, like Britain, has kept silent on its thinking about Hong Kong's future. China's own guided press has, in substance, said nothing more than what Huang Hua said to the United Nations in 1972. (See sidebar at right).

But Hong Kong's anxieties, the 1997 date with destiny, and the Thatcher visit have together forced Peking to think more about the problem than it otherwise might have done. In numerous recent Chinese-language magazines and newspapers in Hong Kong these thoughts have been reported, perhaps with questionable degrees of authenticity:

* Mr. Deng and other Chinese leaders have been quoted as saying China will reclaim sovereignty on or before 1997. The Chinese word for sovereignty implies control and is not necessarily distinguished from jurisdiction, as in English.

* The indications have been that China will seek to retain capitalism - and Hong Kong's economic benefits - by making Hong Kong ''a special administrative region,'' as provided for in the new Chinese communist Constitution. But Hong Kong Chinese note that capitalism here rests upon British law; the freedom to travel and trade rests on British passports (albeit devalued ones) and on trade agreements and quotas possible only because of British colony status.

Objectively, these comments could be China's trial balloons, imaginative Hong Kong reporting, or indications of an initial Chinese bargaining position. Authoritative sources indicate Peking is unhappy with much that has been printed.

In China, as in Britain, there appears to be a lack of understanding of what makes Hong Kong tick - and what could stop it ticking. China understandably feels that if the British can run Hong Kong, so can they. Britain understandably feels that Hong Kong's success is because it is British. Both miss the essential fact that Hong Kong's success is largely perhaps essentially due to its being insulated from the vicissitudes of Chinese Communist politics and policies, and also from those of British domestic politics.

Both Britain (over the Falklands, over US sanctions, over Europe) and China (over US arms sales to Taiwan, Japan's textbooks, and generally, as at the 12th Communist Party Congress) are currently striking a strongly nationalist note in their foreign policies. This may not be the best background for talking about the future of an international city.

Even if both Britain and China are willing to strike a meaningful compromise over Hong Kong, their respective domestic political considerations could make this difficult.So, barring some new formulation allowing the colony self-determination, there are essentially only two solutions.

Peking and London can negotiate on the ways and means of returning the whole of Hong Kong to Chinese jurisdiction. Or they can achieve some form of Anglo-Chinese understanding whereby China asserts sovereignty while Britain continues to exercise jurisdiction.

It is clear from several recent polls, seeking to measure Hong Kong Chinese opinion, that Hong Kong's preference lies with something along the status quo. But if the numerous negative strands in the present situation continue to concatenate, say several well-placed and thoughtful observers, they could produce a vast, but still avoidable, tragedy.

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