July 1, 2017 marks the twentieth anniversary of the 1997 return of Hong Kong to Chinese sovereignty. It is a good occasion to review the past twenty years and to explore win-win avenues for both Hong Kong and the Mainland in the coming thirty years.
In years leading to the handover, Hong Kong people, having observed what had transpired next door, were understandably apprehensive about life under Beijing’s rule. About a million emigrated before the handover. They were soon proved wrong, and many streamed back, just like the many foreigners who headed to Hong Kong to advance their careers.
The key institutional arrangement to account for this happy situation is “One Country, Two Systems.” This has been helped by the rapid growth of the Chinese economy.
However, the journey has its bumps. The biggest bump led to the Umbrella Movement and inspired the emergence of fringe elements fighting for the unrealistic goal of Hong Kong independence.
Before and After 1997
The pending return of Hong Kong to China began to permeate public consciousness in the early 1980s. It evoked anxiety in a good section of the population who did not like what had happened in the Mainland. Many planned to emigrate. This trend increased significantly in the aftermath of the Tiananmen Incident in 1989.
Geoffrey Somers, a former chief information officer of the Hong Kong government, reminds us that before the handover, the overseas media were predicting that tanks of the People’s Liberation Army would be patrolling the streets of downtown Hong Kong.
This being the background, it was no surprise that many chose to vote with their feet. It was estimated that from 1984 to 1997, nearly one million persons emigrated. The result was a brain drain and a loss of capital.
Soon after Hong Kong’s return to the Motherland in July 1, 1997, East Asia experienced the Asian Financial Crisis. It was an occasion skillfully used by Beijing to demonstrate its firm commitment to the prosperity of Hong Kong. Mainland tourists arrived in large number to boost the depressed economy. With the solid backing of China’s massive economy, Hong Kong fended off the attacks of currency speculators. When the buffeting gales of the financial crisis finally died down, it even made money from the miscalculations of the speculators.
And no PLA tanks appeared on the streets. Life was like before, and business as usual. Reality has proved the scaremongers flat wrong.
In the following years after the transfer of sovereignty, many who had emigrated out of fear returned to Hong Kong, some with foreign citizenship, to work and to enjoy their favorite tea time with tim sum.
What has gone right? First, the ways Beijing and London handled the issue of Hong Kong from 1949 till mid-1997 were exemplary. Mutual benefits and pragmatism, rather than commitment to ideological purity, informed decision-making on both sides. The case provides useful lessons for students of statecraft and diplomacy.
Second, the main credit must be given to the idea of “One Country, Two Systems” — a political innovation pretty unique to Chinese political life. With political ingenuity, this idea draws insights from the historical experiences when China was ruled by non-Han minorities. These periods witnessed the co-existence of dual sets of high officials in the imperial court — that from the ruling minority and that from the Han majority.
One Country, Two Systems
The idea behind the principle of “One Country, Two Systems” may be seen as a high-level approach to kill two birds with one stone. The first goal was to have a 50-year transitional period for the people of Hong Kong to gradually adjust to its new status as a special administrative region. The idea was mooted in the early 1980s when the Chinese economy was rather backward, and Hong Kong was seen as a crucial conduit for capital, technology, know-how, and markets much needed by the Mainland. Prosperity, predictability, and stability are the key words. In other words, don’t kill the goose that lays the golden egg.
The second goal was to provide a framework to resolve the Taiwan question. This is an issue of geopolitical, national, and strategic consequence. If post-1997 Hong Kong can be skillfully managed so that the people are content and enjoy prosperity during the next 50 years, it would be a powerful and cogent case to dissuade Taiwan from harboring the unrealistic dream of political independence.
There might be even a third, though unarticulated, goal. A prosperous and stable Hong Kong would promote a positive image of China among the global community. A direct and close-up experience of dealing with a global metropolis with international taste and culture offers Beijing invaluable concrete experiences in introducing and promoting its cherished cultural achievements to the global audience.
As a whole, the 1997-2014 period was a period of tolerance, pragmatism, moderation, and common sense. The annual mass gathering held to mark the June 4 Tiananmen incident, for example, has always proceeded without trouble. Even the Falun Gong, outlawed on the mainland, are allowed to operate in Hong Kong, albeit with some restrictions. The protest in 2012 against national education was resolved quite amicably.
Unfortunately, this was to change in 2014. It was a year when a movement for greater democracy morphed into a massive street demonstration, known the world over as the “Umbrella Movement”.
It Could Have Been Better
In August 2014, Beijing passed a reform framework for Hong Kong. It stipulated that only two or three candidates who were committee-vetted and approved by Beijing could contest for the post of chief executive of Hong Kong.
The point on Beijing’s approval is simply not acceptable to most people in Hong Kong. It is normal in a democratic election that candidates for public office must be vetted to check their criminal records, their financial conditions, and other sensible criteria. Once a candidate has gone through the process successfully, he or she is a qualified candidate and needs no further approval from a higher authority.
The Hong Kong people showed their disapproval by holding a demonstration, as they had done on several occasions in the past. Many expected the good tradition of tolerance and moderation to be displayed again. That is why they were taken aback by the sight of a peaceful, festive movement degenerating into street clashes between protesters and police, with some ugly scenes.
From the perspective of Beijing, the most bitter fruit of the event was the election into the Legislative Council of eight members who are products of the Umbrella movement.
The Hong Kong police, well known for their professionalism and efficiency, resorted to violence to suppress the protest. Several public TV outlets broadcast police officers kicking and punching a handcuffed social worker and activist as he lay on the ground.
What was China doing? Beijing and its mouthpieces denounced the protests, labeling them illegal and issued stern warnings.
The whole episode was a truly negative-sum game in three ways:
One: Hong Kong has become a deeply divided society. The episode generated a social basis for political extremism calling for political independence. From the perspective of Beijing, the most bitter fruit of the event was the election into the Legislative Council of eight members who are products of the Umbrella movement. They are either openly advocating political independence or are anti-Beijing.
Two: The then-chief executive was seen to be incompetent, inflexible, and unimaginative, or simply trying his best to please Beijing, perhaps with counter-productive results. Hong Kong’s image of moderation and pragmatism has been dented and it will take a long time and Herculean efforts to repair it.
Three: The event drove angst into the hearts and souls of numerous Taiwanese who saw this as a vivid statement of the true character of the Communist Party of China. The protest movement in September 2014 came just two months ahead of local elections in Taiwan. It was an important factor in swaying voters in Taiwan to dump Kuomintang candidates. The KMT’s disastrous defeat demoralized the party and created a favorable political environment for the Democratic Progressive Party in the general election in January 2016. Taiwan now has a DPP president and vice president, and the party enjoys a majority in the Legislative Yuan. This political configuration is not something that Beijing had hoped for or wanted to see.
The whole episode suggests a strange lack of political confidence on the part of the Beijing leadership in charge of Hong Kong. Consider the period when Beijing was dealing with Chris Patten, the last governor of Hong Kong. Before his appointment in Hong Kong, Mr. Patten had been a former British cabinet minister and a former chairman of the British Conservative Party. He was certainly a seasoned politician with tons of gravitas. And let us not forget, the man enjoyed the backing of Downing Street. If Beijing could do business with him, it could certainly deal with a Hong Kong leader elected locally, most likely without the wealth of Mr. Patten’s experience. Moreover, Beijing could call on the help of the Hong Kong business community should the elected chief executive turned out to be Don Quixotesque.
The way Beijing handled the situation remains a puzzle and the real answer can be revealed only after the archive of classified documents of the CPC around the year 2014 is opened for research.
Before Deng Xiaoping introduced economic reform in 1978, Hong Kong was the only truly international port available to China in its dealings with the outside world. The entrepôt trade fueled the growth of the city’s financial sector and other auxiliary services. Even during the chaotic days of the Cultural Revolution, the city could carry on its usual business of money making.
After the historic decision of 1978, Hong Kong became the conduit for inflows of investment, technology, and business contacts, including adventurous business people among the overseas Chinese. This great oriental metropolis took on the additional role seamlessly, and was bountifully rewarded for it. It was soon to enjoy the sobriquet as one of the four little dragons, bestowing on it the enviable reputation of being an economic miracle and a darling of the World Bank.
History endows the city with a special geo-economic position, allowing it to offer special services to China’s economic development and thereby enjoying Beijing’s favors.
An important milestone in Hong Kong’s evolution was when China became a member of the World Trade Organization in December 2001. Although Hong Kong still serves as a channel to deal with the outside world, this role now shared by other major Chinese cities which are gradually upgrading themselves to be more like Hong Kong. As other Chinese cities become more integrated into the global economy, Hong Kong needs to reinvent itself in order to enjoy prosperity by continuing to be relevant to China.
Meanwhile the economies of the Mainland and Hong Kong are facing intensifying competition from other economies in the region and around the world. Herein lies the rationale for strengthening their competitive capacity through closer economic integration.
It takes the form of free trade of goods since January 2006 to free trade of services in June 2016, to the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect and mainland-Hong Kong bond connect in the near future. Hong Kong should leverage on its position as the big boy in the offshore yuan trade and its closer integration into the Chinese economy to expand mainland-oriented financing services and yuan-denominated clearing services.
There is a piece of good news for Hong Kong’s economic future. To face off global competition from regional entities like clusters around New York, San Francisco, and Tokyo, Beijing wants to develop the Guangdong-Hong Kong-Macao Greater Bay Area. Hong Kong should seize this golden opportunity and join the project as a major player.
But the value of Hong Kong to China is not limited to its economic role. For decades, this tiny dot on the map has shone brightly as a cultural center with its own brand of vibrancy, creativity, hardworking habits, and can-do spirit. For many years, it made movies in Mandarin, Teochew, and Hokkien — tongues that were not spoken by the majority of the locals. It was almost like Hollywood making movies spoken in Greek, German, and French.
Looking ahead, the future of Hong Kong lies in weaning itself off political extremism and making itself relevant to China. Meanwhile Beijing has much to gain in appreciating the city’s special position to woo Taiwan and to project its cultural influence to the wider world.
Central to the bright future is strict adherence to the principle of “One Country, Two Systems.” It enhances the moral authority of Beijing and curbs political extremism in Hong Kong. Mainland China, being the big player in the equation, would do well to show magnanimity and to continue the wisdom and long-term vision demonstrated by the late Deng Xiaoping.