The Pandemic Depression
The Global Economy Will Never Be the Same
On December 11, 1996, Tung Chee-hwa, a shipping magnate whose family had fled communist rule in China almost five decades earlier, was chosen chief executive-designate of post-1997 Hong Kong. He was selected from a field of three candidates that included Ti-liang Yang, Hong Kong's chief justice until he resigned to run for chief executive, and Peter Woo, one of the most important businesspeople in Hong Kong.
The event was epochal. In the past, Hong Kong governors had been appointed in London without any consultation with Hong Kong's populace. This time, all the candidates were from Hong Kong, and Tung was chosen after weeks of campaigning. The candidates were questioned on issues ranging from education, housing, and transportation to such sensitive political matters as how to deal with Chinese dissidents and whether rallies to commemorate the military crackdown in Tiananmen Square on June 4, 1989, should continue.
Tung was chosen by the 400-member Selection Committee, made up of businesspeople as well as prominent doctors, lawyers, educators, and union leaders, many of whom have entries in Hong Kong's Who's Who. They constituted a large part of Hong Kong's elite.
While the selection of Tung was considered welcome news in Hong Kong, it was widely condemned in the American press as a "rigged election." Certainly Tung was the clear favorite from the beginning, but no one can say that Yang and Woo entered the race simply to make it appear that there was a real race. Both thought they had a chance and made substantial sacrifices in order to run. Yang had to take early retirement as chief justice and give up his British passport as well as his knighthood. Woo gave up the chairmanship of two major companies, Wharf Holdings and Wheelock Marden & Co.
The proceedings could certainly be criticized as elitist and nondemocratic, but, even so, they were much more democratic than the way in which Hong Kong's last British governor, Christopher Patten, had been chosen. Patten was chosen by just one man, Prime Minister John Major.
Ten days later, the Selection Committee chose the 60 members of the legislature, known as the Provisional Legislative Council, who will assume office July 1. A majority, 33 of the 60, are members of the current Legislative Council, elected in 1995.
These actions of the Selection Committee were condemned by the American media. In an editorial December 28 headlined "Farewell to Hong Kong's Freedom," The New York Times contended that the leaders were chosen "without the slightest accommodation to democracy." That all previous governors had been chosen with even less "accommodation to democracy" was not mentioned. Nine days before the Times editorial, The Washington Post condemned the chief executive-designate as "Beijing's man," "hand-picked" by a "Beijing-controlled committee." It went on to say that "Tung's elevation is not encouraging," even though the chief executive-designate's popularity rating was higher than Governor Patten's. Meanwhile, reports in the American media about China's intention to pass "harsh new laws on subversion and treason" and "repeal laws protecting Hong Kong's civil liberties" triggered new recriminations. The New York Times affirmed its gloomy predictions in another editorial on January 30 titled "The Berlin Wall and China." The paper declared, "Beijing has left little doubt that it will strip Hong Kong of its liberties, even if that diminishes the economic benefits of the transfer to China." While The New York Times and The Washington Post are among the most influential American newspapers, they were by no means the only ones to spread the message of gloom and doom about Hong Kong.
The American media, as well as some members of Congress, have already concluded that Hong Kong's transition from a British crown colony to a Chinese special administrative region will go badly and, indeed, already has. Influential media people have made up their minds that there is little hope for Hong Kong after June 30, when the Union Jack will be lowered for the last time and the British governor and his closest advisers will depart for the United Kingdom.
Anecdotal evidence suggests that the general perception in the United States is that Hong Kong is in grave danger, if not already beyond salvation. I myself received Christmas cards from friends asking, "Are you going to stay in Hong Kong?" and assuring me that "our prayers are with you." In January, a district court judge in Boston, Joseph Tauro, decided not to permit the extradition of Jerry Lui, a man wanted by Hong Kong's Independent Commission Against Corruption on bribery and smuggling charges. The judge said that since Lui couldn't be tried before June 30, he would be tried and punished by China. Clearly, the judge did not think that rule of law would remain in Hong Kong. China's Foreign Ministry immediately issued a statement reaffirming the autonomy of Hong Kong's judicial system after the handover.
NO END IN SIGHT
Is it true that Hong Kong will lose its freedom on July 1? Will its six million people try to flee its shores for a safe haven in the West? Will the economy falter as civil liberties are curtailed? The short answer, which of course needs to be qualified, is no. All economic indicators suggest that Hong Kong's transition is going relatively well. The stock market is at an all-time high. The real estate market is booming, so much so that the territory is in danger of pricing itself out of the market. The exodus from Hong Kong, which was serious in the after math of the Tiananmen Square massacre, has slowed to the levels of a decade ago. In fact, there are now more people coming to Hong Kong than leaving. While about 10 percent of the population has left since the 1984 Joint Declaration, under which Britain promised to "restore Hong Kong to the People's Republic of China" on July 1, 1997, and China pledged to create a Hong Kong Special Administrative Region, about a fifth of those who left have returned. Moreover, recent public opinion surveys find that confidence in the future is close to 80 percent. And the atmosphere in Hong Kong is generally relaxed and not politically charged, as it was in the mid-1990s when Sino-British relations were tense. The clamor for British passports has been replaced by a small but significant number of people publicly giving them up so as to be eligible to serve as top officials in the future Special Administrative Region.
The American consul general in Hong Kong, Richard Boucher, delivered a balanced speech at the National Press Club in Washington on February 27. Boucher declared the situation in Hong Kong "basically positive with some important issues unresolved. . . . Many things are going well at this crucial and confusing time, but we have serious reservations about some key elements."
The official American government position on Hong Kong was presented recently by Jeffrey Bader, deputy assistant secretary of state, at hearings on Hong Kong held by the Asia and Pacific subcommittee of the House International Relations Committee. Bader noted that the transfer of Hong Kong's sovereignty on July 1 from Britain to China "is without precedent or historic parallel" and cited some basic facts about the territory that should assuage concerns. "Hong Kong has become the world's eighth-largest trading economy and a leading international financial center," he said. "Its one-runway airport is among the world's top five in both passenger and cargo volume, and its container port is the world's busiest. It has Asia's second-largest stock market. Over 700 foreign companies maintain regional headquarters in Hong Kong, including 85 of the world's top 100 banks." Moreover, despite the uncertainty the 1997 factor poses, "Over the last two decades, the Hong Kong economy has more than quadrupled, and its per capita GDP has tripled to about $26,000, higher than that of the United Kingdom, Canada, or Australia."
While praising Hong Kong's economic progress, Bader lamented China's lack of understanding "of the need to provide Hong Kong with the same high degree of autonomy in the political area." "A good relationship" between the United States and Hong Kong, he said, "will enhance the prospects for protecting U.S. interests in Hong Kong and positively influencing its future." He advised against "either excessive optimism or excessive pessimism." He concludes that "the transition is progressing much better than most observers forecast when the Joint Declaration was signed in 1984, or after the military assault on Tiananmen Square in 1989. On both occasions, many predicted that massive emigration and capital flight would occur. Neither has."
Given Hong Kong's performance, the extreme bullishness of the business community is understandable. The American Chamber of Commerce in Hong Kong conducts annual surveys of its member companies, and its latest, conducted in late 1996, showed that most respondents looked for a fairly smooth transition and believed that China would adhere to the Joint Declaration and the Basic Law, passed by China's National People's Congress to be Hong Kong's mini-constitution after 1997.
In fact, 95 percent of the members of the Chamber of Commerce expected the business environment in Hong Kong in the next five years to be "very favorable" or "favorable." This was an increase of four percentage points from 1995. The top five positive factors cited were Hong Kong's location, communications network, infrastructure, free port status, and taxation. The five worst factors were the high cost of housing, office space, and labor, the low quality of the environment, and inflation. Interestingly, all factors cited, positive and negative, were economic, not political. And the European, Japanese, and Hong Kong business communities echo the optimism of the American business community in Hong Kong.
Why, then, the aura of negativism surrounding the American press? To a large extent, it reflects continued hostility over China's military crackdown in Tiananmen Square. Images of tanks and armed soldiers repressing pro-democracy student demonstrators were seared into the American consciousness eight years ago. Those images remain vivid. Even though China has promised that Hong Kong would largely be able to govern itself, the press is unwilling to give China the benefit of the doubt.
Added to this apprehension is the cumulative effect of reports over the last half-dozen years, while Britain and China were squabbling over Hong Kong, that suggest China intends to dismantle Hong Kong's elected legislature and replace it with an appointed one, to abrogate or water down Hong Kong's bill of rights, and to restore draconian colonial laws that had been amended or repealed by the British. Also, statements by Chinese officials such as Lu Ping, director of the Hong Kong and Macau Affairs Office of the State Council, and Vice Premier Qian Qichen have added fuel to the fire. Hong Kong's pro-democracy politicians have called on the United States and other Western countries to condemn China for its actions in Hong Kong. As a result, there is in the American mind an unease about Hong Kong.
BEIJING'S LEGAL PERSPECTIVE
This is not to suggest that there is no truth to the pessimistic view. There will be some changes, and there may be a rollback of civil liberties. But indications thus far are that the changes will be narrow rather than sweeping.
As far as abolishing the 1995 legislature is concerned, international law is clearly on China's side. Britain had no legal right to hold elections for a term of office that extended beyond June 30, 1997, unless it could reach an agreement with China. Indeed, when China adopted the Basic Law in 1990, it expected that the two governments would reach agreement on how the last elections under British sovereignty would be conducted. In the interests of a smooth transition, China hoped that the legislature elected in 1995 would serve two years under British sovereignty and two years under Chinese sovereignty.
But Britain changed the rules after Patten arrived as Hong Kong's last governor. Patten expanded the concept of "functional constituencies," which are responsible for choosing half the members of the legislature, from the narrowly based elitist bodies created under his predecessors to embrace the entire working population. Moreover, despite an earlier Sino-British agreement, he changed the nature of the election committee responsible for electing 10 of the 60 members. The Chinese refused to accept these proposals, and when talks remained deadlocked in 1993, Patten proceeded unilaterally. The Chinese announced that they would not be bound by any unilateral British actions and that, as a result, the legislature chosen in 1995 could not remain in session beyond June 30, 1997.
Given that the 1995 legislature would only have a two-year term, Britain -- and the rest of the West -- should have offered to help China prepare for early elections after July 1, 1997, a course of action I had suggested in a column in the Far Eastern Economic Review and during a television interview with Patten. However, the British rejected my proposal, insisting that the legislators elected in 1995 should serve a four-year term and that offering to cooperate with China to hold elections in 1997 would undermine the body. The United States and other Western countries backed the British position.
To avoid a legal vacuum, the Chinese have explained, they had to set up a provisional legislature. But this is strictly temporary. A properly constituted legislature is to be elected in 1998. Members of the Democratic Party and independents are expected to be able to run in those elections. Of course, it will be necessary to ensure that the 1998 elections are conducted openly and fairly. Monitoring of them both within and outside Hong Kong may well be useful.
The controversy over the bill of rights and related legislation has a longer history. Britain is a signatory to the main United Nations human rights conventions -- the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social, and Cultural Rights -- and extended them to Hong Kong in 1968. However, it took no action to implement them and, in fact, did not tell anyone that his or her rights were being protected by the covenants. Instead, Britain repeatedly assured the United Nations Human Rights Committee that there was no need for a bill of rights or other new legislation because human rights were already fully protected. Furthermore, it declared that all existing legislation was consistent with the covenants.
The British position changed in the aftermath of Tiananmen Square. To restore confidence in Hong Kong, the British agreed to enact a Bill of Rights Ordinance for Hong Kong, which put into domestic law the provisions of the ICCPR. The ordinance stipulated that all previous laws inconsistent with the bill of rights be amended, and proscribed new legislation inconsistent with it. After the ordinance came into effect in 1991, Hong Kong's laws had to be scrutinized. The British then discovered that, despite their assurances to the United Nations, dozens of existing laws contravened the covenant. As a result, beginning in 1992, several dozen laws were amended.
In the suspicious eyes of Beijing, the British had needed these laws to administer Hong Kong, and now that the British were leaving, they were taking them away. The Chinese pointed out that Britain had assured them during the negotiations that led to the Joint Declaration that there was no need for a bill of rights. They threatened to repeal it and declared that they might have to restore the amended laws to their old form.
The Chinese also argued that the bill of rights usurps the Basic Law, which, as Hong Kong's constitutional instrument, was superior to all other laws. Three years ago, the China-appointed advisory body known as the Preliminary Working Committee, in a moderating move, recommended that instead of several dozen laws, only six needed to be restored to their old form.
What was reported in the American press early this year as the abolition of civil liberties was a decision by the Preparatory Committee, a body created by Beijing in 1993 to help handle the transition, not to accept the recommendation of the Preliminary Working Committee. The Preparatory Committee decided that only two laws, rather than six, needed to be changed. Altogether, 24 Hong Kong laws are to be repealed or amended by China's legislature, the National People's Congress. But most of those are not related to civil rights, having instead to do with British troops, marriages, nationality, and emblems -- things that would have to change because of the transfer of sovereignty.
As for the Bill of Rights Ordinance, the Chinese decided to leave it intact but to remove paragraphs that seem to make the law "supreme." Two sections in the law are relevant. One mandates that all previous laws inconsistent with the bill of rights be amended to make them consistent, and the other says that no future law can be inconsistent with the bill of rights. The removal of these provisions will revoke the power of courts to strike down laws on the grounds that they violate the bill of rights. However, the practical effect may be minor. By and large, current laws have already been examined and reconciled with the bill of rights, so the deletion of the bill's powers over previous legislation may have little effect. As far as future laws are concerned, the Basic Law provides that the ICCPR will continue to apply to Hong Kong. Therefore, no laws contrary to the covenant should be introduced. Of course, if the executive knowingly introduces legislation contrary to the covenant and the legislature knowingly passes such legislation, then the judiciary will be unable to strike it down. Monitoring of new legislation by nongovernmental bodies will help ensure that blatant disregard of bill of rights provisions does not occur, and if it does, that such actions are publicized widely both in Hong Kong and abroad.
The two laws amended under the Bill of Rights Ordinance that are slated for change are the Public Order Ordinance and the Societies Ordinance. The British amended the former in 1995, the latter in 1992. Asserting that restoring these two laws to their old form would amount to the abolition of civil liberties in Hong Kong would imply that Hong Kong did not enjoy civil liberties for 151 years.
The old Societies Ordinance prohibited local groups in Hong Kong from having links with foreign political organizations. This prohibition is also contained in the Basic Law, which calls for legislation "to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies." The amended law permits Hong Kong organizations to have ties to foreign political organizations. The Chinese say that for the ordinance to be consistent with the Basic Law, the prohibition must be restored. They also point to the current controversy in the United States over foreign funding of the Democratic Party to show that in America, foreigners are not allowed to influence political parties.
The Public Order Ordinance, in its unamended form, required organizers of demonstrations to apply for police permits before staging a protest. It was amended so that organizers need only inform the police of their plan to hold a protest. What is proposed is that after July 1, it will again be necessary to get a police permit before staging a demonstration. China notes that many American and European cities require permits from the police before demonstrations can be held. China's desire to give the government some control over demonstrations is understandable. The Chinese have repeatedly said that they do not want Hong Kong to be too "politicized." Hong Kong, they say, should be an economic city. Moreover, they are unhappy that the number of demonstrations has skyrocketed in recent years. The Xinhua News Agency, which represents the Chinese government in Hong Kong, was the scene of 165 demonstrations in 1996, or one nearly every other day. Moreover, when Sir David Wilson, Patten's predecessor, was governor, protesters were kept a certain distance from the Xinhua building. Now they are allowed to protest right outside its entrance. Protesters often camp outside Xinhua all night long, and people who work there are forced to use the back entrance. China no doubt wants to see an end to such activities.
THE BAD WITH THE GOOD
Understandable though it may be for China to want to scrap or change some Hong Kong laws, the manner in which these changes are being carried out raises concern. The Basic Law gives China the right to nullify any Hong Kong law that is contrary to it. But it is by no means apparent that the revised Public Order Ordinance is in any way contrary to the Basic Law. Similarly, the electoral laws passed under Patten, though objectionable to China, cannot be shown to be contrary to the Basic Law. By declaring that certain laws are contrary to the Basic Law without identifying what specific provisions of those laws contravene what sections of the Basic Law, China is creating the impression that it thinks the law is whatever it says it is. Such an approach is worrisome and dangerous. In fact, China's approach to Hong Kong laws often appears to be political rather than legal.
It will be helpful if international monitoring of Hong Kong continues after 1997. At present, the United Nations Human Rights Committee holds periodic hearings on Hong Kong. It is unfortunate that China has taken the position that although covenants extended to Hong Kong by Britain will continue to apply, China has no obligation to report to the United Nations because it is not a signatory. The Human Rights Committee has taken the position that reports must be submitted either by China or directly by Hong Kong. Recent reports suggest that China is seriously considering becoming a signatory to the human rights covenants. If so, it would solve a major problem for Hong Kong.
Another frequently discussed problem is freedom of the press. Article 23 of the Basic Law says that laws will be passed by Hong Kong regarding subversion, secession, sedition, treason, and theft of state secrets. Such laws will inevitably affect the press. The law against secession, for example, will probably make it illegal for anyone to advocate the breakup of China or independence for Hong Kong, Taiwan, Tibet, or any other part of China. Thus it will become illegal for a newspaper to editorialize in favor of independence. This situation has been made clear by Lu Ping, director of the Hong Kong and Macau Affairs Office of the State Council. He made a distinction between news reporting and advocacy and said that while anything can be reported, newspapers will not be permitted to advocate independence for any part of China. The parameters of press freedom will, in that sense, be narrower.
Much will depend on how new laws are worded. If they are general or vague, they may have a chilling effect on the press and on the public. The impact of the new laws can be studied and gauged, but what cannot be gauged as easily is the impact of self-censorship, which is already pervasive in Hong Kong. It is known that China keeps dossiers on reporters and editors, and many are fearful of reprisals.
It is virtually impossible to prove self-censorship, since no reporter or editor is going to come forward and admit that he wrote a story in a particular way so as not to offend China. But there is already plenty of evidence of self-censorship where media owners are concerned. Several years ago, for example, Rupert Murdoch sold the South China Morning Post. Afterward he held a press conference where he explained that he wanted to do business with China and the Post's critical stance toward Beijing had become a political liability for him. Murdoch also controls Star TV, which used to carry BBC news. But when China became angry with the BBC for a documentary on Chairman Mao that emphasized his sex life, Murdoch dropped BBC news from Star TV.
Within Hong Kong, too, there are signs that media owners have already practiced self-censorship. Several years ago, six top journalists resigned in protest from Asia Television because, they said, ATV management was refusing to show a documentary on Tiananmen Square made by Spanish journalists, who were among the last to leave the square on June 4, 1989, and had rare footage. After the resignations caused a public outcry, ATV finally showed the documentary. Another station, Television Broadcasts, or TVB, obtained the rights to the BBC documentary on Mao. To this day, the station has not shown it. The legislature has inquired and TVB management insists that the problem is simply one of scheduling and that the right time slot has not been found. The right time slot has eluded television management for several years.
UNIQUELY HONG KONG
On the whole, China will try to keep its commitments. China did not spend two years negotiating the Joint Declaration, five years drafting the Basic Law, and many more years negotiating other agreements with the idea that it would tear them all up on July 1. It must be remembered that China did not initiate the return of Hong Kong. It went along under British pressure. The Chinese position on the three nineteenth-century treaties under which Britain acquired Hong Kong was that they were all null and void because they were "unequal treaties" imposed on the Qing dynasty through gunboat diplomacy. The expiration of a null and void treaty should have no effect.
However, from the standpoint of the British, their legal right to administer Hong Kong rested on these treaties. The expiration of the 1898 lease on the New Territories would mean that they had lost the right to administer 92 percent of Hong Kong. Thus, beginning in 1979, they pressed China for a decision. The Chinese had just emerged from the chaos of the Cultural Revolution and were preoccupied with domestic problems, but the British persisted. While China was prepared to turn a blind eye to the fact that part of its territory was under British rule because of a historical legacy, it was not prepared to sign a new treaty granting an extension of colonial rule. So in the end, China decided it had no choice but to "take back" Hong Kong.
Even so, it devised a formula of "one country, two systems" under which Hong Kong would change as little as possible, despite the change in sovereignty. China derives tremendous economic benefits from Hong Kong in terms of trade, investment, and the raising of capital, so that the territory is rightly called the goose that lays golden eggs. Besides, China's ultimate goal is the reunification of Taiwan with the mainland. The Chinese know that if things go badly with Hong Kong after 1997, Taiwan will have no interest in accepting "one country, two systems." Thus there are strong reasons to believe China will honor its commitments to Hong Kong. The problem is that the communists are known as authoritarians. Saying that they will not interfere in Hong Kong's affairs is a little like a left-handed person promising to use only his right hand. The intention may be good, but before he knows it, he will start using his left hand again. There must be a conscious effort to exercise restraint.
During the 13 years since the signing of the Joint Declaration, China has become more and more involved in Hong Kong's affairs. In March it reached agreement with Hong Kong on the budget for 1997-98. But the Chinese negotiator, Chen Zuo'er, made a point of saying that after 1997 it will be up to Hong Kong to draft its own budget, and China will not be involved. It is good that such statements are being made because if the Chinese renege after 1997 these pledges can be read back to them.
The extent to which Hong Kong will be different from the rest of China is often little appreciated in the West. For one thing, the border between Hong Kong and China will remain. People in China will not be able to enter Hong Kong freely, much less settle there. Residents of Hong Kong will travel on different passports. Hong Kong will have its own currency, the Hong Kong dollar, which will remain convertible, unlike the Chinese renminbi. English will be an official language, used by the government and the courts. Hong Kong will remain a separate member of such international bodies as the World Bank, the International Monetary Fund, and the Asian Development Bank. Hong Kong will maintain separate treaties with foreign countries to govern economic relations, such as air services agreements, and extradition. In other words, Hong Kong will maintain its separate international identity.
Perhaps in the end China will break its promises of "one country, two systems" with "Hong Kong people running Hong Kong" with "a high degree of autonomy." But it is far too early to assume that will be the case.