HONG KONG: MORE MALAISE

By Danny Gittings

The good times are gone in Hong Kong. A city whose population became accustomed to prosperity during the boom days of the early to mid-1990s is now struggling through its second recession in four years. The property market–formerly such a locomotive of economic growth, with prices topping even Tokyo’s in the run-up to the 1997 handover to Chinese sovereignty–remains stuck in the doldrums and shows scant sign of recovery. While the Hang Seng Index has become one of Asia’s worst performing stock markets–slumping 24.5 percent last year.

But far more troubling than this present malaise is the growing uncertainty over Hong Kong’s long-term prospects. Although it has benefited tremendously from the economic opening-up policies pursued by Beijing since the end of the Cultural Revolution, China’s accession to the World Trade Organisation has called into question the future of the city’s traditional middleman role in the country’s economic dealings with the outside world.

The Hong Kong Government optimistically insists that the city will benefit from the extra business that WTO entry is expected to bring to China. It predicts that this will boost the city’s annual economic growth by 0.5 to 1 percent. But it is difficult to find many others who share such confidence. Instead, from education standards to employment opportunities, there is a widespread perception that Hong Kong is falling behind other parts of China. Suggestions that other cities–particularly Shanghai–are better placed than Hong Kong to reap the benefits of China’s WTO entry are also becoming increasingly commonplace.

For instance, Fang Xinghai, assistant president of the Shanghai Stock Exchange, has predicted that “Hong Kong’s traditional strengths may become political complications” in a recent article for The Asian Wall Street Journal (“Creative Destruction: Banking on the Mainland,” November 13, 2001). Ironically he cited safeguards put in place under the Basic Law mini-constitution, to preserve Hong Kong’s autonomy after its return to Chinese sovereignty in 1997, as potential handicaps that may prompt Beijing to encourage foreign financial firms to invest elsewhere in China instead. These include Hong Kong’s exemption from paying any tax to Beijing and the continuing existence of a separate currency.

Conscious of the question mark hanging over the city’s future role, Hong Kong authorities have started stressing the advantages the city still enjoys over other parts of China, as part of the “one country two systems” arrangement under which it enjoys a far greater degree of autonomy and individual liberties than exist anywhere else in the country. Chief Executive Tung Chee-hwa has suggested that businesses are prepared to pay Hong Kong’s high costs in return for such benefits as a solid legal framework and the free flow of information that comes from an uncensored media–both factors that are still a long way from taking root anywhere else in China.

But even these advantages are visibly eroding. The bitter row in 1999 over the Hong Kong Court of Final Appeal’s ruling granting residency rights to the China-born children of Hong Kong parents, which was controversially overturned by the National People’s Congress Standing Committee in Beijing, did lasting damage to confidence in the rule of law. Although most observers agree that the Hong Kong judiciary continue to dispense justice impartially on daily issues, a series of subsequent cases on residency rights has seen the courts rule in favour of the government. On January 10, 2002, the Court of Final Appeal even held that those given a “legitimate expectation” of being allowed to stay in Hong Kong could be denied this right if the authorities had strong enough policy reasons for doing so. This has raised concerns that, scarred by the 1998 experience, when some judges came under heavy personal criticism, the court is now reluctant to rule against the government on issues affecting Beijing, for fear of provoking another constitutional crisis.

In the media arena, government and proprietorial interference with editorial independence is also undermining Hong Kong’s former claim to have the advantage of one of the freest media in Asia. The government broadcaster Radio Television Hong Kong, which is supposed to enjoy editorial independence, has come under consistent attack from pro-Beijing politicians who argue it should not be allowed to criticise the government. Last October these received official sanction for the first time when Mr Tung echoed leftist criticism of an RTHK satiricial progamme, which had compared him with the former Taliban administration in Afghanistan. The station was also reprimanded by the government’s broadcasting authority over this incident, albeit in a mild manner.

Concerns have also been raised by events at the South China Morning Post, which because of its position as the dominant English-language paper in Hong Kong is inevitably viewed as a bell-weather of press freedom. In October 2000, 115 then journalists on the paper–including myself–signed a protest petition, following the removal of internationally renowned journalist Willy Wo-Lap Lam (now a regular contributor to China Brief) as the paper’s China editor. This came only four months after he had been publicly criticised by Robert Kuok Hock-nien, the paper’s former chairman and largest single shareholder, in an letter published by the Post.

While serving as the paper’s editorial pages editor during 2000-01, I also repeatedly came under pressure to tone down coverage of politically sensitive issues. For instance, in January 2001, Thomas Abraham, now the Post’s editor, ordered me not to serialise extracts from the Tiananmen Papers–which had just been strongly denounced by Beijing–because Kuok Khoon Ean, the paper’s present chairman and Robert Kuok’s son, had objected to this and “he signs the cheques.” Mr. Abraham also told me that it was necessary to take “a realistic view” of editorial independence. It was only after strenuous protests that this ban on publication was reversed.

Hong Kong’s past success was built on a rigorously free-market approach–in contrast to the approach taken in other so-called Asian tiger economies such as Singapore–of leaving it to the private sector to determine in which direction the economy would develop. But this too is being increasingly eroded, as Mr Tung and his advisers react to the growing doubts about the city’s future by taking an increasingly interventionist approach towards trying to carve out a new role.

But the dangers of this were graphically demonstrated when they seized onto the dot.com fad, and ended up tarnishing Hong Kong’s reputation for having a level playing-field in which to do business. The bypassing of normal tendering procedures in the 1999 granting of land for a Cyberport to Richard Li Tzar-kai, son of Li Ka-shing, the city’s most influential businessmen, provoked howls of protest from other property developers who were never given a chance to bid for the project. And it has continued to cause embarrassment as the collapse of the Internet bubble has left the government struggling to find high-calibre tenants for the project.

Now Mr. Tung and his team have seized on a new fad, talking about developing Hong Kong into a logistics hub, a goal also being pursued by several other cities in southern China. But again it is a government-driven initiative, casting aside the free-market approach of the past.

Anson Chan Fang On-sang, Mr Tung’s former deputy as chief secretary for administration until she quit last year following a series of rows with him, has warned that if Hong Kong is to preserve its present position in the light of the threat from such cities as Shanghai, it must concentrate much more on safeguarding those factors–such as the rule of law and a free media–that still give it an edge over other cities in China. “I have become increasingly concerned since the [1997] handover that too many Hong Kong people have become more inward looking,” she said in a farewell speech to the Asia Society in Hong Kong last April. “Some are so concerned about integration [with China] that they seem to forget that our strength lies in the separation which is fundamental to the success of One Country Two Systems.”

The task of maintaining Hong Kong’s competitive edge through the preservation of the values that distinguish Hong Kong from the rest of China will be the city’s greatest challenge in the years ahead. And, especially following Mrs. Chan’s departure, there must be cause for doubt how enthusiastically those now in power in Hong Kong will carry it out.

Danny Gittings is the Asian Wall Street Journal’s deputy editorial page editor.

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