Hong Kong's Progress Toward Reversion: Implications for the US - Assistant Secretary for East Asian and Pacific Affairs Winston Lord describes US policy toward the return of Hong Kong to China - Transcript

US Department of State Dispatch, July 22, 1996

Mr. Chairman, I am pleased to have the opportunity to appear before this subcommittee today to discuss Hong Kong.

In less than one year, Hong Kong will revert to Chinese sovereignty. At midnight on June 30,1997, Hong Kong's 155-year history of British colonial rule will cease and it will become a Special Administrative Region of the People's Republic of China. This transfer of sovereignty is without historic precedent or parallel, and the world will be watching. Already, countless prognosticators have opined about what the reversion will mean to Hong Kong's future. Thus, it is an opportune time to review Hong Kong's progress toward reversion and its implications for the United States.

Hong Kong Today

First, a few words about what Hong Kong is today. By almost any standard, Hong Kong is one of the world's most successful societies. With a land area of only 420 square miles and a population of just 6.3 million, Hong Kong is the world's eighth-largest trading economy and a leading international financial center. Its 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.

Over the past two decades, the Hong Kong economy has more than quadrupled, and its per capita GDP has tripled to about $24,000--higher than that of the United Kingdom, Canada, or Australia. Unemployment is only 3.2%, regular budget surpluses have produced a secure fiscal environment, and Hong Kong has accumulated over $58 billion in foreign exchange reserves. Hong Kong is one of the safest cities in the world and is Asia's most popular travel destination, with a record 10.2 million visitors in 1995. Hong Kong is also a center for telecommunications technology and has long been a media hub for Asia, with over 700 newspapers and periodicals based there.

But numbers tell only part of the story. The reasons underlying Hong Kong's extraordinary success are significant as well. Hong Kong has one of the world's most liberal trade and investment regimes. For the second year in a row, the Heritage Foundation rated Hong Kong as the freest economy in the world. Government regulation is transparent and nonburdensome. Taxes are low and the Hong Kong dollar is freely convertible. The workforce is educated, highly motivated, and industrious, and Hong Kong's pool of enterprising entrepreneurs is legendary.

Other factors are more subtle, but they are no less compelling. Hong Kong people live and work within a trusted framework of law and justice--without economic, social, or political repression. Civil liberties and individual political, cultural, and academic freedoms are protected assiduously. The rule of law is well-established, and Hong Kong courts act as independent arbiters between the government and the governed. Freedom of expression is guaranteed, including the freedom to advocate changes of policy and practice without fear of government retribution.

This combination of favorable government policies and an open way of life has given Hong Kong people the energy, enterprise, and confidence to pursue their own interests within the bounds of the law. Their instinctive belief in these values--combined with their hard work, resourcefulness, and imagination--has transformed Hong Kong into the thriving international entrepot it is today.

The Road to Reversion

Hong Kong's status after reversion to Chinese sovereignty is defined in two documents: the 1984 Sino-British Joint Declaration and the 1990 Basic Law promulgated by the People's Republic of China. Together, these documents are China's promise that, although sovereignty will change in 1997, Hong Kong's way of life will not.

The Joint Declaration provides that the post-1997 Hong Kong Special Administrative Region will be directly under the authority of the P.R.C. central government. Unlike other regions of China, however, Hong Kong will retain a high degree of autonomy in all matters except foreign affairs and defense. The Joint Declaration established the concept of "one country, two systems" for Hong Kong, and guarantees that the social and economic systems, lifestyle, and rights and freedoms currently enjoyed by the Hong Kong people will remain unchanged for at least 50 years. The Joint Declaration is an international agreement registered with the United Nations; it is the international legal foundation upon which Hong Kong's relations with the rest of the world are based.

The Basic Law provides the fundamental governing framework for implementing the "one country, two systems" principle in Hong Kong consistent with China's commitments in the Joint Declaration. It says that the P.R.C. socialist system and policies will not be extended to the territory. The Basic Law reiterates the Joint Declaration promise to allow Hong Kong to exercise a high degree of autonomy and to exercise separate executive, legislative, and judicial power after 1997.