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

A Transition in Progress

And what of the future? In the runup to reversion, a plethora of views on Hong Kong's future abound. Some contend that Hong Kong will be contaminated by a repressive system intolerant of dissent and any form of democratic government, thereby violating the letter and spirit of the Joint Declaration. Others claim that nothing will change, and that Hong Kong will continue as an economic dynamo, a major center for business and finance, and an entrepot and incentive for continued economic and political liberalization in China.

The reality is that Hong Kong's transition is still a work in progress that will play out over many years. One year from July 1,1997, the most accurate view of its progress is neither doom-laden nor blindly optimistic, but is a realistic balance of the promise and the problems that have appeared to date. On the one hand, the transition is progressing better than most observers forecasted when the Joint Declaration was signed in 1984, or after the military assault on Tiananmen Square in 1989. On both occasions, many predicted that, by 1996, massive emigration and capital flight would have already occurred. Neither has. On the other hand, Beijing has often made moves or statements that suggest at the least an insensitivity to what makes Hong Kong stable and prosperous.

Hong Kong's economy remains healthy and strong. Most Hong Kong business representatives view the future positively and are less concerned with the uncertainties over political arrangements. Recent surveys by the American Chamber of Commerce, the Hong Kong Government, and the Japanese Chamber of Commerce show that over 90% of international investors remain optimistic about Hong Kong's prospects after 1997. A stable law-and-order situation enhances this position; Hong Kong is not a city gripped by violence, panic, or corruption. And emigration from Hong Kong has actually decreased over the past two years. In its place, many Hong Kongers have acquired foreign passports and have returned to Hong Kong.

In the end, the answers lie primarily in Beijing and Hong Kong. It is critical that Beijing adhere to its commitment to preserve Hong Kong's high degree of autonomy. The signals it sends to Hong Kong and the world during the next year will be watched closely for indications that China will handle controversial transition issues with sensitivity and in accordance with the Joint Declaration.

Beijing has ample reasons to live up to its commitments; no country has benefited more from Hong Kong's success than China itself. Hong Kong is China's largest trading partner and much of China's two-way trade uses Hong Kong as a transshipment point. Sixty-five percent of foreign direct investment in China now comes from or through Hong Kong. Over 50,000 enterprises in Guangdong Province alone use Hong Kong investment and employ over 4 million P.R.C. workers.

Indeed, China has relied on Hong Kong's easy access to investment capital; sophisticated financial, technical, and legal expertise; and entrepreneurial skills to fuel its own economic growth over the last two decades. Beijing knows that Hong Kong's vibrant service economy could quickly dissipate through steady or mass emigration if its signals or actions erode confidence. Many in Hong Kong carry a second passport to Canada, Australia, or the United States as insurance against future uncertainty. Beijing wants to send a positive message to Taiwan that a promising future follows the reunification Beijing seeks. Thus, Beijing has a real interest in making its stewardship of Hong Kong a success; the issue is whether it understands what is needed to do so.