Many observers predicted dramatic changes after

Britain returned Hong Kong to China in 1997. In-

stead, Beijing has adopted a cautious strategy in-

tended to slowly take the mystique out of the island

and bring it back into the mainland fold.

DOSSIER

In the Hong Kong historical museum is a framed frontpage of the Milan daily “Corriere della Sera” dated Ju-

ly 1, 1997. Under the headline “History is Made. And thestory continues” is an opinion piece written by TizianoTerzani that analyzes the move of Hong Kong to Commu-nist China after more than 150 years of British adminis-tration. Seeing my interest, a security guard comes up tome and asks what language it’s in. I reply, and ask herwhat’s changed over the last 15 years. “I had to get a jobafter reunification,” she tells me. “My husband’s salarydropped and prices went up.”

Her story is the norm. Hong Kong, for decades referredto as having the world’s freest economy or as the engineof the Asian economic revolution, opened a new chapterof its short history when it was officially returned to Chi-na, one fraught with uncertainty. Many at the time pre-ferred not to speculate on the effects of the handover.Pushed by alarm surrounding the 1989 TiananmenSquare massacre, an estimated 10 percent of Hong Kong’sresident population had left he British colony before1997.

Now, 15 years after what in Britain was known as the“handover” and was referred to as the “reunification” inChina, the island and its surrounding areas continue tomaintain privileges and a level of freedom unthinkableon the mainland. A border still divides the two territo-

ries, mainly to avoid a wave of migration to the island.In accordance with “One Country, Two Systems” prin-

ciple negotiated between China and Britain before thehandover, Hong Kong remains a capitalist paradise dom-inated by laissez-faire policies, a next-to-nonexistent taxburden, and a massive presence of foreign capital. Thanksto its special status, set to last through 2047 (50 years af-ter reunification), Hong Kong “where the games areplayed,” as former Chinese leader Deng Xiaoping wasfond of saying. More than any other figure, Deng was re-sponsible for China’s pro-capitalist transformation andits economic boom, which has peaked in recent years.Not surprisingly, Hong Kong is now the only offshoremarket for the Chinese currency, the renmimbi, and aplatform for Beijing’s efforts to give it an internationaltrade value, taking advantage of the ongoing weakness ofthe dollar and euro.

But the anomaly represented by Hong Kong is not on-ly economic. Its people still enjoy civil liberties that areclose to Western standards, reflecting years of British law.The press is relatively free. The Internet isn’t censored.Residents can log into Facebook or Twitter as easily asthey can in Europe. Meanwhile, a few kilometers awayon the mainland, all sites that even hint at freedom of as-sembly are inaccessible, dimmed by government censors.Street protests are illegal and those that do crop up are

usually repressed swiftly and violently. On June 4 of eachyear, Hong Kong commemorates the anniversary of theTiananmen Square massacre, the only place in Chinawhere such public remembrance is allowed. Even the re-unification anniversary date, July 1, still generates regu-lar protests. On the 2003 anniversary, more than 500,000demonstrators took to the streets notwithstanding the p-resence of Chinese Prime Minister Wen Jiabao.

“The past 15 years are proof that the ‘One Country, T-wo Systems’ approach has worked,” says Tang Rui, whoheads the media and public relations department of Chi-na’s Hong Kong Special Administrative Region, the sta-tus officially given to the island. “Hong Kong retains ahigh degree of autonomy while the central governmenthas not interfered in its affairs.”

But skeletons lurk behind the veil of freedom andprogress. In spite of official statements to the con-

trary, Beijing is in fact far from being a neutral observer inthe political and economic developments of the formerBritish territory. First, the governor of Hong Kong is al-most a direct offshoot of the Chinese central government,chosen by a committee composed of members whose loy-alty is to Beijing and are ready to endorse the party nom-inee, as evidenced by the most recent governor’s electionin March.

8180

Chinese Shadows

A young woman in Hong Kong’s chic Central District.

Hong Kong and China:A Whiter Shade of Paletext by Francesco Guarasciophotos by Alessandro Rizzi

Tuen Mun

Tai O

Tai Po

Hoi Ha

HONGKONG

05

10

15 km

CHINA

New Territories

Kowloon

Lo Wu

Shenzhen

Aberdeen

Hong KongIsland

LantauIsland

South ChinaSea

MirsBay

MACAU

0

50

Eiu, Onu, Wb, Wef, Heritage Foundation, Transparency International, Global Peace Index

Political Risk & Country Analysis - UniCredit

15on 142 countries

12on 183 countries

40

2114

Judicialindependence

Corruption

100max.

risk

Reference values:first country Norwaylast country Somalia

Political stabilityGovernment effectivenessSecurity

Qualityof bureaucracy

min.risk

max.risk

min.risk

0

Political indicatorsHONG KONG

AREA 1,104 km2

POPULATION 7,15 million (2012 estimate)

MEAN AGE 43.4 years

RELIGION Multi-religious: 90% local religions;

10% Christian.

FORM OF GOVERNMENT Limited democracy

SUFFRAGE Universal (age 18)

HEAD OF STATE Chinese President Hu Jintao (since March 2003)

HEAD OF GOVERNMENT Donald Tsang Yam-kuen (since June 2005)

GDP (nominal) $256 billion (2012 estimate)

INFLATION 3.6% (2012 estimate)

0 10

15 km5

east . crossroads europe number 41 . april 2012

Chinese Shadows

82

Hong Kong’s so-called special status is based on a kindof constitution principle (‘Basic Law’) that the Chinesehave often interpreted to their advantage. The most strik-ing example in the early 2000s, when legislation was in-troduced in an effort to bar any subversive activities di-rected against Chinese central government. The short-term goal was to ban the Falun Gong religious cult.Though already banned in China, the Beijing governmentremains worried about its potential growth and spread.In the long term, however, the law, which was worded ina deliberately vague way, could have had a devastatingeffect on all protest.

Popular uprisings prevented its introduction, but newefforts are in the offing. “Hong Kong already has a

blacklist of foreign militants that the Chinese governmentwould move to shut down at any critical moment,” saysYang Lixin, journalist at the Epoch Times, a New York-based print and web newspaper banned in China. “It’s al-ready happened as a result of Tiananmen massacre com-memoration, when several activists were denied entryvisas into Hong Kong,” added Yang. Yang himself can’treturn to China, which he left in 1997, at the risk of fac-ing in absentia convictions. Asked whether he’d returnto Hong Kong, he smiles and shakes his head. “For now,that’s not a good idea.”

Nor is press freedom a given. “If you work backwards,it only takes a couple of steps to reconnect Hong Kong me-dia ownership with the Communist Party,” says Yang,who expresses concern about rising self-censorship a-mong journalists on the island. Independent data tendsto support Yang’s worries. The World Press Freedom in-dex compiled by Reporters Without Borders placed HongKong in 54th place on its global list in 2011-2012, laggingbehind Moldova and Haiti. In 2010, it was ranked 34th,while it was in 18th place in 2002.

Beijing’s fears that Hong Kong has the making of a hotpotato aren’t entirely unfounded. Historically, HongKong has always been a haven for free spirits. Many usedthe island to hatch revolutions that were then played outon the mainland. The movement against the last Manchuemperor was supported and funded from Hong Kong.Sun Yat-sen, who founded the first Chinese republic in1911 and a tireless organizer of protests against the deca-dent empire, was educated and trained in Hong Kong.

At the same time, it seems Beijing wants to play theHong Kong game carefully. Chinese officials seem con-vinced that what eventually happens in Taiwan, and theentire Chinese model, is contingent on the outcome of theHong Kong transition. Tanks and restrictions in civil lib-erties aren’t what will bring the island in line with partythinking, or so the thinking goes in Beijing. It has to flow

from the economy. “There’s a clear plan in Beijing to s-low Hong Kong’s growth by delaying the implementationof its strategic infrastructure,” says a Western consultantbased in Hong Kong who preferred to remain anony-mous. “The goal is a gradual economic harmonization be-tween Hong Kong and the surrounding region of Guang-dong, so that, over the course of the transition period, thetwo areas are gradually placed on the same economicplane and that as a result the appeal of Hong Kong’s sup-posed uniqueness disappears.”

Beijing doesn’t aim to starve Hong Kong. The island re-mains crucial to the economic and political developmentof the mainland. Instead, the efforts to reduce the island’sallure are far subtler. “The failure of Hong Kong wouldnot only be cause for international embarrassment, but

would also endanger the party itself,” argues John M. Car-roll, professor of history at the University of Hong Kong.

Still, recent years have witnessed a steady decline inthe island’s vibrant economy. In fairness, Beijing’s poli-cies may not be to blame. The avian flu epidemic of 1997-1998, the subsequent Asian financial crisis, and the 2003outbreak of SARS (Severe acute respiratory syndrome),which hit Hong Kong harder than anyplace else in theworld, all contributed to damaging the island’s econom-ic status.

Beijing hasn’t done much to help out. On the contrary,Shanghai long ago replaced Hong Kong China’s financialhub and reference point. The southern city of Schenzhen,another special economic zone (SEZ), is soon expectedto surpass Hong Kong in terms of container volume traf-fic. Chinese authorities have deliberately preferred Shen-zhen, a mega-city of 10 million inhabitants, though itlacks the geographical advantages of Hong Kong, which

DOSSIER

83

Passersby seen leaving Hong Kong’s

Cheung Kong Park after attending an event.

0

50

Eiu, Onu, Wb, Wef, Heritage Foundation, Transparency International, Global Peace Index

Political Risk & Country Analysis - UniCredit

15on 142 countries

12on 183 countries

40

2114

187° Congo

4,9 millions-176.125

n.d.n.d.

54 8

131

n.d.

94,6%43,31° Seyshelles (19)

Last Comoros (64,3)

Business Environment

178° Eritrea 135° Yemen 187° Qatar 142° Haiti

2

on 183 countries

(1° Singapore, 183° Chad)

11

on 142 countries

(1° Switzerland, 142° Chad)

1on 179 countries

(1° Hong Kong, 179° North Korea)

Judicialindependence

Corruption

100max.

risk

Reference values:first country Norwaylast country Somalia

Political stabilityGovernment effectivenessSecurity

Qualityof bureaucracy

min.risk

max.risk

min.risk

0

Political indicators

Human development

Press freedom

Gender gap

% of seats held bywomen in NationalParliamentsB rain drain

Literacy rate

Social unrest

Wealthdistribution

(Gini index)

Internet users

Social indicators

(on 100,000 people)

verylow

veryhigh

Jailed population

Net migration

1° Norway1° Finland

1° Iceland

1° Rwanda

1° Switzerland

min.risk

max.risk

Ease of doingbusiness

Globalcompetitiveness

Economic freedom

Literacy rate

east . crossroads europe number 41 . april 2012

has a nearly perfect natural harbor (Hong Kong means‘fragrant harbor” in Cantonese dialect). Even inland Can-ton, reachable only along the Zhu Jiang River, is makingimmense strides as a Hong Kong alternative.

The security employee at the museum isn’t the onlyone who’s had to endure belt-tightening. At the sametime, life in Hong Kong is hardly a hardship. The island’seconomy remains extremely dynamic, and apart from abrief recession in 2008-2009, GDP growth rates has beenrunning at about five percent annually. Contrast that withthe annual Chinese growth of eight-to-percent and thegap seems is in line with Beijing’s alleged scheme to bringHong Kong gradually into painless economic alignmentwith the mainland.

Migration from the mainland to Hong Kong has recent-ly contained a strange mixture of newly rich Chinese ea-ger for more shopping outlets alongside a large continent

of unemployed workers and pregnant women, the latterseeking health care services.

The so-called harmonization policy may produce someshort-term advantages for Hong Kong’s economy, but inthe end the numbers will stop adding up. The first to be-come aware of a slowdown will likely be Hong Kong’s in-ternational partners, located primarily in Europe. Tradewith Hong Kong is already falling off, as is European di-rect investment in the island, and Hong Kong’s in Europe.

The European Union would seem to have an easy cardto play to make things right by starting negotiations

on a free trade agreement with Hong Kong. After all, theEU signed a historic bilateral agreement with South Ko-rea in 2011. But Hong Kong is among the EU’s top Asianpriorities. It is focusing instead on Japan, Vietnam, Indiaand Malaysia.

Chinese Shadows

84

DOSSIER

85

FACING PAGE Night view of China’s

IFC government building in Hong Kong.

RIGHT Streets and buildings in Kowloon, Hong Kong.

We already have a high trade volume withHong Kong,” says John Richards, the Eu-

ropean Commission official in charge of traderelations with the Far East. “Negotiating a freetrade agreement simply isn’t among our prior-ities.”

That would make perfect sense if Europe w-eren’t in the advanced stages of negotiations ofreaching just such a deal with Singapore, HongKong’s sister island when it comes to EU tradevolume, financial assets, tax haven status.When asked why Singapore and not HongKong, Richards just smiles. A number of Chi-nese officials and state media journalists re-spond in much the way, which is to say theywon’t answer the question. That Taiwanesediplomats, who carefully monitoring the situ-ation and would do anything to reach a dealwith Brussels, know what such a deal wouldmean to Hong Kong. Pressed, Hong Kong reluc-tantly agree, no surprise since they just reacheda free trade agreement with EFTA countries(Switzerland, Norway, Iceland and Liechten-stein). Given the framework and chess-gameevolution of events, it seems clear the EuropeanUnion has already sacrificed Hong Kong toavoid creating tension with China.

But Europe’s hand washing policy, an oldschool maneuver, may hurt more than usual. Not only isHong Kong’s future at stake, but also that of China and Eu-rope itself. Beijing’s harmonization policy is pushing de-velopment toward socially and environmentally unsus-tainable levels. In Guangdong, blue-collar Chinese haveincreasingly ignored warnings and protested againstworking conditions. The province is a venue for a crucialbattle for the defense of worker rights that are increasing-ly at risk not only in China but also in other parts of theindustrializing world. It’s a major battlefield in the socialdumping war (the national or international importing of

cheap labor), a phenomenon considered among the rootcauses of rising unemployment and the gradual drop-offin worker rights in the West.

But Europe doesn’t seem to want to look too closely.The attitude of its leaders resembles that of the HongKong taxi driver who bitterly criticizes the changes sincethe island went over to Chinese rule, but when confront-ed with prospect of even more dramatic changes after thereunification is complete, knows to respond only withsarcasm. “That doesn’t worry me,” he says, smiling. “Bythen I’ll be dead.” .

east . crossroads europe number 41 . april 2012

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