50 Years with no Change?

The 1st of July marks the 20th anniversary of the establishment of Hong Kong as a Special Administrative Region of China. The Joint Declaration between the United Kingdom and China, which agreed the reunification of Hong Kong with China after British rule, was signed between Prime Minister Thatcher and DENG Xiaoping in 1984. The terms for the handover in 1997 were enshrined in a Basic Law for Hong Kong which promised that Hong Kong could continue to have its own economic and political system with a high degree of autonomy for at least 50 years after reunification until 2047.

The slogan adopted by DENG Xiaoping for this was One country, two systems; the success of the Joint Declaration and the subsequent sophistication of the “hands off” treatment for Hong Kong, whilst maintaining a one party state for China, was hailed as evidence of the sincerity of China’s open door policy to the West. The settlement helped DENG Xiaoping to achieve his goal of being remembered by history as the man who reunified China. Whilst in economic terms 50 years represents a significant period of time, in historical and cultural terms it is a grain of sand in an hour glass. China has since continued to maintain its open door policy, with huge success.

The last 20 years have certainly seen a dramatic rise in the the development and wealth of China’s regions to catch up and overtake Hong Kong’s economy. Whilst Hong Kong has contributed hugely to that development, it now finds itself in competition with China’s regions and represents less than 3% of the total GDP of China. Hong Kong still has an edge of advantage in terms of the ease of doing business, location, shipping, communications, the protection of the legal system and the rule of law. But it has undoubtedly become more complacent and bureaucratic. The laissez-faire policies that led to the entrepreneurial growth of Hong Kong in the 1970s have been stifled by increasing red tape that has made the business environment less efficient.

This weekend will see China’s President XI Jinping visiting Hong Kong to join in the 20th anniversary celebrations, and the inauguration of Hong Kong’s new Chief Executive Carrie Lam. What is the local feeling in Hong Kong about the prospects for their society in the next 30 years, and can the Special Administrative Region of Hong Kong preserve its distinctive characteristics within the embrace of China’s one party state? The Chinese Communist party does not take kindly to criticism, and it is possible that the energetic activities of young intellectual idealists and radicals in Hong Kong could trigger an adverse reaction if it were to be perceived that political activism might spread out of control to the mainland. But it would be a mistake to patronise or underestimate the Hong Kong people, who are amongst the most resourceful and intelligent on the planet.

During China’s Cultural Revolution DENG Xiaoping said “It does not matter whether a cat is black or white as long as it catches mice”. He was referring to the need for pragmatism at that time, and not to punish communist party members who did not display the colours of revolutionary fervour. By the same analogy, in terms of modern day China, you might interpret this aphorism as meaning that as long as Hong Kong keeps performing an important economic role, then there is every reason for China to maintain a pragmatic arms length treatment of dealing with local political activism in Hong Kong by leaving this to the control of the local government.

But to enjoy this confidence from China, the Hong Kong administration needs to shake off its complacency and to start listening more to the Hong Kong people to address some of the failings of government bureaucracy. This is the challenge facing Carrie Lam as she takes office, the need on the one hand to undertake reforms to keep Hong Kong competitive in global terms, whilst maintaining China’s respect that she has a safe pair of hands that can be trusted to feed the “Hong Kong cat” that has always, and always will, catch the mice.