The Hong Kong citistate, poised to inherit the future

June 03, 1996|By Neal R. Peirce

HONG KONG -- Are economic-powerhouse citistates destined to eclipse nation states in the 21st century If so, Hong Kong poses a fascinating test case. Next year on July 1, China assumes sovereign power over this pulsating, globally connected city of 6 million. Will Hong Kong's vigor and investment power be quashed?

The prevalent theory is: It's up to China. If the power brokers in Beijing step too heavily, revoke too many of the economic and personal liberties Hong Kong enjoys, they'll trigger free-market panic and cripple a powerful economy.

Agonizing drumbeat

The world press is keeping up an agonizing drumbeat -- ''Darkness Dawns'' (Far East Economic Review); ''The Death of Hong Kong'' (Fortune).

Voices of concern are even heard on the Chinese side. Li Ruihuan, chairman of the Chinese People's Political Consultative Committee, recently compared Hong Kong to an antique teapot being sold by an old lady who knows nothing about tea drinking. True aficionados, he noted, understand that what makes such an ancient pot so special is the residue of tea leaves inside. But the foolish old lady washed out the insides of the teapot before putting it up for sale.

So Mr. Li warned his Beijing friends: ''If you do not understand how a valuable item works, you will never be able to keep it intact for long.''

There's no denying the perils. Few of China's leaders have had any personal exposure to Hong Kong, its rule of law, its entrepreneurial, open economic order.

At stake is China's contractual agreement with the departing British to follow a ''one country, two systems'' policy, allowing Hong Kong's political liberties and free market to continue for at least 50 years.

So far, China is adhering to the technical terms of the agreement. Yet it's making many people nervous as it dictates a political transition that will exclude leaders of the vocal Democratic Party and backers of pro-democracy agitators on the mainland.

There's some irony in the political posturing of Chris Patten, the last British governor, who loudly espouses democracy for post-'97 Hong Kong. The British didn't permit a single free vote for any office from the creation of the crown colony in 1841 until 1991.

Many Hong Kong business and civic leaders say are betting that China, out of sheer self-interest, will permit a healthy amount of continuing democracy and economic freedom. What other realistic choice does it have?

Consider the mercantile muscle of this virile citistate:

In the past 20 years, Hong Kong's trade in goods has expanded 44-fold. A tiny territory of 413 square miles has become the world's eighth-largest trading economy, and boasts the world's largest container port.

The Chinese Geneva

''Hong Kong is becoming the Geneva for the Chinese global economy,'' says a local economic analyst. More than 60 percent of direct foreign investment in China and two-thirds of China's foreign syndicated loans come through the territory, which has an astounding 500 banks and deposit-taking companies from 43 nations. Some 1,850 multinationals have offices here.

In the last decades, Hong Kong has transformed itself from a low-wage manufacturing center to a financial, service-based economy with massive investments focused in the neighboring, fast-urbanizing Chinese province of Guangdong. Today some 4 million people in China work for Hong Kong industrialists -- while per capita income in Hong Kong has soared to $24,000 a year, more than Great Britain or Canada, second only in Asia to Japan.

China is Hong Kong's largest trade partner; Hong Kong is China's largest. China itself has $26 billion in investments in Hong Kong enterprises.

Extensive travels through China in the early '90s, says billionaire Hong Kong-based investor Ronnie Chan, convinced him that China's ''open economic policy is truly pervasive and irreversible.'' Beijing truly understands now ''that to redistribute wealth, you must first create it.'' Mr. Chan has since invested $1 billion in China, focusing on mid-tech manufacturing like printing presses.

Bumps in the road

He and other believers in a successful transition acknowledge that there will be bumps in the road, some perhaps serious. But in the end, they assert, economic force and logic will win out in a strong, largely democratic, dynamic Hong Kong citistate.

Walk the streets of this lively city, crowded with people, a world symbol of what hard work and capitalist power can achieve, and the idea that it will soon sink into a miasma of communist statism would seem absurd.

More likely, Hong Kong's success will telegraph a message to citistates everywhere -- assert yourself, invest, lead and in a post-Cold War world, nation states and their ideologies will be no match for your economic power.

Neal R. Peirce writes a column on state and urban affairs.

Pub Date: 6/03/96

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