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Take
that, doom-mongers
Almost since the handover, pessimists have been predicting Hong
Kong’s decline. They got it wrong, says James Featherstone
Back in 1997, when Governor Pattern – or ‘Fat Pang’
as the Chinese called him – doffed his ostrich feathers
for the last time, pessimists said that the island and its territories
would soon collapse into the not-so-freedom-loving arms of the
Chinese Communist government. Trade would be stifled, wealth
would evaporate, freedom would be curtailed. It’s been
a favourite refrain ever since. But today, that vision seems
more remote than ever.
There were certainly a number of forecasters who believed that
the tender embrace of the Chinese Communist Party would kill
the Hong Kong goose – either by not understanding how
free – and free-market – societies work, or by actually
taking steps to curtail freedoms Hong Kong residents had enjoyed
for years. But that, if residents of the territory are to be
believed, has not happened.
In fact, Hong Kong residents believe themselves to be at least
as free as they were prior to the Chinese takeover of the island
in 1997, according to a recent survey. A “freedom survey”
carried out by Hong Kong University in early January asked 1,000
people to rate their satisfaction on 10 “freedom indicators”.
The results were interesting – and heartening.
“Almost all subjective freedom indicators have gone up
over the past three months – many near record highs since
the handover,” commented Robert Chung director of Hong
Kong University’s public opinion programme which carried
out the research.
Residents were asked to rate the categories on a scale of 0-10.
Among the 10 indicators, ‘Freedom of speech’ ‘Freedom
of the press’ and ‘Freedom of publication’
all rose most strongly during the previous three months. So
much for repressive policies.
Even when clear repression occurs on the mainland, it doesn’t
seem to seep across to Hong Kong. Freedom of religious belief,
for instance, was thought by Hong Kong’s residents to
be strong and protected. Given the often violent repression
of organisatiosn like the Falung Gong byu the Chinese communist
party further north, that is a good sign. Freedom in entering
or leaving Hong Kong topped the list, too, with a score of 8.45
out of a possible ten. They were followed by ‘Freedom
to engage in academic research’ (8.1) and ‘Freedom
in artistic and literary creation’ (8.09). Clearly, the
link between of golden eggs and geese has not been lost on the
Chinese government.
Then there is the economy. It is, put simply, booming. A series
of measures put in place by the mainland government and the
government of the special Administrative Region (SAR) as Hong
Kong is known, designed to dampen down growing unrest over fears
of curtailment of freedom – there was a big protest march
in 2003 which clearly put the wind up the two governments -
has paid dividends. From the summer of that year, measures designed
to link Hong Kong more closely with the adjacent provinces of
the mainland have led to a huge increase of economic activity
across the border. Since Beijing and Hong Kong signed the Closer
Economic Partnership Arrangement in 2003, millions of mainland
Chinese have flocked across the border, bent on a very Western
form of leisure – shopping till you drop. Overnight visitors
are now spending, on average, $6,000 per capital – beyond
anything spent by other foreign visitors. The boost to Hong
Kong’s economy has been formidable.
Gross domestic product has grown by 12.1 per cent sine 2003
and the number of households with negative equity has fallen
by 30 per cent.
There are some cautious voices which argue that the current
economic boom is too dependent on personal expenditure and tourism.
George Leung, an HSBC China economist, has forecast that Hong
Kong’s GDP will fall to 4 per cent in 2005 from 7.8 per
cent last year. He warns that other sectors of the island’s
economy “should not be neglected”. But it will be
difficult to dampen the general enthusiasm. “Ever the
next decade Hong Kong is uniquely placed to become the business
capital of the world,” said one senior broker in the territory.
One thing that might be either foreboding, or encouraging depending
on your point of view, is Hong Kong’s remoteness from
Beijing. It is more than 1,500km (940 miles) from the capital,
Beijing, and its leaders do not belong to the Communist Party's
ruling elite. This remoteness from China's political pulse leads
to a nervous question: will Shanghai, 1,200km away and much
nearer to Beijing, recover its pre-communist status as China's
greatest city, and once again outshine Hong Kong as a business
and financial centre? Worse, isn't that what China's leaders,
especially President Jiang Zemin and his powerful “Shanghai
clique”, secretly want?
These fears were current a while ago, but appear to have receded
somewhat, in part as a result of the freer rules put in place
by the Chinese and the Hong Kong authorities. It doesn’t
look like Shanghai is going to eclipse the SAR. Most commentators
note that they are good at very different things in any case.
Even so, according to official figures, 77 foreign financial
institutions already operate in Shanghai, with six more planning
to set up shop soon. With the vast majority of the world’s
50 largest banks already present, the city government has promised
to double the percentage of gross domestic product accounted
for by financial services to 20 per cent by next year. That
would be far higher than China’s average of 5 per cent
and above Hong Kong’s 12 per cent, according to management
consultants Mercer Oliver Wyman.
Hong Kong’s concern is that more and more financial institutions
will follow those clients out of the city and into the mainland.
With lucrative businesses, such as cash management, becoming
more important as China becomes wealthier and a growing number
of companies seeking equity underwriting and merger and acquisitions
advice, those concerns seem justified.
Nevertheless, few analysts believe Shanghai will supplant Hong
Kong in the near term, mainly because the mainland’s developing
legal and regulatory systems make it a less hospitable place
for financial firms.
Hong Kong, busy and inventive, is here to stay as a key business
centre. Fears that China’s often repressive brand of ‘market
communism’ was simply not up to the task of managing such
a potential cuckoo have so far proved groundless.
Annual data 2002
Population (m) 6.8
GDP (US$ bn; market exchange rate) 161.5(b)
Real GDP growth (1998-2002) 2.1
GDP (US$ bn) 181.8(b)
GDP per head (US$; market exchange rate) 23,733 Inflation -1.9
Source: Economist Intelligence Unit
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