Thursday, November 20, 2014

Maintain Comparative Advantage and ProcessTransformations: Hong Kong after 1997

Introduction

After the transfer of sovereignty over Hong Kong in 1997, Britain’s colonial involvement with Hong Kong, which lasted for 154 years had finally come to an end. However, when Hong Kong officially became a part of People’s Republic of China, some challenges for both the Chinese government and Hong Kong’s local citizens showed up, which put Hong Kong at a historical crossroad. Hong Kong, as an international metropolis, was already famous for its unique economic structure and sound legal system; but China, was still relatively backward in terms of the level of economic development. In this article, I will briefly introduce the development and changes of Hong Kong after 1997, from the perspective of economy, politics and regional relationships.

Background Information

Let me provide some information about Hong Kong today. Hong Kong is a relatively tiny region but with a high living standard and free social atmosphere. Unlike China, in Hong Kong, citizens can enjoy many rights like the freedom of belief, speech, and demonstration, which were protected by laws. Meanwhile, as a free port, Hong Kong has a good international reputation, many countries and regions are willing to build partnership with Hong Kong.

Economy

In terms of economy, I would like to make a brief introduction to Hong Kong’s economic level first. Above all, the most intuitive statistic I would like to research for is undoubtedly the Gross Domestic Product (GDP) in last three years (see graph 1) and per ca-pita GDP (see graph 2)[i] in last thirteen years. In the graph, one can see that although the GDP of Hong Kong in last three years was not quite stable, the overall tendency in the last three years is obviously rising. Meanwhile, graph 2 indicates the per ca-pita GDP actually keep rising during the last thirteen years except for the decrease in 2003 and 2008 caused by financial crisis. Moreover, according to the World Bank Data, Hong Kong’s income level is high,[ii] which shows Hong Kong is a place with high living quality. Based on those statistics, although I did not find the GDP graph of Hong Kong during the last seventeen years, one still can easily figure out that after 1997, Hong Kong’s economy keep increasing and currently Hong Kong is absolutely prosperous.

Graph 1
Graph 2



After 1997, in order to adjust Chinese market and policy, Hong Kong experience an economic structural transformation which brought some good opportunities to Hong Kong. According to Y. C. Richard Wong, “The opening up of China presented Hong Kong’s manufacturers and producer services suppliers with enormous opportunities to engage in outward processing and support other forms of export-oriented manufacturing activities Guangdong province on an unprecedented scale.”[iii] So after 1997, since China is large and has many resources including natural resources and human resources, Hong Kong is no longer need to do manufacturing itself, but can just be a hub for Chinese products. Because of the low manufacturing and salary cost, Hong Kong can make more profits by exporting Chinese products.

Superficially, Hong Kong’s economy is very affluent and diverse after 1997. However, there are still some serious problems that the Hong Kong Special Administrative Region (HKSAR) government need to be aware of. I talked about after Chinese opening up, there is a good opportunity for Hong Kong to be a hub for Chinese products, but in fact, things are not going as smoothly as many people think. One of the most important reason is China has already recognized the environmental pollution which is brought by manufacturing. According to Leo F. Goodstadt, “From 2003, stricter enforcement of new Mainland labour and anti-pollution laws drove down Hong Kong manufacturers’ profits.”[iv] Therefore, it would be necessary for HKSAR government to find a countermeasure as soon as possible.

Politics

In order to comprehend the political situation of Hong Kong after 1997, I would like to introduce the structure of HKSAR government first. The head leader of the government is called the Chief Executive, and the organ which assist him is called the Executive Council. According to the official webpage of the Hong Kong government,
“Except for the appointment, removal and disciplining of officials and the adoption of measures in emergencies, the Chief Executive shall consult the Executive Council before making important policy decisions, introducing bills to the Legislative Council, making subordinate legislation, or dissolving the Legislative Council.”[v]
Thus unlike provinces of China, Hong Kong government has its own autonomy, which is similar to the British parliamentary system, and it would be the most acceptable administrative system for Hong Kong citizens.

The Basic Law is the supreme law of Hong Kong, which was submitted by the Chinese Communist government in 1990. In the Basic Law, one of the most important and unique policies is the “One country, two systems” policy. According to the fifth article of the Basic Law, “The socialist system and policies shall not be practiced in the Hong Kong Special Administrative Region, and the previous capitalist system and way of life shall remain unchanged for 50 years.”[vi] Under the current situation, this policy works well in most of the case, although there is still some misunderstanding and problems, China seems to do a good job on administrating Hong Kong without drawing much antipathy from Hong Kong citizens.

However, as I have mentioned, some problem still remains in the Chinese policy towards Hong Kong, and these kinds of problems had actually led to some social and political affairs. One of the biggest challenge should be the Hong Kong’s democratic challenge. According to Alvin Y. So, “These democratic activists formed political groups, participated in elections, and began to act like an opposition party toward the Hong Kong colonial government. They called for direct elections of the legislature and the popular election of the future chief executive of Hong Kong (one person, one vote).” However, currently the Chinese communist government seems do not want to agree with the democratic, and this kind of attitude angered the democratic and led to some movements like Occupy Central with Love and Peace and Umbrella Movement. In my opinion, the Chinese government should deal with the democratic problems of Hong Kong carefully with full consideration, try the best to seek for the best solution, and communicate with the democratic properly.

Regional Relationships

Japan is one of the partners of Hong Kong, having a really complex relationship in terms of commerce, culture, and even contention. Early in 1950s, Hong Kong accepted Japan as its commercial partner, and Japanese products, technologies, and culture became more and more popular in Hong Kong. However, around 1997, Hong Kong’s “patriotism” and “anti-Japanese movement” suddenly burst out and made some negative influence to Japan-Hong Kong relationship, which might be regarded as a result of the dispute of Senkaku Island (Diaoyu Dao). According to Brian Bridges, “Japan-Hong Kong trade levels fell then fluctuated, but in 2002 the level of $25.9 billion was still below that of 1996; provisional figures for the first quarter of 2003 suggest only a slow recovery.”[vii] In my opinion, “anti-Japanese movement” is not something people should involve in, since Japan is a developed country which would be a very important partner in the future. Having a good relationship with Japanese is good for both Hong Kong and Japanese people, so spending much time on disputes is extremely unnecessary.

After the handover, the China-Hong Kong’s cross-border relationship was more and more significant. Before 1997, since Hong Kong had a better connection with the outside world, many Chinese businessmen moved to Hong Kong illegally. Moreover, most of this kind of immigrants were one-way, which means they were totally not interested in coming back to mainland China. According to Jianfa Shen, to deal with this situation, “Soon after 1997, the HKSAR government had to establish a legal basis to maintain its tight immigration policy on the dependent migrants from the mainland.”[viii] However, this policy also has its own disadvantage, which prevented some cross-border families from reunion. Thus this policy still needs to be improved, and it would be a key point which would largely influence the China-Hong Kong relationship.

Currently, in southern China, there is a famous region called “the Pearl River Delta”, which mainly includes three important cities: Canton, Hong Kong and Macau. In terms of the influence to Hong Kong, according to Louis Augustin-Jean, “Without major technological improvements, but with small and medium scale enterprises (SMEs), playing the lead role, Hong Kong was able to maintain its economic strength, develop its service industries, and become a major financial center.”[ix] In my opinion, this policy is very beneficial to Hong Kong, and Chinese government was really considerate and operated it well.

Conclusion

To conclude, after 1997, Hong Kong is on the right track, and its economy, politics and regional relationships remains relatively stable. However, there are still some challenges in terms of problems like democracy and patriotism, which should be handled appropriately.




[i] “Hong Kong Statistics.”  http://www.censtatd.gov.hk/hkstat/sub/bbs.jsp (accessed November 19, 2014)
[ii] “Hong Kong SAR, China.” http://data.worldbank.org/country/hong-kong-sar-china (accessed November 19, 2014)
[iii] Y. C. Richard Wong, Diversity and Occasional Anarchy : On Deep Economic and Social Contradictions in Hong Kong (Hong Kong : Hong Kong University Press, 2013), 53, accessed November 19, 2014, http://web.b.ebscohost.com/ehost/ebookviewer/ebook/bmxlYmtfXzU5ODkxMl9fQU41?sid=6423143e-da79-4d59-9d74-dc90eb14e1a5@sessionmgr112&vid=0&format=EB&lpid=lp_49&rid=0
[iv] Leo F. Goodstadt, Poverty in the Midst of Affluence : How Hong Kong Mismanaged Its Prosperity (Hong Kong : Hong Kong University Press, 2013), 30, accessed November 19, 2014, http://web.a.ebscohost.com/ehost/ebookviewer/ebook/bmxlYmtfXzYzODk5NF9fQU41?sid=aea95639-8334-4c7d-bad0-0ec9d80a3949@sessionmgr4003&vid=0&format=EB&lpid=lp_29&rid=0
[v] “Executive Council.” http://www.ceo.gov.hk/exco/eng/index.htm (accessed November 19, 2014)
[vi] “The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China.” http://www.basiclaw.gov.hk/en/basiclawtext/images/basiclaw_full_text_en.pdf (accessed November 19, 2014)
[vii] Brian Bridges. “Hong Kong and Japan: Commerce, Culture and Contention,” The China Quarterly 176 (2003): 1061, accessed November 19, 2014. http://www.jstor.org/stable/20059073
[viii] Jianfa Shen. “Cross-Border Connection between Hong Kong and Mainland China under 'Two Systems' before and beyond 1997,” Geografiska Annaler. Series B, Human Geography 85 (2003): 10, accessed November 19, 2014. http://www.jstor.org/stable/3554377
[ix] Louis Augustin-Jean. “Urban planning in Hong Kong and integration with the Pearl River Delta: A historical account of local development,” GeoJournal 62 (2005): 1, accessed November 19, 2014. http://www.jstor.org/stable/41147970