China Prevailing in Hong Kong Airport Dispute : Politics: Beijing is already successfully exerting its influence over issues that will remain after it takes over in 1997, and that worries those in the colony.

Thanks in part to the Persian Gulf War, China is clearly getting its way in the controversy with Hong Kong over the British colony’s proposed airport. In the process, Beijing also seems to have established a voice over Hong Kong affairs six years before taking control.

Hong Kong government officials and other sources say the massive and expensive new airport--which China had feared would drain the colony of its foreign reserves--will proceed on a much scaled-down basis, the way China has wanted it. In effect, observers say, Beijing has exercised a veto over the airport’s size.

“The last remaining point between us is (financial) viability,” said Baroness Dunn, senior member of Hong Kong’s executive council, chairman of the Hong Kong Trade Development Council and one of the colony’s most powerful public figures. “They are worried Hong Kong will have a small amount of funds left over, but they really have nothing to worry about; Hong Kong is in good shape.”

Even more important, China has impressed on the British and the people of Hong Kong that it wants and can get a voice on colonial matters that Beijing deems important and that “straddle” the pre- and post-1997 future, Hong Kong officials concede.

That is a major accomplishment. Until now, many outside Beijing believed that Britain was to exercise full sovereignty over Hong Kong until 1997 under the Sino-British Declaration of 1984 that then-Prime Minister Margaret Thatcher signed in Beijing after two years of negotiation.

“Observing the development of the Persian Gulf War has been a maturing process for Hong Kong,” Dunn said in an interview. Before the Gulf War, Hong Kong’s confidence had been rocked by Beijing’s massacre of dissidents in Tiananmen Square in June, 1989.

But “people in Hong Kong are more realistic and pragmatic now about the China dimension,” Dunn said. “The Persian Gulf War has induced a more sober approach to the situation, following the euphoria at the end of the Cold War, and their world view has changed.”

Among other things, Hong Kong’s residents have seen the importance to Britain of keeping China’s support in the United Nations on the Gulf issue.

Many Hong Kong residents and officials have also come to see that it is virtually futile to keep the Chinese out of major decisions over Hong Kong in which Beijing wishes to participate.

But China’s greater voice could add to Hong Kong residents’ worries about China’s intentions for the colony and could spur additional out-migration.

More than 60,000 Chinese a year are leaving Hong Kong for Canada, Australia, the United States and other nations willing to take them as immigrants. After obtaining foreign citizenship as “insurance,” some are returning to Hong Kong to await the future.

Recently, Hong Kong & Shanghai Banking Corp., the colony’s de facto central bank, moved its legal residence to London to safeguard its overseas assets from Beijing’s reach while leaving its operating headquarters in Hong Kong.

Britain has long viewed strong opposition to China as contrary to British interests, but it nevertheless speaks for Hong Kong until June 30, 1997. That’s when the Union Jack comes down to make room for China’s national flag and Beijing resumes it sovereignty over the territory for the first time since the Treaty of Nanking ceded Hong Kong to Britain in 1842.

Under the 1984 declaration, Hong Kong is to become a “special administrative region” of China, permitted to maintain its capitalist system for at least 50 years.

After the Tiananmen massacre, the colony’s authorities announced plans for the new airport complex at Chek Lap Kok on Lantau Island, southwest of Hong Kong’s main business area in Kowloon. The authorities explained later that the government had hoped that the project would restore some confidence among the shaken Hong Kong population.

As originally conceived, the airport was to be a grandiose gift from Hong Kong to its own future--a massive $16.3-billion complex with two runways, a huge container port, 4,719-foot suspension bridge between the mainland and Lantau Island, and miles of roadways and tunnels.

With Bechtel Corp. of San Francisco as overall project manager and Morgan Stanley & Co. of New York as financial consultant, the complex is still designed to replace undersized Kai Tak Airport for international flights and to compete against new airports planned for nearby Macao and Canton. The idea was to help assure Hong Kong’s continued role as an Asian center.

To Beijing, however, the project loomed as a potential poison pill. Although the Chinese agree on the need for additional airport capacity in Hong Kong, they have displayed outrage that the announcement was made without advanced consultation with Beijing.

“We feel we were entitled to that,” a high Chinese official said, speaking under terms of anonymity. “We feel that we should be consulted now on all matters that will affect us after 1997. Loan obligations in connection with the airport fall into that category.”

Tensions began in mid-December when a Chinese official, Lu Ping, publicly accused the Hong Kong government of lying about the airport’s financing and of planning to deplete Hong Kong’s foreign exchange reserves with the airport project.

His remarks started a two-month round of “megaphone diplomacy.” Another Chinese official, Luo Jiahuan, argued that contracts for the project should be withheld from competitive bidding and allocated to local firms--against long-held British policy.

After that, Chinese Vice Minister Wu Xueqian said Beijing alone was entitled, under the 1984 Sino-British Joint Declaration, to speak on behalf of the “people” of Hong Kong--a point immediately contested by Hong Kong officials and the news media.

From the beginning, all parties seemed to view the airport issue as symbolizing the greater question of how much say Beijing should have over the colony during the next 6 1/2 years.

And this question seems about to be answered--to the mainland’s liking--in the settlement expected to emerge. Hong Kong officials say the settlement is expected to call for one runway instead of two, a smaller port and diminished road and rail connecting capacity. And the project’s cost will be cut one-third to one-half.

Furthermore, the Chinese have made it clear that they want all parties attending a meeting with Hong Kong officials in Beijing next week to understand that Britain won’t leave the colony in debt in 1997. In March or April, British Foreign Secretary Douglas Hurd is expected to fly to Beijing--the highest-level British visit since the Tiananmen Square massacre.

“If the airport is still a live issue at that time, no doubt the foreign secretary will discuss it,” said Peter Johnson, the Hong Kong government’s representative in San Francisco.

In any case, Johnson said, the airport proposal “would have been refined and slimmed down from the original scale.” But he conceded that the Chinese “have had an effect.”

Furthermore, Johnson said, Hong Kong is proceeding even now with the letting of some contracts.

The ultimate Chinese leverage lies in the fact that the airport project will depend to a large extent on private financing as well as on Hong Kong’s public funds. Bankers have shown no desire to extend loans to the project unless Beijing gives its approval.

The specter of China’s eventual takeover of Hong Kong appears not to have greatly diminished the colony’s attraction for Americans, now Hong Kong’s largest foreign investors with 900 company operations representing 31% of all foreign direct investment.

Each year since 1985, an average of 60 U.S. companies has established a regional headquarters office in Hong Kong. Since the Tiananmen Square massacre, Bank of America, Walt Disney, McDonnell Douglas, General Motors and the Riggs National Bank of Washington have set up or expanded operations.

But the 5.8 million Chinese of Hong Kong see a different picture: Worried about their fate, their question is whether Hong Kong can hope to remain unmolested under Chinese sovereignty if Beijing insists on interfering with their affairs now.