The Vanishing Border : As 1997 Approaches, Is China Taking Over Hong Kong or Vice Versa?

Daniela Deane, who lives in Hong Kong, writes about south China for the Washington Post.

A HEAVY MIST HUGS THE GROUND along the Sham Chun River on the border between Hong Kong and China. A hunched-over Chinese woman in a cone-shaped straw hat emerges from a foggy patch on the Hong Kong side and sidles up to a small hole in the fence. Through it she pushes several cans of beer, a few bottles of shampoo and some bars of soap. A man on the other side stuffs the items into a plastic bag, slips some money back through the hole and sets off in his sampan up the river toward China.

"They're just doing what Hong Kong's big companies are doing--trading, but on a smaller scale," says Police Chief Inspector Stuart Jones. "It's illegal, but it's so small that we don't do anything about it."

The man in the sampan will resell the goods in China, where quality products are rare. He is one of about 2,000 mainland Chinese whose ancestral farmland was bisected when the border was drawn in 1898 and who are allowed free travel around the closed frontier area.

Since Hong Kong was founded 150 years ago by British merchants swapping opium for tea with Chinese mandarins, its lifeblood has been its trade with the mainland, still the colony's major trading partner. The staggering amount of to-and-fro is unmistakable at the Man Kam To crossing, which about 11,000 trucks and cars traverse daily in bumper-to-bumper traffic, making it one of the world's busiest international land-vehicle connection points. Ninety percent are trucks carrying watches, toys, appliances, clothes and electronic goods from Hong Kong-owned factories in southern China to the British colony for export. Because Hong Kong depends on its northern neighbor for most of its food and water, trains from China arrive full of livestock and vegetables. And some 27 million people cross the border each year at the Lo Wu railway station--probably the busiest international passenger crossing in the world. During the Chinese New Year holidays, more than 100,000 a day pass through.

At midnight on June 30, 1997, the link between the two regions will be formalized as Hong Kong, one of the world's most successful and freewheeling capitalist economies, is handed back to China under a 1984 agreement with no parallel in human history. Beijing promises in its accord with London that Hong Kong can retain its capitalist way of life for 50 years after the takeover.

But now, six years before the hand-over date, the Hong Kong-China border is disappearing. In many ways and at a dizzying pace, China already is extending its tentacles into the British colony perched on its southern coast. This premature intervention is viewed by many as Beijing making a mockery of its promise to keep its hands off the colony until 2047. At the same time, the Hong Kong Chinese--most of them refugees or the offspring of refugees who fled communism--are moving back into their homeland, bringing a capitalist influence so vast it is certain to alter China forever. More and more, 1997 is becoming a mere formality.

ENNIS AND KENNETH TING LANDED IN Hong Kong from Shanghai when they were young boys, fleeing the communist takeover of China with their family. The boys' father was one of the richest industrialists in the swinging, capitalist Shanghai of the 1930s, a flashlight manufacturer employing 3,000 workers.

Ting Senior started over in Hong Kong. The company he formed in 1949, Kader Industries, has become one of the largest toy manufacturers in the colony. It employs 13,000 workers, the majority in factories in southern China.

Kader's toys are exported, mostly to the United States for merchandising by such U.S. firms as Hasbro and Mattel. In 1985, Kader exported 20 million Cabbage Patch dolls to the United States. "All the major American toy companies have offices in Hong Kong," says Dennis Ting, now chairman of the company.

Toy samples, pilot runs and molds--processes that require flexibility and expertise--are made at the company's high-tech factory in Hong Kong, using highly sophisticated computerized equipment. All the mass production--of those millions of Cabbage Patch dolls--occurs at the company's seven factories in mainland China, where Kader employs about 10,000 people, 98% of them Chinese peasant women between the ages of 17 and 25.

The Tings opened their first factory in China in 1980, soon after the communists, under reformist Deng Xiaoping, invited foreign companies to establish joint ventures on the mainland. "The communists opened the door a crack; Hong Kong businessmen pushed it in all the way," Dennis Ting says. About 14,000 Hong Kong companies are currently making their goods in China's Guangdong Province, now by far the country's richest province. Other foreign investors, including American firms, are manufacturing there as well, but Hong Kong money subsidized 90% of the 11,000 foreign investment projects--worth a total $15.2 billion--approved in southern Guangdong Province by the end of 1989. In Guangdong, about 2 million mainland Chinese are working directly or indirectly for Hong Kong companies, the province's single largest employer.

"As soon as China started the open-door policy, the link began," says Peter Wong, Kader's executive director. "Hong Kong had become too sophisticated by then. No one (in Hong Kong) wanted to work in the factories anymore. If we hadn't been able to expand into China, we couldn't have competed on the world market. China is where the profit comes from.

"But we've helped them a lot, too," Wong says. "We've given them jobs, helped them improve their standard of living. Officially, China is taking over Hong Kong. But, really, economically, it's Hong Kong that is taking over China."

TRAFFIC IS HEAVY ON THE GUANG-SHEN road, the main road from Hong Kong to Guangzhou (called Canton by Westerners), the capital of Guangdong Province. Hundreds of trucks full of heavy goods lumber up and down the narrow, potholed road, throwing dust onto dozens of people walking along the street's dirty edges.

The Guang-shen was paved only six years ago, in conjunction with the onslaught of Hong Kong investment in the Pearl River Delta area south of Guangzhou. Hundreds of Hong Kong-operated factories now line the road, and masses of Chinese peasants, most from the hinterland, shuffle in the dust from one factory gate to another, looking for work.

Before China's opening to the West, the land between Guangzhou and Hong Kong was a backward area where men with water buffaloes plowed their fields. Hong Kong investment has transformed it into the fastest-growing region of China and a powerful magnet for millions of peasants.

For a year, 17-year-old Chan Selin (has been sewing legs onto dolls at a Hong Kong-owned toy factory in Zhongtang, one of the boom towns of the Pearl River Delta. She and a friend traveled a thousand miles from her village in China's southwestern Sichuan Province looking for work.

"I miss my home and my friends," says Chan, a round-faced girl with a pair of long, black braids tied behind her head. "I have no friends here. But the more I work, the more (money) I get, so it is good." She sits with hundreds of other girls--many barely in their teens--in a huge open room, under a few scattered ceiling fans, at long metal tables stacked with pink doll legs and arms waiting to be sewn onto pink bodies.

The girls earn 10% of what their counterparts in Hong Kong make, bringing home about $45 a month. A foreign company is required to pay about that same monthly amount per employee to the Chinese government, bringing the total cost of a worker, including food and lodging, to $120 or so a month--about 20% of what it costs to employ someone in Hong Kong. The girls are also given some capitalist incentives--Hong Kong dollars for overtime, bonuses for extra work completed--practices until recently frowned upon in egalitarian China.

The workers live in big company dormitories and take their meals standing up, three times a day.

"Our main problem here is the standard of the workers," says factory manager Lin Yik, a Hong Kong Chinese who lives at the factory site during the week. "These girls are very backward. When they first arrive, they leave the light on all night because they don't know how to turn it off. They fall asleep at their sewing machines. They use the showers as toilets.

"But slowly they learn," says Lin. "They are human. They can think. When they first come, I see them as my little daughters, who I must teach, who know nothing."

THERE'S A SEA OF PEOPLE OUTSIDE THE Guangzhou railway station, masses of men and women wearing worn blue and brown jackets and lying on the ground next to their bamboo carrying poles, their possessions stuffed into small plastic bags tied to the poles.

One of the thousands lying around the station is Hou Yumei, a 25-year-old woman from Hunan Province, 400 miles to the north, who sits on the street with her 3-year-old son asleep on her knee and her 3-month-old baby girl sucking on her shriveled breast. "I came here looking for work," she says. "I wandered around all the factories, but I couldn't find a job. I guess I will go home, but I have no money."

Hou is one of 40 million Chinese peasants said to be looking for non-farming jobs, with about five million roaming the country without job contracts. Guangzhou, China's capitalist mecca, is said to harbor hundreds of thousands of these migrants.

Guangdong's growth has been striking. The province's population grew 17% last year, compared to 6% for all of China. But in a country of 1.2 billion people, the inexhaustible labor supply far exceeds demand. China is said to have a rural work force of 400 million--twice what it needs--and about 92 million more youths will reach working age in the next five years.

This immense movement of people has made it difficult for officials to track down women--like Hou--who have violated the government's stringent one-child policy. "In my village, you're allowed to have more than one baby," Hou answers nervously when asked how she was able to bear two children. Officials say some parents--dubbed "excess-birth guerrillas"--apparently leave their hometowns to avoid the penalties for having borne a second child.

Some women do manage to find work in Guangdong, however. Down the street from the station, at the China Hotel, a plush establishment frequented by Hong Kong businessmen, 23-year-old Miss Zhang scans the lobby bar for potential clients for the evening. The young prostitute, who asks to be identified only by her surname, came to Guangzhou about 18 months ago from China's bleak industrial city of Harbin, nearly 2,000 miles to the north. "I looked for a job for a while, but I couldn't find one. So. . . ."

"I can make between 2,000 and 4,000 Hong Kong dollars ($250 to $510 in U.S. money) a night," says Zhang, a tall, attractive woman wearing Reeboks and a baggy sweater over black leggings. "My customers are almost all from Hong Kong, with a few from Taiwan."

Prostitution is strictly prohibited in China, and men caught going to prostitutes are frequently humiliated in public. "I've never been arrested," says Zhang, one of many prostitutes hanging around the hotel lobby telephones that evening. "A few times, when I did get into a bit of trouble with the police, I just offered my services. No problem."

"Social problems have cropped up because of Hong Kong's rapid expansion into southern China," says one businessman who visits the mainland every week from his Hong Kong base. "There is more prostitution, more robberies, gangs, hundreds of people hanging around doing nothing. It's a bit like East and West Germany coming back together."

NOT ONLY ARE HONG KONG CHINESE moving back into their ancestral homeland to turn a tidy profit, but mainland Chinese also are investing in Hong Kong, as fast as they can, to get a piece of that golden capitalist pie.

Since the 1984 Sino-British declaration sealing Hong Kong's fate, mainland companies have acquired substantial parts of key Hong Kong businesses, including 35% of the territory's telephone company. China also has acquired minority, but nevertheless substantial, stakes in Hong Kong's container-terminal port operations and in the territory's Cathay Pacific Airways, one of Asia's most successful carriers. China also owns Hong Kong's tallest skyscraper, the Bank of China building.

Mainland Chinese firms are so entrenched in Hong Kong that their business dealings have been known to cause embarrassment to their communist masters in Beijing. For example, China Resources, a major mainland business group with dealings in Hong Kong, owns 30% of Giordano, a trendy Hong Kong retail clothing chain. Giordano was one of the most prominent Hong Kong businesses aiding anti-government demonstrators in China in 1989, which culminated in the Tian An Men Square crackdown.

Giordano made the 23,000 T-shirts worn by volunteers who managed the crowds during the demonstrations of that heady spring in Beijing. The firm then launched a highly successful series of T-shirts bearing the faces of student leaders who escaped to the West.

Apart from business interests, China also has gained influence over a wide spectrum of unions and other left-wing mass organizations in the colony, including the 170,000-strong Federation of Trade Unions. "The mainland Chinese are all over this town; they're everywhere," says Simon Murray, group managing director of Hutchison Whampoa, one of the colony's biggest companies. "They've got $80 billion in Hong Kong (more than $10 billion U.S.), we know that. You don't have to look very hard to see evidence of it. They've got the biggest bloody building in Hong Kong."

In the colony's loosely regulated financial world, no official records exist specifying how many mainland Chinese firms operate in Hong Kong. Experts put the number at about 4,000, employing a cadre of about 30,000 from China. Only about 1,000 are actually registered as companies, however; most are "briefcase" operations with no fixed office address--making them virtually impossible to supervise.

Beijing also has become involved in Hong Kong's fledgling political scene. For the first time in their history, Hong Kong Chinese began shouting for democracy after the Tian An Men Square massacre. A series of elections is being held this year in Hong Kong, the first time ever under British colonial rule, as part of a plan to introduce a limited form of elected government representation in time for the 1997 hand-over.

The Chinese at first balked at any democratization, arguing that there was never democracy under the British. But after agreeing to a limited form of democracy, in which only a certain number of representatives would be elected to local governing boards, the Chinese--through the New China News Agency, their de facto embassy in Hong Kong--are becoming involved to ensure the success of pro-China candidates.

Under the specifics of the Sino-British declaration Hong Kong will, in 1997, become a Special Administrative Region of China, to be governed by local Chinese people. But the recent political wrangling between Beijing and London over Hong Kong's new $16-billion airport and port-expansion scheme has given the unmistakable impression that the communists run the place already.

After months of stalling, China recently gave its blessing to the airport project, but only after Britain gave firm assurances as to the size of the territory's fiscal reserves at the time of the hand-over. Beijing also won a seat on the influential Airport Authority.

"This does not bode well for the future," warned local legislator Martin Lee the night of the agreement. Many Hong Kong analysts welcomed the accord, predicting a huge boost for the local economy, but critics said it showed that China was already holding the reins of power. China was able to set conditions--and get them met--in exchange for approving the scheme.

"Considering all the circumstances, I don't think a much better deal for Hong Kong could have been won," says local legislator Jimmy McGregor. "'We now have an airport project under way, which is of vital importance to Hong Kong . . . even if we had to concede some things we earlier thought should not be conceded. The worry now is that this agreement by the British government will be a precedent for other interventions by China."

"There's a huge gap of mistrust between China and Britain," says Hutchison Whampoa managing director Murray. "China, for one reason or another, thinks that we, the British, are going to cream off a lot of assets out of Hong Kong before we leave. And to prevent this, they are desperate to get their hands on this wheel before 1997. They're like a landlord waiting to take back a building. They don't want to come back and find that the tenant has made off with the carpets.

"1997 is here now," says Murray with a shrug. "It's today. It's our conversation, it's everyone's conversation. It's part of our day-to-day decision making."

THE COMMUNIST PARTY OFFICIAL SITting beside me at the Dong Guan Hillside Hotel in Dongguan, in the Pearl River Delta, toed the party line. He said all the right things, but somehow, he just didn't look the part.

Are Hong Kong and Guangdong very much alike?

"No, Guangdong practices socialism, and Hong Kong has capitalism," says the 35-year-old official, who requested anonymity. "Politically, they may become one country, but it's definitely one country, two systems."

Could Hong Kong's system spill over into Guangdong?

"No, communism is the best system for China. No other system can replace it."

Hmmmm. Let's forget about politics for a while. I like your watch. What kind is it?

"It's a Rolex."

I see. And your pen? Your Reeboks?

"It's a Cross pen. Yes, they are Reeboks," says the party official, who travels to the territory to promote investment in Dongguan. "I got everything in Hong Kong. I buy almost everything there--my clothes, my wife's clothes. I go to Hong Kong once a month at least. I need to go visit manufacturers and investors."

What do you do for fun?

"I fuss in the garden. I own my own house here. I go jogging. I watch Hong Kong television."

I thought you weren't supposed to watch Hong Kong television?

"We are advised not to, but we have to, to understand what's going on. Excuse me now, I must go."

China's hard-line leaders in Beijing seem threatened by the creeping capitalism down south. After all, southern China has often been the starting place of revolts against the Chinese empire.

Former Guangdong Governor Ye Xuanping, who has close ties with Hong Kong businessmen, fought to stay on as governor when hard-liners emerged on top following the chaos of the pro-democracy spring of 1989. Ye, a close ally of the disgraced former Chinese general secretary Zhao Ziyang and the son of a late Politburo member and military hero, resisted several attempts to pull him back to Beijing--and away from his Guangdong power base. He recently lost his struggle when the leadership announced that he would be promoted to a largely ceremonial post in Beijing.

But just across the border from Hong Kong, on a street corner in Shenzhen, one of several Special Economic Zones--areas marked out by the central government for foreign investment--the freewheeling British colony seems a lot closer than hard-line Beijing. Pile drivers breaking the ground for yet another skyscraper pound relentlessly. Chinese businessmen in gray suits, on their way to the city's new stock exchange, bark into their portable telephones. Women in miniskirts meet for lunch at McDonald's, just down the street from where the Chinese flag waves in the misty breeze.

"The Chinese will have to, at some point, deliver to their own people," says one China trader in Hong Kong. "It's easy to see over someone's wall, and the southern Chinese are already doing that. They've had a smell of the food in the kitchen. They're not going to wait years for a crust of bread."

Many people aren't waiting. Smugglers in speedboats ferrying television sets, videocassette recorders and refrigerators from Hong Kong to southern China race around the waters between the two, impervious to the possibility of arrest. They roar up the coast to south China, where prosperity and the desire for consumer goods have created a billion-dollar black-market. Favorite items at the moment are luxury cars. Hundreds of costly automobiles have started the day in the parking lots of swank apartment buildings in the colony, only to end up in Guangdong by sunset--stolen and then ferried up by speedboat.

SIMON MURRAY GLIDES HIS MERCEDES out of the best parking place in town--the ground floor of Hutchison House in central Hong Kong--and into late-evening traffic. Usually his driver would be waiting, but sometimes Murray lets him off early.

Murray, 51, is the last in a long line of expatriate Englishmen who have run Hong Kong since its colonization in 1841. He lives in a big colonial-style house on the Peak--Hong Kong's most moneyed neighborhood--with his wife, their three dogs, and the family's two Filipino servants. The three Murray children grew up in Hong Kong, where the family has lived for more than 20 years.

Hutchison Whampoa is one of the original British trading houses of Hong Kong. In 1979, the colony was turned upside down when Chinese billionaire Li Kashing bought the company; it marked the first time that one of the old British houses had come under Chinese control.

Li came to Hong Kong from southern China as an impoverished child. He went from being a watchband salesman to probably the richest man in Hong Kong. He now maintains a large, secret network of contacts on the mainland. But his headquarters is in Hong Kong, and his investments are worldwide.

Hong Kong became a most international place under British rule, an Asian city accessible to foreigners and a good foreign training ground for Hong Kong Chinese. And that has been one of the secrets of its success. Tens of thousands of expatriates from around the world live comfortably in this city of 6 million. Everyone agrees that if Hong Kong is to succeed internationally after 1997, it must keep its own multicultural identity.

That won't be easy. Sixty-two thousand Hong Kong Chinese left last year--mostly to Canada and Australia, with fewer going to the United States and Britain--and another 60,000 or so are expected to leave this year, the majority of them driven away by the specter of communist rule. One result is that English-language skills are already on a disastrous decline.

And will 1997 spell the end of life as he knows it for Murray, the English taipan? "Yes, of course. There will be changes in my life after 1997," he says, "but not necessarily in the quality of my life. I don't think I'm going to be slung out of my house. I don't think my salary is going to be cut. I don't think I'm going to be barred from the golf course. The Chinese love golf. They want to play, too.

"But there may be changes in what I read in the newspaper, in my relationship with government, which is a big factor in running a business. There may be changes in the feeling of freedom here, and there may be big changes in atmosphere--and changes in the people around me."

What will the British role be? "Traders," Murray says. "We'll be traders--the role that we played before. We'll go full circle.

"People are becoming less resistant to the idea of 1997," Murray says. "They've already accepted it. They're realistic people, the Hong Kong Chinese. They know who the boss is here.

"The border is disappearing," he says. "It will be completely gone after 1997. . . . I am positive about Hong Kong. It could be miraculous; it could be a huge success. If China doesn't mess it up, this jewel box--because that's what it is--will belong to them. You might say it already does."

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