Five Years After Hand-Over, Hong Kong Feeling a Bit Blue

Just behind the computer monitor on the desk of his 12th-floor office, Chief Secretary Donald Tsang keeps a framed Fortune magazine cover from 1995 with this prediction: “The Death of Hong Kong.”

Published more than two years before the then-British colony returned to Chinese rule, the article sketched a doomsday scenario that included People’s Liberation Army soldiers strolling the streets to enforce the diktats of hundreds of recently arrived Communist Party officials.

Five years after capitalist Hong Kong passed into the hands of Communist China, Fortune’s forecast seems excessive, its death notice premature.

But as Tsang and others in this Special Autonomous Region mark the fifth anniversary today of Hong Kong’s hand-over, the outcome of this fascinating political experiment remains loaded with question marks, and the dangers to Hong Kong are far more subtle than initially believed.

Today, the experiment faces a disturbing set of difficulties--problems that include a struggling economy, an erosion of personal freedom, and weak leaders who appear to have no clear path or vision for the future.

Collectively, these problems have sapped much of the optimism and spirit that enabled a community mainly of refugees fleeing the mainland’s turmoil in the wake of World War II to transform Hong Kong from a sleepy British imperial outpost into an energy-charged global financial center.

“There’s no sense of security for our future now,” said Mandy Ho, a secretary. “The politicians all seem lost.”

Said a 40-year-old civil servant named Hueng, who declined to provide his first name: “I’m worried about unemployment, that business will move to the mainland. I don’t believe in the ability of our leaders.”

In part, Hong Kong’s problems have to do far less with Beijing’s political control than with China’s emergence as an increasingly open global economic power. China’s entry into the World Trade Organization ended Hong Kong’s lock on the country’s international trade, reducing it in effect to just one of several large Chinese trading centers.

Shanghai looms to challenge Hong Kong’s historical role as the dominant commercial center. Hong Kong’s lucrative position as a middleman in the trade between Taiwan and mainland China appears also about to end as Beijing and Taipei search for ways of opening direct trade links across the Taiwan Strait.

Today, Hong Kong clings to one of its few remaining claims: an efficient, corruption-free center for financial services.

Hong Kong had yet to fully recover from the 1997 Asian financial crisis when it was hit by last year’s economic decline and then by the aftershocks from Sept. 11. The result of all this has been record unemployment, plummeting property values, low public morale and civil service pay cuts. This year’s expected economic growth of 1% is a fraction of the 7% projected for the mainland.

Signs on the region’s buses urge, “Bounce Back Hong Kong” but do little to brighten the public mood.

Under the terms of the hand-over, Hong Kong became part of China yet kept considerable autonomy and human rights under a formula that became known as “one country, two systems.”

But the percentage of those feeling optimistic about Hong Kong’s prospects as a part of China dropped from 62% in early 1997 to 26% this May, according to figures gathered by the Hong Kong Transition Project, which has tracked public attitudes about the region’s transfer to Chinese rule.

In a discussion with reporters last week, the territory’s financial secretary, Anthony Leung, found himself comparing its woes to those of Japan before adding quickly, “I just hope it won’t take as long as Japan to correct them.”

Hong Kong’s chief executive, Tung Chee-hwa, is widely seen as part of the region’s problem rather than a source of solutions.

A much-ballyhooed reform scheduled to go into effect today that transforms his Cabinet from one of job-secure civil servants to political appointees seems for many more like a rearranging of deck chairs than a serious streamlining for a new start.

The Tung era’s leading commercial initiative, an information technology industrial park called Cyberport, is widely seen as a flop. Handed to a property baron’s son two years ago for development as an incubator for innovative ideas, it languishes today on the south side of Hong Kong island, a symbol more of the failures of crony capitalism than of the seeds of Hong Kong’s future.

With polls showing that less than 20% of the public wanted Tung to seek another term, there is little enthusiasm among those who realize that today also marks the start of his second five-year tenure as Hong Kong’s leader.

“Nobody’s happy with the government under these circumstances,” Leung said. “But whether everyone should tag this to Tung Chee-hwa is another question. This [economic] correction would have happened whoever took over.”

The distinct lack of enthusiasm for Tung’s reelection underscores worrisome shortcomings in the promised development of Hong Kong’s democratic political system. Although the territory’s de facto constitution still carries a commitment to full electoral democracy, progress toward that goal has been slow.

Of the 6.9 million Hong Kong Chinese, a grand total of 800 handpicked residents--all of them approved by Beijing--reelected Tung this spring. That’s double the 400 who voted Tung into office just before the hand-over, but any move toward full electoral participation seems years away.

There is also concern about a gradual erosion of human rights, political freedoms and the rule of law since Beijing’s takeover. The prime actors in this aren’t Beijing hard-liners or PLA jackboots, as many had predicted. Instead, the weakening has been initiated largely locally, either by Hong Kong’s leaders trying to guess Beijing’s will or as the result of simple self-censorship.

Evidence of this erosion is abundant.

Last month alone, Hong Kong immigration officials refused entry to Chinese American human rights advocate Harry Wu, then questioned distinguished U.S. scholar Perry Link for 40 minutes before allowing him in. Link, co-author of a book called “The Tiananmen Papers” about the debate within the Chinese hierarchy surrounding the tumultuous 1989 student revolt, said he had never been stopped on several previous trips to Hong Kong.

“It says a lot about the promise of five years ago that the one country, two systems would hold for 50 years,” he said. He said the mere fact that he was pulled aside and questioned will probably intimidate at least some colleagues from coming.

Tight restrictions on groups such as the Falun Gong spiritual movement, outlawed on the mainland, are also cited as examples of Hong Kong authorities following Beijing’s lead--possibly on their own initiative.

Sonny Lo, a Hong Kong University political scientist and Transition Project member, said he believes that a further erosion of freedoms is inevitable.

“It’s a clash of civilizations between China and the West,” he said. “And 150 years of Western influence [under the British] can’t compete with thousands of years of influence from China.”

Despite the difficulties, no one--not even Fortune--is predicting Hong Kong’s demise as a major commercial center. In a more recent issue, the magazine dismissed the territory’s goal of becoming the New York of Asia but conceded that if it succeeded in integrating economically with fast-growing Guangdong province and the rest of southern China, Hong Kong could become the Chicago of China.