Major Changes in China Will Impact Hong Kong and Japan
On Feb. 18, 2015, Epoch Times Hong Kong branch president Ms. Guo Jun gave a speech in Tokyo’s Shinjuku Keio Plaza hotel on the current affairs of China. She provided a detailed analysis of some key issues surrounding the great changes China is currently going through and their implications for Japanese and Hong Kong society.
From 1997 on, the wealthy class of Hong Kong began the integration process with mainland China, usually through association with mainland officials, to obtain huge profits from the real estate sector.
This led to a rapid increase in the number of billionaires in Hong Kong. Now Hong Kong is the most billionaire-concentrated place in the world.
The increase in the wealth of the super-rich did not help Hong Kong’s economy much, and it essentially did not lead to any increase in employment opportunities and tax revenues.
This is the fundamental reason that the Hong Kong general public is in a dissatisfied mood with the social status quo. This is especially so for young people, who have no hope for the future. I think this is the basic background of the Hong Kong people’s conflict with the Chinese government.
After Hong Kong’s entire manufacturing industry moved to the mainland, three main functions have been retained in Hong Kong: the financial center, the trading-logistics center, and the information center.
The status of the trading-logistics center has been weakening in recent years. Mainland Chinese coastal cities have constructed many maritime ports, and the designers have incorporated international outlook into the design of their ports.
With more overseas-educated individuals returning to China, it is not necessary to go through Hong Kong for trading and logistics.
Financial and Information Center
However, Hong Kong still maintains its status as one of the international financial and information centers.
Hong Kong’s status as a financial center is largely benefited by its currency system, in which the Hong Kong dollar is closely linked to the U.S. dollar.
Hong Kong does not have a central bank; several banks can issue currency. For every U.S. dollar that goes in, the bank will issue HKD$7.8. This system was adopted due to lack of other choices.
One of its biggest problems is that the U.S. Federal Reserve developed the monetary policy, including interest rates for Hong Kong. However, the economies of America and Hong Kong are not synchronized, and the economic development is also very different.
With Hong Kong’s economy getting closer to China, the Hong Kong dollar is closely linked to the Chinese yuan and less linked to the U.S. dollar. If Hong Kong adopted the yuan, or delinked from the U.S. dollar and then linked to the yuan, then its status as an international financial center may be hit hard, especially with the adverse impact from Shanghai.
The information center, financial center, and trading-logistics center are linked to each other. The financial sector, including the stock market, securities market, futures trading, and other financial and trading services, all need free flow of information.
Legal Advantage Eroded
Hong Kong retains the Anglo-American legal system from British governance, and this provides the basic guarantee for the financial and information centers.
However, this last advantage of Hong Kong is being eroded. Beijing frequently meddles in Hong Kong’s internal affairs and intervenes in judicial issues, which has badly damaged Hong Kong’s judiciary system.
For example, the National People’s Congress (NPC) provided an interpretation of the Basic Law of Hong Kong; Beijing has asked Hong Kong to have legislation on national security; and the NPC Standing Committee is to make a decision on political reform in Hong Kong.
If this situation continued and Hong Kong lost its judicial advantages, its financial and information center position would inevitably disappear. Hong Kong, the well-known Pearl of the Orient, would be gone.
In 1994, a businessman who fled from Shanghai to Hong Kong in 1949 described to me his feeling when he first arrived in Hong Kong. He thought Hong Kong was like a rural suburb of Shanghai, and everything was very backward.
In fact, after Hong Kong was leased to Britain in 1840, within one hundred years, Hong Kong was not much better than ordinary mainland cities. It was certainly not as good as Shanghai, Nanjing, or even Guangzhou.
It was the Chinese Communist Party’s (CCP) closed-door policy that provided Hong Kong an opportunity to develop and gain a special international status and attention.
From the geo-economic point of view, Hong Kong’s position is far less important than those of Shanghai and Tianjin. Southern China has a lot of mountains and rivers, and the road conditions are very tough. As a central economic city, Hong Kong has limited radiation to the inland area, not as good as Shanghai and Tianjin.
Hong Kong’s recent 50 years of achievement can only be attributed to its independent judicial system and free capitalism, although a democratic system is missing.
The Way Out
Regardless of whether the CCP continues to rule mainland China, Hong Kong’s unique role in China will be gradually reduced.
If the CCP were no longer in power, China would face a comprehensive change and would fully implement the capitalist system, and then Hong Kong’s position would be the same as that of 1840 to 1949.
If the CCP were to stay in power, the CCP would be bound to adopt a “warm-water-boiling-the-frog” strategy to gradually control the judicial, legislative, and executive powers of Hong Kong. This would turn Hong Kong into a Special Administrative Region slightly more special than Shenzhen.
By that time, Hong Kong would lose its unique advantages. As it does not have natural power relations with Beijing, the future might be even worse.
Therefore Hong Kong’s issue is not isolated and cannot be treated separately from mainland China. If the problem of the CCP’s authoritarian rule is not resolved, then Kong Kong’s problem will not be resolved.
Therefore, there is only one way out for Hong Kong, and that is China itself adopted a full, free democratic system and Hong Kong progressing together with mainland China to achieve common social and economic development.
Hong Kong retains a partial legal system that is in line with international practice, a free convertible currency settlement system, an open financial trading center, limited convergence of information, and the remnants of Chinese cultural heritage. These would enable it to quickly combine the advantages of the West and East and become a transition center between China and overseas.
This would be Hong Kong’s way to the future. Now, however, many foreigners have chosen to leave Hong Kong after the “umbrella campaign” for democracy in Hong Kong.
Written in English by Sally Appert.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.