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Future shock hits Hong Kong: Britain loses its lease.

Future Shock Hits Hong Kong

November is still snake season in Hong Kong. And at stands in the old districts of Kowloon, the peninsula opposite Hong Kong's harbor, you can watch Chinese housewives choose their dinner from baskets of writing brown and black reptiles. Once a selection is made, the proprietor plunges his hand into a basket, grasps the hapless snake just bejust the head and deftly impales it on a spiked cutting board. Then a knife darts out to make an incision the length of the snake's body. The vertebrae, now exposed, are neatly peeled off and discarded, the guts scraped, the head severed and the body popped in a clean plastic bag for the waiting customer. The whose procedure takes about two minutes.

Some Hong Kong watchers, remembering the febrile days of the Cultural Revolution, think that the capitalist spine of Britain's last crown colony may meet a similar end. Although China is beginning to adopt Western business practices, that trend could be reversed given the unpredictable nature of the political situation in the People's Republic. The late Richard Hughes, an astute chronicler of such turns, speculated in Borrowed Place, Borrowed Time, "Suppose there was a Communist command split inside China after the aging men in Peking ascend the dragon, and a warlord in Canton decided that [by communizing Hung Kong] he would prove he was more Chinese and a truer revolutionary than . . . [an] indecisive party front in Peking still scrambling for [a] leader.'

For the time being, however, there appears to be cautious optimism that the negotiations between the British and the Chinese which began in 1982 will result in the maintenance of the status quo at least until 1990--more than enough time for many fortunes to be made and enough time, perthaps, to enable Hong Kong's exploding cohort of young people (roughly 50 percent of the colony's 5.4 million people are under 20) to sense its own political power. Ultimately Beijing will have to contend with the aspirations of this new Chinese working class, raised on Western pop culture, accustomed to working for wages and used to decent housing and material comforts. That was made evident in January when thousands of young people joined a riot prompted by a two-day taxi strike, even though they had no direct stake in the outcome.

Some history is necessary for understanding Britain's latest island predicament. The ten-mile-long island of Hong Kong was settled by British opium traders in 1840. Thrust out of the continental shelf by ancient volcanoes, it has a beautiful mountainous coastline, a tropical climate and an excellent deep-water harbor on its north shore.

British legal claims to sovereignty over the island stem from the 1842 Treaty of Nanking. Consented to by the last Manchu emperor following the defeat of his troops outside Nanking, the treaty opened five Chinese ports to British merchants and ceded "the island of Hong Kong, to be possessed in perpetuity by her Britannic Majesty, Her Heirs and Successors.' Twenty years later, the British acquired a toehold on the Chinese mainland under a second treaty, the 1860 Convention of Peking. That agreement granted Queen Victoria "to have and to hold, as a dependency of her Britannic Majesty's Colony of Hong Kong,' approximately three and a half square miles on the Kowloon Peninsula.

The remaining land that makes up modern Hong Kong is known as the New Territories and was leased from China for ninety-nine years under a third treaty, signed in Beijing on June 9, 1898. The New Territories consist of 366 square miles, more than twelve times the size of Hong Kong Island, on the mainland to the north of Kowloon. That region provides Hong Kong with critical food supplies, water and other resources. As far as the British are concerned, only this land grant expires in 1997, since Hong Kong Island and Kowloon were ceded to Britain in perpetuity.

The Chinese see it otherwise. Beijing makes no legal distinction between the three treaties. All were extracted by force or threat of force, the Chinese say; hence, all are null and void. China's sovereignty over Hong Kong accordingly remains undiminished. Obviously, Sir Richard Evans, Britain's Ambassador to China and head of Prime Minister Margaret Thatcher's negotiating team, has his work cut out for him.

At stake is the fate of one of the most prosperous areas in Southeast Asia. Hong Kong's per capita income is the third highest in the region, behind Japan's and Singapore's. Unemployment is less than 4 percent and the island is host to numerous U.S. multinational corporations as well as to many companies founded in the so-called newly industrialized countries like Thailand, Indonesia and South Korea. It is a place where, as the chairman of Hong Kong's most powerful trading company, Jardine-Matheson, has said, "It is still fashionable to make a profit.' With a flat 15 percent income tax, no customs duties and a compliant British administration, profit is still very much in fashion.

A visitor to Hong Kong cannot help but be struck by the profusion of material wealth. There are several shantytowns on the south side of the island, but in the rolling hills below Victoria Peak numerous Chinese estates make the mansions of Beverly Hills seem positively modest by comparison. In Kowloon, the Peninsula Hotel competes with its cross-street rival, The Regent, by chauffeuring guests in a fleet of forest green Rolls Royces; The Regent has silver Mercedes-Benzes. And every Sunday in Market Square on Hong Kong Island thousands of Philippine amahs, young women who serve as housekeepers for wealthy Westerners and Chinese, gather to share their day off.

You do not have to be a born-again capitalist to admire the drive to get ahead that is everywhere evident in Hong Kong. Walking down a street in Wanchai, near the island's central business district, you can traverse several centuries within a single block. On the street, squatting over a charcoal fire, a blacksmith hammers angle irons and split pins for local pushcarts; behind him, in an open storefront, sheet metal is cut and fabricated for cabinets; on the floor above, a sign advertises traditional Chinese ivory carvings; the third story is occupied by a small clothing shop and on the fourth, in a warren of crowded rooms, circuit boards are being stuffed with electronic components. The building is capped by a giant neon sign proclaiming the magic of Citizen brand watches.

Hong Kong's ascendancy as the world's top manufacturer of watches aptly symbolizes the colony's growing importance in the capitalist order. Watch exports in 1982 totaled approximately $900 million. As Harvard historian David S. Landes wrote in Revolution in Time, clock manufacturing typically has been "an agent and a catalyst in the use of knowledge for wealth and power.' Landes also reports, ironically, that before the opium trade took hold, the British tried to balance their early trade with China by selling them European timepieces--with little success. In 1793, a gift of a watch from the Court of St. James's to the Emperor Ch'ien Lung produced the following response:

The Celestial Court has pacified and possessed the territory within the four seas. Its sole aim is to do its utmost to achieve good government and to manage political affairs. . . . We have never set much store on strange or ingenious objects, nor do we need any more of your country's manufactures.

Despite the difference in rhetoric, the substance of the Middle Kingdom's negotiating posture may not have changed much since the days of Ch'ien Lung. The Chinese admit--at least privately--that trade with the West is vital to their country's economic progress. However, they find it curious that so many Westerners believe an independent, capitalistic Hong Kong is necessary for that progress, supposedly to provide China with a large proportion of its foreign exchange earnings and a trade outlet to the West. Fortunately for realists on both sides, those myths are being debunked.

Last year The Asian Wall Street Journal reported that China earns only about one-third of its foreign exchange by selling goods, mostly food, to Hong King. But even if that projection is too low, many economists estimate that China would gain more by absorbing Hong Kong's international trade earnings than it would lose in "foreign sales' to Hong Kong.

While Hong Kong does provide China with an entree to Western markets, it is also a competitor for those markets. So long as the colony remains an independent political entity, the West can play off Hong Kong's export interests against those of China. The textile industry, which produces nearly half of China's manufactured exports, is a case in point: Hong Kong textile companies' profits are often China's losses. Recently, however, China seems to be gaining the upper hand; in 1983 the Chinese signed a five-year bilateral agreement with the United States which allows it to increase its textile exports to nearly $900 million by 1985. At the same time, the Commerce Department has taken tough measures to stop Hong Kong manufacturers from dumping textile products on American markets and to hold them to their present quotas. Were China able to speak for Hong Kong, it might be able to increase net exports to the West and, perhaps more important, shift the mix of exports to favor mainland producers.

Once those facts become more widely recognized, another wave of pessimism and financial panic could sweep Hong Kong. Yet the same facts point to an eventual solution--not so much political as economic--for integrating Hong Kong into China. The island's ultimate political status and the issue of sovereignty, which the Thatcher government seems to be quietly forsaking much to the dismay of the colonial lobby in the Conservative Party, could then be downplayed, and the focus shifted to the kind of economic guarantees that would be written into Hong Kong's new charter.

There are signs that economic integration is proceeding apace. A group of private Hong Kong investors recently agreed to provide 25 percent of the $4.5 billion required to finance a nuclear power plant in Guangdong province; 70 percent of the plant's power will be sold to Hong Kong. Similarly, the Bank of China's Hong Kong office reportedly has offered financing (in Hong Kong) extending beyond the 1997 lease. An article in the December 29, 1983, Far Eastern Economic Review suggested that an expanded role for British companies in new Chinese development projects might also be part of a Hong Kong settlement. Britain currently has a negative trade balance with China.

Of course, the road to such economic integration is likely to have many surprises. Beijing might choose to open the "bamboo curtain' as it did in 1962, allowing a flood of Chinese to enter the New Territories from Guangdong province. Such an influx would inevitably set off a wave of immigration by healthier and richer Chinese to Australia, Canada, the United States and other Western countries. (Immigration lawyers and financial advisers are already in great demand in Hong Kong.) But the bulk of Hong Kong's new working class cannot leave--the young people who toil for McDonald's, drive taxis in Hong Kong Central, run countless sewing machines in Wanchai's back alleys and dance to David Bowie at their favorite clubs. It is the energy of that generation that will ultimately decide Hong Kong's future prosperity, whatever promises are written into the fourth Hong Kong treaty by aging men and women in London and Beijing.
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Author:Staple, Gregory C.
Publication:The Nation
Date:Feb 25, 1984
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