Hong Kong's Future Uncertain; H. Vanderleest

266 on the Hong Kong stock exchange have dropped markedly during the past year. In addition, property val ues in Hong Kong have declined on an average of nearly 30 per cent in the last twelve months. Another indicator of Hong Kong's uncertain future is that private investors and government officials recently decided not to spend $8 bil lion on a badly needed new airport. Both corporate and public investors feel a sense of urgency for a final decision because most loans are ar ranged for fifteen years and would be jeopardized if signed after July 1, 1983. As the result of Hong Kong's uncertain financial climate, many local and international firms are channeling their investment capital to the United States as well as to HONG KONG'S FUTURE UNCERTAIN 267 other developing Asian trade cen ters such as Singapore. Great Britain obtained Hong Kong, an area consisting of approximately 400 square miles and a population of about 5.5 million, from China af ter Opium Wars between the two nations in the early 1840s. Hong Kong Island and the tip of the Kow loon Peninsula on the mainland of China were ceded in perpetuity by China to Britain by the Treaty of Nanking in 1842. By 1895, the Brit ish had also obtained control over addi tional land on the Kowloon Peninsula, referred to as the New Territories, which also became part of the Crown Colony. It is only the New Territories section of Hong Kong which is scheduled to revert to the PRC under terms of a 99-year lease signed in Peking in 1898.

ComplexPolitical Issues Of critical concern to Hong Kong's current Governor who is appointed by Britain's Parliament is that the New Territories accounts for nearly 90 per cent of Hong Kong's land area and contains the commercial life blood of the colony. The area which would be left to Britain contains no airport, no agricultural land and virtually no industries. A related problem is that if the New Territo ries is reclaimed, the remaining part of Hong Kong would be largely de pendent upon China for food and water. Chinese Vice Chairman Deng Xiaoping has repeatedly told busi ness leaders throughout the world that China would prefer to retain the status quo for the near future and deal with the Hong Kong problem when the "time is ripe," that is, when she is ready. The time is not yet ripe for two reasons. In the first place, China regards Taiwan as the "prob lem" which she wishes to settle before deciding on the Hong Kong situation. Secondly, and more im portant, is that the economic bene fits generated by the existence of Hong Kong in its present form are immense. The British colony, for ex ample, accounts for approximately 35 per cent of China's annual foreign exchange earnings. China also ben efits from Hong Kong's financial services, port facilities, interna tional contacts, and skills in mar keting Chinese-made products.

The situation is made more bi zarre by the fact that many of Hong Kong's leading businessmen, own ers of ships, banks and department stores, for example, are Commu nists. What currently exists in a large sector of the Hong Kong business community is a massive paradox; administered capitalism in the ser vice of the People's Republic ofChina. China would have everything to lose and little to gain by absorbing Hong Kong. PRC leaders particularly rec ognize the potential difficulty of having to govern and feed Hong 268 THE FREEMAN May Kong's westernized Chinese resi dents who are long accustomed to British influences. From a political standpoint, some Chinese leaders do not agree with Deng's status quo position. They be lieve that it is imperative that Hong Kong revert to the PRC in 1997 so it does not appear that modern China has "sold" out to foreigners as the Ching Dynasty did when the origi nallease was signed. It is feared that other Asian and African nations would look down upon any type of compromise, causing the Chinese to lose face. Many Chinese have never acknowledged China's relinquish ment of Hong Kong and have al ways considered the colony to be a part of China. Others believe that the British are in Hong Kong to simply administer a part of China, with no more than a very technical sovereignty. There are also those who maintain that the treaties signed in the 19th century between China and Britain were "unequal" because the terms were dictated to a weakened China by an aggressive imperialist power.

Despite the fact that Hong Kong is spiri tually and emotionally Chinese, the vast majority of its res idents also support the status quo. Although most do not philosophi cally support their colonial status, they recognize the economics of the situation. Hong Kong residents have grown to appreciate that the fastpaced laissez-faire business environ ment that exists in the colony has allowed them to enjoy one of the highest standards of living in Asia. Alternative Solutions Likely to Be Considered Although it is expected that many formulas will be considered before Hong Kong's international future is determined on or before July 1,1997, several alternatives short of a status quo merit attention: 1. London could acknowledge Chinese sovereignty over all of Hong Kong. It could do so by accepting the position that the original treaties were invalid. In return, China would agree to allow Great Britain to con tinue administering the territory.

This alternative appears to be espe cially workable because it would save the political face of both Britain and China but still allow both nations to have a stake in Hong Kong's super charged economy. 2. Short of reclaiming Hong Kong, China could declare the New Terri tories to be a special economic zone with British administrators hired to run it. Although this alternative is met with some enthusiasm by most Chinese leaders, the plan is unac ceptable to Parliament because Britain does not want to be involved in mercenary operations. It is be lieved that Britain will not allow it1983 HONG KONG'S FUTURE UNCERTAIN 269 self to be politically humiliated and experiment in capitalism that has would probably sever all ties to Hong proven to be phenomenally success Kong before agreeing to such an ful since beginning two years ago. arrangement. 3. Perhaps the most radical alter native would be for China to include a clause in its new constitution that would allow for special administra tive regions outside of the current boundaries of the PRC. Hong Kong, Taiwan, and the nearby Portuguese colony of Macau whose population is also predominately Chinese could fall into this category. This could be a politically expedient, although eco nomically damaging, move since China would be able to incorpo rate all its "problem areas"

simultaneously. 4. Possibly the most logical move would be for China to expand its newly created Western oriented Shenzhen economic zone across the border to absorb Hong Kong. This would be a logical extension of an Rule of Succession Hong Kong is presently a political pawn in the game of Chinese power politics. In fairness to both parties of the original lease agreement, however, it was extremely difficult to imagine what the situation might be a century later. For those who ne gotiated the lease in 1898 with a terminal date in 1997, future events were so far away as to be of rela tively little concern. It is certain that there will be changes in Hong Kong's relationship with China after 1997. Although the specifics are not clear at this time, it is suspected that they will not be so drastic as to undercut Hong Kong's usefulness to China. Unless the colony's long term future is quickly settled, however, the con fidence and trust that has made Hong Kong one of the most aggressive and successful trading centers in the world will disappear. , IDEAS ON LIBERTY AN economic "rule of succession" prevails in states where competition is free. Imaginative and efficient managers are constantly rising to the top, and being elected by customers to larger constituencies, while less imaginative and efficient managers are voted out. But the management of a nation's economy by civil servants discourages imagination, and has no "built-in" mechanism for selecting the most efficient. The besto wal of honors, it is sometimes argued, takes the place of the money incentive of private gain. But there is a vast difference. Honors are bestowed from above, by the "ins." They favor the conformist "Organi zational man." HAROLD FLEMING, States, Contracts and Progress Hans ~ Sennholz Minimum Wages IN simple language, a mInImum wage law is nothing more than a government order that workers must not work lJ.nless they find jobs pay ing at least the stated minimum. It is an order to employers that they must pay workers the minimum, or not employ them at all. It is a direct order that is enforced by the coer cive powers of the state.