China’s Hong Kong experiment faces biggest trial

June 13, 2014

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China’s experiment with Hong Kong is facing its biggest trial. The former British colony has mostly thrived in the 17 years since it was handed back to the People’s Republic. But a planned “Occupy Central” democracy protest is about to test Hong Kong’s openness – and China’s patience.

Hong Kong has defied the gloomy predictions of its demise that greeted the 1997 handover. Despite competition from Singapore and Shanghai, it has become a stronger financial and commercial centre. The authorities in Beijing have mostly respected Hong Kong’s special status, which former paramount leader Deng Xiaoping summarised as “one country, two systems”. Many citizens who decamped to Canada or Australia before 1997 have returned.

Yet tensions are rising. Economic success has brought inequality, while ultra-low interest rates – the result of Hong Kong’s currency peg to the U.S. dollar – have pushed up property prices. The cost of the average apartment has doubled in five years. Regulatory demands that buyers put down a large lump sum before qualifying for a mortgage have made owning a home an even more remote prospect for many citizens.

Lots of large cities suffer from similar problems. In Hong Kong’s case, however, the outlet is rising anger at mainland Chinese who cross the border to spend their new wealth on property and luxury goods.

The 1997 handover agreement protects Hong Kong’s special status for 50 years. At the time, British negotiators hoped that China would gradually come to resemble its new region. Yet while economic fortunes are converging, Hong Kong’s approach to political freedom is increasingly at odds with the mainland.

The territory’s tolerance of free speech contrasts with China’s increasingly sophisticated approach to censorship. The former colony remains the only place in the People’s Republic where citizens can openly commemorate the bloody 1989 crackdown in Tiananmen Square, as tens of thousands did on June 4.

The two sides also have vastly different attitudes to the rule of law. Hong Kong is currently gripped by the trial of the billionaire Kwok brothers, who stand accused of bribing the region’s most senior civil servant. The court proceedings could not be more different than the Communist Party’s campaign against corruption in its senior ranks, which has largely been conducted behind closed doors.

The relationship faces an even stiffer test in coming weeks as Hong Kong unveils proposals to give its citizens the vote. Despite denying them democratic rights for 150 years, the departing British managed to insert a commitment to hold elections into the handover agreement. According to the Basic Law that serves as Hong Kong’s constitution, the “ultimate aim” is for the region’s chief executive to be elected by universal suffrage. China subsequently agreed that the first election under this system should take place in 2017.

However, the Basic Law also states that candidates should be selected by “a broadly representative nominating committee”. Unsurprisingly, the Chinese authorities are keen to ensure that only pro-Beijing candidates make it onto the ballot. Democracy activists, sensing what may be their last opportunity to shore up Hong Kong’s political system, want the nomination process to be open to everyone.

This dispute is set to come to a head in the next few weeks when Hong Kong’s leadership publishes its plan. If, as seems likely, the proposals fall short of the democrats’ demands, a movement calling itself Occupy Central has pledged to stage an open-ended protest in Hong Kong’s central financial district.

It’s not clear how much support there is for Occupy Central, which has been organised by an academic called Benny Tai. However, this has not stopped local politicians and tycoons from issuing dark warnings about the threat to Hong Kong’s economic wellbeing. The Chinese authorities, perhaps alarmed by the prospect of a high-profile pro-democracy protest 25 years after Tiananmen, have also stepped up the rhetoric. The Beijing government this week published a “white paper” which stated that Hong Kong’s autonomy is the gift of the Chinese leadership – implying it could be withdrawn. Hong Kong residents increasingly fear the debate is polarising, raising the risk of a heated and possibly violent confrontation.

That would not benefit anybody. Hong Kong citizens enjoy a high standard of living they will be reluctant to jeopardise. Chinese leaders, while less concerned about their international reputation than they were 17 years ago, benefit from Hong Kong being a vital window onto the world economy, and a sign of their tolerance for different systems.

The rising tensions mean it’s no longer obvious that those things can be taken for granted.

This article has been corrected in paragraph eight to state that Britain’s Hong Kong handover agreement included a commitment to elections, not universal suffrage. Universal suffrage was first introduced in the Basic Law, adopted in 1990.


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Much ado about nothing. All of the rhetoric and sensalitionism is just that. Behind all of the bluster there are two key facts.

1. China still needs HK’s status as a global commercial and economic hub far too much to risk drastically changing things up. Even though China has been pushing for the Yuan to become a major global trade currency, that reality is still at least a decade away if not more. Until then, they will continue to rely on the major financial institutions in HK for USD transactions.

2. As much as some Hong Kongers like to complain about the housing prices and influx of mainland wealth, many of them also know that they won’t be prosperous without it. The tourism, retail and real estate cash being injected into their local economy is by no means trivial and vital to a tiny territory that has no natural resources and limited selection of industries. Often times, Hong Kongers just like to complain for the sake of complaining.

It’s great for the author of this article to be concerned for Hong Kong’s status and well-being but in the end, it’s really just all academic.

Posted by blah77 | Report as abusive

Hong Kong might do better if they fixed their broken electoral system allowing companies and foreign entities more votes than the people that lived there. (A system it inherited) – but that is hong kong – it’s always been about the Money.$$$

Posted by StigTW | Report as abusive