Bumpy ride
| by Peta Tomlinson 12 Jun 2007 Topic: Countries, International business |
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Next months marks the first decade since the UK handed back to China the territory of Hong Kong, which it had ruled for almost a century. Peta Tomlinson looks back on an eventful decadeSince the 19th century opium wars with China, the British had used this one-time fishing community and pirate safehold as their naval base for the region. As wartime treaties ceded various parts of Hong Kong to the invaders, the British presence increased until the last portion - the New Territories - was acquired in 1898 on a 99-year contract. Despite being infamously dismissed as 'a barren rock' by Queen Victoria's Foreign Secretary, Lord Palmerston, Hong Kong under British rule - and since - has emerged as one of Asia's most vibrant cities and a global success story. Bereft of natural resources, the territory has reinvented itself variously as a trade and manufacturing centre, ending up with today's service-based economy. As the clock ticks towards 1 July 2007 to mark the handover's 10th anniversary, Hong Kong's milestones are many. Among them, Hong Kong has been:
In 2007, Hong Kong is basking in a robust economy that sees unemployment at its lowest rate in nearly a decade (at 4.3%) and a budget surplus of US$7.1bn, or 3.7% of GDP. Yet the road to prosperity has not been without its obstacles, among them the year of 1997 itself. In the lead-up, cracks began to appear. Immigration, which had been rising steadily for years, peaked at 44,000 in 1994, before declining to just 3,000 in 2000. Not only were the people no longer coming, they were also leaving. A mass exodus of affluent local Chinese and expatriates alike was widely attributed to uncertainty about Hong Kong's political future under Chinese rule. As Sarah Wu, director of the Hong Kong Economic and Trade Office, recalls: 'There were a lot of gloomy predictions about Hong Kong. Friends would say don't go back, there may be trouble.' Within months of the 1997 handover ceremony, the Asian financial crisis hit. Though a victim, not an instigator, of the financial instability which led to a crisis throughout the region, Hong Kong could not remain immune to external pressures. Overnight in August 1998, interest rates jumped from 8% to 23% and, at one point, to 500%. Hong Kong's sound fundamentals and the early intervention by the Hong Kong Monetary Authority to thwart speculative forces enabled Hong Kong to emerge from the crisis sooner, and in better shape, than some of its neighbours. Financially Hong Kong bounced back, but worse was to come - and this time the enemy was within. While the dotcom collapse of 2000 proved little more than a hiccup, the severe acute respiratory syndrome (SARS) outbreak in early 2003 brought Hong Kong to its knees. Everyone who could flee did. Businesses closed every day. The economy shrank and property prices crashed by 66%. Such was the fear factor over an ailment that killed 812 people worldwide that the (apparently perfectly healthy) Hong Kong business delegation attending a major luxury goods trade fair in Basel, Switzerland, was banned from entering the building. And why wouldn't they be, when even the most devout had lost faith? Billionaires who had made their fortunes in Hong Kong deserted the city via their sealed first-class cabins, and even the granddaughter of the then Hong Kong chief executive, Tung Chee-Hwa, was reportedly pulled out of school. In the end, Hong Kong's SARS death toll was 298, not a huge number among a population of almost seven million. By mid-year the crisis was declared over, and it was back to business as usual. After SARS came CEPA, another four-letter word, but this time with a positive spin. The landmark Closer Economic Partnership Arrangement, allowing free trade between Hong Kong and the Chinese Mainland, gave Hong Kong a new competitive edge. Not only did 'CEPA the saviour' make doing business with China cheaper for locally-based companies, it also allowed big spending, increasingly affluent Chinese tourists freer access to visit Hong Kong. This was welcome news to the hotel industry, whose business had shrunk to just 10% during the SARS epidemic. Proven economic survivor though it well might be, Hong Kong still has a political thorn in its side. The handover to Chinese rule saw the introduction of a 'one party, two systems' model which has failed to find favour outside the Government itself. Elections remain skewed, and democracy elusive, which is hard to swallow in this tiny but vastly globalised newest city of China. 'The problem with non-elected governments,' says Christine Loh, a former Hong Kong legislator turned civil activist who founded the Civic Exchange, 'is their policies do not have to stand the test of the ballot box.' Hong Kong is exceptionally well endowed with financial resources, Loh points out, but 'money cannot buy who we are'. Festivities The 10th anniversary is a big deal for Hong Kong. China is marking its return to the fold by presenting two giant pandas as an anniversary gift. Much festivity is planned, with tourists and international media descending in droves to take part. Wu says that many among those original doubters were surprised at how smooth the transition turned out to be. And she is right. Hong Kong failed to pale into obscurity - in fact, quite the opposite - and on the ground, things seem largely the same as they were when the British left in 1997. Yet, for all the fanfare, it is China that has changed, not Hong Kong. As the second decade since the handover dawns, Hong Kong must figure out how to keep well clear of its encroaching 'little brothers' - the rapidly developing cities of Shanghai, Beijing and Guangzhou - and retain its proud status in the economic powerhouse that is the motherland. Peta Tomlinson is a freelance journalist who writes for the South China Morning Post and the Hong Kong Trade Development Council. | |