Beyond the current recession, the challenge facing Hong Kong is to avoid going from being the commercial centre it is today to becoming the next Japan
Early March was an important time for Hong Kong, wasn't it? Chinese Premier Zhu Rongji confirmed Tung Chee-hwa for a second five-year term as chief executive of the territory. Then financial secretary Anthony Leung announced his first budget. It's hard to decide which to be less excited about.
Tung's reappointment, of course, came after an election campaign ' can we call it such? ' that had all the political edge of Brezhnev's last run in Moscow. By the kindest accounts, the budget Leung advanced for the fiscal year starting 1 April was conservative. Considering that it all but ignored a fiscal deficit that is at the heart of Hong Kong's structural problems, there are less gentle terms for this document.
An important time, then, precisely for its emblems of inertia.
Let's not be boring and blame Tung for all that ails Hong Kong. True, he's something less than a democratic icon. As many in Hong Kong see it, he doesn't represent the territory's interests so much as Beijing's and those of the magnates who sit atop Hong Kong's economy. It's a problem, certainly.
It's too easy to lay the blame on Tung, whom supporters say is fundamentally committed to the right policies. Nor can one credibly suggest that Leung, as a financial secretary with little mileage on his odometer, must be singled out for his incompetence. Again, a facile analysis.
No, better to take the personalities out of it and see both men as symptoms of Hong Kong's deeper difficulties. On the one hand, the territory evinces a strong resistance to facing its problems squarely ' the old agility isn't there. On the other, it has a political and administrative structure that's stacked against the very thing Hong Kong needs most: debate, discussion, rambunctious politics. Let's be daring and call it democracy.
Beyond the current recession, even beyond the loss of confidence Hong Kong suffered when the Asia crisis punctured the almighty property market and thereby knocked the whole economy off kilter, the challenge before Hong Kong is to face its own maturity. To put it another way, Hong Kong must learn to accept itself as a settled society. Or another: Hong Kong must make the transition away from the transitional place it used to be.
If there's a prevalent emotion in the territory these days, China envy is among the top contenders. It's familiar across the region, of course, but you find in Hong Kong a jealousy of Shanghai's admittedly daunting dynamism that borders on self- flagellation. 'They want it,' a friend said recently of all those Shanghai-dwellers. 'They want what they're going to become, and they want it more than Hong Kong wants to remain Hong Kong.'
True enough, as far as it goes. But there are a couple of further points worth making about the Shanghai phenomenon and what it means for Hong Kong.
First, implicit in Shanghai's dynamism is a widespread understanding that those participating in the enterprise are contributing to a larger whole ' that burgeoning, half-formed thing called China. This recognition may be limited to the mainland's business class, but it shows up a missing ingredient in Hong Kong.
To put the point plainly, Hong Kong must turn itself from a port, a market, and a commercial centre into a society ' a polity. The sense of belonging and identity is strong enough ' has been for more than a decade ' but the mechanisms aren't there. Outside of government, it's a question of parties influential enough to help form a consensus on the right way forward. Within the administration, there's no cohort of ministers surrounding the chief executive to develop or articulate policies.
China's no model in this respect. There's plenty to suggest that China is attempting to modernise by way of a social contract all too familiar across Southeast Asia: democratic politics and public life are exchanged for a guarantee of increasing material prosperity. It's the model Hong Kong must leave behind if it is to find a new future for itself.
But neither does China seem to be standing in Hong Kong's way ' not yet, anyway. It was a telling moment last autumn when Chinese president Jiang Zemin exhorted Hong Kong to stop navel-gazing and get on with the business of being Hong Kong. The speech has been interpreted variously, but it presumably meant that the territory can look forward to fulfiling the stipulations of its Basic Law, which provides not only for a fully elected legislature but an elected chief executive as well.
Second point: the comparison with Shanghai could prove to be no more than a useless distraction. China and its dynamic urban areas, including Hong Kong, are not a zero-sum game. Consider these two cities carefully and they are as apples to oranges.
'Just as you don't compare Tokyo with Hong Kong, you don't compare Hong Kong with Shanghai,' says David Dodwell, executive director in Hong Kong at Golin/Harris Forrest International, a global consultancy. 'They do different things.'
While the hinterland upon which Shanghai will feed is vast ' with a population running into the hundreds of millions, depending on which provinces you count ' Guangdong Province and the Pearl River delta's environs give Hong Kong a hinterland of 60 million all its own.
'Hong Kong has grown in spite of China for 40 years,' Dodwell says. 'Only now is China achieving any power as a consumer. Only now is Hong Kong becoming a genuine import-export economy.'
Dodwell calls it a reinvention, and he's an optimist on the point. One can see it. It is far from foregone that Hong Kong will lose its place as a trading and financial centre. Property prices, since the bottom fell out of the market in the late-1990s, are already much closer in line with those of neighbouring areas on the mainland, for instance.
What will decide if Hong Kong can realise the future Dodwell sees out there in the middle distance? Institutions ' political and social ' are essential. By what other mechanism will Hong Kong wean itself from its dependence upon high property prices, given the vested interest so many of its residents have in them?
How else will it advance beyond the 'cartelised' society the British left to China and which China has done nothing to dismantle? Let us not forget that the freest of free markets, Milton Friedman's paradise, boasts only the semblance of a free-market system in many respects: look at law, banking, property, and so on down to supermarkets. How else can the territory avoid becoming an unlikely copy of Japan: high standard of living, an aging population, and a kind of exhausted dynamism? The more astute in Hong Kong already look northward with these worries in mind.
How else, finally, can Hong Kong learn to respond to what Dodwell, in a very useful phrase, calls 'a normally uncertain future?'
Bloomberg Norfolk, Connecticut newsroom
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