The reinvention of Hong Kong

Shyam Saran

Former Foreign Secretary and Honorary Fellow, CPR

I recently visited Hong Kong after several years. My first exposure to the free port city was in the early 1970s, when it served as a freewheeling capitalist outpost on the southern edge of communist China, then in the throes of Mao Zedong’s deeply disruptive Great Proletarian Cultural Revolution. Even during those ideologically charged days, Hong Kong served as an indispensable economic lifeline for China, its only bridge to the world and a valuable window for the rest of the world looking into a bewildering behemoth. The arcane art of China-watching was born here. Then, after the adoption of economic reforms and liberalisation by China in 1978 and particularly after she entered the World Trade Organisation in 2001, China was seen transforming itself into a giant version of Hong Kong, but as the Chinese would say, with unique ‘Chinese characteristics’.

The closer integration of Hong Kong with the Chinese economy is portrayed as an asset rather than a constraint.

When sovereignty over Hong Kong was transferred from the British to the People’s Republic of China in 1997, the two sides had agreed that Hong Kong would retain its political and legal institutions and its economic system with minimal change over 50 years under the ‘One China Two Systems’ policy announced by then Chinese leader Deng Xiaoping. This had some credibility as China appeared to be converging towards the East Asian trajectory of economic prosperity translating into a gradual evolution towards some recognisable form of liberal democracy and market economy. The ‘one country two systems’ policy was also directed towards Taiwan, the island state claimed by China, which, too, was promised the extended retention of its political and economic institutions but under Chinese sovereignty. However, the script has changed dramatically since Xi Jinping emerged as China’s undisputed leader in 2013 and taken the country in a more ideologically oriented direction, reasserting the primacy of the Communist Party in Chinese politics and the state-owned enterprises as the vanguard of Chinese economic advance, especially in the quest for technological self-reliance.

This trend has been accompanied by an increasing emphasis on national security and a suspicion of external state and non-state actors. There was less and less room for an open city and free-wheeling economy such as Hong Kong. Beijing’s attempt to assert its control over Hong Kong met with strong resistance. In 2014, there was the popular but peaceful ‘umbrella movement’, with mostly young demonstrators protesting the proposed promulgation of an extradition law which would allow fugitives to be transferred to China to face justice. The umbrellas were used as protection against pepper spray the police deployed to break up demonstrations and then became its symbol. The protest, however, fizzled out after paralysing all activity in the heart of the city for 79 days. Subsequently, there were violent riots by students in the aftermath of the Chinese National People’s Congress passing the Hong Kong National Security Bill, which placed serious restrictions on freedom of expression and assembly and allowed only those vetted as ‘patriotic’ to hold electoral office. The prolonged and violent riots, along with the severe repression that followed, seriously undermined the status of Hong Kong as an international financial and business centre. There was also an exodus of many of its residents to other countries, while several businesses moved to Singapore.

The lockdown imposed during the Covid-19 pandemic only exacerbated the negative outlook for the city, even while it stopped public protests on the streets. Hong Kong followed China in abruptly lifting all Covid-related restrictions in December 2022 and has since been engaged in re-establishing itself as a regional and international business and financial centre. The current narrative is that Hong Kong is open for business, and it offers stability and security. Its closer integration with the Chinese economy is being projected as an asset rather than a constraint. With its own economy slowing down and facing headwinds from a collapsing property sector and high indebtedness, China has become aware of the value of Hong Kong as its bridge to the rest of the world and is invested in its revival as an international financial and business centre.

Is this message getting through? There is no doubt that there is a significant increase in tourist and business traffic to Hong Kong, both from the Chinese mainland and abroad, but it remains below the existing capacity. Some long-time Indian residents told me that business was still in the slow lane. But they feel safe and there is no pressure on them to leave or seek residence elsewhere. It is mainly white expatriates who have left and are not yet convinced that Hong Kong has regained its credibility as a relatively free and legally predictable and fair jurisdiction. The US has included Hong Kong within the ambit of the several economic sanctions and technology denial measures applicable to China. The role that Hong Kong traditionally played as an alternative route for accessing US high technology and sensitive items has now been constricted, though not entirely.

There is also a sustained effort to bring the Chinese population in Hong Kong into what may be called the ‘mainland mainstream’. An impressive Palace Museum has been established in the new Culture District, constructed on land reclaimed from the sea. It has several exhibits on loan from the Beijing Palace Museum. I had the opportunity to see rare archaeological finds from Sichuan, which include bronzes from possibly a pre-Han period. Other exhibitions underscore the rich cultural heritage of China, making Hong Kongers aware of the proud civilisation to which they belong. Recently, China’s first aircraft carrier, the Liaoning, docked in Hong Kong harbour and received scores of local residents, hopefully instilling pride in their nation’s growing military prowess.

We are seeing the Chinese principle of ‘walking on two legs’ on display, underscoring Hong Kong’s international and cosmopolitan character on the one hand and projecting its Chinese identity on the other. But the steps remain hesitant.

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