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SPEAKING
FREELY
Hong Kong and China reverse
roles
By Todd Crowell
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here if you are
interested in contributing.
The
Heritage Foundation and the Wall Street Journal
recently released their Index of Economic Freedom
for 2005. Not surprisingly, Hong Kong headed the
list of 166 countries as the world's freest
economy as it has almost every year since the
index was first published. Hong Kong remains the
world's "poster child for economic development
around the world", said the Heritage Foundation.
China ranked 112th. That is not surprising
either considering that China is still formally a
communist state, even if the socialist system has
given way to market socialism. Considering their
relative positions, one might think that a huge
gulf, an enormous chasm, exists between Hong Kong,
the paradise of free markets, and China, the
paradigm of command economy. But that's not how a
lot of Hong Kong people see it these days.
"China's cities are becoming more like us every
day," says Michael Kadoorie, scion of an old Hong
Kong business family and owner of the territory's
leading electric power company.
A growing
number of people are beginning to think that
China's economy may, at least in some respects, be
more receptive to open competition and more
supportive of a robust private sector than Hong
Kong's. Political scientist and longtime observer
Michael DeGolyer put it this way in a recent piece
in the Toronto Star: "While regulation and
taxation still lag behind Hong Kong standards, the
battle for market share is far more contested in
the [Chinese] mainland than in the monopoly- and
cartel-plagued and developer-dominated Hong Kong."
Writing on the 20th anniversary of the
signing of the Joint Declaration that set the
terms for Hong Kong's return to China, DeGolyer
went on to say: "Free market ideologue Margaret
Thatcher undoubtedly never thought China would
outdo the rabid Thatcherites when it came to
competition and trade. But 20 years on, not only
the prospect looms before us but China makes every
other imitator of Manchester manufacturing pale in
comparison."
Of course, Hong Kong still
scores high on many of the criteria that the
Heritage Foundation uses to rank economies. Its
tax rate is relatively low. There is no tax on
capital gains or savings. The rule of law is
firmly in place. Civil service is free of
corruption. Yet Hong Kong is falling behind in
aspects no one would have imagined. Why, for
example, are there no big discount retailers in
Hong Kong? The last time any major retailer made a
foothold in Hong Kong was British retailer Marks
and Spencer in the late 1980s while Hong Kong was
still a British colony. Yet Wal-Mart stores are
opening all over China - two of them just across
the border in Shenzhen.
In Hong Kong,
"collusion" has suddenly become the buzzword for
2005 much as "democracy" was the political issue
for most of 2004. In his most recent policy
address, Chief Executive Tung Chee-hwa felt
compelled to declare his opposition to "collusion
between business and government". Poster child for
economic freedom? More like the poster child for
crony capitalism.
Of course, the two are
connected. The chief executive is not picked by
the people. He is selected by a committee made up
mainly of big business interests. Half of the
legislature too is picked from narrow special
interests. Tung himself is the scion of a major
ship-owning family. Since the handover of Hong
Kong in 1997, Tung has been dogged by the belief
of many that he is beholden to special interests.
Exhibit A in the indictment is a decision
the new SAR (Special Administrative Region)
government made fairly soon after the handover. In
1999, the government awarded several hectares of
prime government-owned land on the eastern side of
Hong Kong Island (almost all land on Hong Kong
Island is government-owned) to a company
controlled by Richard Li, son of Hong Kong's
richest man Li Ka-shing, a prominent Tung
supporter. He proposed building Cyperport, which
was billed as an incubator for transforming Hong
Kong into a regional high-tech center. Nothing
controversial about that, except that the
government did so without putting the project out
for public bidding. Many observers believe
Cyperport was Tung's biggest blunder (among many).
Over the years, the issue has continued to fester
and is one reason for Tung's continuing
unpopularity.
Last month - six years after
the project was awarded - the government felt
compelled to defend its action. Secretary of
Commerce, Industry and Technology, John Tsang,
wrote a lengthy defense of the government's role,
which was carried as an opinion piece in six Hong
Kong newspapers. (Some refused to carry the
article, complaining of the government's unusual
demand that it be run unedited and uncommented on.
"We're Nobody's Mouthpiece," declared The
Standard.
Tsang argued basically that the
decision had to be made quickly if Hong Kong were
to be competitive in the fast-moving high-tech
environment of the dotcom boom. And to be fair,
there was considerable angst in Hong Kong in the
immediate aftermath of the Asian Financial Crisis
(which broke out one day after the July 1, 1997,
handover) that Hong Kong was losing its
competitiveness to other Asian cities, such as
Singapore and Shanghai. There still is.
The issue has come to the fore again in
part because of another mammoth development
pending on government-owned land. The proposed
West Kowloon Cultural Center will comprise four
museums, four large concert halls and theaters and
a school for the performing arts. Every major
cultural institution in the world, from the
Pompidou Center in France to the Guggenheim
Foundation in America, is watching this project
closely. But the government's decision to put the
entire project out for tender as a single project
means that only a handful of the wealthiest
property developers in the city have the means to
bid. Many of the smaller, though still wealthy
property developers, have been lining up against
the project, until and unless it is withdrawn and
broken into smaller pieces for which they might
compete.
This year marks the 20th
anniversary of the signing of the Joint
Declaration between Britain and China in 1985,
setting the terms under which Hong Kong would
revert to Chinese sovereignty. At that time, China
was just beginning with the market reforms that
would transform the country 20 years later into an
economic powerhouse. It was still seen mainly as a
backward country dominated by the dead hand of the
Communist Party.
So the best efforts of
the British negotiators and their Hong Kong allies
were directed at trying to insulate Hong Kong from
China and from the Communist Party cadres, who
lacking any understanding of how the free market
works, were sure to muck things up if they were
given a chance to run Hong Kong's economy. Twenty
years on, Hong Kong is the one that seems to be
stuck in the past and it is China that has moved
ahead in many ways. Hong Kong pales in comparison
with the kind of freewheeling enterprise that
characterizes much of China's economy today. The
world's "freest economy" might benefit from a
little of the cowboy capitalism from across the
border.
Todd Crowell is the
author of Farewell My Colony - Last Years of
British Hong Kong. He comments on Asian affairs
at www.asiacable.blogspot.com.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.)
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here if you are
interested in
contributing. |
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