Asia Times: China


	June 29, 2002	atimes.com

China

Hong Kong, China: Five years on

HONG KONG - Five years ago, Didier Balme was a little circumspect on potential changes to Hong Kong after its sovereignty shifted from Britain to China.

"It is true that a worrying aspect of the handover is whether, in future, we are going to be under the same spirit or understanding of law," he said then.

In the short term, Balme, then president of the French Business Association, expected Hong Kong to stay the same, but beyond that, he feared political influence, and that Hong Kong might be worse off. "In China, politics is a big factor ... this is not the case in Hong Kong today," he said.

At the time, the relationship with Beijing was bad, and this had become a source of concern for business. There were constant disputes, recalls Balme, which made it difficult to make decisions on the business future of Hong Kong. Since the handover, however, the political relationship with the mainland has improved.

Balme, now head of North and East Asia for BNP Paribas, says there were then political issues, such as the right of abode and the possibility of mainlanders becoming residents of Hong Kong.

On this point, he says there were problems on interpretation of the Basic Law, Hong Kong's constitution jointly drafted by London and Beijing. This was referred to the National People's Congress for interpretation, and the special administrative region (SAR) government was immediately criticized for deferring to Beijing.

The issue of migration has generated fierce debate in Hong Kong: can the SAR, given its dense population, afford to take in migrants on family reunion or opt for skilled and professional migrants?

Balme says another point of controversy is that the SAR government is expected to voice and indeed has expressed the views of Beijing on foreign-policy issues. Under the Basic Law, foreign policy comes under the jurisdiction of the Chinese central government.

Still, aside from these issues, Balme sees no measurable change in Hong Kong as it prepares to mark the fifth anniversary of the handover on Monday, July 1. "The Basic Law is respected, to the surprise of others," he says. Balme has detected no interference from Beijing on monetary, fiscal and legal issues.

"Beijing has taken great care to show that it does not interfere," he says, adding: "Hong Kong is still a free market, and the rule of law prevails, along with the free movement of people, capital assets and funds.

"But Hong Kong is struggling to come to terms with its destiny within Greater China. While it has completely accepted that it is part of China, it is acutely aware of the challenges of potential competition."

Today, says Balme, people no longer compare Hong Kong to Singapore. Rather, they wonder about Shanghai as a competitor.

Some are disturbed by the rapid development of Shanghai, which generates excitement and confidence reminiscent of the Hong Kong of the 1980s. Then, Balme says, everything was easy and Hong Kong had full employment. The past five years has been one of Hong Kong's most difficult periods.

Balme says Hong Kong's unexciting economic growth of 1-2 percent is largely due to its property market, which has remained flat (he says 25 percent of households in Hong Kong have negative equity in their property, and that explains the lack of confidence). Generally, there is concern for a lack of vision of where Hong Kong will go and what it will become of it.

Despite criticisms, Balme believes Hong Kong is still relatively well managed and that it remains a good place for business. BNP Paribas will always use Hong Kong as the hub for its business in Greater China, he says, because Hong Kong offers a wide range of technical and logistic support for banking and financial services companies.

"It is difficult for companies to start from scratch [in China] because the rules in China are uncertain," says Balme. Although China's legal environment is "a lot better than five years ago", he doubts it will ever be the same as in Hong Kong, where laws are upheld and there is no room for "discretion".

(Asia Pulse/Asia Today)