The high level of prosperity in the former colony is now under threat by China’s crackdown, as international investors become wary of the future.
Hong Kong was always an exciting place to live and work. Even the arrival by air was a riveting “seat of the pants” experience. In the late 1960s, when I made the first of many trips to the British colony, Hong Kong’s international airport was at Kai Tak, slap bang in the centre of the crowded city. To land, pilots had to aim for a huge checkerboard on the side of a mountain, bank sharply to the right just before colliding with it, and then descend through densely-packed tall buildings, where passengers could often see what the residents were watching on their TVs. The final challenge for the pilots was to stop the plane before it tipped over into the sea. Only one ever did, and that was a China airlines Boeing 747, which in 1993 skidded-off the runway after landing in a typhoon.
As business in the colony rapidly expanded, it was clear in the early 90s that a new, safer airport was needed. The ensuing airport controversy came to symbolise the growing political control Beijing would exert over Hong Kong both before and after 1 July 1997, the date the British colony reverted to Chinese rule. Britain had acquired Hong Kong Island as a colony following the opium wars in 1841. It expanded into the Kowloon Peninsula in 1860, and grew further when Britain obtained a 99-year lease on the New Territories in 1898. Although in theory, Britain was required to give up only the lease in 1997, it was considered prudent to pass the whole colony back to China as a sign of friendship and cooperation between the two countries.
China’s main objection to the new airport project, which included plans to build a new seaport and the second-largest suspension bridge in the world, had been the $16.2 billion cost. Beijing argued it was too expensive and would drain Hong Kong’s coffers before the handover date. In the end, diplomacy prevailed. The new airport, bridge and seaport were built and have since become hugely beneficial to Beijing.
One of the striking features of Hong Kong at the time of handover, 25 years ago, was the high level of prosperity, a level which continued to grow until recently. Much of this is due to the “one-country two-systems” principle, originally developed in 1979 by China’s then Chairman Deng Xiaoping for Taiwan. The idea at the time was to allow Taiwan to keep its economic and social systems, government, and even military in return for acknowledging that it was part of the People’s Republic. Although Taiwan rejected that proposal, Deng pursued the same idea to resolve the crisis over Hong Kong in 1984, when real-estate holders were becoming jittery about losing everything after the colony reverted to China 13 years later. This led to a deal between Deng and British Prime Minister Margaret Thatcher that became the 1985 Sino-British Joint Declaration, an international treaty that is still legally in effect.
But President Xi Jinping is clearly not bothered by international treaties and global rules-based order. Over the past few years he has systematically and unilaterally destroyed the agreement his predecessor made, while perversely claiming last week during his brief visit to commemorate the 25th anniversary of the return of the former colony that “democracy is flourishing in Hong Kong”. This, of course, is total nonsense as political life and civil society in Hong Kong are in a sharp downward trajectory, while citizens are denied basic freedoms and forced into Orwellian conformity.
It was back in March this year that the annual conference of functionaries rubber stamped a Chinese Communist Party plan to gut most of what is left of Hong Kong’s democratic processes. At the “Two Sessions” meeting, or Lianghui, over 5,000 members of the CCP elite, members of both the Chinese People’s Political Consultative Conference and the National People’s Conference, adopted the “Decision on the Improvement (sic) of the Electoral System of Hong Kong”, by a vote of 2,895-0, with one abstention. Party officials hailed the emergence of a “new democratic system with Hong Kong characteristics”, which in reality is a facile and perverted denial of Hong Kong’s proud tradition of limited but vivid democracy. What is coming is an electoral system in Hong Kong with Chinese Communist Party characteristics, where the electorate can only vote for candidates carefully approved by the CCP.
In a review of political conditions in Hong Kong, the European Union earlier this year described an “alarming political deterioration” and a “severe erosion of autonomy, democracy and fundamental freedoms” which would ‘stifle political pluralism’. An accompanying statement from the UK Foreign Office said that the UK would now consider China to be in a state of ongoing non-compliance with the Sino-British Joint Declaration that was supposed to guarantee Hong Kong’s autonomy until 2047. “China must act in accordance with its legal obligations and respect fundamental rights and freedoms in Hong Kong”. But Beijing simply shrugged its collective shoulders, insisting that Hong Kong’s electoral system and everything else was China’s internal affair.
And this is the nub of the issue. China considers itself to be so large both economically and militarily that it can ride roughshod over international norms and simply brush aside any criticism. Its Constitution states that its form of government is “people’s democratic dictatorship”, although how it can link democracy with dictatorship defies any form of logic. When Britain governed Hong Kong there was wide-ranging autonomy, judicial independence, with unfettered individual rights. All this has now gone, yet Xi proudly proclaimed during his visit last week that “after reuniting with the motherland, Hong Kong’s people became the masters of their own city. Hong Kong’s true democracy started from here.” This is a perverse, topsy-turvy line of argument.
Denied the vote and a voice by an island administration run by Communist place-men, Hongkongers are voting with their feet. More than 120,000 expatriates and locals fled in 2020-21, as a result of the imposition of the draconian national security law and the subsequent disappearance of democracy. Many of them, especially younger people, came to Britain. A 2021 survey in Hong Kong found that 40% of expatriates plan to leave or may do so. In addition to the outflow of people, last year there were capital outflows of more than $100 billion in Hong Kong, for only the second time since 1997, following a significant dip in investments.
The high level of prosperity in the former colony is now under threat by China’s crackdown, as international investors become wary of the future. Hong Kong’s human rights rating is plunging and so is growth. A German business confidence survey last week concluded that 2022 was “worse than 2021 in terms of attracting overseas talent, regional headquarters location and political climate”. It’s becoming clear that Xi’s myopic trademark revisionism and systematic repression are storing up huge problems for the future.
Noting the severe downturn in the business environment, many foreign investors are now recalibrating their strategy in Hong Kong. In fact, nearly half of European companies are considering leaving this year, according to the local European Chamber of Commerce. The city’s unemployment rate from February to April hit a 12-month high of 5.4%. A recent survey conducted by the University of Hong Kong found that about 1 in 10 suffers from depression, citing job loss as the principal cause. No wonder so many young Hong Kongers are fleeing overseas, simply because they see no future in a city that no longer resembles the place they grew up in. In short, Xi Jinping’s autocratic behaviour and warped idea of democracy is turning Hong Kong’s economic success into failure.
After the exhilarating landing at Kai Tak, one of the great experiences in Hong Kong was to dine on the huge Jumbo floating restaurant, one of Hong Kong’s most famous landmarks. More than three million guests, including royalty, are believed to have eaten Jumbo’s Cantonese cuisine over the past 50 years. Last month, to the horror of onlookers, Jumbo sank as it was being towed away from the harbour. Beijing’s critics were quick to promote Jumbo’s fate as a metaphor for Hong Kong’s sinking future under Xi Jinping.
John Dobson is a former British diplomat, who also worked in UK PM John Major’s office between 1995 and 1998. He is currently Visiting Fellow at the University of Plymouth.