XN000022-1995-10-23 — Page 7

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Question: How viable in your opinion, following the events in Hong Kong, is the proposition to establish one country with two systems which would encompass effectively, a socialist with a capitalist system?

Governor: One country/two systems is exceptionally hard to make work anywhere. It has been tried elsewhere. I suppose the best local example of it working was the Act of Union in the United Kingdom which brought Scotland and England together within the same nation state, but retaining their independent legal systems and churches, etc. But elsewhere it has not always been so successful. One country/two systems was not a spectacular success in Germany for example. It is difficult.

It is difficult for China, it is difficult for Britain, it is difficult for Hong Kong. Nobody should underestimate those difficulties. For China to make it work will involve great sophistication, great self-restraint and perhaps rather more understanding of what it is that makes Hong Kong work than has been shown by some Chinese officials in recent years. Hong Kong itself will also have to show a degree of restraint if it is to work.

I go back to something I said in my earlier remarks. I happen to think that in Asia as elsewhere, the future will not just lie with those who can produce for a time the fastest rate of GDP growth. I think the future will lie with those who can best combine economic freedom and human dignity. Hong Kong does that remarkably successfully today, which gives me some confidence that it will be able to do that for the foreseeable future.

Question: In you view, what is there to stop the Chinese nationalising the industries? I know that is against the agreement, but in practice presumably they could do that.

Governor: They would be breaching the Joint Declaration were they to try to overturn the way that the Hong Kong economy was run and managed. Since they are attempting to run their own economy in an increasingly capitalist way introducing market principles wherever possible, I do not think they would seek to change things dramatically or fundamentally in Hong Kong. Hong Kong has been described variously over the last year as the freest economy in the world by the American Heritage Foundation, as the most business friendly economy in the world by the leading American business magazine. It came third recently in the league table of world competitiveness. It is a success story which I do not think China would want to dismantle.

It is important that Chinese officials should understand that part of the success of a market economy like ours is that business takes place on a level playing-field within the parameters of the Rule of Law, and that is not something which Chinese officials are accustomed to.