TNAG-2119-FCO40-3025-Future-of-Hong-Kong-general-1990 — Page 10

Strategy Paper

HONG KONG AND CHINA: THE REAL ISSUES

Conventional wisdom:

China will wreck Hong

Kong

But even radical China

protected Hong Kong

China is investing

heavily in Hong Kong

S

ince Tiananmen Square, it has been the conventional wisdom that

when Hong Kong reverts to China in July 1997, China will

promptly use its newfound sovereignty to cripple Hong Kong. In this view, China cannot be trusted, so the Joint Declaration of 1984, which promises Hong Kong 50 more years of capitalism after 1997, is worthless. Moreover, the Basic Law, China's recently enacted constitution for Hong Kong, is not democratic, and it can and will be used to subvert freedom and the free market. Knowing this, Hong Kong's inhabitants and its capital are fleeing to a degree that will destroy its viability in anything like its present form long before 1997.

This view raises many questions. The first is, if this is what Beijing intends to do, why has it decided to wait until 1997? For at least three decades, China could have absorbed Hong Kong simply by walking in and taking it. The British garrison was pitifully small, could not have been reinforced to counter a Chinese invasion, and would not have been reinforced even if it could have been. In fact, to conquer Hong Kong, all China had to do was to cut off the water supply. Hong Kong is not the Falklands geographically, strategically, demographically, or in the psychology of the British.

Moreover, even in its moments of greatest insanity, China has chosen to protect Hong Kong. The most insane time in several centuries was 1967, the height of the Cultural Revolution, when the degree of turmoil, irrational behavior, and xenophobia exceeded anything that has occurred in the Iranian Revolution. But when Red Guards approached the Hong Kong border, Beijing had the local army commander clear them away. Most surprisingly, when Portugal attempted to give sovereignty over Macau back to China, Beijing refused, out of concern about the impact on Hong Kong.

During tense periods of Sino-British negotiations over Hong Kong's future in 1981-'84, China subsidized financial stability in Hong Kong. Since that time, China has been making huge investments in Hong Kong. The Bank of China Building, Asia's tallest structure, symbolizes China's investments in Hong Kong land, buildings, and companies. Bank of China has located 14,000 of its total 20,000 employees in Hong Kong. China has bought major stakes in Hong Kong companies such as HK Telecom and Cathay Pacific Airways. If it plans to take arbitrary actions that would severely damage the Hong Kong economy, these huge investments by a regime desperately short of capital make no sense whatsoever.