BANKERS TRUST SECURITIES RESEARCH
The risks to the future are also substantial. Hong Kong is likely to be economically successful even if the Beijing leadership remains relatively conservative and insecure, but the future would be much rosier if Beijing were able to regain its composure and adopt a posture of confident magnanimity. Beijing's current insecurities lead it to a prickly nationalism that damages its own interest in Hong Kong stability by, inter alia, refusing to recognize British passports given to Hong Kong people and adopting a threatening tone toward Hong Kong demonstrations. One cannot predict how this will evolve by 1997. The leadership's insecurities could be either
much worse or much better.
A more important source of risk is the natural limitations to Hong Kong's autonomy regardless of treaties. The importance of Hong Kong's airport to China, the indivisibility of the Hong Kong and Guangdong economies, the flow of knowledge across the border, the dominance of Hong Kong capital in southern China, the presence of powerful Chinese interests in Hong Kong, and the inevitability of efforts by Hong Kong businessmen to gain competitive advantage by exploiting political connections in China have made Siamese twins of Hong Kong and southern China. This means that it will take an active effort by China, not just restraint, to maintain Hong Kong's distinctive system.
Finally, and most important of all, there would be overwhelming risk in continued failure by the Hong Kong government and the Hong Kong press
Three major risks
to surface the subversion issue explicitly, achieve a degree of public. This is the issue
consensus, acknowledge Beijing's legitimate concerns, reach an explicit
accommodation with China, and extract in return some explicit assurance from Beijing that it must be acceptable for Hong Kong people to criticize China, debate about it, and even demonstrate so long as they confine themselves to Hong Kong. The government has dealt with the policy problem effectively and quietly. The "quietly" part must be abandoned.
Once again, Hong Kong has only two choices: one country, two systems or else one country, one system. The risks it faces in making one country, two systems work are substantial, but they are less overwhelming than is widely believed, and they are not disproportionate to the political risks faced by a number of other highly successful third world societies.
William H. Overholt Regional Strategist
25
28 August, 1990 BTB 398/2
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