But despite all the bluster and threats following the Patten proposals neither the stock market nor land values have fallen (the currency is officially pegged to the US dollar). In fact they have risen. Even the Chinese talk of a 'second stove' relates to 1997 rather than to the immediate situation. In other words even though no one doubts the Chinese capacity to takeover the territory at any time of their choosing no one is acting as if that is to be expected. After all the Chinese could use their claim that the British have violated the previous agreements as a basis for so doing. But everyone knows that the cost to China's credibility as an economic partner in the international economy would be unacceptably high. In other words, even when the Chinese claim to have been unjustly provoked they have recognized that their best interests are not served by unilateral intervention.
The Significance of the End of the Cold War
Beijing's interest in the sustaining the economic significance of Hong Kong is also political. The lessons that Deng Xiaoping in particular has drawn from the Tiananmen killings and especially from the collapse of communism in Eastern Europe followed by the disintegration of the Soviet Union itself are that Communist rule in China can only survive if the Chinese economy continues to grow and the people experience growing prosperity. To this end Deng issued his calls for economic growth to be accelerated that were heeded only after certain infighting after his famous tour of southern china in the early Spring of 1992. In that tour he called upon Guangdong Province to become the next economic dragon after South Korea, Taiwan, Hong Kong and Singapore. In other words he called upon Guangdong to model itself upon Hong Kong.
This may be regarded as a mixed blessing as far as HongKong is concerned despite the implied accolade. For it has had the effect of drawing HK more closely into the factional disputes about China's general orientation. Although the ideological appeal of communism may be said to have vanished in China as elsewhere there are still old fashion Communists in positions of considerable power in China whose traditional loyalty to the Communist Party and its ethos is underscored by
by a kind of nativistic nationalism which blames many of China's current ills upon the adverse external influences attendant upon its particular method of modernisation.
Their political constituencies are to be found among the remnants of the command economy and the state owned industries. These are the big losers of the modernisation process. They have been eclipsed economically by the periphery of the non state sector and by the growing economic regional centres. The state owned enterprises which used to account for over 90 percent of the value of industrial production only fifteen years ago now account for less than 50 percent. A third of them operate at a loss, another third allegedly break even and the rest supposedly are profitable. Because of soft budgeting and other dubious
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