International Herald Tribune
Hong Kong scorecard
Monday, June 25, 2007

HONG KONG: Opinions on how Hong Kong has fared in 10 years under Chinese sovereignty are largely determined by the expectations, hopes and fears that prevailed in 1997.

Those who feared the worst back then are now agreeably surprised that Hong Kong remains a generally prosperous and open society. Those in the government who hoped for the best but feared otherwise are now prone to self-congratulation. Yet those who saw 1997 as an opportunity for positive change, who did not believe that preserving the status quo was sufficient, have reason to be disappointed.

Taking the decade as a whole, the high degree of autonomy promised by the Joint Declaration and Basic Law is still intact, but precedent-making holes have been made.

The first big hole was made by the Hong Kong government, which used Beijing to overturn a judgment by the Court of Final Appeal which the local bureaucracy found inconvenient. In response to the economic problems of the Asian financial crisis and the SARS epidemic, it also sought economic favors from Beijing which further compromised autonomy.

More recently, Beijing has made some more holes by intervening overtly to limit progress towards the universal suffrage eventually promised by the Basic Law. Mass demonstrations and public opinion surveys show Hong Kong's own commitment to continue pressing for this, but political activism is causing concern in a Beijing.

The economy has come through the decade in fairly good shape - not much better or worse than the likes of Singapore and Taiwan, which also went through the Asian crisis, but not the turmoil experienced by the likes of Korea and Thailand.

This can be attributed in part to continued adherence to a very strong fiscal situation and pegged exchange rate, and partly to China's remarkable growth. Perhaps Hong Kong should have done rather better, given China's growth - its relative importance to China has declined as other regions, most notably Shanghai, have prospered and taken some business from Hong Kong.

The financial sector has benefited, in particular from China's growth and the listings of mainland companies in Hong Kong. However, focus on the mainland has meant that opportunities to become a center for trading foreign stocks, as in London and to a lesser degree Singapore, have been ignored.

While Hong Kong remains open to foreigners, the foreign presence - excluding low-paid domestic servants from Southeast Asia - has declined. Emphasis on cross-border business and on national identity have been at the expense of the "Asia's world city" rhetoric.

Hong Kong's relatively smooth passage through the Asian crisis also meant that there were none of the reforms which accompanied it elsewhere. The ending of colonial rule has resulted in increased links between the upper bureaucracy and big business, most of which is focused on the domestic economy. Beijing's support for business leaders has further strengthened local oligopolies in property, retailing and utilities.

The influence of these groups has contributed to what is the most evident deterioration in Hong Kong since 1997 - air quality. While much of this is attributable to industries across the border, failure to address pollution has become a byword for bureaucratic inaction and the influence of big business.

Despite the Asian and SARS crises, per capita Gross Domestic Product has risen and unemployment is now back down to pre-handover levels. But income distribution has worsened markedly. Now at 0.533, the Gini-coefficient - the most widely used measure of income inequality - is high by any standards, particularly those of developed Asia.

This is attributable to tax changes favoring upper-income groups as well as to changes in the economic structure and an influx of low skill labor from the mainland. It is a social problem which could become a political one.

Top level decision making remains in very few hands and an inward looking-bureaucracy is loathe to listen to contrary voices or learn from other cities. But the general level of order and the competence of daily administration remains high.

The judiciary has impressed with its determination not to be bullied by an executive which tends to see judiciary and legislature as obstacles to the "executive-led" government favored by Beijing.

Much of the media practices a self-censorship on issues relating both to the mainland and to big business, but this situation prevailed long before the handover. Non-governmental organizations are now more active than ever and Hong Kong people appear generally determined to assert their rights and to speak out on issues which concern them.

Although they know that Beijing remains the ultimate arbiter, they must continue to press for more representative government. As it is, they have exchanged one colonial master for another while the same bureaucratic and business elites remain in charge. That is both comfort and disappointment.