The Asian Wall Street Journal
July 1, 1999
Hong Kong Two Years On
by Bretigne Shaffer
"Tung Chee Hwa's predecessors left 'vision' to entrepreneurs and
stuck to creating an environment where others could pursue their vision free of
government interference. Mr. Tung has decided he can do better."
A year ago today, all of Hong Kong breathed a collective sigh of relief that the
worst of the post-handover gloom and doom scenarios had failed to materialize.
No banks or industries had been nationalized, the free press had not been
squelched. Even the annual commemoration of the Tiananmen massacre went on
undisturbed, and a few of the city's pro-democracy legislators were able to
make their way back into the Legislative Council after having been removed by
the Beijing-selected administration in 1997.
By all appearances, the Chinese government had lived up to its promise not
to interfere in Hong Kong's affairs. Today, another year on, at least one of
the reasons for Beijing's apparent restraint is clear: There was no need for
it to interfere directly with the underpinnings of the capitalist enclave,
when the new Hong Kong government was willing to do so for it.
Hong Kong's outstanding performance over the past 50 years, both in terms
of economic prosperity and human liberty, was due in no small part to the
colonial British government's policy of "positive non-intervention" and to
the solid legal foundation that administration brought to the territory.
Unfortunately, it is on these two fronts - the two that have mattered the
most to Hong Kong's unique success - that the post-handover government has
done the most damage.
Only recently, the Hong Kong government dealt its most severe blow yet
to the rule of law, when it asked the Chinese National People's Congress to
essentially overrule a decision made by the Hong Kong Court of Final Appeal.
Relying on highly questionable survey methods, the government created a
bogeyman of 1.67 million immigrants ready to pour into Hong Kong if the Hong
Kong court's ruling on a right-of-abode case were upheld.
The government insisted that this could not be allowed. But rather than
amending Hong Kong's Basic Law, a solution that would have maintained more
integrity for the legal system, the government called upon the NPC to
"reinterpret" the sections of the Basic Law in question. In other words,
to override the Court of Final Appeal's interpretation, usurping its role
as final adjudicator for matters that are within the limits of Hong Kong's
The reason for going to the NPC rather than choosing to amend the law?
Expediency. The government claims that the amendment process would have
simply taken too long.
Even before the Hong Kong court's ruling had been made, though, the local
administration had already begun to chip away at Hong Kong's legal foundations -
most pointedly by failing to prosecute the politically well-connected.
Last year, Secretary for Justice Elsie Leung refused to prosecute Sally Aw,
a prominent businesswoman, friend of Chief Executive Tung Chee Hwa, and member
of the Chinese People's Political Consultative Conference, for defrauding her
newspapers' advertisers. Ms. Aw had originally been named as a co-conspirator
in a case charging that the circulation figures for the newspapers had been
inflated; three of her employees were convicted. Astoundingly, one of the
reasons Justice Secretary Leung gave for not prosecuting Ms. Aw was her concern
that such a prosecution might lead to the collapse of Ms. Aw's company, and
thus damage confidence in Hong Kong.
Earlier, the government had refused to prosecute the New China News Agency,
a representative of the Chinese government in Hong Kong, after it blatantly
failed to comply with a local privacy ordinance by ignoring a request made by
a former legislator to see the file it kept on her. Rather than hold the
agency accountable, the government rushed through a new law granting "state"
entities exemption from many Hong Kong laws, thus relieving the NCNA -
retroactively - of its obligation to comply with the request for the file.
Nearly as disturbing as the government's actions are some of its official
statements revealing a scant appreciation for the very notion of Hong Kong's
common law system. Chief Executive Tung's assurances, for instance, that the
NPC reinterpretation poses no threat to Hong Kong's judicial autonomy do not
inspire confidence. And the secretary for justice - the person more responsible
than anyone else for upholding the rule of law - has indicated that she is
unaware of the distinction between Hong Kong's common-law legal system and
what is essentially rule by fiat across the border.
"We shouldn't as a matter of course believe the Hong Kong system is the
best," said Ms. Leung on the eve o f the NPC's re-interpretation of right-of-abode
provisions in the Basic Law. "We should open our eyes and know more about the
The new government also displays a limited understanding of the past
administrations' tradition of non-interference in economic affairs. In his
maiden policy address, Chief Executive Tung announced that Hong Kong "should
have the courage to set aside past modes of thought and plan Hong Kong's future
with a vision."
Mr. Tung's predecessors were astute enough to leave the "vision" to private
entrepreneurs and stick to maintaining an environment in which others could
pursue their vision largely free of government interference. Most important,
they were not afraid to let the market reign even in times of difficulty. Mr.
Tung has decided that he can do better, and has embarked upon a policy of actively
promoting the technology sector, in an effort to turn Hong Kong into a regional
While the effort has been cheered by many - including, not surprisingly,
those in high-tech businesses themselves - the consequences of allowing
government to dole out preferential treatment to certain industries are already
beginning to show. Most notable is the advent of cronyism.
Earlier this year, the government awarded a plot of land worth $777 million
to a private company for development into a government-subsidized
information-technology development center dubbed "Cyberport." The government's
failure to offer the land for public tender, as has been the usual practice,
ignited a firestorm of controversy, particularly given the large commercial
real-estate portion of the project. The government's explanation for forgoing
an open bidding? It would have taken too long, and Hong Kong needs to hurry
if it is to catch up with the rest of the world.
Calls for the government to offer subsidies and other advantages to various
business sectors aren't new to Hong Kong. In the past, however, they were
deflected by the commonsense approach of such people as former Financial
Secretary Sir John Cowperthwaite. When businessmen in the 1960s asked for
special treatment for their industries, which they claimed were crucial to the
well-being of Hong Kong, Mr. Cowperthwaite replied that "I should have thought
that a desirable industry was, almost by definition, one which could establish
itself and thrive without special assistance in ordinary market conditions."
Apparently Mr. Tung believes otherwise.
Mr. Tung's administration has shown itself to be willing to intervene on
other fronts. Last August, the government purchased approximately $15 billion
in Hong Kong stocks in an effort to fight of speculators who were driving down
the stock market and the Hong Kong dollar. While the government has had to
struggle to defend its currency, the territory has certainly seen harder times.
The stock market crash of 1973, for example, saw the Hang Seng Index plummet
from 1775 to 160 in only a few months. The government didn't intervene in this
case, and Hong Kong was one of the first economies to recover from the global
Last year's intervention, meanwhile, has come at a heavy price: irreversible
damage to the territory's free-market reputation. The move has left foreign
investors and locals alike wondering what it will take to spark the government's
next foray into the markets.
Hong Kong's political and business elite seem blissfully unaware of - or
unconcerned by - the universal tendency of governments to continue to grow when
unchecked. They are currently in the process of tearing down a system of checks
on government power that was built and maintained with great care by people who
had some understanding of its real-world implications. At best, today's leaders
use the terms "rule of law" and "free market" as palliative buzz-words, insisting
that they are upholding them even as they act to undermine them.
Two years after its return to Chinese sovereignty, Hong Kong is still much
freer than most societies. And, given the degree to which the state has
encroached upon life everywhere else, it may remain so for some time to come,
at least in purely relative terms. It is this very status as a rare enclave
of freedom that makes the current government's indifference to what has made
Hong Kong unique so tragic.
Ms. Shaffer is an editorial page writer of The Asian Wall Street Journal.
Copyright Dow Jones & Co. 1999