The Hong Kong Special Administrative Region in Its First Decade 9789629374723, 9789629371456

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The Hong Kong Special Administrative Region in Its First Decade

The Hong Kong Special Administrative Region in Its First Decade Edited by

Joseph Y. S. Cheng

© 2007 City University of Hong Kong All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, Internet or otherwise, without the prior written permission of the City University of Hong Kong Press

First published 2007 Printed in Hong Kong

ISBN: 978-962-937-145-6

Published by City University of Hong Kong Press Tat Chee Avenue, Kowloon, Hong Kong Website: www.cityu.edu.hk/upress E-mail: [email protected]

Table of Contents Preface ....................................................................................................................................................... xv Acronyms, Abbreviations and Conventions Used in This Volume.................................................................xvii Introduction: Hong Kong Since Its Return to China: A Lost Decade? Joseph Y. S. CHENG....................................................................... 1

The Economy: Are We Doing Better? ............................................................... 1 Economic Integration with China...................................................................... 17 Governance, Democracy and Legitimacy.................................................... 24 The Pro-democracy Movement ............................................................................ 35 Conclusion............................................................................................................................... 47 1.

Democratic Development in Hong Kong: A Decade of Lost Opportunities Ngok MA ........................................................................................ 49

Introduction ........................................................................................................................... 49 Theoretical Review .......................................................................................................... 50 First Phase: Fragmentation, Loss of Direction, and Weimar Syndrome ...................................................................................... 53 Second Phase: Re-mobilization and Rebirth ............................................ 59 Third Phase: Lost Opportunities and the New Impasse .......................................................................................... 65 By Way of Conclusion: Glass Half-Empty or Half-Full? ................................................................ 72 2.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong: Results of a Longitudinal Study Timothy Ka-ying WONG and Shirley Po-san WAN ........................ 75

Introduction ........................................................................................................................... 75 Legitimacy and Political Support........................................................................ 78 v

Satisfaction with the SAR Government’s Performance in Various Policy Areas................................................... 83 Satisfaction with the Performance of the Related Political Authorities ........................................................ 89 Trust in the SAR Government .............................................................................. 91 Evaluation of the Practice of “One Country, Two Systems” ................................................................... 93 Major Factors Affecting the SAR’s Legitimacy ..................................... 96 Conclusion ........................................................................................................................... 104 3.

To What Extent Have Members of the Functional Constituencies Performed the “Balancing Role” in Hong Kong? SING Ming ................................................................................... 109

Introduction ........................................................................................................................ 109 Study of Four Policy Domains ........................................................................... 113 Overall Quantitative Assessment of the “Balancing Role” of the FC by Examination of Voting Records (1998–2004) ................. 124 Conclusion of Study .................................................................................................... 131 4.

The Mainlandization and Recolonization of Hong Kong: A Triumph of Convergence over Divergence with Mainland China Sonny LO..................................................................................... 179

The End of the Tung Chee-hwa Era ............................................................. 180 Convergence and the Hong Kong Case ..................................................... 182 Convergence and the Policy of Mainlandization .............................. 185 Success and Failure of Tung Chee-hwa from the Convergence Perspective ....................................................... 188 Mainlandization of the Hong Kong Polity ............................................. 200 The Legal Profession: Resistance to Mainlandization of the Legal System ............................................................................................ 207 Social Divergence and Economic Convergence with China .... 211 Donald Tsang’s and Beijing’s Policies of Recolonizing the Polity and Mainlandizing the Economy................................ 219 vi

Conclusion and Implications for the Theory of Convergence ............................................................... 223 5.

From Tung Chee-hwa to Donald Tsang: China’s Grudging Self-Correction and Policy Re-orientation towards Hong Kong in the Lost Decade HUNG Ching-tin ........................................................................... 233 Introduction ........................................................................................................................ 233 The Current and Future Relevancy of Positive Non-Interventionism............................................................ 234 Post-97 Hong Kong: The Lost Decade ....................................................... 249 Current and Future Relevancy of PNI ........................................................ 255

6.

Hong Kong in between China and the Great Powers: The External Relations and International Status of Hong Kong after the Chinese Resumption of Sovereignty TING Wai ..................................................................................... 261

Introduction ........................................................................................................................ 261 China–Hong Kong Relations and Changing Perceptions of the West ............................................ 264 External Relations of Hong Kong as Reflected in Foreign Direct Investments and Trade ...................................... 271 Significance of Hong Kong as Regional Headquarters ............... 281 Western Triad and the Future of Hong Kong...................................... 289 Conclusion............................................................................................................................ 301 7.

Hong Kong in the Eyes of the International Community REN Yue ...................................................................................... 305

Introduction ........................................................................................................................ 305 Non-Sovereign International Actors: New Active Forces in International Arena ................................... 306 Central People’s Government and SAR Government Relations............................................................ 309 Modes of SAR Participation in International Organizations ................................................................ 314 SAR and International Conventions............................................................. 317 vii

External Relations of HKSAR............................................................................ 321 Perspectives of HKSAR as an Active Non-Sovereign International Actor.................... 324 8.

The Economy Lok Sang HO ............................................................................... 327

Introduction ........................................................................................................................ 327 To Understand Hong Kong, One Must Understand the Market ...................................................... 330 Common Myths about the Hong Kong Economy........................... 333 Financialization and Globalization................................................................ 336 Market Rents, Economic Rents, and the Conflict between Allocation and Distribution Goals ............................... 338 Financial Centre, Pollution, and the World City .............................. 341 Competition Policy ....................................................................................................... 345 Speculation, Herd Behaviour, and the Incursion into the Stock Market....................................... 348 Does High Cost Erode Hong Kong’s Competitiveness and Marginalize the Hong Kong Economy?.......................................................................... 352 China’s Accession to WTO, RMB Reform and US Dollar Movements..................................... 356 Conclusions ......................................................................................................................... 360 9.

Hong Kong People’s Economic Attitudes 1997–2007 Michael E. DEGOLYER ............................................................... 363

10. Mainland China–Hong Kong Economic Relations Baozhi QU ................................................................................... 383

Mainland China–Hong Kong Trade Relations .................................. 383 Strengthening Investment Ties between Mainland China and Hong Kong.................................. 387 Increasing Economic Integration: The Impact of the CEPA............................................................................... 393 viii

The Development of the Greater Pearl River Delta (PRD) and the Pan-PRD Region ............................................................................. 405 The Impact Index of Hong Kong on Different Parts of Mainland China ............................................. 417 11. From Free Port to Competition: Is Asia’s World City Playing Catch-up? John D. HO .................................................................................. 421

Great Expectations ....................................................................................................... 422 Momentum Lost ............................................................................................................. 425 Momentum Regained? .............................................................................................. 438 12. Labour and Society Sek-hong NG and Olivia IP .......................................................... 443

Introduction ........................................................................................................................ 443 The Impetus of Socio-economic Changes ................................................ 444 Hong Kong as a Post-industrial City: an Urban Society in Transition ............................................................... 445 Hong Kong Society Tested by Crises, and Rise of an Urban Sub-class .............................................................. 452 The Labour Market Challenges, and Changing Demography of Population .................................. 461 Envisaging a Human Resource Agenda ..................................................... 465 The Labour Movement: Agenda and Challenges ............................. 469 Building of a Civil Society: Labour Policy and Labour Legislation ............................................ 479 What Lies Ahead: A Labour Market and Labour Protection Agenda?............. 486 Conclusion............................................................................................................................ 492 13. Class, Mobility and Social Transformation: Hong Kong Before and After 1997 Victor ZHENG and Siu-lun WONG............................................... 495

Introduction ........................................................................................................................ 495 Definition and Research Methodology ...................................................... 497 Social Mobility and Subjective Class Characteristics.................... 499 Attitude Towards the Government ................................................................ 508 ix

The Post-1997 Socio-Economic-Political Development ............. 513 Expectation Towards Future and Emigration ..................................... 522 Discussion and Conclusion ................................................................................... 530 14. Responding to Poverty, Income Inequality and Social Welfare: The Neo-liberalist Government Versus a Social Investment State Raymond NGAN and Mark Kin-yin LI .......................................... 535

Aggravating Poverty and Rise in Income Inequality...................... 536 The Extent of Poverty in the Post 1997 Era in Hong Kong ................................................... 539 The Commission on Poverty: How Effective or Not Effective? ........................................................... 554 Policy Recommendations and Alternative Solutions? .......................................................................... 559 15. The HKSAR’s Welfare Policy and Services for the Elderly Alex Yui-huen KWAN................................................................... 565

Introduction ........................................................................................................................ 565 Demographic Size .......................................................................................................... 566 Welfare Expenditure ................................................................................................... 568 General Services for the Elderly ........................................................................ 571 Community Support Services for the Elderly ....................................... 572 Residential Care Services for the Elderly.................................................. 574 Housing for the Elderly with Special Needs.......................................... 579 Health Care for the Elderly .................................................................................. 580 The Unfilled Elderly Service Gap..................................................................... 580 Conclusion ........................................................................................................................... 586 16. Outmoded Planning in the Face of New Politics Mee Kam NG ............................................................................... 591

Introduction ........................................................................................................................ 591 The Politics of Planning ........................................................................................... 592 The Politics of Planning in Hong Kong ..................................................... 598 x

Missed Opportunities in Collectively Envisioning the City’s Future Development ............................................................... 602 A Decade of Civic Awakening?......................................................................... 610 Concluding Remarks .................................................................................................. 629 17. The Environment After 1997 HO Kin-chung .............................................................................. 631

The State of the Environment ............................................................................. 632 New Environmental Policies, Legislation and Programmes ..................................................................... 636 Heading Towards Sustainable Development? ..................................... 654 Regional Environmental Cooperation and Environmental Governance ............................................................ 656 Environmental Awareness, Environmental Education and Public Participation .................................................... 659 Summary and Conclusion ...................................................................................... 660 18. From Excitement to Disillusionment: The Lessons of Education Reform in Hong Kong, 1997–2007 IP Kin-yuen and Michael H. LEE .................................................. 667

Introduction ........................................................................................................................ 667 A “Romantic” Beginning ........................................................................................ 668 Why Reform?..................................................................................................................... 672 New Excitement .............................................................................................................. 676 Lessons to be Learned ................................................................................................ 681 Conclusion............................................................................................................................ 696 19. Housing (1997–2007) Adrienne LA GRANGE................................................................. 699

Introduction ........................................................................................................................ 699 Housing Policy Before 1997................................................................................. 700 Housing Policy 1997–2006................................................................................... 702 Achievements and Failures .................................................................................... 714 Issues and Prospects ..................................................................................................... 721 Conclusion............................................................................................................................ 726 xi

20. Transport Policy Rebecca KWOK........................................................................... 729

Introduction ........................................................................................................................ 729 Hong Kong Moving Ahead .................................................................................. 731 Environmental Changes in the Past Decade .......................................... 743 The Way Forward ......................................................................................................... 758 21. Review of the Health System Grace CHENG ............................................................................. 763

Health, Health Care and Health Determinants ................................. 763 Challenges of the Demographic, Socio-economic and Epidemiologic Environments ........................................................ 765 Changing Paradigm in Health and Health Needs ............................ 771 Health System Developments Before 1997 ............................................ 773 Health System Consultations in the First Decade After 1997 ................................................................ 777 Health System Developments Since 1997................................................ 787 Issues and Discussions ............................................................................................... 811 Health Reform – The Way Forward ............................................................ 814 Conclusions ......................................................................................................................... 823 22. The Radio Phone-in Talk Show as the People’s Council in Postcolonial Hong Kong Clement Y. K. SO and Alice Y. L. LEE......................................... 827

“Big Media,” “Small Government,” and Radio Talk Shows ................................................................................... 829 Theorizing the Radio Talk Show: The Concept of a “People’s Council” .............................................. 832 Methodological Note ................................................................................................. 838 Radio Talk Shows in the Tung Period........................................................ 838 The Case of SARS.......................................................................................................... 843 Radio Talk Shows in the Post-Tung Period........................................... 846 Discussion ............................................................................................................................. 848

xii

23. The Catholic Role in Hong Kong SAR’s Governance: Past and Present Beatrice LEUNG, Camoes TAM and Marcus CHU ...................... 853

Catholic Role in the Early Establishment of Hong Kong (1841–1945) ...................................................................... 857 Catholic Role in Hong Kong After World War II ........................... 859 Catholic Political Involvement in the Transitional Period (1984–1997) ......................................... 863 The Bridging Endeavour: Complicated Hong Kong Church-State Relations ................ 865 Catholics’ Relations with the HKSAR Government ...................... 867 The Limit of Political Development: Internal Political Control of Hong Kong by the Basic Law .................................................................................................. 870 Christianity and the Chinese Cultural Tradition of Hong Kong........................................................ 874 Traditional Elites and Christian Education............................................ 875 The Church’s School and the Pursuit of Secular Justice ......................................................... 877 Catholic Involvement and the Church Recruits Help from the Laity .......................... 880 Conclusion............................................................................................................................ 882 Authors ................................................................................................................................................. 883 Index ....................................................................................................................................................... 895

xiii

Preface This volume intends to survey the developments of the Hong Kong Special Administrative Region (HKSAR) in various important areas in its first decade. It aims to critically review past developments, identify the significant issues, and assess the performance of the government and that of the community as a whole. It also attempts to consider future development trends and offers policy suggestions. In the context of increasing self-censorship in the academic community and among the media, authors in this volume are keen to demonstrate their integrity and objectivity. There is no intention to put the blame on the government either. This substantial book of twenty-four chapters hopes to offer a comprehensive overview of Hong Kong in the past ten years. It covers various aspects of political development; the implementation of “one country, two systems”; China’s policy towards Hong Kong; nationalism, regionalism and globalism; the economy; Hong Kong people’s economic attitudes; economic relations between Mainland China and Hong Kong; competition law; labour; social transformation and social mobility; poverty, income inequality and social welfare; the elderly population; urban planning; the environment; education; housing policy; transport policy; medical and health; the media; and church-state relations. Each chapter is written by a recognized expert(s) in the specific area concerned; and the team of authors is arguably the best in the territory. The book aims to be an important contribution to Hong Kong studies. It should appeal to local and international readers interested in Hong Kong; the latter include the international financial and business community, researchers in Asian Studies, journalists and educated tourists. The local general public should find the book a good introduction to various policy debates too. Finally, I would like to take this opportunity to thank the staff of the City University of Hong Kong Press for their hard work and dedication throughout the publication process, especially Mr. Patrick Kwong, the director, who has offered much valuable xv

assistance. Thanks are also due to all the authors for their support and co-operation, especially in meeting the numerous deadlines set within a tight editorial schedule. Joseph Y.S. Cheng May 2007

xvi

Acronyms, Abbreviations and Conventions Used in This Volume Acronyms

Names in Full

Appear First on Page

AAB AAT ACE ACTEQ ADPL AIRS API ASPDMC

Antiquities Advisory Board Academic Aptitude Test Advisory Council on the Environment The Advisory Committee on Teacher Education and Qualifications The Association for Democracy and People’s Livelihood The Advanced Incident Reporting System Air Pollution Index The Alliance in Support for the Patriotic Democratic Movement of China ATC Area Traffic Control BBI Bus-Bus-Interchange BOF Basket of Factors BOT The Build-Operate-Transfer CASET Computer-Aided Sustainability Evaluation Tool CBD Central Business District CCPI Composite Consumer Price Index CCTV Closed Circuit Television CE Chief Executive of the Hong Kong Special Administrative Region CEDAW United Nation’s Convention on the Elimination of All Forms of Discrimination Against Women CEPA The Closer Economic Partnership Arrangement CFA The Court of Final Appeal CHT The Cross-Harbour Tunnel CIIF The Community Investment and Inclusion Fund CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CLP The China Light and Power Hong Kong Limited CMB The China Motor Bus CME Continuous Medical Education COMPAG The Competition Policy Advisory Group CoP Commission on Poverty CPC The Communist Party of China CPD Continuing Professional Development CPG The Central People’s Government CPRC Competition Policy Review Committee CSD The Commission on Strategic Development CSO Civil Society Organizations CSSA Comprehensive Social Security Assistance CTS The First Comprehensive Transport Study CTU The Confederation of Trade Unions C&A Care-and-attention C&D Construction and Demolition DAB The Democratic Alliance for the Betterment of Hong Kong DCUs Day Care Units DE Day Care Centres for the Elderly

xvii

624 676 649 686 54 802 634 54 740 738 752 757 655 755 752 740 61 479 28 207 756 558 651 139 737 804 345 538 183 686 309 421 602 61 542 730 54 579 636 31 577 573

DECC DP DSS EC ECR ED EELS EHC EHCCS EIA EIAO EIU EMB EMSD EPD ERB ERP ETWB ExCo EU FC FTU GCs GDP GNP GP GST GTC HA HA HAPCC HATS HBAI HEC HH HOS HSBC HKCAA HKDHA HKEx HKHS HKMA HKMAO HKPCSD HKPRO HKPTU HKSAR HKUST HMDAC HOS HZMB

District Elderly Community Centres The Democratic Party Direct Subsidy Scheme An 800-member Election Committee Education Commission Report The Education Department Energy Efficiency Labelling Scheme Eastern Harbour Crossing Enhanced Home and Community Care Services Environmental Impact Assessment The Environmental Impact Ordinance The Economist Intelligence Unit The Education and Manpower Bureau The Electrical and Mechanical Services Department Environmental Protection Development Employment Re-training Board Electronic Road Pricing Environment, Transport and Works Bureau Executive Council European Union Functional Constituencies Federation of Trade Unions Geographical Constituencies Gross Domestic Product Gross National Product The General Practitioner Goods and Services Tax General Teaching Council The Housing Authority Hospital Authority The HA Public Complaints Committee The Harbour Action and Treatment Scheme The Households Below Average Income The Hong Kong Electric Company Limited Home Help Service Home Ownership Scheme Hong Kong and Shanghai Banking Corporation The Hong Kong Council for Academic Accreditation Hong Kong’s Domestic Health Accounts Hong Kong Exchanges and Clearing Limited The Hong Kong Housing Society The Hong Kong Monetary Authority The State Council’s Hong Kong and Macao Affairs The Hong Kong People’s Council for Sustainable Development Hong Kong Public Record Office Hong Kong Professional Teachers’ Union Hong Kong Special Administrative Region The Hong Kong University of Science and Technology Health Care Financing Development Advisory Committee The Home Ownership Scheme The Hong Kong-Zhuhai-Macao Bridge

xviii

573 54 691 49 688 682 666 756 573 615 647 288 466 653 615 467 757 633 187 264 49 207 116 4 599 779 361 684 699 774 798 641 546 139 573 699 238 468 790 390 579 430 194 606 859 685 1 329 777 338 754

ICAC ICAO ICBC IEAP IFA IFC IHCSTs ILO IMF IT ITACs ITS KCRC KLAs KMB LegCo LF LNG LO LPA LPG LTHs MA MCHK MEs MPF MRIR MSW MTRCL NEC NEP NGOs NPCSC OECD OLS OWP PIC PISA PLB PNI Pos POA POAS P.O.O PPP PR PRC PRD PRH PRSs PSB

The Independent Commission Against Corruption The International Civil Aviation Organization Industrial and Commercial Bank of China Intensive Employment Assistance Projects Internal Floor Area International Financial Centre Integrated Home Care Services Teams International Labour Organization International Monetary Fund Information Technology Industry Training Advisory Committees Intelligent Transport Systems Kowloon Canton Railway Corporation Key-learning Areas Kowloon Motor Bus Limited The Legislative Council The Lotteries Fund Liquefied Petroleum Gas Liaison Office The Language Proficiency Assessment Light Petroleum Gas Long Term Housing Strategy Management Agreement Medical Council of Hong Kong Multi-service Centres for the Elderly Mandatory Provident Fund The Median Rent to Income Ratio Municipal Solid Wastes Mass Transit Railway Corporation Limited Neighbourhood Elderly Centres New Environmental Paradigm Non-governmental organizations The National People’s Congress The Organization of Economic Co-operation and Development Ordinary Least Squares The One Way Permit The Preliminary Investigation Committee The Programme for International Student Assessment Public Light Buses Positive non-interventionism Principal Officials The Primary One Admission The Principal Officials Accountability System Public Order Ordinance Purchasing Power Parity The Proportional Representation Formula People’s Republic of China The Pan-Pearl River Delta Pubic Rental Housing The Producer Responsibility Schemes The Mainland Public Security Bureau

xix

239 316 390 555 715 446 573 479 9 471 468 740 614 677 737 53 568 662 194 685 638 701 651 798 573 480 711 636 735 573 660 361 173 488 96 461 798 675 738 233 707 676 192 151 367 55 261 19 699 645 206

PSPS PTIS QAI RC RCHEs REIT RGC RMB ROC RSPs RTHK SAR SARS SBM SDC SDU SE SEA SEPA SMI SMCs SOPD SPH SSB SSDS SSPA SSSI SUSDEV21 SWD TIMSS TIS TPS YYRA UC UCAN UDHK UGC ULURP URA URTI VOCs VTC WTO WHC WHO WQI WQO

Private Sector Participation Scheme Public Transport Information System Quality Assurance Inspection The Regional Council Residential Care Homes for the Elderly The Link Real Estate Investment Trust The Research Grants Council of the University Grants Committee Renminbi The Republic of China The Respirable Suspended Particulates The Radio and Television of Hong Kong Special Administration Region The Severe Acute Respiratory Syndrome School-based Management The Strategic Development Committee The Sustainable Development Unit Social Centres for the Elderly Strategic Environmental Assessment State Environmental Protection Administration School Management Initiative School Management Committees Specialist Out-patient Department The Protection of the Harbour School Sponsoring Bodies The Strategic Sewage Disposal Scheme The Secondary School Places Allocation Special Sites of Scientific Interest Sustainability and Development for the 21st Century The Social Welfare Department The Trends in International Student Assessment Transport Information System The Tenants Purchase Scheme Targets and Target-Related Assessments The Urban Council Union of Catholic Asian News The United Democrats of Hong Kong University Grants Committee Uniform Land Use Review Procedure Urban Renewal Authority The Upper Respiratory Tract Infection Volatile Organic Compounds The Vocational Training Council The World Trade Organization Western Harbour Crossing The World Health Organization Water Quality Index Water Quality Objective

Conventions Used in This Volume 1 billion 1 trillion

1,000 million (1,000,000,000) 1 million million (1,000,000,000,000)

xx

617 742 688 57 574 501 75 342 182 638 642 443 26 689 69 607 573 648 650 690 690 810 620 690 640 676 650 746 361 675 741 328 669 57 866 54 683 625 611 779 640 467 387 756 763 635 634

Introduction Hong Kong Since Its Return to China: A Lost Decade? Joseph Y S CHENG City University of Hong Kong

The Economy: Are We Doing Better? Chinese leaders, being orthodox Marxist-Leninists, believe that a strong economy is the key to political stability. The Hong Kong Special Administrative Region (HKSAR) government naturally toes the Beijing line. When more than half a million people took to the streets to protest against the Article 23 legislation1 and demand democracy on 1 July 2003, the Tung Chee-hwa administration and its supporters blamed the economy for the grievances of the

1 Article 23 of the Basic Law (Hong Kong’s constitution) states: “The Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region form establishing ties with foreign political organizations or bodies.” This article was written into the draft Basic Law after the massive protest rallies in Hong Kong during the Tiananmen Incident in 1989; obviously, the Chinese authorities were concerned with a repetition of such activities. The Tung administration was wise enough not to initiate the controversial legislative process in his first term. In response to the open prompting of the Chinese authorities, a paper addressing the implementation of Article 23 of the Basic Law was finally unveiled for public consultation in September 2002. As expected, the proposals stirred fears of a crackdown on human rights groups and Falungong. The pro-democracy camp in the territory also perceived the proposals a threat to civil liberties. See South China Morning Post (an English language newspaper in Hong Kong), 25 September 2002. 1

2

The Hong Kong Special Administrative Region in Its First Decade

community. The Chinese authorities responded to the political crises by offering strong economic support for the territory. The rationale was simple: if the economy improved, the people would largely be satisfied and they would be much less interested in democracy. Political stability would no longer be challenged. When Donald Tsang, Tung’s successor, visited Beijing on his duty trip in December 2006, he told the Central Government that “Hong Kong’s economy is the best it has been in almost twenty years.”2 The message was clear: the economy was in good shape, there should be no severe political challenges, and the Chinese leadership should be satisfied with his administration. His re-election thus was reassured, as perceived by all Hong Kong people. Tsang apparently had the statistics behind him, as demonstrated by Tables 1, 2, 3 and 4. Many Hong Kong people, however, disagreed. On the basis of the views expressed in various phone-in programmes, they did not feel that they had benefited from economic growth in recent years. A study by the Bauhinia Foundation, a think-tank close to Donald Tsang, revealed that the median household income in 2005 was still 15.8% lower than that in the previous peak year of 1997. More serious still, between 1996 and 2005, the number of households with a monthly income below HK$8,000 rose by 76.5%, to more than 500,000; and their proportion of the total number of households rose from 13% to 22%.3 Obviously the Chief Executive felt the pressure to respond. Speaking in a question-and-answer session in the Legislative Council in January 2007, Donald Tsang admitted that some low-income households had failed to benefit from the stronger economy, but the most important thing was to create jobs through a stronger economy. He indicated that at least wage levels had stopped declining; in the last quarter of 2005, those earning HK$15,000 or more per month accounted for more than one-third of the labour force, compared with a quarter during the same period a decade ago.

2 South China Morning Post (an English language newspaper in Hong Kong), 28 December 2006. 3 Ibid., 10 January 2007; and Ming Pao (a Chinese language newspaper in Hong Kong), 10 January 2007.

Hong Kong Since Its Return to China: A Lost Decade?

Further, the proportion of workers earning less than HK$9,000 per month had also dropped from 42% in 1996 to 36% in 2005; while the lowest income group, earning less than HK$5,000 per month, represented only 5% of the working population. The Chief Executive also pointed to the falling unemployment rate, which stood at 4.4% at the end of 2005 (see Table IV).4 Kenichi Ohmae’s book, The Impact of Rising Lower-Middle Class Population in Japan: What Can We Do About It?, is a best-seller in Japan, and has generated much discussion in Taiwan as well.5 Dr Ohmae considers that a vast majority of Japanese will fall into the lower-middle class socio-economic group because globalization will lead to further widening of the gap between the rich and poor, and exacerbate social polarization. Perhaps Hong Kong’s new graduates can most easily associate with Dr Ohmae’s arguments. A sociology professor of a local university told the author this true story about three years ago, when Hong Kong's economy had hit rock bottom. He was talking to some new graduates, and when he addressed them as the young middle class, one student said he did not feel like they belonged to the middle class. The economy today is, of course, better. But the median monthly salary of new graduates is between HK$10,000 and HK$11,000; many also owe the government HK$200,000 or so in student loans. Unless they can depend on their parents for food and accommodation, they will hardly be able to maintain a middle-class lifestyle. Neither can they expect steady promotions and salary increases. The post-war generation in Hong Kong enjoyed satisfactory salary increases on the basis of hard work. Dr Ohmae argues that this cannot be expected in today’s Japan, where employee’s salaries will probably peak when they hit 40. Further rises will be difficult, and Hong Kong’s situation is probably similar. Dr Ohmae suggests the Japanese should adjust their lifestyles, since not everyone will join the middle class. They may have to forget about owning cars or

4 South China Morning Post, 12 January 2007. 5 See Ohmae Kenichi, The Impact of Rising Lower-middle Class Population in Japan: What Can We Do About It? (in Japanese) (Tokyo: Kodansha, 2006).

3

1,266,702

1,314,789

1,298,813

1,276,757

1,233,983

1,291,425

1,382,675

1,472,291

1998

1999

2000

2001

2002

2003

2004

2005#

2006#

6.5

7.1

4.7

–3.4

–1.7

–1.2

3.8

–2.0

–5.3

11.0

% change

GDP

1,734,280

1,623,479

1,509,915

1,390,610

1,347,495

1,323,167

1,314,789

1,195,624

1,149,662

1,216,102

HK$ million

6.8

7.5

8.6

3.2

1.8

0.6

10.0

4.0

–5.5

5.1

% change

At constant (2000) market prices

84.9

85.2

85.5

88.7

94.8

98.2

100.0

105.9

112.4

112.2

–0.4

–0.4

–3.6

–6.4

–3.5

–1.8

–5.6

–5.8

0.2

5.6

(2000=100) % change

Implicit price deflator of GDP

214,710

202,941

190,377

181,385

188,118

193,135

197,268

191,736

197,559

210,350

HK$

5.8

6.6

3.8

–3.6

–2.6

–2.1

2.9

–2.9

–6.1

10.1

% change

252,917

238,284

222,586

204,408

198,541

196,756

197,268

180,977

175,690

187,401

HK$

6.1

7.1

7.7

3.0

0.9

–0.3

9.0

3.0

–6.2

4.2

% change

At constant (2000) market prices

Per capita GDP At current market prices

Source: Census and Statistics Department, The Government of the Hong Kong Special Administrative Region, “Hong Kong statistics – statistical tables.” http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=12&tableID=030. Accessed on 28 March 2007. Notes: (1) Figures in this table are the latest data released on 28 February 2007. (2) # indicates that figures are subject to revision later on as more data become available.

1,365,024

1,292,764

1997

HK$ million

Year

At current market prices

Table 1: Gross Domestic Product (GDP) of Hong Kong, 1997– 2006

4 The Hong Kong Special Administrative Region in Its First Decade

2,329,469

2,599,804

2006

11.6

10.3

16.9

11.5

3.3

–5.4

19.0

–2.5

–11.5

5.2

% change

134,527

136,030

125,982

121,687

130,926

153,520

180,967

170,600

188,454

211,410

HK$ million

–1.1

8.0

3.5

–7.1

–14.7

–15.2

6.1

–9.5

–10.9

–0.4

% change

Domestic exports

2,326,500

2,114,143

1,893,132

1,620,749

1,429,590

1,327,467

1,391,722

1,178,400

1,159,195

1,244,539

HK$ million

10.0

11.7

16.8

13.4

7.7

–4.6

18.1

1.7

–6.9

5.0

% change

Re–exports

2,461,027

2,250,174

2,019,114

1,742,436

1,560,517

1,480,987

1,572,689

1,349,000

1,347,649

1,455,949

HK$ million

9.4

11.4

15.9

11.7

5.4

–5.8

16.6

0.1

–7.4

4.2

% change

Total exports

–138,777

–79,295

–92,009

–63,334

–58,903

–87,208

–85,273

–43,718

–81,443

–159,141

Merchandize trade balance (HK$ million)

Source: Census and Statistics Department, The Government of the Hong Kong Special Administrative Region, “Hong Kong statistics – http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=3&tableID=055. statistical tables.” Accessed 28 March 2007. Notes: (1) Figures in this table are last revised on 26 March 2007. (2) Hong Kong’s external trade statistics are compiled based on information contained in import/export declarations. The Hong Kong Special Administrative Region is a separate customs territory, as stated in “The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China,” Import/export declaration is also required of Hong Kong’s trade with Mainland China, and statistics relating to this are included in Hong Kong’s external trade statistics.

2,111,123

2005

1,568,194

2001

2004

1,657,962

2000

1,619,419

1,392,718

1999

1,805,770

1,429,092

1998

2003

1,615,090

1997

2002

HK$ million

Year

Imports

Table 2: External Merchandize Trade Aggregate Figures of Hong Kong, 1997– 2006

Hong Kong Since Its Return to China: A Lost Decade? 5

717,074

785,625

2002

2003

123,569

119,252

111,994

98,730

91,478

104,941

112,801

98,572

106,537

125,381

US

40,268

44,643

37,898

36,757

41,374

49,547

54,158

50,414

56,066

63,867

33,159

37,767

38,636

39,130

41,908

47,589

54,438

51,358

54,842

55,073

US

Domestic exports China

1,115,941

967,923

850,645

705,787

571,870

496,574

488,823

399,188

407,366

443,878

US

337,971

322,872

302,964

285,084

291,043

282,189

311,047

269,444

259,856

261,372

Re–exports China

2,349,162

2,061,900

1,806,818

1,528,169

1,330,317

1,228,101

1,257,968

1,057,149

1,044,045

1,116,117

US

494,699

479,892

453,594

422,945

424,429

434,720

478,286

419,374

421,236

441,826

Total trade China

Source: Census and Statistics Department, The Government of the Hong Kong Special Administrative Region, “Hong Kong statistics – statistical tables.” http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=3&tableID=057; http://www.censtatd.gov. hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=3&tableID=058; http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=3&tableID=059; and http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&subjectID=3&tableID=060. Accessed 28 March 2007. Note: Figures in this table are last revised on 26 March 2007.

1,192,952

681,980

2001

2006

714,987

2000

918,275

607,546

1999

1,049,335

580,614

1998

2005

608,372

1997

2004

China

Year

Imports

Table 3: Hong Kong’s Trade with Mainland China and the United States, 1997 – 2006 (HK$ million)

6 The Hong Kong Special Administrative Region in Its First Decade

3,234.8

3,276.1

3,319.6

3,374.2

3 425.9

3 474.0

3 472.5

3 515.9

3 538.1

3 582.5

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1.3

0.6

1.3

–

1.4

1.5

1.6

1.3

1.3

2.3

% change

170.9

197.3

239.4

275.1

253.8

174.6

166.9

207.5

154.1

71.2

Unemployed (thousand)

4.8

5.6

6.8

7.9

7.3

5.1

4.9

6.2

4.7

2.2

Unemployment rate (%)

86.6

96.3

114.1

121.4

103.9

84.8

93.5

96.9

81.8

37.1

Underemployed (thousand)

2.4

2.7

3.2

3.5

3.0

2.5

2.8

2.9

2.5

1.1

Underemployment rate (%)

Source: Census and Statistics Department, The Government of the Hong Kong Special Administrative Region, “Hong Kong statistics – statistical tables.” http://www.censtatd.gov.hk/hong_kong_ statistics/statistical_tables/index.jsp?charsetID=1&subjectID=12&tableID=006. Accessed 28 March 2007. Note: Figures in this table are the latest data released on 20 March 2007.

No. (thousand)

Year

Labour Force

Table 4: Statistics on Labour Force, Unemployment and Underemployment in Hong Kong, 1997– 2006

Hong Kong Since Its Return to China: A Lost Decade? 7

8

The Hong Kong Special Administrative Region in Its First Decade

houses in the suburbs, or paying expensive tuition fees to prepare their children for top universities. Further, in an ageing society with a sharply falling fertility rate, the financial burden of social services will increase. Taxation will rise in the absence of administrative reforms. At this stage, Hong Kong’s Mandatory Provident Fund is inadequate to provide for the community’s retirement, and Hong Kong people have yet to tackle the long-term financing of their hospital services. Hong Kong’s international competitiveness has been in decline, triggered off by the Asia-Pacific financial crisis in 1997–1998. They are acutely aware that both the Tung and the Tsang administrations have offered no convincing plans to reverse the trend. This inaction on the part of the government has eroded the community’s confidence which does not compare favourably with that of the people of Singapore and Taiwan, though in terms of economic statistics, Hong Kong has been doing better. Arguably the weakening of the Hong Kong economy began much earlier. Real per capita gross domestic product (GDP) growth in Hong Kong fell from an annual average of 5.2% in the 1980s to 3.5% in 1990–1996; and per worker GDP annual growth fell from 4.7% to 3.3%.6 Further, a group of economists at The Chinese University of Hong Kong observed that the total factor productivity in the manufacturing sector had been declining from 1984 to 1993; its study shows that “the manufacturing sector could produce in 1993 only 87% of the output in 1984.” 7 Access to cheap labour in the Pearl River Delta and the huge profits it generated had weakened the local manufacturing sector’s incentive to invest to raise its technological level, in contrast to the other three little dragons of Asia. The “economic bubble” in the run-up to 1997 generated by dramatic rises in prices in the real estate market and

6 Tsang Shu-ki, “Changing structure of Hong Kong’s economy,” in Gungwu Wang and John Wong (eds.), Hong Kong in China: The Challenges of Transition (Singapore: Times Academic Press, 1999), p. 108. 7 Kwong Kai-sun, Lawrence J. Lau and Lin Tzong-biau, The Impact of Relocation on Total Factor Productivity of Hong Kong Manufacturing, mimeograph (Hong Kong: Department of Economics, The Chinese University of Hong Kong, August 1997).

Hong Kong Since Its Return to China: A Lost Decade?

stock market also made the economic adjustment process much more painful. The values of Hong Kong people have been changing gradually. Before 1997, unemployment was not a concern. The community believed that anyone who was willing to work should have no difficulty finding a job. In recent years, it has to accept that the territory’s unemployment rate is higher than those in the United States and the United Kingdom, and this will remain the trend in the near future. Hence even those who are gainfully employed worry about the employment of their next generation. The unemployment issue has been compounded by the widening gap between the rich and poor. While Donald Tsang said that “Hong Kong’s economy is the best it has been in almost twenty years,” it was reported that Hong Kong people had the highest individual net worth in the world, amounting to US$202,000. According to the global study by the United Nations’ World Institute for Development Economics Research in 2006, Hong Kong was ahead of Luxembourg, Switzerland and the United States which ranked second, third and fourth respectively, while Japan ranked ninth and Singapore twelfth.8 From 1981 to 2001, Hong Kong’s Gini coefficient steadily rose from 0.451 to 0.525 (see Table 5a); in terms of this measurement of income distribution, Hong Kong compared rather unfavourably with the developed countries, and was in a situation similar to those of Argentina and Zambia (see Table 5b). The Regional Economic Outlook in Asia and Pacific released by the International Monetary Fund (IMF) in September 2006 observed that income inequality had worsened “dramatically” in Asia in the past decade. Thirteen out of eighteen Asian countries experienced increases in income inequality, as measured by the Gini coefficient. A common assumption has been that globalization leads to a widening of the gap between the rich and poor, but the IMF report disagrees. 9 It argues that no link exists between free trade and

8 South China Morning Post, 7 December 2006. 9 Craig Meer and Jonathan Adams, “Specter of inequality haunts Taiwan,” Far Eastern Economic Review, Vol. 169, No. 10 (December 2006), pp. 38–39.

9

10

The Hong Kong Special Administrative Region in Its First Decade Table 5a: Gini Coefficient of Hong Kong

Gini coefficient

1981

1986

1991

1996

2001

0.451

0.453

0.476

0.518

0.525

Sources: Census and Statistics Department of the Hong Kong Government, 1991 Population Census Main Report (Hong Kong, 1992); and Census and Statistics Department of the Hong Kong Special Administration Region, Population Census 2001 Main Report – Volume I (Hong Kong, 2002). Table 5b: Gini Coefficients of Hong Kong and Selected Developed Economies Region/Country

Gini Coefficient

Survey year

South Africa

0.593

1995

Brazil

0.591

1998

Zambia

0.526

1998

Hong Kong, China

0.525

2001

Argentina

0.522

2001

Singapore

0.425

1998

United States

0.408

2000

United Kingdom

0.360

1999

Australia

0.352

1994

Canada

0.331

1998

France

0.327

1995

Taiwan

0.326

2000

South Korea

0.316

1998

Germany

0.283

2000

Sweden

0.250

2000

Japan

0.249

1993

Source: Fact Sheet on Gini Coefficient released by Research and Library Services Division, Legislative Council Secretariat, Hong Kong on 6 December 2004. The Fact Sheet quotes sources from The World Bank, 2004 World Development Indicators (Washington, D.C.: The World Bank, 2004); Census and Statistics Department of the Hong Kong Special Administration Region, Population Census 2001 Main Report – Volume I (Hong Kong, 2002); and Distribution of Income in Taiwan. http://www.gio.gov.tw/info/taiwan-story/economy/edown/table/ table-10.1.htm. Accessed 29 November 2004.

Hong Kong Since Its Return to China: A Lost Decade?

income inequality, and net foreign direct investment flows have no impact on income equality too. Instead it considers that technological change is a more probable cause, as “skill-biased technological progress represents a shift in the production technology that favours skilled over unskilled labour.” Up to a third of Hong Kong’s labour force have only nine years of formal education or less; naturally they will find it difficult to benefit from the territory’s economic growth. The surplus of unskilled labour in the territory has been vividly reflected by the hourly wage of its McDonald’s outlets. Exacerbating income inequality easily leads to a sense of grievances and possibly social instability. A recent opinion survey conducted by the Democratic Party based on a sample of middle-class respondents reveals that 22.5% of them think that Donald Tsang mainly considers the interests of major business groups, 22.4% those of the Central Government, 13% those of the citizenry, 5.5% those of the middle class, and 2.1% those of the grassroots. 43.3% think that their life remains more or less the same under the Donald Tsang administration, and 38% think that probably there would be no major change if Tsang got re-elected.10 Since the Beijing visit of Margaret Thatcher, the then British Prime Minister, in 1982, the British administration had been almost totally absorbed in the Sino-British negotiations on the territory’s future and the associated diplomatic confrontations. As a result, it took no major initiatives in economic reforms and social services in the transitional period before 1997. This meant that when the Tung administration took over, it really had its hands full in tackling the accumulated problems in almost every major policy sector. Tung himself had conveniently come up with a “conspiracy theory,” i.e., he had to spend tremendous efforts removing the “landmines” left by the British administration. This “landmines” thesis, however, had not enhanced the community’s sympathy for the Tung administration by the summer of 2003. Most people considered that the Tung administration might have needed some time to tackle the “landmines”; but after

10 Ming Pao, 27 November 2006.

11

12

The Hong Kong Special Administrative Region in Its First Decade

Table 6 Rating of Former Chief Executive Tung Chee-hwa – Half-yearly Average, 1997–2005

Survey question: Please use a scale of 0–100 to rate your extent of support to the Chief Executive Tung Chee-hwa, with 0 indicating absolutely not supportive, 100 indicating absolutely supportive and 50 indicating half-half. How would you rate the Chief Executive Tung Chee-hwa? (half-yearly average)

Month of survey

Total sample (half-yearly average)

Support rating (half-yearly average)

Recognition rate (half-yearly average)

Jan – Jun 2005

7,146

47.4

96.5%

Jul – Dec 2004

12,227

48.2

96.5%

Jan – Jun 2004

15,397

44.2

95.5%

Jul – Dec 2003

14,466

42.3

95.6%

Jan – Jun 2003

16,908

44.1

95.1%

Jul – Dec 2002

12,490

48.4

94.3%

Jan – Jun 2002

14,745

54.1

93.0%

Jul – Dec 2001

14,736

50.7

92.9%

Jan – Jun 2001

12,619

53.9

92.9%

Jul – Dec 2000

14,854

51.3

91.8%

Jan – Jun 2000

8,523

53.7

95.1%

Jul – Dec 1999

7,281

53.9

95.0%

Jan – Jun 1999

6,867

57.6

95.4%

Jul – Dec 1998

8,868

56.5

94.9%

Jan – Jun 1998

7,440

58.8

92.7%

Jul – Dec 1997

11,007

64.8

91.7%

Jan – Jun 1997

9,133

59.5

80.5%

Source: The web site of the Public Opinion Programme of The University of Hong Kong, “POP polls: rating of Chief Executive Tung Chee-hwa – half-yearly average.” http://hkupop.hku.hk/english/popexpress/ceall/cerq/ halfyr/datatables1.html. Accessed 1 December 2006. Note: Tung Chee-hwa was the Chief Executive of the Government of Hong Kong Special Administrative Region from 1 July 1997 to 12 March 2005. He was elected on 11 December 1996.

Hong Kong Since Its Return to China: A Lost Decade?

Table 7 People’s Satisfaction with the HKSAR Government – Half-yearly Average, 1997–2006 Survey question: Are you satisfied with the overall performance of the HKSAR government? (half-yearly average)

Month of survey

Don’t know/ Total Very Quite Not quite Very Hard to sample satisfied satisfied Half-half satisfied dissatisfied say

Jul – Dec 2006

6,076

4.2%

37.8% 41.7%

11.4%

3.7%

1.1%

Jan – Jun 2006

7,113

5.8%

45.7% 36.5%

8.5%

2.4%

1.1%

Jul – Dec 2005

6,097

5.2%

44.0% 35.7%

9.5%

3.1%

2.4%

Jan – Jun 2005

6,109

2.9%

26.2% 37.9%

20.2%

8.6%

4.3%

Jul – Dec 2004

6,148

2.7%

17.5% 35.3%

27.6%

14.2%

2.8%

Jan – Jun 2004

6,207

1.9%

13.0% 33.1%

30.6%

18.1%

3.5%

Jul – Dec 2003

7,364

1.5%

12.2% 26.9%

35.3%

21.3%

3.0%

Jan – Jun 2003

6,293

1.1%

14.3% 25.6%

36.9%

18.6%

3.6%

Jul – Dec 2002

6,260

1.0%

17.0% 28.1%

37.9%

11.3%

4.8%

Jan – Jun 2002

6,217

1.3%

23.7% 31.3%

32.8%

6.1%

4.9%

Jul – Dec 2001

6,321

1.0%

19.2% 30.9%

33.4%

10.5%

5.0%

Jan – Jun 2001

6,348

1.3%

25.3% 35.0%

26.7%

6.5%

5.2%

Jul – Dec 2000

6,324

1.5%

19.9% 31.3%

32.1%

9.6%

5.7%

Jan – Jun 2000

4,240

1.6%

22.4% 39.1%

22.9%

9.0%

5.1%

Jul – Dec 1999

3,205

1.4%

22.8% 39.2%

23.6%

8.0%

5.0%

Jan – Jun 1999

4,213

0.7%

24.5% 39.9%

26.3%

5.4%

3.2%

Jul – Dec 1998

4,755

1.0%

21.7% 35.8%

29.0%

8.0%

4.6%

Jan – Jun 1998

3,744

0.8%

27.4% 38.7%

23.0%

4.6%

5.5%

Jul – Dec 1997

3,181

1.9%

40.7% 32.7%

13.6%

1.9%

9.3%

Source: The web site of the Public Opinion Programme of The University of Hong Kong, “POP polls: people’s satisfaction with the HKSAR Government – half-yearly average.” http://hkupop.hku.hk/english/popexpress/ sargperf/sarg/halfyr/datatables.html. Accessed 28 March 2007.

13

24

Article 45 Concern Group

76

72

66

–

53

52

51

38

21

Satisfied with performance

+52

+44

+32

–

+6

+4

+2

–24

–58

Difference

27

29

32

54

54

59

51

36

58

73

71

68

46

46

41

49

64

42

Satisfied with performance

November 2005 Dissatisfied with performance

+46

+42

+36

–8

–8

–18

–2

+28

–16

Difference

31

37

39

54

52

68

47

37

55

Dissatisfied with performance

69

63

61

46

48

32

53

63

45

Satisfied with performance

March 2006

+38

+26

+22

–8

–4

–36

+6

+26

–10

Difference

Source: Parties, Policies and Political Reform in Hong Kong, a report written by The Hong Kong Transition Project and commissioned by National Democratic Institute for International Affairs (May 2006), pp. 76-78. Note: DAB = Democratic Alliance for the Betterment and Progress of Hong Kong FTU = Federation of Trade Unions HKCTU = Hong Kong Confederation of Trade Unions ADPL = Hong Kong Association for Democracy and People’s Livelihood

28

ADPL

47

The Frontier

–

48

Democratic Party

34

49

Liberal Party

The Alliance

62

FTU

HKCTU

79

DAB

Political Party

Dissatisfied with performance

September 2004

Table 8 Satisfaction and Dissatisfaction with the Performance of Various Political Parties, September 2004, November 2005 and March 2006

14 The Hong Kong Special Administrative Region in Its First Decade

Hong Kong Since Its Return to China: A Lost Decade?

six years or so, it should at least be able to show the community the way forward. This dissatisfaction with Tung Chee-hwa is reflected by his popularity rating (see Table 6). In comparison with Macao, Hong Kong people noted that despite the immense problems inherited from the Portuguese administration, Edmund Ho Hau-wah’s government apparently had been doing very well and enjoyed much support from the community. Finally, the political skills of Chris Patten, the last British governor of Hong Kong, overshadowed the performance of Tung. In general, Hong Kong people’s attitude towards the government was more moderate (see Table 7); and opposition parties tended to do well (see Table 8). Globalization means that it will be more difficult to maintain Hong Kong’s international competitiveness. Like Singapore, the territory has been handicapped by its high cost structure, as every Hong Kong citizen realizes that the wages across the border in Shenzhen are only one fifth of those in Hong Kong. From the very first policy address of Tung Chee-hwa to the recent Action Agenda on “China’s 11th Five-Year Plan and the Development of Hong Kong” of the Donald Tsang administration, 11 the HKSAR government has been trying hard to maintain the territory’s international competitiveness and respectable economic growth rate. Hong Kong will continue to function as an international financial centre and business services centre. Though the territory’s unique position in the China market will decline, the China market is expected to maintain its impressive growth in the foreseeable future. Hence the absolute size of a declining share of an expanding pie (the China market) may still expand. The territory will have to work hard to improve its productivity and competitiveness so that the share of the pie will not shrink too much. This also means that Hong Kong has to remain a cosmopolitan metropolis and avoid becoming just another coastal city in China. Such a consideration will help to preserve the freedoms and the rule of law in Hong Kong as it is in the interest of every party to do so. Hong Kong will continue to seek new niches to prosper, which

11 For the contents of the Action Agenda and the initial responses to it, see all major newspapers in Hong Kong on 15 January 2007.

15

16

The Hong Kong Special Administrative Region in Its First Decade

has been its typical mode of operation. An increasing share of the accumulated wealth of the major business groups in the territory will go to Mainland China; this partly explains why while Hong Kong’s GDP has continued to grow; the lower socio-economic strata do not experience an improvement in living standards. There must be more investment in education and human resources development; the major challenge is to ensure that the education system encourages creativity and innovation. The development of hi-tech industries in Hong Kong has not made much progress, in contrast to the other three “little dragons of Asia.” Meanwhile, the re-allocation of manufacturing industries to the Pearl River Delta in southern China and beyond has almost been completed. The employment situation will remain tight because the service industries will continue to adopt automation and other cost-cutting measures to maintain their competitiveness and profit margins. In the past decade, there was a suggestion that hi-tech industries might be developed in the territory with Hong Kong’s capital, marketing skills and international network, as well as the scientific and technological talents from Mainland China and its advanced industrial base. Unfortunately, nothing much has been achieved so far. Hong Kong’s only connection with hi-tech industries is its financial institutions which serve to raise venture capital supporting their development. In the aftermath of the Asia-Pacific financial crisis, Singapore mobilized the entire nation to deliberate on how to face the challenges of globalization. As a result, it now has a grand strategy well understood by the people. The Hong Kong government is still restrained by its traditional laissez-faire philosophy. The Tung administration attempted to take a more active approach in promoting economic development, but the results were mixed. The Disneyland theme park is in general welcomed, but the Cyberport project is often perceived as an example of collusion with big business. The administration of Donald Tsang is under considerable pressure to demonstrate major initiatives to guide the territory’s economic development, as the business community and Hong Kong people in general expect the government to assume a more active role.

Hong Kong Since Its Return to China: A Lost Decade?

Hong Kong’s search for new niches exploiting its entrepreneurship and pragmatism may well bring fortunes to some business groups, but it may not be adequate to maintain a healthy economic growth rate for the territory as a whole in the long term. According to a study by the China Institute of City Competitiveness released at the end of 2006, Hong Kong remains the most competitive city in Greater China, ahead of Shanghai, Beijing, Shenzhen, Taipei, Guangzhou, Macao, Tianjin, Hangzhou and Nanjing (in that order). However, in terms of growth potential, Hong Kong was ranked number four, behind Shenzhen, Macao and Beijing. In the previous annual survey, Hong Kong was second after Shenzhen.12

Economic Integration with China Hong Kong people now realize that the territory’s economy is highly dependent on that in Mainland China; they have lost their pride in the territory which served as a valuable window for China’s opening up to the external world in the late 1970s and 1980s. In the early years of China’s economic reforms, Hong Kong concentrated on business and financial services while its manufacturing industries moved northward. Guangdong, the province neighbouring Hong Kong, welcomed this arrangement of the Pearl River Delta as the workshop, while Hong Kong served as the shop-front. Guangdong is seeking a more balanced division of labour in recent years, but Hong Kong has not been able to respond effectively. Shortly before 1997, leaders of Guangdong approached Hong Kong for close co-operation, with the intention of exploiting the territory’s capital, advanced business and marketing services, and international networks. In the first two or three years after Hong Kong’s return to China, the HKSAR government was lukewarm in response to the initiatives from its neighbour. Hong Kong’s civil service, led by Anson Chan Fang On-sang, did not know

12 South China Morning Post, 29 December 2006.

17

18

The Hong Kong Special Administrative Region in Its First Decade

Guangdong well; and it also wanted to maintain a certain distance between Hong Kong and Mainland China so as to better preserve the “one country, two systems” arrangement. Later, when the HKSAR government better appreciated the significance of economic integration with China, its bargaining position had much weakened. Guangdong was much more interested in upgrading its industrial structure, absorbing advanced technology and management, as well as establishing international wholesale and retail networks. Major corporations in the province therefore accorded priority to joint ventures with multinational corporations in the Fortune 500 list. Investment from Hong Kong was still welcomed, but Guangdong was no longer short of investment funds. The provincial authorities much resented Hong Kong’s earlier cool response to their initiatives, and perceived that Hong Kong turned to its northern neighbour only when it encountered difficulties. Hong Kong’s economic problems adversely affected its political and social stability. Even before the massive protest rallies in 2003 and 2004, the Chinese leadership was aware of the plight of the Tung administration. Economic assistance was seen as the most effective support for the territory and the Tung administration, and economic co-operation became a political responsibility for Guangdong and other coastal provinces. Unfortunately, the HKSAR government compounded its earlier mistake by often taking its requests to Beijing instead of engaging in patient negotiations with Guangdong and other provincial governments. Obviously the latter had no choice but to make concessions in view of the national policy to ensure Hong Kong’s political stability, but this pressure from Beijing was not conducive to the maintenance of a cordial, co-operative relationship between Hong Kong and its neighbour in the long term. Today, Guangdong has experienced more than two decades of impressive economic growth and it anticipates a per capita GDP of US$7,000 by 2010. Guangdong’s economy grew 12.5% in 2005, and its GDP reached 2.17 trillion yuan (US$264.84 billion), outpacing those of Hong Kong (US$165.5 billion) and Singapore (US$111.45 billion). In fact, in terms of GDP, Guangdong had overtaken Singapore and Hong Kong since 1997 and 2002

Hong Kong Since Its Return to China: A Lost Decade?

respectively. Guangdong’s expansion continues to be mainly fuelled by increases in investment and exports. Exports from the province accounted for about a third of the country’s total, and amounted to US$238.2 billion in 2005, a rise of 24.3% over that of the previous year.13 In 2006, Guangdong’s GDP was expected to exceed 2.5 trillion yuan (US$305.1 billion), with an annual growth rate of 15.2%;14 and its foreign trade topped US$500 billion in the same year, up 20% over that of the previous year.15 To the average Hong Kong citizen, the most vivid sign was the value of the yuan rising above that of the Hong Kong dollar in the beginning of 2007, so much so that when they went to Shenzhen to have a good time, some shops and restaurants refused to take Hong Kong dollar. Guangdong leaders are acutely aware that the challenge of globalization, symbolized by China’s entry into the WTO, will mean keener competition. The province will not only encounter fierce competition from abroad, it will also have to contend with domestic competition, especially from the Yangtze River Delta region with Shanghai as its centre. Innovation and restructuring focussed on improving quality and efficiency will be needed to maintain economic growth in the years ahead. The Guangdong leadership plans to promote regional economic integration to expand the province’s hinterland. The Pan-Pearl River Delta (PRD) economic co-operation involving nine provinces as well as Hong Kong and Macao has been approved by the Beijing leadership and the Framework Agreement on Pan-PRD Regional Co-operation was signed in June 2004. The implementation of the Framework Agreement will lead to the emergence of the largest economic region in China. Guangdong hopes to exploit the resources and markets of the interior provinces through Pan-PRD economic co-operation; and Hong Kong is eager to offer its international financial and business services to the interior provinces too. Some critics in Guangdong believe that the Pan-PRD economic co-operation is far too ambitious. They are concerned that the other

13 Ibid. 27 January 2006. 14 Ibid. 29 November 2006. 15 Ibid. 8 January 2007.

19

20

The Hong Kong Special Administrative Region in Its First Decade

provinces all have their hidden agendas and that they lack sufficient commitment to the common good. They consider that Guangdong should better concentrate on the province alone. Hong Kong welcomes an organizational framework to approach the interior provinces, but it has not been adequately involved to influence the process. So far it has remained aloof from the rivalries among the local governments in Mainland China. The HKSAR enjoys provincial status, and therefore mainly relies on its dialogue with the Guangdong authorities. Shenzhen, on the other hand, feels neglected. It has an economic plan independent of Guangdong and directly accountable to the State Council. It is therefore in competition with the province. To overcome the issues of protocol, the Hong Kong government should secure the services of business groups such as the Hong Kong General Chamber of Commerce and the Chinese General Chamber of Commerce. They are not bound by considerations of government hierarchy, and should have more room of manoeuvre in exploring new ideas. Mobility of professional talents between Hong Kong and Mainland China will continue to improve. Multinational corporations in Hong Kong will have good opportunities to recruit Mainland talents to be trained and to serve in Hong Kong first, and then sent back to Mainland China to expand their networks of services. This development, however, may further exacerbate competition among local professionals. The gap in remuneration between that for the best and the mediocre will further widen. In mid-January 2007, the Donald Tsang administration released its Action Agenda on “China’s 11th Five-Year Plan and the Development of Hong Kong.” The Action Agenda is significant in two important aspects. In the first place, it reveals the extent of economic integration between Hong Kong and Mainland China. Similar to other provincial governments, the HKSAR government has to lobby and influence the Central Government to advance the territory’s interests. Naturally, it has much to learn regarding the related research as well as lobbying strategies and techniques. Further, it shows that the HKSAR government intends to assume an important role in the territory’s economic development. Earlier in September 2006, Donald Tsang denied that its administration had made “positive non-interventionism” a blueprint for its economic

Hong Kong Since Its Return to China: A Lost Decade?

development strategy, but instead it would adhere to the principle of “big market, small government.16” The Chief Executive’s statement attracted criticism from Nobel Prize-winning economist Milton Friedman who once landed Hong Kong as the perfect model of a free-market economy. Dr Friedman called it a “mistake” for the HKSAR government to shift from the policy of “positive non-interventionism” to a policy of “big market, small government.” 17 Despite Milton Friedman’s criticism, Hong Kong retained its top ranking for the thirteenth straight year as the world’s freest economy, according to The Heritage Foundation, a Washingtonbased think-tank which compiled the Index of Economic Freedom with The Wall Street Journal.18 According to the Fraser Institute in Vancouver, Canada, Hong Kong has also been ranked the freest economy in the world since 1970 by its Economic Freedom of the World annual report (see Table 9). However, Tim Kane, director of The Heritage Foundation’s Centre for International Trade and Economics, warned that a minimum wage and other policies that impose price controls are threatening Hong Kong’s position as the world’s freest economy. Hong Kong’s score in the Fraser Institute’s Summary Economic Freedom Index also declined from a peak of 9.1 (10 being the full mark) in 1995 to 8.7 in 2004. Obviously the community accepts that the government will assume a more pro-active role in promoting the territory’s economic development; and in its economic integration with Mainland China, Hong Kong people and the business community expect that the government will effectively articulate the territory’s interests and try to influence the Central Government’s policy in the territory’s favour. Hence the Tsang administration has to define its role clearly, and seek to arrive at a consensus through community-wide discussion. Making occasional odd statements like the above will only confuse the public and the international community.

16 Ibid. 12 September 2006. 17 Ibid. 27 September 2006. See also Milton Friedman, “Hong Kong wrong,” The Wall Street Journal (Eastern edition, New York), 6 October 2006, p. A14. 18 South China Morning Post, 17 January 2007.

21

6.2

6.9

6.0

-

7.5

5.4

5.3

6.6

5.7

Japan

Luxembourg

New Zealand

Russia

Singapore

South Korea

Sweden

Taiwan

Thailand

5.6

5.8

5.2

5.4

7.3

-

5.4

6.9

5.9

8.3 (1)

1975

5.9

6.7

5.6

5.7

7.5

-

6.1

6.8

6.4

8.5 (1)

1980

5.9

6.9

6.2

5.7

7.9

-

5.9

7.2

6.5

8.2 (1)

1985

6.8

7.1

6.6

6.3

8.5

-

7.3

7.4

7.1

8.5 (1)

1990

7.2

7.3

7.1

6.7

8.9

3.7

8.5

7.6

6.9

9.1 (1)

1995

6.7

7.2

7.4

6.6

8.5

4.9

8.4

7.8

7.3

8.8 (1)

2000

6.7

7.1

7.2

7.0

8.5

4.9

8.2

7.7

7.0

8.7 (1)

2001

6.6

7.2

7.3

6.9

8.5

5.1

8.2

7.6

6.9

8.7 (1)

2002

6.6

7.2

7.5

6.9

8.5

5.2

8.2

7.7

7.4

8.7 (1)

2003

6.6

7.3

7.3

7.1

8.5

5.6

8.2

7.9

7.5

8.7 (1)

2004

Source: James Gwartney and Robert Lawson with William Easterly, Economic Freedom of the World: 2006 Annual Report (Vancouver: The Fraser Institute, 2006), pp. 19-21. Notes: (1) Numbers in brackets represent the rankings of Hong Kong. Hong Kong has been ranked the freest economy in the world in the index published annually in Economic Freedom of the World since 1970 to the present. (2) The chain-linked summary economic freedom index is based on the 2000 rating as the base year. Changes to the index going backward (and forward) in time are then based only on changes in components that were present in adjacent years.

8.2 (1)

Hong Kong

1970

Table 9: The Chain-Linked Summary Economic Freedom Index, 1970–2004

22 The Hong Kong Special Administrative Region in Its First Decade

Hong Kong Since Its Return to China: A Lost Decade?

The Action Agenda was the result of an economic summit held in the previous year on the same subject. It offers 207 concrete proposals on the development of financial services; trade and business; maritime, logistics and infrastructure; and innovation, tourism and professional services, i.e., the four pillars of the Hong Kong economy. This is also considered a major publicity programme promoting Hong Kong after the Brand Hong Kong programme with its dragon symbol launched in May 2001 in the wake of the Asia-Pacific financial crisis.19 The Action Agenda was released two months before the election of the Chief Executive, so it was perceived in a way as Donald Tsang’s campaign platform. As the economic summit involved almost all of the territory’s business leaders, the Chief Executive probably felt compelled to involve all their proposals. As a result, a major criticism against the Action Agenda was its lack of identification of priorities. Hong Kong’s economic summit was different from those held in Taiwan and Singapore in recent years to formulate economic development strategies for the years ahead. There was no serious attempt to involve representatives from various socio-economic strata, nor allow the opposition to articulate its views. It was no accident that the Action Agenda has included a proposal to employ truck drivers from the Mainland to reduce the costs of the logistics sector, which led to a small-scale protest by the trade unionists concerned. There was no systematic consultation with the academic community too, which is in sharp contrast to the practice of Chinese governments at all levels. The feasibility of the 207 policy proposals remains controversial. In an earlier question-and-answer session in the Legislative Council, Donald Tsang criticized the pro-democracy legislators for only being able to offer visions, but his administration would ensure the concrete implementation of its policy programmes.20 Donald Tsang therefore emphasized the feasibility of all the proposals in the Action Agenda. But even Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, openly admitted that some of the proposals

19 See the web site of Brand Hong Kong, www.brandhk.gov.hk. See also Ming Pao, 16 January 2007. 20 Ibid. 12 January 2007.

23

24

The Hong Kong Special Administrative Region in Its First Decade

were “subjective wishes” and might not be realized.21 The Tsang administration also stressed that the proposals in the Action Agenda would bring a win-win situation to Mainland China and Hong Kong. To ensure their feasibility and the win-win situation, it seems that this cannot be achieved through unilaterally making the proposals; certainly detailed negotiations among the bureaucracies and business communities concerned are required. But at this stage, such negotiations have yet to begin. Actually 2007 is the second year of the Eleventh Five-Year Economic and Social Development Programme. Hong Kong seems to be a bit late in raising its proposals when the media in Mainland China are already concentrating on evaluating the programme’s performance in its initial year. Perhaps the HKSAR government should seriously consider at this stage how to articulate its next series of policy proposals so as to facilitate its incorporation into Beijing’s Twelfth Five-Year Programme.

Governance, Democracy and Legitimacy In the initial years of his administration, Hong Kong people found Tung Chee-hwa a sincere man with his heart in the right place. His inclinations to depart from the hitherto followed laissez-faire philosophy (euphemistically known as positive non-interventionism) caused some concern even in the business community. Before his assumption of office, he already indicated that his priorities were housing, education and services for the elderly. His plan of expanding housing supply to 85,000 units per annum was highly controversial and attracted much criticism. Tung’s plan was to curb speculative activities which had driven housing prices to irrational heights so as to lower the cost structure in the territory to enhance its competitiveness. Implicitly he had hoped that lower housing prices would lead to lower wages and lower prices in general, which would then strengthen Hong Kong’s international competitiveness.

21 Ibid. 17 January 2007.

Hong Kong Since Its Return to China: A Lost Decade?

But unfortunately, Tung’s plan coincided with the onset of the Asia-Pacific financial crisis. The bubble in the real estate market burst and the government’s plan to expand housing supply much exacerbated the fall in housing prices. Given the significance of the housing sector in the territory’s economy, the dramatic downward adjustment in housing prices (up to 65% from the peak in the summer of 1997) was naturally blamed for the decline in consumer demand and the associated deflation, etc. The housing problem also created a new group of middle-class flat-owners whose properties had become liabilities instead of assets because of the sharp drop in real estate prices.22 To be fair to Tung, when he announced his housing plan, it was favourably received. His fault was his inability to adjust his policy to the new situation. In addition to being considered incompetent, most people believed that Tung did not have a strong personal base of support. He could not trust the senior civil servants (for example, he did not get along with the previous Chief Secretary for Administration, Anson Chan); he only consulted a narrow circle of friends and aides dominated by the rich families in the territory; he refused to maintain a dialogue with the opposition camp; and he found it difficult to make hard decisions and tended to procrastinate. It was said that the former Chinese Premier Zhu Rongji once criticized Tung for “discussing without deciding, and deciding without executing.” This subsequently became a most popular line of criticism against Tung. In order to strengthen his control over his administration, Tung introduced an accountability system (ministerial system) in his second term, making all of his policy secretaries political appointees and members of the Executive Council. They were no longer civil servants and had to be accountable to Tung himself. Although few people believed Tung’s claim that the system would make the top government officials more accountable to the public, the community accepted that Tung should have his own team of ministers. However,

22 According to a local leading real estate agency, property-owners suffering from negative assets numbered 177,468 in July 2003, and the number declined to 161,958 in the following September; see Ming Pao, 23 September 2003.

25

26

The Hong Kong Special Administrative Region in Its First Decade

quite a number of his ministers soon got into trouble. Frederick Ma Si-hang, Secretary for Financial Services and the Treasury, first came under severe criticism for his proposal to de-list the penny stocks; 23 former Financial Secretary Antony Leung Kam-chung was then accused of dishonesty for buying a car just before his sharp increase of the first vehicle registration tax; and Yeoh Eng-kiong, former Secretary for Health, Welfare and Food, was called upon to resign because of his ill-handling of the Severe Acute Respiratory Syndrome (SARS) crisis. In all these cases, Tung chose to defend his ministers and they were allowed to keep their positions. Tung therefore had to pay the political price of absorbing the public’s wrath. It was in the context of these developments that Tung introduced the Article 23 legislation. Admittedly, most people in Hong Kong did not have the time and expertise to go through the bill in detail. But they certainly became concerned and worried when the legal profession, social workers, journalists, librarians, bankers, the Catholic Church and Christian churches, etc. came out to articulate their opposition. The resentment rapidly escalated because of the arrogance of Regina Ip Lau Suk-yee, former Secretary for Security, who was responsible for “selling” the bill to the public. In the beginning of 2003, the Tung administration decided against the introduction of a “white bill” for further consultation of the public. With the benefit of hindsight, this was probably the fatal decision. If the government had been willing to spend more time consulting the public in the form of a “white bill,” and had offered the three important amendments it announced later on 5 July 2003, the legislation most probably would have been able to go through the legislature. The rejection of the “white bill” approach was seen as further evidence of the lack of concern for public opinion on the part of the Tung administration, and that it was determined to complete the legislative process to fulfil its commitment to Beijing. Meanwhile, the SARS outbreak resulting in about three hundred deaths in Hong Kong generated more dissatisfaction and frustration with the Tung administration. Naturally it was accused of poor

23 South China Morning Post, 12 August 2003.

Hong Kong Since Its Return to China: A Lost Decade?

co-ordination in fighting the epidemic, and SARS also dealt a severe blow to the economy. All kinds of grievances prompted various groups to march in protest against the Tung administration on 1 July 2003. Hong Kong has never enjoyed a fully democratic system. After its return to China, it is obvious that the Chief Executive has to be someone trusted by the Chinese leadership and accepted by the local business community. In the executive-led system of government, the Chief Executive enjoys very substantial powers. The electoral system of the legislature is also designed in such a ways so as to prevent the pro-democracy camp from securing a majority.24 In many ways, the political system of the HKSAR was even less democratic than that in the final years of the British administration which secured its legitimacy by results. Hong Kong people accepted the colonial administration because it was able to deliver the goods, i.e., it maintained law and order well, guaranteed the freedoms that Hong Kong people treasured, and brought economic development and prosperity to the community. In the opinion surveys in the decade or more before 1997, Hong Kong people consistently showed substantially more trust and support for the colonial administration than for London and Beijing, while the latter usually trailed behind London by a relatively small margin. The earlier discussion in this section obviously shows that the Tung administration gradually lost its legitimacy, and this loss was clearly demonstrated in his popular ratings (see Tables 6 and 7) and by the demand for him to step down from the participants in the protest rallies in 2003 and 2004. In the first place, many people experienced a fall in living standards (see Table 1); and a substantial segment of the middle-class families suffered from negative assets which meant that a substantial part of their life savings evaporated. Further, most people did not believe that the Tung administration could offer the leadership to revive Hong Kong’s economy. They also perceived that there was increasing collusion between the Tung administration and the major local business leaders, a perception

24 See Joseph Y.S. Cheng, “The Basic Law: messages for Hong Kong people,” in Richard Y.C. Wong and Joseph Y.S. Cheng (eds.), The Other Hong Kong Report 1990 (Hong Kong: The Chinese University Press, 1990), pp. 29–63.

27

28

The Hong Kong Special Administrative Region in Its First Decade

generated and reinforced by several business deals such as the Cyberport project as well as the widening gap between the rich and poor. Article 23 legislation was probably the last straw on the camel’s back because the Tung administration was seen to be willing to sacrifice Hong Kong people’s freedoms to please Beijing. Democratization came into the picture because people were angry that they had no part in selecting Tung Chee-hwa as the Chief Executive; and when he performed badly causing them misery, there was no way to get rid of him. Various arguments against the premature introduction of full democracy, i.e., universal suffrage, as articulated by the pro-Beijing united front fell flat because the community in the final years of the Tung administration believed that any candidate would be better. The Chinese leadership was acutely aware of this decline in legitimacy on the part of the Tung administration, and it was eager to help to maintain the territory’s political and social stability. Chinese leaders understood that they had to soften the opposition to Tung at least within the pro-Beijing united front and the business community. They therefore chose to help Hong Kong solve its economic problems. Assistance included a sharp increase in the number of tourists allowed to visit Hong Kong (the Individual Travel Scheme), the Closer Economic Partnership Arrangement (CEPA) which gives Hong Kong better access to the China market, 25 and political pressure on Guangdong to improve co-operation with the territory. Hong Kong people appreciated the economic support from the Central Government, and they in general had a very good impression of the new leaders in China, namely, Hu Jintao and Wen Jiabao (see Table 10). When Wen visited Hong Kong in late June and early July 2003, he was well received by the local community. The new Chinese leaders followed the dictum of “stability takes precedence over everything else” in the handling of Hong Kong’s political crisis, and they were willing to pay the economic price. While Hong Kong people were grateful for the Central

25 For details of CEPA, see all major newspapers in Hong Kong on 30 September 2003.

Hong Kong Since Its Return to China: A Lost Decade? Table 10: People’s Trust in the Beijing Central Government – Half-yearly Average, 1992–2006 Survey question: On the whole, do you trust the Beijing Central Government? (half-yearly average)

Month of survey

Very trust

Quite trust

Halfhalf

Quite distrust

Very distrust

Don’t know/ Hard to say

Jul – Dec 2006

11.7%

32.9%

31.4%

13.6%

6.1%

4.3%

Jan – Jun 2006

12.5%

36.0%

28.2%

13.1%

5.6%

4.6%

Jul – Dec 2005

13.5%

33.3%

23.8%

15.9%

8.5%

5.0%

Jan – Jun 2005

10.5%

32.7%

25.3%

16.3%

8.4%

6.9%

Jul – Dec 2004

13.1%

33.9%

25.5%

14.0%

6.9%

6.6%

Jan – Jun 2004

9.6%

30.4%

26.2%

16.9%

8.7%

8.2%

Jul – Dec 2003

8.4%

37.3%

24.6%

15.0%

5.6%

9.1%

Jan – Jun 2003

5.5%

32.1%

21.9%

22.3%

7.1%

11.1%

Jul – Dec 2002

4.2%

36.8%

21.8%

21.1%

5.1%

11.0%

Jan – Jun 2002

5.7%

42.9%

21.5%

17.5%

3.1%

9.2%

Jul – Dec 2001

5.0%

38.9%

24.0%

17.3%

4.8%

9.9%

Jan – Jun 2001

4.3%

29.5%

24.9%

23.3%

7.8%

10.3%

Jul – Dec 2000

4.6%

27.0%

22.8%

22.7%

8.3%

14.7%

Jan – Jun 2000

4.9%

27.0%

27.1%

20.7%

6.6%

13.7%

Jul – Dec 1999

5.0%

24.3%

27.4%

22.3%

7.4%

13.6%

Jan – Jun 1999

3.2%

24.1%

30.0%

22.1%

5.3%

15.3%

Jul – Dec 1998

3.2%

27.3%

28.4%

24.4%

6.3%

10.2%

Jan – Jun 1998

3.3%

25.4%

28.5%

24.5%

5.6%

12.7%

Jul – Dec 1997

3.8%

28.6%

24.0%

24.5%

5.4%

13.8%

Jan – Jun 1997

3.3%

25.7%

21.0%

33.0%

8.6%

8.3%

Jul – Dec 1996

2.6%

24.4%

23.7%

32.7%

8.3%

8.4%

Jan – Jun 1996

2.2%

20.2%

23.9%

33.5%

12.0%

8.4%

July–Dec 1995

2.3%

20.4%

19.5%

34.9%

12.1%

10.8%

Jan – Jun 1995

2.8%

17.8%

19.2%

38.4%

12.9%

8.9%

Jul – Dec 1994

1.5%

16.4%

21.9%

38.6%

13.6%

8.1%

Jan – Jun 1994

3.0%

17.6%

21.2%

35.3%

14.2%

8.8%

Jul – Dec 1993

2.3%

21.0%

16.7%

36.4%

13.9%

9.7%

Jan – Jun 1993

3.2%

21.4%

17.9%

32.7%

14.9%

10.0%

Jul – Dec 1992

1.9%

17.0%

20.7%

34.8%

18.8%

6.8%

Source: The web site of the Public Opinion Programme of The University of Hong Kong, “POP polls: people’s trust in the Beijing Central Government – half-yearly average.” http://hkupop.hku.hk/english/popexpress/ trust/trustchigov/halfyr/datatables.html. Accessed 1 December 2006.

29

30

The Hong Kong Special Administrative Region in Its First Decade

Government’s economic support, they also felt embarrassed by the fact that people enjoying a per capita annual GDP of over US$24,000 had to seek assistance from the Mainland where people had a per capita annual GDP of about US$1,000 (2003 figures for both Hong Kong and Mainland China). The Chinese authorities had been sending many agents to the HKSAR to collect information after the massive protest rally on 1 July 2003 as their confidence in the Central Liaison Office, the State Council’s Hong Kong and Macao Affairs Office and the Tung administration was badly shaken. It was said that all three had informed the Chinese leaders that they expected a turnout of about 30,000 to 40,000 people for the protest rally. The actual turnout of more than half a million people therefore showed that they did not have a good understanding of the situation, and that they probably had been sending unrealistically favourable reports on the territory to the Chinese leadership. The victory of the pro-democracy camp in the District Council elections in November 2003 and its being perceived to have a small chance of securing half of the seats in the Legislative Council elections in September 2004 symbolized the revival of the pro-democracy movement, as well as the extent of public dissatisfaction with the Tung administration threatening Beijing’s fundamental policy towards Hong Kong. The Chinese authorities therefore had to be involved to ensure that the pro-Establishment candidates would be able to retain a solid majority in the Legislative Council elections in 2004. Support from Beijing included some shadowy activities too. It was reported in the media that Hong Kong people doing business and working in the Pearl River Delta were contacted by cadres advising them to vote for pro-China candidates and not to support the pro-democracy candidates. Town and township heads in China also rang up their acquaintances in Hong Kong repeating the same message. The successive resignations of three popular radio talk-show hosts before the protest rally on 1 July 2004 were widely believed to have been caused by pressure from the pro-Beijing united front, if not from the Chinese authorities. Finally, there was a prostitution case involving a Democratic Party candidate in Dongguan in the Pearl River Delta just before the Legislative Council elections, and apparently the

Hong Kong Since Its Return to China: A Lost Decade?

public security organ in Dongguan was involved in propaganda activities discrediting the pro-democracy camp. In sum, the pro-democracy camp felt that they were fighting against a powerful state machinery in the elections. The heavy involvement of Chinese leaders in Hong Kong affairs further weakened the legitimacy and effectiveness of the Tung administration and, in fact, the HKSAR government. Business leaders probably felt that if they needed anything, they should lobby Beijing. Soon after the 1 July 2003 protest rally, Vice-President Zeng Qinghong received delegations from the three pro-Beijing parties, namely, the Democratic Alliance for the Betterment of Hong Kong (DAB), the Hong Kong Progressive Alliance and the Liberal Party, in a high-profile manner and praised them for their contributions to Hong Kong. This was unprecedented and may be interpreted as political intervention in support of the pro-Beijing political parties, as the Chinese authorities had been refusing any contact with the territory’s pro-democracy camp since the Tiananmen Incident. Further, the DAB visited the Guangdong and Shanghai authorities roughly at the same time; and with the help of the latter, it can claim to serve Hong Kong by reflecting the community’s views and demands to the provincial governments, a service which obviously could not be delivered by the pro-democracy camp. Despite the political stability after the Legislative Council elections in September 2004, Tung Chee-hwa did not seem to be able to capitalize on the situation. His administration was still plagued by the mishandling of the issue of the Link REIT, the West Kowloon Cultural District development project, and the sale of the Hunghom Peninsula Home Ownership Scheme flats to a private developer who planned to tear the buildings down. It was under such circumstances that Tung offered to resign on 10 March 2005 for health reasons. It came as a surprise to all parties concerned, including the local pro-Beijing united front; and the Hong Kong community believed that he had been asked to step down by Beijing. Chinese leaders probably realized that Tung had become too much a political liability. Replacing him with Donald Tsang, a more competent and more popular career civil servant serving as the Chief Secretary for Administration then, would help to restore Hong Kong

31

32

The Hong Kong Special Administrative Region in Its First Decade Table 11: Rating of Donald Tsang Yam-kuen as Financial Secretary, Chief Secretary for Administration, and Chief Executive – Half-yearly Average, 1997–2006 Survey question: Please use a scale of 0–100 to rate your extent of support to the Chief Executive Donald Tsang Yam-kuen, with 0 indicating absolutely not supportive, 100 indicating absolutely supportive and 50 indicating half-half. How would you rate the Chief Executive Donald Tsang Yam-kuen? (half-yearly average)

Month of survey

Total sample

Support rating

Recognition rate

(half-yearly average)

(half-yearly average)

(half-yearly average)

Jul – Dec 2006

13,180

62.9

Jan – Jun 2006

13,253

67.3

98.0% 90.9%

Jul – Dec 2005

13,083

67.4

96.0%

Jan – Jun 2005

10,197

68.0

94.2%

Jul – Dec 2004

6,079

61.3

96.3%

Jan – Jun 2004

8,165

62.3

95.4%

Jul – Dec 2003

6,178

62.0

95.4%

Jan – Jun 2003

8,306

59.6

93.6%

Jul – Dec 2002

6,230

61.8

92.0%

Jan – Jun 2002

9,595

65.3

89.0%

Jul – Dec 2001

2,108

64.8

86.6%

Jan – Jun 2001

3,627

69.8

92.6%

Jul – Dec 2000

1,038

70.0

86.0%

Jan – Jun 2000

535

64.7

92.1%

Jul – Dec 1999

1,035

63.8

87.0%

Jan – Jun 1999

1,049

68.1

91.7%

Jul – Dec 1998

1,608

61.4

89.9%

Jan – Jun 1998

538

61.7

86.8%

Jul – Dec 1997

1,077

62.6

76.0%

Jan – Jun 1997

525

61.3

74.7%

Source: The web site of the Public Opinion Programme of The University of Hong Kong, “POP polls: rating of Chief Executive Donald Tsang Yam-kuen – half-yearly average.” http://hkupop.hku.hk/english/popexpress/ ce2005/donald_new/hyear/datatables.html. Accessed 31 March 2007. Note: Donald Tsang Yam-kuen became the Financial Secretary under British rule in September 1995; he continued to serve as the Financial Secretary of the Government of Hong Kong Special Administrative Region from 1 July 1997 onwards; was promoted to be the Chief Secretary for Administration on 1 May 2001; appointed as the Acting Chief Executive on 12 March 2005; and formally elected as the Chief Executive on 21 June 2005.

Hong Kong Since Its Return to China: A Lost Decade?

people’s confidence in the HKSAR government (see Tables 11 and 7). Moreover, the economy was recovering. This change of leadership therefore was perceived by Beijing as conducive to maintaining political stability and dampening Hong Kong people’s demand for democracy. In mid-2005, visitors from Mainland China’s think-tanks on Hong Kong emphasized the “new thinking” of the Chinese leadership’s policy towards the HKSAR. They indicated that Chinese leaders had adopted a new approach not only in dealing with Taiwan, but also with Hong Kong. They pointed to the resignation of Tung Chgee-hwa, the replacement by Donald Tsang, and the new contacts with the pro-democracy camp as concrete evidence of this “new thinking.” Given the past failures resulting in successive political crises, a new approach was most welcome. The focus of this “new thinking,” however, seemed to be on the improvement of governance, maintenance of political stability and dampening of the community’s demand for democracy. In view of the political fatigue on the part of Hong Kong people, such a more progressive, more tolerant approach proved effective at this stage. The community welcomed Donald Tsang as the Chief Executive for a change, and the economic upturn also removed considerable dissatisfaction (see Tables 1, 2, 3 and 4). The absence of a positive response to the community’s demand for democracy, however, would only be avoiding the issue. As a mature economy, Hong Kong’s economic growth rates, in the longer term, will bound to slow down. It has to face the same set of problems facing the advanced Western countries, Japan and Singapore. They include: an ageing population, high structural unemployment, budget difficulties leading to re-definition of the government’s commitments in the provision of social services, etc. Competition for the resources of the public sector will become fiercer. The debates on small-class teaching, social security for single parents, charges for hospital services, etc. indicated that many more similar controversies would follow. Only by strengthening its legitimacy and accountability would the government be in a better position to resolve the competition. Otherwise it would either choose to avoid the problems or become terribly worn down through involving in a long series of controversies.

33

34

The Hong Kong Special Administrative Region in Its First Decade

Regarding the former, Donald Tsang’s policy address in October 2006 was a classic example, as the government still lacked a strategy and a timetable on important issues such as the long-term financing for hospital services. His administration chose to shelve the goods and services tax proposal too. Despite the economic boom and the careful management of the community’s expectations, Donald Tsang’s strategy of avoiding controversial issues until after his re-election apparently backfired. According to a public opinion survey by The University of Hong Kong’s Public Opinion Programme, the average score for the 2006–07 policy address among the respondents was 55.8 out of 100, 10.6 lower than that for Tsang’s first policy address, and 0.5 lower than that for Tung’s last policy address. 34% of the respondents found the policy address satisfactory, while 25% found it unsatisfactory; with regard to Tsang’s first policy address, 48% of the respondents found it satisfactory, and only 9% found it unsatisfactory.26 Jacob Hacker, a political scientist from Yale University, recently warned of a pervasive feeling of permanent insecurity among Americans in his new book The Great Risk Shift. He believes that Americans increasingly realize that they have to rely on their own efforts to pay for their health care and retirement plans instead of depending on their employers and the government. Hacker argues that this creeping doubt can lead to big shifts in the political landscape.27 Apparently, this feeling of insecurity is shared by Hong Kong people, and they realize that time lost now will make a significant impact in the future decades. Competence of the Chief Executive is therefore not the key; but institutions are the foundation. The Singaporean model has a lot of appeal to the neo-conservatives in Beijing. But Singaporean governance is obviously more than strongman politics; it has a highly efficient mass governing party. The People’s Action Party has to face the test of open elections, and it has to count on electoral victories to consolidate its political legitimacy. The Chinese leadership now assumes an increasingly significant

26 Ming Pao, 13 October 2006. 27 See Jane Bryant Quinn, “The economic perception gap,” Newsweek, Vol. CXLVIII, No. 21 (20 November 2006), p. 39.

Hong Kong Since Its Return to China: A Lost Decade?

role regarding the maintenance of legitimacy for the HKSAR government. It has to take up responsibility for the choice of the Chief Executive. The perception of its decisive role has certainly been much reinforced by the resignation of Tung Chee-hwa and his replacement by Donald Tsang. Hong Kong people also realize that the decisions on the territory’s democratization are made in Beijing, and not by the HKSAR government. Their sense of political impotence has been exacerbated because they are often afraid to exert pressure on the Chinese leadership, and they understand that the territory’s prosperity is increasingly dependent on Beijing’s good will. The Chinese leadership’s responsibility reduces the pressure on the Chief Executive and his administration. Their legitimacy deficit has been made up by strong support from the Chinese leadership, but it would also be much more difficult for them to secure their legitimacy through efforts of their own.

The Pro-democracy Movement The pro-democracy movement was in a difficult state in the years before the massive protest rally on 1 July 2003. There was considerable frustration with the lack of progress as no one expected any breakthrough before 2007. Even the political parties in the pro-democracy camp did not believe that democratization was an issue with much political appeal. The Democratic Party, the party with the most seats in the legislature until September 2004, and its allies could make very little impact on the government’s policy-making process. As the Tung administration enjoyed the backing of a safe majority in the legislature, it did not have to lobby for the approval of the pro-democracy groups which were treated as the opposition. In fact, there had been little meaningful consultation between the pro-democracy groups and the government. The sense of political impotence on the part of the pro-democracy groups was exacerbated by Hong Kong people’s strengthening trust in China (See Table 10). Attacking the Chinese authorities’ infringements of the community’s freedoms and human rights had become less attractive to voters than before. The most

35

36

The Hong Kong Special Administrative Region in Its First Decade

important concerns of Hong Kong people were obviously the economy and unemployment (Table 12), and the pro-democracy groups were not perceived to have much to offer.28 Under such circumstances, the “young Turks” of the Democratic Party felt frustrated and attempted to challenge the leadership in December 1998. It appeared that intra-party differences were concentrated on three issues: a) the party’s relationship with the Chinese authorities and the HKSAR government; b) whether the party should attempt to aggregate class interests or to articulate more distinctively labour interests; and c) whether the party should try to effect change by working within the legislature, or resort to mass movements outside the political establishment. 29 The “young Turks” and the non-mainstream factions were opposed to efforts to improve relations with the Chinese authorities by means such as presenting candidates to compete for seats in China’s National People’s Congress. They were not interested in a better relationship with the HKSAR government and publicly called for the resignation of Tung. Regarding the party’s policy platform, they warned the party leadership against opportunism in attempting to represent the interests of all classes. In turn, they were accused of trying to turn the party into a labour party and adopting a populist approach. Above all else, the “young Turks” and the non-mainstream factions appealed for a return to

28 The results of an opinion survey among young people (16–25 years of age) released in late June 1998 indicated that 61.6% of the respondents considered the economy to be the priority of the elected legislature, and 36% of the respondents considered employment to be the most pressing issue. Moreover, about 70% of the respondents did not trust the legislators. See Ming Pao, 29 June 1998. In another series of public opinion polls conducted by university academics, 46.6% of the respondents identified employment as the most serious social problem that should receive top priority in 1999; and 35.7% of the respondents did the same in 2001; see Victor Zheng and Wong Siu-lun, “Attitudes towards unemployment and work,” in Lau Siu-kai, Lee Ming-kwan, Wan Po-san and Wong Siu-lun (eds.), Indicators of Social Development: Hong Kong 2001 (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, 2003), p. 80. 29 See Ivan Chi-keung Choy, “Shuangyue zhengbian – Minzhudang feizhuliupai de fanpu” (“A coup in the frosty month – counter-attack by the non-mainstream factions of the Democratic Party”), Ming Pao, 16 December 1998.

Hong Kong Since Its Return to China: A Lost Decade?

the grassroots to mobilize the masses instead of engaging in futile parliamentary politics. The episode, nonetheless, highlighted many important issues in the pro-democracy movement in Hong Kong. Before Hong Kong’s return to China, there was substantial moral and public opinion pressure to maintain unity within the pro-democracy camp. Such pressure soon evaporated after July 1997. In the frustration in the political wilderness, differences in political orientations were exacerbated and could no longer be contained. The above differences remain controversial among pro-democracy groups today. Initially some of the “young Turks” left the Democratic Party and joined more radical groups such as The Frontier, and the differences existed both at the intra-party and inter-party levels. There were several waves of such departures from the Democratic Party, resulting in considerable damages to its image. The frustrations of the “young Turks” were exacerbated by bottlenecks in their political careers. The two municipal councils were abolished in 2000; and there were very limited chances of getting elected to the Legislative Council as the “old guards” held on to their seats. Hence they had to serve as District Councillors for many years, and the remuneration was insufficient to support full-time political careers. It is only natural that splittism breeds more wildly in political wilderness. Politicians in the pro-democracy movement believe that the Chinese authorities have no intention of allowing genuine democracy in the territory in the near future; there is therefore no chance for the pro-democracy groups to form a government. Further, in contrast to the colonial administration in its final years, the HKSAR government is not interested in consulting the opposition when it is normally assured of a safe majority support in the legislature on important issues on which the Chinese authorities have clear positions. The pro-democracy groups have almost no influence on the government’s policy-making process. Under such circumstances, unity and discipline have less and less appeal to the politicians in the pro-democracy camp. Moreover, the multi-member, single-vote geographical constituencies in the Legislative Council elections exacerbate splittism. In the largest constituency, i.e., New Territories West, which returns eight legislators, a candidate can secure a seat with 8–9% of the votes. Hence moving towards a more

37

38

The Hong Kong Special Administrative Region in Its First Decade Table 12 Perceived Problems in Hong Kong Most Mentioned by Respondents in Telephone Opinion Surveys Conducted by the Government, 1997–2003 Time of Survey Problems

Jan

Mar

May

July

Sept

Nov

1997 1997 1997 1997 1997 1997

Labour-related

27%

25%

19%

18%

19%

24%

Economy-related

18%

12%

7%

9%

12%

29%

Governance of HK Government-related

–

–

–

–

–

–

Politics and HK future-related

–

–

–

–

4%

5%

Education-related

13%

11%

18%

15%

19%

14%

Housing-related

68%

66%

60%

69%

63%

62%

Social welfare-related

25%

25%

21%

17%

26%

20%

Transport-related

15%

13%

13%

15%

19%

12%

–

–

–

–

–

–

6%

4%

6%

4%

11%

6%

–

–

–

–

–

–

Environmental protection-related Medical and health-related New arrivals from mainland-related (Base: No. of respondents) Time of Survey Problems

1,040 1,045 1,017 1,099 1,033 1,033 Mar

May

July

Sept

Nov

Jan

2000 2000 2000 2000 2000 2001

Labour-related

45%

39%

45%

50%

46%

47%

Economy-related

40%

34%

38%

38%

42%

46%

Governance of HK Government-related

–

–

–

–

–

–

1%

3%

4%

–

–

–

Education-related

18%

19%

17%

16%

14%

16%

Housing-related

17%

20%

32%

18%

17%

19%

Social welfare-related

11%

10%

4%

6%

7%

7%

Politics and HK future-related

Transport-related Environmental protection-related Medical and health-related (Base: No. of respondents)

–

–

–

–

–

4%

9%

26%

9%

6%

10%

10%

–

10%

3%

3%

2%

6%

1,278 1,268 1,253 1,154 1,107 1,118

Source: The telephone opinion surveys were conducted by the Home Affairs Bureau of the Hong Kong Special Administrative Region (formerly the Home Affairs Branch of the Hong Kong Government) since January 1983 until August 2003 to monitor public opinion trends in respect of perceived problems in Hong Kong, Government’s overall performance and expectations about the general situation of Hong Kong. The data were provided by the Home Affairs Bureau under request.

Hong Kong Since Its Return to China: A Lost Decade? Table 12 (Continued) Perceived Problems in Hong Kong Most Mentioned by Respondents in Telephone Opinion Surveys Conducted by the Government, 1997–2003 Jan

Mar

May

July

Sept

Nov

Jan

Mar

May

July

Sept

Nov

Jan

1998 1998 1998 1998 1998 1998 1999 1999 1999 1999 1999 1999 2000 33%

41%

54%

48%

49%

50%

46%

49%

47%

45%

38%

47%

51%

52%

44%

48%

66%

60%

57%

61%

54%

38%

43%

51%

42%

42%

–

–

–

–

–

–

–

–

–

–

–

–

–

5%

5%

3%

3%

–

–

–

–

–

–

4%

2%

2%

9%

10%

11%

8%

9%

9%

7%

12%

12%

11%

17%

13%

13%

44%

46%

30%

20%

29%

24%

17%

16%

20%

15%

22%

20%

21%

14%

14%

8%

6%

8%

9%

12%

10%

6%

7%

10%

7%

7%

8%

9%

4%

3%

–

–

5%

4%

3%

6%

6%

6%

–

–

–

4%

2%

2%

5%

3%

6%

4%

5%

9%

14%

11%

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

2%

–

1%

1%

2%

14%

–

–

–

–

–

1,144 1,099 1,185 1,272 1,233 1,296 1,301 1,247 1,350 1,219 1,101 1,237 1,292 Mar

May

Jul

Sept

Nov

Jan

Mar

May

Jul

Oct

Jan

May

Aug

2001 2001 2001 2001 2001 2002 2002 2002 2002 2002 2003 2003 2003 49%

42%

49%

52%

54%

55%

57%

58%

70%

60%

51%

42%

49%

42%

47%

44%

55%

52%

48%

52%

44%

43%

36%

40%

46%

41%

–

–

–

–

2%

2%

3%

3%

2%

5%

11%

22%

14%

–

–

–

–

2%

2%

2%

3%

3%

7%

6%

4%

8%

18%

21%

19%

20%

16%

13%

15%

14%

14%

11%

8%

5%

8%

20%

16%

15%

21%

13%

10%

11%

11%

8%

9%

7%

4%

7%

6%

6%

4%

4%

4%

5%

6%

8%

5%

5%

7%

4%

2%

4%

3%

4%

2%

4%

2%

3%

2%

3%

5%

–

–

–

7%

9%

8%

4%

3%

4%

4%

4%

3%

–

–

–

–

4%

–

–

–

–

–

–

–

–

–

–

–

1,149 1,157 1,158 1,128 1,181 1,152 1,236 1,237 1,317 1,424 1,359 1,447 1,292

39

40

The Hong Kong Special Administrative Region in Its First Decade

radical position may contribute to a sharp image with a strong appeal to a sufficient minority of the electorate. Emily Lau has been adopting this approach successfully, and she has been followed by “Long Hair” Leung Kwok-hung. At the other end of the pro-democracy political spectrum, the Hong Kong Association for Democracy and People’s Livelihood avoids controversial political issues and concentrates on district work in Sham Shui Po. Their different political orientations make the maintenance of solidarity within the pro-democracy camp more problematic. There were other types of problems as well. Despite its electoral victories, the Democratic Party failed to expand its membership in a significant way. It probably had less than six hundred members, of whom about one-third remained active. In view of its limited resources, it was preoccupied with parliamentary politics and elections, and had not made much progress in institutionalization. The party’s systems and procedures were not well established, and because of the work pressure, a small number of parliamentary leaders had to make decisions within a short period of time. Hence, accountability to the general membership, internal transparency, and intra-party democracy were not well developed. In recent years, the Democratic Party has been plagued by internal quarrels, and leadership changes from Martin Lee to Yeung Sum, Lee Wing-tat and then Albert Ho have not brought significant improvements. These internal disputes damage the party’s appeal to supporters of democracy in the territory and adversely affect its political will and ability to provide leadership to the pro-democracy movement. While the Tung administration failed to show Hong Kong people the way ahead, the Democratic Party and other pro-democracy groups were not able to demonstrate significant initiatives in presenting Hong Kong people with well-researched policy alternatives. They failed to perform the role of an effective and constructive opposition from the perspective of policy platform. According to Lau Siu-kai’s survey in 2001, 63.6% of the respondents indicated that the Chief Executive could not represent their respective views, and only 12.1% of the respondents said he could. Similarly, 51.7% of the respondents revealed that the HKSAR government could not represent their respective views, and only 15.2% said it could. But the Democratic Party was not much

Hong Kong Since Its Return to China: A Lost Decade?

better: 46% of the respondents indicated that it could not represent their respective views, and only 13.4% said it could. The public affairs concern groups were considered most representative: only 22.1% of the respondents said that they could not represent their respective views, and 38.6% indicated that they could.30 To attract the media’s attention, legislators from the pro-democracy political parties usually had to dramatize their gestures and statements. A harsh criticism of Beijing obviously had a better chance of making headlines in the newspapers than a balanced statement. Their success with the media, however, made it very difficult for their leaders to establish a dialogue of mutual trust with senior civil servants. It also offered convenient excuses to the Chinese officials for rejecting any contact with them. Such political posturing often had a negative impact on the intelligentsia’s support for the pro-democracy political parties. The pro-democracy political parties encountered difficulties, too, in their relationship with grassroots community organizations which emerged and developed in the late 1960s and 1970s, and had been supporting pro-democracy political groups. The pro-democracy political parties certainly could help to raise issues of importance to grassroots community organizations in the legislature or with senior government officials, thus exerting pressure on the Tung administration to provide solutions. But their high profile and eagerness for publicity often resulted in failures to compromise and in delays in achieving settlements. Many grassroots community organizations worried that they might be taken for a ride, and they often preferred to act without the involvement of political parties. After all, grassroots community organizations were issue-oriented; they wanted concrete solutions to their problems. Further, the introduction of proportional representation in the direct elections to the legislature in 1998 and the split in the pro-democracy camp exerted pressure on grassroots community organizations to take sides. They were eagerly courted by the pro-Beijing political groups

30 See Lau Siu-kai, “Socio-economic discontent and political attitudes,” in Lau Siu-kai, Lee Ming-kwan, Wan Po-san and Wong Siu-lun (eds.), Indicators of Social Development: Hong Kong 2001, p. 69.

41

42

The Hong Kong Special Administrative Region in Its First Decade

too. The pro-democracy political parties understood the problems, but their options were limited. It was in this context that new groups such as Power for Democracy, Hong Kong Democratic Development Network and Civil Human Rights Front emerged in early 2002. They planned to concentrate on the cause of democracy and human rights, and wanted to offer an alternative to political parties in political participation. Their emergence and development reflected the disappointment with political parties in the pro-democracy camp and the suspicions against its politicians. It was significant that these new groups were dominated by church activists and academics who were generally seen as having no political ambitions. At this stage, these groups attempted to bring together various types of organizations in support of democracy and human rights because of the decline in the appeal of the pro-democracy political parties, the suspicions against them, and the in-fighting among them and that between them and the grassroots community organizations. This was not a healthy phenomenon as political parties had the resources and the most important role to play in the push for democracy in the territory. Power for Democracy and the Hong Kong Democratic Development Network have been handicapped by limitations in resources. They are small groups whose influence comes mainly from their moral appeal, and are often politely ignored by the pro-democracy political parties. The Civil Human Rights Front remains extremely suspicious of the pro-democracy political parties which are perceived to be mainly interested in elections for the benefit of their leaders. The more active of the groups belonging to this front organization tend to concentrate on the empowerment of the underprivileged groups. Their strong support for the homosexual community often creates difficulty in their relations with the church groups. The dissatisfaction with the Tung administration produced the massive protest rally on 1 July 2003. It was a major boost for the morale of Hong Kong’s pro-democracy movement. The opposition to the Article 23 legislation was linked to the demand for democracy, and the anger with the Tung administration also highlighted the significance of democracy. The pro-democracy camp managed to

Hong Kong Since Its Return to China: A Lost Decade?

present a united platform in the District Council elections in November 2003. More than two hundred candidates from all pro-democracy groups supported: a) the direct election of the Chief Executive by universal suffrage by 2007; b) direct elections of all seats of the legislature by universal suffrage by 2008; c) the initiation of public consultations on political reforms by the government before the end of 2003; and d) the abolition of all appointed seats to the District Councils after the November 2003 elections. The record voter turnout rate (44.1%) was the most important feature of the 2003 District Council elections. After the 1 July 2003 massive protest rally, Hong Kong people came out to vote in the local elections to express their dissatisfaction with the government and their demand for democratization again. While the pro-Beijing united front had tried to explain the participation in the protest rally on 1 July 2003 as a reflection of the economic difficulties then, and that people had various types of grievances, the record voter turnout rate was a clear indication that people remained dissatisfied with the Tung administration, even though Beijing strongly backed Tung and provided economic assistance to Hong Kong. Further, candidates from the pro-democracy camp won handsomely, while the pro-government DAB suffered a serious defeat.31 In early 2003, it was widely expected that the DAB would do well in the coming District Council elections because of its huge resources spent in district work in the past years as well as the difficulties within the pro-democracy movement discussed above. In sum, the victory in the District Council elections and the prospect of securing half of the seats in the Legislative Council elections in September 2004 symbolized the revival of the pro-democracy movement. Subsequently in the 2004 Legislative Council elections, the pro-democracy camp secured 18 seats in the geographical constituencies – two more than in 2000, and seven in the functional constituencies – two more than in 2000. The result could have been better. In terms of the share of votes won, the pro-democracy camp

31 See Joseph Y.S. Cheng, “The 2003 District Council elections in Hong Kong,” Asian Survey, Vol. 44, No. 5 (September/October 2004), pp. 734–754.

43

44

The Hong Kong Special Administrative Region in Its First Decade

increased its proportion from 58.2% in 2000 to 60.5% in 2004.32 The Chinese authorities should feel relieved with the election results though, as the pro-democracy camp failed to capture half of the seats of the legislature. The Chinese authorities had clearly indicated their opposition to universal suffrage by 2007 and 2008, and this position had weathered the anger and protest of the community. They expected no severe challenges in the immediate future. It was in this context that the HKSAR government introduced its political reform plan in October 2005 for consultation. 33 Basically the existing mode of the Election Committee would remain unchanged, although the membership would be expanded from 800 to 1,200. The inclusion of all the District Council members in the Election Committee would facilitate the claim that all voters in Hong Kong would be involved in a limited way in the election of the Chief Executive, and that the representativeness of the Election Committee would then be strengthened. There would be five more directly elected seats in the legislature in 2008, plus another five to be elected among all the District Councillors. The reform package did not respond to the pro-democracy camp’s demand for a timetable for the introduction of universal suffrage as well as a roadmap showing how the final goal would be achieved. The Chinese authorities and the Tsang administration worked very hard to persuade at least six legislators (out of 25) in the pro-democracy camp to defect so as to secure a two-thirds majority in the legislature to endorse the political reform proposal. They failed; the pro-democracy legislators remained united and defeated the Donald Tsang administration’s political reform package. The political reform package demonstrated the respective political dilemmas on both sides. The Chinese leadership wanted to show Hong Kong, Taiwan and the world that democratization was making progress in the territory, and that it was fulfilling its pledge that universal suffrage would ultimately be realized. A moderate political reform package endorsed by the required two-thirds majority in the legislature would enhance the legitimacy of the

32 See Joseph Y.S. Cheng, “Hong Kong’s democrats stumble,” Journal of Democracy, Vol. 16, No. 1 (January 2005), pp. 138–152. 33 See all major newspapers in Hong Kong on 20 October 2005.

Hong Kong Since Its Return to China: A Lost Decade?

political system. The defeat of the package damaged the legitimacy of the Tsang administration and the political system as the pro-democracy camp had just won 60.5% of the popular votes in the elections in 2004. The pro-democracy movement was in a difficult position too. It considered that it could not retreat from the political platforms in the earlier District Council elections and Legislative Council elections demanding universal suffrage for the coming Chief Executive election and the elections of the entire legislature. While a consistent majority of Hong Kong people favoured the implementation of universal suffrage at the earliest possible date (from slightly over 50% to almost 80% in various opinion surveys in recent years), there was also a majority support for the Tsang administration’s political reform package. Rejection of the package would mean no progress in democratization at least until 2012; and the younger-generation leaders in various pro-democracy groups believed that the increase in the number of seats in the legislature would offer them significant opportunities. The Tsang administration did not seem eager to negotiate with the pro-democracy movement; the latter did not have the solidarity and consensus to formulate a strategy to negotiate with and to exert pressure on the Tsang administration. There was just enough unity to hold on to the common line of demanding universal suffrage in the 2007 and 2008 elections. The only victory won by the pro-democracy movement was that it succeeded in foiling the Tsang administration’s attempt to divide and rule, and to win over six of the pro-democracy legislators. The political reform issue has now gone to the Commission on Strategic Development, a high-level consultative body appointed by the Chief Executive. The same competition for legitimacy will likely be repeated, as the political will to engage in negotiation between the HKSAR government and the pro-democracy movement is lacking on both sides. In the end, the latter will continue to severely criticize the former for lack of sincerity as there are still no timetable and roadmap, and the latter’s inflexibility will be blamed for the lack of progress in democratization by the Establishment. In the Chief Executive election in 2007, the pro-democracy movement was able to secure more than one hundred seats in the

45

46

The Hong Kong Special Administrative Region in Its First Decade

Election Committee to ensure the official nomination of its candidate, Alan Leong. This small breakthrough demonstrated that Hong Kong people, and in this specific case the professional groups, valued competition, accountability, and checks and balances. Though it was clearly understood that Donald Tsang would be able to secure his re-election easily, opinion surveys revealed that up to 70% of the respondents wanted to see competition in the Chief Executive election. The pro-democracy camp will face an uphill battle in the District Council elections in 2007 and the Legislative Council elections in 2008. In the District Council elections in 2003, the pro-democracy camp candidates much benefitted from the poor performance of the Tung administration and the grievances of the community as reflected in the huge turnout in the previous 1 July protest rally. This advantage will no longer be available in 2007, and the hard work backed by the impressive resources of the pro-Beijing united front is expected to pay dividends. A District Councillor from the pro-democracy camp normally has to deliver 10% of his/her salary and allowances to his/her political group to pay for its expenditure. A District Councillor of the pro-Beijing united front, on the other hand, can expect HK$30,000 or so per month (a bit more than the amount of a District Councillor’s salary and allowances) from his/her political group to support his/her services for the constituents. Further, these pro-Beijing District Councillors will have better access to government resources such as the use of community hall facilities, small-scale funding for cultural and educational activities, etc. They too can expect various types of honours and appointments from the HKSAR government and the Chinese authorities; the former will certainly be more helpful in support of these District Councillors including the redressing of grievances of their electorates. Undeniably, the pro-Beijing political groups have been able to attract dedicated candidates, offer them good training, and adopt highly sophisticated campaign strategies. In contrast, the pro-democracy camp candidates are much weaker in resources, and are divided among themselves. The above phenomena will also apply to the electorate. In short, the pro-democracy camp will likely suffer a setback in the District Council elections in 2007, and will be

Hong Kong Since Its Return to China: A Lost Decade?

considered lucky to retain all its seats in the Legislative Council elections in the following year.

Conclusion In the past decade, Hong Kong encountered similar challenges facing Japan and the other three “little dragons of Asia.” The territory entered a period of mature development with considerably lower economic growth rates. At the same time, its delivery of social services was hard pressed by more limited supply due to financial difficulties resulting from slower economic growth, as well as by greater demand because of higher expectations from the community and an ageing population. Re-definition of priorities means hard choices, and is often costly in terms of political support for and legitimacy of the government. Economic development alone is no longer sufficient to ensure legitimacy by results. In this sense, the HKSAR government faces severer challenges than the British colonial administration. The economic summit held in 2006 to exploit the opportunities offered by China’s Eleventh Five-Year Economic and Social Development Programme (2006–2010) is a significant example. The summit involved almost all important business leaders, but labour groups were not represented. The Tsang administration was not prepared to consult the experts and the political opposition either. In the end, the community has no sense of ownership concerning the development blueprint. The Chinese leadership considers that economic growth remains the key to the territory’s social and political stability. But it will not guarantee a harmonious society, hence Beijing’s “new thinking” discussed above. But this “new thinking” stays within a united front framework without the intention of introducing genuine democracy. Since the status quo is still satisfactory to the community which has no intention to challenge the Chinese authorities, moderate economic growth is adequate to dampen grievances to maintain stability. However, the government lacks the legitimacy to re-define the priorities even in the economic and social services field. In view

47

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The Hong Kong Special Administrative Region in Its First Decade

of Beijing’s perception of threat from the pro-democracy movement, it is unlikely that it will release a timetable and a roadmap to implement genuine democracy. Apparently value change in the Hong Kong society has been a subject much neglected by all parties concerned. The experiences in the past decade have taught Hong Kong people to lower their expectations concerning promotions and salary increases. Many young families do not want children; they therefore have less pressure to work hard to increase their incomes. Naturally they pay more attention to issues relating to the quality of life, health, the environment, the protection of the Victoria Harbour, and the preservation of historic buildings, etc. Ten years after the territory’s return to China, there has been no further progress in democracy. In fact interference from Beijing has increased after July 2003 when compared with the initial three years after 1997. The dogmatic insistence on an “executive-led” system of government means that the systemic difficulties in the executive-legislature relationship have not been tackled. Meanwhile, the absence of serious civil service reforms has resulted in declining performance of the system as well as accumulating frustration. The economy has demonstrated its resilience. But relative international competitiveness has been in decline; and the community’s confidence in future development has been eroded. While values are changing, the government’s policy programme does not show such awareness. In sum, this may not have been a decade lost, but it was obviously a crucial era in which there was not much to show off. The lesson is: people seek satisfaction in their daily life; they hope to secure meaning in it. After meeting their basic needs, they want to make a contribution. If the Chinese leadership and the HKSAR government continue to think that when the economy improves, political stability will not be challenged, then they have not been able to catch up with the times.

1 Democratic Development in Hong Kong: A Decade of Lost Opportunities Ngok MA The Chinese University of Hong Kong

Introduction Hong Kong’s first decade after the handover was a disappointment as far as development of formal political institutions is concerned. While opinion polls and popular election results consistently showed that a majority of Hong Kong population was in favor of faster democratization, the democrats made little headway in terms of making the formal political institutions more democratic since 1997. By 2007, the Chief Executive is elected by an 800-member Election Committee (EC), with the Legislative Council half-elected by functional constituencies (FC). The EC and the FCs are drawn from a narrow franchise of about 200,000 electors or 3% of Hong Kong’s population. The democrats also made little progress in terms of engaging the Central Government into formal negotiations over future democratic development. This chapter reviews the democratic development of Hong Kong in the past decade. It shows that the democracy movement as a whole faced problems of internal division, institutional constraints, and lack of institutional power or means to move the system forward. On the other hand, the relatively autonomous civil society, the legitimacy accorded to the democracy formula by the Basic Law, the constitutionally-guaranteed civil liberties, and public support for 49

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democracy in a post-industrial society, are all major forces behind the movement for full democracy. This created numerous contradictions in Hong Kong politics and legitimacy problems for the current regime, which will pose tensions for SAR governance for some years to come.

Theoretical Review There have been different explanations for the underdevelopment of democracy in Hong Kong. To modernization theorists, the slow democratization of Hong Kong was an anomaly.1 Hong Kong has had a high per capita income, a sizeable middle class, free flow of information, a free market economy, few irresolvable ethnic and religious cleavages, a sound foundation of rule of law and civil liberties. By these standards, Hong Kong has most of the social requisites of a modern democracy, but its democratic progress has been slow since decolonization started in the mid-1980s. The “cultural theorists,” most notably Lau Siu-kai, saw the political culture of the Hong Kong Chinese as an obstacle to democratic development in Hong Kong. Lau claimed that the political culture of the Hong Kong Chinese was marked by “utilitarian familism,” as they put family values over societal values, and relied on kinship networks and not political participation to solve their livelihood problems.2 To Lau, the Hong Kong culture was largely materialistic, having less regard for idealistic ideological aspirations. The Hong Kong Chinese was also said to have a “partial vision” of democracy, focusing on instrumental values of democratic reform rather than seeing democratic participation as a right in itself, and had a low political efficacy.3 This makes them

1 Sing Ming, “Democratization and economic development: the anomalous case of Hong Kong,” Democratization 3, 3 (1996), pp. 343–359; Sing Ming, Hong Kong’s Tortuous Democratization: A Comparative Analysis (London and New York: Routledge Cruzon, 2004). 2 Lau Siu-kai, Society and Politics in Hong Kong (Hong Kong: Chinese University Press, 1984). 3 Lau Siu-kai and Kuan Hsin-chi, “The Attentive Spectators: Political

Democratic Development in Hong Kong: A Decade of Lost Opportunities

difficult to be mobilized to form a formidable democracy movement as in elsewhere. Different scholars have cast doubts on the cultural argument. Some doubt the validity of the psycho-cultural approach, some questioned if there was really no serious political participation in postwar years, and some saw Lau’s explanation as tautological.4 Lau and Kuan’s more recent surveys showed that the Hong Kong people had a more “modern” political attitude than Taiwan and China; only the lack of institutional change arrested further changes to a participant culture. The cultural explanation also fails to account for the occasional outbursts of mass participation in 1989 and 2003, and the trend of higher voter turnout rates and more active social movements since democratization started in 1980s. If the impacts of the cultural factors are inconclusive (especially for the twenty-first century Hong Kong), power dependence on China has been a constant factor for the underdevelopment of democracy in Hong Kong.5 Hong Kong’s democratization has never been determined by Hong Kong, with the two sovereign masters, China and Britain, making most of the decisions. With a grave imbalance of power and with local elites divided over the pace of

participation of the Hong Kong Chinese.” Journal of Northeast Asia Studies 14, 1 (1995), pp. 3–24; Kuan Hsin-chi and Lau Siu-kai, “The partial vision of democracy in Hong Kong: a survey of public opinion,” The China Journal 34 (1995), pp. 239–264. 4 See Lam Wai-man, Understanding the Political Culture of Hong Kong: The Paradox of Activism and Depoliticization (Armonk, New York: M.E. Sharpe, 2004); Ma Ngok, Political Development in Hong Kong: State, Political Society and Civil Society (Hong Kong: Hong Kong University Press, 2007); Lo Shiu-hing, “Citizen participation, political culture and governability in Hong Kong: a critique of the psychocultural approach,” in Joseph Cheng (ed.), Political Participation in Hong Kong: Theoretical Issues and Historical Legacy (Hong Kong: City University of Hong Kong Press, 1999), pp. 49–69; Thomas Wong W.P. and Lui Tai-lok, “From one brand of politics to one brand of political culture,” in Lau Siu-kai (ed.), Social Development and Political Change in Hong Kong (Hong Kong: Chinese University Press, 2000), pp. 309–354. 5 Kuan Hsin-chi, “Power dependence and democratic transition: the case of Hong Kong,” The China Quarterly 128 (1991), pp. 774–793; Lau Siu-kai and Kuan Hsin-chi, “Partial democratization, ‘foundation moment’ and political parties in Hong Kong,” The China Quarterly 163 (2000), pp. 705–720.

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democratization, Hong Kong had very little bargaining power vis-à-vis the two sovereign states. Sing used a bargaining perspective to explain the “tortuous democratization” of Hong Kong. 6 To him, if the Hong Kong democracy movement had enough mobilization power, it was possible to force the omnipotent Chinese state into more concessions on the pace of democratization. He brought together a wide variety of factors to explain the futile democratization in Hong Kong. Seeing the Chinese government as the primary constraint, he pointed to the weakness and internal division of the civil society and political society in Hong Kong as a major factor for the weak mobilization power of the democracy movement. A colonial system that brought good economic performance and civil liberties, which was relatively free of corruption, accorded the ancien regime some legitimacy, which served to weaken the public’s support for democratization.7 Ma suggested that the underdevelopment of political society in Hong Kong was a crucial factor in the futility of the democracy movement, a factor overlooked by various scholars.8 Political society is defined as the arena in which the polity and society organize themselves for political contestation to gain control over public power and the state apparatus. 9 The weak political parties and legislature of Hong Kong disabled its functions of mitigating between state and civil society, which gradually led to a detachment between civil society and political society, weakening the democracy movement. This chapter will review the democratic development in Hong

6 7 8 9

Sing, Hong Kong’s Tortuous Democratization. Ibid. Ma, Political Development in Hong Kong, Chapter One. Alfred Stepan, Rethinking Military Politics: Brazil and the Southern Cone (Princeton: Princeton University Press, 1988); Yossi Shain and Gary Sussman, “From occupation to state-building: Palestinian political society meets Palestinian civil society,” Government and Opposition 33, 3 (1998): pp. 275–306; Juan Linz and Alfred Stepan, Problems of Democratic Consolidation: Southern Europe, South America, and Post-Communist Europe (Baltimore and London: The Johns Hopkins University Press, 1996), p. 8.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

Kong in the first ten years after the handover. The analysis will focus on the constraints and difficulties facing the democracy movement, and how the democrats responded to these constraints over time. It will also analyze the internal dynamics of the democracy movement, the changing social conditions, and how these interacted to shape the democratic development in Hong Kong after 1997.

First Phase: Fragmentation, Loss of Direction, and Weimar Syndrome The democracy movement in the first phase after the handover, 1997–2002, was marked by fragmentation, internal fighting, and loss of direction. Institutional changes weakened the influence of the Legislative Council (LegCo), the political parties, and the democrats, which partly contributed to the divisions within the pro-democracy camp. On the part of the public, the lack of democratic progress and inability of the parties and elected councils to change government policy or improve livelihood during the economic downturn led to a general disillusionment against the partially-democratic system and a lower support for the democrats. A most important political change in the “first phase” after 1997 was that the significance of the China factor in local politics faded. There was neither high-handed oppression nor ostensible intervention from Beijing. As most Hong Kong people did not feel the Chinese communists breathing down their necks, the pro-autonomy and anti-communist themes of the democrats became less appealing.10 On the other hand, the pace of democratic progress in the first ten years after the handover has been defined by the Basic Law, and with the difficulty of amending the Basic Law, 11 the

10 Ma Ngok, “The Decline of the Democratic Party in Hong Kong: the second Legislative Council election in HKSAR,” Asian Survey 41, 4 (2001), pp. 564–583. 11 According to Article 159 of the Basic Law, any amendments proposed by Hong Kong should first obtain the consent of the Chief Executive, two-thirds of the LegCo members, and two-thirds of the Hong Kong deputies to the

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democrats’ political agenda of democratization lost its immediate appeal after 1997. The economic downturn brought by the Asian financial crisis also turned the public’s attention to bread-and-butter issues, which made it more difficult for the democrats to find immediate goals for movement or reform after 1997. The lack of immediate goals led to a debate over direction in the pro-democracy camp after 1997. Historically the Hong Kong democrats have never been a unified group. Ideological differences within the camp were mostly along two cleavages: the class cleavage and the attitude towards the Chinese government. While most groups within the camp agreed to the desirability and necessity of a democratic system, they differed on whether or not they should adopt a confrontational attitude against Beijing. Before its merger with the United Democrats of Hong Kong (UDHK) to form the Democratic Party (DP), the Meeting Point leaders boasted better relationship with the Chinese government, while quite a few leaders in the Alliance in Support for the Patriotic Democratic Movement of China (ASPDMC), who formed the backbone of UDHK, thought that only confrontation can prevent encroachment from the North. This difference was carried to the DP. The second cleavage was along class issues. Groups such as the Confederation of Trade Unions (CTU) and the Association for Democracy and People’s Livelihood (ADPL) adopted a more pro-labour stand, while the mainstream DP hailed a catch-all class position. Before 1997, these pro-democracy groups managed to stay together and cooperate in times of elections, largely because of fear of possible oppression from China after 1997. After 1997, when the predicted oppression did not materialize, the ideological differences resurfaced, especially over the future direction of the democratic movement, best exemplified by the factional struggle within DP since 1998. The struggle was a culmination of personal rivalries, ideological differences, power struggle within the party, the lack of mobility chances of the young activists, and the like, but a most important factor was a disagreement over the future direction of NPC, before they could be submitted to the NPC for consideration. This means that any amendment proposals that are contrary to the wishes of the Central or the SAR government would not even get the chance of being submitted to the NPC.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

DP.12 The party leaders, the “mainstreamers” supported by former Meeting Point members, believed that the DP should adopt a more conciliatory attitude towards both the Chinese and the SAR government to win over moderate voters, and to engage the incumbents to open negotiations for future reform. They also believed that the party should focus more on parliamentary work, to show the public that they are a “credible alternative” to the incumbents. The Young Turks, a group of relatively young local councillors, believed that the “parliamentary road” would be futile as the LegCo’s power had been curtailed after 1997 (see below), and advocated a more confrontational strategy that relied on street-level mass movements. They were also divided on class positions: while the mainstreamers believed that the DP should cater more for the interests of the middle class, whom they believed was increasing in number, the Young Turks insisted on a pro-grassroots position. The factional struggle was short-lived, as the Young Turks quickly lost out in the internal power struggle for want of intra-party leadership and resources. It however weakened the DP as many of the Young Turks later quit the party, and the well-publicized factional strife tarnished DP’s moral image. The fragmentation within the pro-democracy camp was further aggravated by other institutional changes. The adoption of the proportional representation formula (PR) encouraged the smaller pro-democracy groups to compete directly with the DP for voters for a similar spectrum. In the 1998 campaign, this led to vicious attacks among the pro-democracy candidates.13 The logic of PR also prevented the democrats from re-integrating into a unified party

12 For a more complete account of the factional struggle, see Ma Ngok, “Factionalism in the Democratic Party and the 2000 Election,” in Kuan Hsin-chi, Lau Siu-kai and Wong Ka-ying (eds.), Out of the Shadow of 1997? The 2000 Legislative Council Election in the Hong Kong Special Administrative Region (Hong Kong: Chinese University Press, 2002), pp. 125–159. 13 Ma Ngok and Choy Chi-keung, “Party competition patterns: the 1995 and 1998 campaigns compared,” in Kuan Hsin-chi et al. (eds.), Power Transfer and Electoral Politics: The First Legislative Elections in the Hong Kong Special Administrative Region (Hong Kong: Chinese University Press, 1999), pp. 71–104.

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after 1997, as splitting into different groups or different lists would boost their electoral fortunes under PR. The result was a much more fragmented democracy movement after 1997.

Institutional Changes The democrats were further hurt by post-1997 institutional changes, among them the constitutional constraints imposed by the Basic Law, the change of the electoral rules, and the abolition of the Urban Council and Regional Council. In 1995–97, when the democrats held about one half of the LegCo seats, they had considerable policy influence. They could force government policy changes by threatening to veto government appropriations, amending government bills, and proposing and passing alternative policies by private members’ bills. Two built-in constraints in the Basic Law severely reduced LegCo’s policy influence after 1997. The weapon of private members’ bills was largely made impotent. Article 74 of the Basic Law stipulates that all private members’ bills cannot be related to government structure, operation of government or public expenditure. If the bill is related to public policy, it has to get the written consent of the Chief Executive, which means any proposals that are against government policy would have no chance of getting tabled. The second constraint is that while government bills and proposals need only a simple majority to pass the LegCo, amendments, bills and motions proposed by LegCo members have to be passed simultaneously by two groups of legislators. The first group was the 30 members elected by functional constituencies (FCs), while the other group was the 30 who were elected by popular elections and the Election Committee (EC). The control of the majority of these two groups of legislators, however, was usually in the hands of the two different political camps. While the democrats held only a small number of seats in the FCs, they usually have a majority or near-majority in the directly-elected plus EC component. This means that it was very difficult for the post-1997 LegCo to engineer a consensus to pass private motions or proposals to put policy pressure on the SAR government.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

Electoral rule changes, put in by the Provisional LegCo, substantially reduced the number of seats that the democrats could win in the post-1997 LegCo. In the 1995 election, the democrats won 17 of the 20 directly-elected seats under the first-past-the-post system, won four of the ten seats elected by the EC that was formed by elected District Board members, and eight seats from the FCs thanks to the enlargement of the FC franchise to all of working population in Hong Kong. After 1997, the Provisional LegCo quickly redefined the composition of the FCs and EC. The 400-member EC was indirectly elected by a limited franchise of fewer than 200,000 electors, weighted in favour of the business and professional groups. The FCs were redefined to disenfranchise most of the working population in Hong Kong, again restricting the franchise to about 200,000 electors. As a result, in the 1998 and 2000 elections, the democrats were unable to win any of the EC seats, and could only secure three seats from the FCs. The democrats’ seat share in the direct election component was also reduced by the change of the electoral formula to PR. With a steady 60% of the vote share over the years, the democrats were able to win more than 80% of the directly-elected seats in the contests that used plurality systems in 1991 and 1995. Under PR, the democrats could win only 14 out of 20 (70% of seats) in 1998 and 15 out of 24 seats (62.5%) in 2000. The aggregate effects of the above electoral rule changes for the LegCo was to reduce the democrats to a minority of 21–22 seats before 2004, much weakening their influence in the political system. Sing pointed to other trends of “democratic retrogression” after 1997, including the reinstatement of appointed members into the District Councils, the government becoming less open or accountable, denying public access to government information, and curbing of civil liberties in Hong Kong.14 Among these, the abolition of the Urban Council (UC) and Regional Council (RC) merits special attention, as it hurts the democrats in more than one aspects.

14 Sing Ming, “The Handover of Hong Kong and the retrogression of its democratic development,” in Joseph Cheng (ed.), Political Development in the HKSAR (Hong Kong: City University of Hong Kong Press, 2001), pp. 101–118.

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These two financially autonomous elected bodies were responsible for managing cultural and recreational affairs and overseeing food and environmental hygiene, their members receiving handsome salaries that allowed them to serve as full-time politicians. By 1998, DP had 24 UC/RC members, representing the cream of the party’s next generation of leaders. In 1999, the SAR government decided to recentralize control of food hygiene and cultural and recreational affairs, and abolished the two councils with the help of the pro-government majority in the LegCo. This seriously hurt the succession plan of the DP, as the younger generation of leaders could not serve as full-time politicians to wait for their turn to succeed the senior leaders. The loss of these offices also put a dent in party resources, both in terms of financial allowances and local network resources. The lack of upward mobility opportunity also partly contributed to the factional struggle within DP, as the Young Turks chose to challenge the party leaders for greater influence within the party.

The Weimar Syndrome The lack of progress of democratic development and the inadequate prowess of the LegCo led to increased disillusionment with the elected institutions and political parties in Hong Kong. Elsewhere I termed this phenomenon the “Weimar Syndrome,” likening it to the situation in Germany in the interwar years.15 Amidst an economic downturn, the Hong Kong public saw only partisan struggles within the LegCo chamber, mutual-vetoing and acrimonious criticisms among parties, with little concrete deeds to improve people’s livelihood. The public was quickly disappointed with the performance of the LegCo and the political parties, including the democrats. Opinion polls shortly before the September 2000 LegCo election showed that only 23.9% of respondents were satisfied with the performance of the SAR LegCo members.16

15 Ma, “The decline of the Democratic Party.” 16 University of Hong Kong, Pop Express, Public Opinion Program, July 2000.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

The outcomes of the 2000 LegCo election testified to the democrats’ plight. The election saw a drop of about 10% in voter turnout from the 1998 election, with about 160,000 fewer voters casting their votes. About 8,500 voters (0.6%) cast empty ballots to show their dissatisfaction, an unprecedented high number. The democrats suffered a drop in 7% of the vote share (or 190,000 fewer votes), with the DP alone responsible for 170,000 of the drop.17 Post-election surveys showed that a lot of those who stayed away from the polls in 2000 were less satisfied with the democratic development of the SAR, which means they were likely to be pro-democracy voters.18 By 2002, the democracy movement of Hong Kong was at the crossroads. The democrats were ridden with internal strife, did not have a clear sense of direction, could achieve little in the partially-democratic system, and saw their popularity and influence declining. Although the SAR government itself was suffering from low popularity, it did not help the pro-democracy opposition much. To the democrats, the decision of the SAR government to enact legislation related to Article 23 of the Basic Law was a godsend.

Second Phase: Re-mobilization and Rebirth Civil Society Striking Back From early 2003 to early 2005, Hong Kong’s democracy movement saw a rebirth, not so much due to its own reform or rejuvenation, but to consecutive failures of the SAR government. The major turning point took place in the first months of 2003, when the failure to handle the SARS outbreak and attempts to legislate Article 23 drove 500,000 Hong Kong people to a historic anti-government protest.

17 See also Ma, “The decline of the Democratic Party.” 18 Milan Sun Tung-wen, “Why voters did not vote in the 2000 Legislative Council elections?’ in Kuan Hsin-chi, Lau Siu-kai and Timothy Wong (eds.), Out of the Shadow of 1997? The 2000 Legislative Council Election in the Hong Kong Special Administrative Region (Hong Kong: Chinese University of Hong Kong, 2002), pp. 269–288.

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The SAR government’s proposal to enact legislation to protect national security, as stipulated in Article 23 of the Basic Law, was a major watershed of post-handover politics. For years, the Article 23 of the Basic Law, which states that the SAR government should “enact laws on its own” to forbid treason, secession, sedition, subversion, theft of state secrets, links with foreign political organizations, and activities of foreign political organizations in Hong Kong, has been a Sword of Damocles over the heads of the democrats. Many saw the article as a legal tool to clamp down on political dissidence, especially on the ASPDMC and local groups that supported the mainland democracy movement. While the SAR government procrastinated on legislating for Article 23 after 1997, after Tung Chee-hwa had secured a second term, the SAR government put forward their legislative proposals in September 2002. What followed was a massive campaign from civil society against the legislation, culminating in the half-million march on July 1, 2003. It was not the purpose of this chapter to recount the struggle against Article 23. 19 It was nevertheless necessary to highlight factors that contributed to the massive turnout. Article 23 legislation touched on a sensitive chord of Hong Kong people, who has never been very confident of the Central Government’s resolve in protecting Hong Kong’s civil liberties. Many were at least uneasy about introducing mainland concepts of “national security” into the Hong Kong legal system. A major part of the blame of course should go to the Security Bureau officials, whose inability to put the legislation in clear and precise enough terms to alleviate public worries, failure to explain the Bill’s details and loopholes, and lack of regard to opposing opinion, fuelled public fury against the Bill. The arrogant attitude of Secretary for Security Regina Ip of course did not help the government’s cause. The public outcry had its deep roots in the distrust against the Central Government and the SAR government in terms of their sincerity in protecting human rights in Hong Kong. Events after

19 Ma Ngok, “Civil society in self-defense: the struggle against national security in Hong Kong,” Journal of Contemporary China No. 14, Vol. 44 (2005), pp. 465–482.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

1997 showed that the SAR government was actively engaged in “selective prosecution” of anti-government activists, and there was immense pressure on the media to self-censor.20 This led many civil society organizations (CSOs) and the public at large to believe that Article 23 was an attempt to curb political dissidence and further encroach on public space. The all-encompassing nature of the National Security Bill also alarmed many CSOs, many of which were not usually politically active. The Catholic Church feared that they would be victimized because of their links with mainland underground churches; academics feared that routine academic discussions can constitute sedition; the news media felt threatened by provisions related to “theft of state secrets”; movie directors were afraid that freedom of expression might be affected; even university librarians were unsure when their collections would be seen as “seditious publications.” The few weeks preceding 1 July 2003 saw unprecedented mobilization by various social sectors, calling on people to protest the impending enactment of the Bill. It should be emphasized that the massive turnout on 1 July 2003 was not all due to the dissatisfaction against Article 23 legislation. It was an outburst of the totality of frustrations against SAR governance since 1997, spurred on by the SARS epidemic in March to May 2003. In these fateful three months, about 1,700 Hong Kong citizens contracted the deadly virus, with 299 eventually sacrificing their lives. The epidemic also hit the Hong Kong economy hard, bringing lots of job losses, with the retail market and tourism suffering most. The SAR government, and Tung as the Chief Executive (CE) in particular, was generally criticized for under-reporting of the epidemic at the beginning, and too indecisive in crisis management during the outbreak. With most of the city grieved by the tragedy and the economic loss, the Article 23 legislation proved the last straw for the tolerance of SAR citizens.

Remobilization and Re-negotiation The Article 23 saga and the 1 July march had profound impacts on

20 Ma, Political Development in Hong Kong, Chapter 8.

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the democratic development of Hong Kong. It was a huge political victory for the democrats, who successfully mobilized “people’s power” to defeat the government. It also lent much credence to the democrats’ claim that a non-elected government could ignore public opinion and pass bills that hurt people’s freedoms. For the Hong Kong people, the governance ills after 1997 showed that a non-elected government could go very wrong, and that they had no way to replace unpopular and incompetent government leaders (read: Tung) without a democratic system. While the colonial experience showed that it was possible to have liberty without democracy, post-1997 events showed the Hong Kong people that they should not take that as granted. For the younger generation, the July 1 experience was one of revelation and empowerment. If political efficacy was the key for low participation in Hong Kong, the 1 July march should teach the Hong Kong people that their participation matters – they only need to find enough people. The democrats lost little time in turning the movement against Article 23 into a full-scale democracy movement. Successive rallies on 9 July and 13 July 2003 had “universal suffrage for 2007/08” as a clear slogan, and were joined by tens of thousands. The re-mobilization of the public strengthened the hand of the democrats, which allowed them to force the Central Government to consider universal suffrage in 2007/08. The months after July 2003 saw the whole city embroiled in a debate over universal suffrage in 2007/08. Judging from the speeches of mainland officials since mid-2003, the “patriotism propaganda” in early 2004, and the NPCSC verdict on 26 April 2004, the priorities of Beijing were quite clear. Above all else, they did not see it as desirable for Hong Kong to move to full democracy as early as in 2007/08. Firstly, they were unsure that full democratic elections could yield government elites that were “patriotic” or at least acceptable to them.21 They also thought that Hong Kong people’s dissatisfaction after 1997 was mostly due to the economic downturn, as demonstrated by their stepping up of economic assistance to Hong Kong since mid-2003. Vice President

21 For the debate around the “patriotism” issue, see Ming Pao (editorial), Aiguo Lunzheng (The Patriotism Debate) (愛國論爭 ) (Hong Kong: Ming Pao, 2004).

Democratic Development in Hong Kong: A Decade of Lost Opportunities

Zeng Qinghong said in 2004, “The eternal value for Hong Kong is economic development.” 22 To the Beijing leaders, Hong Kong’s raison d’etre was a capitalist city that specializes in creating wealth for China, and should stay away from confrontational politics. The NPCSC verdict in April 2004 showed clearly the preferences of Beijing. They must have heard the general pro-democracy sentiment of Hong Kong, as opinion polls in late 2003 to early 2004 showed as many as 70–75% supporting universal suffrage in 2007/08. They were also aware that economic assistance in late 2003, the withdrawal of Article 23 legislation, and the stepping down of unpopular officials such as Antony Leung and Regina Ip in July 2003, had not been able to stem the democrats’ rising tide, as testified by the landslide victory of the democrats in the November 2003 District Council election. It was clear that the democrats would use “universal suffrage in 2007/08” as their campaign issue in the September 2004 LegCo election. Beijing might be wary that if the democrats won another landslide in the LegCo election, they would have a slight chance of getting majority control in the LegCo, which would substantially augment their bargaining power. Because of this, the Central Government preferred to nip the hope of full democracy in 2007/08 in the bud, and prevented the democrats getting the LegCo majority by riding the tide of public enthusiasm. The NPCSC verdict on 26 April 2004 categorically ruled out election of the 2007 CE by universal suffrage, and ruled that the 2008 LegCo would remain only half popularly-elected. The ruling was in fact much more conservative than the proposals of many local pro-Beijing elites at the time, who at least proposed that the proportion of directly-elected seats should increase in 2008.

Fighting a Lost Battle The verdict fully exposed the difficult situation of democratic development in Hong Kong. The Central Government’s prime concern was political control, making sure that Hong Kong would

22 South China Morning Post, 7 June 2004.

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not be ruled by people who might confront the Central Government from time to time. They have so much distrust against the Hong Kong democrats that it was inconceivable in the foreseeable future they would give green light to a fully democratic system that very possibly could return the democrats to power. The NPCSC verdict also showed that the Central Government would rather make a knowingly unpopular decision, when it comes to constitutional reform, than risking loss of political control. For the democrats, while they had the backing of majority public opinion in Hong Kong for the quest of democracy, they almost had no institutional channels to engage the Central Government in direct dialogues to move the system forward. After the NPCSC verdict, they had no institutional means to make the Central Government reconsider its position. In between, the pro-Beijing elites, who had some access to Beijing, were usually not sympathetic with the democratic cause, and had too much interest and power considerations at stake to alleviate the worries of the Central Government towards democracy. The SAR officials, just like the pro-Beijing elites, were power-dependent on the Central Government and usually would not fight on behalf of majority opinion of Hong Kong against Central directives on the issue of democracy. After the NPCSC verdict the democrats vowed to fight on, but their appeal was much weakened. Facing the September 2004 LegCo election, the pro-democracy camp claimed that they were not giving up on universal suffrage in 2007/08, but never explained effectively by what means they could change the minds of the Central Government. The July 1, 2004 march was joined by huge crowds, but the democrats got a less-than-satisfactory result in the 2004 LegCo election. By getting only 25 seats, partly due to a couple of strategic blunders,23 the democrats did not improve their bargaining

23 See Joseph Cheng, “Hong Kong’s democrats stumble,” Journal of Democracy 16, 1 (January 2005), pp. 138–152; Ma Ngok, “Strategic coordination under proportional representation: a study at the candidate level,” in Kuan Hsin-chi and Timothy Wong (eds.), The 2004 Legislative Council Elections in Hong Kong (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, 2006), pp. 115–143.

Democratic Development in Hong Kong: A Decade of Lost Opportunities

position, and lost the strong momentum and mandate that they had accumulated since July 2003 to move the system forward. The democracy movement in Hong Kong began to lose its direction or immediate goal (again) after the September 2004 election. The civil society as a whole, partly stimulated by the July 1 awakening, did not silent itself. Late 2004 saw a series of governance problems that led to various social movements challenging the government, including the Hunghom Peninsula case, the Link REIT case, and the West Kowloon debate. The persistent low popularity of Tung and his government, however, did not help the democrats to force democratic progress. The tide began to change after March 2005, rendering the democrats in a new impasse.

Third Phase: Lost Opportunities and the New Impasse The Difficult Fifth Report In March 2005, Tung resigned his post as CE, citing health reasons. It was reported that the failure to list the Link Reit on the stock exchange was the last straw that drove the Beijing leaders to pull the plug on Tung.24 Chief Secretary Donald Tsang was responsible for finishing the remaining two-year CE term. As a long-time civil servant, Tsang had better media and political skills and personal image. The stepping down of Tung also served to let out a considerable part of the public dissatisfaction against the government. This, coupled with a timely economic recovery, led to a rebound in government popularity after March 2005. The tempering of public dissatisfaction made the job of the democrats even more difficult. In the public, they insisted that they would continue to fight for universal suffrage in 2007/08. Periodic mass mobilizations served to confirm the public conviction for the

24 See Hong Kong Economic Journal, 4 March 2005, p. 16; Ming Pao, 23 March 2005, p. A12.

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democratic cause, but could do little to convince the Central Government to change its policy on Hong Kong. Internally, they failed to arrive at any alternative courses of action. Any political formula other than full democracy for 2007/08 would be seen within the camp as betrayal and throwing up the sponge prematurely; even the compromising but seemingly realistic target of “universal suffrage in 2012” was taboo for some time. This again left them with no intermediate goals to lead the movement. With most people in Hong Kong understanding that universal suffrage in 2007/08 was next to impossible, it became increasingly difficult to mobilize the public to join the movement. With the rebound in government popularity, the democrats could no longer fan the anti-government sentiments to support democracy. As a result, public rallies in support of democracy were joined by fewer and fewer crowds after March 2005. The democrats’ difficult and ambivalent position was fully exposed by the debate around the government’s Fifth Report of the Task Force on Constitutional Development. In October 2005, the government proposed limited reforms to the electoral methods for the 2007 CE and 2008 LegCo elections, within the constraints of the April 2004 NPCSC verdict. It proposed to expand the 800-member Election Committee to 1,600, in the process of which including all the District Councillors, thus widening the base of the indirect electorate. The government also proposed to add ten seats to the 2008 LegCo, with five directly-elected and five FCs elected by District Councillors. The government claimed that this was the best deal they could muster given the constraints of the NPCSC verdict and the political influence of the conservatives in Hong Kong. According to Annex I and II of the Basic Law, an amendment of the electoral methods of CE and LegCo requires the consent of a two-thirds majority of the LegCo, which means the 25 democrats in the LegCo can veto the proposal if they vote en bloc against it. The minimal reform proposal immediately put the democrats onto the horns of a dilemma. In principle they were still demanding universal suffrage for 2007/08, thus any political formula less democratic than that should be rejected outright. However, everybody in the territory, by late 2005, knew that realistically Beijing would not change their position, making the democrats’

Democratic Development in Hong Kong: A Decade of Lost Opportunities

position seemingly too uncompromising and unrealistic. The difficult part was: if they vetoed the minimalist proposal, Hong Kong would be stuck with the old electoral methods in the 2007 and 2008 elections. By voting against a less-than-satisfactory model, they were in fact voting for the more conservative electoral methods used in 2002 and 2004. Public opinion at the time was divided. The government claimed they had majority support for their proposal. Public opinion polls at the time usually showed that about half of the respondents agreed to the proposal.25 While the majority of Hong Kong people would like to see full democracy as soon as possible, with universal suffrage ruled out for 2007/08, many of the pragmatics would opt for a reform proposal that could at least move the system forward. The pro-democracy camp was also divided on the issue. The more radical wings objected to voting for anything other than universal suffrage, but they were in the minority. There were always rumours that some moderate democrats were going to defect and vote for the government proposal. The mainstream democrats, represented by the Democratic Party and the Article 45 Concern Group that combined for 12 votes in the LegCo, were more concerned about the public opinion backlash that might follow if they vetoed the proposal. To soften the impact and tread the middle ground they picked on two issues of the government proposal: (1) the District Councillors currently included 102 members appointed by the CE, which allowed the incumbent CE to plant supporters in the expanded Election Committee and violated the democratic principle; (2) the government proposal did not offer a clear road map and timetable to full democracy. They claimed that they would not vote for the government proposal unless the appointment system in the District Councils was abolished, and the government offered a clear road map and timetable to full democracy.

25 A survey in late October 2005 showed that 58.8% of respondents accepted the government proposals. See Ming Pao, 4 November 2005. After the 3 December rally, a survey reported 49.9% accepted the proposal. See Hong Kong Daily News, 10 December 2005.

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Several events in November–December 2005 turned the tide and tied up the democrats. On November 4, several democratic leaders met religious leaders Bishop Zen and Reverend Chu Yiu-ming, who persuaded them to vote en bloc against the government proposal as it did not offer plans for universal suffrage. About one week later, a political advertisement appeared on front pages of selected newspapers. It showed a sandglass in black background, with only one written phrase: “Tell me, would I live to see universal suffrage?”, addressed by “a 78-year old man.” Both events served to redirect the focus of discussions from the technicalities of the government proposal to the issue of when universal suffrage will be delivered. The advertisement also reminded the public that they had waited long enough – partial democratization has started for more than 20 years, and there was no end in sight. The rally on 3 December, demanding universal suffrage, was joined by an estimated 100,000 people. To the democrats, this more or less confirmed that there were a substantial hard-core of citizens who were committed to supporting democracy and might punish them in the next election if they sounded too compromising. This more or less convinced them to stay together and scared away the would-be defectors. In the end, 25 democrats voted en bloc against the government proposal on December 2005.

To Run or Not to Run: That is the Question The effects of the December 2005 veto were multifold. Public opinion polls in early 2006 showed that the democrats suffered a certain (but not substantial) drop in popularity ratings, implying that at least part of the public thought the democrats’ uncompromising attitude was to blame for the lack of progress in democratization. As far as democratic institutions were concerned, the veto means that the momentum generated by the July 1 march had counted for nothing. The failure to reach a compromise also severed chances of improving relationship and continuation of reform dialogue, at least temporarily, between the democrats and the Central Government. For Donald Tsang, the defeat was the first setback in his revitalized CE reign. Many thought that with his

Democratic Development in Hong Kong: A Decade of Lost Opportunities

better relationship with the democrats, he could manage to lobby enough democrats to vote for the proposal. The course of the political debate in late 2005 only showed that the political hiatus between the establishment and the opposition was too wide for him to bridge. For the democrats, the problem was how to maintain the momentum of the movement after the veto. With the economic recovery since 2005 and the stepping down of Tung, dissatisfaction against the SAR government quickly dwindled. Now that universal suffrage for 2007/08 was dead, and full democracy in 2012 seemed all too remote, they struggled to enlarge their political space or keep the momentum going. They continued to put pressure on Donald Tsang to deliver the so-called “timetable” and “roadmap” for full democracy. In response Tsang revamped the Strategic Development Committee (SDC), claiming that one of its tasks was to look into reform possibilities towards universal suffrage. The SDC, however, was a grand collection of people from different sectors, dominated by business elites and pro-Beijing conservatives, with the democrats having only a token representation. The diversified composition, the large committee size, absence of a clear reform agenda, and the lack of expertise in constitution-drafting, all disabled the SDC from conducting meaningful discussions on how political reforms could move forward. The political reality was simple: without the green light from the Central Government, and with Tsang yet to secure his second CE term, it is hard to imagine Tsang initiating drastic political reforms towards universal suffrage. By 2006, the democrats saw the political gain from the July 2003 mass rally slipping away, and saw the 2007 CE election as a political opportunity that they need to grasp to at least maintain the momentum of the movement, to keep the universal suffrage issue in the limelight and keep up the pressure on the government. In the past, the democrats feared that if they participated in the undemocratic CE election, they would legitimize the undemocratic system. By late 2006, they knew that most Hong Kong people were longing for at least some minimal democratic progress, and would not sympathize too much for a boycotting position. With most of the EC sectors dominated by conservative forces, the democrats knew that they had next to no chance in winning the CE election,

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but they tried to wring the maximum political gain from it. They hoped that if they could win more than 100 EC seats in the subsector elections, they could cross the nomination hurdle. The pro-democracy candidate can then put forward a comprehensive election program and force Donald Tsang into high-profile and meaningful policy debates on how to govern Hong Kong. This serves to put forward the democrats’ platform, keep the political debate going, and show the Hong Kong public that the democrats are a viable alternative to the current non-elected regime. The pro-democracy camp first decided to support Alan Leong of Civic Party to run as the pro-democracy candidate, and then tried their best to find pro-democracy figures to run for the EC seats in the December 2006 EC subsectoral election.

Christmas Delights December 2006 saw two events that provided food for thoughts for Hong Kong’s democratic future. In the December 2006 EC subsectoral election, the democrats won a landslide. With the EC composition weighted in favor of the business elites and some sectors dominated by pro-Beijing forces (including Heung Yee Kuk, District Councils, Labor unions, Agriculture and Fisheries, etc.), the democrats could only lay their hands on the 240 seats allocated to various professional sectors. They sent out 137 members to compete in these 11 sectors. Their calculation was that with about 20 pro-democracy legislators who are guaranteed EC membership, they could cross the 100-nominator hurdle if they won 80 seats in these subsectors. The result was much better than the democrats had expected. In subsectors such as education, higher education, legal, accounting, information technology, and engineering, all the candidates nominated by the democrats won with a high vote ratio. In total they got more than 120 seats in the EC, which should help to secure the nomination for Leong. The vote not only reflected that a majority of the professionals were in favour of more progressive democratization, but also registered their dissatisfaction with the establishment. Many pro-government EC candidates had high

Democratic Development in Hong Kong: A Decade of Lost Opportunities

professional standings in their respective fields and much better name recognition, were well represented in various government-appointed bodies and held top positions in big firms and the major institutions, but were beaten heavily. Junior lawyers who ran on a pro-democracy platform beat conservative senior counsels. Junior teaching staff on the pro-democracy list got twice as many votes as pro-government university vice presidents. It to a certain extent shows that frontline young professionals are quite disgruntled with the vested interests, the pro-government big sharks who wield much influence in the field and dominate access to government. If given a choice (as in the EC subsector elections), they would not cast their votes for these people to “represent” their interests. Yet the government has been relying on these sectoral “leaders” to “reflect” opinions of the professions, making the government aloof to the views of the average professional. This can lead to an ever-widening gap between the government and the professionals and middle class in Hong Kong, heightening dissatisfaction against the government. In the last days of 2006, the government was shaken by a spontaneous social movement which they did not foresee. In order to extend transportation networks around Central to ease congestion, the government was due to demolish the old Star Ferry Pier in Central, together with the Pier clock tower. The plan did not meet a lot of public opposition when it was announced in 2001, and the related appropriation proposals went through the LegCo largely unscathed. But the pictures of the last days of the old Pier, shown on television and newspapers, aroused much nostalgia and sentimental reactions. When the bulldozers moved in, they were faced with a sit-in protest of young activists who stayed for consecutive nights to try to stop the demolition of the clock tower, resulting in scuffles with the police. The government’s response was to accelerate the demolition work, getting it done almost overnight. The move, however, created a lot of public opinion backlash, raising sympathy for the protesters and triggered off a new movement on protection of heritage in Hong Kong. The government could not really comprehend the Star Ferry movement. Hong Kong people were usually seen as pragmatic and materialistic, and the demolition of Star Pier seemed to have little

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material interests at stake. There were no sizeable mobilization from political groups, and the activists were not the regular protesters against government policies, yet the resolve and drastic action adopted by the protesters was a surprise to many. The Star Ferry episode hinted that the younger generation of Hong Kong is less materialist than the older generation. Post-materialist values begin to have better appeal in the Hong Kong post-industrial society: people begin to pay more attention to cultural issues, environmental issues, and are more conscious of their identity, together with any symbols associated with it. Pervasive developmentalism, which has been bulldozing old buildings with heritage value, polluting the air, narrowing the harbour, pulling down trees, and destroying the skyline, is being met with more and more resistance and resentment. Widespread perceptions of a heavy pro-business slant by the SAR government mean that the post-materialist generation is not going to reflect favourably on the government. More importantly, the old formula of relying on economic performance for legitimacy will no longer appeal to this generation who stresses post-materialist values. The old formula of administrative absorption is no longer feasible, with the new generation more anti-establishment and detesting formalistic participation, not to mention the fact that the channels of absorption have been dominated by the rich and the influential. This brings yet another big gap between the government and substantial segments of society, which the government may not be really aware of it.

By Way of Conclusion: Glass Half-Empty or Half-Full? The Hong Kong democratization experience demonstrates how a protracted transition can generate dynamics that are unfavorable to the development of democracy. Protracted transitions lead to divisions over the direction of the movement, disappointment with the lack of democratic progress, and transition fatigue26 on the part

26 For discussions on “transition fatigue,” see Marina Ottaway, Democracy

Democratic Development in Hong Kong: A Decade of Lost Opportunities

of the public. The government can carry out institutional changes that weaken the political space of the opposition. Institutional constraints more or less prevented the Hong Kong democrats from accumulating enough resource and influence to push for more progressive reforms, or force the Central Government into a dialogue over political reform. With major actors having divergent preferences and no institutional bargaining and negotiation mechanism between them, the democrats failed to make use of the governance crisis and the mass mobilizations since 2003 to move the system forward. This lack of progress in institutional terms only made the various contradictions in Hong Kong politics more striking.27 Hong Kong is constitutionally guaranteed ultimate universal suffrage but nobody knows when that promise would be delivered. The population is guaranteed a full set of civil liberties to criticize the government, defend their own rights, and stage opposition movements, but denied the most basic political right of electing their government. The pro-democracy camp, which consistently gets 60% of the popular votes in the polls, is a permanent minority in a constitutionally-weak LegCo under an executive-dominant system. The government is facing an increasingly post-materialist young generation, but is still relying on a mostly materialist legitimacy formula. All these contradictions can be at least alleviated by democratic reforms, yet fundamental institutional reforms were arrested by Beijing’s intransigence and opposition of the local business sector. This means the government will face a bigger and bigger gap with society, and finding it increasingly difficult to cope with societal aspirations and demands. From a pessimistic point of view, the first decade after the handover made little progress in democratic institutions – it is a decade of lost opportunities. Moreover, one does not see how in the short run, the priorities of the Central Government can be changed, and how consensus on reform can be engineered among major political actors. From the optimistic side, the last decade all but

Challenged: The Rise of Semi-Authoritarianism (Washington D.C.: Carnegie Endowment for International Peace, 2003). 27 See also Ma Ngok, Political Development in Hong Kong, Conclusion.

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confirms Hong Kong people’s urge for full democracy. It was an important period of cultural change in terms of building consensus for the desirability and necessity of democracy. By 2007, even conservative local figures and Central Government officials acknowledged the need for reform and Hong Kong people’s overwhelming support for democracy. The old system is much de-legitimized by the ills of a non-elected government (as in Tung’s reign), the widespread perception of government-business collusion, and the repeated challenges by the civil society. It is difficult to conceive how the current institutional setup, incongruent as it is with public aspirations, with the level of economic development and other societal conditions, can be tenable for a long time without severely hurting Hong Kong’s development. The last ten years have built a consensus towards the direction of universal suffrage: the question is when and how. The task in the next decade is how to build pact-making mechanisms between various stakeholders to solve the questions of when and how.

2 Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong: Results of a Longitudinal Study* Timothy Ka-ying WONG Shirley Po-san WAN The Chinese University of Hong Kong

Introduction The first decade of the existence of the Hong Kong Special Administrative Region (SAR) has undoubtedly been one of the most turbulent periods in Hong Kong’s recent history. According to the Basic Law, Hong Kong’s mini-constitution, the SAR shall be governed under the principle of “one country, two systems.” Under this arrangement, the socialist system and policies of Mainland China are not to be practised in Hong Kong, and Hong Kong’s pre-handover capitalist system and way of life are to remain unchanged for 50 years.1 The Basic Law also promises a high degree of autonomy to the SAR and gradual and orderly progress towards full democracy.2 With this unique political framework, on the eve of

* The October 2006 survey data reported in this paper is funded by the Research Grants Council of the University Grants Committee (RGC Ref. No.: PolyU5411/05H). 1 See Article 5 of the Basic Law of the Hong Kong SAR of the People’s Republic of China. 2 See Articles 2, 45, and 68 of the Basic Law of the Hong Kong SAR of the People’s Republic of China. 75

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the transition both the local people and international community widely expected that the economic prosperity and social stability characteristic of the last years of the British colony would continue after 1997, despite the outbreak since 1992 of a furious row between the Chinese and British governments over democratic reform in the colony, which had created some divisions in the local society.3 However, soon after the transition, the SAR unexpectedly suffered the blows and challenges of a sudden economic recession triggered by the Asian financial crisis and the bursting of the local real estate bubble. In 1998, Hong Kong’s real-term gross domestic product (GDP) per capita plunged by 7.8%, a phenomenon unseen in Hong Kong for many decades.4 The prolonged recession was also accompanied by massive layoffs and retrenchments, which resulted in a record unemployment rate of 8.7% recorded in May–July 2003,5 as well as an unprecedented acute poverty problem.6 At the same time, the new SAR government headed by Chief Executive Tung Chee-hwa continued to face rising public discontent over its frequent policy and executive errors and over the political conservatism it shared with Beijing in responding to calls for a faster pace in local democratization and other political issues. 7 The public’s accumulated discontent eventually exploded in a massive demonstration on 1 July 2003, when more than half a million people protested against the SAR government and demanded greater

3 Siu-kai Lau, “Public Attitudes towards the Old and New Regimes,” in Siu-kai Lau et al. (eds.), Indicators of Social Development: Hong Kong 1997 (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, 1999), p. 158. 4 Alvin Y. So, “Social Protests, Legitimacy Crisis, and the Impetus toward Soft Authoritarianism in the Hong Kong SAR,” in Siu-kai Lau (ed.), The First Tung Chee-hwa Administration (Hong Kong: The Chinese University Press, 2002), p. 406. 5 Census and Statistics Department, Hong Kong Monthly Digest of Statistics: February 2004 (Hong Kong: Government Logistics Department, 2004), p. 14. 6 Bauhinia Foundation Research Centre, Review of HK’s Socio-economic Progress: A Quantitative Assessment (Hong Kong: Bauhinia Foundation Research Centre, 2006). 7 Timothy Ka-ying Wong, “The Changing Public Perception of the Chief Executive,” in Siu-kai Lau (ed.), The First Tung Chee-hwa Administration, pp. 375–397.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

democracy. The incident attracted much international attention and strained people’s confidence in the “one country, two systems” arrangement.8 It also heightened Beijing’s sense of political crisis with regard to Hong Kong, prompting it to employ both economic and political measures to stabilize the political situation in the SAR and to appease the people of Hong Kong.9 These measures included permitting a sharp increase in the number of Mainland tourists allowed to visit Hong Kong (the Individual Travel Scheme), introducing the Closer Economic Partnership Arrangement between Hong Kong and the Chinese Mainland (CEPA) to give Hong Kong better access to the China market, and the eventual removal in March 2005 of the unpopular Chief Executive Tung Chee-hwa. As a result of the abovementioned deterioration in the economy, polarization in society, and intensified political confrontations, sharp fluctuations were seen in the attitudes of the citizens of post-colonial Hong Kong towards the new SAR government. Various opinion surveys have shown that the rate of support for the government repeatedly reached dangerous lows.10 Many have thus raised questions concerning the governance and legitimacy of the SAR.11 Some have even felt that the SAR is facing a serious crisis of legitimacy.12 This chapter attempts to examine how Hong Kong citizens have evaluated the SAR’s legitimacy in the past ten years

8 For discussions on the incident, see Joseph Y. S. Cheng (ed.), The July 1 Protest Rally: Interpreting a Historic Event (Hong Kong: City University of Hong Kong Press, 2005). 9 Timothy Ka-ying Wong and Shirley Po-san Wan, “The Implementation of the Principal Officials Accountability System: Efficacy and Impact,” in The July 1 Protest Rally, p. 209. 10 See Michael E. DeGolyer, “Demonstrating Failure: How the Accountability System Failed in Less Than a Year,” in The July 1 Protest Rally, pp. 232–233; Wong and Wan, “The Implementation of the Principal Officials Accountability System,” pp. 190–195. 11 Timothy Ka-ying Wong, “The Legitimacy Problem of the Hong Kong SAR Government: Challenge and Response,” Issues & Studies, Vol. 35, No. 4 (1999), pp. 55–85. 12 Kenneth Ka-lok Chan, “Taking Stock of ‘One Country, Two Systems’,” in Yiu-chung Wong (ed.), “One Country, Two Systems” in Crisis (Lanham: Lexington Books, 2004), p. 36; So, “Social Protests, Legitimacy Crisis, and the Impetus toward Soft Authoritarianism in the Hong Kong SAR,” pp. 403–407.

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and identify the major factors that have shaped such evaluations. Unless otherwise noted, the data used here have been drawn from a longitudinal telephone survey research project conducted semi-annually since April 1998 by the Hong Kong Institute of Asia-Pacific Studies of The Chinese University of Hong Kong.13 By October 2006, 18 surveys had been completed. The analysis in this chapter covers data from all 18 surveys. Since a random sampling method in selecting eligible respondents was employed in all of the surveys, we believe that the views of the respondents basically reflected the views of Hong Kong citizens as a whole.

Legitimacy and Political Support Legitimacy here refers to the people’s support for or approval of the political system in which they live.14 According to political scientist David Easton, such support can be diffuse or specific. The former refers to the people’s general attachment to the political system as a whole and is largely independent of the varying performance or outputs of the system and is relatively enduring. In contrast, the

13 The authors of this chapter are in charge of this project. It is an on-going study, the goal of which is to chart changes in the public’s attitude towards the practice of “one country, two systems” in Hong Kong after the 1997 handover. The sampling for every semi-annual survey involves two steps. First, a fixed set of telephone numbers is randomly selected from the latest Hong Kong Residential Telephone Directory. To cover unlisted and new numbers, we replace the last two digits of the selected telephone numbers with two randomly selected digits within the range of 00–99. Second, after successfully reaching the selected resident, a family member aged 18 or above is selected for an interview in accordance with the last birthday rule. For every valid phone number, a maximum of three contacts at different times is made before the number is classified as “unanswered.” The response rate of each survey has been around 50% and the samples have ranged in size from 800 to 1,000. 14 Theda Skocpol, States and Social Revolutions (Cambridge: Cambridge University Press, 1979), p. 31; Dennis Kavanagh, “Political Culture in Great Britain: The Decline of the Civic Culture,” in Gabriel A. Almond and Sidney Verba (eds.), The Civic Culture Revisited (Newbury Park: Sage Publications, 1989), p. 152; Carlton C. Rodee, Totton J. Anderson, Carl Q. Christol and Thomas H. Greene, Introduction to Political Science (New York: McGraw-Hill, 1983), p. 21.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

latter is contingent on the individual’s perception of the system’s performance and may vary greatly even over short periods of time.15 Specific support is directed at the political parties, their leaders, and the performance of governments. Usually, people offer and withdraw specific support depending on their awareness of the authorities, their ability to associate the satisfaction and dissatisfaction of their needs and demands with the perceived behaviour of the authorities, and the responsibility they attribute to the authorities.16 Scott has analyzed the question of legitimacy in the case of colonial Hong Kong using three criteria proposed by Beetham: legal validity, moral justiciability, and expressed consent. Scott pointed out that the colonial government acquired its legitimacy by output, and that the future regime would likely attempt to construct its rule on a similar basis. 17 Thus, any evaluation of the legitimacy of the Hong Kong SAR should not ignore the concept of “performance legitimacy,” which is based on the expressed consent of the local community regarding the performance of the government. Furthermore, if legitimacy means citizen support for key system values, a consensus on the validity of system structures, and identification with system leadership,18 the measurement of the popular support for the SAR government is undoubtedly an important indicator of legitimacy. In any case, the distinction between diffuse and specific political support is important because it helps us differentiate between general disappointment with a political system and mere loss of support for specific authorities in that system. Logically, disappointment with specific authorities (particularly the government) and a consequent loss of support for them will, if maintained for a sufficiently prolonged period of time, lead to general dissatisfaction with the system, especially when the

15 David Easton, “A Re-assessment of the Concept of Political Support,” British Journal of Political Science, Vol. 5, No. 4 (1975), pp. 437–439. 16 Kavanagh, “Political Culture in Great Britain,” p. 153. 17 Ian Scott, “Legitimacy and Its Discontents: Hong Kong and the Reversion to Chinese Sovereignty,” Asian Journal of Political Science, Vol. 1, No. 1 (1993), p. 75. 18 David P. Conradt, “Changing German Political Culture,” in The Civic Culture Revisited, p. 222.

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government is an undemocratic regime. Hence the distinction may also highlight the possible linkages between the two processes. Recognizing this, it suffices to say that legitimacy is a prerequisite for any government wishing to rule with stability in a modern society. When the legitimacy of a political system in general, or of a government in particular, is seriously questioned or challenged, governments tend not to function properly. Often, the result is social or political disorder.19 In retrospect, Hong Kong’s political system, both before and after the transition from a British colony to a Chinese SAR, has been rather unusual. Before the transition, the colony was basically under the authoritarian rule of the governor, who was appointed by the ruling party in London rather than elected by local people. While the governor was subject to both British law and to all ordinances passed by the Hong Kong Legislative Council (LegCo), he was delegated with ample authority over colonial society. He was both the commander-in-chief of the armed forces and the head of the colonial government. He had the power to sign bills and promulgate laws, and enjoyed the right to refuse his assent to any legislation passed by the LegCo and even to dissolve the LegCo and order fresh elections at any time. Until constitutional changes in 1984 somewhat reduced the governor’s control over the LegCo, he had the power to appoint civil servants to form a majority of the seats on the council, and councillors were bound to follow his instructions on how to vote. All appointments, promotions, transfers, and dismissals of members of the civil service were made by him or in his name. He appointed all judges and magistrates and could pardon any convicted criminal and remit all or part of his or her sentence. In short, in the colonial political system, the governor and his government monopolized most of the political power over colonial society and allowed no other major authorities independent of the government to challenge his rule.20 Hence, the governor and the government he led became the principal political authorities upon

19 Siu-kai Lau, Hong Kong Politics in Transition (Hong Kong: Wide Angle Press Ltd., 1993), pp. 383–384. 20 Timothy Ka-ying Wong, “Constraints on Tung Chee-hwa’s Power and His Governance of Hong Kong,” Issues & Studies, Vol. 33, No. 8 (1997), p. 28.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

which the diffuse support of the Hong Kong people was focused. If the colonial government led by the governor failed to bring about social order and economic prosperity, not only would specific support for the government rapidly decline, but the diffuse support for the entire colonial political system would also be jeopardized, as attested to by the large-scale anti-British riots that broke out in the 1960s.21 The SAR political system inherited many of the attributes of its colonial predecessor. Chosen by a selection committee of a few hundred members in Hong Kong who were largely pro-China in orientation and then formally appointed by the Chinese government in Beijing, the Chief Executive of the SAR derives his power base mainly from Beijing rather than from Hong Kong society. According to the Basic Law, the Chief Executive holds a pivotal position in the political system. He is vested with great constitutional powers similar to those previously enjoyed by the colonial governor. He is the head of the SAR government and has the power to sign bills, nominate major officials, appoint judges of the courts at all levels, and dissolve the LegCo. Such constitutional powers allow the Chief Executive to play a leading role in the administrative, judicial, and legislative arms of the government. This leading role of the Chief Executive is further strengthened by the special constitutional arrangement that only one-third of the LegCo’s members are returned by direct elections of geographical constituencies. The remainder are returned by elections of functional constituencies mainly composed of professional and business elites who are also largely pro-China in political orientation. The limited democracy of the LegCo has also kept the newly emerged popularly based political parties to the margins of the political system.22 One major difference between the Chief Executive and the colonial governor seems to be that the Chief Executive no longer serves as the commander-in-chief of the military forces in Hong Kong. However, this is a largely nominal loss of power because,

21 Norman Miners, The Government and Politics of Hong Kong (Hong Kong: Oxford University Press, 1995), pp. 34–35. 22 Wong, “Constraints on Tung Chee-hwa’s Power and His Governance of Hong Kong,” p. 29.

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although the governor was appointed the commander-in-chief, “the organization of the British Forces [was] almost entirely separate from the civil government, and the Commander of British Forces [dealt] directly with the Ministry of Defense in London.” 23 Furthermore, it is important to note that, as mentioned earlier, the Basic Law also stipulates that the Hong Kong SAR is supposed to operate under the principles of “one country, two systems” and “Hong Kong people ruling Hong Kong,” the Chinese government is not to intervene in Hong Kong’s domestic affairs. Any such direct intervention might damage public confidence in, and even cause a breakdown of, the political system in Hong Kong. This condition contrasts with the situation that prevailed under colonial rule, when Britain directly controlled and governed the colony. Thus, in attempting to understand the overall legitimacy of the SAR in the eyes of Hong Kong people, it is also crucial to assess their political support for “one country, two systems” in Hong Kong after the handover. Proceeding in accordance with the above conceptual delineation, we also measure Hong Kong citizens’ evaluations of the SAR’s legitimacy in terms of specific and diffuse political support. On specific political support, we first look at how satisfied people are with the SAR government’s performance in various policy areas as well as with its overall performance. Then, the performances of the related political authorities such as the civil service, the Chief Executive, the Executive Council, the LegCo, and the judicial system are also examined, as these authorities represent the key powers in the SAR’s political system. While the LegCo and the judicial system are theoretically supposed to be separate from the SAR government in terms of operations, in practice since the SAR government is still not a democratic regime, many people may regard these two authorities as an extension or part of the executive branch of the government. Their inclusion in our list for observation may help us to later clarify whether their performance will affect the legitimacy of the SAR government. In the end, we also look at people’s trust in the government in order to determine the relationship between

23 Miners, The Government and Politics of Hong Kong, p. 68.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

“performance legitimacy” and the more emotionally charged concept of political trust. On diffuse political support, our question is straightforward: Do Hong Kong citizens think that the larger political framework of “one country, two systems” has truly been implemented following the handover?

Satisfaction with the SAR Government’s Performance in Various Policy Areas On people’s satisfaction with the SAR government’s performance in various policy areas, our findings are presented in Table 1 and Figure 1 on ten selected indicators, nine on the performance in various specific policy areas and one on overall performance. The nine specific indicators are: housing, educational development, welfare, economic development, democratic development, Mainland–Hong Kong relations, Hong Kong–Taiwan relations, freedom of speech and assembly, and anti-corruption efforts. These nine specific indicators are quite inclusive, covering almost all of the major policy areas of the SAR government as a local regime under Chinese sovereignty. Obviously, the movements of these ten ratings have not been completely identical. Several observations can be made from Table 1 and Figure 1. To begin with, the public’s level of satisfaction with the government’s economic performance was very low in April 1998, and indeed was the lowest of the ten performance ratings, with only 19.3% of respondents indicating that they were satisfied. This compares with a satisfaction rating for housing of 24%, educational development 26.8%, welfare 26.5%, democratic development 31%, Mainland–Hong Kong relations 47.2%, Hong Kong–Taiwan relations 29.6%, freedom of speech and assembly 42%, anti-corruption efforts 78.3%, and overall performance 32.1%. This more or less reflected the fact that by April 1998, the rapid economic deterioration in Hong Kong triggered by the Asian financial crisis was putting heavy pressure on the SAR government. After April 1998, there was a general decline in the nine ratings with the exception of the anti-corruption rating, despite some rebounds at various points in time. All of the nine ratings hit

83

84

The Hong Kong Special Administrative Region in Its First Decade

historical lows between October 2000 and April 2004, a period when Hong Kong was deeply troubled by the Chung Ting-yiu incident,24 the introduction of the accountability system of principal officials that failed to meet public expectations,25 an outbreak of Severe Acute Respiratory Syndrome (SARS),26 the introduction of controversial legislation on a new national security law,27 the ruling out by Beijing in April 2004 of the possibility of universal suffrage in 2007 and 2008, and other matters. In October 2000, a month after the conclusion of the Chung Ting-yiu incident, which was

24 In July 2000, Robert Chung Ting-yiu, a prominent pollster at the University of Hong Kong, wrote an article published in two local newspapers alleging that the Chief Executive had pressured him via a third channel to stop conducting polls on his popularity. According to Chung’s polls, Tung’s popularity had declined continuously since 1998. It was later revealed that Tung’s senior special assistant, Andrew Lo, raised some concerns over Chung’s polling activities at a meeting with the University’s vice-chancellor, Cheng Yiu-chung. The Chief Executive, Lo, and Cheng all denied the allegations. The incident captured both local and international attention, and was seen as a threat to academic freedom in Hong Kong. Under enormous pressure, an independent commission was set up to investigate the allegations. Contrary to the denials of the respective parties, the commission finally concluded that Chung’s allegations were credible, while Lo and Cheng had not been truthful in their testimonies. Faced with the commission’s unfavourable conclusion, Cheng reluctantly resigned as vice-chancellor, but Lo, defended by the Chief Executive as fully reliable and trustworthy, remained in his post. 25 On the problems with the system, see Wong and Wan, “The Implementation of the Principal Officials Accountability System,” pp. 185–219. 26 The epidemic first broke out in a local hospital in early March 2003 and spread to the entire community in less than two months, causing thousands of people to be hospitalized and about 300 deaths. The public condemned the government for its slowness and incompetence in dealing with the disease. 27 In September 2002 and February 2003, the SAR government consecutively published two documents entitled “Proposals to Implement Article 23 of the Basic Law” and the “National Security (Legislative Provisions) Bill” as a prelude to passing a law on national security. Because the bill would curtail civil liberties in Hong Kong, kindling long-standing fears of communist oppression, opposition from every sector of society grew ever more vehement following debate on the bill and its submission to the legislature. In the face of rising opposition, the government not only did not soften its position, but also accused opponents of the bill as being unpatriotic and lacking faith in the government. This was arguably the most important reason why over 500,000 people took to the streets on 1 July 2003.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

widely viewed as a threat to local academic freedom, only 22.9% of the respondents were satisfied with the government’s performance in safeguarding local freedom of speech and assembly. In November 2001, the level of satisfaction with the government’s performance in the areas of housing and welfare dropped to only 8% and 13.9%, respectively. In October 2002, only 7.1% of the respondents were satisfied with the economic performance of the SAR government. In April 2003, those satisfied with the SAR government’s handling of Mainland–Hong Kong relations and Hong Kong–Taiwan relations and with its overall performance shrank to 25.1%, 19.3%, and 11.3%, respectively. In April 2004, only 10.9% and 15.9%, respectively, of respondents were satisfied with the government’s performance in educational development and democratic development. When the levels of public satisfaction in all of these important areas of governance shrank one after the other to miserable percentages, many local analysts concluded that the SAR government was experiencing a crisis of legitimacy. However, in the above nine areas public opinion has since rebounded rapidly from historical lows. In the past two years, Beijing greatly increased its economic support for Hong Kong and even decisively appointed Donald Tsang, a colonial bureaucrat with proven administrative ability and personal charisma, to replace the unpopular Tung Chee-hwa as the new Chief Executive. In fact, as can be seen in Table 1 and Figure 1, following Donald Tsang’s assumption of the office of Chief Executive, all nine ratings jumped significantly in either April or October 2005 compared to October 2004. As of April 2006, in terms of mean values, eight out of the nine ratings were higher than in April 1998. Quite a few of the ratings were even at record highs, including those on housing, economic development, democratic development, performance in Mainland–Hong Kong relations, performance in safeguarding freedom of speech and assembly, and overall performance. Judging by the high level of satisfaction (48.3% satisfied versus 11.6% dissatisfied) in overall performance in April 2006 alone, it can be said that if the government did indeed experience a crisis of legitimacy from 2000 to 2004, this crisis did not last very long and had largely subsided by 2006 under Beijing’s economic and political intervention.

85

86

The Hong Kong Special Administrative Region in Its First Decade Table 1 Satisfaction with the SAR Government’s Performance in Various Policy Areas (%)

Housing

Educational development

Welfare

Economic development

Democratic development

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

1998/04

47.7

28.3 24.0

44.5

28.7 26.8

39.2

34.3 26.5

53.2

27.6 19.3

35.1

33.9 31.0

1998/10

60.4

23.9 15.8

45.7

28.7 25.5

49.2

30.6 20.2

56.7

26.7 16.6

33.5

34.8 31.7

1999/04

43.6

33.2 23.2

40.2

28.3 31.5

37.3

33.5 29.2

36.2

34.8 29.0

31.6

35.0 33.3

1999/11

51.5

34.2 14.3

47.4

29.8 22.7

46.7

32.8 20.5

42.1

29.6 28.4

36.4

37.0 26.6

2000/04

48.6

38.7 12.7

49.8

31.6 18.6

46.5

36.1 17.4

39.3

39.4 21.2

33.0

41.4 25.6

2000/10

55.2

32.5 12.3

45.8

30.8 23.4

49.1

33.8 17.1

44.1

36.1 19.8

39.9

39.9 20.2

2001/04

54.4

32.9 12.7

52.1

30.5 17.3

46.2

35.6 18.1

47.4

35.1 17.6

32.7

39.4 27.8

2001/11

63.9

28.1

8.0

60.6

23.1 16.3

56.1

30.1 13.9

63.5

27.1

9.4

37.9

37.2 24.9

2002/04

54.9

33.5 11.7

56.4

26.0 17.5

45.2

33.0 21.9

54.6

33.2 12.2

29.8

40.9 29.4

2002/10

64.1

26.7

9.2

60.3

24.1 15.6

52.4

31.4 16.2

68.5

24.3

7.1

38.4

39.4 22.2

2003/04

64.2

26.6

9.2

52.2

32.5 15.3

58.7

26.3 15.0

69.2

23.0

7.8

41.9

37.2 20.9

2003/10

61.3

30.0

8.7

62.1

26.7 11.2

57.8

27.1 15.1

51.8

32.9 15.2

51.1

28.0 20.9

2004/04

63.0

27.9

9.1

65.6

23.4 10.9

49.9

35.1 14.9

42.0

37.8 20.1

52.3

31.9 15.9

2004/10

45.4

41.8 12.8

57.6

29.4 13.0

52.4

33.1 14.5

30.6

37.9 31.5

42.9

35.4 21.6

2005/04

38.2

48.3 13.5

50.9

31.1 17.9

38.2

37.0 24.8

17.6

41.6 40.8

35.0

35.4 29.7

2005/10

25.9

55.3 18.8

48.0

32.4 19.6

36.2

39.9 23.9

15.7

42.6 41.7

27.4

40.1 32.4

2006/04

24.8

54.9 20.2

53.2

30.8 16.0

32.6

42.9 24.6

17.6

35.8 46.6

27.7

40.1 32.2

2006/10

36.3

47.1 16.6

50.9

31.6 17.5

36.6

41.4 22.0

24.1

42.5 33.5

29.5

42.3 28.2

It is noteworthy that the only rating that remained high, and indeed was the highest of all of the ratings over the entire period, was that of anti-corruption efforts. In addition, its movements were wholly unaffected by those of the other nine ratings. This likely reflects the public’s view that, despite the various economic and political challenges the SAR government has faced following the transition, it has basically managed to keep itself as clean as its colonial predecessor. Finally, ratings on many of the ten areas of governance again fell significantly in October 2006, even though the local economy

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong Table 1 (Continued) Satisfaction with the SAR Government’s Performance in Various Policy Areas (%) Mainland-HK relations

HK-Taiwan relations

Freedom of speech and assembly

Anti-corruption efforts

Overall performance

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

Dissatisfied So-so Satisfied

1998/04 19.2

33.6 47.2

32.4

38.0 29.6

30.7

27.3 42.0

6.1

15.7 78.3

26.7

41.2 32.1

1998/10 17.3

33.7 49.0

27.8

41.2 31.0

29.2

25.9 44.9

3.3

15.6 81.2

34.0

40.7 25.3

1999/04 24.6

33.5 41.9

26.0

42.2 31.8

21.7

31.5 46.7

4.1

14.6 81.3

20.6

45.8 33.6

1999/11 34.2

33.7 32.1

35.8

40.4 23.8

31.4

32.1 36.5

4.8

15.1 80.0

34.3

39.2 26.5

2000/04 33.1

41.0 25.9

34.6

44.5 21.0

29.9

35.5 34.6

3.6

18.3 78.1

32.9

43.0 24.0

2000/10 32.8

39.8 27.5

30.2

47.8 22.0

50.8

26.4 22.9

3.1

16.1 80.8

39.0

41.3 19.7

2001/04 27.4

42.2 30.4

28.8

45.8 25.4

33.5

34.5 32.0

3.5

16.3 80.2

33.7

42.0 24.3

2001/11 27.6

42.1 30.3

28.0

47.3 24.7

33.3

32.5 34.2

2.7

16.3 81.0

48.1

38.4 13.5

2002/04 23.4

35.8 40.8

26.4

48.8 24.8

30.5

30.8 38.7

2.8

13.0 84.1

37.7

40.3 22.0

2002/10 28.5

38.5 33.0

25.7

54.7 19.6

43.8

30.0 26.2

2.9

16.9 80.2

48.1

36.1 15.8

2003/04 37.5

37.5 25.1

28.6

52.1 19.3

39.3

32.1 28.6

4.2

17.5 78.3

59.6

29.1 11.3

2003/10 21.6

35.6 42.8

29.1

48.9 22.0

43.9

26.0 30.1

5.9

23.4 70.7

54.8

32.8 12.3

2004/04 34.1

36.0 29.8

27.9

51.8 20.3

44.0

28.7 27.3

3.3

20.8 75.9

51.5

34.3 14.2

2004/10 21.1

34.8 44.1

27.4

51.2 21.3

31.7

34.8 33.5

8.6

23.9 67.5

40.1

40.0 20.0

2005/04 23.3

35.6 41.1

30.0

46.5 23.5

25.8

31.9 42.3

4.8

21.3 73.9

25.4

44.5 30.1

2005/10 12.6

32.9 54.5

24.5

51.6 23.9

22.0

36.1 41.9

4.9

20.2 74.9

10.9

47.0 42.2

2006/04 10.7

34.6 54.7

21.4

52.5 26.0

15.8

30.1 54.2

4.5

19.2 76.3

11.6

40.2 48.3

2006/10 13.7

38.5 47.8

20.4

54.5 25.1

17.4

29.7 52.9

3.8

20.5 75.7

14.0

49.0 37.0

was still growing rapidly.28 These ratings include those on housing, economic development, democratic development, Mainland–Hong Kong relations, and overall performance. Taking the rating on overall performance as an example, those who expressed satisfaction dropped to 37% from 48.3% half a year ago. Local analysts and politicians attributed the phenomenon to the failure of the new

28 The GDP growth rate in the third quarter of 2006 was 6.8%, higher than the second quarter’s 5.5%. See Census and Statistics Department, Hong Kong Monthly Digest of Statistics: December 2006 (Hong Kong: Government Logistics Department, 2006), p. 226.

87

Mean

1999/11

1999/04

1998/10

Housing Economic development HK-Taiwan relations Overall performance

2000/10

2000/04

1998/04

Note: 1 = dissatisfied; 2 = so-so; 3 = satisfied

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

Figure 1: Satisfaction with the SAR Government’s Performance in Various Policy Areas

2003/04

2002/10

2002/04

2001/11

Educational development Democratic development Freedom of speech and assembly

2005/10 2005/04

2004/10

Welfare Mainland-HK relations Anti-corruption efforts

2006/10 2006/04 2004/04

2003/10

2001/04

88 The Hong Kong Special Administrative Region in Its First Decade

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

Chief Executive Donald Tsang to put forward effective measures to tackle the problems of social polarization and poverty in his second policy address, thus causing disappointment among the grassroots.29 Whether or not this is true, a drop of more than ten percentage points in the overall performance rating in half a year is significant, reflecting that political support for the SAR government is still quite volatile.

Satisfaction with the Performance of the Related Political Authorities As can be seen in Table 2 and Figure 2, the ratings on the performances of the five selected political authorities differ from each other as well as from the above ratings of the SAR government’s performance in a number of ways. First of all, despite some minor to modest fluctuations, a relatively high level of satisfaction can be seen in the ratings for the civil service and judicial system over the entire period. Those who expressed satisfaction consistently outnumbered those who expressed dissatisfaction by very large margins. This may mean that while the SAR government was experiencing a deepening crisis of legitimacy soon after the transition, the people felt that members of the civil service and judiciary largely maintained their professionalism. As a result, their performances continued to be rated by the general public more positively than those of other political authorities. In contrast, the ratings for the LegCo and Executive Council were disappointing, with satisfaction rates largely at below the 25% level. This is not at all surprising, because the members of the Executive Council were either unfamiliar to the general public or very conservative in their political stance, while the LegCo was fragmented and plagued by infighting, its members too distracted to carry out their proper role of checking and monitoring the government.30

29 See Apple Daily, 26 October 2006, p. A08. 30 Siu-kai Lau, “Tung Chee-hwa’s Governing Strategy: The Shortfall in Politics,” in The First Tung Chee-hwa Administration, pp. 1–39.

89

22.8 26.7

24.9

29.8

23.9

21.3

16.6

25.9

19.8

22.1

23.0

22.4

21.1

19.6

16.3

14.6

15.7

16.3

1998/04 1998/10

1999/04

1999/11

2000/04

2000/10

2001/04

2001/11

2002/04

2002/10

2003/04

2003/10

2004/04

2004/10

2005/04

2005/10

2006/04

2006/10

42.3

40.5

42.7

42.8

38.0

43.0

44.2

41.8

40.6

37.3

37.9

43.0

46.5

42.2

42.2

40.2

38.3 37.9

41.4

43.8

42.8

40.9

42.4

35.9

33.3

35.2

37.3

42.9

36.2

40.3

32.3

33.9

28.0

34.9

38.9 35.4

So-so Satisfied

Civil service

Dissatisfied

30.7

30.5

31.7

43.1

32.8

37.4

37.2

36.9

31.7

32.9

34.5

28.0

29.9

30.5

36.8

30.2

49.5 34.1

Dissatisfied

48.2

50.4

48.7

42.1

48.5

47.2

47.0

41.7

48.6

47.6

43.9

50.1

50.7

47.8

42.1

42.1

29.5 39.4

21.2

19.1

19.7

14.8

18.7

15.5

15.8

21.4

19.7

19.5

21.6

21.9

19.4

21.7

21.1

27.7

21.0 26.4

So-so Satisfied

LegCo

27.1

25.1

24.6

35.0

39.7

46.3

46.9

44.9

37.5

34.9

40.6

31.5

41.9

32.1

36.9

31.8

35.1 39.6

Dissatisfied

55.4

55.5

53.8

47.3

46.5

42.7

40.3

40.9

48.3

50.1

44.9

50.5

45.8

49.9

44.0

41.0

43.1 40.7

17.5

19.4

21.5

17.6

13.9

11.0

12.8

14.2

14.2

15.0

14.5

18.0

12.4

17.9

19.2

27.2

21.8 19.7

So-so Satisfied

Executive Council

14.2

14.6

18.2

20.0

20.2

25.9

34.9

28.9

23.5

24.8

28.9

31.6

29.6

22.0

31.1

27.5

20.7 14.9

Dissatisfied

26.1

26.9

31.1

28.8

27.5

30.4

24.7

27.4

30.4

26.8

27.8

30.3

31.0

32.4

25.2

25.1

26.0 26.0

59.7

58.5

50.7

51.3

52.3

43.7

40.4

43.7

46.1

48.5

43.3

38.2

39.4

45.6

43.7

47.4

53.3 59.1

So-so Satisfied

Judicial system

Table 2 Satisfaction with the Performance of the Related Political Authorities (%)

11.8

5.7

3.9

6.0

44.9

60.8

60.0

65.4

50.2

37.0

53.0

36.6

40.2

35.8

39.7

27.5

24.3 36.4

49.5

35.7

34.3

36.2

39.4

30.3

31.4

26.2

36.4

42.8

34.4

44.1

41.5

44.3

37.8

44.8

43.8 38.6

38.6

58.6

61.8

57.8

15.8

8.9

8.5

8.4

13.4

20.2

12.6

19.3

18.3

19.9

22.5

27.7

31.9 25.0

So-so Satisfied

Chief Executive Dissatisfied

90 The Hong Kong Special Administrative Region in Its First Decade

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong Figure 2: Satisfaction with the Performance of the Related Political Authorities 2.80 2.60 2.40

Mean

2.20 2.00 1.80 1.60 1.40

Civil service

Legislative Council

Judicial system

Chief Executive

2006/10

2006/04

2005/10

2005/04

2004/10

2004/04

2003/10

2003/04

2002/10

2002/04

2001/11

2001/04

2000/10

2000/04

1999/11

1999/04

1998/10

1998/04

1.20

Executive Council

Note: 1 = dissatisfied; 2 = so-so; 3 = satisfied.

The only rating that demonstrated a pattern of movement similar to the ratings on the SAR government’s performance was the rating on the Chief Executive. Initially, in April 1998, the Chief Executive received a modest rating, with a satisfaction rate of 31.9% (versus 24.3% for dissatisfaction). The rating then declined and hit historical lows from April 2003 to April 2004. It then rose rapidly again. In October 2005, the public’s level of satisfaction with the Chief Executive reached a record high of 61.8%, but fell back to 38.6% a year later, probably for the same reason that caused ratings in the same survey on the SAR government’s performance to again decline, as pointed out earlier.

Trust in the SAR Government The pattern of movement in the rating on trust is both similar to and different from the ratings on the performance of the Chief Executive and the SAR government in several ways. The most important

91

The Hong Kong Special Administrative Region in Its First Decade Table 3: Trust in the SAR Government (%) Not trusted

So-so

Trusted

1998/04

16.2

23.5

60.3

1998/10

19.9

26.8

53.3

1999/04

15.0

28.1

56.9

1999/11

22.9

30.7

46.4

2000/04

20.0

32.3

47.8

2000/10

26.8

33.5

39.7

2001/04

23.6

31.4

45.0

2001/11

30.2

33.1

36.7

2002/04

23.9

31.0

45.1

2002/10

31.4

32.5

36.1

2003/04

43.7

29.4

26.9

2003/10

39.1

31.2

29.7

2004/04

36.8

32.8

30.3

2004/10

26.0

32.3

41.6

2005/04

16.7

30.4

52.9

2005/10

8.7

32.7

58.6

2006/04

9.2

25.2

65.5

2006/10

10.0

29.9

60.1

Figure 3: Trust in the SAR Government 3.00 2.50 Mean

2.00 1.50

2006/04

2005/04

2004/04

2003/04

2002/04

2001/04

2000/04

1999/04

1.00 1998/04

92

Note: 1 = not trusted; 2 = so-so; 3 = trusted.

difference is that, in contrast to the relatively low levels of satisfaction in the performance of the Chief Executive and the SAR government recorded in April 1998, Table 3 and Figure 3 show that people’s trust in the SAR government was very high at the beginning, with 60.3% of respondents regarding the SAR government as trustworthy. The discrepancy revealed that the poor performance of the SAR government headed by Chief Executive Tung Chee-hwa

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

had not caused the Hong Kong people to question its integrity and ability, at least in the first year after the handover. Nonetheless, as with the performance ratings of the SAR government and the Chief Executive, the rating on trust began to decline in 1999 and hit a record low in April 2003. In that month, only 26.9% of the respondents thought that the government was trustworthy, whereas about 43.7% thought it was not trustworthy. As political trust is a reflection of feelings about the integrity of a government and is the cornerstone of governmental legitimacy, the low level of trust that lingered from April 2003 to April 2004 certainly confirms that the SAR government was experiencing a crisis of legitimacy during that time. Again, as with the ratings on the government’s performance, the rating on trust climbed back rapidly after April 2004, especially under Donald Tsang as Chief Executive. In April 2006, those who regarded the SAR government as trustworthy rose to a record high of 65.5%, indicating that the crisis of legitimacy that had recently plagued the SAR government had largely been diffused. Half a year later, the public’s level of trust in the government dropped five percentage points to 60.1%, but this was still a very high level, almost identical with that of April 1998. In other words, in comparison with most of the performance ratings of the SAR government and the Chief Executive, the rating on trust was less volatile, at least as indicated in our last survey.

Evaluation of the Practice of “One Country, Two Systems” In the area of diffuse political support, our findings on the respondents’ evaluations of the practice of “one country, two systems” are summarized in Table 4 and Figure 4. Again, similarities and differences can be observed in the ratings on governmental performance and trust. First, in the first two years following the handover, citizens’ evaluations of the practice of “one country, two systems” remained quite positive. No big fall in confidence was observed; in contrast to the findings on the other indicators. In fact,

93

The Hong Kong Special Administrative Region in Its First Decade Table 4: Evaluation of the Practice of “One Country, Two Systems” (%) Not successfully implemented

Half-half

Successfully implemented

1998/04

16.2

31.4

52.3

1998/10

19.6

23.7

56.7

1999/04

17.2

31.0

51.7

1999/11

26.5

29.8

43.7

2000/04

21.4

32.0

46.6

2000/10

28.0

38.6

33.4

2001/04

23.0

41.9

35.1

2001/11

24.7

37.3

37.9

2002/04

22.9

36.5

40.6

2002/10

25.1

41.7

33.2

2003/04

32.6

34.5

32.9

2003/10

28.9

39.7

31.4

2004/04

35.9

42.9

21.2

2004/10

28.1

44.4

27.5

2005/04

26.8

40.0

33.3

2005/10

22.7

43.6

33.7

2006/04

18.0

41.9

40.1

2006/10

18.0

44.1

37.9

Figure 4: Evaluation of the Practice of “One Country, Two Systems” 2.60 2.40 2.20 Mean

2.00 1.80 1.60 2006/10

2006/04

2005/10

2005/04

2004/10

2004/04

2003/10

2003/04

2002/10

2002/04

2001/11

2001/04

2000/10

2000/04

1999/11

1999/04

1998/10

1.40 1998/04

94

Note: 1 = not successfully implemented; 2 = half-half; 3 = successfully implemented.

before November 1999, over 50% of respondents felt that the “one country, two systems” policy was being successfully implemented, while less than 20% thought otherwise. The figures show that the problems of economic deterioration and government performance

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

that emerged beginning in early 1998 had little effect as yet on people’s evaluations of the practice of “one country, two systems.” However, people’s positive rating on the issue fell gradually after April 1999, as the economic crisis in Hong Kong deepened in the aftermath of the Asian financial crisis, and after the SAR government for the first time asked the Standing Committee of the National People’s Congress to interpret certain provisions of the Basic Law in accordance with the true legislative intent of the provisions concerning the right of abode in Hong Kong.31 The rating reached a low in October 2000 then slowly rose again. But it fell again after April 2002 and hit a new low in April 2004 when Beijing unilaterally ruled out the possibility of universal suffrage in the 2007 Chief Executive election and the 2008 LegCo elections. Since then, there has been a turnaround in the rating. As of April 2006, 40.1% of the respondents thought that the “one country, two systems” policy was being successfully implemented – still significantly lower than the peaks recorded between April 1998 and April 1999, but almost double the historical low of April 2004. Besides, if we look

31 On 29 January 1999, the Court of Final Appeal ruled that children born in the Mainland of a Hong Kong permanent resident, whether legitimate or not, had the right of abode in Hong Kong, irrespective of the parent’s length of residence in the territory. It also ruled that such children did not need to have a Certificate of Entitlement affixed to their one-way permit when they sought to enter Hong Kong. The SAR government was upset by the ruling and warned on 28 April 1999 that, according to a government survey, at least 1.67 million immigrants would flood into Hong Kong over the next 10 to 13 years if the ruling of the Court of Final Appeal were to be implemented. This became the background of the SAR government’s request that the Standing Committee of the National People’s Congress interpret the related provisions of the Basic Law. The Standing Committee later accepted the SAR government’s request. On 26 June 1999, it issued its interpretation, which overturned the ruling of the Court of Final Appeal, declaring that only about 170,000 Mainlanders whose parents were already Hong Kong permanent residents when they were born were eligible for the right of abode in Hong Kong. During the process, the SAR government was severely criticized by local scholars, human rights activists, and lawyers for exaggerating the number of eligible immigrants, and for undermining the rule of law in Hong Kong by bringing the matter to the Standing Committee. To protest the interpretation of the Standing Committee, on 30 June 1999 more than 600 lawyers dressed in black and marched silently from the High Court to the Court of Final Appeal.

95

96

The Hong Kong Special Administrative Region in Its First Decade

at the movement of the rating shown in Figure 4, we see that almost all of the mean values of the rating in the 18 surveys were above the mid-point of 2, meaning that despite the fluctuations mentioned above, the Hong Kong citizens gave a relatively positive rating of their experience with “one country, two systems” in the nine years following the handover.

Major Factors Affecting the SAR’s Legitimacy Given the above findings on the people’s evaluations of the performance outputs of the SAR government and the related authorities as well as the implementation of “one country, two systems,” our question now is: What were the major factors that shaped people’s evaluations of the SAR’s legitimacy? Did the weightings of importance of these factors change over time? We employ a multivariate analysis to answer these questions. The main purpose of a multivariate analysis is to examine the relative impact of each independent variable on the dependent variable by simultaneously controlling the other independent variables. Our multivariate analysis is based on ordinary least squares (OLS) regression. To this end, three regression models are constructed: one on the satisfaction with the SAR government’s overall performance, one on the trust in the government, and one on the implementation of the “one country, two systems” policy. The independent variables for the first two models are the ratings on the SAR government’s performance in various specific policy areas and the performance of the related political authorities. For the third model, the additional independent variables of the government’s overall performance and trust in the government plus Beijing’s Hong Kong policy are added. Beijing’s Hong Kong policy is included in the third model because China forms the basis of the “one country” under which Hong Kong’s system is subsumed. Any change in China’s Hong Kong policy would surely have an impact on self rule in the SAR, as we have pointed out all along in this chapter. In addition, four socio-demographic variables are added in the three models: sex, age, education, and identity. We exclude personal income from our

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

models because in every survey over one-third of the respondents indicated that they did not have an income.32 If we were to include income in the three models, the result would be a large number of missing cases in the computation of the regression statistics. Identity is included because previous studies showed that compared to those who identified themselves as “Hongkongese,” those who identified themselves as Chinese were more positive about the practice of “one country, two systems.” 33 We want to verify the argument here. For simplicity, we do not analyze all 18 surveys, but select only six for the analysis, including the five conducted in April in alternate years from 1998 to 2006 plus the last one conducted in October 2006. The results of the regression analysis for the three models are reported in Table 5, Table 6, and Table 7. Table 5 shows that in all of the six selected surveys, the respondents’ assessment of the SAR government’s overall performance was not significantly affected by their views of the SAR government’s performance in the areas of Hong Kong–Taiwan relations and freedom of speech and assembly, and by the performance of the LegCo, along with the variables sex and identity. The variables that had a significant effect on the dependent variable in one of the six surveys were the SAR government’s performance in anti-corruption efforts (2000), the performance of the judicial system (2004), and age (April 2006). Two variables significantly affected the dependent variables in two surveys: the performance of the Executive Council (2004, October 2006) and education (2002, April 2006). Five variables had a significant effect on the dependent variable in three surveys: the SAR government’s performance in housing (2000, April 2006, October 2006), educational

32 This should not lead us to assume that our samples are biased because our question only measures personal income instead of family income. Those who reported having no income were mainly students, retirees, housewives, and unemployed people. 33 Siu-kai Lau, “Hongkongese or Chinese: The Problem of Identity on the Eve of Resumption of Chinese Sovereignty over Hong Kong” (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, 1997); Timothy Ka-ying Wong, “Civic Awareness and National Identity in Hong Kong: A Survey of Popular Opinion,” The Journal of East Asian Affairs, Vol. 12, No. 2 (1998), pp. 452–487.

97

98

The Hong Kong Special Administrative Region in Its First Decade Table 5: Regression on Satisfaction with the Overall Performance of the SAR Government (standardized coefficients) 1998/04 2000/04 2002/04 2004/04 2006/04 2006/10 Housing

0.034

0.147**

0.071

0.049

Educational development

0.142**

0.024

0.132**

0.190*** 0.068

0.000

Welfare

0.116*

0.097*

0.059

0.047

0.053

Economic development

0.128**

0.100*

0.171*** 0.080*

0.175*** 0.107**

Democratic development

0.165**

0.121*

0.015

0.124**

0.224*** 0.203***

Mainland-HK relations 0.117*

0.105*

-0.037

0.041

0.058

HK-Taiwan relations

0.088

0.050

0.040

0.031

-0.015

0.061

Freedom of speech and assembly

-0.006

0.080

0.080

0.033

0.009

-0.013

Anti-corruption efforts

0.008

0.079*

-0.014

0.046

-0.002

0.062

Civil service

0.090

0.051

0.129*** 0.044

LegCo

-0.050

0.104**

0.086*

0.145***

0.112**

0.128*** 0.079*

-0.013

0.069

0.068

Executive Council

0.089

-0.038

0.060

0.096*

-0.017 0.001

-0.017 0.128**

Judicial system

0.033

0.004

0.046

0.103**

0.040

0.047

Chief Executive

0.153**

0.279*** 0.410*** 0.315*** 0.342*** 0.246***

Sex

0.028

-0.063

-0.018

0.055

0.008

-0.056

Age

-0.006

-0.019

0.001

0.020

0.087*

-0.040

Education

0.022

-0.051

0.107** -0.062

Identity

0.085

-0.019

0.020

0.000

-0.008

0.027

R

0.658

0.717

0.767

0.772

0.762

0.752

Adjusted R square

0.401

0.491

0.568

0.579

0.563

0.548

F

0.092** -0.054

13.714*** 21.677*** 30.093*** 35.548*** 34.469*** 31.736*** * p < .05, ** p < .01, *** p < .001. Notes: Sex: 0 = female; 1 = male. Age: chronological age. Education: 1 = no schooling/kindergarten; 2 = primary; 3 = junior secondary; 4 = senior secondary; 5 = tertiary. Identity: 0 = Hongkongese; 1 = Chinese.

development (1998, 2002, 2004), welfare (1998, 2000, April 2006) and Mainland–Hong Kong relations (1998, 2000, October 2006), and the performance of the civil service (2002, April 2006, October 2006). The SAR government’s performance in democratic

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

development had a significant effect on the dependent variable in five surveys (1998, 2000, 2004, April 2006, October 2006), while two variables showed a similar relationship in all six surveys: the SAR government’s economic performance and the performance of the Chief Executive. The above findings reveal several important points. First, the SAR government’s performance in economic development and democratic development and the performance of the Chief Executive appear to be most powerful in shaping the Hong Kong people’s assessment of the SAR government’s overall performance. This is because these three variables not only had a significant effect on the dependent variable in at least five of the six selected surveys, but also had larger partial coefficients, many well over 0.2. Second, among these three variables, the performance of the Chief Executive should be regarded as the most powerful, since its partial coefficient was the largest in five of the six surveys (except for 1998). Third, as the SAR government’s performance in economic development is one of the three most powerful variables in the model and had a significant impact on the dependent variable in all six selected surveys, this confirms the general wisdom that economic development is an important source of legitimacy for any polity. Fourth, since the SAR government’s performance in democratic development is also one of the three most powerful variables in the model and its partial coefficients were all very impressive in five of the six selected surveys (ranging from 0.121 to 0.224), it is arguable that if the SAR government could step up the pace of democratic development in Hong Kong, this would certainly strengthen its political support and legitimacy. Fifth, given the finding that all four socio-demographic variables exhibited relatively small or even no significant effects on the dependent variable, we may properly say that, for the most part, the people’s assessment of the SAR government’s overall performance largely transcend gender, age, class, and identity. Finally, the values of the adjusted R square of the model for the six surveys, as listed in the second-last row of Table 5, ranged from 0.401 to 0.579, meaning that our model can account for almost two-fifths to three-fifths of the variance in the Hong Kong people’s evaluation of the SAR government’s overall performance. This result is indeed impressive.

99

100

The Hong Kong Special Administrative Region in Its First Decade Table 6 Regression on Trust in the SAR Government (standardized coefficients) 1998/04 2000/04 2002/04 2004/04 2006/04 2006/10 Housing

0.097

0.025

0.093*

0.075

0.050

0.022

Educational development

0.103*

-0.007

0.002

0.052

0.031

0.001

Welfare

-0.004

0.125*

0.005

0.021

0.074

-0.027

Economic development

0.091

0.045

0.147**

0.098*

0.099*

0.075

Democratic development

0.118*

0.064

0.104*

0.081

0.099*

0.082

Mainland-HK relations 0.074

0.055

0.070

0.099*

0.127**

0.199***

HK-Taiwan relations

-0.005

0.018

0.036

Freedom of speech and assembly

0.044

-0.006

0.016

Anti-corruption efforts -0.079

0.075

Civil service

0.044

0.092*

-0.099

0.009

LegCo

-0.046

0.069

0.095*

0.062

0.062

0.071

0.007

-0.006

0.043

0.052

0.029

-0.019

-0.035 0.130**

0.108**

0.016

-0.092*

0.032

0.057

0.144*

Judicial system

0.214*** 0.240*** 0.188*** 0.229*** 0.151*** 0.242*** 0.114*

0.106*

0.113**

Executive Council Chief Executive

-0.030

-0.017

0.211*** 0.278*** 0.201*** 0.268*** 0.200***

Sex

-0.095*

-0.094*

-0.065

0.017

-0.002

-0.026

Age

-0.003

-0.035

0.003

-0.017

-0.001

-0.080*

Education

0.009

0.011

0.081

0.009

0.059

-0.011

Identity

0.136**

0.048

0.069

0.033

0.077*

0.078*

R

0.579

0.620

0.708

0.702

0.660

0.680

Adjusted R square

0.298

0.354

0.478

0.472

0.413

0.440

F

8.865*** 12.568*** 21.269*** 23.327*** 19.115*** 20.821*** * p < .05, ** p < .01, *** p < .001. Notes: Sex: 0 = female; 1 = male. Age: chronological age. Education: 1 = no schooling/kindergarten; 2 = primary; 3 = junior secondary; 4 = senior secondary; 5 = tertiary. Identity: 0 = Hongkongese; 1 = Chinese.

With regard to the trust model, the findings are somewhat different from those of the overall performance model discussed above. Table 6 indicates that the following three indicators had no significant relationship with the dependent variable in all of the six

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

selected surveys: the SAR government’s performance in Hong Kong–Taiwan relations and anti-corruption efforts, plus the socio-demographic variable of education. Six indicators had a significant effect on the dependent variable in one of the six surveys: the SAR government’s performance in housing (2002), educational development (1998), welfare (2000), and freedom of speech and assembly (2004), the performance of the LegCo (October 2006),34 and age (October 2006). Sex was the only variable that had a significant relationship with the dependent variable in two surveys (1998, 2000), while those variables that had a similar relationship in three surveys included the SAR government’s performance in economic development (2002, 2004, April 2006), democratic development (1998, 2002, April 2006), and Mainland–Hong Kong relations (2004, April 2006, October 2006), the performance of the civil service (2000, April 2006, October 2006), the performance of the Executive Council (1998, 2002, 2004), and identity (1998, April 2006, October 2006). Finally, both the performance of the judicial system and the performance of the Chief Executive had a significant effect on the dependent variable in all six surveys. The above findings demonstrate that the performance of the judicial system and the performance of the Chief Executive are the two most powerful variables in shaping the way Hong Kong people assess the SAR government’s trustworthiness because they had a significant relationship with the dependent variable in all six surveys and their partial coefficients were all relatively large (ranging from 0.114 to 0.278). The other variables are much less important and less stable as none of them had a significant effect on the dependent variable in more than three of the six selected surveys. Moreover, the values of the adjusted R square of the model for the six surveys ranged from 0.298 to 0.478. Such statistics are slightly smaller on

34 It is strange that the performance of the LegCo has a negative relationship with the rating on trust. One possible explanation for this is that the democratic camp is very vocal in the LegCo. This may have caused some people to think that the democratic camp represents the LegCo. However, the democratic camp is also viewed by the SAR government as an opposition force. Thus, those who regard the democratic camp as representing the LegCo may likely see the relationship between the LegCo and the SAR government in a negative light.

101

102

The Hong Kong Special Administrative Region in Its First Decade Table 7: Regression on Evaluation of the Practice of “One Country, Two Systems” (standardized coefficients) 1998/04 2000/04 2002/04 2004/04 2006/04 2006/10 Housing

0.040

-0.012

-0.070

0.041

Educational development

0.005

0.021

0.051

-0.044

Welfare

-0.004 0.085*

0.145** -0.033

0.023

-0.072

0.035

0.014

-0.004

-0.002

Economic development

-0.016

-0.001

0.085

0.029

0.014

0.082

Democratic development

-0.017

0.005

0.198*** 0.066

0.097

0.089*

0.089*

0.083

0.176***

0.038

0.040

0.004

-0.007

0.148**

0.088*

0.031

0.037

Mainland-HK relations HK-Taiwan relations Freedom of speech and assembly

0.165**

0.166** -0.043 -0.020

0.010

0.202*** 0.036

Anti-corruption efforts -0.032

0.028

0.052

-0.007

0.094*

-0.027

Overall performance

0.042

0.064

-0.007

0.032

0.092

0.014

Civil service

-0.126*

-0.084

-0.079

-0.035

-0.108**

0.006

LegCo

-0.031

-0.034

-0.023

-0.040

-0.099*

-0.105*

Executive Council

0.050

0.080

-0.048

0.039

0.004

0.026

Judicial system

0.034

0.138**

0.102*

-0.024

Chief Executive

0.034

0.079

0.037

0.077

Trust in government

0.258*** 0.193*** 0.183**

Beijing’s Hong Kong policy

0.177**

Sex Age

0.137** 0.077

0.240*** 0.157**

0.090* -0.044 0.101

0.254*** 0.318*** 0.202*** 0.225*** 0.191***

-0.036

-0.083

-0.063

-0.058

-0.017

-0.011

-0.014

0.038

0.021

-0.068

-0.019

0.054

Education

-0.039

0.109*

0.106*

0.042

0.034

0.092*

Identity

-0.001

0.018

0.083*

-0.021

0.077*

0.087*

R

0.592

0.640

0.703

0.722

0.660

0.595

Adjusted R square

0.305

0.374

0.466

0.497

0.409

0.322

F

7.721*** 11.621*** 17.162*** 21.864*** 16.002*** 11.156*** * p < .05, ** p < .01, *** p < .001. Notes: Beijing’s Hong Kong policy: 1 = dissatisfied; 2 = so-so; 3 = satisfied. Sex: 0 = female; 1 = male. Age: chronological age. Education: 1 = no schooling/kindergarten; 2 = primary; 3 = junior secondary; 4 = senior secondary; 5 = tertiary. Identity: 0 = Hongkongese; 1 = Chinese.

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

average than those of the overall performance model, but they are still quite satisfactory as they mean that the model can explain away almost one-third to one-half of the variance in the Hong Kong people’s assessment of the SAR government’s trustworthiness. As to the model on the practice of “one country, two systems,” Table 7 reveals that a total of eight variables demonstrated no significant effect on the dependent variables, including the SAR government’s performance in welfare, economic development, and Hong Kong–Taiwan relations, its overall performance, the performance of the Executive Council, the performance of the Chief Executive, sex, and age. Those variables that had a significant relationship with the dependent variable in one of the six surveys included the SAR government’s performance in housing (October 2006), educational development (April 2006), and anti-corruption efforts (April 2006). Three variables had a significant effect on the dependent variable in two surveys: the SAR government’s performance in democratic development (2000, 2004), the performance of the civil service (1998, April 2006), and the performance of the LegCo (April 2006, October 2006).35 Another three variables had a similar relationship in three surveys: the SAR government’s performance in freedom of speech and assembly (1998, 2002, 2004), and the socio-demographic variables of education (2000, 2002, October 2006) and identity (2002, April 2006, October 2006).36 Two variables were significantly related to the dependent variable in four surveys: the SAR government’s performance in Mainland–Hong Kong relations (1998, 2002, 2004, October 2006) and the performance of the judicial system (2000, 2002, April 2006, October 2006). Trust in the SAR government was the only variable that had a significant relationship with the

35 The performance of the LegCo has a negative relationship with the rating on the practice of “one country, two systems.” This again may be due to a similar reason for its negative relationship with the rating on trust, as we explained in Note 34. 36 Identity was found to have a significant effect on the evaluation of the practice of “one country, two systems,” i.e., those who identified themselves as Chinese tend to rate the practice of “one country, two systems” more positively than those who identified themselves as “Hongkongese.” This result is largely consistent with the findings of previous studies.

103

104

The Hong Kong Special Administrative Region in Its First Decade

dependent variable in five surveys (1998, 2000, 2002, 2004, April 2006), while only Beijing’s Hong Kong policy had a similar relationship in all six surveys. Apparently, the findings of the model on the practice of “one country, two systems” are quite different from those of the two previous models in the sense that when Beijing’s Hong Kong policy was introduced, this variable turned out to be the most powerful variable in shaping the public’s evaluation of the practice of “one country, two systems,” as it is the only variable that had a significant relationship with the dependent variable in all six surveys and its partial coefficients were all very large, ranging from 0.177 to 0.318. This is understandable because, as pointed out earlier in this chapter, the principle of “one country, two systems” presupposes that the Chinese government will not intervene in Hong Kong’s domestic affairs. Any direct intervention in the SAR’s domestic affairs by Beijing could harm the public’s confidence in the political system in Hong Kong. Hence, our finding that Beijing’s Hong Kong policy is crucial to the Hong Kong public’s evaluation of the practice of “one country, two systems” only confirms the validity of our original presupposition. By the same logic, other less crucial but still important variables should include trust in the SAR government, the SAR government’s performance in Mainland–Hong Kong relations, and the performance of the judicial system, as these three variables had a significant relationship with the dependent variable in at least four of the six selected surveys and most of their partial coefficients were also relatively notable. In addition, the overall explanatory power of the model is comparable to that of the two previous models, since its adjusted R square values for the six surveys (ranging from 0.305 to 0.497) show that it can also account for one-third to one-half of the variance in the public’s evaluation of the practice of “one country, two systems.”

Conclusion Based on the findings of a longitudinal telephone survey and borrowing David Easton’s classification of legitimacy into diffuse

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

and specific support for a political system in which people live, this chapter has examined the evaluations of Hong Kong citizens of the SAR’s legitimacy following the handover in 1997, and discussed the major factors that have shaped such evaluations. On specific political support, we looked at people’s satisfaction with the SAR government’s performance and the performances of the related political authorities, as well as their trust in the SAR government. On diffuse political support, our focus was on the public’s evaluation of the “one country, two systems” policy under which Hong Kong’s larger political system is constructed. We have found that of the ten ratings on different aspects of the SAR government’s performance, the only rating that remained high over the entire period was on the government’s anti-corruption efforts. The other nine ratings, varied in April 1998, but all soon declined and hit historical lows between October 2000 and April 2004. This led many local analysts to observe that the SAR government was experiencing a crisis of legitimacy during that period. Nevertheless, since then these nine ratings have rebounded rapidly due to increased economic support and political intervention from Beijing. By April 2006, eight out of the nine ratings were higher than they were in April 1998, even though they again fell in October 2006. On the other hand, among the performance ratings of the five related political authorities, the only rating that showed a similar pattern of ups and downs with the nine ratings on the government’s performance was the rating for the Chief Executive. In contrast, the ratings for the civil service and judicial system remained relatively stable and satisfactory over the entire period, while those for the LegCo and the Executive Council remained at low levels most of the time. The ratings on trust and on the practice of “one country, two systems” also moved in a similar pattern to the ratings on the government’s performance. Both ratings were quite positive in the first two years after the handover, but started to fall after April 1999 when Hong Kong was experiencing increasing economic and political problems, and reached record lows in April 2003 and April 2004, respectively. The two ratings have since begun to climb back steadily as local economic and political conditions have become

105

106

The Hong Kong Special Administrative Region in Its First Decade

increasingly stable. In October 2006, the rating on trust was at about the same high level as in April 1998, while the rating on the practice of “one country, two systems” was still some distance away from its peaks in 1998 and early 1999. Thus, judging from the recent movements of all of the ratings discussed above, we may conclude that despite some signs in the last survey of renewed volatility in people’s attitudes towards the SAR government, the specific “performance legitimacy” crisis that haunted the SAR for some years soon after the handover now seems to have dissipated. Yet, it seems that Hong Kong citizens have not regained all of their previous confidence in the “one country, two systems” policy that defines the larger political system in the SAR. This is no paradox, however, as the successful implementation of the “one country, two systems” policy depends not merely on the performance of the SAR government and its related authorities, but also on Beijing’s determination to uphold a non-interventionist policy towards Hong Kong. When Beijing stepped up its political intervention in the SAR after 2000 in response to rising local calls for a faster pace of democratization, Hong Kong people clearly felt some dissatisfaction with the “one country, two systems” policy even as the local economy appeared to be recovering quickly with Beijing’s support in the form of a string of initiatives to bolster Hong Kong’s economy. Finally, through a regression analysis we have also found that the Hong Kong people’s evaluations of the overall performance and trustworthiness of the SAR government as well as of the practice of “one country, two systems” have been shaped by a slightly different set of factors. For the assessment of the SAR government’s overall performance, the most powerful explanatory factors are the SAR government’s performance in economic development and democratic development, plus the performance of the Chief Executive. For the evaluation of the SAR government’s trustworthiness, the performance of the judicial system and the performance of the Chief Executive are the two most important determinants. For the rating on the practice of “one country, two systems,” Beijing’s Hong Kong policy turns out to be the single most crucial independent variable. Hence, to strengthen the “specific” legitimacy of the SAR government in particular and the “diffuse”

Citizens’ Evaluations of Legitimacy in Post-colonial Hong Kong

legitimacy of the larger political system in the SAR in general, both the Beijing and SAR governments should focus their efforts on these factors. They should strive to maintain a healthy economy, find ways to ensure that the Chief Executive exercises quality leadership, make efforts to safeguard the independence of Hong Kong’s judiciary and Hong Kong’s high degree of autonomy, and last but not least, respect the long-standing appeal of Hong Kong citizens for more democracy by granting them universal suffrage at the earliest date.

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3 To What Extent Have Members of the Functional Constituencies Performed the “Balancing Role” in Hong Kong? SING Ming City University of Hong Kong

Introduction According to the Basic Law, for at least ten years after the handover of Hong Kong’s sovereignty, thirty or a half of the seats in its legislature will be produced through functional constituencies (FCs). FCs are comprised of separate constituencies for various professional, business, and labor groups. Each specified constituency elects its own representative(s) to the legislature. In 1995, under the former Hong Kong Governor, Chris Patten’s reform package, nine new seats were added to the original twenty-one functional constituency seats.1 The eligible electors of the nine new functional seats, unlike the traditional twenty-one, included a broad base of virtually the entire Hong Kong working population other than those working in the twenty-one narrow functional sectors. As a result, Patten dramatically added 2.7 million new eligible electors under his reform.

1 See Ming Sing, Hong Kong’s Tortuous Democratization: A Comparative Analysis (London: RoutledgeCurzon, 2004). 109

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The Hong Kong Special Administrative Region in Its First Decade

In 1998, however, under the Preparatory Committee’s decision, the franchise for the nine new functional seats was drastically diminished, leaving the total eligible voters of the entire thirty functional seats to less than 200,000. Moreover, for many sectors, the right to vote was also be shifted from individuals working in different occupational sectors to various corporate heads among those sectors. The new arrangement not only sharply emasculated the political inclusiveness and representativeness of the legislature in 1998, but also, owing to corporate voting, produced more conservative representatives.2 On what grounds has the FC been given such enormous political influence in Hong Kong’s political structure?

The Raison-d’etre of Functional Constituencies It has been argued by business sectors, pro-Beijing parties and the Central Government, that the major raison-d’etre of functional constituencies has been their ability to “balance” various societal interests so as to protect the interests of the business sector. Scrapping the functional constituencies would “breach the Basic Law’s requirement of “balanced participation” and retaining the capitalist system,” as alleged by Qiao Xiaoyang, the deputy secretary-general of the National People’s Congress Standing Committee. 3 The “balancing role” of the FCs was officially reaffirmed in the recent National People Congress Standing Committee’s decision to maintain the half-and-half ratio for members of Hong Kong’s Legislature elected from functional constituencies and geographical constituencies in 2008.4 The alleged “balancing role” of the functional constituencies has also been defended by senior officials of the HKSAR.5

2 3 4 5

Ibid. See South China Morning Post, 27 April 2004. Ibid. See for instance HKSAR government’s Attorney General, Ms Elsie Leung’s endorsement of the position delivered in Hong Kong’s legislature on 19 May 2004.

Functional Constituencies and Their “Balancing Role”

To assess the validity of the argument, this report is divided into two sections. The first section investigates FCs members’ positions as registered by their votes in the legislature over four pivotal policy domains – fair competition, civil liberties, political accountability and democratic development. Those four domains have been selected on several grounds. First, they represent some of the crucial pillars underpinning the further development of Hong Kong as a financial hub in the Asian-Pacific region; second, they have been under threat to various extents since the handover; third, promoting economic competitiveness, civil liberties and political accountability are clearly in line with the protection of capitalists’ interests, i.e. the declared raison-d’etre of the functional constituencies. Given the presence of socio-economic prerequisites for developing democracy in Hong Kong, and the ability of democracy in enhancing freedoms, rule of law as well as political accountability, legitimacy and representativeness of its political structure, further democratic development also aligns well with the long-term interests of Hong Kong’s business sector. This section thus examines the following four types of issues: 1. Motions/bills relating to economic competitiveness in Hong Kong: competition law, public utility charges, and the government’s taxation and economic policies. 2. Civil Liberties: motions/bills relating to the revision of Public Order Ordinance and legislation of national security, i.e. Article 23. 3. Political Accountability: motions/bills relating to Tung Chee-hwa’s stance towards interference with University of Hong Kong’s public opinion surveys; the former Financial Secretary’s car tax scandal; non-prosecution of a media tycoon, Sally Aw; and adoption of the Principal Officials’ Accountability System. 4. Democratic Development: major motions/bills relating to democratic development including those concerning the National People Congress’s decisions over Hong Kong’s democratic reform and the performance of the three-member taskforce.

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The Hong Kong Special Administrative Region in Its First Decade

In the second section, all voting records of motions, bills and amendments in the legislature between 1998 and 2004 will be counted, to gauge the extent to which the functional constituencies have in reality managed to “balance” interests in Hong Kong under the current constitutional structure. In particular, the following quantitative assessments will be done: i. Calculating the actual passage rates of the motions, bills and amendments oriented towards different types of issues under the bicameral or separate voting system. It will evaluate how the separate voting structure has dampened their passage rates and thus assess if the presumed “balancing role” of the FCs has been seriously mitigated. The motions, bills and amendments will be classified into social, economic, political, and others for a more refined interpretation.6 In case the bicameral voting system severely limits the capacity of the FCs to pass their votes, be they intended to “balance” the interests in the legislature or not, the allegation that the FCs can effectively balance the interests in society will then be built on flimsy ground. ii. Assessing the extent that the votes of FC members are in line with the positions of the HKSAR government, so as to judge the degree of cooperation between the FCs and the government. The FCs will be classified into liberal and conservative camps to see if this additional classification will help illuminate the results. In case the FC members are overwhelmingly pro-government, given that government’s policies have from time to time drawn criticisms from the business sector since the handover, it becomes difficult to argue that the FCs have managed to contribute to the interest of business sector and therefore played its “balancing role” well.

6 Political issues include those constitutional changes, the Basic Law, civil liberties and political parties; social issues include those on family, crime, recreation, sports, transport, housing, labour, education, mass media, and health and environment; economic issues cover those relating to finance, trade, budget, economic restructuring, competitiveness.

Functional Constituencies and Their “Balancing Role”

Practical Significance of the Research Functional Constituencies in Hong Kong have been criticized for long for its limited franchise, lack of representativeness and protection of sectoral interests at the expense of the societal interest. If the ability of the FCs to “balance” various societal interests and to protect the interests of the business sector cannot be substantiated by empirical data, a major raison-d’etre of FCs will become wobbly. This research may rekindle debate on the worth of the continued existence of the FC.

Study of Four Policy Domains Data for Quantitative and Qualitative Analysis The following dimensions of the aforementioned motions/bills will be analyzed in this section: i. relevant voting records of FCs and non-FC members, classified along the types of motions/bills and the political camp (liberal or conservative) they belong to7; ii. justifications of the stances of various FC representatives for their votes over those motions/bills.

I.

Empirical Context of this Study: The Declining Economic Competitiveness of Hong Kong

Late 1997 was a monumental landmark for Hong Kong’s economy. From that time forward, Hong Kong has undergone the most severe economic recession in a generation. Concomitantly, many local and international experts have pointed out that the productivity in Hong

7 Liberal camp consisted of those legislators who have been regarded by the public as supporters for speedier democratization, while the conservative camp consisted of those legislators who tended to reject calls for speedier democratization.

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The Hong Kong Special Administrative Region in Its First Decade

Kong could not justify its high wages, in comparison with other places, given the increasingly keen regional and global competition. According to the World Economic Forum, Hong Kong has suffered a precipitous decline in economic competitiveness, an authoritative indicator comparing the competitiveness of global economies since 1999 (Figure 1): Figure 1 Declining International Economic Competitiveness of Hong Kong

25 Ranking (1 as the most competitive)

114

20 15 10 5 0 1999

2000

2001 Year

2002

2003

Note: Computed by 2003’s formula, the ranking in 2002 was 22nd. The ranking would be 17th if computed according to 2002’s formula. Source: World Economic Forum, 2003.

8

Worse still, added to the structurally induced economic grievances has been a perceived sense of intensifying cronyism. Though the European Union had already issued a report publicly blasting the lack of a level-playing field in the Hong Kong economy in 2000, the Hong Kong government and some conglomerates opposed introducing a “competition law,” which, in different versions, has been implemented in over 100 developed and developing countries for securing fair competition.9

8 http://www.weforum.org/site/knowledgenavigator.nsf/Content/Hong+Kong+ SAR+KN+sessions 9 See Ho Suk-ching and Chi-fai Chan, “In Search of a Competition Policy in a Competitive Economy: The Case of Hong Kong,” The Journal of Consumer Affairs, Vol. 37, No. 1 (Summer 2003), p. 70.

Functional Constituencies and Their “Balancing Role”

Waning Political Accountability & Civil Liberties amid Upsurge for Greater Democracy The economic nightmare has coexisted with a non-democratic government and political structure that lacks procedural legitimacy and political accountability for addressing Hong Kong’s aforementioned governance problems. The non-democratic government has performed a number of measures that in effect truncates its own performance legitimacy. It has first undercut its own legitimacy by reversing Hong Kong’s limited democracy with manipulation of the electoral system to favor pro-government forces, and narrowing the franchise for its legislature during the 1998 elections. In addition, it initiated changes in legislation of the Public Order and Societies Ordinance to curb civil liberties in Hong Kong. The government’s steadfastness to impose the changes despite robust and widespread opposition to those amendments has stirred much public anxiety about their continuous enjoyment of freedom of procession, demonstration and association. Additionally, a string of eye-catching controversies that erupted between mid-1997 and 2002 has further cast doubts in the minds of the Hong Kong public on the continuance of freedoms, political responsiveness and rule of law in Hong Kong. The dismantling of two elected Municipal Councils, the involvement of its Chief Executive’s personal assistant in a scandal of suppressing academic freedom in a leading university of Hong Kong, the decision of the government not to indict a media magnate with a good relationship with Beijing on the grounds that it would cost the jobs of many employees, and the selective appointment of pro-government members into various political bodies, entail an unpopular, legitimacy-sapping and authoritarian turn of the government since the handover. After the handover, as mentioned earlier, the Hong Kong government repeatedly made serious blunders between mid-1997 and 2002. As those blunders have largely clashed with prevailing popular values, they have apparently deepened the “cultural clashes” and widened mass support for greater democracy. Those blunders include, first, just prior to the July 1 rally, the Hong Kong

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The Hong Kong Special Administrative Region in Its First Decade

government was widely perceived as being determined to impose a draconian National Security Bill onto Hong Kong that would severely undermine Hong Kong’s civil liberties and rule of law.10 As well, the outbreak of Severe Acute Respiratory Syndrome (SARs) that brought 299 deaths and illness to over 1,700 lives, sparked widespread criticism not only of the senior officials responsible for medical policy but also the government as a whole. Finally, the government’s mishandling of the former Financial Secretary’s allegedly “tax-evasive” act further nailed a fatal blow to the already crumbling credibility of the executive-led political system. What role(s) have the various FCs played in the abovementioned controversies? The answer can be mirrored in the votes they have cast and the views expressed in the legislature on those issues as unfolded below.

II. Data Analysis 1. Votes from the FCs & GCs (Geographical Constituencies) on Improving Economic Competitiveness in Hong Kong Legislators’ votes on economic competitiveness can be classified into two categories. In the first category, motions pertain to the demands for the legislating of fair competition laws and removing unfair market barriers in order to boost the economic competitiveness in Hong Kong (Appendix I, Table 1.1). In general, liberal members of geographical constituencies have backed up those motions, while members from the business sectors, pro-Beijing parties, and the FCs in the legislature have mostly rejected them robustly (Appendix I, Table 1.2). Those who stood for the competition law have rightly highlighted the presence of unfair competition in the energy sector, freight services, telecommunications, supermarket, container

10 A survey done during the July 1 rally showed that 89.8% of participants were against the draft of the national security bill (See http://hkupop.hku.hk/), whereas another survey conducted in June 2003 found 64.2% of people were against the second reading of the bill in the legislature (Ming Pao [Ming bao], 28 June 2003).

Functional Constituencies and Their “Balancing Role”

terminals, and Easy Pay system, as well as broadcasting and banking (Appendix I, Table 1.1). The presence of unfair competition in those sectors has been well documented by reports from Hong Kong’s Consumer Council and local academics.11 The second category of motions targeted at the cutting of charges including business tax or costs of public utilities for boosting competitiveness of Hong Kong, as well as improving and streamlining the infrastructure for doing business with Mainland China. Such motions have understandably been supported nearly across the board. In particular, FC members did not shy away from asking the government to reduce various government fees, decrease the charges of gas for consumers, ensure a reasonable return rate for power companies, extend the right of Hong Kong manufacturers to sell products on the Mainland, and streamline Hong Kong’s import and export services infrastructure. In summary, a core difference between the FC and GC members was their attitude towards a competitive law. The two camps put forward arguments on the following page. Given the presence of competition laws in over 100 advanced and developing countries, ample experiences can be referred to from overseas cases to avoid any alleged negative consequences put forth by FC members. While few will doubt that advanced Western economies such as the US has managed to maintain a relatively higher level of economic competitiveness than that of Hong Kong, the presence of competition laws or the like in those countries turn most aforementioned arguments against legislating the competition law in Hong Kong into fragile ones. The apparent rise in influence of oligopolies in the Hong Kong market and the decrease in economic competitiveness in many sectors since the handover has also proved false the claim that there is a level-playing field in Hong Kong. Though some FCs members have objected to a competition

11 Tsang Shu-ki, “The Case for a Competition Institution in Hong Kong,” Chairperson, Competition Policy Committee, Consumer Council, Hong Kong, 2 November 2000 (unpublished paper); Chen Edward K. Y. and Ping Lin, “Competition Policy under Laissez-Faireism: Market Power and its Treatment in Hong Kong,” Review of Industrial Organization, Vol. 21, No. 2 (September 2002), pp. 145–66.

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The Hong Kong Special Administrative Region in Its First Decade

Supporters

Non-Supporters

• A fair competition law would enable the highest degree of competition in the market, which would have the greatest economic effect.

• The legislation would mean the rigid and identical treatment for everyone without considering the particular needs of various industries.

• It would provide an un- • There would be difficulty to define what constituted antiambiguous level playing field competitive market practices. for all participants. • It would help ensure against exorbitant prices and inefficient services.

• Market uncertainties would be created for investors that would undermine their confidence in thinking that there was no protection for their investments, or that their hard-earned competitive edge would be taken away by enforced cut-throat competition. Economic chaos and unemployment would then ensue.

• A comprehensive fair competetion law would clearly set out general criteria to which professional judgment could be applied to determine what constituted monopolization. These criteria would provide a stable and clear framework which would in turn encourage • The market rather than the government should dictate the and facilitate long-term competition. Where regulation investment. This would, in the was needed, however, a long run, create more job sector-specific approach would opportunities. be much preferred against • Companies that could not intervention by a central survive and those depending overarching authority. on privileges and monopolization would suffer but well- • Hong Kong already enjoyed a level-playing field, so there was managed companies and inno need to set up a fair novative entrepreneurs would competition law. A fair survive. competition law might cause excessive lawsuits, create hurdles to businesses, strangle business opportunities, and result in the domination of foreign firms over local ones.

Functional Constituencies and Their “Balancing Role”

law on the grounds of avoiding a rigid and unifying approach to alleviate Hong Kong’s decreasing competitiveness, their lack of follow-up of sectoral approaches for addressing the issue may well reflect their absence of resolve if not sincerity to confront the problem squarely. The lack of follow-up actions may also reflect some inward-looking and self-interested motives among some FC members in the legislature, resulting in the repeated failures to legislate a “competition law” to tackle oligopolies and halt the continued erosion of economic competitiveness in Hong Kong (Appendix I, Table 1.2). Such failures have obviously also hurt the business sector as a whole especially in the medium and long-run. Table 1.2 (Appendix I) and Table 1.3 (Appendix I) provide more refined data corroborating that while FC members are in general less supportive for improving economic competitiveness than the Geographical Constituencies’ (GC) counterparts, those FC members belonging to the conservative camp have been especially prone to taking up the stance.

2. Votes from FCs & GCs on Improving Civil Liberties in Hong Kong To repeat, since the handover, Hong Kong has faced the possible legislation of draconian laws that may curb civil liberties in Hong Kong. Table 2.1 (Appendix II) lists the relevant motions/bills in relation to civil liberties debated in the legislature between 1998 and 2004, as well as the outcomes. As seen in table 2.2 (Appendix II), concerning motions aimed at strengthening civil liberties in Hong Kong, FC members have consistently been less supportive when compared with their GC counterparts. When their respective votes are further divided into either the liberal and conservative camp (Table 2.3, Appendix II), conservative FC members have predominantly rejected the motions/bills that would enhance Hong Kong’s civil liberties. The positions of the respective camps were shown on the following page. In short the legislators from the FCs, especially those affiliated with the conservative camp, tend to reject motions demanding strengthening of civil liberties in Hong Kong (Table 2.3(i), in Appendix II).

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The Hong Kong Special Administrative Region in Its First Decade

Supporters

Non-Supporters

• Presence of threats to Hong • Absence of threats to Hong Kong’s civil liberties from the Kong’s civil liberties from the laws in force (e.g. on debates laws in force (e.g. on debates over the Public Order over the Public Order Ordinance); Ordinance); • Absence of necessity of legislating in accordance with the stipulation of Basic Law as in the case Article 23;

• Necessity of legislating in accordance with the stipulation of the Basic Law as in the case of Article 23;

• Alleged incompatibilities between the bill or law under debate with international human rights covenants (Article 23 and the Public Order Ordinance (Amended));

• Alleged compatibilities between the bill or law under debate with international human rights covenants (Article 23 and the Public Order Ordinance (Amended));

• Alleged weakening of Hong • Alleged strengthening rather than weakening of Hong Kong’s Kong’s civil liberties owing to civil liberties owing to the the proposed legislation (e.g. proposed legislation (e.g. the the Public Order Ordinance and Public Order Ordinance and Article 23); and Article 23); and • Alleged absence of threats to • Alleged fulfilling Hong Kong’s responsibility to the central the central authority and/or the authorities in preempting Mainland (Article 23). threats to the central authorities and/or the Mainland (Article 23).

Next, we turn to the motions/bills regarding the enhancement of political accountability in Hong Kong.

3. Votes from FCs & GCs on Improving Political Accountability in Hong Kong As can be seen from Table 3.1 (Appendix III), many motions about the issues of political accountability include demands for the resignation of senior officials including the Chief Executive. At times, the motions comprise the vote of no confidence of the senior officials, for examples, the former Financial Secretary and the

Functional Constituencies and Their “Balancing Role”

existing Secretary for Justice. Confronted with the repeated blunders of senior officials, some legislators have submitted the aforementioned motions to ensure accountability of the government. Some motions deal with the structural problems. They called for raising the transparency of the high-powered Executive Council and for handling the conflict of interest among its members. Another motion urged that the introduction of the accountability system be democratically constituted and grounded. Many of those motions have been raised in the context of the major scandals involving the SAR government official(s). For instance, the decision of the Secretary of Justice not to prosecute a former media tycoon having good connections with Beijing was a case in point. Liberal legislators, who predominately occupied seats in various GCs, have cited powerful legal and administrative reasons to back up their submissions. The FC members usually counter-argued that the motions were too radical or simply not sufficiently grounded. As seen from Table 3.2 (Appendix III), over motions aimed at boosting accountability of the Hong Kong SAR government, members of the FCs have again been less supportive for them vis-à-vis those in the GCs. When the members of the FCs and GCs are further broken down into either the liberal and conservative camp (Table 3.3 in Appendix III), it shows that conservative members of the FCs mostly rejected the motions/bills demanding the augmentation of Hong Kong’s political accountability.

4. Votes from FCs & GCs (Geographical Constituencies) on Promoting Democratic Development in Hong Kong For many, the root cause of Hong Kong’s governance problem lies in its unrepresentative and undemocratic structure. Hence, between 1998 and 2004, a relatively large number of motions/bills have been proposed in relation to democratic development. For those legislators who have supported implementation of full democracy by 2008, a number of reasons have been raised. It has been argued that regarding the timeframes of implementing full democracy, flexibility has been provided for under the Basic Law, as long as the implementation process would be “in

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The Hong Kong Special Administrative Region in Its First Decade

the light of the actual situation in Hong Kong” and of “gradual and orderly progress.” Also, it is contended that whether the two pre-conditions are fulfilled shall be entirely for the HKSAR to decide upon. Functional constituencies are taken as antithetical to all principles of democracy, as they imply political privileges to some organizations, industries or groups with vested interests. FCs has allegedly engendered a legislature that is frequently at odds with prevalent public opinion. It has also been pointed out the single vote of Tung Chee-hwa counted more than 110 seats in the District Councils. No matter how many representatives the general public of Hong Kong has elected, and no matter how many votes that the public have cast, they cannot defeat the single vote of Tung Chee-hwa. More recently, the setting-up of a three-person Task Force on Constitutional Development has sparked debate on its role. Liberal legislators raised a motion urging it to consult the public for concrete proposals of constitutional reform, to avoid unnecessary arguments, polarization and instability. They also would like to express to the Central Government that the principles prescribed in the Basic Law should be respected and complied with in implementing constitutional reform. Liberal legislators also argued that there has been crystal-clear public support for implementing universal suffrage by 2008, based on opinion polls. They also underlined that the mini-constitution has been interpreted as an “executive-led” government by the Chinese and HKSAR government, which has not been underpinned by any provisions in the Basic Law. Consequently, they challenged that anything considered by the people in power as the “original intention” could be smuggled into the Basic Law whenever they preferred. Among those legislators who rejected the implementation of full democracy by 2008, they emphasized different rationales to rebuff the idea. A typical reason in rejecting the election of the Chief Executive via universal suffrage has been that the FCs and appointed members have been allegedly offering much useful advice on many issues. Additionally, it has been claimed that a legislative member’s

Functional Constituencies and Their “Balancing Role”

representativeness does not always depend on whether he or she is directly elected. Some plainly added that should functional constituency elections be abolished immediately, many professionals may oppose. Some functional sectors might reject having a Legislative Council representative affiliated with any political party or group. Also, some pointed out that in a few Western democracies such as Germany, half of the members of parliament were recommended by political parties in accordance with the number of votes won. The composition of legislators was not simply decided by universal suffrage entirely. Though universal suffrage was certainly important, it was not the only option of a democratic system. Consideration should also be given to the other major components of the constitutional system, including the judicial system, public opinion, and so on. Still another line of objection rested on the alleged haste of implementing it. Though democracy was admittedly valuable, given Hong Kong’s political context, it has been argued as inappropriate for Hong Kong to push through the political reforms over a very brief time-span. Instead, a gradual and orderly approach has been advocated to underpin the continued prosperity and stability of Hong Kong. Those legislators who rejected the motion plainly revealed their conservative ideas and worries about democracy: Many of those conservative legislators underscored that under the concept of one “country, two systems,” “one country” should come ahead of “two systems.” They claimed that if “one country” is not manifested before “two systems,” a state of democracy and stability cannot be witnessed. Some emphasized that the main body of people governing Hong Kong has to be patriotic, and that constitutional development should be gradual and orderly. The principle of executive-led government should be followed, and the balance of interests and obligations be practiced. Above all, they have stressed that the constitutional development in Hong Kong needs to be led by Beijing. Still others openly admitted that people from the business sector apprehended that universal suffrage would engender welfarism and a general hostility against the business sector.

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The Hong Kong Special Administrative Region in Its First Decade

Based upon Table 4.1 (Appendix IV), all motions in enhancing democratic development in Hong Kong have been raised by liberal legislators between 1998 and 2004. In addition, Tables 4.2 & 4.3 (Appendix IV) evince the legislators from the FCs, especially those affiliated with conservative camp, have mostly rejected motions demanding for democratic development in Hong Kong.

Overall Quantitative Assessment of the “Balancing Role” of the FC by Examination of Voting Records (1998–2004) Assess the extent to which the functional constituencies have managed to “balance” the interests in Hong Kong. It has been argued by the business sector, pro-Beijing forces and the Central Government that the major raison-d’etre of the functional constituencies has been their ability to “balance” various societal interests via the legislature. To assess the validity of the argument, this section analyzes quantitatively the impacts of FCs in the Legislature between 1998 and 2004 via the voting records of motions, bills and amendments: i. Calculating the actual passage rates of the motions, bills and amendments oriented towards different types of issues under the bicameral or separate voting system. It will evaluate how the separate voting structure has dampened their passage rates and thus assess if the presumed “balancing role” of the FCs has been seriously mitigated. The motions, bills and amendments will be classified into social, economic, political, and others for a more refined interpretation.12

12 Political issues include those on constitutional changes, Basic Law, civil liberties and political parties; social issues include those on family, crime, recreation, sports, transport, housing, labour, education, mass media, health and environment; economic issues cover those relating to finance, trade, budget, economic restructuring, competitiveness.

Functional Constituencies and Their “Balancing Role”

ii. Assessing the extent that the votes of FC members have voted for the government-initiated bills, so as to judge the degree of cooperation between the FCs and the government. The FCs will be classified into either the liberal or conservative camp to see if this additional classification will help illuminate the results. iii. Counting the number of questions raised by each legislator in FCs and GCs. Again, those numbers will be classified into either the liberal or conservative camp for more refined analysis.

I.

Findings

The presumed “balancing role” of the FCs has been seriously mitigated under the current political structure. Annex II of the Basic Law specifies that the passages of motions, bills or amendments introduced by individual members of the Legislature demands a simple majority vote of “each” of the two chambers of members present therein, i.e. (i) those returned by functional constituencies; and (ii) those returned geographical constituencies through direct election and by the Election Committee. The bicameral voting system as indicated below has made passage of motions, bills and amendments etc. far more difficult than the unicameral voting system during the pre-handover period. A total of 161 motions, bills or amendments defeated by the bicameral system from the legislative years of 1998 to 2004 (1998–1999: 29, 1999–2000: 30, 2000–2001: 31, 2001–2002: 14, 2002–2003: 26, 2003–04: 31) could be passed were the old unicameral system adopted. The result suggests that the relative majority voices of legislators, including those from FC sectors, were disregarded from time to time under the existing bicameral voting system. As seen from the Table 1 and Figure 2, there would be substantial increases in the passage rates of motions, bills or amendments initiated by both FCs and GCs if unicameral voting structure had been used from 1998 to 2004.

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The Hong Kong Special Administrative Region in Its First Decade Table 1 Passage Rates of All Kinds of Motions/Bills/Amendments 13 under Different Voting Systems 1998 – 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 FC (Bicameral System)

23.21

34.62

17.86

19.23

9.52

5.26

FC (Unicameral System)

48.21

57.69

57.14

38.46

52.38

63.16

GC (Bicameral System)

8.47

12.50

13.79

10.53

15.00

16.98

25.42

38.89

32.76

34.21

52.50

50.94

GC (Unicameral System) Source: Hansard

Figure 2 Successful Rate of Passing All Motions/Bills/Amendments under Different Voting Systems 70 60 50 Percentage

126

40 30 20 10 0 1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Year

FC (Bicameral System) GC (Bicameral System)

FC (Unicameral System) GC (Unicameral System)

13 Formula for all motions, bills and amendments (Table 1): FC (GC) Bicameral System Passage Rates of All Motions/Bills/Amendments = number of all types of motions/bills/amendments passed in FC (GC) divided by the total nimber of all types of motions/bills/amendments in FC (GC). FC (GC) Unicameral System Passage Rates of All Motions/Bills/Amendments = the sum of all types of motions/bills/amendments passed in FC and failure of all types of bills/motions/amendments in FC (GC) divided by the total number of all types of motions/bills/amendments in FC (GC).

Functional Constituencies and Their “Balancing Role”

After breaking down the types of motions, bills or amendments, as can be seen from the Tables 2–5 and Figures 3–6 below, the bicameral voting system has heavily dampened the ability of the relative majority in the legislature to pass the motions, bills or amendments, be they of social, economic, political or other nature. Table 2 Successful Rate of Passing Political Motions/Bills/Amendments 14 under Different Voting Systems (%) 1998– 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 FC (Bicameral System)

6.50

20.00

0.00

14.30

0.00

0.00

GC (Bicameral System)

13.30

15.00

0.00

0.00

12.50

10.50

FC (Unicameral System)

25.90

60.00

40.00

28.60

GC (Unicameral System)

23.30

30.00

21.40

7.70

33.30 100.00 37.50

47.40

Source: Hansard Table 3 Passage Rate of Economic Motions/Bills/Amendments under Different Voting Systems (%) 1998– 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 FC (Bicameral System)

36.40

20.00

18.20

50.00

33.30

0.00

GC (Bicameral System)

7.10

0.00

22.20

0.00

0.00

0.00

FC (Unicameral System)

63.60

20.00

63.60 100.00

33.30 100.00

GC (Unicameral System)

35.70

16.70

33.30

40.00

40.00

50.00

Source: Hansard

14 Formula for social/economic/political/other motions, bills and amendments (Tables 2 to 5): FC (GC) Bicameral System Passage Rates of Social Motions/Bills/ Amendments = social motion/bills/amendments passed in FC (GC) divided by the total number of social motions/bills/amendments in FC (GC). FC (GC) Unicameral System Passage Rates of Social Motions/Bills/ Amendments = social motions/bills/amendments passed plus social motions/bills/amendments rejected due to bicameral system in FC (GC) divided by the total number of social motions/bills/amendments in FC (GC). The same formula applies to political, economic, and other motions/bills/ amendments (i.e. Tables 2 to 5).

127

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The Hong Kong Special Administrative Region in Its First Decade Table 4 Successful Rate of Social Motions/Bills/Amendments under Different Voting Systems (%) 1998– 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 FC (Bicameral System)

33.30

42.90

33.30

10.00

9.10

8.30

GC (Bicameral System)

0.00

13.30

16.00

20.00

17.60

24.10

FC (Unicameral System)

83.30

71.40

55.60

40.00

63.60

66.70

GC (Unicameral System)

18.20

46.70

40.00

50.00

70.60

55.20

Source: Hansard Table 5 Passage Rate of Other Motions/Bills/Amendments under Different Voting Systems (%) 1998– 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 FC (Bicameral System)

62.50

50.00

0.00

28.60

0.00

0.00

GC (Bicameral System)

0.00

0.00

0.000

0.00

50.00

0.00

FC (Unicameral System)

87.50

50.00

66.70

28.60 100.00

50.00

GC (Unicameral System)

25.00

0.00

0.00

0.00

50.00

0.00

Source: Hansard

In short, the bicameral voting system has severely curtailed the capacity of the FCs to pass votes, be they intended to “balance” interests in the legislature or not.

Compare the Performance of the FCs versus the GCs in Monitoring the Government A rough indicator for the legislators to play its monitoring role is to count the number of questions raised by each legislator in the FCs and GCs. Again, the numbers will be classified into either the liberal or conservative camp for a more refined analysis. As seen in Table 6, the total number of questions raised by the FC members as a whole was obviously less than that by the GC members. On comparing the makeup of functional constituencies, liberal members within FCs were more active than their conservative

Functional Constituencies and Their “Balancing Role”

counterparts. FCs has thus failed to be politically as active as their counterparts in the GCs in terms of raising questions, and as a corollary, in playing its monitoring role. As seen in the next section, the less active role of the FCs in monitoring a major political actor, i.e. the government, has received further corroboration. Table 6 The Average Number of Questions Raised by Each Legislator in FCs and GCs (1998–2004) 1998– 1999– 2000– 2001– 2002– 2003– 1999 2000 2001 2002 2003 2004 Liberal FC members

17.00

15.00

12.60

13.00

14.60

14.60

Conservative FC members

11.80

8.12

8.60

7.20

7.20

7.30

Liberal GC members

14.80

11.10

10.40

10.90

11.40

12.40

Conservative GC members

17.20

15.20

14.40

14.90

15.60

15.40

Source: Hansard

Assess the Extent the Votes of the FCs Support the Bills Initiated by the HKSAR Government. One easy way in gauging the degree of cooperation between the FCs and the SAR government is to find out the proportion of votes of FCs members that have been in line with the bills raised by the HKSAR government. Again, the FCs will be classified into either the liberal or conservative camp to see if this additional classification will help illuminate the results. Tables 7 and 8 reveals several features: First, liberal FC members at times were very supportive of the HKSAR government’s bills. Second, on considering Table 8, it is shown that conservative FC members were obviously far more pro-government than liberal ones. Third, conservative legislators in the FCs were on the whole overwhelmingly pro-government, as their minimum supporting rate for the government stood at 86% for a particular year, and that the rates were beyond 90% in four out of the six other years.

129

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The Hong Kong Special Administrative Region in Its First Decade Table 7 Average Percentage that FC Members Voted for Government-initiated Bills No. of liberal FC members’ votes

No. of conservative FC members’ votes

Date

For

Against

Abstained

% For

For

Against

Abstained

% For

31 Mar 99

4

0

0

100

22

0

0

100

14 Jul 99

5

0

0

100

20

3

0

87

23 Feb 00

3

0

0

100

22

0

0

100

5 Apr 00

4

0

0

100

20

0

0

100

24 May 00

4

0

0

100

11

2

2

73.3 81.8

21 Jun 00

0

4

0

0

18

4

0

27 Jun 01

0

5

0

0

19

0

0

100

11 Jul 01

0

4

1

0

23

0

0

100

13 Mar 02

0

5

0

0

10

0

0

100

17 Apr 02

3

1

0

75

23

0

0

100

22 May 02

4

1

0

80

19

1

0

95

26 Jun 02

4

1

0

80

10

8

0

55.6

11 Jul 02

0

5

0

0

19

5

0

79.2

6 Nov 02

0

5

0

0

20

0

0

100

18 Dec 02

0

1

4

0

18

0

0

100

22 Jan 03

4

0

0

100

14

1

0

93.3

12 Feb 03

5

0

0

100

21

0

0

100

26 Feb 03

4

1

0

80

20

0

0

100

19 Mar 03

1

0

3

25

20

0

0

100

9 Apr 03

0

5

0

0

23

0

0

100

7 May 03

1

3

0

25

18

0

2

90

28 May 03

4

0

1

80

18

0

0

100

18 Jun 03

0

0

3

0

20

0

1

95.2

25 Jun 03

4

0

0

100

19

0

0

100

3 Jul 03

1

4

0

20

18

0

0

100

9 Jul 03

4

0

0

100

17

5

0

77.3

10 Dec 03

1

2

0

33.3

17

1

0

94.4

18 Feb 04

4

1

0

80

12

0

0

100

17 Mar 04

0

5

0

0

20

3

0

87

28 Apr 04

3

1

1

60

19

0

1

95

9 Jun 04

2

3

0

40

16

0

0

100

16 Jun 04

5

0

0

100

12

8

1

57.1

30 Jun 04

5

0

0

100

20

0

0

100

8 Jul 04

0

5

0

0

21

0

0

100

Source: Hansard

Functional Constituencies and Their “Balancing Role”

Table 8 Average Percentage of FC Members that Voted for Government Bills within the Liberal & Conservative Camps Year

Liberal FC Members

1998–1999

100

Conservative FC Members

1999–2000

75

2000–2001

0

100

2001–2002

47

86

2002–2003

48.5

96.6

2003–2004

51.7

91.7

93.5 88.8

Source: Hansard

Conclusion of Study It has been contended in Hong Kong by pro-Beijing parties, the central and HKSAR governments, and some prominent leaders of the business sector that the key raison-d’etre of the functional constituencies rests on their capacity to “balance” various societal interests, which in turn enable them to protect the interests of the business sector. The alleged “balancing role” of the FC was also recently reiterated in the recent National People Congress Standing Committee’s decision to maintain the half-and-half ratio for members of Hong Kong’s Legislature elected from functional constituencies and geographical constituencies in 2008. To gauge the validity of the argument, this report has used case studies in the first section (Policy Domains) and overall quantitative assessment of voting records in the legislature between 1998 and 2004 in the second section (Quantitative Assessment) to scrutinize the role of the FCs. The first section investigates the positions of FC members as registered by their votes in the legislature over four pivotal policy domains of fair competition, civil liberties, political accountability and democratic development. Those four domains have been selected as (i) they represent the crucial pillars underpinning the further development of Hong Kong; (ii) they have been under threat to various extents since the handover; and (iii) that promoting the policies of the four domains are in line with the protection of

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The Hong Kong Special Administrative Region in Its First Decade

capitalists’ interests, i.e. the declared raison-d’etre of the FC. Based on the above analyses in the first section, the following concluding remarks can be drawn in relation to the aim of this research: 1. Most motions for enhancing economic competitiveness in Hong Kong have been raised by the legislators of the GCs rather than the FCs between 1998 and 2004. Members of the GCs belonging to the liberal camp have been obviously more enthusiastic with the motions than those from the conservative camp within the GCs. In addition, the legislators from the FCs, especially those affiliated with the conservative camp, have been less supportive for such motions than those in the liberal camp. 2. All motions for boosting civil liberties in Hong Kong have been raised by the legislators of the GCs rather than the FCs between 1998 and 2004. Members of the GCs belonging to the liberal camp have been obviously more enthusiastic with such motions than those from the conservative camp within the GCs. In addition, the legislators from the FCs, especially those connected with conservative camp, have been mostly likely to reject such motions. 3. Most motions for improving political accountability in Hong Kong have been put forth by the legislators of the GCs rather than by the FCs between 1998 and 2004. Members of the liberal camp of the GCs have been more supportive for the motions than those from the conservative camp within the GCs. In addition, the legislators from the FCs, especially those connected with the conservative camp, have been mostly likely to decline such motions. 4. All motions striving for speedy democratic development in Hong Kong have been raised by liberal legislators. Data also show the legislators from the FCs, especially those affiliated with conservative camp, have mostly rejected motions demanding for further and speedy democratic development in Hong Kong. 5. It has been argued by pro-Beijing parties, the central and HKSAR government, and some prominent leaders of the business sector that the major raison-d’etre of the functional

Functional Constituencies and Their “Balancing Role”

constituencies lies in their capacity to “balance” various societal interests so as to preserve the interest of the business sector. This part of the investigation has found that the conservative legislators of the FCs have gone against the long-term interest of capitalists and Hong Kong by rejecting motions striving for improvement in economic competitiveness, civil liberties, political accountability and democratic development. The alleged raison-d’etre of the FCs in balanceing and furthering the societal interest has thus been gravely challenged by the findings presented in the first section. In the second section (Quantitative Assessment), all voting records of motions, bills and amendments in the legislature between 1998 and 2004 have been counted, to calculate the degree to which the functional constituencies has succeeded in “balancing” the interests in Hong Kong under the current bicameral voting structure. The calculations evaluate how the separate voting structure has dampened their passage rates and thus assess if the presumed “balancing role” of the FCs has been seriously mitigated. Also, assessments have been for the extent that the votes of FC members are in line with the positions of the HKSAR government, so as to measure the degree of cooperation between the FCs and the government. Based on the analyses in the second section, the following concluding observation can be drawn with reference to the aim of this research: 1. The bicameral voting system has severely curtailed the capacity of the FCs to pass their votes, be they intended to “balance” the interests in the legislature or not. Should the pre-handover unicameral voting structure be restored, it has been found that the passage rates of the motions, bills or amendments initiated by FC could be doubled or tripled based upon the calculations of the voting records in the legislature between 1998 and 2004. 2. Conservative FC members have been consistently and obviously far more pro-government than liberal ones since the handover, based on voting records. As the conservative

133

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The Hong Kong Special Administrative Region in Its First Decade

legislators in the FCs were on the whole overwhelmingly pro-government, and that they have taken up a disproportionately large number of seats in the FC under the lopsided electoral system biased against liberal members, the FCs as a whole has significantly buttressed the executive-dominant government by supporting government’s bills in the legislature. Given that government’s policies have from time to time drawn criticism from the business sector since the handover, there is no prima facie evidence that FC members, particularly form the conservative FC members, have managed to contribute to the overall interest of business sector and play its “balancing role” well. On the whole, results of both sections testify that the FC by and large has failed to played well its allegedly “balancing role” by contributing to the long-term interests of the business sector in both crucial policy domains and overall voting behaviour. The alleged major raison-d’etre of the FC has thus failed to receive support from the available empirical evidence. Given the highly restricted franchise for adult citizens in electing representatives the FCs, the large disparities in the number of enfranchised voters for different FCs, and the overwhelmingly pro-government character of the FCs, there is grave doubt on the ability of the FCs to represent public aspirations and to effectively monitor the government. Worse still, under the current bicameral voting system, there has been constant dampening of the relative majority voices of legislators, including those from FC sectors, in passing their motions, bills and amendments. Hence, the unrepresentative FCs, amid the separate voting system, has largely curtailed both the monitoring and legislating power of the legislature since the handover. In Asia, a fundamental challenge for the legislatures of newly democratized or semi-democratized regimes has been amplifying the institutional capacity of the legislature for effective monitoring of the executive branch of the government.15 In

15 Hein G. R., “Strengthening Legislatures in Asia: The Challenges of Institution Building, Political Power, and Popular Legitimacy,” in L.D.

Functional Constituencies and Their “Balancing Role”

view of the decline in the monitoring and policy-making power of the legislature since Hong Kong’s reversion to China in 1997, an overall debate on the continuity of the FCs deserves urgent and serious treatment in order to improve the overall governance of Hong Kong.

Longley (ed.), Working Papers on Comparative Legislative Studies (Wisconsin: Lawrence University, 1994), pp. 361–371.

135

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The Hong Kong Special Administrative Region in Its First Decade

Appendix I Table 1.1 List of Major Motions/bills Concerning Economic Competitiveness in the Post-handover Legislature (1998–2004)

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

1

Lee Wing-tat (Democratic Party); 27 Jan 1999

Antimonopolization

That, as the Government vetoed Negatived the proposal for enacting a fair competition law in 1997 and set up the Competition Policy Advisory Group instead, but the Group has failed to put forward any measure to deal with unfair competition in various sectors such as energy, freight services, telecommunications, broadcasting and banking, thereby seriously impairing the interests of industrial and commercial enterprises and the public, this Council urges the Government to expeditiously enact a fair competition law and remove the unfair market barriers, so as to encourage enterprises to innovate and promote consumers' rights and interests.

2

Kenneth Ting (Liberal Party); 9 Jul 1999

Competition

That, following the substantial depreciation of the currencies and the increasing political stability of the Southeast Asian countries, Hong Kong’s manufacturing industry has been steadily losing goods orders, and the Government’s various policies to promote the development of the manufacturing industry have only had limited effect; to enhance the competitiveness of the local manufacturing industry, this Council urges the Government to:

Passed

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

i)

reduce the various government fees and charges relating to the manufacturing industry, as well as coordinating with the various relevant public and private organizations for lowering as far as possible public utilities charges, public transport costs, airport charges, container terminal handling charges and those fees which have a direct impact on the operating costs of the manufacturing industry; ii) introduce more tax concessions which are conducive to the development of the manufacturing industry; iii) explore the feasibility of offering direct government loans to manufacturers; and iv) discuss with the Central Government the extension of the right of Hong Kong manufacturers to sell their products in the Mainland and the provision of tax concessions, and streamline the regulation of the operation of factories established with capital from outside the Mainland. 3

Hui Import and Cheung-ching Export Trade (Hong Kong Progressive Alliance); 26 Jan 2000

That, in view of China’s Passed imminent accession to the World Trade Organization and the impact of new competition that Hong Kong’s import and export trade has to face, this Council urges the Government and the relevant support organizations, apart from continuing to

137

138

The Hong Kong Special Administrative Region in Its First Decade

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject consolidate Hong Kong’s established advantageous position and improve the local business environment, to exert all efforts to enhance the competitiveness of our import and export trade, thereby giving Hong Kong a head start in seizing any opportunities that may arise; to this end, the policies to be adopted should include: (i) broadening and strengthening the connections between Hong Kong and the Mainland, including setting up more resident business liaison offices in key provinces and cities in the Mainland to provide up-to-date information for Hong Kong businessmen and assist them in exploring business opportunities and solving problems; (ii) enhancing Hong Kong’s import and export services infrastructure in order to attract enterprises in the Mainland to patronize various import and export services provided in Hong Kong, including those in re-export, transportation, financing, insurance, logistics management, technical processing, quality accreditation and electronic transactions, etc.; (iii) implementing expeditiously infrastructural projects on cross-border transport and

Outcome of Motion

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

improving cross-border arrangements, including streamlining customs clearance procedures for passenger and freight transport between the Mainland and Hong Kong; (iv) stepping up trade promotion efforts, and in particular actively canvassing overseas enterprises to co- operate with Hong Kong enterprises (particularly those small and medium ones) in developing the Mainland market; and (v) providing additional training and financial support, etc., to upgrade the standards of the trade in such areas as language proficiency, information technology, management, marketing and global vision. 4

Dr Yeung Sum Electricity (Democratic Tariffs Party); 28 Jun 2000

That, as the Government has not Negatived required the Hongkong Electric Company Limited (“HEC”) and the CLP Power Hong Kong Limited (“CLP”) to increase their interconnection capacity and has approved the financial plans of HEC and CLP to invest a total of $57 billion up to 2004 for the extension and refurbishment of their electricity generation and supply facilities, thereby increasing the territory's electricity tariffs and the burden on the public in the coming years, this Council regrets the Government’s decisions.

139

140

The Hong Kong Special Administrative Region in Its First Decade

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

5

Leung Yiu-chung (Neighbourhood & Workers Service Centre); 19 Dec 2001

Fair Competition

That, as currently unreasonable market domination and unfair competition exist in such domains as power supply, gas, petroleum products, supermarkets, container terminals and their complementary services, and the Easy Pay System, and the trend tends to escalate, thereby adversely affecting people's livelihood as well as industrial and commercial enterprises, this Council urges the Government to expeditiously enact a fair competition law and set up a fair competition authority, so as to promote fair competition and safeguard the rights and interests of the public.

Negatived

6 (Passed as amendment)

Fred Li (Democratic Party); 23 Jan 2002

Electricity Companies/ Scheme of Control Agreement

That, regardless of the sustained economic recession in Hong Kong, the two power companies have been reaping, year after year, huge profits equivalent to the maximum permissible returns under the Scheme of Control Agreement, and fail to share the public's hardship, this Council urges the Government to strive for a more reasonable rate of return when it conducts the interim review in 2003, expeditiously announce the findings of the study on power interconnection, and to prepare, as early as possible, for the opening up of the electricity supply market in the future.

James Tien’s Amendment Passed

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

6(i) No Division

James Tien’s Amendment (Liberty Party); 23 Jan 2002

Electricity Companies/ Scheme of Control Agreement

That, in order to improve Hong Passed Kong’s business environment and alleviate people's burden, this Council urges the Government to strive, subject to the principle of upholding the spirit of contract, for fairer and more reasonable rates of return and other terms when it conducts in 2003 the interim review on the Scheme of Control Agreements signed with the two power companies, expeditiously announce the findings of the study on power interconnection, and to prepare, as early as possible, for the opening up of the electricity supply market in the future.

6(ii) Negatived

Lau Chin-shek (Hong Kong Confederatio n of Trade Unions); 23Jan 2002

Electricity Companies/ Scheme of Control Agreement

That, in order to improve Hong Negatived Kong’s business environment and alleviate people’s burden, this Council urges the Government to strive, subject to the principles of upholding the spirit of contract, protecting consumers’ interests, ensuring that users are free from shouldering and guaranteeing absolutely the high profits of the power companies, and keeping the public informed of the timetable for the opening up of the electricity supply market, for fairer and more reasonable rates of return and other terms when it conducts in 2003 the interim review on the Scheme of Control Agreements signed with the two power companies, expeditiously announce the findings of the study on power interconnection, and to prepare, as early as possible, for the

141

142

The Hong Kong Special Administrative Region in Its First Decade

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

opening up of the electricity supply market in the future. 7

Kenneth Ting (Liberal Party); 16 Oct 2002

Terminal Handling Charges

That this Council urges the Government to expeditiously study the specific impact of the persistently high terminal handling charges on the local economy and to strive to have those charges reduced to a reasonable level.

8

Fred Li (Democratic Party); 13 Nov 2002

Electricity and Gas Tariffs

That this Council urges the Passed Government to expeditiously discuss with the two power companies and Town Gas and encourage them to take account of their respective operating conditions and reduce their tariffs or offer concessions to users, thereby alleviating the burden on the public and the commercial and industrial sectors.

9

Tam Yiu-chung (DAB); 29 Oct 2003

Electricity, Gas and Water Charges

That, as various public transport operators have reduced their fares or offered concessions to passengers, this Council urges the Government to adopt the following measures to further alleviate the burden on the public and the commercial and industrial sectors, and speed up the economic recovery of Hong Kong, thereby promoting employment: (i) expeditiously discussing with the gas company and the two power companies and encouraging them to reduce their charges or provide concessions to consumers; (ii) lowering the permitted rates of return of the two power

Passed

Fred Li’s Amendment Passed

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

companies in the interim review on their Schemes of Control; and (iii) expeditiously consulting with the Government of Guangdong Province on entering into a new agreement on the supply of Dongjiang water and introducing a clause that allows flexibility in the supply of water, and returning to consumers all the savings derived from the purchase of Dongjiang water. 9(i)

(Amendment to Tam Yiu-chung) Li Wah-ming, Fred (DP) 29 Oct 2003

That, although individual public Passed transport operators have reduced their fares or offered concessions to passengers through interchange schemes, not all members of the public have benefited from these concessions; hence, this Council urges the Government to adopt the following measures to further alleviate the burden on the public and the commercial and industrial sectors, and speed up the economic recovery of Hong Kong, thereby promoting employment: (i) expeditiously discussing with the gas company and the two power companies and encouraging them to reduce their charges or provide concessions to consumers; (ii) striving to amend the Scheme of Control of the two power companies including the method for calculating their returns in

143

144

The Hong Kong Special Administrative Region in Its First Decade

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject the interim review; and (iii) expeditiously consulting with the Government of Guangdong Province on entering into a new agreement on the supply of Dongjiang water and introducing a clause that allows flexibility in the supply of water, and returning to consumers all the savings derived from the purchase of Dongjiang water, as well as exploring other water sources so as to increase the supply of potable water.

10 (Passed as amendment; see 10(i))

Cheng Ka-foo (DP) 12 Nov 2003

Livelihood

Transport Fare System

That, in regard to public transport fare system, this Council urges the Government to: (i) discuss with various franchised bus companies ways to improve their existing fare structures and the setting of full and sectional fares of each bus route according to the distance of the journey, so that the fare structures become more transparent and reasonable and fares paid by each passenger are as fair as possible; and (ii) examine jointly with various public transport operators the feasibility of issuing daily, weekly and monthly tickets that can be commonly used on various modes of public transport, so as to facilitate local passengers and tourists who need to use them to

Outcome of Motion

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

commute frequently, as well as to alleviate the burden of travelling expenses on them. 10(i)

(Amendment to Cheng Ka-foo) Lau Kong-wah (DAB) 12 Nov 2003

Livelihood

Transport Fare System

That, this Council urges the #Passed Government to expeditiously discuss with various public transport operators to seek a 10% reduction of fares across the board and the re-introduction of half-fare travel concessions for students, and to encourage them to co-operate in offering more joint concessions and, in regard to public transport fare system, to: (i) discuss with various franchised bus companies ways to improve their existing fare structures, expeditiously revise the scale of fares under the Public Bus Services Ordinance as well as reformulate existing guidelines on the setting of fares, and study the setting of full and sectional fares of each bus route according to the distance of the journey on condition that the burden on long-haul passengers will not be increased, so that the fare structures become more transparent and reasonable and fares paid by each passenger are as fair as possible; and (ii) examine jointly with various public transport operators the feasibility of issuing daily, weekly and monthly tickets that can be

145

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The Hong Kong Special Administrative Region in Its First Decade

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject

Outcome of Motion

commonly used on various modes of public transport, so as to facilitate local passengers and tourists who need to use them to commute frequently, as well as to alleviate the burden of travelling expenses on them. 10(ii)

(Amendment to Lau Kong-wah) Ho Chung-yan, Albert (DB) 12 Nov 2003

Livelihood

Transport Fare System

That, this Council urges the Government to expeditiously discuss with various public transport operators to seek a 10% reduction of fares across the board and the re-introduction of half-fare travel concessions for students, to encourage them to co-operate in offering more joint concessions, to expeditiously implement a procedure and mechanism for public transport fare adjustment which allow increase as well as reduction in fares and, in regard to public transport fare system, to: (i) discuss with various franchised bus companies ways to improve their existing fare structures, expeditiously revise the scale of fares and the groupings of routes in the scale under the Public Bus Services Ordinance as well as reformulate existing guidelines on the setting of fares, and study the setting of full and sectional fares of each bus route according to the distance of the journey on condition that the burden on long-haul passengers will not be

Negatived

Functional Constituencies and Their “Balancing Role”

Ref No.

Moved by (Affiliation)/ Date

Issue

Subject increased, so that the fare structures become more transparent and reasonable and fares paid by each passenger are as fair as possible; and (ii) examine jointly with various public transport operators the feasibility of issuing daily, weekly and monthly tickets that can be commonly used on various modes of public transport, so as to facilitate local passengers and tourists who need to use them to commute frequently, as well as to alleviate the burden of travelling expenses on them.

Sources: Minutes of Legislature (Hansard) 1998–2004. http://www.legco. gov.hk/english/.

Outcome of Motion

147

148

The Hong Kong Special Administrative Region in Its First Decade

Appendix I Table 1.2 Positions of Members of FCs & GCs on Major Motions/Bills Concerning Economic Competitiveness (1998-2004) Proportion of Functional Constituency Votes (per member present)

Ref No. Motion in Table 4

Date

No. of % % members % Remarks present For Against Abstained

Proportion of Geographical Constituency Votes (per member present)

Result

No. of members present

% For

% % Against Abstained Result

1

27.01.99

22

50

50

0

Negatived

17

94

6

0

Passed

2

09.07.99

20

80

0

20

Passed

15

40

0

60

Passed

3

26.01.00

4

28.06.00

25

39

61

0

Negatived

17

95

5

0

Passed

5

19.12.01

23

22

74

4

Negatived

18

67

33

0

Passed

6

23.01.02

No Division

No Division

6(i)

23.01.02

Passed (Not Available)

Not Available

6(ii)

23.01.02

7

16.10.02

8

13.11.02

9

29.10.03

9(i)

29.10.03

10

12.11.03

10(i)

12.11.03

14

57

0

43

Passed

19

95

10(ii)

12.11.03

14

50

7

43

Negatived

19

100

Passed (Not Available)

No Available

26 Passed (Not Available)

31

69

Passed

No Division

72

28

Passed

0

Negatived

Not Available

21

Passed

0

Passed

67

No Division

17

90

5

Passed

5

Not Available

20

No Division 18

Passed

No Division

Not Available

25

Not Available

100

0

Passed

Passed

0

Passed

21

Passed

5

0

Passed

0

0

Passed

No Division 17

Passed

19

No Division

79

0

No Division

Functional Constituencies and Their “Balancing Role”

Appendix I Table 1.3(i) Positions of Members of FCs in the Liberal & Conservative Camp on Major Motions/Bills Concerning Economic Competitiveness in the Post-handover Legislature (1998–2004)

Ref No. Motion in Table 4

Proportion of Liberal FC Members’ Votes

Proportion of Conservative FC Members' Votes

Date

No. of total Liberal FC members present

No. of total Conservative % % FC members Against Abstained present

% For

1

27.01.99

4

100

0

0

2

09.07.99

4

0

0

100

3

26.01.00

4

28.06.00

5

100

0

0

18

22

78

0

5

19.12.01

4

100

0

0

24

8

71

21

6

23.01.02

No Division

No Division

6(i)

23.01.02

Not Available

Not Available

6(ii)

23.01.02

7

16.10.02

8

13.11.02

9

29.10.03

9(i)

29.10.03

10

12.11.03

10(i)

12.11.03

4

100

0

0

10

40

0

60

10(ii)

12.11.03

4

100

0

0

10

30

10

60

% For

% Against

% Abstained

18

39

61

0

16

100

0

0

Not Available

4

100

0

Not Available

0

22

Not Available 5

100

0

100

0

82

0

Not Available 0

25

No Division 5

18

0

22

No Division

52

48

No

Division

31

14

0

55

No Division

149

150

The Hong Kong Special Administrative Region in Its First Decade

Appendix I Table 1.3 (ii) Positions of Members of GCs in the Liberal & Conservative Camp on Major Motions/Bills Concerning Economic Competitiveness in the Post-handover Legislature (1998-2004) Proportion of Liberal GC Members’ Votes Ref No. Motion in Table 4

Proportion of Conservative GC Members' Votes

Date

No. of total Liberal GC members present

No. of total Conservative % % GC members Against Abstained present

% For

1

27.01.99

13

100

0

0

2

09.07.99

11

18

0

82

3

26.01.00

4

28.06.00

12

100

0

0

5

80

20

0

5

19.12.01

12

100

0

0

6

0

100

0

6

23.01.02

6(i)

23.01.02

6(ii)

23.01.02

7

16.10.02

8

13.11.02

% For

% Against

% Abstained

4

75

25

0

4

100

0

0

Not Available

Not Available

No Division

14

100

0

No Division

0

7

Not Available 13

9

100

0

29.10.03

10

12.11.03

14

100

0

14

14

Not Available 0

7

No Division

9(i)

72

100

0

0

No Division 0

5

No Division

20

0

80

No Division

10(i) 12.11.03

14

93

6

0

5

100

0

0

10(ii) 12.11.03

14

100

0

0

5

100

0

0

Functional Constituencies and Their “Balancing Role”

Appendix II Table 2.1 List of Major Motions/Bills Concerning Civil Liberties Debated in the Post-handover Legislature (1998-2004)

No. 1

Moved by (Affiliation)/ Date

Issue

James To Public Order (Democratic Ordinance Party) (P.O.O.) (Amendment to a Government motion); 21 Dec 2000

Subject

Remark

That this Council notes that, in its Negatived concluding observations issued after considering the report on Hong Kong’s human rights situation submitted by the Hong Kong Special Administrative Region (“HKSAR”) Government in 1999, the United Nations Human Rights Committee stated that the HKSAR Government should review the Public Order Ordinance and bring its provisions into compliance with the relevant international covenant on human rights; this Council also considers that the Public Order Ordinance’s existing provisions relating to the regulation of public meetings and public processions, in balancing between protecting the individual’s right to freedom of expression and right of peaceful assembly, and the broader interests of the community at large, need to provide for a notification system, but the specific requirements and penalty provisions need to be amended, such as by increasing the maximum number of participants to be exempt from the notice requirement, shortening the required notice period and lowering the level of penalty for non-compliance with the notice requirement, so as to bring such provisions into line with the relevant covenant and the aspirations of a modern, democratic and liberal society.

151

152

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remark

1 (i)

Emily Lau Public Order (Frontier) Ordinance (Amendment (P.O.O.) to a Government motion); 21 Dec 2000

That, in view of the diversity of Negatived views in the community on the Public Order Ordinance’s provisions relating to the regulation of public meetings and public processions, this Council urges the authorities to refer this issue to the Law Reform Commission for consideration.

2

James To Civil Liberties (Democratic Party); 12 Dec 2002

That this Council considers that Negatived enacting laws according to the proposals in the “Consultation Document on Proposals to implement Article 23 of the Basic Law” will reduce the rights and freedoms enjoyed by the people of Hong Kong and damage the rule of law and “One Country, Two Systems.”

3

Sin Chung-kai (Democratic Party); 26 Feb 2003

That this Council condemns the Negatived authorities for compiling the Compendium of Submissions in respect of the enactment of laws to implement Article 23 of the Basic Law in a slipshod, incomplete and inequitable manner, distorting the views expressed by the public and organizations, and urges the authorities to commission an independent organization to analyze and summarize the views expressed by the public on the various proposals in the Consultation Document and to ensure that public opinions are fully and properly reflected and addressed.

Article 23

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remark

3(i)

Dr Yeung Sum (Democratic Party) (Amendment); 26 Feb 2003

Article 23

That this Council condemns the Negatived authorities for compiling the Compendium of Submissions in respect of the enactment of laws to implement Article 23 of the Basic Law in a slipshod, incomplete and inequitable manner, distorting the views expressed by the public and organizations, and urges the authorities to commission an independent organization to analyze and summarize the views expressed by the public on the various proposals in the Consultation Document and to ensure that public opinions are fully and properly reflected and addressed; hence, this Council urges the authorities to shelf the continuation of the legislative procedures for the National Security (Legislative Provisions) Bill.

4

Lee Cheuk-yan (Confederation of Trade Unions); 25 Jun 2003

Article 23/ 1 July March

That this Council appeals to all the people of Hong Kong to enthusiastically take part in “The 1 July march to oppose the enactment of legislation to implement Article 23 of the Basic Law and strive for the return of political power to the people,” and to continue to fight for building a democratic, prosperous and socially just Hong Kong.

Negatived

5

Chan Wai-yip Freedom of 2 Jun 2004 press and speech

That, as hosts of personal-view programmes have recently successively told the media that they are under pressure, and individual hosts have even taken themselves off the air, this Council expresses grave concern about this and is worried that freedom of

No Division

153

154

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remark

the press and freedom of speech in Hong Kong are at stake; this Council urges the Government to take measures to defend such freedoms. 5(i)

(Amendment to Chan Wai-yip)

Freedom of Press and Speech

That, as hosts of personal-view Passed programmes have recently successively told the media that they are under pressure, and individual hosts have even taken themselves off the air, and some members of the public are worried that freedom of the press and freedom of speech in Hong Kong are at stake, this Council expresses grave concern about this and urges the Government to expeditiously find out the truth of these incidents and take measures to keep ensuring that members of the media are free from threats of violence, so as to defend such freedoms.

Freedom of Press and Speech

That, as hosts of personal-view Passed programmes have recently successively told the media that they are under pressure, and individual hosts have even taken themselves off the air, and the public at large are worried that freedom of the press and freedom of speech in Hong Kong are at stake, this Council expresses grave concern about this and urges the Government to expeditiously find out the truth of these incidents and take measures to ensure that members of the media and their families are free from harassment and threats of violence, so as to defend such freedoms.

LAU Kong-wah (DAB) 2 Jun 2004

5(ii)

(Amendment to Lau Kong-wah)

Cheng Ka-foo (DP) 2 Jun 2004

Functional Constituencies and Their “Balancing Role”

No. 5(iii)

Moved by (Affiliation)/ Date (Amendment to Lau Kong-wah) Cheung Yu-yan (LP – Catering) 2 Jun 2004

Issue

Subject

Remark

That, as hosts of personal-view Passed programmes have recently successively told the media that they are under pressure, and individual hosts have even taken themselves off the air, and some members of the public are worried that freedom of the press and freedom of speech in Hong Kong are at stake, this Council expresses grave concern about this and urges the Government to expeditiously find out the truth of these incidents and take measures to smooth out their worries and to keep ensuring that members of the media are free from threats of violence, so as to defend such freedoms.

Sources: Minutes of Legislature (Hansard) 1998–2004. http://www.legco.gov.hk/english/.

155

156

The Hong Kong Special Administrative Region in Its First Decade

Appendix II Table 2.2 Positions of Members from the FCs & GCs on Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998–2004) Proportion of Functional Constituency Votes (per member present) Ref No. Motion in Table 3

No. of members present

% For

21.12.00

30

23

77

1(i) 21.12.00

30

20

2

12.12.02

30

3

26.02.03

Proportion of Geographical Constituency Votes (per member present)

Result

No. of members present

% For

0

Negatived

22

68

32

0

Passed

80

0

Negatived

22

68

32

0

Passed

19

78

3

Negatived

22

68

32

0

Passed

30

17

83

0

Negatived

23

74

26

0

Passed

3(i) 26.02.03

30

17

83

0

Negatived

23

70

30

0

Passed

4

25.06.03

25

20

80

0

Negatived

20

70

30

0

Passed

5

02.06.04

No Division

5(i) 02.06.04

Passed (Not Available)

20

90

0

10

Passed

23

74

0

26

Passed

1

Date

Remarks

5(ii) 02.06.04 5(iii) 02.06.04

Passed (Not Available)

% % Against Abstained

% % Against Abstained

Result

Functional Constituencies and Their “Balancing Role”

Appendix II Table 2.3 (i) Positions of Members of the FCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998-2004) Proportion of Liberal FC Members’ Votes Ref No. Motion in Table 3

Proportion of Conservative FC Members' Votes

Date

No. of members present

% For

1 1(i)

21.12.00 21.12.00

5 5

100 100

0 0

2

12.12.02

5

100

3

26.02.03

5

100

3(i)

26.02.03

5

4

25.06.03

5

5

02.06.04

No Division

No Division

5(i)

02.06.04

Not Available

Not Available

5(ii)

02.06.04

5(iii)

02.06.04

5

No. of members present

% For

0 0

25 25

8 4

92 96

0 0

0

0

25

0

88

12

0

0

25

0

96

4

100

0

0

24

0

100

0

100

0

0

20

0

100

0

100

% % Against Abstained

0

0

15

Not Available

87

% % Against Abstained

0

13

Not Available

Table 2.3 (ii) Positions of Members of GCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998-2004) Proportion of Liberal GC Members’ Votes No. of Motion in Table 3

Date

No. of members present

% For

1

21.12.00

15

100

0

1(i)

21.12.00

15

100

0

2

12.12.02

15

100

3

26.02.03

17

100

Proportion of Conservative GC Members' Votes No. of members present

% For

0

7

0

100

0

7

0

100

0

0

0

7

0

100

0

0

0

6

0

100

0

% % Against Abstained

% % Against Abstained

0

3(i)

26.02.03

17

94

6

0

6

0

100

0

4

25.06.03

14

100

0

0

6

0

100

0

5

02.06.04

No Division

No Division

5(i)

02.06.04

Not Available

Not Available

5(ii)

02.06.04

5(iii)

02.06.04

17

100

0

Not Available

0

6

0

0

Not Available

100

157

158

The Hong Kong Special Administrative Region in Its First Decade

Appendix III Table 3.1 List of Major Motions Concerning Political Accountability in the Post-handover Legislature (1998–2004)

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remarks

1

Margaret Ng No Confidence (Independent); 11 March 1999

This Council has no confidence in the Secretary of Justice, Ms Elsie Leung.

2

Cyd Ho (The Frontier); 9 July 1999

Accountability/ Democracy

Urges the Chief Executive to Negatived expeditiously review the powers and responsibilities of the Executive Council, the criteria for appointing the Executive Council Members, the role of the Executive Council Members and the means for dealing with conflicts of interest, and to enhance the transparency of the Executive Council, so as to enhance its accountability to Hong Kong people

3

Margaret Ng No Confidence (Independent); 8 November, 2000

That the Chief Executive should Negatived terminate the appointment of Mr. Andrew Lo as Senior Special Assistant to the Chief Executive having regard to the fact that Mr. Lo has completely lost public credibility through the evidence he gave to the Independent Investigation Panel appointed by the University of Hong Kong and the manner in which he gave the evidence.

4

Martin Lee POAS/ Universal (Democratic Suffrage Party) (Amendment to a Government motion on POAS); 30 May 2002

That this Council supports the Negatived accountability system for principal officials which is grounded in a democratic political system based n universal suffrage and is a accountable to the Legislative Council.

Negatived

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

159

Remarks

5

Margaret Ng No Confidence (Independent); 7 May 2003

Vote of no confidence in the Financial Secretary, Mr. Anthony Leung.

Negatived

6

Albert Chan Resignation (Independent); 14 May 2003

Calls for the resignation of the Chief Negatived Executive, Mr Tung Chee-hwa.

7

Dr Yeung Sum (Democratic Party); 10 Jul 2003

POAS

That this Council endorses the Passed Report of the Select Committee to inquire into the handling of the Severe Acute Respiratory Syndrome outbreak by the Government and the Hospital Authority, and condemns the former Director of Health, Dr Margaret Chan Fung Fu-chun.

8

Emily Lau (The Frontier); 8 Oct 2003

Resignation

That, as there has been Negatived retrogression in human rights, the rule of law and economic development in Hong Kong and democratization of the political system has remained stagnant under the administration of the Chief Executive Mr. Tung Chee-hwa, prompting the public to make repeated demands for him to step down, this Council calls on Mr. Tung to take the responsibility and resign in accordance with the wishes of the people.

9

Michael Mak SARS (Independent); 15 Oct 2003

That, in view of the possible No resurgence of the Severe Acute Division Respiratory Syndrome (SARS), this Council urges the Government to devise a better contingency mechanism and adopt preventive measures to safeguard public health and ensure that the spread of the disease can be effectively contained in case of an outbreak, with a view to minimizing the

160

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remarks

damage; these measures should include: (i) enhancing the coordination and collaboration of the work of public and private medical institutions as well as residential care homes for the elderly in the treatment and prevention of SARS, and issuing standardized guidelines in this respect; (ii) providing sufficient and proper protective gears as well as infection control training to front-line health care workers to ensure that they work in a safe environment; (iii) expediting the construction of isolation facilities in public hospitals; (iv ) establishing a clear mechanism for reporting confirmed and suspected SARS cases for public and private medical institutions; (v) implementing primary health education more extensively in the community and at schools so as to enhance public understanding and awareness of infectious diseases; (vi) promoting continuously with all efforts the territory-wide participation in sustainable measures on public health and cleanliness; and (vii) vigorously enforcing quarantine and health measures at exit and entry points. 9(i)

Chan Kwok-keung (DAB); 15 Oct 2003

SARS

That, in view of the possible resurgence of the Severe Acute Respiratory Syndrome (SARS) in winter, this Council urges the Government to devise a better

Passed

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject contingency mechanism and adopt preventive measures to safeguard public health and ensure that the spread of the disease can be effectively contained in case of an outbreak, with a view to minimizing the damage; these measures should include: (i) enhancing the coordination and collaboration of the work of public and private medical institutions as well as residential care homes for the elderly in the treatment and prevention of SARS, and issuing standardized guidelines in this respect; (ii) providing sufficient and proper protective gears as well as infection control training to front-line health care workers to ensure that they work in a safe environment; (iii) expediting the construction of isolation facilities in public hospitals; (iv) establishing a clear mechanism for reporting confirmed and suspected SARS cases for public and private medical institutions; (v) implementing primary health education more extensively in the community and at schools so as to enhance public understanding and awareness of infectious diseases; (vi) promoting continuously with all efforts the territory-wide participation in sustainable measures on public health and cleanliness;

Remarks

161

162

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Remarks

(vii) vigorously enforcing quarantine and health measures at exit and entry points; (viii) implementing as soon as possible the recommendations of the SARS Expert Committee. Sources: Minutes of Legislature (Hansard) 1998–2004. http://www.legco.gov.hk/english/.

Appendix III Table 3.2 Positions of Members from FCs & GCs for Major Motions/Bills Concerning Political Accountability in the Post-handover Legislature (1998–2004) Proportion of Functional Constituency Votes (per member present)

No. of Motions

Date

No. of members % % % Remarks present For Against Abstained

Result

Proportion of Geographical Constituency Votes (per member present) No. of members % present For

% % Against Abstained

Result

1

1 (11.03.99)

29

21

55

24

Negatived

20

75

25

0

Negatived

2

2 (09.07.99)

22

27

73

0

Negatived

16

81

19

0

Passed

3

3 (08.11.00)

28

18

79

4

Negatived

20

65

35

0

Negatived

4

4 (30.05.02)

28

18

75

7

Negatived

21

65

35

0

Passed

5

5 (07.05.03)

27

19

74

7

Negatived

23

74

26

0

Passed

6

6 (14.05.03)

29

17

83

0

Negatived

20

70

30

0

Passed

7

7 (10.07.03)

24

29

71

0

Negatived

21

71

29

0

Passed

8

8 (08.10.03)

27

19

81

0

Negatived

22

73

27

0

Passed

9

9 (15.10.03)

9(i) 9(i) (15.10.03)

No Division

No Division

Passed (Not Available)

Not Available

No Division

Passed

Not Available

Passed

Functional Constituencies and Their “Balancing Role”

Appendix III Table 3.3 (i) Positions of Members of FCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998–2004) Proportion of Liberal FC Members’ Votes as % of total Liberal FC members present Number of Motion/ Date

Proportion of Conservative FC Members’ Votes as % of total Conservative FC members present

For

Against

Abstain

For

Against

Abstain

1 (11.03.99)

100

0

0

4

64

29

2 (09.07.99)

100

0

0

6

94

0

3 (08.11.00)

100

0

0

0

96

4

4 (30.05.02)

100

0

0

0

91

9

5 (07.05.03)

100

0

0

0

91

9

6 (14.05.03)

100

0

0

0

100

0

7 (10.07.03)

100

0

0

11

89

0

8 (08.10.03)

100

0

0

0

100

0

9 (15.10.03) 9(i) (15.10.03)

No Division

No Division

Not Available

Not Available

Table 3.3 (ii) Positions of Members in GCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998–2004) Proportion of Liberal GC Members’ Votes

Proportion of Conservative GC Members’ Votes

No. of members present

% For

1 (11.03.99)

15

100

0

0

5

0

100

0

2 (09.07.99)

13

100

0

0

3

0

100

0

3 (08.11.00)

13

100

0

0

7

0

100

0

4 (30.05.02)

15

93

7

0

6

0

100

0

5 (07.05.03)

17

100

0

0

6

0

100

0

6 (14.05.03)

14

100

0

0

6

0

100

0

7 (10.07.03)

11

100

0

0

2

0

100

0

8 (08.10.03)

16

100

0

0

6

0

100

0

Date (with vote division)

9 (15.10.03) 9(i) (15.10.03)

No. of members % % Against Abstained present

% For

% % Against Abstained

No Division

No Division

Not Available

Not Available

163

164

The Hong Kong Special Administrative Region in Its First Decade

Appendix IV Table 4.1 List of Major Motions/bills Demanding/Obstructing Democratization Rejected/Passed in the Post-handover Legislature (1998–2004)

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

1

Cheng Kar-foo (Democratic Party); 15 Jul 1998

Universal Suffrage/ Elections of LegCo and CE

All Members of the Second Negatived Legislative Council of the Hong Kong Special Administrative Region should be directly elected in the year 2000, and that the Chief Executive for the second term of office should be directly elected in the year 2002.

1 (i)

Christine Loh (Citizens’ Party); 15 Jul 1998

Elections of LegCo and CE/Public Consultation

All Members of the Second Negatived Legislative Council of the Hong Kong Special Administrative Region should be directly elected in the year 2000, and that the Chief Executive for the second term of office should be directly elected in the year 2002; and to this end, this Council urges the Chief Executive to set up forthwith constitutional convention in which relevant constitutional issues can be discussed expeditiously an din an open and organized manner.

2

Cyd Ho Sau Universal Lan (Frontier); Suffrage 29 Jul 1998

Puts to the Government its views on the Consultation Document on the Review of District Organizations published in June 1998, and urges the Government, on the principles of not reducing the existing powers and functions of district organizations and returning all seats by equal and universal suffrage, to fully

Negatived

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

consult the various sectors of the community before making a final decision on the future development of district organizations. 3

Lee Universal Cheuk-yan Suffrage (Confederation of Trade Union); 23 Sep 1998

Urges the Government to expeditiously introduce bills to amend the Basic Law so as to achieve the following objectives: 1. the Chief Executive and all Members of the Legislative Council be elected by universal suffrage to make both the executive authorities and the legislature accountable to the Hong Kong public; 2. the provisions which restrict the introduction of bills by Members of the Legislative Council and which require Members’ proposals to be voted in groups be repealed, to enable the Legislative Council to exercise more effective checks and balances on the acts of the executive authorities; and 3. the Chief Executive makes political appointments of principal officials and the legislature may, by passing a vote of no confidence, impeach officials for dereliction of duties, so as to fulfil the objective that principal officials should assume political responsibility.

Negatived

165

166

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

4

Fred Li (Democratic Party); 13 Oct 1999

Democracy

Urges the Government to Negatived conduct a referendum on the retention or abolition of the two Municipal Councils, which should be held on the same day as the 1999 District Councils Election; this Council also requests the Government to respect the outcome of the referendum.

5

Secretary for Constitutional Affairs; 11 Jul 2001

Chief Executive Election Bill

Winning candidate for the post Passed of Chief Executive needs to declare he is not a member of a political party.

6

Martin Lee (Democratic Party); 11 Jul 2001

Democracy

If Hong Kong is to be Negatived developed into a first-class cosmopolitan city comparable to New York or London, the Government cannot confine itself to promoting a knowledge-based economy, producing highly-talented people and cultivating a healthy natural environment, this Council calls upon the Government to urgently take effective measures to establish a political system based on universal suffrage, a tradition of respect for human rights and the rule of law, and a social system that upholds social justice and the dignity of the individual – which no cosmopolitan city can do without.

7

Emily Lau (Frontier); 14 Mar 2002

Universal Suffrage/ Public Consultation

The method for the selection of Negatived the second Chief Executive of the Hong Kong Special Administrative Region is undemocratic, depriving the

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

general public of the right to participate in the election process, and urges the authorities to expeditiously start its consultation work on political reform. 8

Martin Lee (Democratic Party); 30 May 2002

Universal Suffrage

Supports the accountability system for principal officials which is grounded in a democratic political system based on universal suffrage and is accountable to the Legislative Council.

9

James To (Democratic Party) 12 Dec 2002

Article 23

Enacting laws according to the Negatived proposals in the “Consultation Document on Proposals to implement Article 23 of the Basic Law” will reduce the rights and freedoms enjoyed by the people of Hong Kong and damage the rule of law and “One Country, Two Systems.”

10

Yeung Sum (Democratic Party); 17 Jan 2003

Article 23

Thanks the Chief Executive for Negatived his address, but deeply regrets that the Government has not proposed in the Policy Address the introduction of a white bill on the enactment of legislation to implement Article 23 of the Basic Law.

11

Emily Lau (Frontier); 20 Feb 2003

Public As the Executive Authorities Consultation have undertaken in the Policy Agenda to begin to make suitable preparations for the review of constitutional developments after 2007, this Council urges the Administration to conduct as soon as

Negatived

Negatived

167

168

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

possible a public consultation on constitutional reforms. 12

Sin Chung-kai Public (Democratic Consultation Party); / Article 23 26 Feb 2003

Condemns the authorities for Negatived compiling the Compendium of Submissions in respect of the enactment of laws to implement Article 23 of the Basic Law in a slipshod, incomplete and inequitable manner, distorting the views expressed by the public and organiza tions, and urges the authorities to commission an independent organization to analyze and summarize the views expressed by the public on the various proposals in the Consultation Document and to ensure that public opinions are fully and properly reflected and addressed.

12(i)

Yeung Sum (Democratic Party); 26 Feb 2003

Condemns the authorities for Negatived compiling the Compendium of Submissions in respect of the enactment of laws to implement Article 23 of the Basic Law in a slipshod, incomplete and inequitable manner, distorting the views expressed by the public and organizations, and urges the authorities to commission an independent organization to analyze and summarize the views expressed by the public on the various proposals in the Consultation Document and to ensure that public opinions are fully and properly reflected and addressed; hence, this Council urges the authorities to shelf the continuation of the

Article 23

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

legislative procedures for the National Security (Legislative Provisions) Bill. 13

Albert Ho (Democratic Party); 21 May 2003

Universal Suffrage

Demands that the Basic Law Negatived be amended so as to expedite the full implementation of the election of the Chief Executive and all Members of the Legislative Council by universal suffrage.

14

Lee Article 23 Cheuk-yan (Confederation of Trade Unions/ Frontier); 25 Jun 2003

Appeals to all the people of Negatived Hong Kong to enthusiastically take part in “The 1 July march to oppose the enactment of legislation to implement Article 23 of the Basic Law and strive for the return of political power to the people,” and to continue to fight for building a democratic, prosperous and socially just Hong Kong.

15

Yeung Sum (Democratic Party); 10 Jul 2003

Democracy

Considers that the Negatived accountability system for principal officials introduced by the Chief Executive, Mr. Tung Chee-hwa, is neither democratic nor accountable, and is a failed system.

16

James To (Democratic Party); 12 Nov 2003

Universal Suffrage

Urges the Government to Negatived publish a green paper on the reform of the political system of the Hong Kong Special Administrative Region by the end of this year so as to implement the election of the Chief Executive and all Members of the Legislative Council by universal suffrage in 2007 and 2008 respectively, and expeditiously abolish the

169

170

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

appointed and ex-officio seats in the District Councils to return the political power to the people. 17

Yeung Sum (Democratic Party); 3 Dec 2003

Universal Suffrage

As more than one million voters Negatived cast their votes in the District Council elections on 23 November, the appointment of District Council members by the Chief Executive will be tantamount to changing the results of voting by the public, this Council urges the Chief Executive to appoint the least number of District Council members in accordance with the law and respect the choices made by more than one million voters who cast their votes in the District Council elections.

18

Yeung Sum (Democratic Party); 6 Feb 2004

Universal Suffrage/ Public Consultation

Thanks the Chief Executive for Negatived his address, but regrets his failure to respond to the public’s democratic aspirations for electing the Chief Executive and all Members of the Legislative Council by universal suffrage in 2007 and 2008 respectively, and urges the Government to immediately commence its consultation on constitutional review; also demands that the Task Force on Constitutional Development proactively relay to the Central Government Hong Kong people’s strong aspirations for democracy, and operate in a transparent and open manner, keeping the public informed of the progress of the discussions.

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

19

Andrew Cheng (Democratic Party); 25 Feb 2004

19(i)

Howard Young

19(ii)

Yeung Sum

Issue

Subject

Public Regrets that the Task Force on Negatived Consultation Constitutional Development's trip to Beijing lacks transparency and urges the Government to immediately consult the public on whether the Chief Executive and all Members of the Legislative Council should be elected by universal suffrage in 2007 and 2008 respectively, collate the public’s views received in an impartial manner, and accurately relay them to the Central Government.

Not support Urges the Task Force on Public Constitutional Development to Consultation expeditiously consult the (LP - Tourism) public on the constitutional 25 Feb 2004 developments for 2007 and 2008 respectively, collate the views received in an impartial manner, and accurately relay them to the Central Government.

(DP) 25 Feb 2004

Result

Negatived

Political Urges the Task Force on Negatived Development Constitutional Development to increase the transparency of its discussions with the Central Government, and also urges the Government to immediately Public Consultation consult the public on whether the Chief Executive and all Members of the Legislative Council should be elected by universal suffrage in 2007 and 2008 respectively, collate the public's views received in an impartial manner, and accurately relay them to the Central Government.

171

172

The Hong Kong Special Administrative Region in Its First Decade

No. 20

21

Moved by (Affiliation)/ Date

Subject

Result

James To (Democratic Party); 17 Ma 2004

Public Urges the Task Force on Negatived Consultation Constitutional Development to consult, in a pragmatic manner, the public on concrete proposals of constitutional reform, to avoid unnecessary arguments, causing social polarization and instability; and to express to the Central Government that the principles prescribed in the Basic Law shall be respected and complied with in implementing constitutional reform.

Fung Kin Kee

Political That the Council do now Negatived Development adjourn for the purpose of debating the Report by the Chief Executive of the Hong Kong Special Administrative Adjournment Region to the Standing Committee of the National on the People’s Congress on whether Debate of there is a need to amend the CE Report methods for selecting the Chief Executive of the Hong Kong Special Administrative Region in 2007 and for forming the Legislative Council of the Hong Kong Special Administrative Region in 2008.

(ADPL) 22 Apr 2004

22

Issue

Fung Kin Kee (ADPL) 5 May 2004

Political That this Council does not Negatived Development accept the report submitted by the Chief Executive (“CE”) to the Standing Committee of the Universal National People’s Congress, Suffrage and is dissatisfied with the nine (Not Accept factors proposed therein regarding constitutional reform, CE Report Submitted to as such a move is tantamount the NPCSC) to setting up more barricades hindering the implementation of universal suffrage in Hong

Functional Constituencies and Their “Balancing Role”

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

Kong and hampering the development of democracy; at the same time, this Council urges the CE to consult Hong Kong people immediately and submit a supplementary report which fully reflects the opinions of the public, so as to meet Hong Kong people’s expectations of electing the CE and all Legislative Council Members by universal suffrage in 2007 and 2008 respectively. 23

HO Chun-yan (DP) 20 May 2004

Others

That, in view of the objection of Negatived the people of Hong Kong at large to the decision of the Standing Committee of the National People’s Congress Regret & (“NPCSC“) to rule out flatly the Dissatisfaction selection of the Chief Executive with NPCSC by universal suffrage in the year 2007 and the election of Decision all the Members of the Legislative Council (“LegCo“) by universal suffrage in the year 2008 in Hong Kong, and to maintain the existing ratio between LegCo Members returned by functional constituencies and Members returned by geographical constituencies through direct elections, as well as the procedures of separate voting on bills and motions introduced by individual Members, this Council considers that the decision of NPCSC completely ignores Hong Kong people’s general aspirations for democracy; this Council expresses regret about and dissatisfaction with such

173

174

The Hong Kong Special Administrative Region in Its First Decade

No.

Moved by (Affiliation)/ Date

Issue

Subject

Result

decision, and calls upon the people of Hong Kong to continue striving for democracy with all might and never give up. 23(i)

(Amendment to HO Chun-yan)

Leung Yiu-chung (DAB) 20 May 2004

Others

That, in view of the objection of Negatived the people of Hong Kong at large to the decision of the Request Standing Committee of the NPCSC National People's Congress Withdraw (“NPCSC“) to rule out flatly the the selection of the Chief Executive Decision, by universal suffrage in the But Reject to year 2007 and the election of Express all the Members of the Regret & Legislative Council (“LegCo”) Disby universal suffrage in the satisfaction year 2008 in Hong Kong, and to maintain the existing ratio between LegCo Members returned by functional constituencies and Members returned by geographical constituencies through direct elections, as well as the procedures of separate voting on bills and motions introduced by individual Members, this Council considers that the decision of NPCSC completely ignores Hong Kong people’s general aspirations for democracy and expresses regret about and dissatisfaction with such decision; this Council urges the Chief Executive to request the State Council to propose to NPCSC the withdrawal of the above decision.

Sources: Minutes of Legislature (Hansard) 1998–2004; http://www.legco.gov.hk/english/.

Functional Constituencies and Their “Balancing Role”

Appendix IV Table 4.2 Positions of Members from FCs & GCs on Major Motions/Bills Concerning Democracy in the Post-handover Legislature (1998–2004) Proportion of Functional Constituency Votes Proportion of Geographical Constituency Votes (per member present) (per member present) No. of Motion in Table 1

1

Date (with vote division)

No. of members present

% For

15.07.98

25

19

Results

No. of members present

% For

0

Negatived

20

48

52

0

Negatived

% % Against Abstained

81

% % Against Abstained

Results

1(i)

15.07.98

24

20

80

0

Negatived

20

52

48

0

Negatived

2

29.07.98

24

21

54

25

Negatived

20

48

48

4

Negatived

3

23.09.98

23

17

83

0

Negatived

20

56

44

0

Passed

4

10.03.99

27

30

70

0

Negatived

56

44

0

Negatived

5

13.10.99

25

23

77

0

Negatived

15

46

54

0

Negatived

6

12.07.01

27

17

79

4

Negatived

21

54

46

0

Passed

7

13.03.02

25

20

80

0

Negatived

19

59

41

0

Passed

8

20.05.02

28

18

75

7

Negatived

21

54

46

0

Passed

9

11.12.02

28

18

79

3

Negatived

22

56

44

0

Passed

10

17.01.03

25

16

80

4

Negatived

24

55

41

4

Passed

11

19.02.03

23

17

31

52

Negatived

23

63

4

33

Passed

12

26.02.03

29

17

83

0

Negatived

23

61

39

0

Passed

12(i) 26.02.03

28

17

83

0

Negatived

23

57

43

0

Passed

13

21.05.03

23

22

74

4

Negatived

21

58

42

0

Passed

14

25.06.03

25

20

80

0

Negatived

20

56

44

0

Passed

15

09.07.03

24

29

71

0

Negatived

21

60

40

0

Passed

16

12.11.03

23

22

61

17

Negatived

20

64

20

16

Passed

17

03.12.03

26

31

62

7

Negatived

22

63

37

0

Passed

18

06.02.04

27

15

85

0

Negatived

22

59

41

0

Passed

19

25.02.04

25

20

80

0

Negatived

19

57

43

0

Passed

19(i) 25.02.04

25

68

32

0

Passed

19

41

59

0

Negatived

19(ii) 25.02.04

25

24

76

0

Negatived

19

54

46

0

Passed

20

17.03.04

26

42

33

25

Negatived

21

60

40

0

Passed

21

05.05.04

27

19

81

0

Negatived

24

59

41

0

Passed

22

20.05.04

25

16

84

0

Negatived

23

61

39

0

Passed

22(i) 20.05.04

25

16

84

0

Negatived

23

61

39

0

Passed

23(i) 20.05.04

25

16

84

0

Negatived

23

61

39

0

Passed

Sources: Minutes of Legislature (Hansard) 1998–2004. http://www.legco.gov.hk/english/.

175

176

The Hong Kong Special Administrative Region in Its First Decade

Appendix IV Table 4.3 (i) Positions of Members of FCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Democracy in the Post-handover Legislature (1998-2004) Proportion of Liberal FC Members’ Votes No. of Motion in Table 1

Date

No. of members present % For

% Against

Proportion of Conservative FC Members’ Votes

No. of members % Abstained present % For

% Against

% Abstained

1

15.07.98

5

100

0

0

20

0

100

0

1(i)

15.07.98

5

100

0

0

19

0

100

0

2

29.07.98

5

100

0

0

19

0

68

32

3

23.09.98

5

80

20

0

18

0

100

0

4

13.10.99

5

100

0

0

21

5

95

0

5

11.07.01

5

0

80

20

23

100

0

0

6

11.07.01

5

100

0

0

22

18

77

5

7

14.03.02

5

100

0

0

20

0

100

0

8

30.05.02

5

100

0

0

23

0

91

9

9

12.12.02

5

100

0

0

23

0

96

4

10

17.01.03

5

80

0

20

21

0

95

5

11

20.02.03

4

100

0

0

19

0

42

58

12

26.02.03

5

100

0

0

24

0

100

0

12(i)

26.02.03

5

100

0

0

23

0

100

0

13

21.05.03

5

100

0

0

18

0

94

6

14

25.06.03

5

100

0

0

20

0

100

0

15

10.07.03

5

100

0

0

19

11

89

0

16

12.11.03

5

100

0

0

18

0

78

22

17

03.12.03

5

100

0

0

21

14

76

10

18

06.02.04

4

100

0

0

23

0

100

0

19

25.02.04

5

100

0

0

20

0

100

0

20

17.03.04

5

100

0

0

19

26

42

32

21

22.04.04

22

05.05.04

5

Not Available 100

0

0

22

Not Available 0

100

0

23

20.05.04

5

100

0

0

25

16

84

0

23(i)

20.05.04

5

100

0

0

25

16

84

0

Functional Constituencies and Their “Balancing Role”

Appendix IV Table 4.3 (ii) Positions of Members of GCs in the Liberal & Conservative Camp for Major Motions/Bills Concerning Civil Liberties in the Post-handover Legislature (1998-2004) Proportion of Liberal GC Members’ Votes No. of Motion in Table 1

Date

No. of members present

% For

Proportion of Conservative GC Members’ Votes

No. of % % members Against Abstained present

% For

% % Against Abstained

1

15.07.98

15

100

0

0

5

0

100

1(i)

15.07.98

15

93

7

0

5

0

100

0 0

2

29.07.98

15

93

0

7

5

0

100

0

3

23.09.98

15

100

0

0

5

0

100

0

4

13.10.99

11

100

0

0

4

0

100

0

5

11.07.01

14

0

93

7

7

100

0

0

6

11.07.01

14

100

0

0

7

0

100

0

7

14.03.02

13

100

0

0

6

0

100

0

8

30.05.02

15

93

7

0

6

0

100

0

9

12.12.02

15

100

0

0

7

0

100

0

10

17.01.03

17

93

0

7

7

0

100

0

11

20.02.03

17

100

0

0

6

0

0

100

12

26.02.03

17

100

0

0

6

0

100

0

12(i)

26.02.03

17

93

7

0

6

0

100

0

13

21.05.03

15

100

0

0

6

0

100

0

14

25.06.03

14

100

0

0

6

0

100

0

15

10.07.03

15

100

0

0

6

0

100

0

16

12.11.03

16

100

0

0

4

0

25

75

17

03.12.03

17

100

0

0

5

0

100

0

18

06.02.04

17

100

0

0

7

0

100

0

19

25.02.04

13

100

0

0

6

0

100

0

19(i)

25.02.04

13

0

100

0

6

100

0

0

19(ii)

25.02.04

13

100

0

0

6

0

100

0

20

17.03.04

15

100

0

0

6

0

100

0

21

22.04.04

22

05.05.04

17

100

0

0

7

0

100

0

23

20.05.04

17

100

0

0

6

0

100

0

23(i)

20.05.04

17

100

0

0

6

0

100

0

Not Available

Not Available

177

4 The Mainlandization and Recolonization of Hong Kong1: A Triumph of Convergence over Divergence with Mainland China Sonny LO University of Waterloo, Canada

Since Hong Kong’s return of its sovereignty from Britain to the People’s Republic of China (PRC) on 1 July 1997, its political development has proved to be turbulent. This chapter aims at analyzing the dynamics contributing to Hong Kong’s governing crisis. It will argue that the most significant factor leading to its governance crisis from July 1997 to March 2005 was the tension between convergence and divergence. While the concern of “one country” has been propelling Hong Kong toward a system more similar to the PRC politically than ever before, the demands of maintaining the “two systems” has become an obstacle to the policy intentions of both Beijing and its clientelist Hong Kong regime.2 The

1 “Mainlandization” is defined here as the policies of the Hong Kong government to make Hong Kong more politically dependent on Beijing, economically more reliant on the Mainland’s support, socially more patriotic toward the motherland, and legally more reliant on the interpretation of the Basic Law by China’s National People's Congress. “Recolonization” is an academic concept referring to the policies of either the Central Government in Beijing or the local government in Hong Kong to support, promote and achieve the mainlandization of Hong Kong. 2 For an interesting work that depicts Hong Kong’s clientelist relations with its patron Beijing, see Bruce Kwong, “Patron – client politics and elections in Hong Kong,” unpublished doctoral thesis, University of Hong Kong, December 2004. 179

180

The Hong Kong Special Administrative Region in Its First Decade

chapter will first examine the end of the Tung Chee-hwa administration. Then it will discuss the theory of convergence with special reference to the Hong Kong case. This chapter will explore how the two dimensions – political and economic – of convergence have been unfolding in Hong Kong since its retrocession. It will also elaborate on the divergence between the Hong Kong society and the governmental attempt at legislating on the anti-subversion law in 2003. Finally, it will assess the strategy of mainlandization of the Donald Tsang administration, the problem of recolonizing the Hong Kong polity, and the political consequences of Hong Kong’s increasing politico-economic convergence with Mainland China.

The End of the Tung Chee-hwa Era On 10 March 2005, the Chief Executive of the Hong Kong Special Administrative Region (HKSAR), Tung Chee-hwa, tendered his formal resignation to the State Council of the PRC, terminating his seven years and eight months of turbulent governance. Tung used health as a justification for his resignation. 3 Yet, the new PRC leadership under President Hu Jintao and Premier Wen Jiabao since 2003 had viewed the Tung administration as having “inadequacies” in governance.4 Hu publicly appealed to the Tung government to look into its “inadequacies” on 21 December 2004, when he attended the fifth anniversary of the Macao Special Administrative Region.5 After the mass protests of half a million Hong Kong people on the streets on 1 July 2003, Beijing set up a coordination committee led by Politburo member Zeng Qinghong to deal with the Hong Kong crisis, which stemmed from the public outcry over the proposed enactment of Article 23 of the Basic Law – a provision

3 Ming Pao (Ming bao, a Chinese newspaper published in Hong Kong), 11 March 2005. 4 Next Magazine (Yizhoukan, a Chinese weekly magazine published in Hong Kong), no. 782 (3 March 20 05), pp. 46–53. 5 Sing Tao Daily (Xingdao ribao, a Chinese newspaper published in Hong Kong)), 4 March 2005.

The Mainlandization and Recolonization of Hong Kong

that outlaws treason, sedition, secession, and subversion in the HKSAR.6 The protestors were dissatisfied with a whole range of government policies, including housing, social welfare cuts, civil service reform, and the crisis mismanagement of the severe acute respiratory syndrome (SARS).7 The mass protests shocked the PRC leaders who immediately decided to establish the coordination committee. It was composed of eighteen members including officials from the State Council’s Hong Kong and Macao Affairs Office, the Liaison Office in Hong Kong, the Liaison Office in Macao, the Ministry of Public Security, the Ministry of National Security, the Party Central Committee’s United Front Department, and the People’s Liberation Army.8 Although Beijing propped up Tung after the political earthquake on 1 July 2003 by signing the Closer Economic Partnership Arrangement (CEPA) with the HKSAR government and by allowing more Mainland tourists to visit the territory, the gradual economic rebound in Hong Kong could not prevent dissatisfied citizens from taking to the streets.9 On 1 July 2004, about half a million people again protested against the Tung administration, ensuing reports that three popular radio hosts – Albert Cheng, Wong Yuk-man, and

6 Eastweek (Dongzhoukan, a Chinese weekly magazine published in Hong Kong), 26 May 2004, pp. 19–28. Also see Cheng Ming Monthly (a monthly magazine published in Hong Kong), No. 215 (July 2003), pp. 6–8; Wide Angle (Guangjiaojing, a Chinese monthly magazine published in Hong Kong), No. 371 (15 August – 16 September 2003), pp. 6–10; and Frontline (Qianshao, a Chinese monthly magazine published in Hong Kong), No. 162 (August 2004), pp. 6–8. For the debate over Article 23 of the Basic Law, see Fu Hualing, Carole J. Petersen, and Simon N.M. Young (eds.), National Security and Fundamental Freedoms: Hong Kong’s Article 23 Under Scrutiny (Hong Kong: Hong University Press, 2005). 7 See Sing Pao (Cheng bao, a Chinese newspaper published in Hong Kong), 24 July 2003. Also see Liam Fitzpatrick, “The Long March,” Time (14 July 2003), 18–23. The Central Government criticized its officials in Hong Kong for failure in understanding the problems of the territory and the degree of public discontent. Political commentator and Hong Kong member to the National People’s Congress, Allen Lee Peng-fei, publicly unveiled that Gao Siren, the director of the Liaison Office in the HKSAR, was criticized by Beijing. Lee made the remarks in his program at the Commercial Radio, 25 July 2003 at 9:25 AM. 8 Sing Pao, 18 July 2003. 9 See Eastweek, 9 June 2004, pp. 14–29.

181

182

The Hong Kong Special Administrative Region in Its First Decade

Allen Lee – quit their radio phone-in programs mainly because of mysterious intimidation. 10 The HKSAR’s “one country, two systems” was designed by PRC leaders, including the late Deng Xiaoping, as a show window for Mainland China to appeal to the Republic of China (ROC) on Taiwan for reunification. 11 Nevertheless, the Tung regime’s turbulent governance discredited the Hong Kong model and embarrassed the Beijing leadership. Understandably, Beijing’s leaders such as Hu and Zeng publicly expressed their mild criticisms of the Hong Kong government. After all, Tung’s patron, the former PRC President Jiang Zemin, transferred political power to the new PRC leaders and stepped down from his chairmanship of the Central Military Commission in March 2005. The withdrawal of Jiang from the PRC’s political arena, the displeasure of the new leaders over Tung’s performance, and the gradual economic recovery of the HKSAR in 2004 and early 2005 presented a golden opportunity for the embattled and unpopular Chief Executive to offer his resignation. 12 Beijing’s acceptance of his resignation ended the Tung era in the HKSAR.

Convergence and the Hong Kong Case This chapter uses the case of the HKSAR to illuminate whether the territory has undergone a path of political, economic, social, and legal convergence with its motherland and overlord, the PRC.

10 For the intimidation incidents, see Next Magazine (3 June 2004) which dealt with Allen Lee’s story. A former Mainland Chinese official of the PRC’s Hong Kong and Macao Affairs Office called Lee’s home and he appeared to be intimidated. Wong Yuk-man was reportedly in debt, whereas the threats issued to Cheng and Lee appeared to be purely political. Both Wong and Cheng were staunchly anti-Communist, but Lee tended to be an independent commentator critical of the Tung regime. 11 Wang Wenfang, China’s Resumption of Sovereignty over Hong Kong (Hong Kong: David C. Lam Institute for East-West Studies, Hong Kong Baptist University, 1997). 12 Ming Pao Weekly (Mingbao zhoukan, a weekly magazine published in Hong Kong), No. 616 (6 March 2005), pp. 28–33. One unsubstantiated report said Tung had offered to resign five times (2002, 2003, 2004, January 2005, and March 2005). See also Cheng Ming Monthly, No. 235 (March 2005), pp. 16–17.

The Mainlandization and Recolonization of Hong Kong

During the late 1960s and early 1970s, the theory of convergence emerged, predicting that the former Soviet Union’s sociopolitical metamorphosis would be parallel to the American democratic development. The convergence theory’s premise was that “all industrial societies do share certain salient features,” such as a pluralistic society, a participatory and democratic polity, economic abundance, bureaucratization, and the use of merit to assess individual performance in public and private organizations. 13 Another assumption was a firm “belief in progress, expressed as theories of development and modernization based on economic determinism.”14 The eventual collapse of the former Soviet Union has appeared to prove the validity of the convergence theory, for democracy seemed to be the outcome of economic modernization; nonetheless, critics have pointed to the authoritarian nature of the new Russian regime.15 It is premature to jump to the conclusion that the PRC’s rapid socio-political development is corroborating the convergence theory; the Communist Party of China (CPC) remains a politically preponderant force in the Mainland although the Chinese economy is increasingly marketized and globalized. It is debatable whether marketization and economic liberation in the PRC will bring about Western-style democracy.16

13 Alfred G. Meyer, “Theories of convergence,” in Chalmers Johnson (ed.), Change in Communist Systems (Stanford, Calif.: Stanford University Press, 1970), pp. 336–37. 14 Ibid. p. 323. Also see Alan J. Foster, Political Convergence: The Theory (London: Politics Association, 1978); and Johan K. Vree, Political Integration: The Formation of Theory and Its Problems (The Hague: Mouton, 1972). 15 See Andrew Jack, Inside Putin’s Russia: Can There Be Reform Without Democracy? (New York: Oxford University Press, 2004); and Lilia Shevtsova, Putin’s Russia (Washington, D.C.: Carnegie Endowment for International Peace, 2003). 16 For an optimistic view, see Su Shaozhi, “Problems of Democratic Reform in China,” in Edward Friedman (ed.), The Politics of Democratization: Generalizing East Asian Experiences (Boulder, Colo.: Westview, 1994), pp. 225–30; and Zibigniew Brzezinski, “Will China democratize? Disruption without disintegration,” Journal of Democracy 9, No. 1 (January 1998), pp. 3–4. For a pessimistic perspective, see, for example, Pei Minxin, “Is China democratizing?” Foreign Affairs 77, No. 1 (January/February 1998), p. 81; and Tatsumi Okabe, “China’s prospects for change,” in Larry Diamond and

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Regardless of the predictions on China’s future development, this article uses the case of Hong Kong to shed light on the dimensions of the HKSAR’s convergence with the PRC during the Tung Chee-hwa era from 1997 to 2005.17 Instead of having the PRC’s authoritarian system converging politically with Hong Kong’s semi-competitive system where opposition can challenge the ruling political forces,18 a reverse process of convergence that has diluted Hong Kong’s political and economic uniqueness could be seen. In a nutshell, the HKSAR’s return to the motherland has propelled the former’s polity and economy to move closer to the latter’s than before. Although the HKSAR’s polity and economy have increasingly become dependent on and convergent with the PRC,19 its legal system and society remain relatively diverged from the PRC’s.20 The legal system of Hong Kong retains its common law, although Beijing has increasingly interpreted the Hong Kong Basic Law. The society of Hong Kong remains relatively pluralistic and defiant of the government, unlike the relatively weaker society in the PRC.21

17

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21

Marc F. Plattner (eds.), Democracy in East Asia (Baltimore: Johns Hopkins University Press, 1998), pp. 175–76. On Hong Kong’s convergence or divergence with China, see an earlier study by James Cotton, “Hong Kong: convergence or divergence?” Journal of Northeast Asian Studies 6, No. 4 (Winter 1987). Also see Gerald Segal, The Fate of Hong Kong (London: Simon & Schuster, 1993), pp. 207–10. On China’s authoritarian system, see Michel Oksenberg, “China’s political system: challenges of the twenty-first century,” in Jonathan Unger (ed.) The Nature of Chinese Politics: From Mao to Jiang (New York: M.E. Sharpe, 2002), pp. 193–208. On Hong Kong’s semi-competitive system, see William Overholt, “Hong Kong: between third world and first,” Hong Kong Democratic Foundation Newsletter, No. 17 (January 2001). For a discussion of Hong Kong’s dependence on China, see Ian Holliday, Ma Ngok, and Ray Yep, “After 1997: the dialectics of Hong Kong dependence,” Journal of Contemporary Asia 34, No. 2 (2004), pp. 254–70. Indeed, the HKSAR can also influence the political culture of the PRC, especially in South China. See Andrew Scobell, “After Deng, what? reconsidering the prospects for a democratic transition in China,” Problems of Post-Communism 44, No. 5 (September/October 1997), pp. 27–28; and Michel Oksenberg, “Will China democratize? confronting a classic dilemma,” Journal of Democracy 9, No. 1 (January 1998), pp. 31–32. The Party-state in the PRC remains “quite heavy-handed in controlling activities by religious groups, educated professionals, labour, youth, and women.” See Carol Lee Hamrin, “Social dynamics and new generation

The Mainlandization and Recolonization of Hong Kong

Convergence and the Policy of Mainlandization The turbulent governance of the Tung era could be seen as an outcome of his mainlandization policy, which attempted to make Hong Kong politically and economically converge with the PRC. Tung’s failures overshadowed his successes although his regime’s hallmark was to embark on policies that transformed the HKSAR into an entity more akin to the PRC than ever before. A subtle process of mainlandization, or sinification, of Hong Kong could be witnessed; various aspects of the political, economic, and legal systems were converging with the PRC. The term “mainlandization” has been used by some Hong Kong people and observers to refer to the political and legal processes in which the HKSAR has demonstrated the practices of Mainland China. Political scientists Anthony Cheung and Wilson Wong expressed their concerns about the trend of the “mainlandization” of the civil service in Hong Kong where the bureaucracy might become less Weberian and more vulnerable to political penetration.22 The former Democratic Party chairman Martin Lee argued in 1999 that without democratic conventions, the PRC would weaken the rule of law in the HKSAR. 23 Journalists pointed to the likelihood that “mainlandization” of Hong Kong would lead to self-censorship in the mass media.24 During the debate over the National Security (Legislative Provisions) Bill, some Hong Kong people expressed grave concerns that their civil liberties would be restricted or

politics,” in David M. Finkelstein and Maryanne Kivlehan (eds.), China’s Leadership in the 21st Century (New York: M.E. Sharpe, 2003), pp. 205–11. 22 Anthony B.L. Cheung, “Civil service reform in post-1997 Hong Kong: political challenges, managerial responses?” International Journal of Public Administration 24, No. 9 (2001), pp. 929–50; and Wilson Wong, “From a British-style administrative state to a Chinese-style political state: civil service reform in Hong Kong after the transfer of sovereignty,” paper written for the Brookings Institution, (June 2003), http://www.brookings.edu/fp/cnaps/ papers/wong2003.pdf. Accessed 2 June 2005. 23 Martin Lee, “Letter to Hong Kong,” RTHK Radio 3, 5 September 1999, http://www.martinlee.org.hk/lettersToHK9.5.99.htm. Accessed 15 May 2005. 24 Melinda Liu and Alexandra A. Seno, “Getting the word out,” Newsweek (12 July 2004).

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“mainlandized.”25 Cheung, Wong, Lee, and others have not clearly defined “mainlandization,” which to them refers specifically to a trend that the HKSAR’s uniqueness is diluted to some degree. Mainlandization is here referred to Tung’s policy of making Hong Kong politically more dependent on Beijing, economically more reliant on the Mainland’s support, socially more patriotic toward the motherland, and legally more reliant on the interpretation of the Basic Law by the PRC National People’s Congress. It was the dependency psyche of the Tung administration that triggered Hong Kong’s swift convergence with the motherland in multi-faceted aspects. His premise that the interest of “one country” must precede the interest of the “two systems” and that the motherland’s development must be beneficial to Hong Kong laid the foundation for his dependent policy toward Beijing.26 From the perspective of political convergence, the HKSAR under the Tung leadership became similar to the PRC’s practices in two prominent aspects. First and foremost, Beijing’s political intervention in the HKSAR affairs was deeper as the legitimacy crisis of the Tung administration became serious.27 Such intervention took the forms of PRC leaders, such as Jiang Zemin, voicing support of

25 See “Research team on the compendium of submissions on Article 23 of the Basic Law,” report prepared by Robert Chung and his research team at the University of Hong Kong. http://www.hkupop.hku/Chinese/resources/b123/ /bl23gp/report/app8.pdf. Accessed 10 May 2005. 26 Tung’s governing strategy was shaped by Confucian values such as harmony, benevolence, and peace, but it was out of touch with the increasingly politicized environment of Hong Kong. See Lau Siu-kai, “Government and political change in the Hong Kong Special Administrative Region,” in James C. Hsiung (ed.), Hong Kong the Super Paradox: Life After Return to China, (London: Macmillan, 2000), pp. 35–57; and Lau Siu-kai, “Tung Chee-hwa’s governing strategy: the shortfall in politics,” in Lau Siu-kai (ed.), The First Tung Chee-hwa Administration: The First Five Years of the Hong Kong Special Administrative Region (Hong Kong: The Chinese University Press, 2002), pp. 1–40. 27 For the crisis of legitimacy in Hong Kong before the retrocession, see Ian Scott, Political Change and the Crisis of Legitimacy in Hong Kong (Hong Kong: Oxford University Press, 1990). With regard to the PRC’s intervention in Hong Kong’s political reform in the 1990s, see Jermain T.M. Lam, “Democracy or convergence: the dilemma of political reform in Hong Kong,” Asian Journal of Public Administration 15, No. 2 (December 1993), pp. 225–53.

The Mainlandization and Recolonization of Hong Kong

Tung and mobilizing the pro-Beijing trade unions, Fujianese associations, and other united front organizations to vote for like-minded candidates in both Legislative Council and District Council elections.28 The PRC officials’ recent open support of the candidate of the Chief Executive election, former Chief Secretary Donald Tsang, was a testimony to Beijing’s political intervention in the HKSAR polity.29 Another feature of mainlandization of Hong Kong’s political arena was the prominence of patronage in the Tung administration that appointed pro-Beijing elites into advisory committees and policymaking organs such as the top advisory Executive Council (ExCo).30 At the same time, the democrats were excluded from participation in these bodies until Donald Tsang became the Acting Chief Executive in March 2005, when he began to appoint some of them into bodies such as the Equal Opportunities Commission while removing a few pro-Beijing elites from advisory bodies.31

28 Cheng Ming, No. 183 (November 2000), pp. 6–8; and Kaifang (Open Magazine), No. 158 (February 2000), p. 18. 29 Beijing also decided that the term of the replacement Chief Executive should be two years rather than five years, generating a debate in Hong Kong over whether the Basic Law’s stipulation concerning the five-year term of office of the Chief Executive was violated. Eventually, on 27 April 2005, the NPC had to interpret the Basic Law saying that the term of office of the replacement Chief Executive would be two years. For the entire debate, see Sing Tao Daily, 28 April 2005; Editorial, “Court need not anticipate NPC,” Ming Pao, 5 April 2005; and “Rule of law a necessity, not a luxury,” South China Morning Post, 20 April 2005, p. A14. For a critique of the NPC interpretation of the Basic Law by the democrats such as Margaret Ng and Martin Lee, see Hong Kong Economic Journal (Xinbao, a Chinese newspaper published in Hong Kong), 2 May 2005, p. 4 and Ming Pao, 20 April 2005, p. D13. The Catholic Church’s Bishop Joseph Zen criticized the NPC interpretation as a move that “failed to respect the Basic Law.” See Hong Kong Economic Journal, 9 April 2005, p. 4. 30 The British colonial administration relied heavily on patronage too. See Ambrose King Yeo-chi, “Administrative absorption of politics in Hong Kong: emphasis on the grass-roots level,” Asian Survey 15, No. 5 (May 1975), p. 424; and S. N. G. Davies, “One brand of politics rekindled,” Hong Kong Law Journal 7 (1977), pp. 69–70. The post-handover political absorption can be found in Anthony B.L. Cheung and Paul C.W. Wong, “Who advised the Hong Kong government? The politics of absorption before and after 1997,” Asian Survey 44, No. 6 (December 2004), pp. 874–94. 31 Raymond Wu was removed from the Equal Opportunities Commission and

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Success and Failure of Tung Chee-hwa from the Convergence Perspective Tung Chee-hwa was a diligent Chief Executive whose moral integrity has been widely recognized. He reportedly worked for long hours every day. 32 Tung succeeded in projecting an image of a persistent leader in face of public criticisms and condemnations. From the perspective of the PRC government, Tung succeeded in helping Hong Kong survive from the Asian financial crisis of late 1997 and 1998. Beijing praised him for implementing the unprecedented concept of “Hong Kong people ruling Hong Kong” and the tenet of “one country, two systems,” albeit the reality was his proclivity of tilting toward the concerns of Beijing, such as the labeling of the Falungong as a “cult” in the HKSAR.33 From the perspective of convergence, Tung had impressive achievements, including the emphasis on patriotism and the determination to make Hong Kong economically dependent on the Mainland. Tung was free from either corrupt scandal or any event riddled with conflict of interest. When Tung announced his resignation to the people of Hong Kong on March 12, his last statement was that he would not return to his family shipping business. Tung was a generous leader in the eyes of the public; he seldom asked his principal officials to resign despite the fact that a number of them committed grave errors. 34 From the perspective of the tourist

Tam Yiu-chung was stripped of his chairmanship of the Vocational Training Council, thus sparking suspicion that the Tsang alienated some pro-Beijing elites. The pro-Beijing elites such as Wu and Choy So-yuk publicly expressed their displeasure with Tsang, triggering an attempt by officials of the Liaison Office – China’s representative office in the HKSAR – to persuade them to support Tsang. See Sing Tao Daily, 20 May 2005, p. B3. 32 Sing Tao Daily, 11 March 2005. 33 Tan Ee Lyn, “Hong Kong Tung says Falun Gong evokes Jonestown suicide,” Reuters, 22 May 2001; and Stella Lee and Kong Lai-fun, “Tung steps up attack on sect,” South China Morning Post, 26 April 2001. The rise of Falun Gong in China can be seen as a confrontation between the Party-state and society. See Clemens Stubbe Ostergaard, “Governance and the political Challenge of the Falun Gong,” in Jude Howell (ed.), Governance in China (Lanham, Md.: Rowman & Littlefield, 2004), pp. 297–25. 34 The former Financial Secretary Anthony Leung was involved in a car scandal;

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industry, Tung succeeded in not only finalizing an agreement with the Walt Disney to build the Disneyland theme park on the Lantau Island but also forging a closer economic relationship with the PRC. Tourism in Hong Kong has benefited tremendously from the visits of Mainlanders to Hong Kong in July 2003. Apart from Tung’s success in enlisting the support and trust from the Central Government, some commentators have pointed to Tung’s relative tolerance of the political opposition without using the police to suppress and arrest its members, although some democrats were constantly monitored by Beijing’s agents and the local police.35 It is fair to conclude that the Tung era seemingly allowed political space for the opposition to survive. Yet, Tung’s failures overshadowed his successes. Critics have pointed to the failure of the first HKSAR government from 1 July 1997 to June 2001 in formulating and implementing a coherent set of policies for Hong Kong. In 1997, Tung and his advisers had the good intention of providing affordable housing to all the people of Hong Kong by building 85,000 units per year. However, due to the onset of the Asian financial crisis in late 1997 and 1998, his new housing policy was abandoned in 1998 without announcing its end to the public until the summer of 2000. Critics maintained that his regime’s communication gap with the public was wide, a problem compounded by the implementation of other reforms without adequate consultation, such as civil service reform, education reform and the reduction of government subsidies to social service agencies.36

the former Secretary for Health Yeoh Eng-kiong was severely criticized for his mishandling of the outbreak of the Severe Acute Respiratory Syndrome; and the former Secretary for Security Regina Ip was enmeshed in the debate over Article 23 of the Basic Law. Tung did not ask any of the three to resign until they themselves took the initiative to do so. 35 See Editorial, “First-rate good man but not first-class leader, wholeheartedly working for Hong Kong but lacking in capability,” Ming Pao, 11 March 2005. 36 Alvin Y. So and Ming K. Chan, “Conclusion: crisis and transformation in the HKSAR – toward soft authoritarian developmentalism?” in Ming K. Chan and Alvin Y. So (eds.), Crisis and Transformation in China’s Hong Kong (New York: M.E. Sharpe, 2002), pp. 363–84; and Anthony B.L. Cheung, “The changing political system: executive-led government or

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The Tung administration demonstrated inexperience in tackling abrupt crises, such as the outbreak of the bird flu in late 1997 and later the sudden emergence of SARS in March 2003.37 The hesitancy of Tung was exacerbated by the fact that these health crises were completely new and unprecedented. It was the former Chief Secretary, Anson Chan Fang On-sang, who made the decision to slaughter the infected chickens, thus stopping the spread of the deadly disease. The outbreak of SARS originated from the PRC, but it fully exposed the poor coordination between not only the HKSAR’s Health Department and the Mainland’s health authorities but also the Health Department and the Hong Kong Hospital Authority.38 Tung performed much better in the outbreak of SARS than the bird flu, for he urged the health officials to tackle the crisis in a more determined manner. However, the series of governing crises plunged his popularity to an all time low prior to the mass protests on 1 July 2003. Another failure of the Tung administration was its patronage strategy that excluded all his political foes, notably the democrats, from ExCo and many advisory bodies while awarding friends and supporters with appointed positions. The pro-Beijing elites were given preferential treatment in ExCo, District Councils, and public corporations. Yeung Kwong, a pro-Beijing working-class leader who instigated the 1967 riots in Hong Kong, was awarded with the Grand Bauhinia Medal in July 2001 amidst public outcry. 39 Unfortunately, the pro-Beijing elite’s performance did not measure up to public expectations. Some of them constantly made remarks offending the general public; others like the leaders of the pro-Beijing political party Democratic Alliance for the Betterment of Hong Kong (DAB) were uncritical supporters of Tung and became

‘disabled’ governance?” in Lau, The First Tung Chee-hwa Administration, pp. 41–68. 37 Michael E. DeGolyer, “How the stunning outbreak of disease led to a stunning outbreak of dissent,” in Christine Loh and Civic Exchange (eds.), At the Epicentre: Hong Kong and the SARS Outbreak (Hong Kong: Hong Kong University Press, 2004), pp. 117–38. 38 Next Magazine, No. 749 (15 July 2004), pp. 42–48. 39 See Editorial, “The organizer of the 1967 riots should not receive the medal,” Ming Pao, 2 July 2001.

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increasingly detached from public sentiments. 40 The Housing Authority headed by former ExCo member Rosanna Wong Yick-ming was engulfed in a short piling scandal in which housing units in the Home Ownership Scheme were found to have substandard foundation – a scandal leading to Wong’s resignation. Overall, the pro-Beijing and pro-government elites who dominated the political arena failed to demonstrate their competence in assisting Tung to manage crises effectively. The exclusion of democrats from participation in an overwhelming majority of the policy-making and advisory bodies resulted in a one-sided view encircling the Tung leadership and perpetuating its communication gap with the public. The price of political patronage was high to Tung. From the vantage point of convergence, Tung’s patronage politics had much in common with the PRC. Beijing also backed Tung up for his decision to distribute political favors to supporters and clients, notably the DAB and many pro-Beijing elites. Yet, from the perspective of many Hong Kong people, Tung’s policy of mainlandization had the impact of alienation. Most civil servants, for example, detested his reforms. During Tung’s first term of office, his sour relationships with some civil servants sowed the seeds of discord and discoordination in the government. Tung’s ExCo was dominated by the business people, who advocated civil service reform and who saw public servants as being overpaid and under-worked. The ExCo’s approval of civil service reform antagonized many civil service unions that viewed the Chief Executive as being hostile to public servants. Tung’s disagreement with the former Chief Secretary Anson Chan, who had been promoted by Patten as the first Chinese Chief Secretary before the handover and whose determination to defend the uniqueness of the “two systems” clashed with Tung’s preference for the concerns of “one country,” emerged as a thorny problem of governance, especially in the eyes of the pro-Beijing elites who were deeply

40 The former DAB chairman Tsang Yok-sing claimed that the protestors who went to the streets were “misled.” His remarks alienated the public and eventually apologized. See The Sun (Taiyang bao, a Chinese newspaper published in Hong Kong), 6 July 2003.

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distrustful of Chan’s political loyalty.41 The retirement of Chan from politics in 2000 cleared the way for Tung to install his own batch of political supporters into the new Principal Officials Accountability System (POAS) on 1 July 2002, when the Chief Executive began his second term after a non-competitive Chief Executive election in which he had become the only candidate endorsed by both Beijing and the majority of the members of the 800-member Election Committee.42 Some former civil servants such as Donald Tsang and Michael Suen joined the POAS; nevertheless, Tung’s civil service reform had already cultivated distrust and dissent amongst many civil servants. The implementation of any mainlandization policy required political finesse on the part of Tung; nevertheless, his failure was his inability balancing various political actors. Tung was viewed as too pro-business, anti-civil servants, anti-democracy, indecisive, over-ambitious in his grandiose plans and policies, and protective of principal officials whose performance was questionable. The outcome was a relatively weak post-colonial state where the pro-Beijing elites were fragmented; even the pro-business Liberal Party and the middle-lower class DAB bickered over issues concerning livelihood and Article 23 of the Basic Law. The chairman of the Liberal Party, James Tien, quitted the ExCo on 6 July 2003, thus plunging the Tung regime into disarray and forcing him to announce the indefinite postponement of the legislation on Article 23.43 Compounding the weak post-colonial government was Tung’s lack of charisma and authority. Tien presented Tung with an ultimatum that he would resign from the ExCo if the National Security (Legislative Provisions) Bill were not postponed.44 The PRC officials responsible for the HKSAR affairs turned a blind eye to the rapidly deteriorating governing environment before the mass

41 For Chan’s disagreement with Tung, see Next Magazine, No. 567 (18 January 2001), 52; and Dongzhoukan, No. 407 (10 August 2000), p. 26. 42 For the Principal Officials Accountability System, see Christine Loh and Richard Cullen, “Political reform in Hong Kong: the principal officials accountability system: the first year (2002–2003),” Journal of Contemporary China 14, No. 42 (February 2005), pp. 153–76. 43 The Sun (Hong Kong), 7 July 2003. 44 Ibid. 8 July 2003.

The Mainlandization and Recolonization of Hong Kong

protests on 1 July 2003, feeding the Central Government with perhaps over-optimistic and over-positive reports about the territory. Due to the total underestimation of the Hong Kong crisis by the PRC officials stationed in Hong Kong in late June 2003, when media reports predicted a large turnout of protestors on 1 July, Beijing was alarmed and decided to send various work teams and researchers to understand the public sentiments in a more accurate manner.45

Tung’s Convergence Crisis and Beijing The crisis of governance in the Tung era actually reflected the dilemmas and difficulties of his convergence policy. If he adopted policies politically converging with the Mainland, they were bound to alienate the majority of the Hong Kong people. Ironically, Beijing found such convergence policies politically acceptable. Thus, what was in Beijing interest was not necessarily the interest of the people of Hong Kong – a position that was ignored and denied by Tung as he assumed the harmony of interests between the Hong Kong people and the Central Government. Beijing’s high-profile and uncritical support of Tung for the second term of office was a strategy attributable to two major factors. First and foremost, Beijing found Tung a perfect ally in his policy of converging Hong Kong with China. The Hong Kong people, in the minds of Beijing, lacked a strong sense of patriotism. Tung’s vision of patriotism had much in common with Beijing’s, for both equated nationalistic sentiment with political loyalty to the Communist Party of China.46 Since Tung had been endorsed by the former President Jiang Zemin in late 1996 until 2003, when the

45 Ibid. 10 July 2003. 46 For a discussion that Chinese nationalism is compatible with authoritarianism, see Suisheng Zhao, “Chinese nationalism and authoritarianism in the 1990s,” in Suisheng Zhao (ed.), China and Democracy: Reconsidering the Prospects of a Democratic China (New York: Routledge, 2000), pp. 253–70.

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elderly Chinese leader began to transfer his political power to the younger successor Hu Jintao, Tung’s leadership problem became a political taboo constantly shunned by the uncritical pro-Beijing elites in Hong Kong. Although a minority of Hong Kong businessmen and some Mainland Chinese entrepreneurs did express their dissatisfaction with Tung’s performance to Beijing’s leaders, PRC officials responsible for Hong Kong affairs swiftly conducted united front work to appease the tycoons’ anger. 47 Some of the local business elites were alienated by the Tung regime’s apparently preferential treatment offered to tycoon Li Ka-shing’s son, Richard Li, in the development of the Cyberport without any public tender.48 Still, Beijing and Jiang’s high-profile support of Tung for the second term of office stifled the local elite’s criticisms, not to mention any need for Beijing to truly understand public discontent in Hong Kong before the political earthquake on 1 July 2003. Second, compounding the problem of Beijing’s insistence in propping up the unpopular Chief Executive was the political dominance of its agents and officials handling the Hong Kong affairs, notably the State Council’s Hong Kong and Macao Affairs Office (HKMAO) led by Liao Hui and the Liaison Office (LO) in Hong Kong led by Jiang Enzhu and later Gao Siren. Liao and Gao were at loggerheads at the Central Government’s Hong Kong and Macao Work Committee meeting in 2004.49 Prior to the political

47 Dongxiang (The Trend Magazine), No. 235 (March 2005), pp. 16–17. For China’s united front work, see Holly Porteous, “China’s united front strategy in Hong Kong,” Commentary, No. 72 (Winter 1998), pp. 1–10. The aim of united front is to isolate the minority and to win the majority. See Van Slyke Lyman, Enemies and Friends: The United Front in Chinese Communist History (Stanford, Calif.: Stanford University Press, 1967), pp. 3–6. For a good review of China’s united front work in Hong Kong before the handover, see Jamie Allan, Seeing Red: China’s Uncompromising Takeover of Hong Kong (Singapore: Butterworth-Heinemann Asia, 1997), pp. 68–111; and Wai-kwok Wong, “Can co-optation win over the Hong Kong people? China’s united front work in Hong Kong since 1984,” Issues & Studies 33, No. 5 (May 1997), pp. 102–37. 48 Editorial, “Cyber priorities,” South China Morning Post, 5 August 2000; and Next Magazine, No. 473 (2 April 1999), pp. 30–38. 49 Dongxiang, No. 235 (March 2005), 17. Interestingly, when Donald Tsang was tipped as the replacement Chief Executive in April and May 2005, the Hong Kong reports said he was close to Liao Hui. However, when Hong

The Mainlandization and Recolonization of Hong Kong

tsunami on 1 July 2003, the LO was too close to the pro-Beijing Hong Kong elites and naturally provided over-positive reports on the HKSAR to Beijing, the HKMAO kept a very low profile under Liao’s leadership – a far cry from his predecessor Lu Ping who had confronted and argued with Chris Patten over Hong Kong’s political reform.50 As Jiang Zemin was determined to support Tung for the second term and accused the Hong Kong reporters of being “too simple, too naïve,” 51 both PRC officials and pro-Beijing elites quickly became loyal followers of Jiang without the political will to remove Tung. Yet, once Beijing was determined to let Tung resign and designate Donald Tsang as the replacement Chief Executive, the uncritical pro-Beijing elites toed the official line. 52 In short, the supporters of Beijing in the HKSAR, notably the LO officials, favored Tung’s convergence policy. When Tsang was the candidate favored by Beijing, the local hard-line leftists in the HKSAR had no choice but to support him, although they doubted whether Tsang would continue to make Hong Kong politically and economically converge with the Mainland. In an attempt to ameliorate the governing crisis resulting from the convergence policy, the second Tung administration altered its composition with Beijing’s full backing. The introduction of the POAS on 1 July 2002 was a move designed to unify the advisers of Tung and consolidate his regime legitimacy.53 Unfortunately, the newly appointed principal officials, who serve the government on contractual terms and who are not civil servants, needed more time Kong reporters asked Gao for his view on Tsang, the former refused to say anything in public – a move apparently contrary to most PRC officials dealing with Hong Kong affairs. Therefore, the report on the opinion differences between Liao and Gao appeared to be accurate. 50 John Flowerdew, The Final Years of British Hong Kong: The Discourse of Colonial Withdrawal (London: Macmillan, 1998), pp. 178–86. 51 Dongxiang, No. 183 (November 2000), pp. 6–8. 52 The DAB and the rural advisory body Heung Yee Kuk publicly endorsed the nomination of Tsang as the candidate for the Chief Executive election scheduled to be held on 10 July 2005. See TVB News, 1 June 2005. 53 For details, see “Framework of accountability for principal officials,” press release, http://www.info.gov.hk/gia/general/200204/17/0417251.htm. Accessed 1 August 2002. Interesting, in March 2004, the PRC’s legal expert, the late Xiao Weiyun, visited Hong Kong and he argued that the POAS actually violated the Basic Law.

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to accumulate their political experience and expertise. In March 2003, the former Financial Secretary Anthony Leung was embroiled in a car purchasing scandal in which he bought a luxurious car when he knew that the vehicle license’s tax would increase.54 From early to mid-2003, the former Secretary for Security, Regina Ip, alienated the public by trying to push through the passage of the National Security (Legislative Provisions) Bill that would outlaw sedition, treason, secession and subversion. 55 The public widely regarded the bill as an infringement upon their much cherished civil liberties, whereas an overwhelming majority of lawyers rose up against the attempt at legislating on Article 23.56 The legitimacy crisis of the second Tung administration was aggravated by the defiant Bishop Joseph Zen, whose relations with Beijing remained frosty, who publicly spoke against the government on its refusal to grant Mainland Chinese the right of abode in the HKSAR in 1999, and who mobilized members of the Catholic Church to protest against Article 23 of the Basic Law. Zen’s opposition provided the spiritual leadership in the society’s confrontation with the post-colonial regime. 57 Due to the mobilization by the Catholic Church, radio hosts, lawyers,

54 Leung’s letter of resignation to Chief Executive Tung Chee-hwa, 10 March 2003, in LC Paper No. CB(2)1526/02-03(01), Annex; Chris Yeung, “I forgave an honest mistake, says Tung,” South China Morning Post, 22 March 2003; Editorial, “Chief Executive must let Antony Leung go,” ibid., 19 March 2003, p. 12; Editorial, “A Time of reckoning,” The Standard, 7 May 2003, p. A2; “Credibility crisis,” ibid., 26 March 2003, p. A15; Margaret Ng, “The case against Antony Leung,” South China Morning Post, 28 March 2003, p. 16; and Yeung Sum, “Abuse of power?” ibid., 15 April, 2003, p. 14. 55 Carole J. Petersen, “National security offences and civil liberties in Hong Kong: a critique of the government’s ‘consultation’ on Article 23 of the Basic Law,” Hong Kong Law Journal 32, Part 3 (2002), pp. 457–70. 56 A survey found that 90% of the 1,154 protestors opposed the legislation on Article 23 of the Basic Law, and that 60% of them came from the middle class. See The Sun (Hong Kong), 7 July 2003. 57 For Bishop Zen’s political defiance, see Beatrice Leung and Chan Shun-hing, Changing Church and State Relations in Hong Kong, 1950–2000 (Hong Kong: Hong Kong University Press, 2003), pp. 117–24. In October 2000, Zen publicly unveiled that the Liaison Office’s officials tried to warn him of his contacts with the Mainland Catholics. See Apple Daily (Pingguo ribao, a Chinese newspaper published in Hong Kong), 5 October 2000, p. 21.

The Mainlandization and Recolonization of Hong Kong

intellectuals, students, working-class employees, and middle-class homeowners who suffered from negative equity after the Asian financial crisis, half a million people went to the streets on 1 July 2003 to protest against the Tung regime’s misrule.58 At this juncture, the new Chinese leadership of President Hu and Premier Wen Jiabao (Wen left Hong Kong and stayed in Shenzhen on 1 July 2003) was shocked by the seriousness of public discontent in the HKSAR.59 Liao reportedly offered to resign but it was rejected by Beijing, whereas the LO leadership underwent a reshuffle.60 Beijing’s officials responsible for Hong Kong matters were forced by the circumstances to reassess their previous policy of steadfastly supporting Tung, to receive delegations from Hong Kong, and to emphasize the importance of maintaining the stability of the HKSAR. From the perspective of convergence, Bishop Zen detested Tung’s mainlandization policy and allied with the democrats to oppose the Chief Executive. Nor did President Hu and Premier Wen realize the devastating consequences of Tung’s convergence policy until the political earthquake on 1 July 2003. Since then, Beijing has accepted a modified and gradual version of convergence in Hong Kong, making the HKSAR economically dependent on the Mainland while accepting some degree of political uniqueness on the part of Hong Kong. Hence, in August 2005, it was reported that PRC leaders accepted a political model of democratization for the HKSAR, where the legislature would have its directly elected members increased in proportion to the functional constituenciesproduced members.61

58 Some students of the pro-Beijing schools, such as the Fukien Secondary Schools, participated in the mass protests. Their teachers reportedly used the justification of the absence from school life to “penalize” them. See The Sun (Hong Kohng), 19 July 2003. 59 Apple Daily, 2 July 2003. 60 Next Magazine, No. 708 (2 October 2003), pp. 46–52. Since 1 July 2003, Liao’s public profile has become so low that his subordinate Chen Zuoe’r is the spokesman of the HKMAO in public. 61 Hong Kong iMail, 28 August 2005. For an overview of the debate on Hong Kong’s constitutional reforms, see Johannes Chan, “Some thoughts on constitutional reform in Hong Kong,” Hong Kong Law Journal 34, Part 1 (2004), pp. 1–12; and Albert Chen, “The constitutional controversy of spring 2004,” ibid., Part 2 (2004), pp. 215–25.

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Yet, political divergence in the HKSAR in the form of political confrontation between the Hong Kong people and Beijing’s trusted Chief Executive was shocking to the Central Government. Although the coordination committee established by Beijing to tackle the Hong Kong crisis immediately after 1 July 2003 came up with a mix of economic and political measures to rescue Tung’s legitimacy crisis, the capability of the second HKSAR government under Tung could not be significantly enhanced. The economic and political measures embraced the CEPA and the visits of Mainland Chinese tourists from various provinces. Nevertheless, the PRC’s united front work could not stop half a million protestors to take to the streets again on 1 July 2004.62 In response to Hong Kong’s unprecedented public outbursts, Beijing strengthened its united front work, such as arranging the visits of the PRC’s Olympic athletes and medalists to Hong Kong, and sending United Front Work Department’s director Liu Yandong to preside over the Buddha finger’s exhibition in the HKSAR. All these moves were calculated to win the hearts and minds of the Hong Kong Chinese, to invoke their nationalistic sentiment and to emphasize the need for political harmony before the September 2004 Legislative Council elections. 63 The Tung regime’s popularity rose gradually in the wake of Beijing’s united front work. During the Legislative Council elections held on 12 September 2004, the pan-democratic camp merely captured twenty-five seats – eighteen from direct elections and seven from functional constituencies – in the sixty-member legislature.64 The pro-Beijing and pro-government elites succeeded in grasping the majority of the seats in the Legislative Council, thus preventing the democratic forces from achieving a political breakthrough. Yet, in late 2004, the Tung administration was soon immersed in another governing crisis. It was in a hurry to privatize the

62 Apple Daily, 2 July and 3 July 2004. 63 Ambrose Leung, Cheung Chi-fai, and Carrie Chan, “United front cadre seeks to heal rift,” South China Morning Post, 27 May 2004, p. 1. 64 For the full results of the elections, see http://www.elections.gov.hk/ elections/legco2004/eindes.html. Also see Christine Loh, “Hong Kong Legislative Council elections: overcoming the system,” China Brief 4, No. 18 (16 September 2004), published by the Jamestown Foundation, http://www.jamestown.org. Accessed 2 June 2005.

The Mainlandization and Recolonization of Hong Kong

shopping malls of public housing estates by encouraging members of the public to buy the Link REIT shares. Nonetheless, a shop owner, supported by a few democrats, protected her interest by filing a lawsuit, plunging the government’s plan of enlisting the Link Reit into a political crisis. Critics of the Tung administration argued that the principal officials responsible for issuing the Link Reit shares did not have the crisis consciousness to anticipate a possible legal challenge from any ordinary citizen, leaving a burden to Tung’s successor Donald Tsang.65 From the angle of convergence, Tung’s maladministration exacerbated both his governing crisis and the political divergence of Hong Kong with China. If such divergence was not arrested, the HKSAR’s “one country, two systems” would become a political joke. Hence, Beijing was determined more than ever before to intervene in the governance of Hong Kong, notably the inception of a transition from the Tung era to the Tsang administration. The hallmark of the Tung era from 1 July 1997 to March 2005 was his emphasis on the need to uphold the convergence policy with Beijing rather than the specialness of the “two systems.” The image of the “one country, two systems,” which is supposed to make the HKSAR a show window for Beijing to reunify Taiwan, was blemished if not discredited by Tung’s turbulent governance. The PRC had to change the HKSAR leadership for the sake of not simply improving the international image of the “one country, two systems,” but also stabilizing the HKSAR in the long run, especially in the event of any Sino-Taiwan conflict in the coming years. The “one country, two systems” concept originally aimed at making Hong Kong’s economy as separate from the PRC’s socialist system. It was never intended as a principle of allowing the HKSAR to develop a political system totally separate from the PRC. However, the Hong Kong democrats consistently interpret the “one country, two systems” as a justification for them to call for a faster pace and larger realm of democratic reform. They are determined to lessen the degree of the HKSAR’s convergence with the PRC, but Beijing and the Tung regime were keen to keep the lid on Hong Kong’s

65 Zheng Ming, No. 330 (April 2005), p. 87.

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democratization or minimize its political divergence with the motherland. Since the 1980s the PRC’s economic system has become far more “capitalist” than ever before by adopting the strategy of marketization. 66 Politically, however, Beijing’s determination to maintain the political status quo in Hong Kong has remained constant. This assumption contradicted the premise of the last Hong Kong Governor, Christopher Patten, who determined to speed up the process and widen the scope of political reform in Hong Kong prior to the return of the enclave’s sovereignty to the PRC.67 Patten’s premise had much in common with the democrats, who have insisted that the HKSAR’s autonomy should be protected by an accelerated process of democratic reform. In his memoir, Patten openly praised the democrats, unveiling his political affinity with the pro-democracy activists.68 Beijing and its supporters in Hong Kong, namely the “patriotic” elites embracing the pro-business Liberal Party and the middle-lower class Democratic Alliance for the Betterment of Hong Kong (DAB), had opposed a faster pace of political reform both before and after the retrocession.

Mainlandization of the Hong Kong Polity Beijing’s distrust of the democrats and their political alliance with Patten led to the rolling back of democratic reforms shortly after the handover.69 To prevent the democrats from capturing most of the

66 For China’s market transition, see Barry Naughton, “China’s transition in economic perspective,” in Merle Goldman and Roderick MacFarquhar (eds.), The Paradox of China’s Post-Mao Reforms (Cambridge, Mass.: Harvard University Press, 1999), pp. 30–44. 67 Patten’s assumptions can be seen in Chris Patten, East Meets West: The Last Governor of Hong Kong on Power, Freedom and the Future (London: McClelland & Stewart, 1998), pp. 292–300. 68 Ibid., pp. 104–5. 69 Beijing set up the Provisional Legislative Council to veto the political reform introduced by Patten. Members of the Provisional Legislative Council were all appointed by the PRC and none of the democrats could ride the “through train” to cross over the legislature beyond 1 July 1997. However, the

The Mainlandization and Recolonization of Hong Kong

seats in the post-colonial legislature, Beijing supported the Tung regime to take a number of measures. First, the proportional representation system was introduced into the direct elections held for the first HKSAR’s legislative elections. 70 The idea of the proportional representation was to balance the political representation in direct elections. Apparently, this justification was strong. Yet, a closer examination of the Legislative Council’s composition proves that the injection of the proportional representation system was democratically unjustifiable. The Legislative Council in 1998 had sixty seats of which twenty were directly elected by citizens in geographical constituencies; ten elected from an Election Committee; and thirty elected from functional constituencies composed of occupational groups such as lawyers, teachers, accountants, engineers, and workers. As the legislature was not wholly directly elected, the use of the proportional representation system in direct election was biased in favor of the pro-Beijing candidates.71 The LegCo’s electoral system was therefore designed in such a way as to maintain the political preponderance of the pro-government and pro-Beijing elites while at the same time having the unintended consequence of fragmenting the democrats, who bickered amongst themselves for party nomination to run in the legislative elections. 72 The end result was a distorted democrats were able to return to the legislature in the 1988 Legislative Council elections. See Leo Goodstadt, “China and the selection of Hong Kong’s post-colonial political elite,” The China Quarterly, No. 163 (September 2000), pp. 721–41. Also see Leo Goodstadt, Uneasy Partners: The Conflict between Public Interest and Private Profit in Hong Kong (Hong Kong: Hong Kong University Press, 2004). 70 Lau Siu-kai, “The making of the electoral system,” in Kuan Hsin-chi, Lau Siu-kai, Louie Kin-sheun, and Timothy Ka-ying Wong (eds.), Power Transfer and Electoral Politics: The First Legislative Election in the Hong Kong Special Administrative Region (Hong Kong: The Chinese University Press, 1999), pp. 3–35. 71 Alvin Y. So, Hong Kong’s Embattled Democracy: A Societal Analysis (Baltimore: The Johns Hopkins University Press, 1999), pp. 231–32; and Lo Shiu-hing and Yu Wing-yat, “The Politics of Electoral Reform in Hong Kong,” Commonwealth & Comparative Politics 39, No. 2 (July 2001), pp. 99–108. 72 Choi Chi-keung, “The decisive effect of the proportional representation system: from inter-party competition to intra-party competition,” in Kuan Hsin-chi, Lau Siu-kai, and Timothy Ka-ying Wong (eds.), Out of the Shadow

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representation in the Tung era; he was surrounded by his mostly uncritical supporters. Moreover, the HKSAR government rolled back democratic reform by abolishing the Urban Council and the Regional Council in 2000. Its justification was financial, asserting that the two Councils had drained the government’s resources.73 The hidden motive behind the abolition of the two Councils was political. Dismantling the two fully directly elected bodies, the Tung regime deprived the democrats of their stipends and exacerbated their internal bickering. Without sufficient participatory channels, the politically ambitious democrats eventually competed amongst themselves for nomination by pro-democracy parties in the LegCo’s direct elections. Financially and politically, the cessation of the two Councils weakened the democrats. To prevent the HKSAR from becoming a base for the democrats to challenge both the local government and Beijing, the Standing Committee of the National People’s Congress (NPCSC) interpreted the Basic Law in April 2004. After the political tsunami on 1 July 2003, the HKSAR government was shocked by the extent of public discontent. The democrats grasped the golden opportunity to demand a faster pace and larger scope of political reforms, called for the election of the Chief Executive by universal suffrage in 2007, and advocated the selection of all legislators by direct election by 2008. The HKSAR government was unprepared. Nor was it able to put forward any document on political reform. In December 2003, when Tung visited Beijing, PRC leaders asked him to consider firstly the Central Government’s view on the pace and scope of political reform in the HKSAR. The message was clear: Beijing was reluctant to envisage the birth of a democratic Hong Kong similar to democratic consolidation in Taiwan where the Presidential election was held in March 2005.74 The timing of Beijing’s decision to apply of 1997? The 2000 Legislative Council Election in the Hong Kong Special Administrative Region (Hong Kong: The Chinese University Press, 2002), pp. 99–124. 73 Dongzhoukan, No. 372 (9 December 1999), p. 45. 74 Also see Craig N. Canning, “Hong Kong: ‘one country, two systems’ in troubled waters,” Current History 103, No. 674 (September 2004), pp. 295–96.

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its brake on Hong Kong’s democratization coincided with its assessment of the Hong Kong circumstances and its trepidation that the HKSAR would follow Taiwan’s footstep. According to the PRC assessment of the mass protests in Hong Kong on 1 July 2003, the political earthquake plaguing the Tung administration was attributable to four types of “troublemakers”: politicians, media professionals, academics and foreigners.75 Politicians referred to the pro-democracy activists; media professionals meant those radio hosts as Albert Cheng, Wong Yuk-man, and Allen Lee critical of the Tung regime; academics embraced the pro-democracy sympathizers providing advice to the democrats and organizing the protests against Article 23 of the Basic Law; and foreigners referred to some British and American expatriates who joined the mass protests on 1 July 2003.76 Taiwan’s presidential election held in March 2004 served as a serious menace to Beijing. The pro-Taiwan independence Democratic Progressive Party led by Chen Shui-bian, who was eventually re-elected after a mysterious assassination attempt on him, was seen as detrimental to Beijing’s sovereignty claim on the island republic. In the event that Beijing made any concession to the Hong Kong democrats prior to the Taiwan Presidential election, it would send a “wrong” message to the Taiwanese on the renegade province. Understandably, Beijing’s pressure on the Tung administration in December 2003 to decelerate Hong Kong’s democratization was a pre-emptive strike against both the local democrats and the pro-Taiwan independence movement in Taiwan. In February, the HKSAR government set up a task force on political reform, admitting in its first report that the Central Government in December 2004 had raised “serious concerns” about democratization in Hong Kong.77 In April, it prepared the second

75 Ta Kung Pao, 20 July 2003. 76 President Hu Jintao said Beijing opposed any intervention from foreign forces into Hong Kong’s domestic affairs. See The Sun (Hong Kong), 20 July 2003. 77 See The First Report of the Constitutional Task Force: Issues of Legislative Process in the Basic Law Relating to Constitutional Development (March 2004), www.info.gov.hk/cab, accessed 1 June 2005. The first report in

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report claiming that the time would not be ripe to have direct elections on the grounds of the “immaturity” and “inexperience” of political parties.78 It also argued that sectional interests would have to be maintained in the event of any political reform, implying that functional constituencies would have to be retained in the HKSAR for the sake of ensuring the representation of various groups. The HKSAR government’s report paved the way for the NPCSC’s interpretation of the Basic Law on 26 April 2004.79 The NPCSC interpretation was as follows: “The election of the third Chief Executive of the HKSAR to be held in the year 2007 shall not be by means of universal suffrage. The election of the Legislative Council of the HKSAR in the fourth term in the year 2008 shall not be by means of an election of all the members by universal suffrage.”80 The collaboration between Beijing and the Tung government in exercising the joint veto over the direct election of the Chief Executive in 2007 and all legislators in 2008 became a fait accompli. The people of Hong Kong, especially the democrats, had no choice but to accept the political reality. The immediate price of the indefinite postponement of democratization was huge; the March also focused on the technical issue of amending the Basic Law and local ordinances. 78 The Second Report of the Constitutional Task Force: Issues of Legislative Process in the Basic Law Relating to Constitutional Development (April 2004), pp. 18–19, www.info.gov.hk/cab. The report came up with a number of rules governing political reform, including the need to maintain the Central Government’s authority and the executive-led system. Also see South China Morning Post, 16 April 2004. 79 See “Decision of the Standing Committee of the National People’s Congress on issues relating to the methods for selecting the Chief Executive of the Hong Kong Special Administrative Region in the year 2007 and for forming the Legislative Council of the Hong Kong Special Administrative Region in the year 2008. Adopted by the Standing Committee of the Tenth National People’s Congress at its ninth session on 26 April 2004,” S. S. No. 5 to Gazette Extraordinary No. 8/2004, http://www.info.gov.hk/cab/cab-review/ eng/basic/pdf/es5200408081.pdf, accessed 29 December 2004. Also see The Fourth Report of the Constitutional Development Task Force: Views and Proposals of Members of the Committee on the Methods for Selecting the Chief Executive in 2007 and for Forming the Legislative Council in 2008 (December 2004). http://www.info.gov.hk/cab/cab-review/eng/report4/pdf/ fourthreport.pdf, 2 No. 1. Accessed 19 December 2004. 80 “The Decision of the Standing Committee of the National People’s Congress . . . ,” p. E9.

The Mainlandization and Recolonization of Hong Kong

democrats became increasingly alienated and were determined to fully mobilize Hong Kong people to take to the streets on 1 July 2004. Shocked by the pro-democracy tide on 1 July 2003, Beijing’s agents, notably the Liaison Office and the national security apparatus, adopted a hard-line policy toward the democrats.81 In February 2004, Xinhua said a “small number” of Hong Kong politicians were “unpatriotic” because they joined organizations subversive of the Central Government. 82 The campaign against “unpatriotic” Hong Kong people was targeted at the democrats, reminding the general public of Beijing’s political criterion of singling out political “enemies.”83 In May, popular radio hosts like Albert Cheng, Wong Yuk-man and Allen Lee were mysteriously intimated. Cheng was frightened by political intimidation and decided to quit his radio phone-in program.84 Wong’s case was more complicated, for he had been reportedly involved in a huge debt. Lee received a mysterious call from a Mainland official formerly affiliated with the State Council’s Hong Kong and Macao Affairs Office.85 One thing was clear: they were all politically intimidated to varying degrees. Their experience demonstrated the dominance of hard-line PRC policy toward the HKSAR. The public fiercely reacted to the fate of the three radio hosts and took to the streets again on July 1, 2004, demonstrating against the threats to their civil liberties reminiscent of the concern over Article 23 of the Basic Law a year ago.

81 Ming Pao, 3 June 2005, revealing national security agents, Public Security Bureau officers, and many other researchers from Beijing, Shanghai, and Guangdong were sent to Hong Kong to collect intelligence on the territory, because the intelligence provided by the Liaison Office had proved to be inaccurate. 82 South China Morning Post, February 2004, p. 1. 83 For a full debate over patriotism, see Ming Pao, editorial, Aiguo lunzheng (The debate over patriotism) (Hong Kong: Ming Pao, April 2004). 84 South China Morning Post, 28 May 2004, p. 1. Also see Editorial, “Freedom of speech must be defended,” ibid. p. 12. 85 The retired Mainland official, Cheng Shousan, denied that he had intimidated Lee, but later reports said he was one of the Chinese officials who were asked to conduct stronger united front work on the people of Hong Kong. See South China Morning Post, 1 June 2004, p. 1.

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At this juncture, Beijing began to sense the urgency of adopting a more soft-line policy toward the HKSAR. If not, the people of Hong Kong would most probably elect more democrats to the Legislative Council in September 2004, thus tipping the balance of the legislature in favour of the pro-democracy activists. Beijing’s priority was to prevent the democrats from capturing half of the seats in the Legislative Council. It strategy was to use economic enticement to woo the Hong Kong voters. As mentioned before, the visits to Hong Kong by the Mainlanders, the Olympic medalists, the first Chinese astronaut Yang Liwei, and the Buddha finger were carefully calculated as pragmatic and soft-line measures winning the hearts and minds of the Hong Kong populace. The warm reception of the Olympic medalists in Hong Kong did not easily translate patriotism into an overwhelming political support for the pro-Beijing political forces. However, Beijing succeeded in exploiting the political pragmatism of Hong Kong people, believing that the improvement in the economy would not only reduce unemployment but also dampen the angry citizenry’s demand for more democracy. The weakness of the Tung administration plunged Beijing deeper into the political arena of the HKSAR. Beijing’s involvement in the political landscape of Hong Kong became salient during the election campaign for the September 2004 Legislative Council elections. The strategy of Beijing was to blacken the image of the pro-democracy candidates and to polish that of the pro-Beijing counterparts. During the election campaign, two candidates of the Democratic Party – Alex Ho Wai-to and James To Kun-sun – were exposed by the mass media as having integrity problems.86 The former was caught by the Mainland Public Security Bureau (PSB) for soliciting a prostitute in Dongguan city, whereas the latter was found to neglect the need to declare his business interest in a company. The PSB severely penalized Ho by throwing him into prison – a punishment viewed as abnormal and excessively severe as many Hong Kong men solicited prostitutes in the Mainland. To’s integrity problem was blown out of proportion by the mass media.

86 South China Morning Post, 17 and 24 August 2004.

The Mainlandization and Recolonization of Hong Kong

At the same time, the pro-Beijing DAB and Federation of Trade Unions (FTU) carefully shaped its political image by highlighting the cancer problem of its leader Ma Lik while shunning any sex scandal. The Liaison Office mobilized the members of the pro-Beijing interest groups and housing associations, including the Fujianese community, to support and vote for DAB and FTU candidates. As a result of careful orchestrated campaign, the alliance of the DAB and FTU succeeded in grasping nine of the thirty directly elected seats and four of the thirty functional constituency seats. 87 Together with some pro-establishment independents and combined with the eleven seats of the pro-business Liberal Party, which captured two directly elected seats and nine functional constituency ones, the pro-government coalition could prevent the pan-democratic camp from grasping half of the seats in the Legislative Council. Yet, the agents of Beijing sank deeper into the electoral politics of the HKSAR, propping up the ramshackle Tung regime. Politically, Hong Kong witnessed obvious convergence with the PRC where political practices have been characterized by Party intervention and limited democratic reforms.

The Legal Profession: Resistance to Mainlandization of the Legal System While the polity of Hong Kong witnessed an obvious process of mainlandization, the legal community has been reacting strongly to any attempt by the HKSAR government and Beijing to dilute judicial autonomy of the HKSAR. The mainstream view of the legal community insists that the Court of Final Appeal (CFA) should be given the opportunity and the right to interpret the mini-constitution, the Basic Law. This premise, however, was challenged twice during the Tung era, and the third time shortly after the Chief Executive’s resignation. The NPCSC interpreted the Basic Law three times: first in mid-1999 over the right of abode of the Mainland Chinese in Hong Kong, the second in April 2004 concerning the direct elections of the Chief Executive and the entire Legislative Council, and the

87 Apple Daily, 14 September 2004.

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third in April 2005 over the question whether the successor to Tung would serve his remaining two years of office or a full five-year term. The controversy over the right of abode issue focused on the question of procedural fairness. The legal community argued that the Basic Law conferred upon the Mainland Chinese, whose father or mother had been born in Hong Kong, the right of abode in the HKSAR. This right was reaffirmed by the verdict of the CFA. Nevertheless, the CFA judgment was severely criticized by Beijing’s legal experts and the members of the Basic Law Committee – a body that was composed of six Hong Kong people and six Mainland Chinese and which makes recommendations to the NPCSC on the interpretation of the Basic Law.88 Most controversially, the Tung government argued that the CFA judgment would open the floodgate to 1.67 million Mainland Chinese who enjoyed the right of abode in the HKSAR.89 It also maintained that the HKSAR would be unable to absorb so many Mainlanders, who would pose a tremendous burden on the housing, social welfare and education system in the enclave. Critics of the HKSAR government asserted that the 1.67 million figure was never scientifically proved. The crux of the problem was the HKSAR government’s initiative to seek the NPCSC’s interpretation of the Basic Law concerning the right of abode of the Mainland Chinese in Hong Kong. The legal community became furious; its members believed that the finality of the CFA was overridden by the NPCSC. In response to the concerns of the legal profession, the HKSAR government promised that its request for the NPCSC to interpret the mini-constitution would be rare and kept to a minimum. Although the NPCSC took the initiative to interpret the Basic Law in April 2004 over the pace and scope of democratic reform, the legal community saw it as Beijing’s move to usurp the power of both the HKSAR government and the legislature to determine the prospects of democratization in Hong Kong. What infuriated the legal community most was the legislation on Article 23 of the Basic

88 Ibid. 27 February 2000, p. 1. 89 The HKSAR Government Daily Information Bulletin, “The Chief Executive report to the State Council,” 10 June 1999.

The Mainlandization and Recolonization of Hong Kong

Law. The Article 23 Concern Group, which was composed of barristers and legal scholars, sprung up to express its deep concerns about the National Security Bill. Later it was transformed into the Article 45 Concern Group expressing its views on the direct elections of the Chief Executive and of the entire legislature. Members of the Article 45 Concern Group, such as Audrey Eu, Margaret Ng, Alan Leong and Ronny Tong, were either re-elected or newly elected to the Legislative Council in September 2004. The third NPCSC interpretation of the Basic Law in April 2005, a month after Tung’s resignation, constituted another move from Beijing to erode the judicial autonomy of the HKSAR. Most members of the legal community argued that Article 46 of the Basic Law states clearly that the Chief Executive’s term of office is five years, and that Tung’s successor should serve five years. This argument was originally adopted but later rejected by the HKSAR government, which had drafted the Chief Executive Ordinance to embrace the five years’ term of office. After the Secretary for Justice Elsie Leung visited Beijing to consult the views of the Mainland legal experts, the HKSAR government changed its view, saying that Tung’s successor would serve his remaining term. 90 Beijing’s constitutional experts voiced their view in support of the HKSAR government’s position. Xu Chongde, a Mainland drafter of the Basic Law, remarked that the legislative intent of the drafters was to allow the successor of the Chief Executive, who may leave office suddenly, to serve the “residual” term.91 Other Mainland legal experts such as Wang Zhenmin maintained that the “residual” term was a convention not only in China but also in the United States. From the perspective of the majority of the Hong Kong lawyers, the NPCSC’s interpretation of the term of office of the Chief Executive was more a political move than a legal one. About 900 legal experts protested against the NPCSC’s move to interpret the Basic Law. Although the NPCSC’s Legislative Affairs Commission sent its secretary-general Qiao Xiaoyang, to Shenzhen to consult and listen to the views of the Hong Kong people, most members of the legal community were

90 Sing Tao Daily, 21 March 2004. 91 Hong Kong Economic Times (Xianggang jingji ribao, a Chinese newspaper published in Hong Kong), 30 March 2005, p. 33.

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unconvinced and they insisted that Beijing should not deprive the opportunity of the CFA to interpret the Basic Law. The clash between the Hong Kong legal community and Beijing’s view of Tung successor’s term of office illustrated two different constitutional cultures. The former regards the CFA as the ultimate authority to interpret the Basic Law and sees the NPCSC’s move as undesirable. Beijing and the HKSAR government led by Acting Chief Executive Donald Tsang viewed the NPCSC as a necessity to prevent a political vacuum in Hong Kong, especially after democrat Chan Wai-yip launched a legal challenge to the HKSAR government to change the interpretation from five to two years.92 Another difference in their constitutional cultures is that while Beijing sees the NPCSC interpretation as a legal right empowered by the Basic Law, the Hong Kong legal community regards any top-down legal interpretation from Beijing as a political move. Compounding the controversies surrounding the NPCSC interpretations of the Basic Law was the role of the Secretary for Justice Elsie Leung. The legal community was dissatisfied with her performance. In February 1999 Leung decided not to prosecute the chair of the Sing Tao Group, Sally Aw Sian, for falsification of the circulation figures of the Hong Kong Standard on the grounds of maintaining the jobs of the Sing Tao Group – a remark regarded by the legal community as unjustifiable.93 Leung’s practice of consulting with the views of the Mainland legal experts in 1999 and 2005 was seen as harmful to the interest of Hong Kong’s judicial autonomy. In

92 Chan withdrew his legal challenge after the NPCSC’s interpretation of the Basic Law. 93 Leung said, “If Aw Sian was prosecuted, it would be a serious obstacle for restructuring. If the group should collapse, its newspapers would be compelled to cease operation.” See South China Morning Post, 5 February 1999, p. 1. For critique of Leung’s position, see Editorial, “Secretary Leung should take a rest,” Apple Daily, 5 February 1999, p. A8; Editorial, “This good person has done a wrong thing,” Ming Pao, 5 February 1999, p. A2; and Editorial, “Question of justice,” South China Morning Post, 5 February 1999, p. 18. For a critical review of the rule of law in Hong Kong, see Margaret Ng, “Post-handover rule of law: a new interpretation,” in Chris Yeung (ed.), Hong Kong China: The Red Dawn (Sydney: Prentice Hall, 1998), pp. 99–120.

The Mainlandization and Recolonization of Hong Kong

a sense, Leung’s role was more a political officer than a purely legal authority, for she had to mediate between Beijing and the HKSAR regarding controversial constitutional and legal issues. The clash between the HKSAR’s legal community and the Mainland’s emphasis on the right of the NPCSC to interpret the Basic Law reflected the tensions between “two systems” and “one country.” The Tung government was faced with the problem of how to reconcile Beijing’s willingness to exercise the NPCSC interpretation with the Hong Kong concerns. Eventually, it sided with Beijing rather than the wish of the legal community in the HKSAR. Critics of the Tung regime accused it of surrendering the supremacy of the CFA in favour of the NPCSC and the same could be said of the third NPCSC interpretation in April 2004. From another angle, however, the three interpretations signalled a dialectical process in which the NPCSC right to interpret the Basic Law must clash with the values of the defenders of Hong Kong’s common-law system.94 In defence of the separate identities of the “two systems,” the mainstream legal community in Hong Kong has become the critics of the Tung administration and acts as a bulwark against any possible encroachment upon civil liberties, as shown in the case of its opposition to Article 23 of the Basic Law. Furthermore, it serves as a deterrent to any post-colonial regime’s attempt at requesting the NPCSC’s interpretation of the Basic Law. Given the resilience of the legal community, which cherishes the finality of the CFA, Hong Kong’s legal convergence with China’s has been kept to a minimum.

Social Divergence and Economic Convergence with China In the same vein, the society of Hong Kong has displayed a relatively high degree of independence from the post-colonial government.

94 Byron S.J. Weng has argued that the Basic Law “provides a weak basis for judicial independence.” See Weng, “Judicial independence under the Basic Law,” in Steve Tsang (ed.), Judicial Independence and the Rule of Law in Hong Kong (Hong Kong: Hong Kong University Press, 2001), p. 69.

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The relatively pluralistic society of Hong Kong is composed of interest groups financially and politically autonomous from governmental control. During the debate over Article 23 of the Basic Law, social groups critical of the legislation emerged, collaborated, and constituted a formidable force that propelled the government to shelve the National Security Bill. Secondary school students, intellectuals, radio hosts, the pro-democracy Apple Daily, human rights activists, working-class unionists, and religious priests and believers, notably the Catholic Church led by Bishop Joseph Zen, mobilized citizens fully in opposition to Article 23 of the Basic Law.95 In a sense, they congealed and signaled the explosion of “an angry society” of Hong Kong, acting as the most powerful and heroic checks against any misrule of the Tung regime. 96 The National Security Bill served as a bone of contention that “crystallizes into a social movement when it taps embedded social networks . . . and produces collective action frames and supportive identities to sustain contention with powerful opponents.” 97 Although the “powerful opponents” embraced both the Tung government and Beijing, social activists utilized e-mails, pagers, cell phones, internet chat rooms, radio programs and personal networks with interest groups to mobilize Hongkongese to participate in the social movements on 1 July 2003 and 2004. 98 The maladministration of the Tung era ironically produced an unprecedented social movement strongly resistant to his government and policies. The angry society of Hong Kong was the repercussion of the Tung government’s policy of accelerating social convergence with

95 See Apple Daily, 30 June 2003; and Hong Kong Economic Times, 2 July 2003. 96 The term is borrowed from Guillermo O’Donnell and Philippe C. Schmitter, Transitions from Authoritarian Rule: Tentative Conclusions about Uncertain Democracies (Baltimore: The Johns Hopkins University Press, 1986), p. 49. 97 Sidney Tarrow, Power in Movement: Social Movements and Contentious Politics (Cambridge: Cambridge University Press, 1998), p. 23. 98 For social movements in Hong Kong, see Tai-lok Lui and Stephen Wing-kai Chiu, “Introduction: changing political opportunities and the shaping of collective action: social movements in Hong Kong,” in Stephen Wing-kai Chiu and Tai-lok Lui (eds.), The Dynamics of Social Movement in Hong Kong (Hong Kong: Hong Kong University Press, 2000), pp. 1–20.

The Mainlandization and Recolonization of Hong Kong

the motherland. 99 The mother-tongue language education was implemented after the retrocession. Although a minority of parents opposed it for fear of the career prospects of their children, the policy was carried out at the secondary school level.100 On the other hand, many formerly elite schools, notably the Catholic ones, had their status curbed by the emerging non-Catholic schools that have gained considerable government subsidies since the handover.101 The previously pro-Beijing secondary schools, such as Fukien and Pui Kiu, have obtained considerable financial support from the government, which occasionally sends high-level officials to attend their graduation ceremonies. Patriotic education has been emphasized since the retrocession and characterized by a new curriculum reform that is inculcating a deeper knowledge of China’s history and culture to the students. The national flags of the PRC are raised in increasingly more primary and secondary schools than the colonial era.102 Pro-Beijing political party the DAB advocated that national flags should be raised in the majority of schools and all

99 Writing before 1 July 1997, Ip Po-keung had already argued that the civil society in Hong Kong would at best be “tamed,” but not “crushed.” See Ip Po-keung, “Development of civil society in Hong Kong: constraints, problems and risks,” in Li Pang-kwong (ed.), Political Order and Power Transition in Hong Kong (Hong Kong: The Chinese University Press, 1997), p. 183. For the civil society’s quest for autonomy in the HKSAR, see Agnes S. Ku, “Negotiating the space of civil autonomy in Hong Kong: power, discourses and dramaturgical representation,” The China Quarterly, No. 179 (September 2004), pp. 647–64. 100 In general, the public believes that the English language “is the key to preparing the young people for a successful career.” See Chao Fen Sun, “Hong Kong’s language policy in the postcolonial age: social justice and globalization,” in Ming K. Chan and Alvin Y. So (eds.), Crisis and Transformation in China’s Hong Kong (New York: M.E. Sharpe, 2002), p. 295. 101 It must be noted that the British colonial officials originally viewed the Catholic Church with either “contempt” or political suspicion. See Beatrice Leung and Shun-hing Chan, Changing Church and State Relations in Hong Kong, 1950–2000 (Hong Kong: Hong Kong University Press, 2003), p. 27. 102 Thomas Tse Kwan Choi, “Civic and political education,” in Mark Bray and Ramsey Koo (eds.), Education and Society in Hong Kong and Macao: Comparative Perspectives on Continuity and Change (Hong Kong: Comparative Education Research Centre, University of Hong Kong, 2004), p. 189.

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government offices. Yet, patriotic education in the HKSAR is not an easy task, partly because of the relatively weak “patriotic” training of the teachers and partly because many students appear to have a weak nationalistic sentiment.103 Although the anti-Japanese protests against the Diaoyu Island in 1997 and the Japanese attempt at revising the content of their textbooks in 2005 aroused the nationalistic fervour of the Hong Kong people, they are comparatively more rational and calm than the Mainland Chinese. At the apex of the anti-Japanese riots in the PRC in April 2005, the Hong Kong people did not call for any boycott of the Japanese goods as with the Mainland Chinese. All in all, most Hong Kong people have increased their nationalistic sentiment since the retrocession, especially when they celebrated for China’s successful bid for hosting the 2008 Olympics, but patriotism in Hong Kong does not translate easily into their uncritical political support of the pro-Beijing forces in legislative and local elections. In practice, the Hong Kong identity of the Hongkongese has remained strong since the handover. In June 1997, a survey showed that 44% of the respondents identified themselves as Hong Kong persons while 22% regarded themselves as Chinese; nevertheless, these figures remained the same in November 2003.104 It appears that the local Hong Kong identity remains stronger than the national Chinese identity.105 On the other hand, the cultural Chinese identity of the Hong Kong people has traditionally been separated from their political identity, meaning that cultural identification does not necessarily bring about unquestionable and loyal attitude toward the Chinese government.106 As a matter of fact, the local

103 Yet, recent surveys have found that patriotism of the Hong Kong people slightly increased; 73% of a survey of 1,054 citizens identified themselves as “feeling proud of being a Chinese.” See Ming Pao, 2 June 2005. 104 Civic Exchange, “Listening to the wisdom of the masses: Hong Kong people’s attitude toward constitutional reform” (January 2004), http://www.hkbu.edu.hk/~hktp. Accessed 1 June 2005), p. 16. 105 See Elaine Chan, “Defining fellow compatriots as ‘others’: national identity in Hong Kong,” Government and Opposition 35, No. 4 (2000), pp. 499–519. 106 Gordon Matthews, “Heunggongyahn: on the past, present and future of Hong Kong identity,” Bulletin of Concerned Asian Scholars 29, No. 3 (1997), p. 13.

The Mainlandization and Recolonization of Hong Kong

Hong Kong identity is so strong that it encompasses the citizens’ perception of the rule of law, their freedoms and their well-being. As a former British official, Sir David Akers-Jones, remarked: “Our interpretation of the phrase ‘one country, two systems’ concentrated on the superiority of our system and its proud possession of the rule of law, our freedom, our administration, our simple tax structure and our economic well-being, so much so that we failed to evaluate the significance of what was happening north of the boundary in Shenzhen and of the changes taking place in the rest of Guangdong and throughout China.”107 Compared with the Mainland Chinese and the Taiwanese, the people of Hong Kong also have “the strongest belief in political liberty.”108 The local identity was so tenacious that it resisted any attempt by the Tung government to implant the Mainland system, either in the form of legislating on Article 23 of the Basic Law or requesting the NPCSC to interpret the Basic Law. In the economic sphere, Hong Kong has transformed from “a core” shaping the development of peripheral China into a region more dependent on the Mainland’s economic support than ever before.109 The HKSAR remains a vibrant financial centre with an often buoyant stock market on which Mainland enterprises are attempting to be listed. Nevertheless, the political earthquake on 1 July 2003 plunged the HKSAR into an economic dependency on the motherland. Beijing has been keen to pump into Hong Kong endless tourists and economic benefits so as to make the “one country, two systems” seemingly successful and to keep the formula superficially attractive to Taiwan for reunification. While the policy-makers of

107 David Akers-Jones, Feeling the Stones: Reminiscences by David Akers-Jones (Hong Kong: Hong Kong University Press, 2004), p. 268. 108 Yun-han Chu and Yu-tzung Chang, “Culture shift and regime legitimacy: comparing Mainland China, Taiwan, and Hong Kong,” in Shiping Hua (ed.), Chinese Political Culture, 1989–2000 (New York: M.E. Sharpe, 2001), pp. 331–32. 109 This phenomenon is contrary to Hong Kong as a “socioeconomic centre” before the handover. See Alvin Y. So and Reginald Yin-wang Kwok, “Socioeconomic center, political periphery: Hong Kong’s uncertain transition toward the twenty-first century,” in Reginald Yin-wang Kwok and Alvin Y. So (eds.), The Hong Kong-Guangdong Link: Partnership in Flux (Hong Kong: Hong Kong University Press, 1995), pp. 251–57.

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Taiwan are uninterested in the Hong Kong formula for reunification, Hong Kong’s economic dependence on China has been inevitable since the handover. China’s global emergence and its rapid economic growth have provided a huge and lucrative market for Hong Kong traders, businessmen and professionals. Lawyers, accountants, engineers, business consultants, bankers and even marriage consultants have utilized the lucrative China market to enhance their businesses in the Mainland.110 The new Disneyland in the HKSAR is going to rely on Mainland tourists. Prior to the opening of the Disneyland in September 2005, the Trade Development Council visited China’s provinces and promoted the special tour packages to Mainland visitors. With many Hong Kong manufacturers operating their factories in South China and employing Mainland Chinese workers, it can be said that economic relationships such as trade and investment between Hong Kong and the Mainland are often interdependent. 111 Yet, judging from Beijing’s economic measures taken by Beijing to deal with the HKSAR’s legitimacy crisis since 1 July 2003, Hong Kong’s economy has undoubtedly become more dependent on China than before. The CEPA has provided more opportunities for Hong Kong businessmen to tap into the China market, while Mainland tourists have stimulated the growth of the hotel, retail and service sectors as well as the property market in the territory. The Tung regime’s policy of economic integration with South China was propelled further in his second term of office by pushing ahead the plan of building the Hong Kong-Zhuhai-Macao bridge. Originally, the cross-border bridge was an idea floated by a few

110 Intermarriage between the people of Hong Kong and mainlanders, especially between Hong Kong men and Mainland women, has become a commonplace since retrocession. More Hong Kong women have visited the Mainland and searched for male partners too. 111 Sung Yun-wing, The Emergence of Greater China: The Economic Integration of Mainland China, Taiwan and Hong Kong (London: Palgrave, 2004); Sung Yun-wing, Hong Kong and South China: The Economic Synergy (Hong Kong: City University of Hong Kong Press, 1998); and Sung Yun-wing and Song Enrong, The China–Hong Kong Connection: The Key to China’s Open-Door Policy (Cambridge: Cambridge University Press, 1991).

The Mainlandization and Recolonization of Hong Kong

businessmen and policy advisors, notably engineer and businessman Gordon Wu and the pro-Beijing One Country Two Systems Economic Institute led by Shiu Sin-por. However, Tung during his first term of office did not push forward the plan of infrastructure coordination with the Mainland until he was “re-elected” without opponent in March 2002. The policy deadlock was partly attributable to Tung’s policy priorities, which focus on his reform agendas, and partly due to the resistance of the former Chief Secretary Anson Chan, who was at loggerheads with Tung and who seemingly had reservations about a closer integration with China.112 The plan of building the cross-border bridge was political; the Shenzhen Special Economic Zone attempted to get the bridge linked to Shenzhen. Its desire reflected a hidden regional rivalry with Zhuhai and a concern that both Zhuhai and Macao will reap the economic benefits from the bridge at the expense of Shenzhen. Beijing’s final decision was that the bridge should be connected with only Zhuhai and Macao, thus sealing the fate of Shenzhen’s ambition. After Tung’s resignation, the HKSAR government has been continuing to negotiate with Zhuhai and Macao on the sites of the bridgeheads, capital accumulation and other related issues such as toll fees and repair arrangements. The decision of constructing the Hong Kong-Zhuhai-Macao bridge signals the Tung government’s determination to accelerate economic integration with South China. Economic integration between Hong Kong and South China has accelerated and facilitated the process of social interactions. The border checkpoints between Hong Kong and Mainland China, including Lok Ma Chau, are opened twenty four hours per day so that Hong Kong people can visit the Mainland and return to the HKSAR conveniently. The measure has greatly facilitated

112 The criticism levelled at Anson Chan came mainly from the pro-Beijing elites, but whether Chan really was an obstacle to closer economic integration between Hong Kong and China was debatable. For a good review of the multifaceted Hong Kong – China integration, see Anthony Gar-on Yeh, Yok-shiu F. Lee, Tunney Lee, and Nien Dak Sze (eds.), Building a Competitive Pearl River Delta Region: Cooperation, Coordination, and Planning (Centre of Urban and Environmental Management, University of Hong Kong, 2002).

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cross-border trade and the flow of goods. Yet, the unintended social consequence of greater economic integration was that, in March 2003, the outbreak of the Severe Acute Respiratory Syndrome (SARS) proved the porous nature of the borders and necessitated urgent measures in checking the body temperatures of travellers. While economic integration and infrastructure projects have enhanced bilateral trade and cross-border travels, they have simultaneously accelerated the detrimental impact of any infectious disease. The political ramifications of Hong Kong’s social divergence and economic integration with the Mainland are obvious. Economic integration has promoted human interactions and minimized social divergence to a limited extent; more Hong Kong people have been visiting the Mainland while more Mainland Chinese who visit the HKSAR are silently appreciating the values of a pluralistic society.113 It remains to be seen whether more Mainlanders who visit Hong Kong and who work in the territory will become more supportive of democratic values. Nevertheless, the pluralistic society of Hong Kong where the legal profession is dedicated to the defense of judicial autonomy and civil liberties is perhaps the strongest colonial legacy that resists any attempt by both Beijing and the HKSAR government to mainlandize Hong Kong’s legal system.114 Conversely, the economic integration between Hong Kong and China has strengthened the realpolitik sentiment of the local business community, which sees the motherland as a lucrative market and whose leaders see the democrats and defenders of the common law

113 Some Mainland visitors were amazed at the mass protests in the HKSAR on 1 July 2003 and 1 July 2004. Some participated in the annual candlelight vigil held at the Victoria Park to commemorate the Tiananmen incident in the PRC. Moreover, some Mainland students have developed their habit of reading politically “incorrect” and pro-democracy newspapers like the Apple Daily. The author’s discussion with a Mainland student in Hong Kong, 16 April 2005. 114 For the British colonial legacy, see Ming Chan, “The imperfect legacy: defects in the British legal system in colonial Hong Kong,” University of Pennsylvania Journal of International Economic Law 18, No. 1 (Spring 1997); and Ming Chan, “The legacy of the British administration of Hong Kong: a view from Hong Kong,” The China Quarterly, no. 151 (September 1997).

The Mainlandization and Recolonization of Hong Kong

system as being “ignorant” of the Mainland’s economic progress and politico-legal cultures. 115 An overwhelming majority of the business leaders in the HKSAR are increasingly pro-Beijing in terms of their political orientations. The anti- democratic, conservative and anti-labor instincts of many Hong Kong business leaders have been consolidated by the rapid process of economic integration, for they realize that confrontations with the PRC would bring about detrimental effects on their businesses in China and Hong Kong.

Donald Tsang’s and Beijing’s Policies of Recolonizing the Polity and Mainlandizing the Economy The departure of Tung Chee-hwa from Hong Kong’s political arena ironically has deepened Hong Kong’s full-scale economic and political convergence with the PRC. Donald Tsang has been adopting the policy of making the political system akin to the colonial style of cooptation, selective exclusion, and postponed democratization. By co-opting supporters and some pro-democracy elites into the Strategic Development Commission (SDC), Donald Tsang has been able to portray himself as the master of social and political harmony. The cooptation of pan-democracy elites into the SDC also served to legitimize the political discussions on a gradual process of democratic reforms. While the democrats clashed with Tsang over his proposal of democratizing Hong Kong. On 21 December 2005, the HKSAR government’s political reform blueprint, which proposed the Election Committee selecting the Chief Executive be widened from 800 to 1,600 members in 2007 and which empowered directly elected and appointed District

115 In the British colonial era, the business people adapted to the transfer of sovereignty by looking for Mainland Chinese partners, enhancing their links with the Mainland, and retaining a politically conservative outlook. See C. K. Lau, Hong Kong’s Colonial Legacy: A Hong Kong Chinese View of the British Heritage (Hong Kong: The Chinese University Press, 1997), pp. 83–100.

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Council members to elect six of the expanded 70-member Legislative Councilors in 2008, failed to gain the required two-thirds support of LegCo. The LegCo rejected it by a 34 to 24 vote, with one abstention from Lau Chin-shek. 116 The Tsang supporters accused the democrats of being obstinate, while the latter argued that Tsang’s reform blueprint was too conservative. Interestingly, after the political row, both sides calmed down and tried to hammer out a democratic blueprint in the SDC, which however has failed to do so due to their deep ideological differences. Still, by co-opting some elements of the pan-democratic camp into the SDC, Tsang was seen as a political winner preparing for his bid for the Chief Executive election in 2007. Another strategy of mainlandizing or recolonizing Hong Kong’s political system is to exclude the political “troublemakers.” Pan-democratic activists such as “Long Hair” Leung Kwok-hung and Emily Lau have been excluded from participation in the SDC to avoid any political impasse. On the other hand, these pan-democratic activists rejected the Chief Executive election in 2007 as a “small circle election,” thus perpetuating their own marginalization and exclusion in Hong Kong’s increasingly narrow political space. The persistence of protest and boycott tactics by the pan-democratic radicals only served to discredit themselves in the long run, for the prevailing political atmosphere that emphasizes social harmony makes the ordinary citizens feel that they are unrealistic confrontationalists. The continuous decline of popular support of Emily Lau in her direct elections of the Legislative Council in recent years has pointed to the increasingly narrow political space unfavourable to the critical democrats in the HKSAR. Tsang’s policy of political exclusion added more weight to the already hopeless predicament of the democratic radicals, who in Western democracies are viewed more as moderates than as “irrational” confrontationists.

116 See Sing Tao Daily, 2 December 2005. Lau Chin-shek has moderated his political views and stance since he had to visit his ailing mother in Mainland China in the late 1990s. His vote share in the direct elections held for the Legislative Council also declined gradually, pointing to his gradual political eclipse.

The Mainlandization and Recolonization of Hong Kong

Tsang’s policy of postponing democratization also forces the pan-democratic radicals into a political corner whereby they have little choice but to voice their grievances on the streets. Ironically, Leung Kwok-hung and Emily Lau are also forced by the narrowing political space to participate in legislative elections. The dialectical phenomenon of the pan-democratic radicals who reject “small circle” Chief Executive elections” and yet who have to compete in legislative direct elections is a testimony to their great difficulties in the HKSAR’s prolonged process of democratization. The mass media, which have increasingly covered Hong Kong’s economic and political events positively since the citizen protests on 1 July 2003 and 1 July 2004, are under the severe threat of self-censorship that further erodes the political space for survival and development of the pan-democratic “radicals.” Apparently, the Hong Kong media are relatively free from governmental interference, but their subtle self-censorship and increasingly over-optimistic portrayal of Hong Kong’s “one country, two systems” have deprived the pan-democratic “radicals” of any further springboard to launch and publicize their political platforms and ideas.117 The most prominent mainlandization strategy adopted by Donald Tsang is his determination to push ahead Tung’s policy of economic convergence with the PRC. In an era when most Hong Kong people regard the rise of Mainland China as a glorious political development, and when more people in Hong Kong are identifying culturally and economically with the PRC, economic convergence between the HKSAR and the PRC has significant political implications. The HKSAR is increasingly tied to the economic fate of its motherland. Hong Kong is now marked by a prominent process of economic dependence on the PRC for trade opportunities, CEPA benefits, tourists’ spending, and above all the Mainland capital for stimulation of the Hong Kong’s stock market as well as the property sector. As a result, the economic bargaining power of the HKSAR vis-à-vis the Mainland is losing ground very quickly. The HKSAR is simply a Mainland Chinese city with the

117 For the most recent survey on self-censorship in Hong Kong, see Hong Kong Journalist Association, “Survey on press freedom in Hong Kong, January 2007.” http://www.hkja.org.hk. Accessed 12 January 2007.

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exception of possessing the rule of law, a more seemingly globalized population (which hides the fact that many Hong Kong youngsters are parochial in their social and political outlook), and a more pluralistic society and polity. In economic terms, Hong Kong’s capitalist class is increasingly loyal to the PRC and sees any democratic reform blueprint initiated by the pan-democratic camp as potentially destabilizing. Businessmen who have vested interests in China’s lucrative economic market dare not antagonize the PRC regime over any political and democratic reforms. In short, Hong Kong’s economic dependence on the PRC is consolidating the ultra-conservatism of the business and capitalist class while simultaneously minimizing its economic leverage and bargaining power. If recolonization, which appears to be a politically “incorrect” term as Hong Kong is undisputedly a part of Mainland China, is defined academically and theoretically as a process in which a powerful metropole is exerting influence on its colonial enclave politically, economically, socially and culturally, this process of recolonization does take place in the HKSAR’s complicated relations with the PRC. Although Hong Kong is no longer a colony of Britain, it politically retains a semi-colonial system. Economically, the HKSAR is increasingly an economic appendage of Beijing. Socially, more Hong Kong people are identifying themselves with the rising and global China. Culturally, China’s “soft power” such as films, movie stars and culture is increasingly seeping into every corner of the Hong Kong society.118 To argue that Hong Kong is still retaining a unique “two systems” is to ignore the harsh reality that the HKSAR has already become another PRC colony, regardless of whether the people of Hong Kong like the academic term or not after their retrocession to the motherland. Indeed, recolonization has its dialectical process too. By integrating with the PRC, the HKSAR also has influence on the Mainland’s elite political culture, economic development, and social values. With a large number of Hong Kong people residing in South China, their activities of influencing government policies in

118 For the concept of “soft power,” see Joseph S. Nye, Soft Power: The Means to Success in World Politics (New York: Public Affairs, 2004).

The Mainlandization and Recolonization of Hong Kong

Guangdong and the localities, as well as other provincial and municipal administrations, mean that the political culture of Hong Kong is also seeping into the Mainland soil. Mainland officials are forced to be more responsive to the demands and criticisms of the Hong Kong people, both in the Mainland and in the HKSAR. Guangdong’s economic development would surely suffer in the event of any economic downturn in the HKSAR, and Macao as well. The soft power of Hong Kong, including their movie stars, cultural lifestyle, and social values, can also be found in the PRC, notably Shanghai where Hong Kong businessmen created Hong Kong-style leisure and entertainment places. Nevertheless, it is doubtful whether Hong Kong’s soft power can really dominate China’s soft power over the HKSAR. The first decade of the HKSAR experience has appeared to show that the mainlandization of Hong Kong, both politically and economically, has proceeded in a much faster pace and deeper scope than the process of Hongkongizing the PRC’s polity and economy. If this argument is valid, then Hong Kong’s politico-economic convergence with the PRC is a destiny that can prolong, postpone and procrastinate a blueprint of how to shape Hong Kong’s political structure so that the previous vitality of “one country, two systems” can be enshrined.

Conclusion and Implications for the Theory of Convergence The processes of political and economic convergence between the HKSAR and the PRC were accelerated by the Tung regime and have been inherited as well as deepened by the Tsang government. While political mainlandization has a dampening effect on the HKSAR’s democratic prospects, the society of Hong Kong remains a pluralistic and vibrant one fighting against any attempts at making Hong Kong’s legal system more akin to the Mainland’s. In particular, the legal profession has been constantly resistant to any erosion of the HKSAR’s judicial autonomy through the NPCSC’s interpretation of the Basic Law. At the same time, perhaps the relatively liberal society left by the British during the final years of

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their colonial rule had a deterrent effect on any attempt by the post-colonial regime to encroach upon civil liberties. The role of the Catholic Church, lawyers, intellectuals, human rights activists, outspoken radio hosts and the democrats was critical to the Tung government’s decision to shelve the legislation on Article 23. They provided a rallying point for the society to oppose the Tung regime. Beijing’s leadership was given a rude awakening in the wake of the mass protests on 1 July 2003 and 1 July 2004, thus speeding up the “glorious” exit of Chief Executive Tung. Yet, it remains to be seen whether the Hong Kong society will remain pluralistic enough to ward off any further process of mainlandization of the HKSAR’s polity. As long as patriotic education proceeds at a snail pace, ironically the Hong Kong identity and values will constrain mainlandization. Yet, if patriotic education proceeds rapidly and more Hong Kong people are identifying themselves with the rise of Mainland China, societal resistance to any attempt of mainlandizing Hong Kong’s polity will become weaker than the 1 July 2003 and 1 July 2004 protests against Article 23 of the Basic Law. From the perspective of convergence, the traditional convergence theory cannot be applied to the Hong Kong case. Rather than having the PRC moving closer to Hong Kong’s polity, the HKSAR political system is under Beijing’s control and shows features of mainlandization, notably the proliferation of clientelism, the reliance on politically correct but mediocre pro-CPC and pro-business elites, and the persistent view of pro-democracy activists as “pro-Western troublemakers.” The PRC, which still has a self-proclaimed socialist regime, was supportive of Tung’s policy of convergence, both politically and economically. Yet, such convergence policy alienated the majority of the Hong Kong people, leading to an unprecedented crisis of governance. To defuse the crisis and to terminate the likelihood of Hong Kong politically diverging from the political orbit of China, Beijing had to intervene in the administration of the HKSAR more prominently after the massive protests on 1 July 2003 at least until Tsang became the new Chief Executive. Tsang’s skilful policy of recolonization has minimized the need for Beijing to explicitly interfere with Hong Kong’s polity, although the remarks of PRC officials in support of Tsang as the Chief Executive election candidate in 2007 stood out as

The Mainlandization and Recolonization of Hong Kong

a prominent hallmark of such “intervention.” Tsang basically maintains Tung’s policy of economic convergence with the PRC, but he has understood the need to temporarily slow down the process of political convergence for fear of any reoccurrence of the political earthquake on July 1, 2003. Yet, soon after Tsang softened Tung’s hard-line stance on the democrats from March to mid-December 2005, the new Chief Executive has been adopting the policy of mainlandization and convergence, propelling Hong Kong’s polity back to the colonial era when cooptation was a rule rather than exception, and deepening the HKSAR’s economic dependence on the Mainland. To put it bluntly, the HKSAR has become a colonial appendage of the PRC, both in terms of the power to control the polity and influence the economy. Socially, Tsang’s subordinates have been adopting the previous policy of the Tung administration to enhance patriotism through educational reform. By doing so, both Tsang and his patron Beijing are moving the HKSAR socially much closer to the Mainland than before. A decade later, when more Hong Kong people have stronger Mainland Chinese cultural and political identity, the Hong Kong uniqueness will most probably be further diluted. Tsang’s policies have much in common with his predecessor Tung, except for the fact that the former is far more publicly popular than the latter, and that the former realizes the temporary need to publicly distance himself from the leftwing/patriotic forces for fear of creating an image of the unholy alliance between the Chief Executive, the politically correct but aggressive leftwing forces, and the business elites in the HKSAR. While this triple alliance was prominent in the Tung era, it has been persisting but become more implicit in the Tsang administration. In fact, after the democrats rejected Tsang’s political blueprint in December 2005, Tsang labelled them as the opposition faction and he has reverted to Tung’s policy of politically excluding the “radical” democrats from the echelons of political power. Tsang has also showed his public alliance with the pro-Beijing and pro-business forces especially during his Chief Executive election campaign in 2007. Economically, Tung’s convergence policies did not arouse public outcry, for the people of Hong Kong were pragmatic to envisage and receive the economic benefits from a closer economic

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partnership with the motherland. The patriotic think-tank of Tung and Tsang views economic convergence as not only a political expediency to rescue the HKSAR’s crisis of confidence, but also a necessary step toward political convergence between Hong Kong and Mainland China in the long run. Tung’s economic integration with Mainland China topped his policy agenda during his second term of office, bringing about intensive social interactions between the Hong Kong people and the Mainlanders. While the political impact of enhanced social interactions on both Hong Kong and China remains to be unfolded, economic integration has already consolidated the anti-democratic and pro-Beijing political sentiments of the local business leaders, who are determined to maintain friendly relations with their overlord China. The business sector is worried that any democratization in the HKSAR would unleash the “anti-business” and “anti-PRC” forces, notably the democrats, in support of more welfare policies to the detriment of the Hong Kong economy. As businessman Gordon Wu remarked in November 2005, the democrats who planned to protest against the Tsang administration’s political reform blueprint were playing “mob politics.”119 The crux of the issue is that as long as the pro-business party, the Liberal Party, cannot grasp a majority of seats in the Legislative Council, other conservative-minded business elites must see democratization as anathema to their economic interests in both Hong Kong and the PRC. Politically, the conservative-minded business elites must ally with the politically patriotic forces to back up Beijing and the HKSAR government in the process of decelerating democratic reforms. In short, the triple alliance of the business elites, leftwing forces and the HKSAR government must protect the interests of “one country” – their patron and overlord Beijing. On the contrary, the local democrats and those Hong Kong people who have strong local identity are determined to resist any move that may encroach upon their civil liberties. Political polarization in the HKSAR is destined to render the encounters between “one country” and “two systems” controversial and conflict-ridden.

119 See Ming Pao, 23 November 2005.

The Mainlandization and Recolonization of Hong Kong

The case of Hong Kong under the leadership of Tung Chee-hwa corroborated the multi-dimensional processes of convergence in which the polity of Hong Kong was mainlandized and de-democratized to considerable extent. Every attempt was made by both Beijing and the HKSAR government to thwart the democrats from capturing a majority of the legislative seats. Nonetheless, the society was exhibiting strong reactions to Sinification not only in the form of resisting the legislation on Article 23, but also opposing the NPCSC’s moves to interpret the Basic Law and to deprive the Court of Final Appeal of its opportunity to do so. In response to the strong societal backlash against Tung’s policy of mainlandization, Beijing has been using economic enticements to enhance the political pragmatism of Hong Kong people. The closer economic integration between Hong Kong and China has strengthened the political loyalty and conservatism of Hong Kong’s business people. It is an undeniable fact that the alliance between the Tung government, Beijing, leftwing forces and the business elites generated a setback in democratic reform, albeit the assertive and pluralistic society of Hong Kong remains the strongest bulwark against any further move toward political convergence. The relatively vibrant civil society in the HKSAR will likely act as a deterrent to any further attempt at diluting Hong Kong’s values of freedom, the rule of law, and group as well as individual liberties. The degree to which patriotic education proceeds, and the extent to which more Hong Kong people will amalgamate their cultural identification with Mainland China into a political identification with the regime in power, are going to be the twin indicators of Hong Kong’s social convergence or divergence with the PRC. If “one country, two systems” formula is supposed to protect Hong Kong’s social uniqueness and divergence, patriotic education is dialectically playing a critical role in forging the social convergence between the HKSAR and the Mainland. The policy of mainlandization put the priority of “one country” over the uniqueness of the “two systems,” triggering public discontent and unleashing fierce opposition from society where the local Hong Kong identity remained relatively strong. Tung was a patriotic leader appreciative of the PRC’s economic progress, imbuing with the idea that the identity of the Hong Kong people

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could be transformed into a stronger sense of Chineseness. Yet, from 1 July 1997 to March 2005, the society of Hong Kong remained deeply divided between a resilient Hong Kong identity and an abortive governmental attempt to enhance the Hong Kong people’s political identification with Mainland China. That the Hong Kong people identified themselves as culturally Chinese could not be easily translated into their uncritical political support of the Communist Party of China. The resilience of the Hong Kong identity, which expressed itself saliently in the form of fighting for civil liberties and protecting the Court of Final Appeal’s judicial autonomy vis-à-vis the NPCSC, clashed with the Tung government’s policy of mainlandization or convergence. While the HKSAR has been propelled to converge with the PRC politically and economically, the strong Hong Kong identity in the society sustains the territory’s social divergence with the motherland. The politico-economic convergence between Hong Kong and China is inevitable, but the people of Hong Kong are determined to maintain socio-legal divergence between the two places. This coexistence of politico-economic convergence and socio-legal divergence will perhaps continue to mark the development of Hong Kong’s integration with China in the years to come. If the conflict-ridden relations between Hong Kong people and the Tung administration were attributed to the policy of convergence, its lesson is that a modified or diluted form of convergence policy could be implemented by Tung’s successors and accepted by Beijing at least in the short run. Donald Tsang did dilute the convergence policy from March to December 2005, but since the democrats’ rejection of his reform model, Tsang has been keen to revert to the policy of politio-economic and social convergence. Enjoying a relatively high degree of popularity, Tsang’s policy of politio-economic and gradual social convergence has been arguably a silent revolution that has gone unnoticed by many outside and even inside observers. On the other hand, Tsang, embarked on a path of maintaining some degree of Hong Kong uniqueness by trying to introducing and accelerating democratic reforms, notably the increase in the number of directly elected legislators from thirty at present to thirty-five in 2007, and the corresponding increase in the number of indirectly elected legislators from thirty currently to also thirty-five in 2007,

The Mainlandization and Recolonization of Hong Kong

with the five new indirectly elected seats coming from the elections among District Council members. 120 Nevertheless, the local democrats opposed his reform blueprint. The crux of the problem was that the democrats who uphold political divergence of Hong Kong from China persisted in opposing the Tsang regime. Tsang was cautious in avoiding any transgression of the political boundary set by Beijing, while simultaneously using some political reforms to entice and split the internally divided and heterogeneous democrats. The implication is that the tensions between “one country,” whose interests and concerns are protected by the Tsang administration, and “two systems,” which are staunchly upheld by the local democrats, persist. Arguably, the “one country, two systems” formula devised by Deng Xiaoping is inherently contradictory, displaying the dialectics of protecting the interests of Beijing while trying to preserve the uniqueness of the two systems. Yet, in the process of political integration of Hong Kong into China, this formula has proved to be very controversial, problematic and conflict-ridden. Both the Tung and Tsang governments are keen to maintain the interests of “one country,” albeit Tsang has learnt a bitter lesson from Tung to avoid antagonizing the majority of the people of Hong Kong. On the other hand, the local democrats are determined to fight for their civil liberties for the sake of preventing the HKSAR from drifting toward “mainlandization.” The politics of the HKSAR will continue to display the ongoing tensions between the pull of convergence and the push of divergence. It is crystal clear that the concepts of divergence and convergence are pertinent but neglected in the study of the political, economic and legal metamorphosis of post-colonial Hong Kong. The interests of “one country” certainly propel the HKSAR toward an irreversible path toward political, legal and economic convergence. Yet, the local demands of retaining the specialness of the “two systems” contribute to the push of

120 The Fifth Report of the Constitutional Development Task Force: Package of Proposals for the Methods for Selecting the Chief Executive in 2007 and for Forming the Legislative Council in 2008 (October 2005). http://www.legco.gov.hk/yr05-06/english/panels/ca/papers/ca1021cb2-rpt-e.pdf. Accessed 25 November 2005.

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divergence. The ongoing tug-of-war between convergence and divergence will continue to become the hallmark of Hong Kong’s political, social and legal transformations from now to 2047. In the final analysis, Tsang’s policy of recolonization has significant bearings on Hong Kong’s political development in the years to come. He recolonized the polity by strengthening the cooptative mechanism, marginalizing the “radical” democrats, postponing democratic reforms and placating the anxiety of Beijing that Hong Kong’s polity would be “Taiwanized” or democratized. Above all, the HKSAR’s economic dependence on the PRC has already weakened its own bargaining power vis-à-vis the motherland. The silent process of recolonizing Hong Kong’s polity and dependenizing its economy means that the HKSAR is increasingly losing its lustre and uniqueness. When China’s economy undergoes a sudden fluctuation, the HKSAR will surely suffer most plunging the entire economy and society into turbulence and public panic. When China’s polity experiences a sudden crackdown on any pro-democracy movement, ironically the Hong Kong democrats will enjoy a surge in their popularity. Yet, when China steps into a gradual process of elite-led democratization, 121 Hong Kong’s ultra-conservative capitalist class will surely fight against any public attempt at democratizing the polity. Ultimately, Hong Kong’s polity and economy are by no means so optimistic as the local media, which have an enduring vested interest to overstate the rosy prospects, portray. Mainlandization and colonization are dialectical processes that are impinging on Hong Kong, which also has influence on its motherland politically, economically and socially. Yet, the past decade of developments in the HKSAR has already proved that mainlandization of Hong Kong is going to be deepened, while its colonization by the PRC means that many Hong Kong people still retain a colonial dependency mentality, believing that Beijing must come to their economic rescues and that it is natural for sons and daughters to rely on the parent for politico-economic support. If the dependency relationships between Hong Kong and

121 Bruce Gilley “Elite-led democratization in China: prospects perils and policy implications,” International Journal (Spring 2006), pp. 341–358.

The Mainlandization and Recolonization of Hong Kong

Mainland China are actually deepened, the uniqueness of “one country, two systems” is going to be diluted unintentionally and inevitably even though both the HKSAR and PRC governments must point to the formula’s thriving development so as to lure Taiwan back into the Mainland Chinese orbit. Regardless of whether Taiwan will accept the “one country, two systems” model, the reality is that the HKSAR has been both politically and economically mainlandized and recolonized. The specialness of Hong Kong has been undisputedly diluted since 1 July 1997; nevertheless, it is unclear whether the relatively strong civil society will be able to hold on Hong Kong’s identity and uniqueness until 2047, when Hong Kong will most likely be integrated more fully into Mainland China’s political, social and economic spheres.

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5 From Tung Chee-hwa to Donald Tsang: China’s Grudging Self-Correction and Policy Re-orientation towards Hong Kong in the Lost Decade HUNG Ching-tin

Introduction It took nearly two thousand years for alien Buddhism to be absorbed into Chinese civilization. Marxism was adopted into China in the first years of the twentieth century. Hong Kong is China’s only place where modern capitalism, liberalism and modernity were wholesomely assimilated into Chinese soil and culture. China’s “one country, two systems” national policy towards Hong Kong was once conceived and promoted, not without basis, as an opportunity for China to get to learn the workings of capitalism, liberalism and modernity. The first ten years after Hong Kong reverted to Chinese rule seem to bear witness; however, China has squandered the opportunity. These ten years have been lost. A borrowed place from 1841 to 1997, Hong Kong is not renowned for high-sounding theories and rhetoric. “Positive non-interventionism” (PNI) probably is the only exception. It is a term coined by Sir Philip Hadden-Cave in the late 1970s to replace laissez-faire to depict economic policy. Since then, it has been a 233

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household name in Hong Kong. In the 1980s, PNI was a sacred cow, honoured both in Hong Kong and China. It was an exchangeable equivalent of free economy and market economy. With the blessing and help of Milton Friedman, it made a name for itself in the world of economic thought. In 2006, Donald Tsang, the Chief Executive of Hong Kong Special Administration Region, in a discussion session on how Hong Kong should respond to and coordinate with China’s 11th Five-year Plan, dismissed the importance of PNI, saying it has now been long discarded. This article revisits PNI and is an attempt on the exposition of its contents and significance, with an intention to argue for its current and future relevancy, and possible reinstatement.

The Current and Future Relevancy of Positive Non-Interventionism Inception of and a Revisit to PNI PNI was coined by Sir Philip Hadden-Cave, Financial Secretary and later Chief Secretary of the British Administration in Hong Kong, in the late 1970s as a term underscoring Hong Kong’s economic policy. After World War II, the West skewed to socialism and the East turned socialist or Communist. State interventionism was in vogue. Hong Kong might be the world’s only enclave of laissez-faire capitalism said to be propagated by Adam Smith. Hong Kong and the Hong Kong government were rather out of place with the world. The Hong Kong government was under some pressure from the Labour government at home and pro-socialism, and from Western academicians in Hong Kong to discard laissez-faire policies. In response, Sir Philip Hadden-Cave said he did not like the term laissez-faire either, and would like Hong Kong economic policies to be called positive non-interventionism, thus creating Hong Kong’s only world-class theoretical icon and brand name. In nearly 30 years, Hong Kong is replete with stories of general use and misuse of PNI, and conflicts and contradictions associated with it in different stages since the 1970s. PNI has evolved into a

From Tung Chee-hwa to Donald Tsang

term of convenience with five levels of direct or indirect, explicit or hidden meanings: The first level: Basic ideas and indicative financial, taxation, economic and general policy guidelines originated and expounded by Sir Philip Hadden-Cave in the 1970s and 1980s. The second level: PNI as a coherent orientation of the multi-institution of the British administration in Hong Kong; The third level: PNI as a cultural underpinning of Hong Kong’s generalist elite and the colonial administrative philosophy of the British administration in Hong Kong； The fourth level: PNI as an application of Western economics and politics of humanism, liberalism and conservationism administered by the British in a oriental setting; The fifth level: PNI as an inadvertent merge of East and West in a borrowed territory for a unspecified borrowed time

An Exposition of Multi-faceted PNI Roles of state and/or government and/or party in economic affairs are problematic at the heart of modern society, economics, politics, philosophy and culture. They are pivotal to all core issues of administration and governance. The state and the market vied for control of the economy and society, while state intervention and market self-regulation took turns to achieve equilibrium, justice and socio-political and moral goals, and to cope with crisis with the varying degrees of success and failure. The most exposed facet of PNI is the commonly evoked “positive non-interventionism” in time of normalcy and ordinary running of the system. In a narrow sense, it means non-interventionism that achieves positive results, differing from laissez-faire which has then been widely condemned as non-interventionism that entailing negative, inhuman consequences. But there is also a hidden facet of PNI – positive interventionism in time of crisis and abnormity. It differs from negative interventionism practiced in the collectivistic, planned economies of socialist/communist counties. When extraordinary situations call for positive interventionism as a measure of crisis management, the

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British socio-economic orientation is followed by a policy shift. In times of positive interventionism, the British still called the policy PNI. Never did the British call the policy positive interventionism. That might be a cultural understatement by Sir Philip Hadden-Cave; it might also be a political policy, administrative tack and philosophical propensity. He touched on government interventionism in extraordinary situations to achieve results beyond economic ones, but seemingly never elaborated on the theory, justifications and methods of positive interventionism. As a matter of fact, Hong Kong’s free economy and free society since 1841 is Britain’s greatest positive interventionism in an oriental setting. Carving out a Western-style socio-economic and rule of law, political enclave on the China continent is by no means non-interventionism in its most twisted sense. Hong Kong’s 166 years of history is not simplistically “intervention” vs “non-intervention,” or “interventionism” vs “non-interventionism,” but a configuration of alternative conflicting policies and elements, strategies and philosophy of state intervention and non-intervention, interventionism and non-interventionism. PNI comprises four polarities: positive non-interventionism (vs negative interventionism) and positive interventionism (vs negative interventionism). In response to and in view of the world situation and local reality, the administration changed direction and gears among these four polarities to create contingencies of ad hoc policy combinations, all under the label of PNI.

Hong Kong’s PNI Game-play Like Europe in the middle ages, economic affairs in East Asia, especially the Confucian circle, as in China, Japan, South Korea and Taiwan, have long been subservient to the dictates of dynasty and aristocracy, state and polity, military, cultural and moral establishments. PNI put economy at the centre stage in Hong Kong. That represents a historical departure from the millennium-old tradition on the road to modernization in East Asia. PNI also has a world impact in setting an example of economic liberalization and globalization. For more than 160 years, without

From Tung Chee-hwa to Donald Tsang

interruption except for the Japanese occupation, Hong Kong has been a role model of free trade, market and economy for East Asia and the world. As a founding member, Hong Kong is always instrumental in reaching consensus and resolving progress in GATT and the WTO. Under WTO, the world is playing a multi-lateral global game of economy. Economic affairs and the socio-political strata engaged in economic and financial affairs are gaining strength in East Asia, competing with the state/government/party for a say in overall national policy. The Hong Kong PNI is (a) a game-play of a disowned invisible hand regulating the four polarities of positive non-interventionism and negative interventionism, positive interventionism and negative interventionism, (b) an articulation of positive or negative non-interventionism and interventionism to form a coherent policy in response to and in view of the world situation and local reality, (3) an administrative culture with a self-imposed sense of detachment, modesty and humility, with self-denial as the general, absolute bottom line. In regular times and extraordinary hours, in general management and crisis management, entry points for decisionmaking could be found in the four polarities of positive or negative non-interventionism or interventionism. Every entry point leads to an organic configuration of possible options. Repeated consistent application generates a long-lasting coherent entity of administrative policies in the long run. The absolute bottom line of nominal “non-interventionism” with its self-imposed sense of detachment, self-denial modesty and humility provides the government and officials with a touch of honesty and sincerity in game-plays, success or failure.

An Explanation of Hong Kong Phenomenon Hong Kong could well be the world’s only territory where East and West have merged for the longest time to breed a coherent working system in a well-demarcated, separate jurisdiction, producing

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comprehensive, articulate multi-institution administration. Shanghai and Bombay (Mumbai) differ in many ways. Born of the “original sin” of Opium War, Hong Kong has fed and thrived on the common Sino-British cultural elements of PNI against all odds, gaining paradoxical “bests” of both worlds in a dusty corner where the histories of the East and West were somehow neglected. In the 1970s, Hong Kong reached its zenith. Hong Kong turned out to be an historical miracle produced by default through the free will of Eastern and Western history. Hong Kong’s PNI borrowed the design of game-plays from Britain, and the time and place from China. Hong Kong played the British game uninterrupted and undistracted. Major players, such as Hong Kong government, Royal Hong Kong Jockey Club, Hong Kong Club, Hong Kong and Shanghai Banking Corporation (HSBC) and hongs have been able to play the Adam Smith game of eighteenth to nineteenth centuries with almost a free hand. They successfully played a relatively fair game, to the benefit of private interest and public well-being. Hong Kong as a whole rose to the world through ups and downs, thick and thin under the banner of PNI, either interventionism or non-interventionism, positive or negative, especially after World War II.

The Making of Hong Kong Blending East and West, Hong Kong pioneers in the introduction and institutionalization of the following attributes of modern society: • Secularization of existence, profit-seeking values and culture in survival, • Pro-business environment and quasi-level playfield, • Individualization and re-configuration of society and culture on the basis of emancipated individuals and individuality, • Small and relatively fair amoral, instrumental government, • Quasi-modern concept of “man” and “mankind” (personal basic dignity and protection for property, equality, freedom, humanity and human rights), • Rule of law,

From Tung Chee-hwa to Donald Tsang

• • • •

Quality utilitarian, half-hearted education, Productive but non-reproductive meritocracy, Social mobility and middle class, Following the world trend and currents, laws and standards.

Hong Kong resulted from the synthesis and synergies of Chinese and West, non-Chinese and non-West, anti-Chinese and anti-West elements. A dusty corner became a shining treasure bowl. Heroes of Hong Kong’s success the British system, the elite and professionals, the multi-national and the middle class, and the down-trodden Chinese masses from China and South East Asia. The Hong Kong institutions are the Independent Commission Against Corruption (ICAC), The Hong Kong and Shanghai Banking Corporation (HSBC), the Jockey Club, Cathy Pacific Airways, Li & Fung Group, University of Hong Kong, Hutchison Whampoa Ltd., et cetra.

Colonialism with British Characteristics in Hong Kong One of the main aims of French, German and Japanese colonialism was to save the indigenous people through cultural and religious conversion. Seemingly intentionally keeping this obsession to an absolute minimum, British colonialism aims predominately, if not solely, on building a global network of businesses for profit and power, not for the salvation of barbarian souls. With a basic freedom comparable to what is practiced in Britain at a discounted degree, local indigenous culture and human resources are allowed to go their way, as far as they do not disturb the social order. Further, through education and a level playfield, a meritocracy is constructed to serve the interest of the British global network of businesses, resulting in social mobility and a middle class. Britain monopolizes the multi-institution system and dictates its specifications and standard. Underpinning the design and workings of Hong Kong’s hardware and software infrastructures are liberalism and conservativism borrowed from Britain. At the zenith of the late 1970s, the mainstay socio-political strata of Hong Kong society are:

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• British-centric core and peripheral ruling circles in charge of the British system, • The British-trained supporting elite and professionals in second tier or third tier operations • The international commercial community and multi-national players • The middle class, • The wealthy and educated but sometimes unwelcome Chinese from China and South East Asia, • The down-trodden Chinese masses from China, • Pro-PRC, pro-KMT and independent pro-Hong Kong intelligentsia and cultural circles.

Pre-97 and Post-97 Shortcomings of Hong Kong Hong Kong’s world-class working system is a top-down and outside-in one transplanted from Britain, borrowed, adapted and operated by the colonial lords and the ruling elite, and assisted by local-bred elite of achievers, professionals and technocrats. Hong Kong’s local elite has world-class professional excellence, but are void of understanding of the origin and underpinnings, strengths and weaknesses of the Hong Kong system and the constituent professions’ knowledge, system, specifications and standards. It seems they have achieved excellence and become elite because of, not despite, their lack of the philosophical, social, political, cultural and historical content. Before 1997, the British were aware of the defects of the Hong Kong system and the local elite. These members of the local elite were kept in its proper position, its ego, dignity and arrogance appropriately rewarded. After 1997, the Chinese and local ruling elite picked by Beijing to rule Hong Kong are in general completely unaware of the defects of Hong Kong working system and elite. With opposite and disorientated ideas and concepts that contravene the design and workings of Hong Kong system, the “chosen ruling elite” are not kept in their proper positions, and their ego, dignity and arrogance are not properly rewarded.

From Tung Chee-hwa to Donald Tsang

With no sensitivity about the distinction in running a public system of society and a company, they mainly enlarge their corporate mindset, thinking and behaviour to be applied to public issues and the running of public institutions. There was gross mismanagement in the uneasy partnership between public interest and private profit. Hong Kong’s post-97 self-rule and autonomy was marred by deficiencies of the ruling elite.

Explanation of Defects of Hong Kong: Cultural Deficiencies As an indispensable component of the British administration system and rule, and an integral part of British global business network, Hong Kong’s education system, level playfield and meritocracy are designed only as an utilitarian application of education, level playfield and meritocracy, purged of the cultural contents and philosophical underpinnings of education, level playfield and meritocracy. Although articulated and well-coordinated, Hong Kong’s multi-institutions of economics, administration and rule of law, etc, and the manuals are all imported from the West for their instrumentality. Education is the familiarization of the imported instruments and their working manuals, without going into the temporal-spatial dimensions of the socio-historical backgrounds that produced the multi-institutions of economics, administration and rule of law, etc. Culture is the human subjectivity that creates realities, order and entities, rules and laws, institutions and systems out of the messy chaos of socio-historical phenomena, crossing over the qualitative gap between the unknown and known, uncertainties and certainties, transforming and transcending the previous impossibilities. Only at home in the application of, but alien to, the underpinning concepts and ideas, theories and laws of the Hong Kong system, the Hong Kong elite are only good second- or third-tier operators of Hong Kong’s multi-institutions of economics, administration and rule of law, etc, but unable to maintain and refurbish the system, let alone repair, reform and re-construct it in response to new situations.

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In Britain, the concepts and ideas, theories and laws of the workings, origination, construction and reform of the system may be taught as liberal arts and PPE (philosophy, politics and economics). Specifically and substantively, they are liberalism, humanism, individualism, rationalism, empiricism, utilitarianism and scepticism. Hong Kong’s education, level playfield and meritocracy, the multi-institutions, economics, administration and rule of law, etc, are backed up by the second-hand derivatives of liberalism, humanism, individualism, rationalism, empiricism, utilitarianism and scepticism, the origin of which lies in the hands of the British. Hong Kong is thus deprived of the self-generating, self-creating power for the inception and refurbishment of the multi-institutions, economics, administration and rule of law, education, level playfield and meritocracy,

“Education and Civilization” and “Social Mobility and Progress” Since written language began three thousand years ago, all the great civilizations in the East and West have placed great importance on education and have risen to new heights because of it. Education, studies and culture were organically one in the exploration of the unknowns of Nature and the assimilation of normative and cognitive knowledge from the elite to the masses, resulting in social mobility and sustained historical changes. With the rise of humanism since the Renaissance, a special faith in education arose in the West as part of God’s job in the arts and sciences. Education was seen as the road to humanism, instrumental in the formation, realization and transformation of self. Knowledge of matters, mind and morality may not always be well-coordinated and balanced. A conflict between value rationality and instrumental rationality persists. Education aims to breed friendlier, able followers, but may also produce enemies. Knowledge of matters, knowledge of mind and knowledge of morality may go against each other.

From Tung Chee-hwa to Donald Tsang

Education is double-edged. It may have an instrumentality in socialization and intellectual conditioning, as well as a driving force for the self and ontological autonomy. The direction and momentum of development and the consequences of socialization and internalization of knowledge are unpredictable and uncontrollable. It seems unseen hands are ultimately at play. These unseen hands may also have changing standards and orientations. Unintended self-destructive education and unintended social mobility and historical changes abound. In Hong Kong, the British appeared to keep the “education explosives” under “controlled release.” By and large, Hong Kong’s other-imposed and other-regulated meritocracy and social mobility are in good service, working with little internal disorder. Hong Kong achieved what Confucius dreamed of and the Confucians failed to achieve – efficacious meritocracy and social mobility with just-good knowledge. This is but one of the examples where Hong Kong achieves while China fails.

The Dialectical Interactivities of the Elite and the Masses as a Driving Force in History Education is the creation of normative, cognitive and aesthetical knowledge by elite and the assimilation of the knowledge from the elite and leaders to the masses. There are two types of elite and leaders: those recognized at their lifetime on established terms, specifications and standards; and those not recognized at their lifetime on established terms, specifications and standards, but recognized after their lifetime on terms, specifications and standards they created, probably even not recognized by themselves. A society is formed on the basis of and a culture is determined by how the two types of elite and leaders are defined, identified and awarded, how the two types of elite and leaders relate to and treat each other, how the two types of elite and leaders are related to the masses In socio-politics, there are two types of elite and leaders:

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pro-establishment and anti-establishment. How the two types of elite and leaders interact with the masses and how elite and masses transform and change role and status is a driving force in creativity and social changes in history, for good or for bad The creativity and social changes in history undertaken by the elite and masses are previously part of the job of the creator. Education is a process of dialectical interactivities between pre-writing and writing cultures, between known and unknown uncertainties.

Hong Kong’s Unique Meritocracy and Social Mobility The British in Hong Kong kept the “education explosives” well under “controlled release” and in good service to the power and interest of the day. For over one hundred years, meritocracy and social mobility in Hong Kong have been too efficient in absorbing the elite into the establishment, making them part and partial of the whole system. Hong Kong has no critical mass of non-establishment, self-professed, self sustained in-depth, long range elite. Hong Kong’s pro-business system was crude in Britain but advanced in China. The Chinese masses have only been dreaming of such a working system, only to be frustrated by the imperil aristocracy, the military, the gentry and the intelligentsia. Chinese of all classes, occupations and stripes are given a relatively free and fair environment to o pursuit their personal utilitarian interest, they are fully occupied in the “game-play” of money offered by the British system. Hong Kong reaped the benefits of education, level playfield and meritocracy, the multi-institutions, economics, administration and rule of law, etc, without paying the historic price. It seems Hong Kong is now paying the price for the ignorance.

Hong Kong’s Unique Technocracy of Professions, Professionals and Professionalism Hong Kong’s technocracy of professions, professionals and professionalism is uniquely based on and excels in imported,

From Tung Chee-hwa to Donald Tsang

borrowed rationalism, positivism, empiricism, utilitarianism, bureaucracy and managerialism. Professionals and technocrats are ill-at-ease in dealing with pre-writing civilization, the non-rationalism, non-positivism, non-empiricism, non-utilitarianism, non-bureaucracy and non-managerialism, and anti-rationalism, anti-positivism, anti-empiricism, anti-utilitarianism, anti-bureaucracy and anti-managerialism. The Hong Kong working system is built on Hong Kong’s unique technocracy of professions, professionals and professionalism, and inherits the intrinsic weaknesses and strengths. Hong Kong thrives on compartmentalized, professional-biased unilateral, result-driven application of British multi-institutions, economics, administration and rule of law, and education, level playfield and meritocracy, no cross-discipline, multi-dimensional and total worldview or concept, Hong Kong cultural deficiencies include the lack of cross-discipline, multi-dimensional and total worldview or concept, allowance and utilization of the Parallel Anti-Thesis and dialectical thinking, exploration spirit of the unknown and certainties. These cultural deficiencies are most manifest in the top-notch Chinese elite in the public sector and the establishment. While the business sector and lower strata are brimming with vitality and creativity, facing unknowns and turning unknowns to their advantage, the top-notch Chinese elite in the public sector and the establishment are confined to the routines of administration. When these top-notch Chinese elite in the public sector and the establishment are put at position of political responsibility, the whole Hong Kong society, even the whole world, seems to be completely alien to them. They are confronted by unknowns of the self-rule autonomy, which for them are unknown unknowns, but are in fact known unknowns. Hong Kong has a community of various types of professionals with world-class professionalism. They suffer the same deficiency when the East learns science and technology, even economics and finance.

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Hong Kong Chinese Professionals and the Chinese Culture Blind Spot Over the one or two hundred years, when the Eastern countries learnt science and technology, economics and finance, democracy and rule of law, modernization and modernity, they have been often blind to the hypothetical working assumptions and intrinsic limits and fatal defects of science and technology, economics and finance, democracy and rule of law. The Oriental cultural blind spot is the dialectical transformation from positive to negative, from positive to negative. The positive side of science and technology, economics and finance, democracy and rule of law, modernization and modernity is often unilaterally linearly extrapolated to the infinite, and similarly, the negative side of science and technology, economics and finance, democracy and rule of law, modernization and modernity is often unilaterally linearly extrapolated to the infinite. In such a thinking and working system, the intrinsic strengths and weaknesses of matter are played to the in full. The intrinsic errors are multiplied to the power infinity, only to be corrected after the pattern of error has been repeated and amplified many times. Three factors may explain this Oriental cultural blind spot. The first one is Oriental monism in which ultimate unity is the highest existential order and meaning, resulting in a worldview and thinking that inhibit dialectics. The second factor is Oriental collectivism in which the individuals only existential order and meaning in the masses, all natural, structural, cultural and moral resources are centralized and monopolized, no single individual is allowed to raise a difference in any matter concerning the ultimate existential order and meaning of monism. The third factor is the sheer mammoth size of China that prohibits free-flowing, free-wheeling thinking and action in diverse directions.

Post-modern Age of Information Technology, Hong Kong and China In a post-modern age of information technology, the boundaries between pre-writing civilization, writing civilization and

From Tung Chee-hwa to Donald Tsang

post-writing civilization blur out, “chaos order” reigns as rationalism, non-rationalism and anti-rationalism, merge, positivism, non-positivism and anti-positivism merge, empiricism, non-empiricism and anti-empiricism merge, utilitarianism, utilitarianism and anti-utilitarianism merge, bureaucracy, non-bureaucracy and anti-bureaucracy merge, managerialism, non-managerialism and anti-managerialism merge. Hong Kong’s technocracy of professions, professionals and professionalism is trapped in a three-way orientation in which opposites and contradictions of China, Hong Kong and the World concurrently act and interact. They play in the games of equilibrium and counter-equilibrium, justice and counter-justice, which a decision-maker reduces to decision-points of “most important single factor of relevancy.” In the post-modern era, game-plays are the consummation and optimization of fleeting multitudes of complexities, gains and losses. Situations are increasingly complex and fickle, decisions are still simple, and actions are even more simplistic. Decisions are digital in nature in which decision-points of “most important single factor of relevancy” go in either positive or negative direction. In post-modern existence, in making decision-points and digital decisions, Man plays God, becomes beast and devil. Man, God, beast and devil are all in one. For millennia, the Chinese have created a cultural ontology of eternal collectivistic existential meaning and prowess embodied in and represented by an Absolute Freeman. It gives China a cosmic order, cultural religion and identity that God, man, beast and devil are all in one. Opium War changed all. Since then, China has been obliged to face the greatest challenge in millennia. China has been struggling to cope with the unprecedented challenge and survive in the modern world. So far, after so many historic turns and twists that brought ups and downs to the whole nation, China’s cultural deficiencies are still intact, even not substantively, materially realized.

The Cultural Deficiencies Common in East Asia Hong Kong is the first Chinese society to survive and thrive on the

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traumatic challenges of modern times from the West. It is orientated to the West-led modern times and follows the ways of doing things, specifications and standards modern society and culture. Positive Non-interventionism is its iconic label. Yet only partially, superficially and instrumentally modernized, what the British and Hong Kong achieved is a quasi-modern society, ill-equipped to thrive in China’s millennia-old existential environment and cultural ontology. China’s cultural deficiencies are commonly found in East Asian Confucism Circle: China, Japan, South Korea, Taiwan, Hong Kong and Singapore. They are manifested in the financial crisis in the whole twentieth century, especially after the liberalization of American dollar in the 1970s.

Legacies of PNI in Transition At the point of hand-over in 1997, Hong Kong’s PNI-centric legacies of a quasi-modern society include: • Roles, function sand power of government and officials, small government and big market, • Relations between the state and/or government and/or party and/or officials with the masses, • Relations between the elite and the masses, • Positioning in the West-led modern world, operations in the Western orbit, • Free economy, prudence and realistic in decision-making and game-play at normal and abnormal times, • Modest and humility in power and authority, culture of rule of law, • A multi-institution working system manned by world-class professionals, • Level playground and meritocracy, • Social mobility through education and rise of the middle class, • Synergies and synthesis of East and West.

From Tung Chee-hwa to Donald Tsang

Post-97 Hong Kong: The Lost Decade Ten years after 1997 witnessed a changing track – Hong Kong jumped orbit from quasi-modern to oriental, pre-modern orientation. Both Chief Executives Tung Chee-hwa and Donald Tsang have tried, supposedly rather inadvertently, to be instrumental in this re-orientation of Hong Kong. They differed in their ways of doing and efficacy. The decade after 1997 has been crucial in transforming Hong Kong from a quasi-modern society to a full-fledged modern society, enabling it, to the benefit of both Hong Kong and China, to thrive in China and the world. Instead, the promised democracy, which was essential in making Hong Kong a full-fledged modern society, was first ridiculed before 1997 and delayed after 1997 by China and local supporters in Hong Kong. China idealistically, subjectively and crudely dragged Hong Kong back into China’s millennia-old existential environment and cultural ontology. In the first five years of Tung’s reign, Hong Kong was battered by outside-imposed and internal self-made financial, political, social and economical crisis after crisis, which coalesced into an intractable total governance crisis. Tampered and mishandled, the 160-year-old Hong Kong system suffered power failures and Hong Kong society cracked. The decade is lost. Hong Kong lost out. China lost out. In the first decade, Hong Kong was ruled by five sectors blessed and picked by China. The sixth sector, the Democratic camp, obliquely joined the ruling political game at the periphery. The five sectors are: (a) the enclave of traditional pro-Beijing orthodox leftist organizations and communities, (b) the super-conservative Chinese business communities neighbourhood and affinity organizations who were most vehemently anti-China during the 1967 riots, (c) the small circles of Chinese big tycoons in direct contact with Beijing, (d) the technocrat and professional elite in private practice and middle-class newly sided with the power of the day, and (e) the government official-turned politicians and topmost-level elite civil servants in charge of the administrative machine.

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Under the tutelage and command of Beijing, these five groupings ruled and ruined Hong Kong. Hong Kong was defined by China as only an “economic city,” not a “political city.” While the pro-Beijing Democratic Alliance for the Betterment of Hong Kong (DAB) learned democracy ABC, made progress and gained strength against all odds, an concerted marginalization and alienation programme, called “freezing tactics,” was employed by Beijing, the five ruling sectors and the Special Administrative Region government to contain and subdue the Democratic camp and cut them off from their supporters. Further democratization was put to a halt. All along, the Democratic camp fought against orchestrated marginalization and alienation for survival and for a say in public policies and democratization. A chronic, internecine political bickering prevailed. Hong Kong was torn between Pro-SAR Government and Anti-SAR Government strata, resulting in two Hong Kongs, both short in intellectual and material resources and will power, the Democratic camp was unable to boost mass participation in the democratic movement, add new dynamics, explore new public discourse space and elevate to new heights. Suffering from fatigue and responding to the economic success in the Mainland, Hong Kong’s democratic camp and opposition somehow resigned to the fact of the status quo. China’s de-politicalization tactics seemed to succeed in marginalizing and alienating Hong Kong. people until 1 July 2003 when over half a million took to the streets to protest against the six-year reign of Tung Chee-hwa in parallel with celebrations organized or sponsored by the SAR government.

Watershed of 1 July 2003: From Tung Chee-hwa to Donald Tsang In the years from 1997 to 2003, under continuous, converging financial and economic, mismanagement and administrative crises, and the SARS crisis, Hong Kong was completely downtrodden. Fatigue and a disaffected society passively resigned to the fact that

From Tung Chee-hwa to Donald Tsang

the SAR Government was on a irreversible path to graver and more outrageous errors. Hong Kong people were seemingly helpless and unable to respond. The dwindling strength of the democratic camp was misread by China and the Tung Chee-hwa administration as a show of boundless, fathomless weakness that would not rebound. China and the Tung administration pushed for the legislation of Article 23 for the protection of national security and played a newly-learnt game of legislation in a legislature under their firm control, but unrepresentative of, the whole of society. Expecting absolutely no material, meaningful resistance, they grossly and repeatedly overplayed their hand, mindlessly upped the stakes and were brought down by their own weight. The July 1 protests in 2003 were a total outcry against the six years of Tung Chee-hwa’s rule organized by the pan-Democratic camp but joined on a voluntary basis by different people from all walks of life, including some pro-Beijing and pro-DAB followers. The whole of Hong Kong was suddenly politicalized, sending a concerted message on a territory-wide scale to China, which was grudgingly received but differently interpreted. China’s protégé, Tung Chee-hwa, was replaced by Donald Tsang, an administrative elite nurtured and groomed by the British. Before his ascendancy, Donald Tsang picked up some of Britain’s last Hong Kong governor Chris Patten’s basic political public relations skills in his incumbency of Financial Secretary and Chief Secretary. He was willing to do what Tung Chee-hwa refused to do. Tung initially refused to do so but later, when forced by Hong Kong and China to learn Chris Patten’s “political shows,” emulated half-heartedly and blundered woefully in his delivery of half-baked political gimmicks. He ruled Hong Kong almost totally without knowing the basic rules of what Hong Kong is and how Hong Kong works, even without knowing what China is and how China works. He reigned and made decisions on the basis of his personal preoccupation with an overwhelming sense of holy, absolute, unconditional cultural ontological sovereignty which he took for granted being the essence of Chinese politics, culture, morality and existence. He imposed it on Hong Kong society and the

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administrative bureaucracy a cultural paradigm that contravened what Hong Kong has been in the 170 years.

Donald Tsang vs Alan Leong Under Tung Chee-hwa, Hong Kong ground to a standstill. In a fight against the legislation of Basic Law Article 23, a small group of legal professionals banded together and later formed Article 45 Concern Group which expanded to the Civic Party. They took a legalistic view of political affairs and squarely took on the socio-political, legal and constitutional challenges Hong Kong faced. But there is still a long way to go, from socio-political, legal and constitutional levels to socio-economic, cultural and philosophical levels. On assuming the position of Chief Executive, Donald Tsang capitalized on his public relations skills learnt from Chris Patten, relaxed Tung’s grip on Hong Kong and appeared to be doing things the pre-97 way. This somehow represented China‘s tacit admission of directional mismanagement and technical reversion to the pre-97 days. He thus pacified the general populace and stabilized the situation. Given a greater leeway, however, he did not in fact faithfully practice the British mode of doing things in its totality. Instead, probably due to his personal limitations, he only copied the cosmetic gestures and passed off as the British way. In 2006, he rather mindlessly threw away the once acknowledged, now disgraced but not yet fully realized treasures of Hong Kong, notably the Positive Non-Interventionism. Aiming at the lowest common ground between China and Hong Kong, he undertook to serve material, utilitarian interests to the general populace. The strategy paid off. Despite drawing grudges from the traditional pro-Beijing leftist camp and the pro-Tung clique that formed during Tung’s reign, Donald Tsang achieved what Tung failed in pacifying the general populace, enabling China to engage in many other ways in the sinolization of Hong Kong and cultural assimilation programmes. Beijing gave him a second term in the 2007 Chief Executive election. Donald Tsang’s second term was faced with a veritable

From Tung Chee-hwa to Donald Tsang

challenge from an also-run from the Civic Party of the pan-Democratic camp, Alan Leong, who put up a self-defined campaign on a platform of democratization. In March 2007, they engaged in two first-ever public quasi-debate forums. It was the first time a sure-win candidate endorsed by Beijing was taken to task by an equal and forced to face the public in two well-structured open discussions. For the first time in Chinese history, except in Taiwan, personal and true political ideas and platform, policy debates and attacks and counterattacks, coupled with theatrical skills and rhetoric artistry were exchanged in a well-controlled, civilized manner. In the past 170 years, competition for this top job represents another first-ever convergence of East and West cultures in Hong Kong. Two truthful adversaries in a seemingly real battle engaging in a apparently fair quasi-debate seen to be on seemingly equal footing whetted Hong Kong people’s appetite for democracy in its most basic, populist sense. Both seemingly unknowledgeable of the multi-level meaning and significance of positive non-interventionism, the two candidates included many departures from positive non-interventionism in their platforms. Yet in the open forum, they accused each other of contravening or mindlessly throwing away the iconic treasures of positive non-interventionism.

An Explanation of Post-1997 Hong Kong Despite China’s repeated assurance to keep Hong Kong’s working system and way of life intact after the reversion of sovereignty and rule in 1997, the pre-97 meritocractic working system and multi-institution integrated order under the British rule were overnight disoriented on July 1 1997. Most of the five ruling sectors entrusted with the job of running Hong Kong are non-mainstay elite of Hong Kong, but even the mainstay elite in the meritocractic system under the British rule, such as Alan Leong and Anson Chan, the former Chief Secretary who fall out with Beijing and was widely considered “the conscience of Hong Kong,” were also seemingly unknowledgeable of the

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multi-level meaning and significance of the Hong Kong system, and its underpinning philosophy and culture. While the traditional pro-Beijing leftist sector paid allegiance to China sovereignty and philosophy in opposition to the British, the British did not teach her Hong Kong elite followers the underpinnings of Philosophy, Politics and Economics. Hong Kong’s British-educated mainstay core elites have no intellectual link to the cultural fountain head. They have no knowledge or interest in how the of professions and professionalism evolve from the enigmatic uncertainties and unknowns in history, and what is happening in and to their professional worlds. What draws their attention and interest is applied knowledge. Confined in and chained to the make-shift coherent world of professions and professionalism, corporate and corporatism, they have a reputation of only paying allegiance to money and material gains. Compartmentalization and mechanically empirical thinking and discrete factors mode of reasoning are their typical strengths and weaknesses. Before 1997, the British monopolized the definition and decision on the politics-cum-philosophy-and-culture level, leaving the second- and third-tier execution and operations to local elite nurtured in the meritocractic system by the British. After 1997, the Chinese and local ruling elite picked by Beijing are completely unaware of the cultural and philosophical underpinnings of Hong Kong system and its culture. Defects, they did not match Hong Kong’s politics, economics, society, decision-making and strategy, governance and administration with Western modern cultural orientation. Instead, China directly or indirectly, through the chosen local ruling elite imposed Chinese traditional cultural orientation in politics, economics, society, decision-making and strategy, governance and administration. China is even unaware of her own traditional cultural orientation and Western modern cultural orientation in politics, economics, society, decision-making and strategy, governance and administration, and how far they are lagging between modern times and global top standards. Without surveying the cultural and philosophical terrains of Hong Kong, Hong Kong’s technocracy of professions, professionals

From Tung Chee-hwa to Donald Tsang

and professionalism is turned into a self-governance machinery. While China’s politics-cum-philosophy-and-culture considerations dictated, many professional elite nurtured in the meritocractic system by the British were forced, voluntarily of involuntarily, to double as veritable policy-makers and politicians. In the clash of two cultures and two systems, the ruling machinery composed of traditional leftist camp who has actively paid allegiance to the People’s Republic before 1997 and the traditional elite of Hong Kong newly converted to the pro-Beijing camp was incapable of handling matters and issues at the politics-cum-philosophy-and-culture level intrinsic to the Hong Kong system.. Hong Kong was hit by the worst of both worlds: British operations in the service of the Chinese politics-cum-philosophyand-culture underpinning in economics, society, decision-making and strategy, governance and administration.

Current and Future Relevancy of PNI PNI was instrumental in the institutionalization of modern self-governance game-play after the well-controlled opening up of Hong Kong’s socio-political decision for wider participation in the 1970s. More newly groomed technocratic and administrative professionals joined the game of PNI under the final direction of the British. Roles and functions, responsibility and rewards and status for professionals and masses in modern self-governance game-play, decision-making and policy-making were made clear and known, and accepted by all, resulting in synergies and social mobility, consuming conflicts were rationally tackled and resolved. Selectively responding to the role, functions and responsibility expected of it in modern administration and governance, the government designed the game-play and maintained an order for fair competition. PNI encapsulated the role and responsibility of general public and masses, technocratic and administrative professionals, and the government in modern quasi-autonomous governance officials used

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PNI as a policy narration in dealing with the mass and media both in times of peace and of crisis. Hong Kong’s smooth running – and the way ahead in justifying world-class cost of living and living standards and maintaining top-notch competitiveness – lies in enhancing the politics-cumphilosophy-and-culture substances of PNI and booting up the Hong Kong system with enhanced PNI. As a prerequisite for what Hong Kong is, PNI is also a prerequisite for Hong Kong’s re-positioning and re-orientation in dual world orientations, Hong Kong’s relations with China and Hong Kong’s possible role in the rise of China.

A Revisit of PNI and Remedial Lessons for Hong Kong Hong Kong is now faced with unprecedented challenges both within and without. Externally, Hong Kong is undergoing a shift in orientation from Western to Oriental. Internally, Hong Kong is undergoing a decentralization of the PNI game from elite to masses. By virtue of the democratization and popularization, more people are participating in the game of PNI. China is opposed to Hong Kong taking on this challenge. This opposition adds to the difficulties in dealing with mass participation in PNI. China and Hong Kong SAR still have a lot to learn from PNI. In the past five hundred years of modernization, the West underwent continuous soul-searching on the positive and negative reflections on modernization and modernity, and strove to beat a path best for all with the least cost. The West’s soul-searching represents an institutionalized pluralism of parallel anti-thesis, self-reflection and integration with action. These politics-cum-philosophy-and-culture substances are essential for Hong Kong’s survival yet alien, even repulsive to the Communist Party of China and leadership, Chinese government, Chinese culture and Chinese people. A revisit to PNI ten years after Hong Kong’s reversion to China and in view of the China’s 11th Five-year Plan now in force and the 12th Five-Year Plan forthcoming is now called for. Hong Kong needs initial understanding and preparation for the merge of Hong Kong’s century-old free economy and China’s “planned” economy.

From Tung Chee-hwa to Donald Tsang

In the first seven years after 1997, Hong Kong suffered from China’s idealistic and subjective un-preparedness or mispreparedness, and China’s and Tung’s blind boldness and sheer ignorance of the merger between Hong Kong and China. History should not be allowed to repeat itself. Remedial lessons Hong Kong needs include: • PPE-based Hong Kong system and its workings, • Multi-profession, cross-discipline total know-how in public administration and governance, • Hong Kong society and culture in the dual contexts and orientations of East and West, • Remedial lessons in the essence and accents of commerce, industries and economies, especially their origin and dialectics, cost and return, • Individual and public decision-making and responsibility, self-enhancement and life-long learning, • Origin and dialectics, cost and return of professions, professionals and professionalism, their self-regulation and refurbishment, innovation and creativity, • Politics and mass participation in the global competition game in an IT age. • Remedial lessons of all subject matters and for all levels, individual and collective, public and private, commercial and socio-political. • Remedial lessons for all: the ruling elite and leaders, administration officers and business and community leaders, and the ruled, the middle class and masses, as well as the media

Hong Kong Can What China Cannot In response to imposed challenges from the West in the nineteenth century, China has been going through West’s 500 years of emancipation of the individuals from the collectivity of existential ontology, seeking new existential meaning and identity, new position in the modern world.

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Resurrected from the brim of possible extinctions in the late Qing Dynasty and once again possible collapse in Mao Zedong’s Cultural Revolution, and reaping the benefits of Deng Xiaoping’s Opening-up national policy, China is now entering a new phase of history. The long-dreamed-of re-configuration of historical, cultural energies and rise to the contemporary world stage seem to be up for grabs. CCTV’s 12-episode documentary Rise of Great Nations shows China is aware of the prospects and difficulties, and is starting to study the experiences of the world powers in the past 500 years. Putting “The Rise of China” on her agenda, China views the outside world from a perspective substantively similar to that of Qing Dynasty. She is still preoccupied by the selfsame, heavily loaded subjectivity of the heavenly kingdom. She studies the five hundred years of Western history in strict compliance with the “Chinese entity and Western instrumentality” principle, first promulgated in the self-strengthening movement of late nineteenth century. China is still on a quest for the formulae for the nine chosen nations, without setting the five hundred years of Western history in the totality of socio-economic, political and cultural, philosophical contexts of history. The experiences in the rise of the nine chosen nations are viewed as concrete, substantive know-how, a kind of “scientific knowledge” for China to learn and use. The concrete, substantive “scientific knowledge” embedded in the experiences of the nine chosen nations are reified rules and regulations readily applicable in and actionable by the “informed” and “knowledgeable.” China is to become such an “informed” and “knowledgeable” nation armed with such concrete, substantive know-how and “scientific knowledge.” China is learning to operate these reified Western modern tools, following the manuals, rules and regulations. The massive reverberating currents of cultural and philosophical meanings of the five hundred years of history experienced by the nine chosen nations, as well as others are completely lost to China. At this historical juncture, China departs from the egoistic, ignorant nationhood before and during the Opium War in the early nineteenth century and the Cultural Revolution in the midtwentieth century, and benefits from the “Chinese entity and

From Tung Chee-hwa to Donald Tsang

Western instrumentality” principle. It underpins the cognitive and normative confines of the Opening-up Policy. China has come a long way – two hundred years – to this stage. The May Fourth Movement in 1919 marks China’s total cultural awakening, but later on the whole nation swung to extremes and excess, sending the Communist Party of China under the leadership of Mao Zedong to power. Mao’s poet-philosopher radicalism culminates in the fanaticism of the Cultural Revolution. Deng Xioaping’s pragmaticism took the whole nation back to the self-strengthening movement of late nineteenth century. In terms of culture and civilization, politics and education, science and arts and media, rule of law and civic society, professionalism and management and governance, China is still lagging behind the modern world. Hong Kong is China’s only society with the longest duration of capitalism, liberalism and modernity practiced within a separate territorial jurisdiction with multi-institutions. In terms of culture and civilization, politics and education, science and arts and media, rule of law and civic society, professionalism and management and governance, Hong Kong achieved what China failed, or was unwilling or unable to attempt, or was ignorant of, or opposed.

Advocacy for an Institute of Studies on Hong Kong, China and the World Probably at the lowest cost and with the highest achievements, Hong Kong has gone through the massive reverberating currents of cultural and philosophical meanings over the past five hundred years of history, unlike China. Hong Kong’s achievements are only recognized by China, even by Hong Kong people, at the application-driven commercial, financial, economic and administrative levels. Hong Kong’s achievements at the socio-political, cultural and philosophical levels are unrecognized. Hong Kong, China and the world are unaware of Hong Kong’s unexplored treasures hidden in the socio-political, cultural and philosophical levels.

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Ten years after reverting to China, Hong Kong has been suffering from the separation of “socio-political, cultural and philosophical levels” from the “commercial, financial, economic and administrative levels.” China, Hong Kong and the world need a high-calibre institute to explore the hidden treasures of Hong Kong. This institute would systemize the all-round, all-level and in-depth understanding of Hong Kong’s challenges and fate, such as • Mapping of Hong Kong’s popularization for mass participation of PNI into the five hundred years of modern world’s popularization for mass participation of modernization and modernity, • Hong Kong and China on the roads to modernization and modernity, Hong Kong on China’s roads to modernization and modernity, PNI and modernity, • PNI’s instrumentality in the institutionalization of modern self-governance game-play after the opening up of socio-political decision for mass participation in the game of PNI, • Professionals’ and laymen’s role and responsibility in modern self-governance game-play, decision-making and policymaking, synergies and consuming conflicts thereof, • Government’s role and responsibility in modern selfgovernance game-play, • Role and responsibility of the masses in modern selfgovernance game-play modern self-governance game-play, • Government’s relations with the mass and media, • Re-drawing the lines of role and responsibility in modern self-governance game-play, • Officials explaining policies and giving account to the public or media in times of peace and of crisis, • Hong Kong’s way ahead in justifying world-class cost and living standards, maintaining top-notch competitiveness, • Re-positioning and re-orientation of Hong Kong in dual world orientations, • Hong Kong’s relations with China, China’s relations with the world, • Hong Kong’s possible role in the rise of China.

6 Hong Kong in between China and the Great Powers: The External Relations and International Status of Hong Kong after the Chinese Resumption of Sovereignty* TING Wai Hong Kong Baptist University

Introduction Despite the vicissitudes of Hong Kong’s transition from a British Crown Colony to a Special Administrative Region (SAR) within the People’s Republic of China (PRC), Hong Kong remains an international city, where Western nations, especially the Western triad (United States, Japan and European Union), as well as China, possess strong vested interests. Under 155 years of British rule, Hong Kong’s international role and status was always peculiar and specific. It was a colony, but was never recognized as such by the PRC after 1949. It also enjoyed a high degree of autonomy under British rule, although a Governor sent by London ruled it. The

* An abridged edition of this paper has appeared as “Hong Kong SAR and the World” in Lam Wai-man et al. (ed.), Contemporary Hong Kong Politics: Governance in the Post-1997 Era, Hong Kong University Press, 2007, pp. 265–282 (with Ellen Lai). Extracts of this paper will also appear in “Hong Kong and Macau in between China and the West: the Implications of Chinese Foreign Policies towards the two SARs,” to be published as a book chapter. 261

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Governor sometimes even had to protect Hong Kong’s interests contrary to the wish of London. From the perspective of international relations and geopolitics, Hong Kong has always been considered as part of the West. That is to say, the capitalist enclave serves first of all Western interests. Western countries prefer to have a “bridgehead” in Asia where freedom is well safeguarded by the rule of law, and where Westerners can use as a base to develop their economic and political activities in Asia. The role of Hong Kong for the West has always been very clear to several generations of PRC leaders, but at the same time they also understand the usefulness to China of having such an international city as a “window” to the outside world. The tacit consent to British rule by Beijing despite its non-recognition of Hong Kong’s colonial status was due to the reality that Hong Kong as an international city was vested with multiple relations with the West which served Chinese interests enormously. When China was in a state of isolation, from the fifties to the seventies, Hong Kong functioned as a kind of “window” where information from the outside world was acquired and informal communication with nation-states without official relationship was done. When China started the era of openness and reform since the end of the seventies, Hong Kong as a rich, cosmopolitan industrial and financial centre was extremely helpful to China’s modernization as it provides the crucial capital and expertise badly needed after the failed socialist experiments. Hong Kong in the last two decades provided the largest amount of inward direct investments in China. This amounts to US$129.6 billion as at the end of 2000, which accounts for 58.6% of the total foreign investments in Mainland China.1 After the establishment of the PRC, the tacit acceptance of British rule depended on one condition: Hong Kong must not become a base for subversion against China.2

1 See External Direct Investment Statistics of Hong Kong 2000 (Hong Kong : Census and Statistics Department, 2002), p. 40. 2 For a detailed analysis of the international status of Hong Kong before 1997, see Ting Wai, The External Relations and International Status of Hong Kong, Occasional Papers/Reprints Series in Contemporary Asian Studies, University of Maryland School of Law, No. 2, 1997 (139), 72 pages.

Hong Kong in between China and the Great Powers

The resumption of Chinese sovereignty imposes a significant change of Hong Kong’s geopolitical status, from part of the West to part of China. The future scenario should not appear to be too pessimistic, as the Cold War has ended, and China’s interests in the era of openness and reform are not necessarily contradictory to Western interests. Even during the Cold War era when China was immersed in ideological fervour especially in the fifties and the sixties, Hong Kong as “part of the West” serving primarily Western interests did not lead to great difficulty in its survival due to the clairvoyance of Mao Zedong and Zhou Enlai in tolerating its status. Hong Kong, though caught in the middle of East-West ideological rivalries, did in reality become the “paradise” in the Asia-Pacific region. It was long regarded as a free society well defended by the rule of law and exempted from authoritarian rule. Now Hong Kong, though as “part of China” serving primarily Chinese interests, is also conscious of its role to the West and its unique international status in comparison to other great Chinese coastal cities. Chinese as well as Hong Kong leaders are totally aware of the subtlety involved in maintaining the external relations and international status of Hong Kong. Nobody wants to see any radical change, as the external economic relations and current significant international status of Hong Kong are crucially significant to the survival and livelihood of Hong Kong people. In short, though ideological and political considerations may diverge, there is always a convergence of West’s interests and Chinese interests in conserving the status quo of Hong Kong. However, China and the West after the end of the Cold War has still been entangled in various political controversies due to different cultural values and worldviews, despite that China is actively “joining the world” by gradually integrating her developing market economy into the global capitalist market. How can Hong Kong living under Chinese sovereignty serve at the same time the interests of China as well as the West? Can Hong Kong’s transformation to a Chinese city not be detrimental to its original role as an international and cosmopolitan city? If the autonomy, international status and institutional framework that buttress the proper functioning of the socio-economic system of Hong Kong are affected by the China factor, how would the Western triad – United States

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(US), Japan and the European Union (EU), react in order to defend the status quo of Hong Kong as a free port and international financial and commercial centre? After ten years of experience as an SAR under Chinese rule but constantly checked upon by the West, we attempt to draw a first account of the international status of Hong Kong after the Chinese resumption of sovereignty. What we are going to study is the complex relationship between the theory and practice of “one country, two systems” and the external relations of Hong Kong. What is central in our discussion is to see whether there is a clash of Western and Chinese civilizations in understanding the future of Hong Kong. While in the past as a British colony the encounter of the two civilizations did not prevent Hong Kong from becoming a “paradise’ in the Asia-Pacific, under the Chinese sovereignty would the “clash” appear and be detrimental to the “Western” institutions firmly established in the city?

China–Hong Kong Relations and Changing Perceptions of the West Hong Kong enjoying a very high degree of autonomy under the famous theory of “one country, two systems” might turn out to be just mythical. Indeed, Hong Kong’s socio-economic system remains unchanged, but its autonomy is dictated by its reunification with China, in which the supreme authority of Communist Party of China (CPC) is not to be challenged. Under the Chinese communist rule, some basic tenets are steadfast: the party controls the state, while the state controls the society, although the latter control has been much loosened in the last 28 years of reform and open-door policy. What is even more important, national independence and territorial integrity must be well defended, and reunification is a fundamental goal of the regime which should be achieved at any cost. These tenets can be regarded as a basic structure that determines the political order of China, and Hong Kong under Chinese rule cannot steer away from the constraints imposed by this order and structure, despite the guarantee of a high degree of autonomy. Until the beginning of eighties, Hong Kong’s economic

Hong Kong in between China and the Great Powers

performance depended wholly on exports to Western markets, although it also relied on China for importing daily products like food, water and cheap consumer products. China’s openness provided new opportunities to Hong Kong, which benefits consequentially and continues to prosper. Perceptions of the local people as well as the West are that Hong Kong’s linkage with the outside world is extremely important to Hong Kong’s fate. China opening up to the West would only facilitate the role of Hong Kong as an intermediary, which can provide the Mainland with information, communication channels, capital, expertise and technology that other Chinese cities cannot provide. However, once China resumed her sovereignty over Hong Kong, perceptions of the future of Hong Kong might have been modified. Hong Kong leaders, especially the former Chief Executive Tung Chee-hwa, always emphasize that if China progresses well, Hong Kong will be good. Nobody can challenge the validity of this statement, but if Hong Kong puts national interests first, would western interests be consequently affected? Would western perceptions be changed as a result? Westerners may now think that Hong Kong would first of all defend Chinese national interests, link up Hong Kong’s development primarily with China, and tend to think less about its international characters. As we have clarified before, Chinese interests and Western interests may not be necessarily contradictory to each other in this age of globalization. But if the reality, or the western perceptions of the Hong Kong reality, is that Hong Kong is becoming less and less “international” or westernized and more and more “sinicized,” Hong Kong’s international role and status would certainly be affected. In an interesting survey on the perceptions of German companies doing business in Hong Kong in 2001, “pertaining to the rating of Hong Kong’s cosmopolitan image, only 44% of the companies believed that Hong Kong has maintained or increased its cosmopolitan image,” in comparison to 75% in 1999.3 Can this be regarded as an alarming signal, not only to the image, but also to the international status of Hong Kong?

3 See Survey on German Business in the Hong Kong Special Administrative Region and China (Hong Kong: German Industry and Commerce Hong Kong, South China, Vietnam, 2001), p. 11.

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The Hong Kong Special Administrative Region in Its First Decade

How does the theory and practice of “one country, two systems” pose an influence towards the external relations, and international character and status of Hong Kong? The central government emphasizes on the primordial importance of “one country,” that is to say, national interests come first and Hong Kong has no right to offend those “basic tenets” of one-party rule. But the Hong Kong citizens tend to stress more on the significance of “two systems,” that is, defending the autonomy and peculiarities of Hong Kong’s system is of utmost importance. The concept itself totally fits the communist logic of duili tongyi (unifying on the basis of contradiction), but in practice the supreme position of one country renders limitation to the autonomy of the SAR. In brief, the structure of the relationship between the party-state of China and the civil society of Hong Kong determines the actual practice of the “one country, two systems” concept. One example is the proposed visit of Pope Jean-Paul II to Hong Kong by the end of the year 1999. Hong Kong as a separate entity from Mainland China enjoys full relationship with Vatican as in the past, while Beijing regime declines to build official relationship with the Saint Siege, and allows only “patriotic Catholic Church” to practice in China. The visit of Pope Paul VI to Hong Kong in 1970 should serve as a good precedent if Hong Kong wants to demonstrate the high degree of autonomy it enjoys. But due to the differences between Vatican and Beijing in dealing with the Taiwan regime, as Vatican continues to recognize Taipei, Pope’s visit in Hong Kong cannot be realized. This question does not touch on crucial issues like law and order, or public security in Hong Kong, or challenging the legitimacy of the central government, but only on religion. It may deal with the complex and intricate relationship between the Hong Kong Catholic Church and the patriotic Catholic Church controlled by the CPC in the Mainland, but this should not be a major obstacle. Owing to the political position of Vatican in relation to Taiwan, a religious visit that demonstrates Vatican’s concern of Hong Kong Catholics had to be cancelled. So, even if the Catholic Church in Hong Kong can still maintain its linkage with Vatican, the primordial importance of “one country” (national interests come first) diminishes Hong Kong’s international linkages as well as its international character.

Hong Kong in between China and the Great Powers

This goes to the question of the two characters of Hong Kong: Chinese character or the degree of “Chineseness,” and international character or the degree of “internationalness.” During Hong Kong’s transition from a British Colony to an SAR in the PRC, it is inevitable that its degree of Chineseness increases, but Hong Kong should not ignore the fact that it is its international characters that give Hong Kong its dynamism, spirit and raison d’etre. As a British colony, and as part of the West in geopolitical terms, rendered Hong Kong its international character.4 Not only it possesses all attributes of a western society, such as protection of human rights and all sorts of freedom guaranteed by the rule of law, its sheer existence as a “bridgehead” for the West in the Far East makes it the most international and cosmopolitan city in Asia. In short, before 1997 Hong Kong was more an “international” rather than a “Chinese” city. Not paradoxically, the international character of Hong Kong was welcome by every generation of Chinese leaders, because a cosmopolitan city at the door of China with active economic participation of major Western countries, contributes a lot to China’s development. The fact that Hong Kong could do much for China in ways that other coastal cities like even Shanghai would have had difficulties in catching up, eventually led to the formulation and implementation of a rather “lenient” policy of Deng Xiaoping: “one country, two systems.” For Beijing this is the most that China could do. China takes a “utilitarian” view of Hong Kong. The capitalist enclave can maintain all kinds of institutions, even its legal system and currency. This “leniency” is due to the extreme usefulness of Hong Kong to China. So, despite the fact that it is inevitable for Hong Kong to become another great Chinese city after returning to China, it should seek to develop even further its international character, as well as facilitating the formation of more uniqueness for Hong Kong. The greatness of the city lies in the competitive edge of Hong Kong in relation to other big Chinese cities, especially Shanghai, which

4 The former Consul General of United States, Michael Klosson, uses the term “international personality” to characterize the same idea. See his speech, “Hong Kong’s Transition has been positive,” American Chamber of Commerce in Hong Kong, 6 June 2002.

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The Hong Kong Special Administrative Region in Its First Decade

always try to catch up Hong Kong in all ways. In fact, Shanghai possesses a very strong industrial foundation, incorporating both heavy and light industries. It has been fast developing as a national financial centre. It is equipped with strong universities and research institutes, and is attracting many multinationals to establish their China headquarters there. Shanghai is becoming more and more outward looking. Though Hong Kong is considered as a truly international financial, commercial, tourism, transport and communication hub of the Asia-Pacific region, people are worrying that it has gradually been losing its international character, and becoming more inward looking. Some factors are essentially non-political and domestic, for instance, the declining standard of English especially among young people, and the apparent lack of industrious, competent and dedicated staff, as are frequently complained about by many local and overseas companies. Other factors which are political are not necessarily domestic problems, but rather problems arising from Chinese political culture. These include the changing ruling style of the leadership which is becoming more interventionist, with a “hands-on” attitude towards governance. This is in contrast to the pre-1997 tradition of “positive non-interventionist” attitude of the government in relation to the society and economic development. A different interpretation of law and order, stemming from different philosophies and with national interests overriding local interests, had become a matter of concern among sceptics who were doubtful of the governance and competence of the former Tung administration. The lack of strength from political and business elite in Hong Kong to safeguard the autonomy and institutions that buttress the successes of Hong Kong also alarms the local inhabitants and investors from abroad. Further “sinicization” of Hong Kong that renders the city more “Chineseness” while diminishing its international character will by all means be detrimental to the international status of Hong Kong, though it must be stressed that the two characters of Hong Kong, “Chineseness” and “international character,” are not necessarily contradictory to each other. In other words, the two characters are not a zero sum game. Tung Chee-hwa reiterated in his Policy Address to the Legislative Council on 6 October 1999 that Hong Kong should not

Hong Kong in between China and the Great Powers

only be a major Chinese city but also could become the most cosmopolitan city in Asia. This can be illustrated by the new catchword of Hong Kong: Asia’s World City. The existing advantages of Hong Kong include: “we have the thriving Mainland next to us. We are a melting pot for Chinese and Western cultures. We are a highly liberal and open society. Our institutions are well established.”5 While nobody can deny that the reality of Hong Kong is still equipped with these advantages, some people start to worry about the changing ruling style and the increasing influence of the Chinese political culture. In an opinion poll carried out in January 1998, the vast majority of the interviewees perceive that Hong Kong political culture is becoming more like China’s. The only difference is that 13% thinks that the changes will take place rapidly, while 58% thinks that the changes will proceed slowly.6 If Hong Kong’s “institutional pillars,” or “institutional capital” as some proclaim, including independent judiciary, freedom of speech, and the capitalistic rules of the games (rule of law, free and fair competition, spirit of contract etc.) are adversely affected, and the SAR government overlooks the significance of these institutions in practice, then it is not impossible that Hong Kong’s status as an international financial city would decline. It is not easy to predict the political future of Hong Kong now that it has become part of China, as political development in China is full of uncertainties and upheavals, characteristics of a society of which the fate is determined by patriarchal and parochial rule. But the Western presence in Hong Kong due to their enormous economic interests not only helps to “internationalize” Hong Kong, it also helps to safeguard the characters and proper functioning of this international city. Beijing welcomes the western presence, as the presence is a pre-condition for an international city, but she cannot tolerate western interference in the internal affairs of Hong Kong. In the words of Chinese analysts, economic internationalization of Hong Kong is permitted, but the so-called “political internationalization” is out of question. However, the two cannot be delineated

5 See Policy Address of the Chief Executive, 6 October 1999. 6 See Tomorrow Has Not Died, The Hong Kong Transition Project Survey Report (Hong Kong: Hong Kong Baptist University, January 1998), p. 18.

269

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The Hong Kong Special Administrative Region in Its First Decade

in such a simple way. For instance, if foreigners do not perceive the SAR as being like the former Hong Kong, a very passive reaction, such as withdrawal of enterprises from the city as the political and economic conditions deteriorate, will be detrimental. Hong Kong’s international character will fade away as a result. This depends not only on the sensibility and wisdom of Chinese leaders when they resort to nationalist feelings in appealing to Hong Kong people, but also whether they understand the significance and implications of the western presence, and the importance of the rule of law and other institutions in the proper functioning of the socio-economic system of Hong Kong. It also depends on the vision and leadership style of Hong Kong leaders who should understand the difference between parochial rule and accountability to the people. The former Chief Secretary of Hong Kong SAR government, Anson Chan, stressed that “it would go some way restoring the ‘feel good’ factor if the people of Hong Kong could be assured of greater participation and influence.” Besides, “we must be careful not to blur the dividing line between the “two systems.”7 This certainly arouses criticism from pro-China elements in Hong Kong as her statement implies that Hong Kong’s system is more superior and international and should thus be kept a distance from the Mainland system. But Anson Chan’s statement is not contradictory to the Chinese saying that river water and well water should not be mixed, a saying that has been used by President Jiang Zemin to characterize the nature of “one country, two systems.” How do we measure the degree of “internationalization” of Hong Kong? There is no quantitative way, but trade and investment figures in addition to the status of Hong Kong as regional headquarters for multinationals, as well as tourism figures can be useful measurements to evaluate the external relations and international status of Hong Kong.

7 Anson Chan, “Blurring the dividing line,” Asian Wall Street Journal, 30 June 2002.

Hong Kong in between China and the Great Powers

External Relations of Hong Kong as Reflected in Foreign Direct Investments and Trade Trade and investments are two criteria that can measure the degree of economic interdependence. But while trade can be stopped at any time if relations get worse, investments cannot be pulled out instantly. Direct foreign investments can thus become a more accurate measurement to evaluate not only the degree of interdependence, but also the mutual perceptions of the investing and recipient countries. Entrepreneurs are willing to invest when some kinds of preconditions can be fulfilled, such as the effectiveness and competence of the government, transparency in decision-making, clear regulations and stringent law enforcement, rule of law, consistency of taxation and investment policies, and last but not the least, profitability. The significance of Hong Kong for the West can be demonstrated by a simple juxtaposition of the investment figures of the Western triad in Hong Kong and Mainland China. Up to the end of 2005, the US has invested US$37.9 billion in Hong Kong (on a historical cost basis), which constitutes 5.1% of Hong Kong’s total inward direct investments, in comparison to 11.3% in 1998. As a comparison, actual direct foreign investment of the US in China amounted only to US$16.9 billion.8 For Japan, the stock of inward direct investment in Hong Kong until the end of 2004 reached US$15.5billion, which constitutes 5.8% of Hong Kong’s total inward direct investments, in comparison to 10.7% in 1998. As a comparison, the cumulative total of Japan direct foreign investment in China was valued at US$29.7 billion.9

8 See External Direct Investment Statistics of Hong Kong 2005 (Hong Kong: Census and Statistics Department, 2007), p. 38. Statistics provided in the website of American Consulate General in Hong Kong: http://www.bea.gov/bea/di/usdctry/longctry.htm. The figure on China is from the same official website. 9 See External Direct Investment Statistics of Hong Kong 2005, p. 12. Figure provided by International Finance Division, Ministry of Finance, Japan. See http://www.mof.go.jp/english/fdi. The figure on China is from this official website.

271

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The Hong Kong Special Administrative Region in Its First Decade

Within the western triad, apparently Europe is the least aggressive in terms of investment in China. Foreign direct investments of the EU countries in China from 1979 to 1996 only reached US$3.8 billion, less than half of the investment of either Japan or US in the same period. 10 From 1992 to 2000, EU’s investments in China amounted to US$10.6 billion.11 Up to the end of 2005, the E.U. has invested US$47.3 billion in the Mainland.12 On the contrary, in the case of investment into Hong Kong, the capitalist enclave is still a very favourable place. From Hong Kong government’s statistics, the EU has invested US$61.2 billion as foreign direct investment as at the end of 2005.13 This constitutes 16.4% of Hong Kong’s total inward direct investment. The Western triad invests heavily in Hong Kong in comparison to China. In fact it was only during the last few years, when China was in the final stage of concluding its negotiation in its accession to WTO, and eventually acceded to WTO in November 2001, that foreign direct investments from Japan and US augmented largely in the Mainland. Would this imply that investments in Hong Kong be diminished as a result? During the period 1998–2003, the pattern of inward direct investment in Hong Kong has changed radically. The proportion of inward direct investment from the Mainland has increased from 21.0% in 1998 to 49.5% in 2000, and then dropped to 43.1% in 2001 and 36.0% in 2003. This was then raised to 39.7% in 2004 and 43.6% in 2005. The proportion might be even higher as some funds have been transferred to a third place before it is invested in Hong Kong. On the other hand, the proportion of the

10 See Opinion on Relations between the EU and China, Economic and Social Committee of the European Communities, Brussels, 19–20 March 1997, p. 4. 11 Calculated from figures provided in Statistical Tables: European Union Direct Investment Yearbook 2000 (Brussels: European Commission), pp. 2–16; European Union Direct Investment Yearbook 2001, pp. 85–101. Figures provided by Chinese scholars reach US$26.3 billion as at the end of 2000. See “Research report on China’s policy towards European Union,” Xiandai Guoji Guanxi (Contemporary International Relations), No. 8, 2001 (August 2001), p. 5. 12 See China Commerce Yearbook 2006 (Beijing: Chinese Commercial Affairs Press, 2006), p. 306 13 Figures provided by Census and Statistics Department, April 2007.

Hong Kong in between China and the Great Powers

Western triad has been significantly reduced, from 52.1% in 1998 to 26.4% in 2000, and then slightly augmented to 26.9% in 2001, 33.2% in 2002, 31.6% in 2003, 31.8% in 2004 and 27.9% in 2005, though in absolute values, investments from the Western triad have been slightly increased. The proportion of US investments in Hong Kong has been lowered from 11.3% of Hong Kong’s total inward direct investment in 1998 to 7.1% in 2005, Japan from 10.7% to 4.5%, and the EU from 30.1% to 16.4%. The inflow of capital from these three states or regions staggered, with the United Kingdom noted a significant negative figure of US$5.3 billion in 2000 due to the merge and acquisitions of companies. This results in a negative inflow figure of US$3.6 billion for the EU for the year 2000. The information listed in the table clearly shows that Hong Kong, while still remaining an international financial and business centre, has been becoming a more significant “Chinese” financial and business centre in the course of just eight years time. We can at least say that Hong Kong is becoming relatively more Chinese while remaining international. Table 1 offers a clear picture of the changing investment pattern, which can be used to illustrate the changing international role and status of Hong Kong. Investment flow means outward as well as inward investment. According to the UNCTAD World investment Report, Hong Kong was the second largest source of outward direct investment in Asia and the fourteenth in the world in 2001.14 Most of the outward investments went to Mainland, which has absorbed US$129.6 billion as at the end of 2000, which accounts for 58.6% of the total. The figure was increased to US$189.4 billion as at the end of 2005, and constitutes 58.8% of Hong Kong’s total outward direct investments. The total outward direct investment of Hong Kong at the end of 2005 reaches a historic record of US$322.4 billion.15 Among developing economies, Hong Kong is also the most important investor in the EU. The cumulative direct investments in

14 See the report of OECD “Economic Information on Hong Kong,” in http://www.oecd.org/dataoecd/6/10/18470677.pdf 15 External Direct Investment Statistics of Hong Kong 2005 (Census and Statistics Department, 2007), p. 41.

273

20.7

21.9

(8.4)

14.8

(11.3)

EU

56.5

(21.7)

2.3

(0.9)

1.2

(0.9)

39.3

3.4

(9.7)

(30.1)

7.1

(2.5)

25.1

19.7

(15.1)

(14.2)

40.8

(1.2)

(5.0)

(5.5)

14.5

14.3

13.9

(10.7)

(7.2)

28.8

(13.0)

37.1

(1.1)

3.1

(2.0)

5.8

(5.2)

14.9

(8.7)

24.8

(8.9)

25.6

(43.1)

122.8

285.2

2001 (%)

(16.0)

39.0

(1.1)

2.6

(2.9)

7.2

(7.4)

18.1

(9.8)

23.9

(10.8)

26.3

(31.2)

76.2

244.0

2002 (%)

(16.2)

44.3

(0.7)

2.0

(2.3)

6.2

(6.7)

18.2

(8.8)

24.1

(12.0)

32.8

(36.0)

98.7

273.9

2003 (%)

(16.5)

54.5

(0.9)

3.1

(2.7)

9.0

(5.8)

19.1

(9.5)

31.2

(11.6)

39.4

(39.7)

130.8

329.5

2004 (%)

(16.4)

61.2

(1.0)

3.8

(3.0)

11.4

(4.5)

16.9

(7.1)

26.4

(11.2)

41.9

(43.6)

163.1

351.2

2005 (%)

3.2

0.1

1.1

0.1

0.8

1.7

2.6

8.8

1998

4.2

0.2

0.3

0.9

2.4

3.1

4.9

17.9

1999

–3.6

0.5

–5.3

3.2

2.4

0.9

14.2

32.0

2000

7.0

0.5

0.9

1.1

1.5

–0.3

4.9

20.4

2001

3.3

0.3

1.1

2.0

–1.4

1.3

4.1

1.7

2002

Inflow in year

4.2

0.08

0.6

1.8

2.8

3.1

4.9

11.8

2003

4.0

0.9

2.3

1.4

6.2

1.1

8.0

26.8

2004

6.3

0.5

1.8

1.8

-3.8

2.2

9.4

26.8

2005

Source: External Direct Investment Statistics of Hong Kong 2000, 2002, 2003, 2004, 2005 (Hong Kong: Census and Statistics Department, HKSAR government, 2002, 2004, 2005, 2006, 2007), p. 38 or p. 39. Calculation of percentages by the author.

Taiwan

United Kingdom

Japan

United States

(10.0)

26.5

(10.2)

16.0

(12.2)

Netherlands

(49.5)

(40.1)

142.6

104.5

288.1

(21)

260.4

2000 (%)

27.4

130.4

Total

1999 (%)

Position at end of year

The mainland of China

1998 (%)

Major investor country/ territory

Inward direct investment at market value (US$ billion)

Table 1: Position and Flow of Inward Direct Investment by Major Investor Country/Territory, 1998-2005 (excluding inward direct investment from non-operating companies in offshore financial centres set up by Hong Kong companies for indirect channelling of funds)

274 The Hong Kong Special Administrative Region in Its First Decade

Hong Kong in between China and the Great Powers

the EU reached US$11.6 billion, as at the end of 2005. 16 This accounted for 3.6% of Hong Kong’s total outflow of capital. The reasons of Hong Kong’s investments in Europe are multiple. Some may want to look for opportunities in the single European market, especially in the service sector, including banking, telecommunications, hotel and trade. Others simply want to minimize the risks.17 Although the investments of Hong Kong in other countries (that is, apart from Mainland China) constitute only a small proportion of Hong Kong’s enormous amount of outward direct investment, the strong capability of Hong Kong as an investor should draw our serious attention in seeking a better understanding of the external relations of Hong Kong. Turning to trading, in 1996, Hong Kong became the world’s seventh largest trading entity in goods. Its ranking has since declined due to the Asian financial crisis and the increasing importance of China as a trading entity. In the year 2000, Hong Kong ranked as ninth trading entity in the world, while China rose to seventh. In 2003, China becomes the fourth largest trading entity, while Hong Kong dropped to eleventh.18 In 2006, China ranks the third while Hong Kong remains the eleventh.19 If we look at the trade figures over the last ten years, there was a marked decrease of 9.6% in trade value in the year 1998 in comparison to 1997, and a further decrease of 1.3% in 1999. Though there is a remarkable increase of 17.8% in total trade in 2000 due to economic recovery in Asia and other parts of the world, the year 2001 recorded a decrease of 5.6% in total exports and imports. The year 2002 marked an increase of 4.3%, while in 2003 a massive increase of 11.6% was recorded,

16 Figures provided by Census and Statistics Department, April 2007. 17 See Sharing Asia’s Dynamism: Asian Direct Investment in the European Union, UNCTAD (Geneva: United Nations, 1997), p. 7. 18 Information released by the Hong Kong Trade and Industry Department of the Hong Kong SAR government, see http://www.tid.gov.hk/english/aboutus/ publications/tradestat/wmt03tt_text.html. See also Hong Kong Economic Journal, 23 April 1997, p. 6. 19 See http://www.tid.gov.hk/english/aboutus/publication/tradstat/wmt06tt.html.

275

3.5

Taiwan

37.1

9.1

China

Taiwan

8.8

37.5

16.6

9.8

7.4

1993

2.7

32.3

5.1

14.9

23.0

1993

8.6

37.6

15.6

9.7

7.1

1994

2.4

32.8

5.6

13.9

23.1

1994

8.7

36.2

14.8

10.8

7.7

1995

2.7

33.3

6.1

14.9

21.7

1995

2.5

34.9

6.1

14.7

21.7

1997

2.5

34.4

5.2

16.0

23.4

1998

2.5

33.4

5.4

16.1

23.8

1999

2.6

34.6

5.6

15.3

23.2

2000

8.0

37.2

13.6

11.1

7.9

1996

7.7

37.7

13.8

11.5

7.9

1997

7.3

40.6

12.7

10.9

7.5

1998

7.2

36.5

11.7

9.3

7.1

1999

7.5

43.1

12.0

8.8

6.8

2000

Table 3: Hong Kong’s Import Markets

2.4

34.3

6.5

14.9

21.2

1996

6.9

43.5

11.3

9.7

6.7

2001

2.4

37.0

5.8

14.5

22.3

2001

7.2

44.3

11.3

8.6

5.7

2002

2.2

39.5

5.4

13.4

21.3

2002

6.9

43.6

11.9

8.4

5.5

2003

2.5

42.7

5.4

14.0

18.6

2003

7.3

43.5

12.2

8.0

5.3

2004

2.5

44.1

5.4

14.4

16.9

2004

7.2

45.1

11.0

7.6

5.1

2005

2.3

45.1

5.3

14.8

16.0

2005

4

1

2

3

Rank among the Big Four

1

4

3

2

Rank among the Big Four

Sources: Calculated from information provided in Hong Kong Trade Statistics: Domestic Exports and Re-exports, Annual Supplement, December 1992, 1994, 1996, 1998, 1999, 2001, 2003, 2005 and Hong Kong Trade Statistics: Imports, Annual Supplement, December 1992, 1994, 1996, 1998, 1999, 2001, 2003, 2005 (Hong Kong: Census and Statistics Department, Hong Kong Government).

17.4

9.6

EU

Japan

7.4

US

1992

29.6

China

% of Hong Kong’s Total Import from

5.2

15.8

EU

Japan

24.8

1992

US

% of Hong Kong’s Total Export to

Table 2: Hong Kong’s Export Markets

276 The Hong Kong Special Administrative Region in Its First Decade

Hong Kong in between China and the Great Powers

followed by 16.4% in 2004, 10.9% in 2005, and 10.5% in 2006.20 This obviously reflects the outward-looking nature of Hong Kong which is easily susceptible to fluctuations in the world economy. In comparing the relative significance of major countries in the external trade of Hong Kong, we offer Tables 2 and 3.Needless to say, Mainland China is the most important export market of Hong Kong. Although the proportion stood at around 34% of Hong Kong’s total exports during the nineties, it had risen to 37% in 2001, and then jumped to 45.1% in 2005. China is also the most important source of Hong Kong’s imports, and in 2005 a historic record of 45.1% of its total imports originated from China. The US always ranks second in Hong Kong’s export market. After a slight decrease in proportion in mid-nineties, towards the advent of the new millennium it was increased to 23.8%, but then dropped to 16.0% in 2005. However, the US stands only in the fourth or fifth position as a provider of Hong Kong’s imports and the proportion has been decreased to 5.1% in 2005. Japan is the second most important source of Hong Kong’s imports although this was decreased to 11.0% in 2005 from 17.4% in 1992, after several years of recession in Hong Kong since 1997. On the contrary, Japan ranks only number four among Hong Kong’s export markets. The proportion of Japan has decreased to 5.3% in 2005 from 6.5% in 1996, probably due to Japan’s own prolonged economic slowdown. In addition, Chinese exports are relying less on Hong Kong in order to be shipped to Japan. The EU always ranks third among Hong Kong’s major export and import markets. Exports to the EU only amounted to 15.8% of the total exports of Hong Kong in 1992. This further decreased to 13.9% in 1994. Due to the addition of three members to the EU, the proportion increased to 14.9% in both 1995 and 1996. Since then the EU has become a larger market for Hong Kong exports, as the proportion has risen to 16.1% in 1999. But then it was gradually dropped to 14.8% in 2005. In concurrence with this downward trend, Hong Kong’s imports from EU also accounts for a smaller

20 Ibid., and Hong Kong Trade Statistics, Annual Supplement 2002, Domestic Exports and Re-exports (Hong Kong: Census and Statistics Department, 2003).

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proportion (9.3%) in 1999 after two years of recession, which marked a significant drop in consumption of European consumer goods. This was further dropped to 7.5% in 2005. If our focus of attention is centred on Hong Kong’s significance in extra-EU trade, the EU exports to Hong Kong share in total extra-EU export of goods went up from 2.3% in 1992 and then to 2.8% in 1995, 1996 and 1997.21 Import from Hong Kong share in total extra-EU import of goods went down from 1.4% in 1992, to 1.2% in 1996 and 1.3% in 1997.22 Judging from EU’s high level of economic and technological development together with its vast population, there should be further potential for development of both imports from and exports to Hong Kong. But in the eyes of Hong Kong businessmen, Europe is always a great challenge. Since the formation of a unified European market at the end of 1992, the business sector of Hong Kong has been concerned with the prospect of the formation of “Fortress Europe,” whether this would consolidate regionalism and protectionism which benefits only the internal market of Europe. Hong Kong advocates the practice of free trade, but apparently the EU put more emphasis on “fair” trade than “free” trade. Hong Kong is well aware of this perception, and accelerating the growth of exports to neighbouring Asian nations is a natural reaction. In a nutshell, our figures show that the Western triad accounted for 42.5% of Hong Kong’s total exports in 1997, while China in that year accounted for 34.9%. Hong Kong relied more on the West among its export markets. But this trend has been reversed since then, as the Western triad accounted for 36.1% of Hong Kong’s exports in 2005, while exports to China was raised to 45.1% of Hong Kong’s total. The same trend can be seen in Hong Kong’s imports. In 1997, while the Western triad was the source for 33.2% of Hong Kong’s total imports, China was 37.7%. But in 2005, the

21 See “European Union Trade Relations with Hong Kong, China and Taiwan: Analysis from 1990 to 1996,” Statistics in Focus: External Trade, No. 4, 1997 (Brussels: Eurostat), pp. 1–2. 22 See “European Union Trade and Investment with Asian Countries: Results in 1996 and 1997,” Statistics in Focus: External Trade, No. 12, 1998 (Brussels: Eurostat), pp. 1, 4, 7.

Hong Kong in between China and the Great Powers

Western triad supplied only 23.7% of Hong Kong’s imports, while China rose to 45.1%. Only these trade figures can show that Hong Kong people’s livelihood is now more related to China than in the past. The city has been becoming “less international” in this regard. Another indicator that illustrates the remarkable importance of the Mainland in Hong Kong’s development is the significant increase of tourists coming from other parts of China, which brings in substantial income to tourism industry, one of the economic pillars of this cosmopolitan city. The following two tables offer the relative importance of major countries in bringing in tourists to Hong Kong. Table 4: Visitor Arrival Statistics 1997–2005 (% of Total) % of total

1997

1998

1999

2000

2001

2002

2003

2004

2005

US

7.6%

8.2%

7.6%

7.4%

6.8%

6.0%

4.4%

4.8%

4.9%

UK

3.3%

3.5%

2.9%

2.8%

2.6%

2.3%

1.8%

1.9%

2.0%

Germany

2.4%

1.8%

1.7%

1.5%

1.3%

1.0%

0.7%

0.8%

0.9%

France

1.3%

1.3%

1.2%

1.1%

1.0%

0.9%

0.6%

0.7%

0.8%

Japan

14.4%

10.8%

10.3%

10.6%

9.7%

8.4%

5.6%

5.2%

5.2%

Taiwan

17.0%

18.6%

18.2%

18.3%

17.6%

14.7%

11.9%

9.5%

9.1%

China

21.0%

26.3%

28.3%

29%

32.4%

41.2%

54.5%

56.1%

53.7%

Table 5: Visitor Arrival Statistics 1997–2005 (% Growth) % of growth

1997

1998

1999

2000

US

+3.4%

–3.8% +3.7% +12.5%

–3.1% +7.0% –31.7% +53.8% +8.7%

UK

–16.9%

–4.5%

–2.0% +5.4% –26.0% +46.2% +13.0%

Germany

–19.4% –29.2% +0.8% +2.4% –10.6% +0.4% –32.3% +45.1% +20.6%

–5.3% +10.2%

2001

2002

2003

2004

2005

France

+2.5% +13.8% +5.8% +5.2%

–3.9% +7.2% –34.7% +54.6% +25.3%

Japan

–41.1% –32.2% +6.7% +17.7%

–3.3% +4.4% –37.8% +29.9% +7.5%

Taiwan China Total

–5.1%

–1.8% +9.4% +15.6% +1.4% +0.4% –23.7% +12.0% +2.7%

–1.1% +13.0% +20.0% +18.1% +17.5% +53.4% +24.1% +44.6% +13.1% –13.1%

–9.9% +11.5% +15.3%

+5.1% +20.7%

–6.2% +40.4%

+2.4%

Source: A Statistical Review of Hong Kong Tourism 2003 and 2005, Hong Kong Tourism Board, pp. 34–35 and Hong Kong Annual Digest of Statistics 2002, p. 202

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The Hong Kong Special Administrative Region in Its First Decade

The visitor arrival statistics show that the number of visitors has been raised from 11.3 million in 1997 to more than 16.6 million in 2002, and 22.4 million in 2005. This is regarded as a remarkable achievement of the Hong Kong tourist industry in generating economic and commercial transactions in this period of economic downturn. However, the increase in tourists is due mainly to the enormous number of tourist groups from different parts of China. After 1997, visitors from the Mainland have always been under stringent control from the central authorities, so as not to disrupt the proper functioning of “one country, two systems.” But the staggering economic growth and increasingly high unemployment rate of Hong Kong has led to the SAR government’s request in 2001 to Beijing for unleashing the quota of Mainland tourists travelling to Hong Kong. Hence the proportion of Mainland visitors among tourists in Hong Kong has doubled from 21% in 1997 to 41.2% in 2002, and then continued to rise to 53.7% in 2005. The absolute number of Mainland tourists has soared from 2.4 million in 1997, 6.8 million in 2002, and 12.5 million in 2005. The year 2002 marked an incredible increase of 53.4% of Mainland visitors in comparison to 2001, as control to visit Hong Kong by people from selected cities of China was loosened. The same argument aforementioned applies to the tourism industry in Hong Kong. While Hong Kong remains a favourite tourism spot for international visitors, it is more and more relying on Chinese visitors. While Hong Kong remains international, it is also becoming more and more “Chinese.” There is no problem of having more Chinese visitors, but Hong Kong should be aware of the reality that Hong Kong’s attractiveness is due mainly to its international and cosmopolitan nature. Though Hong Kong’s “Chineseness” and international character are not necessarily mutually exclusive to each other, it is certainly in the interest of Hong Kong to defend its international character even with increasing Chinese influence. Would it be saner to consider the possibility of orienting the city towards a dual direction, having more and more Chinese characteristics, but at the same time becoming more and more international?

Hong Kong in between China and the Great Powers

Significance of Hong Kong as Regional Headquarters Economists have noted that two trends are fast developing in relation to Hong Kong’s external orientation. The first trend is the growth in Hong Kong’s offshore trade, which means that “goods are not re-exported from Hong Kong, but rather transshipped through Hong Kong without ever entering Hong Kong’s customs registry or shipped direct from other locations to end markets.”23 Survey made by the Hong Kong Trade Development Council shows that “among all goods made in third countries and exported by Hong Kong companies, over 50% were directly shipped to importing countries in 1997.”24 This rapid development in offshore trade demonstrates the ability of Hong Kong to coordinate, to provide services, and to play an integrating role for international trade. This is related to the second trend: Hong Kong is increasingly becoming a “metropolitan management and coordination center” for international business. Hong Kong is an important base for multinational companies, which make use of the city as their regional management and coordination hub.25 The presence of more regional headquarters in Hong Kong not only demonstrates the confidence of these companies and their belonging countries towards the future of Hong Kong, they do bring substantial benefits as well to the city. In reality, only with the presence of these companies that implies the economic participation of overseas companies, can the cosmopolitan nature and colour of Hong Kong be built upon. Moreover, these companies bring state-of-the-art management and professional skills that can benefit and help to upgrade the local community, thus being useful in facilitating productivity growth. As the economists in the Hong Kong Trade Development Council remark,

23 See Research Department, Hong Kong Trade Development Council, Hong Kong’s Competitiveness Beyond the Asian Crisis: an Overview, February 1999, p. 18. 24 Ibid. p. 19. 25 Ibid. p. iv.

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The Hong Kong Special Administrative Region in Its First Decade

“the establishment of a major regional centre brings in many of the firm’s highest value-adding activities, such as senior management, regional coordination, finance, strategy formulation, product development, advanced marketing, and the generation of vital information . . . Headquarters investment also creates demand for advanced managerial skills and sophisticated support services.”26 It is with this understanding that Hong Kong government strongly promotes the city for the international business community, attracting especially information technology services such as finance, telecommunication, multimedia, e-commerce, and IT and electronic manufacturing to set up regional offices in Hong Kong.27 As a result, a new government department, the Invest Hong Kong, was established on 1 July 2000, together with another new department that helps to better position Hong Kong in the era of new economy, the Innovation and Technology Commission. The existing favourable policy, including good legal infrastructure and rule of law, transparent and effective regulatory regime, efficient and noncorrupt government, low tax regime, equal treatment of domestic and overseas companies, and willingness to absorb expatriates with expertise, has to be maintained in order to facilitate the city as an even more significant hub for the international business network.28 At present, basing on sources from the respective governments and chambers of commerce, Hong Kong has around 2,300 Japanese companies, 1,700 Australian companies, 1,100 American companies, 500 French companies, 500 British companies, and more than 500 German companies. Many of these companies are using Hong Kong as the base for their regional headquarters or offices. The number of regional headquarters established by multinationals especially from the Western triad as well as from China is often used by the SAR government to illustrate Hong Kong’s crucial role.

26 Ibid. p. 29. 27 See Interview of Chow Tak Hay, former Secretary for Industry and Trade, in Ta Kung Pao, 1 March 2000, p. B9. 28 See Research Department, Hong Kong Trade Development Council, Hong Kong’s Competitiveness in Services, October 1998, p. 42.

Hong Kong in between China and the Great Powers Table 6 Regional Headquarters in Hong Kong Country of Origin

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

US

198

188

219

194

205

212

221

233

242

256

262

295

Japan

116

122

121

109

114

127

160

159

168

198

204

212

UK

94

90

86

95

82

81

90

80

86

105

115

114

France

28

26

35

38

55

50

43

35

44

47

49

55

Germany

33

40

53

59

36

28

56

52

56

67

75

76

Netherlands

28

30

27

27

32

31

48

39

38

46

54

48

China

71

85

117

70

69

69

70

96

84

106

107

112

339

376

390

(EU)

NA

NA

NA

261

253

240

299

266

284

Total

793

829

935

829

848

855

944

948

966 1098 1167 1228

Table 7 Regional Offices in Hong Kong Country of Origin

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

US

228

226

262

285

278

358

420

437

498

557

606

594

Japan

303

338

378

347

368

492

533

471

442

515

537

519

UK

132

123

130

128

124

155

163

163

196

211

215

223

France

26

31

65

76

74

88

88

91

101

106

110

117

Germany

48

85

77

74

76

93

108

96

122

135

139

136

Netherlands

42

48

47

46

48

65

62

57

55

52

50

47

China

81

128

128

135

136

160

172

170

148

156

160

156

(EU)

NA

NA

NA

460

471

561

598

572

641

694

707

712

Total

1290 1502 1611 1637 1655 2146 2293 2171 2241 2511 2631 2617

Regional Offices + Regional Headquarters

2082 2331 2546 2466 2503 3001 3237 3119 3207 3609 3798 3845

Sources: Survey of Regional Representation by Overseas Companies in Hong Kong, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, Industry Department and then Census and Statistics Department for the issues after 2000, Hong Kong SAR government. NA: Not Available

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The Hong Kong Special Administrative Region in Its First Decade

Tung Chee-hwa in his speech during the Chinese New Year of 2001 expressed his delight in mentioning two figures. The total number of regional headquarters and regional offices had increased to more than 3000 in 2000 from 2500 in 1999, though the number of regional headquarters remains stagnant at around 850. Since then, however, the number of regional headquarters increased significantly to 944 in 2001 and then to 1228 in 2006. On the other hand, the number of regional offices has risen from 2146 in 2000 to 2293 in 2001, and then dropped to 2617 in 2006. Thus, the total number of regional headquarters and regional offices has further increased to 3237 in 2001, and then to 3845 in 2006. Correspondingly, the cumulative inward direct investment in the year 1999 has amounted to US$260.1 billion,29 and in 2000, this was further increased to US$288.1 billion.30 But there was a small decline to US$273.9 billion in the year 2003, and then it was increased to US$373.9 billion in 2005.31 Hong Kong has recovered from the economic recession, and the increase in number of regional offices proves that multinationals are still confident of Hong Kong’s future as well as its crucial role as the centre of their transactions or services in the Asia-Pacific region. They want to make use of Hong Kong as the gateway to the vast Mainland market, while increasing number of Chinese companies are also setting up their regional offices in Hong Kong as a stepping stone for their expansion overseas. Thus Hong Kong has become a “two-direction platform” for trading, investments and raising funds.32 Indeed, if we take the year 1990 as the starting point, Hong Kong has achieved enormous progress in its way of developing as a regional hub. In 1990, Hong Kong possesses 451 regional headquarters, and 624 regional offices, giving a total of 1075. Both regional headquarters and regional offices have increased at a rapid rate. In 1995 the total number reached 2082, but then in 1997, the

29 See Ta Kung Pao, 31 January 2001, p. A8. See also External Direct Investment Statistics of Hong Kong 2000, p. 38. 30 See External Direct Investment Statistics of Hong Kong 2001, p. 38. 31 See External Direct Investment Statistics of Hong Kong 2003, p. 38, and External Direct Investment Statistics of Hong Kong 2005, p. 39. 32 See Ta Kung Pao, 15 October 2004, p. A15.

Hong Kong in between China and the Great Powers

number of regional headquarters broke a historical record, attaining 935, making a total number of 2546 in that year. However, people started to worry since late 1997 as some companies did withdraw from Hong Kong or diminish their scope of activities here. The number of regional headquarters shrunk to 829 in 1998. Though the regional offices increased in number, the total of 2466 was still less than the number (2546) recorded in 1997. Although some companies did withdraw due to sheer economic reasons, consequential of the Asian financial crisis, people started to express concern about the possible domestic changes in the SAR. People may query whether the efficiency and competence of the government would be affected by a new governing style and philosophy, as well as whether the long-term liberal economy policy would be modified and replaced by a more interventionist attitude. There was a slight increase in the number of regional headquarters as well as offices in 1999 in comparison to 1998. The upward trend continues to the year 2000. During the same period 1998-2000, the number of regional offices largely increased. However, during the period 2000–2002, the number of regional headquarters established in Hong Kong increased considerably from 855 to 948, but the number of regional offices only increased slightly, from 2,146 in the year 2000 to 2,293 in 2001, and then reduced to 2,171 in 2002. The major reason for the reduction is that many Japanese companies have downgraded their regional offices in Hong Kong to local offices.33 Although it has been reported that since 2000 many IT and software companies are establishing their regional headquarters in Hong Kong catering for the prosperous and

33 See the interview of Mike Rowse, Director of Invest Hong Kong, Hong Kong SAR government, Ming Pao, 7 January 2003, p. B1. Since 2001, the annual survey of regional headquarters and offices representing overseas companies in Hong Kong includes local offices set up by companies incorporated outside Hong Kong. This amounts to 1230 in 2001 and 2509 in 2006. The number of local offices set up by Japanese companies has increased significantly from 220 to 437, US companies from 167 to 391, and Mainland companies from 160 to 449. See Survey of Regional Representation by Overseas Companies in Hong Kong 2001 (Hong Kong: Census and Statistics Department, Hong Kong SAR government, 2001), p. 37; Survey of Regional Representation by Overseas Companies in Hong Kong 2006 (Hong Kong: Census and Statistics Department, 2006), p. 46.

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thriving Asia-Pacific market, there is no doubt that the superhighway can also be used by other city-competitors. A survey of 1,100 companies originated from the western triad carried out by the Economist Intelligence Unit has shown that 35% of these companies choose Hong Kong as their regional headquarters or offices, while 30% choose Singapore, 9% choose Tokyo, and only 3.5% choose Shanghai.34 Although Singapore still lags behind Hong Kong, given the difference in basic factors, such as a more inferior geographical position of Singapore in comparison to Hong Kong which is next to the vast China market and virtually the centre of the Asia-Pacific region, Hong Kong is in fact under severe challenge from Singapore. Both Singapore and Shanghai attempt to attract transnational companies to establish regional headquarters by improving their competitive edge. Singapore is host to 200 regional headquarters in 2000.35 Surveys were conducted every year by Hong Kong government on multinational companies that set up their regional offices in Hong Kong. The results of surveys carried out in 1999 and 2000 have shown that, among all the change in factors affecting Hong Kong as a location for a regional headquarter or regional office, a significant number of companies are in fact worrying about the possible deterioration in government economic policy, political climate, and rule of law, in addition to English communication skills. In 1999, 32.1% of the companies surveyed thought that government economic policy had deteriorated. The figure for political climate is 42.3%, rule of law 36.5%, and English standard 28.5%. 36 The survey results done in 2000 seem a little bit better, 27.2% of the 3001 companies surveyed tend to think that the government economic policy is worse. For political climate, the percentage is

34 “The RHQ question,” Business Asia, December 2000, Economist Intelligence Unit. Quoted in Ming Pao, 7 February 2001, p. A19. 35 See World Investment Report 2001 (Geneva: United Nations Conference on Trade and Development, 2001), p. 5. 36 See Survey of Regional Representation by Overseas Companies in Hong Kong 1999 (Hong Kong: Industry Department, Hong Kong SAR government, 1999), p. 22.

Hong Kong in between China and the Great Powers

30.7%, rule of law, 21.0%, and English standard, 20.2%.37 This can be seen as a political-economic reflection of the transition in Hong Kong, and companies seeking profits are not only concerned about the basic factors like infrastructure, taxation, government competence and availability of skills, but also the possible changes in political climate and economic policy. If Hong Kong cannot remain as it was before, the withdrawal of regional offices from Hong Kong would be disastrous to the city that aspires to become a world-class hub in the Asia-Pacific region. The survey in 2001 omitted the whole set of questions on “Change in Factors” affecting Hong Kong as a location for regional representation. Companies were not asked whether a certain factor, such as political climate or rule of law, has improved or deteriorated. They were merely asked whether the factor is favourable or less favourable. This yields somewhat “different” results in comparison to previous surveys. For instance, only 3.5% of the company respondents said the rule of law and independent judiciary is a less favourable factor, and 4.9% said the business-friendly government economic policy is becoming less favourable. These factors which were previously judged by the companies interviewed as “worrying,” including rule of law and independent judiciary, business-friendly government economic policy and political climate, do not constitute a problem today. However, companies express concern over some other factors. 10.2% of the companies think that the “level of English” is becoming less favourable. 37.8% thinks that the “cost and availability of staff” is also becoming less favourable. For “environmental quality” and “cost and availability of residential accommodation,” those who voted for less favourable constitute 29.1% and 49.1% respectively. 38 The same level of discontent, though ameliorated, was reflected in the survey done in 2004. 6% of the companies think that the “level of English” is becoming unfavourable, and 19% thinks that the “cost, availability

37 See Survey of Regional Representation by Overseas Companies in Hong Kong 2000 (Hong Kong: Census and Statistics Department, Hong Kong SAR government, 2000), p. 36. 38 Report on 2001 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong, pp. 40–41.

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The Hong Kong Special Administrative Region in Its First Decade

and productivity of staff” is also becoming unfavourable. The high cost of doing business in Hong Kong is always highlighted in the annual survey. In 2006, 32% of the companies think that the “cost and availability of business accommodation” is becoming unfavourable. For “environmental quality” and “cost and availability of residential accommodation,” those who voted for “unfavourable” increase to 23% and 33% respectively.39 The surveys conducted by Hong Kong SAR government on the regional representation of overseas companies reflect only the rising number of regional headquarters and offices. However, they do not disclose how many companies have moved their regional or China headquarters to elsewhere, and what the nature of the companies concerned is. It is thus difficult to draw out a picture of the qualitative impact towards the economy and employment prospects of Hong Kong. For instance, Coca Cola moved its China headquarter to Shanghai in 2001. The newly created regional headquarters in other sectors are not necessarily able to absorb the enormous number of Hong Kong workers discharged by Coca Cola, due to the different scales of the companies and the different nature of expertise needed. Moreover, it is reported from time to time that well-known multinationals have shifted their regional headquarters to Singapore or elsewhere, and their China headquarters to Shanghai, which seriously lead to unemployment. On the contrary, companies which have established their regional or China headquarters in Hong Kong in recent years may be of a lesser scale. Given the nature of their operations in the city, which is mainly control and coordination of their regional activities, their investments as well as jobs created in Hong Kong could be rather limited. In another survey done by the Economist Intelligence Unit (EIU), the business environment of Hong Kong is judged to be in decline. Its ranking, which was the 5th among 60 countries or territories during the five-year period from 1997 to 2001, is dropped to the 11th position from 2002 to 2006. At the same time, the position of

39 Report on 2004 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong (Hong Kong: Census and Statistics Department, Hong Kong SAR government, 2006), pp. 49–50.

Hong Kong in between China and the Great Powers

Singapore dropped from seventh to ninth. China’s accession to WTO will certainly liberalize the business environment of China, and Hong Kong’s role as intermediary or entrepôt for China’s imports and exports will be significantly affected. Apart from some non-political factor such as declining English standard and the lack of good quality workers, the EIU is concerned with whether the “Principal Officials Accountability System” created by Tung Chee-hwa in 2002 and the demoralized civil service would adversely affect the good governance and competence of the government.40 The EIU findings are echoed by the annual surveys carried out by World Economic Forum on the competitiveness ranking of states or regions. Hong Kong was ranked second as the most competitive region in 1999, but its ranking has since dropped to the seventh in 2000, thirteenth in 2001, and then seventeenth in 2002.41 For the two major items that pose impact on the general ranking, namely the “ability to utilize innovative and high technology” and “governmental institutions,” Hong Kong unfortunately is in decline. Domestic political-economic changes in Hong Kong, in parallel with the rapid growth of her motherland, would allegedly marginalize its long-term role in helping the motherland. Will this further “provincialize” Hong Kong, making it less important in the eyes of the outside world, as well as in the eyes of the Chinese leaders?

Western Triad and the Future of Hong Kong Hong Kong’s position is unique in the international community as well as within China. On the one hand, its openness and international character have made it one of the commercially most cosmopolitan cities in the world. It is thus treasured by the western businesses, and western interests are linked to the long-term future of Hong Kong. On the other hand, after China resumed its sovereignty over Hong Kong, it still enjoys a very peculiar status. Considering the role of Hong Kong in Sino-Western relations, Hong

40 See Ta Kung Pao, 25 April 2002, p. A8. 41 See the report in Ming Pao, 13 November 2002, p. A12.

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The Hong Kong Special Administrative Region in Its First Decade

Kong is always portrayed as a gateway to China. The former British Consul-General in Hong Kong, Sir James Hodge, has even initiated the “Double gateway” concept: using Hong Kong as a gateway to China for British companies and using London as a gateway to Europe for Hong Kong companies.42 In a similar vein, a Chinese specialist of Shanghai and Hong Kong economic development clearly indicates that the best strategy for the positioning of Hong Kong is a “strategy of interlink.” The world links to China through Hong Kong, while Chinese enterprises also extend to the outside world through the intermediary role of Hong Kong. The city could play this crucial role because it truly “understands the world and at the same time understands China.” No other major Asian cities can thus be compared to Hong Kong in this regard.43 The China-African Business Council established in May 2005 in Beijing aiming to promote trade and mutual investments between China and Africa has established its “Hong Kong Chapter” in April 2007, as Hong Kong is considered very instrumental in serving as a bridge between Chinese and African businessmen. Besides, it is also very useful in the “united front” works of China towards Africa, a continent returning to the agenda of Chinese diplomacy due to its rich resources that China is badly in need. Hong Kong as one of the greatest investors in the world, and a bridge between China and the outside world, is thus considered equally by the West and China as a treasure. The western triad emphasizes the principle of continuity regarding their relationship with the SAR after it becomes part of China. In other words, they want to defend the “status quo” of Hong Kong. The US as well as the EU is encouraging China to foster further economic and eventually political reform, to establish proper institutions in all areas of social and economic life, and to develop a civil society governed by the rule of law. In the case of Hong Kong, it is radically different from the Mainland as it already is a

42 See the interview of Sir James Hodge, in Britain in Hong Kong, 14:6, Jan-Feb 2001, p. 3. 43 The analysis of Yao Xitang, Director of Research Institute of Pudong Reform and Development, Shanghai, is reported in Ta Kung Pao, 20 January 2003, p. A16.

Hong Kong in between China and the Great Powers

highly-developed and advanced city where stability and prosperity is well safeguarded by the strong “institutional pillars” such as rule of law, freedom of speech, an effective and non-corrupt government, and well-regulated capitalist rules of the games. The “principle of continuity” simply means to keep Hong Kong as it was, albeit under Chinese sovereignty. The US and Japan have indicated very clearly that institutions so crucial to ensure success of Hong Kong should not be “eroded” by the China factor or Chinese political culture. This message is hidden under their diplomatic language that Beijing should respect its guarantee of a high degree of autonomy of Hong Kong. Even if Beijing does not intervene directly, the adoption of measures by Hong Kong authorities that suits Beijing’s taste is also regarded as an intriguing interference in Hong Kong’s autonomy. This is always exercised under the pretext that citizens in the SAR should not ignore the primordial role of the concept of “one country.” This can be reflected by the debate started in September 2002 on how to implement Article 23 against subversion, sedition, treason, and the leakage of state secrets. The western triad is always committed to the improvement of the conditions of human rights and fundamental freedoms in China. However, what the western countries could do is rather limited, and all appear rather low-profiled in their approach. In the case of Hong Kong, the western triad is more high-profiled. This is because in the case of China, we are talking about improvement from a very low starting point. A more considerate and measured attitude that encourages gradual improvements in human rights condition is appreciated. In the case of Hong Kong, fundamental rights are all well protected, although democratization started very late. When we claim that there is a problem in the conditions of human rights in Hong Kong, this categorically means deterioration. In other words, some freedoms and rights are curbed or infringed upon, which means straight regress. The conditions of existence of Falungong in China and Hong Kong can demonstrate this point. When Beijing declares Falungong as an illegal sect, what the West could do is very limited. But Falungong does not offend any law in Hong Kong. If a new law is enacted in Hong Kong in order to implement Article 23 of the Basic Law so as to eliminate “subversion, secession, sedition and treason activities” against the Central People’s Government,

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aiming to eradicate Falungong from Hong Kong, this can be regarded as a deterioration of human rights conditions in Hong Kong. The issue of Falungong is becoming more and more sensitive, especially after the advent of the second Tung Administration on 1 July 2002. One urgent task in Tung’s second term is to enact a new law to implement the famous Article 23. Whether Falungong would become illegal still remains to be seen. But for Western countries, including Japan, whether Falungong can survive or not has become a benchmark for the measurement of liberty in Hong Kong. It is in the interests of the US, Japan and European countries to help consolidate first the “institutional pillars” of Hong Kong; second the multiple roles played by Hong Kong as an international financial, services, commercial, media hub and a free entrepôt. Among the three, the US adopts a rather high-profile approach in defending its enormous political and economic interests in Hong Kong. The United States–Hong Kong Policy Act of 1992 portraits Hong Kong as a non-sovereign entity that has a separate legal status. The US continues to accord preferential treatments to Hong Kong, including a separate immigration and textile quota. The US Department of State is requested by the US–Hong Kong Policy Act to produce a report each year on the transition of Hong Kong. In addition, the House of Representatives has a Task Force that scrutinizes the Hong Kong transition and produces a report every half year. Apart from paying attention to the economic status, rule of law, and human right conditions of Hong Kong, judging from the imperatives of American foreign policies, Washington stresses on the importance of export control and law enforcement by Hong Kong. The issue of export control is a heritage of the Cold War when Hong Kong as “part of the West” served primarily Western interests. Basing on the 1955 Import and Export (Strategic Commodities) Ordinance, Hong Kong does not allow trading of weapons and strategic materials, and thus assists US efforts against proliferation of weapons of mass destruction.44 Due to its effective export control,

44 For an earlier analysis of this issue, please see Ting Wai, “China, the United States, and the Future of Hong Kong,” in B. Leung and J. Cheng (eds.), Hong Kong SAR: In Pursuit of Domestic and International Order (Hong Kong: Chinese University Press, 1997), pp. 243–257.

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Hong Kong has been allowed the import of most controlled high technology dual-use items even after 1997. Powerful supercomputers can be used in Hong Kong, but they are not allowed to be re-exported to China. Hong Kong’s Customs and Excise Department is strongly praised for its effective pre- and post-shipment checks of the strategic goods to ensure that they are properly used.45 The US Secretary of Commerce and Hong Kong Secretary of Trade and Commerce have even conducted semi-annual meetings since 1997 to exchange information on export control. The stringent export control exercised by Hong Kong authorities is strictly needed as the city is developing its high-technology and forging ahead to become a services and business hub equipping with the latest technology. Now the policy of Washington vis-à-vis Hong Kong which is also “one country, two systems” puts Hong Kong in an advantageous position so that it can continue to import state-of-the-art high technology products. The discovery of an armoured vehicle in a Chinese cargo ship passing by Hong Kong from Thailand in late August 1997, and a similar case of five armoured personnel carriers from Ukraine on 31 March 2000, both targeted to the ports in China, demonstrates that Hong Kong’s export control mechanism remains effective as in the past.46 In addition, the low-profile attitude of the central authorities

45 See United States Hong Kong Policy Act Report, as of April 1, 2000 (Washington D.C.: Bureau of East Asian and Pacific Affairs, US Department of State, 25 April 2000), p. 15. 46 See Ming Pao, 31 March 2000, p. A03. What is interesting is the final destination of the armoured vehicles after confiscated by Hong Kong Customs Office. Hong Kong Police uses the first vehicle for training purpose. The recent five vehicles are of no use to the Police, so the Customs and Excise Department has been considering destroying them. But the demolition fee is too expensive. It reaches HK$120,000 per vehicle! The Recreation and Cultural Affairs Department of the Hong Kong government did apply for obtaining three vehicles aiming to display them in its recreation centres and resort villages. See Ming Pao, 8 May 2002, p. A11. This is a truly interesting story in the practice of “one country, two systems.” Hong Kong is part of China, but the transport of these armoured vehicles offends the law of Hong Kong and the vehicles have to be confiscated by Hong Kong authorities, though they are of no use at all for Hong Kong, except for the army. The central authorities directly control the army, PLA, but they cannot get the vehicles back.

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in China is a manifestation of their will to maintain a high degree of autonomy in Hong Kong. In both cases, the shipping companies and the captains were penalized and fined due to their legal offence. Beijing merely treated the matter as a minor foreign trade issue but did not regard the cases as a matter of diplomacy and national defence. If China insisted that this is a diplomatic and defence issue, since Hong Kong is a port of China, the sovereign state of course has the right to export or import anything she likes through this port. Since the judicial court of the SAR has no right of jurisdiction over diplomatic and defence matters, Hong Kong can do nothing if Beijing adopted this argument. But then the 1955 Ordinance will be invalid, and Hong Kong will not be regarded as the same Hong Kong as before. Fortunately the goodwill and clairvoyance of Chinese leaders have prevailed. Another Cold War heritage that still continues is the visits of American warships and aircraft stopovers in Hong Kong. This has become in effect a thermometer that measures the ups and downs of Sino-American relations. There is an average of 60 to 70 warships visiting Hong Kong per year, bringing in 45,000 naval officers and soldiers. Despite suspensions of two to three months, after the bombing of the Chinese Embassy in Belgrade in May 1999 and the clash of an EP-3 surveillance plane with a Chinese fighter aircraft in April 2001, visits continue without major problems.47 The US government seems to be satisfied with the law enforcement of Hong Kong against drug trafficking, money laundering, alien smuggling, credit card fraud, violations of intellectual property rights and organized crimes. Hong Kong has been listed by Washington as one of the major narcotics producing or transit countries/entities since 1987, but in November 2000, Hong Kong has been eventually removed from the list. 48 The cooperation of law enforcement agencies of Hong Kong and

47 See Ting Wai, “An East-West Conundrum: Hong Kong in between China and the United States after the Chinese Resumption of Sovereignty,” in Wong Yiu Chung (ed.), One Country, Two Systems in Crisis: Hong Kong’s Transformation since the Handover (Lanham, Maryland: Lexington Books, 2004), pp. 187–208 48 See Ta Kung Pao, 3 November 2000, p. A15, and 3 January 2001, p. A10.

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Washington has in fact deepened and broadened since 1997. The US is expanding its law enforcement presence in Hong Kong. US agencies which are present in Hong Kong include the US Secret Service, the Immigration and Naturalization Service, the Internal Revenue Service Criminal Investigations Division, the US Customs Service, the Drug Enforcement Administration, the FBI, the Export Enforcement Bureau of Commerce Department, and the Department of State.49 Under Chinese sovereignty the Hong Kong government is still able to exercise its law enforcement function in a rightful manner without being troubled by interference from the central authorities. Continual cooperation with the US in this regard helps consolidating Hong Kong’s international status, by upgrading the performance of Hong Kong to a level equivalent to the West. Washington appears to be thankful to Hong Kong in its global actions against terrorism, especially that Hong Kong plays a leading role as presidency of the multilateral (29 members) Financial Action Task Force in fighting against the financial networks of terrorists.50 On the other hand, it seems that Japan adopts a rather low-profile approach concerning the future of Hong Kong by not commenting on political issues, due to its sensitivity aroused from the historical past. However, there exists an international legal difference between the US which has a Hong Kong Policy Act, the Europeans who have no such legislation (although United Kingdom has a commitment under the Sino-British Joint Declaration), and Japan which has nothing at all. Despite all these political-legal constraints, the Japanese want Hong Kong to play its former roles and safeguard its well-established institutions. The former Consul General of Japan in Hong Kong, Hideaki Ueda, reiterated in 1997 that human rights and democracy cannot be separated from the free market economy, and that he would keep a close eye on whether freedoms in Hong Kong would be infringed. 51 Another former Consul-General, Itaru Umezu, stresses that despite some problems in

49 See United States Hong Kong Policy Act Report, as of April 1, 2000, p. 5, and Doug Bereuter, Eighth Report on the Hong Kong Transition (Washington D.C.: House of Representatives, 1 August 2000), p. 4. 50 See U.S.–Hong Kong Policy Act Report as of March 31, 2002, p. 2. 51 See Hong Kong Economic Journal, 30 June 1997, p. 17.

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the practice of “one country, two systems,” such as judicial independence and economic crisis, the rights of Hong Kong people remain intact. However, the economic move made by Japan since 1998 have worried Hong Kong as the number of licensed Japanese financial firms that have businesses in Hong Kong has been reduced from 91 in March 1997 to only 35 in June 2000, though the total assets of Japanese financial companies still rank first and amounts to 26.2% of the total assets of all financial institutions. 52 The withdrawal of assets and the closing down of some major department stores did raise some concern, but it is emphasized that this is due mainly to the domestic economic problems of Japan. Moreover, due to the Asian financial crisis, Japan suffered from the bad debts in Southeast Asian countries. Since Hong Kong is financially healthy and permits the free flow of capital, a vast amount of funds was withdrawn and sent back to Japan. The amount reached US$60 billion. 53 Nevertheless, due to economic recovery of Japan, Umezu said the Japanese investment in 1999 in Hong Kong increased by 40.5% in comparison to 1998, though the overall investment in Asia did decrease by 4.4%.54 This is because many Japanese industrial companies have moved their manufacture bases to the Pearl River Delta region, particularly those that fabricate electronic components and assemble electronic products. In the eyes of the Japanese who want to benefit from the increasingly prosperous Chinese market, Hong Kong as part of China is a very significant base. But for those Japanese conservatives, who may perceive a richer and more powerful China as a kind of threat, they may have second thoughts on whether they should invest more in this part of Asia. Nevertheless, according to the same source of the Japanese government, the value of Japanese investment projects in 2000 was

52 See interview of Itaru Umezu, Ming Pao, 18 September 2000, p. B1. 53 See Hong Kong’s Competitiveness beyond the Asian Crisis: an Overview, p. 30. 54 The number of new Japanese investment cases in 1998 is limited only to 52, with a value of Yen 81,800 million (US$0.77 billion) only, while in 1999 the number of cases was increased to 76, valued at Yen 108,800 million (US$1.06 billion). See http://www.mof.go.jp/english/fdi.

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reduced by 4.5%, and in 2001 another reduction of 58.3%.55 But in the same year, the Japanese investments in China have significantly increased by 63.3%!56 Japanese investments in China marked an increase of 18.3% in 2002 in terms of value, 65.1% in 2003, and 38.2% in 2004. This can be regarded as an alarming sign for the intermediary role of Hong Kong. After China acceded to the WTO in 2001, many companies might consider going directly to the Mainland without seeking the support of Hong Kong. This is a real challenge to Hong Kong with the real opening up of the Mainland. Given the challenges that Hong Kong has to face, the Japanese business sector in Hong Kong is still optimistic about the intermediary role of Hong Kong, which is extremely beneficial to foreign enterprises when they develop their business in the Mainland. This is especially true for those small and medium enterprises which attempt to enter the Chinese market for the first time. Hong Kong employees are able to “breakthrough” the cultural and linguistic barriers in between China and the outside world, and serve as a kind of “lubricant-catalyst” for the commercial and economic transactions. This “know-how” of Hong Kong is very much treasured by Japanese entrepreneurs. Notwithstanding these Hong Kong advantages, Japanese companies based in Hong Kong have started to possess a less positive view of the business environment of this capitalist enclave. In a survey conducted in 2001 by the Japanese Chamber of Commerce and Industry in Hong Kong, 85% of the respondents think that the current business environment is

55 The number of new Japanese investment projects was decreased to 55 in 2000, valued at Yen 104,500 million (US$0.93 billion), and then further reduced to 38 cases in 2001, valued at Yen 43,600 million (US$0.34 billion). It is further reduced to 32 projects in 2002, valued at Yen 25,300 million (US$0.21 billion); 36 projects in 2003, valued at Yen 44,700 million (US$0.42 billion); 42 projects in 2004, valued at Yen 68,700 million (US$0.64 billion). See ibid. 56 The number of Japanese projects in China created in 2000 was 106, with a value of Yen 111,400 million (US$0.98 billion), while the cases recorded in 2001 numbered at 189, with a value of Yen 181,900 million (US1.42 billion), which means an increase of 63.3%. Japanese projects in China sharply increased to 263 in 2002, with a value of Yen 215,200 million (US$1.76 billion); 332 in 2003, valued at Yen 355,300 million (US$3.32 billion); 361 in 2004, valued at Yen 490,900 million (US$4.55 billion). See ibid.

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“very good” or “good,” while in 2000 it was 96%, and in 1999, 91%.57 What is worse, regarding their assessment of future business environment in the next ten years, 37% of the respondents choose “not good.” 58 The major reasons for “not good” include high business cost (37% of the respondents), progress of China’s open economy (35%), and changing circumstances of economy and society (14%).59 They would like Hong Kong to reduce its property price and labour cost, at the same time improve its human capital and English standard. The survey carried out in 2002 gave a gloomier picture. 82% of the respondents think that the current business environment is Hong Kong is “very good’ or “good.” For their assessment of future business environment in the next 10 years, as much as 58% of the respondents opt for “no good.”60 In brief, Japan wants Hong Kong to continue its success, not only in economy, but also in terms of political development. Hong Kong is considered a gateway to China by the Japanese and can play a unique role in improving mutual understanding of China and Japan in this difficult times of Sino-Japanese relations, as emphasized by another Consul General of Japan, Takanori Kitamura in early 2005.61 Hong Kong as a more open and liberal city is seen as a frontier for the future of Greater China. A more open and democratic society in Hong Kong will pose a significant impact as a showcase for the development of China in the future. The close linkage between Japan and Hong Kong is demonstrated by the granting of visa-free status to Hong Kong citizens starting in January 2004. For the European Union, it seems that the Hong Kong issue is becoming an integral part of EU’s China strategy. Europe wants to see a cooperative, responsible and constructive China, by helping China to fully integrate into the international community. This

57 See Survey on Business Activities of the Members, Year 2001 (Hong Kong: The Hong Kong Japanese Chamber of Commerce and Industry, December 2001), p. 7. 58 Ibid. p. 8. 59 Ibid. p. 10. 60 See the report in Ming Pao, 18 March 2003, p. B2. 61 See the interview of Takanori Kitamura in Ming Pao, 27 February 2005, p. A14.

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means that China should accept the international norms lay down by others. The EU also seeks dialogue on questions of regional and global security; support for efforts to reform public life in China and develop a civil society based on the rule of law; development of a program of effective and coordinated cooperation in the fields of law and justice.62 In a report on the development of Hong Kong, the European Parliament “appreciates the efforts of the Commission to support Hong Kong in international bodies, but insists on the necessity to strengthen the links between Hong Kong and EU especially in the perspectives of the general strategy for Asia as expressed by the Commission.” The European Parliament also “stresses the importance of Hong Kong in the process of economic reform and development of China as a whole and insists on the importance of a closer cooperation between the EU and Hong Kong in the field of finance, trade and foreign direct investment.”63 While the Parliament expresses concern over judicial independence arising from the right of abode issue of Mainland immigrants, it pays attention to the lack of fair competition law in Hong Kong, and the predominance of tycoon Li Ka-shing in the Hong Kong business sector. This critical attitude is echoed, albeit in a more diplomatic and polite manner, in the Report from the Commission to the Council, “the absence of overall competition legislation . . . has been the subject of considerable controversy throughout the year. The HKSAR government continues to believe that blanket legislation to combat restrictive competition practices is unnecessary. The Democratic Party and a number of consumer and business interests consider that blanket legislation would provide transparency, benefit consumers and improve the

62 See “A Long Term Policy for China-Europe Relations,” Communication of the Commission to the Council, 4 September 1995, pp. 1–7. 63 Report on the First and Second Annual Reports by the European Commission on the SAR of Hong Kong, Committee on foreign Affairs, Human Rights, Common Security and Defence Policy, European Parliament, 13 October 2000, p. 8.

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business environment by providing a level playing field for all.”64 This has caused a rebuke from the SAR government and certain of business elite. However, the Europeans are very much concerned about whether there is a level playing field in Hong Kong, and whether free and fair competition does prevail so that no privilege is given to Chinese enterprises. Europeans are keeping a close eye on the development of democracy and the question of human rights in Hong Kong, just like US and Japan. The British Consul-General, Stephen Bradley, explicitly expresses his wish that the Chief Executive be elected by universal suffrage, as well as the Legislative Council, by 2017.65 Falungong has been becoming a subject of major concern regarding the freedom of assembly, freedom of expression and freedom of religion. A British author has noted that “to many, the HKSAR was beginning to resemble a ‘high-tech society’ with a ‘low-tech’ legal order.” 66 Judiciary, immigration and human rights have become major foci of concern. European countries also pay respect to “one country, two systems” in their diplomatic representations in China and Hong Kong. The consulates in Hong Kong are independent from the embassies in Beijing and their status is higher than any consulates general in the Mainland. But major European countries are concerned with the attitude of Hong Kong authorities regarding Hong Kong’s identity. Though Tung Chee-hwa was supposed to enjoy a high degree of autonomy, he seemed to be close to Beijing, and his overreactions relating to issues of national interest were judged to be maladroit. Hong Kong does not seem to wish to build up a clear and positive international image among Europeans. Tung did not visit other European countries apart from London and

64 See Report from the Commission to the Council and the European Parliament: Third Annual Report by the European Commission on the Hong Kong Special Administrative Region, COM (2001) 431 final, 25 July 2001, p. 8. 65 See the speech given by Stephen Bradley in the Foreign Correspondents Club on 26 April 2007, Hong Kong Economic Journal, 27 April 2007, p. 12. 66 See Georg Wiessala, The European Union and Asian Countries (London: Sheffield Academic Press, 2002), p. 100.

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Brussels. Public opinion in Europe tends to think that Hong Kong is just like Mainland China, due to the numerous phenomena that affect Hong Kong’s image. Though Hong Kong should do more in terms of international and public image, the concrete actions already taken by Hong Kong authorities are in fact shaping its new identity as well as public relations, and no cosmetic actions are useful to modify the images thus created. The EU granted visa-free status to HKSAR passport holders on 14 March 2001, and the regulation entered into force on 10 April 2001. 67 This was facilitated in parallel with the signing of an EC-Hong Kong readmission agreement on 27 November 2002, the first agreement of its kind, which enables both sides to repatriate illegal immigrants. It has entered into force on 1 March 2004.68 It demonstrates the confidence of the EU towards the autonomy of Hong Kong and the practice and execution of “one country, two systems.”

Conclusion Stepping into 2004, it seems that Hong Kong’s attractiveness towards the Chinese in the Mainland has decreased remarkably. Bernard Chan, member of both Executive Council and Legislative Council, indicates that the number of immigrants from the Mainland to Hong Kong reached only 34,000 in 2004, in comparison to 53,000 in 2003. The quota is 150 per day, but only two-third of the quota was used in 2004.69 Is it because of the decline of Hong Kong’s “international character,” while at the same time those potential immigrants have better opportunities in the Mainland?

67 See “The EU’s relations with Hong Kong SAR – Overview,” Directorate General External Relations, European Commission, 10 December 2004. 68 Six-monthly Report on Hong Kong: January-June 2004, prepared by the Secretary of State for Foreign and Commonwealth Affairs to the British Parliament, July 2004, p. 20. 69 Hong Kong Economic Journal, 21 February 2005, p. 6.

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Many people in Hong Kong are afraid that with the accession of China to WTO, Hong Kong might lose its major function as the useful middleman. But whether companies go to China or not does not necessarily relate to China’s membership in WTO, and Hong Kong keeping its competitive edge would still be useful to foreign enterprises, even if China is more open. It is true that big companies are able to deal directly with China, but the majority of small and medium enterprises which look for opportunities in the Mainland are still relying on Hong Kong as a stepping stone. As indicated by Peter Woo, Chairman of the Hong Kong Trade Development Council, these small and medium companies are employing 30 to 80 workers in their Hong Kong offices. Their manufacture bases are in the Mainland, and Hong Kong is naturally the major coordination centre responsible for sales and marketing.70 Nevertheless, China becoming a member of WTO immediately poses a concrete problem for Hong Kong. In the past, capital inflow from Hong Kong to the Mainland enjoyed special privileges such as exemption of taxes. As a member of WTO, China cannot continue the special treatment. So Hong Kong businessmen started to lobby to establish a “free-trade area” with the Mainland to secure preferential treatment for Hong Kong. This was then baptized as “Closer Economic Partnership Arrangement with China” (CEPA). It is aimed to enable Hong Kong businessmen to enter the Chinese market and benefit from the advantages provided by China’s accession into WTO, one year or one and half year well before the others could obtain the same benefits. Hong Kong entrepreneurs could then occupy strategic strongholds in the Chinese market well before the other competitors, especially in areas such as commercial and professional services, financial services, trading and tourism. The negotiation that was started in January 2002, though arrived at a conclusion and signed on 30 June 2003, appeared to be very difficult. Besides, for a free port and international economic entity like Hong Kong, this at once arouses the attention of western enterprises doing business in Hong Kong. They want to know whether they are regarded as “Hong Kong Inc.” which is entitled

70 Ming Pao, 13 May 2002, p. D12.

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the same privileges as local Chinese enterprises.71 If they are treated differently, it makes no sense for them to stay in Hong Kong. So they would like to see a clearer definition of Hong Kong companies that include all those enterprises which are operating in the city. Obviously, a narrow definition based on ethnicity or nationality of shareholders is not acceptable. But a broader definition that includes all companies from Hong Kong irrespective of their ownership would not be acceptable to China, since this implies permitting foreign companies to enter China ahead of the transitional period agreed upon by Beijing and WTO. This closer economic integration with the Mainland is an inevitable development after Hong Kong becomes part of China, but it poses a problem for Hong Kong’s external relations and international status. The dilemma is that Hong Kong has to prove to the outside world that it is very different from the Mainland, due to its international character and a separate identity, but it is not politically correct to explicitly saying so. The former Consul General of US, Michael Klosson, said explicitly “it will be essential to strike a proper balance between deeper economic interdependence with China on the one hand and Hong Kong’s autonomy and international connections on the other.”72 By the same token, while Hong Kong still aspires to maintain its role as one of the most important financial centres in the world, an increasing number of Chinese enterprises are listed in Hong Kong aiming to raise funds. In the nineties, those were mainly major state-owned enterprises, but in the future more and more private companies will come for funding purposes. Hong Kong has definitely become the most significant Chinese financial centre, but can it move forward to become a truly international financial centre, after New York and London? Hong Kong is always caught in the middle of the great powers. During the Cold War era, Hong Kong maintained its stability and prosperity due to the tacit consent of British rule by China. The city

71 See Interview of the Executive President of the British Chamber of Commerce in Hong Kong, Christopher Hammerbeck, in Ta Kung Pao, 28 February 2002, p. A6. 72 Speech of Michael Klosson at the American Chamber of Commerce in Hong Kong, 6 June 2002.

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served both Chinese and Western interests. Now Hong Kong as part of China has to continuously serve both Chinese and Western interests. If the West does not regard Hong Kong as it used to be, the declining western participation will be detrimental to Hong Kong’s status as an international city. “Provincialization” of Hong Kong is a major challenge that Hong Kong has to face, especially that all major coastal cities of China seek to become more international. Hong Kong, as an international city, always wants to benefit from globalization and internationalization. One of the major objectives of the Western triad in their foreign policy regarding China is to help in reforming the country by influencing on the pace and course of reform. It is definitely in the interests of Hong Kong if the economic and political liberalization of China continues, and the further integration of China into the international community is the best guarantee for the future of the SAR. Hong Kong has always been an important part of the globalized world. It aspires to play an even more significant role in the world of interdependence. Greater openness and transparency in the Asia-Pacific region as well as China will by all means benefit Hong Kong and its firms. China’s accession to WTO denotes the further effort of China “joining the world.” Hong Kong businessmen may worry about the loss of intermediary role that Hong Kong used to play for so long and so well, as a bridge between China and the outside world. However, Hong Kong is a major beneficiary of China joining the WTO from the long-term strategic sense. Whether one country comes first or whether “a high degree of autonomy” comes first reflects in reality the debate on whether globalization would infringe upon national sovereignty and national identity, the sacrosanct principle to which the CPC’s raison d’etre is attached. A China which is more receptive to globalization and understands the benefits of economic interdependence will be the best guarantee for the international status of Hong Kong.

7 Hong Kong in the Eyes of the International Community REN Yue Shantou University

Introduction In the world of sovereign nation-states, Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of China provides an interesting case to study from the perspective of international law: it is a non-sovereign entity, yet it is an active and in many areas an important international actor. It has an independent judicial system categorically different from that of Mainland China; it has a sizeable economy and is one of the freest economies in the world; and it has a highly autonomous government established by the Basic Law of HKSAR. At the time when the HKSAR celebrates its first ten years, this chapter examines how the HKSAR, as a non-sovereign international entity, participates in international affairs and what significances its participation has for the development of international relations.1

1 See James T. H. Tang, “Hong Kong’s international status,” The Pacific Review, Vol. 6, No.3, (1993), pp. 205–215; James C. Hsiung, “Hong Kong as an non-sovereign international actor,” Asian Affairs, vol. 24, no. 4, (Winter 1997/98), pp. 237–245. Also, D. Dyment, “Ontario government as an international actor,” Regional and Federal Studies, Vol. 11, No. 1, (Spring 2001), pp. 55–79. 305

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Non-Sovereign International Actors: New Active Forces in International Arena The classic Realist school talks about international actors focusing mainly on nation-states, especially sovereign nations. Other international actors, such as international organizations (both IGOs and NGOs) and transnational corporations are by and large left out in international relations. Today, though the nation-states still play very important roles in international life, non-sovereign international actors have shown more and more influence in guiding or even setting the international trends in a wide range of issues, including international security, globalization of international trade, environmental protection and other non-traditional security matters.2 Alan James defines non-sovereign international actors this way, “the characteristic which distinguishes a sovereign from a non-sovereign state is constitutional independence – that is to say, a territorial entity’s possession of a constitution which is not subordinate to that of another territorial entity.”3 Non-sovereign international actors, sometimes interchangeably called non-state actors, are not uncommon in the international system anymore. They stand on their own merits in conducting international affairs that would catch the attention of even the most influential nation-states. In the contemporary international system, the non-state international actors can be categorized into three groups: international organizations, transnational corporations, and sub-national entities. In the first category, international organizations can be further classified in accordance with their functions, membership distribution, modus vivendi, affiliation with governments, etc. Some international organizations have almost been regarded as some kind of “super” nation-states whose

2 For a recent discussion on the roles of non-state actors, see Liu Chang-min, “On the international legal status of non-state actors,” Contemporary International Relations, Vol. 2, 2004 (Beijing). 3 Alan James, “A response to Kurtulus,” Review of International Studies, Vol. 28 (2002), p. 779.

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representatives enjoy almost the same kinds of diplomatic immunities and privileges like those diplomats sent by sovereign states. Transnational corporations like Microsoft, IBM, and Sony have mainly been playing important roles in the global economy and other non-traditional security fields. The third category, the one that Hong Kong is in, is different from the more usual forms of sub-national entities such as states (in a federal system, also called estados, bundesland, cantons, republics, oblasts, etc.) and provinces (districts, municipalities, etc.). While the latter may have various degrees of capacities communicating with other international actors, they are usually regarded as parts of sovereign nation-states with limited autonomies. Admittedly, not many territories fit in this category and many of them are not without controversies. Examples of non-sovereign entities include Palestine and, more recently, Kosovo. Unlike other sub-national entities, these autonomous entities may conduct international affairs on their own merits and be recognized by other sovereign nation-states as equal partners in many international occasions where national sovereignty is not required. For example, the United States – Hong Kong Policy Act of 1992 authorizes the US government to treat Hong Kong as a non-sovereign entity distinct from the PRC “for the purpose of US domestic law based on the principles in the 1984 Sino-British Joint Declaration.” This Act further claims that “the laws of the United States shall continue to apply with respect to Hong Kong, on and after 1 July 1997, in the same manner as the laws of the United States were applied with respect to Hong Kong before such date . . .” 4 In other words, Hong Kong is treated as a sub-national entity with substantial autonomy. Historically there are a number of non-sovereign international actors that have actively involved in international life. During the “Cold War” period, two non-sovereign entities, Belarus and Ukraine, were members of the United Nations where only sovereign states are allowed to join in. However, their independent international roles were rather questionable given the nature of the bi-polar international system and of the Soviet political system. The

4 United States-Hong Kong Policy Act of 1992, 22 U.S.C. pp. 5701–5732.

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European Union, on the other hand, is a “super-nation-like” international organization that actively participates in international affairs with functions similar to a sovereign nation-state. However, like all other international organizations, it acts without full-scale sovereignty. Admittedly, not all non-sovereign international actors are welcome by the international community. Many terrorist groups fall in the category of non-sovereign international actors and are threatening the peace and tranquillity of international order. Other international organized crime groups, like that of an international drug cartel, also frequently affect security policies of many nation-states. Most non-sovereign international actors that have exerted great influence in international arena fall in the categories of international organizations and/or transnational corporations. However, in the category of sub-national international entities, there are a few that would catch the attention of the international community, and Hong Kong is such an example. There are a number of sub-national entities that have met almost every criterion of statehood except one key element: sovereignty. Some of them are results of civil war, such as Taiwan and the Turkish Republic of Northern Cyprus; some are legacies of colonial times, such as Hong Kong before 1997 and Macao before 1999. In some circumstances, their sovereigns are reluctant to let them appear in the international arena. Yet in some other cases the sovereigns may be willingly or even supportive to let them conduct various degrees of international relations on their own initiatives. Globalization and technological progresses have fostered the enhanced roles of non-sovereign international actors. Hong Kong as one of the world’s major trading economies has benefited from the globalization trend. Its international influences have been seen increasing in recent years. As a non-sovereign entity, Hong Kong is a formidable economy, ranked eleventh in 2006, an influential financial and trading centre, and a world shipping and transportation hub. Ten years after the return of Hong Kong to China, the HKSAR government has continued to be widely regarded on world stage as an important international actor. The remaining of this chapter will examine the HKSAR’s relations with the Central

Hong Kong in the Eyes of the International Community

People’s Government of China, its modes of participation in international organizations, its activities in international conventions, and its external relations in other fields as stipulated in its Basic Law.

Central People’s Government and SAR Government Relations The past decade has witnessed HKSAR’s growth as an active non-sovereign international actor. The fact that it is part of China has not weakened its international status. On the contrary, closer relations with the Mainland have strengthened the HKSAR’s international status and proved a win-win situation for both sides. The HKSAR’s role as a China’s window to the world and a lookout point for China to see the world has been fairly effective, though one of China’s original considerations to make Hong Kong a model of the “one country, two systems” to bring back its renegade province Taiwan has now been gradually diminished. It is true that HKSAR as an international legal person with the capacity to develop external relations with other sovereign states and/or non-sovereign entities has a great deal to do with how the Chinese government allows it to do within the framework of the constitution of China. The Basic Law adjusts the relations between the Central People’s Government (hereafter the CPG) of the PRC and Government of HKSAR. It is the mini-constitution of the HKSAR. In Article 13 of the Basic Law, the CPG’s role in the SAR is stipulated as being responsible for foreign affairs relating to the HKSAR, and also providing for the establishment of an office in Hong Kong by the Ministry of Foreign Affairs to handle these issues. Another important power that retains in the hands of the CPG is the defence power. This is not surprising, as foreign affairs and national defence are naturally the crucial components of state sovereignty. Other than these powers, the CPG has left a wide range of areas to the HKSAR government in conducting its own relevant external affairs in accordance with the Basic Law.5

5 Basic Law of HKSAR, Art. 13.

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Since the establishment of the HKSAR government, it is generally agreed that the Basic Law-stipulated CPG-SAR relations are carefully protected and nourished. Under the principle of “one country, two systems,” the CPG has been very cautious in handling the SAR affairs. As long as it believes that the SAR has been kept in good order, it would rather leave the domestic issues for the SAR government. In the first year after the turnover, the CPG proved that the implementation of “one country, two systems,” and “Hong Kong people administering Hong Kong” were by no means mere lip-service. The then Foreign Ministry Commissioner, Mr Ma Yuzhen, said at the American Chamber of Commerce in Hong Kong, that his office’s missions include providing assistance to the HKSAR government handling external affairs in accordance with the Basic Law. Ten years later, the current Commissioner, Mr Lu Xinhua, echoed Mr Ma’s words and reiterated his office’s missions as to actively supports “Hong Kong in its communication and co-operation with other countries and areas in various fields” and “employ China’s diplomatic resources to further Hong Kong’s international profile and presence by supporting the SAR govern-ment to engage globally in economic and trade, science and technology, cultural, tourism and other fields.”6 There are, however, a few incidences where the CPG-SAR relations have been put on trial, yet so far they have not shown long lasting reverse consequences. The first test is the “right of abode” issue. On 28 April 1999, Mrs Regina Ip, Head of the SAR Government’s Security Bureau, testified at a legislative meeting that an estimated 1.67 million Mainlanders would be qualified for “right of abode” in Hong Kong, in accordance with Hong Kong Court of Final Appeals’ ruling on the Ng Ka Ling case.7 Prior to the Court’s decision, Hong Kong’s Provincial Legislative Council amended the Immigration Ordinance to be in line with Article 24(2) of the Basic Law, and enacted them on 9 July 1997. When it was released to the public, many Hong Kong residents believed that it would cause severe social problems

6 Ta Kung Pao, 29 April, 1998; Ming Pao, 28 February 2007. 7 Ng Ka Ling v Director of Immigration (1999), 2 HKCFAR4.

Hong Kong in the Eyes of the International Community

with regard to, for example, education, housing, employment, and social welfare, etc. It soon became a heated debate and the constitutional issue involved here is whether the Court of Final Appeals of HKSAR government would have the final say on this case, as many believed it should. It involved CPG-SAR relations, thus inviting a National People’s Congress (NPC) interpretation in accordance with Article 158 of the Basic Law. The Standing Committee of NPC reacted on 26 June, 1999 to the Chief Executive of the HKSAR government’s request and specified the meaning of the Basic Law on “right of abode.” The NPC derives its power on the interpretation of the laws from Article 67(4) of the PRC Constitution and Article 158(1) of the Basic Law. This reinterpretation is tantamount to overruling the Court’s earlier decision. While the decision relieved the SAR government of its pressure and perhaps calmed down many Hong Kong residents’ worries about the impact of a sudden influx of Mainlanders in Hong Kong society, it shadowed, in the eyes of many international observers, the future of the “one country, two systems.” The New York Times lamented, “Hong Kong is now part of a single country that will not hesitate to assert its suzerainty, in matters legal or political.”8 However, other than this incident, the authority of Hong Kong’s independent judicial system has not been seriously challenged and the foundation of Hong Kong’s legal traditions has not been dramatically weakened. Hong Kong’s courts still enjoy their own privileges and carry out their functions without being subject to any unconstitutional pressures of political institutions, both from the CPG and the SAR government. The second major test for CPG-SAR relations is concerned with the implementation of Article 23 of the Basic Law. This article stipulates that the HKSAR “shall enact laws on its own to prohibit any acts” which are jeopardising national security. It does not, however, give a timetable or any specific instructions on this requirement. The Chief Executive of SAR government, Mr Tung Chee-hwa, took it not only as his government’s constitutional duty but also a civic duty of the Hong Kong residents. In February 2003

8 New York Times, 29 July 1999, p. 9.

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the SAR government introduced the controversial legislation, deeming it necessary in the interest of national security and an obligation that the SAR government should enact. Though according to the Basic Law, Hong Kong residents, under the “one country, two systems” principle, still enjoy comprehensive protection of their rights, including the freedom of speech, of the press, of assembly, and of religion, etc, the proposed legislation was regarded by many as a threat to those freedoms. It soon became obvious that it was not a good time to release this bill. Hong Kong was suffering an economic setback and many residents suspect that if such a law was enacted, it would severely curb their political freedoms and civil rights that are guaranteed by the Basic Law and international conventions applicable to the HKSAR. If the “right of abode” issue involved only a fraction of the Hong Kong residents, this time it soon evolved into a wide-spread event that led to a unprecedented demonstration of over half a million people on 1 July 2003. Though the Tung Chee-hwa government had tried best not to make itself publicly humiliated, the CPG obviously lost confidence in him after its reluctant intervention. This uneasy struggle between the SAR government and political and civil rights activists in Hong Kong was under a close scrutiny of international community, if handled improperly, it would damage the images of both SAR government and CPG. The SAR government finally decided to withdraw the National Security (Legislative Provisions) Bill from the legislative programme on 5 September 2003. The other round of NPC interpretations on the Basic Law concerns the methods for selection of the SAR Chief Executive and for the formation of the Legislative Council. The NPC Standing Committee’s April 2004 decisions supported the SAR government’s basic requests and in a way crushed the growing popular demands to elect the Chief Executive by universal suffrage. Though the interpretation itself is unquestionably a legitimate one, the fact that Mr Tung’s government had not been able to keep a close rapport with its people became obvious to leaders of the CPG. Should events like this be allowed to continue, there was a worry that eventually the “Hong Kong people administering Hong Kong” principle would be damaged. The unstable political situation in Hong Kong was

Hong Kong in the Eyes of the International Community

temporarily rested with Mr Tung’s decision to step down in the middle of his second term. An objective observer of the CPG-SAR relations would have no difficulty in recognizing the significance of the CPG’s support to the HKSAR. Traditionally Hong Kong’s role as a non-sovereign entity was based on its economic strengths. The Asian Financial Crisis that took place shortly after Hong Kong’s return to the Mainland dragged the territory’s economy down to a pitiful status. Beijing then did its best to support the SAR government’s effort to recover from this economic downturn. Other than the general backup of China’s steady economic growth and formidable foreign currency reserve, one important act is the signing of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in June 2003. This arrangement covers cooperation between the SAR and the Mainland in three broad areas: goods, services, and investment facilitation. The huge Chinese Mainland market was opened up for Hong Kong in an unprecedented manner that greatly stimulated this territory’s economy. CEPA has further strengthened ties between HKSAR and the Mainland, especially the Pearl River Delta area, and represented a typical win-win cooperation between the two economies. In the past decade, the SAR-Mainland economic relations have been on a healthy track. Many Hong Kong investors and companies made capital investments and/or set up offices and factories in the Mainland. To strengthen close ties with the CPG and Mainland, other than its headquarters in Beijing, the SAR government has also set up economic and trade offices in important cities like Guangzhou, Chengdu, and Shanghai. The changing international environment also contributed to a good CPG-SAR relationship. The global anti-terror collaboration strengthened SAR’s cooperation with the CPG in other traditional and non-traditional security areas. With China’s increasing economic influence in world trade, the Sixth WTO Ministerial Conference was held in Hong Kong in December 2005. Hong Kong once again emerged as one of the strong economies in the world and stood in the limelight of world trade arena. Among other achievements, the WTO conference surely promoted Hong Kong’s role as a window to China and China’s window to the world.

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Modes of SAR Participation in International Organizations In the past decade, the HKSAR has expanded its involvement in activities of international organizations, offering living proof that this Chinese territory is still an active in the international community. The SAR government’s participation in international relations is defined by Article 152 of the Basic Law: “Representatives of the Government of the Hong Kong Special Administrative Region may, as members of delegations of the People’s Republic of China, participate in international organizations or conferences in appropriate fields limited to states and affecting the Region, or may attend in such other capacity as may be permitted by the Central People’s Government and the international organization or conference concerned, and may express their views, using the name “Hong Kong, China.”9 In addition, the HKSAR, using the name “Hong Kong, China,” may join other international organizations and conferences where no state membership is required. Article 152 guarantees that the CPG of the PRC “shall take the necessary steps to ensure” the HKSAR continue to be active in a wide range of international organizations, regardless whether China is a member or not. There are basically four official ways with which the HKSAR is represented internationally. (1) The SAR government sends its own representatives or delegations independently along with delegations from the CPG of the PRC; (2) The SAR government sends its representatives to join the CPG’s delegation yet maintains distinctive roles in the delegation; (3) The SAR government sends individuals to join the CPG’s delegation; and (4) Hong Kong SAR’s interests are represented by China’s CPG. The first way of representation happens in international organizations, conferences, forums or other events where

9 Basic Law of HKSAR. Art. 151.

Hong Kong in the Eyes of the International Community

sovereignty is not a requirement. For example, Hong Kong sends out its own representatives in such organizations like the WTO, the APEC, and the Olympics. In some cases where sovereign state membership is required, and in most cases Hong Kong is already an (associate) member granted from its British colonial times, the SAR government, with the permission of China’s CPG, remains as an associate member. For example, Hong Kong maintains associate membership in the International Maritime Organization and is an associate member in the World Tourism Organization, the Asia Pacific Telecommunications, Economic and Social Commission for Asia and the Pacific of the United Nations, and Statistical Institute for Asia and the Pacific, etc. Since Hong Kong has been an important maritime region and has one of the world largest commercial fleets. Its role in the IMO has been highly respected. The SAR’s IMO delegates have been invited frequently to participate and even chair a number of sub-committees. Another example is Hong Kong’s participation in the International Labour Organization regional seminars using “HKSAR, China,” an independent team from that of China.10 In all these international organizations, Hong Kong usually plays independent roles. In some areas, Hong Kong has acted, at least in the eyes of the international community, as a distinct entity rather than sub-unit of China. Usually that is the case where Hong Kong has traditionally demonstrated its capability to deal with issues of specialties. For example, Hong Kong has joined the Asian Development Bank (ADB) as a full member since 1985, the World Customs Organization since 1986, and the World Health Organization Regional Committee for the Western Pacific since 1988. Like the ADB, some international organizations are open to non-sovereign and interested entities or individuals. They are usually more specified and professional organizations. Hong Kong,

10 Before 1 July 1997, Hong Kong participated in the ILO activities in the name of “Hong Kong.” After that, it still sends its own team under the name of “HKSAR (or Hong Kong), China.” Similarly, Macao after 1999 also changed its name into “Macao, China.” See ILO Circular 12/19 (Rev.9) of 9 March, 1992, from http://www.ilo.org/public/english/standards/relm/ ctry-ndx.htm#Para%205.

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represented by various government branches or agencies, joins 161 of them either as a full (regular, ordinary, primary, collective, institutional/corporate, individual, etc.) member, or as an associate (affiliated, corresponding, honorary, etc.) member. Of all these organizations, the SAR joined 58 of them or more than one third since 1998. 11 One important regional organization the SAR government has participated and actively involved is APEC. It joined on the same day as China in November 1991, and changed its name as “Hong Kong, China” after 1997. If sovereignty membership is required, the SAR government obviously cannot send out its representatives alone. However, it can join the CPG’s delegation if it deems necessary. One way to send out is that under the name of China. There is an HKSAR sub-delegation that oversees events that concern Hong Kong interests. Examples are Asian-Pacific Postal Union, the International Criminal Police Organization (Interpol), International Civil Aviation Organization, International Atomic Energy Agency, Food and Agriculture Organization, International Telecommunication Union, the World Bank Group, United Postal Service, World Health Organization, World Intellectual Property Organization, and UNDP, etc. Since the resumption of sovereignty by the PRC, with the assistance of the Chinese Foreign Ministry’s Commission in Hong Kong, the SAR government participated as part of the Chinese delegation in more than 670 activities organized by international organizations and international conferences.12 An interesting case is how the SAR government works with the International Civil Aviation Organization (ICAO). The SAR government usually joins in the Chinese delegation in the ICAO meetings. However, because Hong Kong joined some civil aviation conventions while China was not yet a party, the HKSAR may, with or without the permission of the CPG (depending on the nature of the tasks), send out its own working team in some of the activities. It is generally recognized that Hong Kong as a very efficient team of civil servants as well as a large pool of well-trained

11 See http://www.cab.gov.hk/images/iorg-ngo.xls. 12 See http://www.fmcoprc.gov.hk/chn/gjzzyhy/xgcj/default.htm.

Hong Kong in the Eyes of the International Community

professionals. Many of them are badly needed by some of the most prestigious international organizations. A recent example is that in November 2006, Dr Margaret Chan was elected Director-General of the World Health Organization. She was a Hong Kong resident and former Hong Kong Health Department chief and her nomination was strongly supported by the CPG of China and the HKSAR government. Her official capacity helps the international community to understand better the concept of “one country, two systems” and Hong Kong’s contribution to the fighting of some of the world’s most focused epidemics such as SARS and avian flu.

SAR and International Conventions Since the return of sovereignty to China on 1 July 1997, Hong Kong continues to be a party, either as “Hong Kong, China” alone or as part of the PRC, in a variety of international conventions. In the diplomatic note issued by China’s UN Ambassador to Mr Kofi Annan, the former Secretary-General of the United Nations, China categorized the related international treaties into two parts and listed them in two annexes. In Annex One, 127 treaties, to which the PRC is a party and that will be applied to the SAR with the effect from 1 July 1997, are listed. These treaties “(i) are applied to Hong Kong before 1 July 1997; or (ii) fall within the category of foreign affairs or defence or, owing to their nature and provisions, must apply to the entire territory of a State; or (iii) are not applied to Hong Kong before but with respect to which it has been decided to apply them to” the SAR from July 1 1997 on (two conventions fell into this last category: Customs Convention on Containers (1972) and Convention for the Protection of Literary and Artistic Works (1886, rev. 1979)). In Annex Two, treaties were listed to which the PRC was not yet a party and which would apply to Hong Kong after the return of sovereignty. The 87 treaties in Annex Two deal with matters in international crime, private international law, customs, marine pollution, science and technology, civil aviation, merchant shipping, trade, health, international property, conservation, transport, telecommunications, human rights,

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international labour conventions, and conventions establishing international organizations.13 As of 30 April 2007, Hong Kong has ratified a total of 228 international conventions. A noticeable fact is that Hong Kong has joined many more international conventions in the fields of international labour conventions and human rights than its Mainland counterpart.14 Historically, Hong Kong, either on its own or by the British Hong Kong government, signed many international conventions to which China has not signed. International labour conventions provide one good example. By the end of 2006, China has ratified 24 international labour conventions (21 in force), while Hong Kong has ratified 41 such conventions.15 Several reasons could explain this. Hong Kong has been a free market for a long time, where many of the rules regulated by the ILO have found their own roots. Hong Kong’s industries are composed mainly of private-owned enterprises and companies, while in the Mainland many state-owned enterprises have sets of rules categorically different from that of Hong Kong. Also, Hong Kong has got a rule of law tradition and the Mainland is still trying to shake off the heavy impact of an administrativeoriented tradition. Another area in which Hong Kong is a party to more conventions than its Mainland counterpart is human rights. Given the fact that the Mainland and the SAR have different political and social systems, this is not surprising. The Basic Law guarantees Hong Kong residents enjoy a number of rights and freedoms such as “freedom of speech, of the press and of publication; freedom of association, of assembly, of procession and of demonstration; and the right and freedom to form and join trade unions, and to strike.” It also assures Hong Kong residents that “the provisions of the International Covenant on Civil and Political Rights, the

13 Qin Huasun, “Letter of notification of treaties applicable to Hong Kong after 1 July 1997, deposited by the Government of the People’s Republic of China with the Secretary-General of the United Nations on 20 June 1997.” 36 I.L.M. 1675 (1997). 14 See http://www.legislation.gov.hk/interlaw.htm. 15 See http://webfusion.ilo.org/public/db/standards/normes/appl/appl-byCtry.cfm?cty choice=2650 &lang =EN&hdroff=1; .

Hong Kong in the Eyes of the International Community

International Covenant on Economic, Social and Cultural rights, and international labour conventions as applied to Hong Kong shall remain in force and shall be implemented through the laws of Hong Kong Special Administrative Region.”16 The human rights conventions to which HKSAR is a party have give the SAR a reputation to be a Chinese entity that offers greater personal freedoms and individual protections. A noticeable case is the Falungong, an organization declared by the Chinese government as an evil cult and banned from practice throughout the Mainland. Yet, in Hong Kong, it is legal to practise Falungong. In fact, Falungong believers in Hong Kong have been advocating their beliefs and distribute their pamphlets to the public regularly in front of the CPG Liaison Office crowded commercial areas and transportation terminals. In fact, anti-government demonstrations, petitions, and even parades are not uncommon in the SAR. The public media in Hong Kong has basically followed the tradition from the British colonial times, criticising government policies, ridiculing politicians, and digging up negative and politically sensitive news about the government. Though there are occasionally complaints heard from the grassroots about the media’s self-censorship, the press has served as the watch-dog of government, which is something that rarely happens in the Mainland. The fact that Hong Kong has been a party to many international conventions has imposed great challenges for the SAR government. How to safeguard the interests of the HKSAR and at the same time balance its relations with the CPG of China proves to be a difficult task for the SAR government. Being a non-sovereign entity that has a sound free economy and a capitalist political system, Hong Kong needs to maintain its image of high autonomy in many fields where the Mainland’s current political and economic systems may not find compatible. In light of this situation, the SAR government has explored ways to safeguard its rights and obligations. First, it relies on its mini-constitution, the Basic Law, which guarantees the SAR’s legal rights to be a party of these international conventions. Secondly, the SAR government actively seeks the understanding of

16 Basic Law of HKSAR, Arts. 27 & 39.

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the CPG when there are potential or actual conflicts of interests. It may send representatives to Beijing or invite the CPG to send its officials to Hong Kong to discuss the concerned matters, or it may consult the CPG offices in Hong Kong, such as the CPG Liaison Office and the Foreign Ministry’s Commissioner’s Office. Thirdly, it may take preventive measures such as sending its civil servants to China in short and regular training courses to better understand the CPG policies. There seems to be a consensus reached between the SAR government and the CPG that they would rather solve the problems among themselves rather than expose them to the public 17 In addition to HKSAR’s participation of multilateral conventions, the SAR is also a party to many bilateral agreements. These agreements fall into the categories of air services agreements, investment promotion and protection agreements, mutual legal assistance agreements, and agreements for the surrender of fugitive offenders, transfer of sentenced persons agreements, and double taxation avoidance agreements, etc. An interesting fact is that among all the 54 nations that signed air services and air services transit agreements with Hong Kong, 33 of them signed with the SAR government after 1 July 1997, and there are still 9 more nations that have signed the agreements but not yet come into force. This tells us that since the return of sovereignty to China, Hong Kong’s international air flight connections have expanded, and very likely it should be attributed to the China factor. Among other bilateral agreements, especially those concerning the investment protection, mutual legal assistance, surrender of fugitive offenders and transfer of sentenced persons, similar things take place. All bilateral agreement between Hong Kong and other nations on mutual legal assistance and transfer of sentenced persons were signed after the return of Hong Kong’s sovereignty and so were an overall majority of fugitive agreements for offenders.18 Most major European countries as well as Australia, New Zealand, Canada and the US have signed mutual legal assistance agreements with the SAR

17 This is based on interviews by the author with over 20 SAR government department spokespersons between June and September, 2000. The author thanks the Hong Kong RGC for its financial support for these interviews. 18 See http://www.legislation.gov.hk/choice.htm#bf.

Hong Kong in the Eyes of the International Community

government which provide the SAR government with legal channels to bring back the criminal fugitives and suspects who find shelter in those countries. Interestingly, many of them do not have such a treaty with the over the years. It was not surprising when Mr Ma Chiu-chun, a businessman who allegedly deceived electrical appliance suppliers of HK$8 million worth of goods, was extradited from Canada after three years, while Mr Lai Changxing, a Chinese businessman allegedly involved in the largest corruption case ever since the establishment of the PRC has so far yet to be extradited from Canada to China.19 In another case, Ewin Launder, a former investment banker, was also extradited from the UK to Hong Kong for trial.20 In the following years, a number of fugitives have been extradited to and from Hong Kong, symbolising that its judicial independence is still honoured by those countries that have signed agreements with the SAR. This evidently demonstrated that in spite of the fact that Hong Kong is part of China now, the legal system still remains distinctive and the common law tradition is well kept. Sharing common legal heritage, it is easier for the common law nations and other nations with the rule of law tradition to sign bilateral agreements in the above fields. Obviously, these bilateral agreements may increase HKSAR’s international image and help maintain Hong Kong as an important non-state international actor.

External Relations of HKSAR Chapter VII of the Basic Law stipulates the external relations of HKSAR. It provides legal basis for Hong Kong to develop relations with other countries and/or entities. Article 151 lays down the bottom line that HKSAR may “on its own, using the name of “Hong Kong, China,” maintain and develop relations and conclude and implement agreements with foreign states and regions and relevant international organizations in the appropriate fields,

19 South China Morning Post, 25 March 1998. 20 Ibid. 21 April 1998.

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including the economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports fields.”21 Hong Kong maintains ten overseas economic and trade offices that cover almost all the world’s financial and trade centres, such as Singapore, New York, Sidney, London, Tokyo, Geneva, Brussels, and Toronto. In addition to the economic and trade offices, Hong Kong Trade Development Council also has over 40 offices worldwide. In many countries these offices serve several functions. First, the offices are a window of Hong Kong to outside of the world; second, the offices serve as a link between Hong Kong and the country/region/organization they are located; third, the offices serve as a protective shelter for the residents of Hong Kong who either live or do business in that area; finally, they serve as liaison office between the SAR government and the governments of the receiving states/regions. The work of these offices has greatly enhanced Hong Kong’s image as an active international actor. Other than the institutional arrangements, HKSAR’s economic and trade strengths have also been widely recognized by the world community. Since the return of sovereignty to China, the HKSAR economy has not always been on the plus side. The Asian financial crisis of 1997–98 hit this prosperous region, too. However, in the past several years, Hong Kong economy has been back on track. Real GDP increased by 8.6%, 7.5%, and 6.8% respectively between 2004 and 2006. In the first quarter of 2007, there has been a 9% increase on a year-on-year basis, according to Hong Kong Trade Development Council’s statistics. 22 The WTO Secretariat’s Trade Policy Review Report made the following positive comments on the SAR’s economy: “Riding on developments of external trade, private consumption, and investment, the HKSAR’s economy is experiencing a balanced and solid expansion, enabling it to rise to various challenges from external environment.” 23 As one of the freest economy, Hong Kong ranks second in Asia both as the source and recipient of FDI.

21 Basic Law of HKSAR, Art. 151. 22 See http://www.tdctrade.com/main/economic.htm. 23 Secretariat of WTO, Trade Policy Review Report, WT/TPR/S/173, 8 November 2006.

Hong Kong in the Eyes of the International Community

Hong Kong is also the world tenth largest exporter of commercial services and eleventh largest trading economy in the world. While nearly half of its total export goes to the Mainland, US, EU, and Japan markets also take a large share. The high quality of service industry, world-class financial and banking centres, top-notch infrastructure, advanced telecommunication networks, and a strategically important location make the SAR an ideal place for foreign investors and corporate headquarters. Another area less known to the general public is that Hong Kong is also a regional centre for international dispute resolution. Ideally located with a legal and cultural tradition that stresses on peaceful solution of disputes, Hong Kong has a large pool of experienced experts specialising in commerce, maritime, shipping and other kinds of arbitration and mediation. The Hong Kong International Arbitration Centre’s figure shows that it is the world fourth largest arbitration tribunal and third largest in terms of the annual number of international arbitration cases received. From 1997 to 2006, in the past ten years, the HKIAC annual cases increased from 218 to 394, a remarkable achievement that puts it among other international arbitration giants like the AAA, CIETAC and ICC.24 Hong Kong is also a world centre of international exhibition and conferences. Since 1 July 1997, HKSAR has held a number of international conferences, over 60 of them inter-governmental international conferences. In December 2006 the most prestigious International Telecommunication Union (ITU) held its Telcom World 2006 in Hong Kong, a recognition of Hong Kong’s leading role in the world telecommunication industry. China has constantly supported the SAR to hold international conferences and exhibitions. This is especially beneficial to China when its own political and economic systems, its infrastructure and its social polarization have all hindered many foreign businesses to invest and do business with the world’s most rapidly growing economy. Hong Kong offers a convenient alternative for Chinese companies and private entrepreneurs to deal with foreign counterparts.

24 See http://www.hkiac.org/HKIAC/HKIAC_English/main.html.

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Perhaps one more fact may illustrate Hong Kong’s special status. According to the HKSAR government’s Protocol Division, currently there are 57 consulates-general and 55 consulates in Hong Kong. It covers practically every corner of the world. In addition, there are five officially recognized bodies, including the EU, the IMF and the UN High Commissioner for Refugees. The desire by those countries and international organizations to set up their consulates and regional offices itself symbolizes Hong Kong’s importance as an international actor. It is also a show of confidence in concept of the “one country, two systems.” Tourism is another field in which Hong Kong has advantages. Favourable government policies, good services, bilingual facilities, food varieties, and many world-class tourist attractions, including a newly opened Disneyland, all make Hong Kong one of the most popular tourist destinations. 2006 Discover Hong Kong Year attracted 25 millions of tourists from North America, Oceania, Europe and other parts of Asia. The Hong Kong Tourism Board has 20 overseas offices promoting the image of Hong Kong as a tourist city. In addition, Hong Kong’s mixed cultures and stable political, economic, and social environments are particularly attractive to visitors for business or pleasure. One final note to describe Hong Kong as an international actor is its external relations in the sports field. In the past ten years, Hong Kong has participated in various games, including the Olympics, in the name of “Hong Kong, China.” These activities, like other activities in which Hong Kong is a party, have greatly enhanced the territory’s positive international image.

Perspectives of HKSAR as an Active Non-Sovereign International Actor In this chapter, the HKSAR as an international actor is analysed in four dimensions: first, to examine its relations with the CPG to see if it has a high degree of autonomy; secondly, to check on HKSAR’s activities in international organizations in terms of its modes of participation, especially to what extent, whenever it is practical, it

Hong Kong in the Eyes of the International Community

may take its own initiatives and make independent decisions; thirdly, to assess HKSAR’s role in international conventions and discuss how it handles the situation where it is a party while China is not; and finally, to look at HKSAR’s external relations in all the fields stipulated in the Basic Law. Despite the ups and downs, especially in the first five years when the CPG intervened on a few important and controversial constitutional matters upon the request of the SAR government, the HKSAR has been a successful example of the “one country, two systems.” Hong Kong residents continue to enjoy a higher degree of freedoms of expression and other fundamental human rights guaranteed by the international conventions, to which Hong Kong is a party. The SAR’s economy has benefited from closer economic and trade cooperation with the Mainland, its roles as a regional financial and banking centre, shipping and transportation hub, and exhibition and conference centre have been greatly enhanced, and its service industry has been growing dramatically. Hong Kong’s judicial independence has not been seriously challenged. Other than 11 national laws, Mainland laws are not applicable in Hong Kong. The good Mainland-SAR relations laid down a solid foundation for the SAR government to expand its external relations and develop its ties with other countries. Hong Kong’s participation in the international organizations is significant for maintaining its image as an international actor. There are basically four modes of HKSAR’s participation in international organizations. It may send its own delegation and/or as an independent member; or join it as an associate member/observer in the name of “Hong Kong, China” when state sovereignty is required. It may also join as part of the Chinese delegation, either as a subgroup or a representative from a SAR governmental branch; or it may ask the Central People’s Government to represent its interests without sending its own representatives. Whatever modes the HKSAR participation in international organizations uses, its image as a non-sovereign international actor has been strengthened in the past decade. Hong Kong plays very important roles in some international organizations, and remains a distinctive member in many others. The HKSAR is a party to many international conventions. Since

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the resumption of sovereignty by China, guaranteed by the Basic Law, the SAR has retained its status in most of the conventions signed during the British era and expanded its participation in quite a number of new international conventions, often with the help of the Chinese government. In cases when the SAR is a party to a convention and China is not, and especially when there are potential tension or even conflict of interests arisen because of this fact, the principle of “one country, two systems” has been strictly implemented and Hong Kong’s rights and obligations have never been challenged by its sovereign. The Basic Law has authorized the SAR government to handle its own external relations in a variety of subjects. Hong Kong’s economic and trade relations with other major economies of the world, for example, have expanded substantially over the past decade. Now as one of the world freest economies and largest trading partners, Hong Kong has been a successful case for other non-state international actors. With the help from the CPG, the SAR may take care of its own economic and trade affairs. During the colonial period, Hong Kong’s role as an international actor was mainly confined in the field of economic and trade areas. The return of sovereignty to China enables Hong Kong to exert its positive influence in other fields as well. Unlike the British Hong Kong government, the SAR government now can develop its own external relations, ranging from international arbitration to summer Olympics, and its achievements have won this Chinese territory a good reputation as a valuable member of the international society. A decade’s practice has made Hong Kong residents confident that their homeland will continue to hold an important position in the world community. It has also made the international community believe that, after China’s resumption of its sovereignty, Hong Kong is still a distinctive member of the world family and has distinguished itself in many areas of international affairs.

8 The Economy Lok Sang HO Lingnan University

Introduction To discuss the Hong Kong economy after the handover, it is fitting to refer first to the Fortune Magazine story in 1995 foretelling “the death of Hong Kong.” For a few years, it did look as if these dire predictions were vindicated. Yet Hong Kong bounced back dramatically after hitting trough during the SARS episode in 2003 at a pace that few analysts believed was possible. Although the government had always found the credit rating companies far too pessimistic, even its officials had always thought that balancing the fiscal budget was out of the question before 2008/2009. Yet the government managed to come up with a real fiscal surplus as early as 2005/2006,1 and by 2006/2007 the fiscal surplus had become rather sizable. Just as the return to black ink came unexpected, so the red ink that began in 1998/99 had come as a surprise. In fiscal year 1997–98, the operational surplus was $86.9 billion. At that time, emotions were high, and Mr Tung Chee-hwa, the first Chief Executive of the SAR government, became over confident because the overall situation appeared superb and the prospects were extremely rosy. Most important of all, he had plenty of fiscal room to manoeuvre, certainly much more than any of the governors during colonial times. At the time, however, I wrote:

1 Actually as early as 2004/2005 already there was a measured fiscal “surplus” when the revenue of a modest $5 billion bond flotation was counted. 327

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“Hong Kong’s fiscal strength can be attributed to strength in the property and stock markets, while Hong Kong’s apparent fiscal restraint is to a certain extent an accounting illusion. If the property market and the stock market should fail to perform, Hong Kong would immediately run into fiscal trouble. To the extent that the property market is considered having run ahead of economic fundamentals, Hong Kong’s fiscal problems cannot be too far away.”2 Unfortunately, Tung was too overjoyed at the handover to take heed. He announced his ambitious plan to raise the homeownership rate to 70% in ten years, and a scheme to turn public rental housing into ownership units called the Tenants Purchase Scheme (TPS) became a key component of his strategy. The TPS was welcomed by all political parties alike and was particularly popular among public housing tenants, but it proved to be a disaster for the homeowner middle class.3 By severing the homeownership ladder, the housing market collapsed through a domino mechanism, bringing the Hong Kong economy to a deep recession that is more appropriately called a small depression in 1998. Yet my analysis then was met with disbelief and even ridicule.4 The SAR government simply ignored my plea to change its misguided housing policy. The rapidity and the extent of the decline of the economy took virtually all observers by surprise. But the economic decline seemed to have vindicated the Fortune Magazine article’s argument. Many

2 Lok Ssang Ho, “Hong Kong in the 21st century,” New Asia (Korea: Yoido Society for New Asia), Vol. 4, No. 2 (1997), p. 90. 3 Lok Sang Ho, “Policy blunder of the century,” South China Morning Post (Analysis), 24 March 1998; Ho Lok-sang, “Largest threat to the economy comes from the largest action of the government,” Ming Pao, 26 March 1998; Lok Sang Ho, “Depressing home truths,” South China Morning Post (Analysis), 18 May 1998; Lok Sang Ho, “Cost of bursting property bubble,” South China Morning Post (Analysis), 15 June 1998. See also Lok Sang Ho, and Robert Ash (eds.), China, Hong Kong, and the World Economy (Hampshire: Palgrave Macmillan, 2006). 4 Tony Miller , “Time for a strong dose of economic realities,” South China Morning Post, 7 June 1998; Reuben Mondejar and William Boardman, “Extend, not curtail, sales of public housing,” South China Morning Post, 7 April 1998.

The Economy

regarded it as symptomatic of more serious structural problems that had been obscured by a superficial economic bloom leading to the handover. To see the general thrust of such lines of thinking, consider Sin-ming Shaw’s article in the Time Magazine, 3 September 2001. There he wrote: “Hong Kong is having trouble competing, not only with a rising China, but against a world built on brains, not asset trading. As the Mainland maintains its rapid growth rates, Hong Kong is barely above water after three years of stagnation. . . . Hong Kong . . . is too expensive, in terms of both wages and real estate, and its government is too big. University graduates have poor skills not only in English but in Chinese, too. Corporations are hiring in the Mainland, and firing in Hong Kong. Premier Zhu Rongji, a former Shanghai mayor, allowed the Mainland property bubble to burst in the mid-’90s without intervention. Now, Shanghai and other Chinese cities are bursting with new businesses in part because both wages and asset prices are but a fraction of Hong Kong’s.” Again, in a report by a team of academics from the Hong Kong University of Science and Technology (HKUST), 5 the following “structural problems” are cited: 1. Over-dependence on land sales and the property sector for revenue. Once the property sector declined, decrease in revenues was inevitable. 2. When Hong Kong manufacturers decided to move their production base to the Chinese hinterland, rather than upgrade their capabilities in Hong Kong, they created an economy over-reliant on the service sector, which now accounts for 86% of Hong Kong’s GDP.

5 Otto C.C. Lin, Kang L. Wang and K.C. Chan, HKUST Forum on the Future Development of Hong Kong: A Report, May–July 2002 (Hong Kong: Hong Kong University of Science and Technology, 2002). http://www.ust.hk/ HKUST_Forum/hkforum_report.pdf.

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3. Industrial policy-making has traditionally been limited in Hong Kong. The lack of coordinated preparation for the high-tech economy, in terms of education, training and manpower, R&D investment, and identification of core industries, has left Hong Kong far behind other economies. 4. The government has abrogated responsibility for nurturing competitiveness because of local politics before and after the handover. The lack of interest in innovation and technology may have led to an over-indulgence of older businesses and not enough encouragement of new and emerging businesses. I cannot agree with any of these views. In particular, I cannot agree with the view that Hong Kong’s economic difficulties from 1997–2003 were structural. Structural problems do not suddenly surface and suddenly disappear. Although there are indeed some structural problems in Hong Kong, the same can be said of most economies. One can easily discover various forms of structural problems in the US, in Japan, in Thailand, in Mainland China, in Taiwan, and so on. It is true that some costs in Hong Kong are very high, particularly land costs, and that this is making life difficult for some businesses. It is true that some university graduates do not have the necessary skills and attitudes to compete effectively in the market. It is true that some businesses were not innovative enough, and that they under-invest in R&D. It is also true that Hong Kong’s fiscal revenues are quite dependent on the land market, and that if the land market goes sour, Hong Kong will most likely run a fiscal deficit. But to say that therefore the government needs a more active industrial policy, to discover new industries and to support the development of high tech industries, to reduce the dependence on services, to clamp down its land costs, and to steer itself away from a dependence on land as a major source of fiscal revenue would be wrong.

To Understand Hong Kong, One Must Understand the Market Unfortunately for Hong Kong, too few people understand the

The Economy

market. By this I mean the strengths and the weaknesses of the free market. We need to have full understanding of the nature of the free market, so we can harness its strengths and overcome its weaknesses. Only when we understand the market can we effectively implement the policy of “positive non-interventionism,” a term coined by the late and former Financial Secretary Haddon-Cave. The term means that when the government chooses not to intervene in the market, it is for a good reason and as a result the non-intervention is positive for the economy. The corollary of the term is that when the government chooses to intervene, there has to be a good reason for it to do so. The first important understanding about the market is that free market prices are always the right prices for resource allocation purposes unless there are technological externalities such as pollution (a negative externality) or public health benefits (a positive externality), excessive concentration of market power, or evidence of herd behaviour. The second important understanding about the market is that free market prices do not always reward people fairly in the sense of rewarding them according to the total contributions that they make to the economy. This means, for example, that a group of people may make much greater contribution to the economy this year than last year and yet they are rewarded less than last year. The classical example is the case of agriculture. If farmers have a fantastic bumper crop, their collective revenue may actually decline dramatically so that each farmer will collect much less than last year. One free market rule is that abundance benefits consumers and hurts producers. On the other hand, if someone owns a special talent, or owns a prime site, he can collect very large earnings when the competition for such talent or site increases. This means that market prices may be wrong prices for distributive purposes. This implies that while we should let the market dictate the prices in order to achieve economic efficiency, we may have to adopt some redistributive measures to achieve fairness and maintain social harmony. The third important understanding about the market is that in the event of technological externalities, economic agents should be

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asked to pay for the negative externalities and should be subsidized for the positive externalities that they cause by their activities. The fourth important understanding is that excessive concentration of market power is detrimental to efficient resource allocation and fair competition. Some form of intervention or regulation may then be appropriate. The fifth important understanding is that herd behaviour may occur, and investors as a group may be excessively exuberant or pessimistic. government intervention may again be appropriate. In the rest of this chapter, I shall go through each of these in turn. But I will summarize my understanding about the major strengths and weaknesses of the Hong Kong economy as follows. Hong Kong’s traditional “positive non-interventionism” has effectively nurtured Hong Kong’s competitiveness. Hong Kong’s entrepreneurs have developed a high sensitivity to the forces of the market, so that they generally respond very rapidly to the turns of the market, and they also have been quite able to capitalize on any emerging opportunities. Thus, for example, many of Hong Kong’s entrepreneurs started investing on the Mainland in the 1980s, well before others did so. They were ready to grasp the opportunities presented to them as the Mainland opened up. Not all of these ventures were successful, of course, and many entrepreneurs had suffered losses due to various reasons, including fraud and unfair treatment by their Mainland partners. But that did not deter them to continue to seek business opportunities. On the whole Hong Kong’s entrepreneurs achieved huge gains in their Mainland ventures. In regard to research and development, Hong Kong’s entrepreneurs have concentrated on those kinds in which they enjoy a comparative advantage. For example, we do not have pharmaceutical companies that spend huge sums developing new drugs, but we have developed very successful items such as the Octopus card and electronic educational toys that rely less on primary research and more on design. Thus Hong Kong is strong in applying modern technology. Moreover, by various measures, such as trade-to-GDP ratios, per capita IDD calls, and internet usage intensity, Hong Kong is one of the most globalized economies in the world. Hong Kong people are about the most travelled in the world, and they have established excellent connections world wide. All this means that Hong Kong’s

The Economy

entrepreneurs are well positioned to take advantage of the opportunities offered by globalization. Hong Kong has some serious weaknesses too, but high cost is not one of them. As a matter of fact, in a free market economy high cost generally reflects the attractiveness of the place. Hong Kong’s entrepreneurs tend to be short-sighted. Short term gains are considered important. Long term gains on the other hand are significantly discounted. The glaring example is the excessive aggressiveness of hotels during the handover, to the extent that travellers feel ripped off. Entrepreneurs appear to be impatient for longer term investments. Some entrepreneurs, particularly in the restaurant business, shirk their responsibilities and systematically exploit their employees, even to the extent of declaring bankruptcy and then opening up another restaurant with another name. More recently the government has laid charges on some law violators. The widening income and wealth gap is a major problem besetting the Hong Kong society and could become a problem for the economy if social stability is at risk.

Common Myths about the Hong Kong Economy The HKUST report is right in pointing out that there are some commonly believed myths about the Hong Kong economy. Such “myths” include the beliefs that Hong Kong operates on a laissez-faire basis, that markets in Hong Kong are all free and competitive, and that Hong Kong has hardly any manufacturing activities. The HKUST team pointed out that “the government has always monopolized land,” that market concentration is a big problem, that in fact the government often interferes with the working the market particularly in regard to land and real estate. Moreover, while the share of GDP due to manufacturing is rather small, as much as 40% of Hong Kong’s GDP is somehow related to manufacturing, and the activities may take the form of services. I agree that Hong Kong is indeed not a purely laissez-faire economy. But then who is? While the government does monopolize the final ownership of land, and there are zoning laws and building

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codes to govern land development, the ownership of the right to use land is quite dispersed, and the government does not interfere with the transactions of properties as long as they are within the law. While market concentration is indeed a problem and there is a clear case to introduce competition law in Hong Kong, the “monopolization of land” by the government would not be a problem if the government releases land against the single criterion of marginal social benefit being larger than marginal social cost. If such land release policy results in land prices that are too high for some businesses to swallow, so be it. In 1994 the government decided that there was speculation and went about interfering with the speculative activities. This was a big departure from the tradition and might have been the main cause behind the overheating of the housing market in 1996–97. Notwithstanding Annex III of the Sino-British Declaration capping annual release of land at 50 hectares, there is no evidence that the colonial government had ever intentionally restricted land supply to boost its coffers. In general, if the land release policy follows the “marginal benefit equals marginal cost rule,” but a business still finds it difficult to survive the high land costs in Hong Kong, the problem would lie with that business, which had better relocate elsewhere, and not with high land costs. Another myth, not mentioned in the HKUST report, is that the most urgent and serious problem besetting the Hong Kong economy today is not to find a new direction for the economy, but to appropriately deal with the widening income disparity, the pervasive poverty in some communities such as Tin Shui Wai and Shum Shui Po, and the sense of injustice this engenders. Hong Kong’s entrepreneurs are quite capable of, and are certainly far better positioned than government bureaucrats or academics, in finding out all the profitable opportunities that can be discovered. We can rely on the market to deal with economic restructuring. All that the government needs to do is to work with the market and to provide the necessary institutional and infrastructural support the market needs. Although there has been significant measures taken by the government to alleviate the plight of the underprivileged, such as the public housing, free education, and subsidized health care, many families have difficulties making ends meet, working and toiling

The Economy

long hours notwithstanding. This has given fresh calls for capping long working hours and for introducing a legal minimum wage in Hong Kong. The SAR government responded with a “wage protection movement” for cleaning workers and security guards, which are well known for their low wages. Announced in the 2006–07 Policy Address in October by the Chief Executive Donald Tsang, the wage protection movement is just a plea to the social conscience of business leaders to offer their cleaning workers and security guards wages no lower than the average wage rate for those occupations as reported in the Quarterly Report of Wage and Payroll Statistics published by the Census and Statistics Department. The government promised to “monitor the effectiveness of the Wage Protection Movement through the LAB (Labour Advisory Board) and conduct a comprehensive review two years after implementation. If the review finds that the Movement has failed to yield satisfactory results, we will set out to prepare for the introduction of legislation for a minimum wage in the cleansing and guarding services sectors.” Given its voluntary participation nature, notwithstanding circulars sent to members by the Hong Kong General Chamber of Commerce stating its support for the movement, participation is miniscule. For June 2006, the average hourly market wage stood at $22.8 for lavatory cleaners and $24.2 for general cleaners. Security guards earned $23.2 to $30.6 per hour on average depending on the pattern of shift required. Such hourly wage works out to about $5,000 to $6,000 per month. Assuming both husband and wife make such wages, raising a family will remain very difficult, and life would be very hard indeed for those who earn lower than such wages. By the end of 2006, according to legislator Leung Yiu Chung, only about 600 enterprises had responded positively to the Wage Protection Movement.6 Notwithstanding the drop in unemployment from a high of 8.7% around June 2003 to below 4.5% by the end of 2006 many people continue to struggle with low incomes. The persistence of low incomes is evident in the fact that as of 2007 taxi drivers are still caught in a vicious competition, with many offering deep

6 See Ming Pao, 27 December 2006.

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discounts for long distance travellers. For this reason when Chief Executive Donald Tsang referred to the Hong Kong economy as in the best shape in 20 years he elicited a lot of criticisms. For example the Editorial of Oriental Daily (3 January 2007) criticized Tsang as “gross exaggeration.” The editorial cited a survey that indicated that only about 30% of the respondents enjoyed an improvement over ten years ago while about 36% indicated a decline in the standard of living. It criticized Tsang as either intending to mislead or “seeing the wood but missing the forest.”

Financialization and Globalization The Chief Executive was right if he was referring to the stock market or to the price that a piece of land on the peak sought in the last auction of the year. The Hang Seng Index surpassed the 20,000 level for the first time ever in 2006 and a 7,353 square metre luxury residential site on Mount Kellett Road at the Peak in Hong Kong fetched HK$1.8 billion (about 231 million US dollars), shattering all records for the per square foot price. 7 It is clear that the rich, particularly the super-rich, have never been so rich before and the excess liquidity is driving up prime asset prices. This phenomenon has even attracted a new term “financialization” and is global. The availability of excess liquidity on the one hand, and the drying up of profitable real investment opportunities in manufacturing and even services on the other hand, means that financial investments often bring higher returns than real investment. Engelbert Stockhammer summarized his paper with this: “Over the past decades, the financial investment of non-financial businesses has been rising, and the accumulation of capital goods has been declining.”8 Hard work and hard investment often bring soft or meager returns. Speculative financial investments and investment in valuable assets of various

7 http://english.cri.cn/3130/2006/12/19/[email protected]. Accessed 1 February 2007. 8 Engelbert Stockhammer, “Financialisation and the slowdown of accumulation,” Cambridge Journal of Economics, Vol. 28, No. 5 (Oxford University Press, September 2004), pp. 719–741.

The Economy

kinds, including works of art, prime property, and antiques, on the other hand, often bring handsome, even huge profits. This is just a simple reflection of the working of supply and demand forces. When too many people seek employment, wages fall. When too many competitors seek opportunities in manufacturing and in services, returns on such new investments fall. The fact is, new profitable investment opportunities among the traditional industries are becoming harder and harder to find. The money that fails to find such profitable investment opportunities often end up chasing after rare assets, whose prices therefore have kept rising. This is not to say that enterprises in the traditional industries do not make big money. They may. Such global companies as Walmart, Ikea, McDonald’s, Nike, Starbucks, and Louis Vuitton are extremely profitable. These companies benefit tremendously from the opportunities made available to them by globalization. Their strengths may be derived from the scale of their operations which give them extremely good bargaining power when it comes to sourcing their supplies, or from the sheer size of the market to which they can sell their goods and services. They may be derived from the cost savings due to global production and sourcing, or from the price premiums that consumers are willing to pay for the use or ownership of “super-brand” products. The sales of Walmart, Ikea, and McDonald’s are targeted at the mass market, and certainly benefited from the low-cost sourcing and the scale of their operations. Those of Nikon, Nike, and Louis Vuitton on the other hand are targeted at the high end market, with their goods selling at premium prices reflecting the economic rent generated by the brand name, which becomes both a status symbol and an icon for quality. Starbucks and Pacific Coffee target at the burgeoning economically comfortable middle class. The key point is that while big money is made by some traditional enterprises which have successfully established themselves, and by a few very innovative enterprises which have been able to harness the opportunities presented by globalization, additional opportunities for productive investment are few and far between. The excess liquidity therefore end up buying financial and real assets and collectibles and boosting their prices, which then further vindicate the wisdom of such investments. Real estate of course is one key destination where such money

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ends up. Over the past ten years investment in real estate has been very profitable globally. For a few years Hong Kong seemed to be the only exception, and those were the years from 1998 to 2003, when prices of homes, offices, as well as retail premises all plummeted in a gigantic way. While many blamed this “bursting of the bubble” to the Asian Financial Crisis, I have offered an alternative explanation, 9 and suggested that the government’s policies were to blame. The government not only dramatically boosted supply with an annual production target 85,000 residential units a year, but also killed demand by the public housing privatization scheme that offered sitting tenants of selected public housing blocks the opportunity of buying their own units at merely 12% of the estimated market price. I argued that such a policy effectively destroyed any interest in the Home Ownership Scheme (HOS) which had served as the “next step” in the home upgrading ladder for public housing tenants since 1978. The TPS made HOS look extremely unattractive, effectively undercutting interest in both new HOS units and old units put on the market by their current owners intending to trade up. Since housing was also an important collateral for small and medium enterprises when they seek loans, the decline in the housing market also affected businesses and really struck a serious blow to the economy. With the economy falling into deep recession in 1998 and hardly recovering at all in 1999, the SAR government’s fiscal position quickly turned into red, exactly as I had predicted in 1997 and 1998.

Market Rents, Economic Rents, and the Conflict between Allocation and Distribution Goals One important aspect of the market that policy analysts and policy

9 Lok Sang Ho and Gary Wai-chung Wong, “Privatization of public housing: did it cause the 1998 recession in Hong Kong?” Contemporary Economic Policy, Vol. 24, No. 2 (April 2006), pp. 262–273. Also see Lok Sang Ho and Gary Wai-chung Wong, “The nexus between housing and the macro economy: the Hong Kong case,” Pacific Economic Review (forthcoming 2008).

The Economy

makers need to understand is that the market both creates “rent” and destroys “rent.” In this context, I am referring to what economists call economic rent. David Ricardo, the classical economist, discovered economic rent and explained that fertile land attracts bidders and so commands a price premium over non-fertile land. Under perfect competition, after paying the price premium for the use of the land, a farmer who works on fertile land will fare just as well as a farmer who works on non-fertile land. Thus competition creates rent and destroys abnormal profits. Today, in Hong Kong we hardly have commercial farming, but Ricardo’s idea still holds for an urban economy. Premises at the most attractive locations always command a price premium over those at other locations. Competition creates rent over scarce factors in exactly the same way as Ricardo depicted in the nineteenth century. The key difference between true economic rent and “quasi-rent” is whether the scarcity of the factor of production in question is enduring or not. If one owns a truly scarce factor that can hardly be duplicated, or when demand for it rises faster than it can be duplicated, the economic rent will increase with competition. Say, we have a prime location that shoppers find extremely convenient. It is evidently very valuable. From the resource allocation point of view we do want the highest bidder to have the use of it, since the highest bidder can generate the most income from it and can therefore afford to pay higher rent than anyone else. This demonstrates the rationality of market rent, no matter how high it goes. Now suppose an entrepreneur comes in with an innovative idea, and is able to double the business volume at this prime location. He is the only one in town who knows how to do this. He out-competes any other bidder and earns a profit that is actually a “rent” due to his innovative idea. Unfortunately, he owns no patent to the idea, and his competitors soon learn the trick too. When the lease comes up for renewal, his “quasi-rent” disappears, because the rent for the premise is bid up. Competition has now destroyed his quasi-rent, and transferred the quasi-rent to the landlord. The landlord who owns the property did not do anything but benefits from the innovative idea of the entrepreneur. The entrepreneur has to come up with yet another idea in order to make any profit again. We can see in this example that when ideas can be copied freely

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hard-working people including the entrepreneurs in the end only make “normal returns.” There is economic growth, but the main benefit actually is captured by the landlord. A paradox about the market is that while the workers and the innovative entrepreneurs generate economic growth, they may not benefit from it. In the earlier example it is the landlord who benefits. But it is also possible that consumers benefit. It is well known that in a bumper crop, farmers’ total income may fall. If the excessive production comes from an innovative farmer whose idea is quickly copied by all other farmers, consumers benefit from the decline in prices, but farmers as a group actually earn much less than otherwise without the innovation. Farmers’ total contribution to society has gone up because total output is higher. But farmers’ total income and hence average income is lowered. More specifically, globalization and improved technology means that there were many more coffee producers in 2000 than say in 1990. The intensifying competition, which is further aggravated by the reduction in the number of buyers globally, has impoverished many coffee farmers. The gross imbalance in bargaining power between buyers and sellers led to very low coffee prices and has given rise to the call for fair trade. Hong Kong of course does not grow coffee. But a similar story is happening here too. Because of the large number of unskilled workers who are available in the market, both in and outside Hong Kong, the wages of unskilled workers have hardly grown at all over the past decade, even though they may be working harder and their productivity is rising. For these reasons, I have long argued that we need a more aggressive redistributive policy in Hong Kong. I would not interfere with prices, because the prices are effective in promoting efficient resource allocation. But market prices may be unfair. The redistribution that I am talking about is not a “welfare,” nor is it a redistribution from those who are productive and earn more to those who are less productive and earn less. The redistribution is necessary because the market mechanism does not reward fairly those who are the most productive and who actually contribute to the economic progress.

The Economy

Financial Centre, Pollution, and the World City The SAR government identified four “pillar industries” of Hong Kong. These are Finance, Trade and Logistics, Tourism, and Specialized Business and Supporting Services. As a small open economy with little natural resources except its harbour and geographic location these “pillar industries” are indeed all very important to Hong Kong. In 2005, total exports inclusive of services were almost double the size of the GDP, while total imports exceeded 185% of the GDP, Hong Kong obviously depends on trading to survive. But finance is unique in that while only 5.5% of the workforce worked in the industry in 2002, it accounted for 12.2% of the GDP. The relative value added per worker is much lower for any of the three other pillar industries. In trade and logistics, the share of employment in the economy was 24.1% but the share of the GDP was 26.5%. As it happens, the importance of tourism appears to have been exaggerated considerably in the media. The share of employment was only 3.9% while the share of the GDP was even lower, at 3.0%. For this reason, the claim that CEPA and individualized travel from the Mainland, which was officially launched in 2003, jumpstarted the economy, has little credibility. Regardless of the talk about pillar industries, Hong Kong is today an important trading hub and a major international financial centre, and Hong Kong is likely to remain so in the years to come.10 In a recent book China, Hong Kong, and the World Economy, Jao concluded: “as long as Hong Kong distinguishes itself from other Chinese cities in respect of currency convertibility, capital mobility, economic freedom, rule of law, and the quality of prudential supervision and corporate governance, it will remain China’s main OFC (offshore financial centre) . . .. From Hong Kong’s own point

10 This is indeed how the Chief Executive pictured Hong Kong in his latest assessment on 15 January 2007, following Economic Summit on China’s 11th Five-Year Plan and Development of Hong Kong. He said: “Under the ‘One Country, Two Systems’ principle, the country has highlighted Hong Kong’s role and the direction of our economic development in the 11th Five-Year Plan, that is to develop financial, logistics, tourism and IT industries and to preserve our status as an international financial, trade and shipping centre.”

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of view, the territory remains an integrated finical centre, and an IFC (international financial centre) in its own right.”11 With a total market capitalization of over HK$13.33 trillion (US$1.71 trillion) as of December 2006, the Hong Kong Stock Exchange ranks seventh in the world by market capitalization of listed companies. This ranking is expected to further move up over the next few years, with more and more Mainland companies seeking listing in Hong Kong. I am not interested in the ranking of Hong Kong in the world in this or in that, but in Hong Kong doing all it can and all it should to capitalize on the opportunities that are available. In this regard, I am particularly keen to point to the importance of each and every distinction that Jao alluded to Hong Kong: currency convertibility, capital mobility, economic freedom, rule of law, and the quality of prudential supervision, as well as corporate governance. Absent any of these factors, Hong Kong as an international financial centre would be gone. But I do not think that Hong Kong needs to be the only city in China with these factors. Many people are worried that should the Renminbi (RMB) become fully convertible Hong Kong as a financial centre could be marginalized given the lower costs in China. Such worries are misplaced. In practice financial centres are not like manufacturing bases in that for financial centres costs seldom hold the key to success. What counts are investors’ confidence about effective and appropriate regulations, the rule of law, and efficiency. High costs are often the result of the success of a city as a financial centre. On the other hand low costs have never been an important factor behind any city’s emerging as a financial centre. I cannot subscribe to the notion that the government needs to find new directions for the Hong Kong economy. As long as we have free markets, the economy will adjust, and how to achieve the necessary “economic restructuring” to keep up with the times will never be a problem that policy makers need to worry about. Yes we will need to worry about the problems that restructuring may bring, but if we have an adequate and well-functioning social safety net, those who suffer temporarily will have their suffering relieved and it

11 Lok Sang Ho and Robert Ash (eds.), China, Hong Kong, and the World Economy (Hampshire: Palgrave Macmillan, 2006).

The Economy

will be bearable. But we will not need to pre-empt our entrepreneurs who are in the market place and who are so sensitized to the market that you can be sure they will make the necessary adjustments. Yes we will need to worry about improving our education and vocational training, but that is an ongoing thing. We will need to nurture a new generation of entrepreneurs and workers who have the stamina and the preparation to face challenges, but why would policy makers ever need to discover new “sunrise industries”? Sadly for Hong Kong, many commentators continue to ask such questions, putting pressures on the government to pre-empt the market. That would simply be wrong. In retrospect, none of the “centres” that Mr Tung Chee-hwa envisaged for Hong Kong ever came to fruition. On the other hand, Hong Kong is developing in its own way, driven by market forces, to become a leading international financial centre. Of course there are circumstances driving these developments, but they are not by the design of the SAR government. China is fast taking off, and many private enterprises are seeking capital to fund their operations. Many state-owned enterprises are being reformed and transformed. Many are becoming very profitable. Hong Kong has very nice traditions in upholding the rule of law and is commanding a lot of confidence from investors. Far more important than infrastructures, institutions and culture and business practices count and weigh heavily in investors’ minds, when it comes to financial services. Hong Kong has clear natural advantages and need to build on these advantages to push itself forward. The RMB can become completely convertible overnight, but business practices and culture can never change over night. What Hong Kong really needs to do is to make itself into a liveable city, a fair city, a city with social harmony and respect and tolerance for differences. Hong Kong has been suffering from serious pollution, particularly air pollution, and in order to attract the best talents to work for Hong Kong, we really have to make our city clean and liveable. It is well known that educated people and financially well-off people are very much concerned health and the health and the education of their children. If we have serious pollution, if our education system is lousy, or if we have poor healthcare, we will never be able to attract the talents we need to make Hong Kong into a top financial centre.

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Thus, when on 27 November 2006, the Chief Executive signed the Clean Air Charter on behalf of the HKSAR government, he was not making an economic sacrifice. He was, rather, investing in Hong Kong’s future. It is time we count the cost to air quality as an economic cost. The Charter was initiated by the business sector in support of the government’s appeal to improve air quality in Hong Kong. Signatories of the Charter are committed to carrying out the following measures at their daily operational level to help reduce emissions: (a) operating by recognized world class standard; (b) using continuous emissions monitors; (c) publishing information on energy and fuel use; (d) adopting energy-efficient measures; (e) taking appropriate measures during days of high pollution; and (f) sharing air quality expertise with others. The Charter is a voluntary act on the part of the business sector and should certainly be applauded. It is gratifying to see that there are businessmen who understand that air pollution is bad for business, and particularly bad for a financial centre. But voluntary acts are not enough. If a business costs others heavily but benefits privately by polluting activities there is a good possibility that it would pollute. Thus, regulations, pollution taxes, or emission trading may be necessary. It is nice to see that the SAR government is using a multi-thronged approach in dealing with pollution. The concept of emission trading is particularly interesting, as it directly deals with cross border pollution, but the scheme as proposed by the HKSAR may not be fair to Hong Kong, since it requires both power companies on the Mainland as well as Hong Kong’s power companies to curtail their current emission levels by the same percentage. Given that Hong Kong’s power companies have already achieved a much lower emission level than those on the Mainland, it will be much more costly for Hong Kong’s power companies to reduce emission levels by the same percentage than Mainland’s power companies. They are expected therefore to buy emission quotas from the Mainland companies, effectively subsidizing the emission reduction efforts of the latter, and this will end up being

The Economy

paid for by Hong Kong’s consumers, who will certainly have to pay higher electricity bills.

Competition Policy The SAR government is well aware of the importance of “free and fair competition” in promoting economic efficiency and a healthy market economy. However, to date the government has followed only a “sectoral approach,” and refused to enact a comprehensive competition law. In 2000 and 2001, the government has passed laws prohibiting certain types of anti-competition behaviour in the telecommunications and the broadcasting industries. According to the consultation document of 2006, for the rest of the economy, the Competition Policy Advisory Group (COMPAG), which was established in December 1997 and which was under the chairmanship of the Financial Secretary, would look at complaints of anti-competitive conduct and to investigate any reports of possible abuses of dominance. At the same time, the Consumer Council was asked to monitor and review trade practices and sectors prone to unfair trading practices. The rationale behind this sectoral approach is not clear at all. What distinguish telecommunications and broadcasting to warrant special treatment? It seems that the reverse approach would make better sense. This reverse approach would apply the comprehensive framework on all sectors except the few where special consideration warranted the exceptional treatment. The burden of proof for justifying the exceptions must further be placed on the industries that seek the exceptional status. In any case without a legal framework and the authority to impose sanctions, it is not clear what is the point of the investigations in the event of reports of possible abuses of dominance or unfair trading practices. To put it plainly, neither COMPAG nor the Consumer Council could do anything, regardless of the evidence obtained in such investigations. Following the same logic, we need to raise a simple question. When practically all OECD countries as well as Singapore have already introduced competition laws of one sort or another, one

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needs to ask what distinguishes Hong Kong, a mature economy quite comparable to these economies, to warrant a different approach to ensuring that competition is free and fair? The Consultation Document says that Hong Kong is a “free and open economy” and that there are no significant entry barriers to most industries. These assertions are however quite misleading. In 2000 Carrefour, a major retailer from Europe which successfully took root on the Mainland, was forced out of the market in September 2000 after just four years in Hong Kong, citing difficulties in securing suitable premises and reasonable rent, as well as pressures from some 22 companies not to undercut prices. The Consumer Council investigation concluded that pressure was applied on Carrefour to keep price levels at the agreed price, or they would withdraw their goods for sale.12 Thus, barriers to entry in practice, though informal, are real, and they certainly had rendered competition far less effective than otherwise. Paradoxically, the absence of government intervention apparently contributed to a “free economy” but in practice hurt the openness of various sectors to competition, Hong Kong remaining a truly “open economy” in the macro sense notwithstanding. Related to competition is the subject of regulations of public utilities, particularly the power companies, which have been enjoying profit protection under the Scheme of Control. There are two power companies in Hong Kong, the China Light and Power Ltd., and Hong Kong Electric Company. The former was founded in 1901 and supplied electricity to Kowloon and the New Territories except Lamma Island. Hong Kong Electric Company Ltd. was established in 1889 and serves Hong Kong Island and Lamma Island. They operate under the Scheme of Control which would expire in 2008 and the new terms are currently under negotiation. The existing Scheme allows both companies to reap a profit at 13.5% of the total value of the average net fixed assets per year plus 1.5% of the shareholders’ investments made after 30 September 1978 for acquiring fixed assets. When profits exceed such permitted rates of return, the excess would go into a development fund. When profits

12 South China Morning Post, 1 November 2005.

The Economy

fall short, the companies are permitted to raise charges. The current version of Scheme of Control was established in 1992, at a time when inflation was high and the rates of return looked more reasonable. In today’s low inflation environment, it is generally believed that the permitted rates of profit are too high. Moreover, many commentators have pointed to the distortion of incentives since the permitted profit rates are based on average net fixed assets. The terms clearly would encourage excessive investment in assets and may well have been behind the gross over-estimation of power consumption growth in the past years. The rationale behind the Scheme of Control is to provide incentives for the power companies to invest and to serve Hong Kong’s best interest. But boosting the size of net assets will also allow the companies to reap handsome profit. As a matter of fact, 13.5% guaranteed profit is very high, if one considers that there is hardly any risk. On the other hand, if the profit was generated through efficient and innovative productive activities, we should not cap it and should allow the company to earn as much as it can. In the case of electricity generation, given the monopoly position of the power companies, higher profit can be achieved simply by raising charges. That is why any Scheme of Control would not make much sense. Instead of renewing the Scheme of Control when it expires in 2008, it is far better regulating electricity charges to make them in line with global levels, while putting up the right of operation for open bidding. We can spell out the terms of operation clearly, and require that the successful bidder pay the original operator for the undepreciated value of the original investment. Of course China Light and Power as well as Hong Kong Electric are both invited to bid. If they win, they would simply be “paying themselves” to acquire the undepreciated assets. We should also allow the possibility that either company takes over the operation of the other company too. If prices are regulated in a transparent way, bidders will take full account of the conditions and their bids will reflect such restrictions. We can also get the help of independent appraisers to assess the values of the undepreciated assets of the companies, which can be announced before the bidding day. Once this is done, we can let the companies make as much profit as they can without regulation.

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Speculation, Herd Behaviour, and the Incursion into the Stock Market Speculation is a scary word for policy makers. In 1994, the Hong Kong government introduced rather drastic measures to curb speculation in the housing market, which then rapidly cooled off. But it then went back up in no less than a year, and in 1996 and 1997 housing prices went through the roof. Today it is widely held that speculation caused the housing bubble, which then burst in 1998 plunging the economy into a deep recession. In the Report of the Task Force on Land Supply and Property Prices released in June 1994, the government’s Planning, Environment and Lands Branch referred to the high vacancy rate for large developments as prima facie evidence of hoarding. Various measures were implemented to increase the cost of speculation and to reduce the profitability of speculation, such as confiscating 5% of the purchase price held as deposit if the purchaser fails to sign the formal sale and purchase agreement or if he enters into a Cancellation Agreement with the developer, and disallowing resale before the issuance of the certificate of compliance or the consent to assign. Despite the measures, housing prices surged again in the first quarter of 1996, and continued to rise through October 1997, ignoring the Asian Financial Crisis for a moment after it broke out in July. It was against this background that Hong Kong people welcomed the announcement of Tung Chee-hwa to increase housing supply to no less than 85,000 units a year. It was widely believed that the surge in housing price before 1997 reflected shortage, and that the shortage was artificially propagated by the provision in Annex III of the Sino-British Joint Declaration of 1984 stipulating that the government should not grant more than 50 hectares of land (excluding land to be granted to the Hong Kong Housing Authority for public rental housing) without the approval of the Land Commission comprising of equal members from the British and the Chinese sides. There is little doubt that speculative pressures were very much behind the run-up in housing prices prior to 1997, as many indicators do show that prices were rising out of the range

The Economy

that would be expected from forecasts based on economic fundamentals. However, to conclude that there is a gross imbalance between supply and demand would be wrong. As pointed out in Ho, while the number of households did exceed the number of dwelling units in the early 1980s, this had been reversed by 1990, and all through 1997 the number of housing units actually exceeded the number of dwelling units.13 There was therefore no physical shortage. Much of the surge in housing prices had reflected a rise in people’s wealth, and this is further multiplied by the effect of savings pouring into the housing market from among the public housing tenants who had enjoyed low rent but rising incomes. The latter effect was especially magnified when the government introduced in April 1987 a policy of making richer tenants pay higher rent. Richer tenants felt compelled to buy a private flat. Thus from the first day, the medicine of increasing supply was wrong for the illness, if there was an illness. It is well known that speculative demand can surge and disappear overnight. It is just not realistic to even attempt to get even with speculative demand, because supply produced cannot disappear overnight as demand can. There will be an overhang of excess supply whenever speculative demand subsides. Thus, we should attempt to produce supply to match society’s long term needs, and simply let prices move up and down in the short run. If prices are momentarily too high and have to fall back, those who pay too high a price will suffer a loss. If prices are momentarily too low and have to rise, those who have the insight to the real situation will gain. This will give speculators as well as homebuyers the incentives to be alert. Unfortunately the SAR government read the signs wrong, and went about trying to boost supply even in 1998, when demand had actually shrunk tremendously both as a result of the Asian Financial Crisis and the Tenants Purchase Scheme. So the dramatic collapse of housing prices and the deep recession came as no surprise.14

13 Lok Sang Ho, “Hong Kong’s economic crisis and misguided housing policy,” HKIAPS Occasional Paper, Chinese University of Hong Kong (2003). 14 Lok Sang Ho, “Credit squeeze is wrong,” South China Morning Post (Analysis), 14 January 1998.

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The Hong Kong Special Administrative Region in Its First Decade

With the economy bleeding, the hungry sharks lurking in the background eventually made a strike at Hong Kong. By a “double play” strategy, hedge funds made huge profits selling short the Hang Seng Index Futures and driving interest rates up at the same time putting pressures on the Hong Kong dollar. This strategy, together with a narrative of the counter-attack by the government, is explained in the official HKSAR government website. “Severe and sustained market disorder prompted the government to launch a defensive incursion into the stock and futures markets in mid-August. The government spent a total of HK$118 billion (US$15.1 billion) buying the 33 constituent stocks of the Hang Seng Index. During the defence, turnover reached a record HK$79 billion (US$10.1 billion) on 28 August, the last day of trading for the month. “Although controversial, the actions preserved the integrity of the financial markets and prevented a general loss of confidence in Hong Kong’s economy. The government’s actions were generally well received by both the domestic and international community. Opinion within the investment community was divided between those who believed it was the right thing to do under such contrived and unusual circumstances and those who believed market forces should have been given free reign and that the Hong Kong SAR government had broken a cardinal rule by intervening in the stock market.”15 The “incursion” was very successful. Psychologically it immediately reversed the herd behaviour of the public. The Hang Seng Index rebounded and continued to surge soon after that. The profits from the action actually brought a handsome profit. The Exchange Fund Investment Ltd. was set up in October 1998 at arm’s length from the government and the Hong Kong Monetary Authority was entrusted with the task of managing the share

15 See http://www.info.gov.hk/info/sar2/economy.htm.

The Economy

portfolio, with the long-term aim of reducing the government’s Hong Kong equity holdings to an amount equal to about 5% of the total assets of the HKSAR government’s Exchange Fund. The government’s Hong Kong equity share portfolio was valued at HK$190 billion (US$22.8 billion) at the end of April 1999. The Tracker Fund of Hong Kong (TraHK) was launched in November 1999 as the first step in the government’s disposal programme with an initial public offer worth HK$33.3 billion (approximately US$ 4.3 billion). Since the IPO, approximately HK$ 140.4 billion (by 15 October 2002) in Hang Seng Index constituent stocks has been returned to the market.16 Just as the government had “incurred” successfully into the stock market, in the end reaping a handsome profit and saving the stock market from even greater losses and ultimately reviving confidence in the Hong Kong economy, so it really should have considered a similar move in the face of gross excessive supply in the housing market. Such moves of course would attract severe criticisms from some liberal economists. Indeed I recall that Steven Cheung, the noted liberal economist, had described the government’s incursion into the stock market as silly and like “dumping bags of sand to fill the ocean.” But there are times when asset prices grossly deviate from underlying values based on economic fundamentals, such as when there is herd behaviour aggravating a loss of confidence or when there is a gross oversupply. One might think that we should let prices fall to “eliminate” the oversupply, but this thinking is extremely dangerous in the case of the housing market. Housing is such an important asset that declines in market prices due to a gross oversupply could damage the economy severely. Moreover, a gross oversupply of housing can never be eliminated by a decline in prices, and could lead to Hong Kong’s homeowners being bankrupted and their homes being taken up by bargainhunters from overseas. Withholding part of the excess supply from the market and releasing it slowly, on the other hand, is a responsible response in an over-supply situation, makes eminent

16 See http://www.trahk.com.hk/eng/homepage.html.

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economic sense, and would have helped bring about the real economic recovery much earlier.

Does High Cost Erode Hong Kong’s Competitiveness and Marginalize the Hong Kong Economy? I am not in favour of a “high land price policy” nor a “low land price policy.” In a well functioning market, with no impediments or artificial boosts in supplies, prices should seek the equilibrium market levels. The SAR government should not prejudge if housing prices are too high or too low. However, it is very important that supply and demand balance, and that means the government should provide as much as, and only as much land as can be absorbed by the market – provided that the value of the new development is larger than the social cost of the new development (“marginal social cost”). There are two ways of counting the marginal social cost of the land supplied. First is the social cost of making a plot of land usable and available. This could entail reclamation, providing access roads, providing incidental urban services, etc. Second is the opportunity cost of making a plot of land available to developers now rather than in the future. If a plot of land is released now, it may no longer be available in the future. If this “marginal rule” is followed, I would like land price be dictated by the market forces. If the economy is very attractive to investors and buyers are cash-rich, it is entirely possible that the resulting land price still appear to be expensive in comparison with land prices elsewhere. This may only reflect the premium that investors are prepared to pay for Hong Kong’s unique characters: low profit and income taxes, political and social stability, a vibrant economy, excellent prospects, etc. If so, then the high land prices in Hong Kong only testify to Hong Kong’s attractiveness and competitiveness. There will be nothing to worry about. Even though some industries may find it hard to survive in Hong Kong’s high cost environment, still it does not matter, because their departure only makes way for other more competitive industries. Of course one may still ask: why not provide

The Economy

more land at lower cost so these less profitable industries can still find a place in Hong Kong. As explained in the foregoing paragraph, this depends on the marginal benefit of providing the land versus the marginal cost of doing so. Only if it can be demonstrated that the marginal benefit is higher than the marginal cost should the additional land be provided for development purposes. Worried if Hong Kong’s competitiveness was being hurt by developers’ greed, Sin-ming Shaw wrote: “Local developers sit on $60 billion worth of land, enough to meet private housing needs for the next 10 years. These developers are in fact Hong Kong’s largest speculative hoarders. Boosting property values may provide temporary relief, but it raises the hurdle of investment returns, deterring business expansions and start-ups. Given that much land is held by a cartel of property companies and not subject to market forces, the government should not allow the developers to dictate when they apply for rezoning or when they build. Initially, lower real-estate prices will arouse ire among homeowners and tycoons, but the alternative – becoming an uncompetitive, overpriced backwater – is even more frightening. Falling prices will quickly stabilize. The last five years of stagnation plainly show that short-term pain is far better than long-term torture.”17 And again: “An alternative would be to allow asset prices and wages to deflate until the market finds its own equilibrium. But the government fears a negative effect on Hong Kong’s corporations, especially its banks, which rely heavily on real-estate revenue. It is also afraid of massive defaults, because numerous homeowners are believed to be suffering from ‘negative equity.’ These misguided concerns have frozen the debate: no one seems to care that lower property prices would attract new home buyers

17 Time Asia, 8 July 2002.

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The Hong Kong Special Administrative Region in Its First Decade

and businesses, creating employment. Without bringing costs down, however, Hong Kong doesn’t have much of a future.”18 The implication of Shaw’s argument is that the developers in Hong Kong had withheld supply to produce a shortage and that in turn had kept housing prices rising through 1997. But to follow through the argument one has to present the evidence that indeed there was a physical shortage of housing. No one has yet provided the evidence for such a shortage. Did we have a low and falling vacancy rate? Did the number of households exceed the number of dwelling units? Statistically, we have seen, during the pre-1997 period, that the number of dwelling units had continued to exceed the number of households, and that space per person in each dwelling unit had been rising. Is there any evidence that the supply of private housing was stunted before 1997? The annual supply ranged from 20,000 units a year to 34,000 units a year between 1987 to 1993. Although supply was a bit low in 1994, it went back up to 41,000 units in 1995, obviously responding to the higher prices leading to 1994. But the policy to clamp down on speculation in 1994 actually led to a decline in supply, which fell to 10,000 units in 1997 and 16,000 units in 1998. It appears that developers had never artificially withheld supplies. They have actually worked very hard converting agricultural land and industrial land to residential and commercial uses. They have also tried to produce as many units as they are allowed under the zoning and town planning rules. If anything, they may be accused of developing too fast. Many citizens, for example, have criticized the government for excessive reclamation of the harbour, and they find the International Financial Centre II, whose 88 storey office tower rising almost right in the centre of the harbour, particularly distasteful. Private housing supply shot up to 54,000 units a year in 2001, following the implementation of the “85,000 units a year” policy. Instead of “quickly stabilizing,” the prices fell through the floor, bankrupting tens of thousand of families, boosting the suicide rates and hurting business sentiments (Table 1). Only after Michael Suen,

18 Time Asia, 3 September 2001.

The Economy Table 1 Statistics on Compulsory Winding-up and Bankruptcy for the Period 1996 to 11–2006 Bankruptcy

Year

Petitions presented

Compulsory Winding-up

Receiving/ Bankruptcy Orders made (Note 1)

Petitions presented

Winding-up Orders made

1996

780

543

742

557

1997

829

639

658

503

1998

1,362

893

946

723

1999

3,876

3,071

1,161

795

2000

5,487

4,606

1,241

910

2001

13,186

9,151

1,401

1,066

2002

26,922

25,328

1,430

1,292

2003

22,092

24,922

1,451

1,248

2004

12,489

13,593

1,306

1,147

2005

9,933

9,810

955

849

2006 through November

9,923

9,671

633

502

Note 1: Receiving orders were made upon bankruptcy petitions presented before 1 April 1998 and bankruptcy orders, after that date. Note 2: The number of orders made in a particular month is affected by the number of weekly hearings (usually on every Wednesday and, if necessary, Tuesday commencing July 1999) in the month when cases are heard in Court. Cases are not heard in public holidays. Note 3: New statutory provisions came into operation on 1 April 1998. Note 4: Petitioners appear to be getting used to new provisions for bankruptcy petitions effective from 1 April 1998. Source: Official Receiver’s Office

Secretary of Housing, Planning, and Lands, announced a nine-point strategy, in November 2002, that includes supply management and halting the Tenants Purchase Scheme after Phase 6A and 6B in 2003, that the groundwork for an economic recovery of the economy was laid. If it had not been for the outbreak of SARS that lasted through the middle of 2003, the economy probably would have recovered

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The Hong Kong Special Administrative Region in Its First Decade

much sooner. But as it happened, most people mistakenly credited the Closer Economic Partnership Arrangements (CEPA) and individualized travel – both of which were announced in the summer of 2003 – as the factors that jumpstarted the economy back to a growth path. In point of fact, CEPA saved Hong Kong exporters a total of 66.4 million yuan in the first year, when some US$12 billion dollars of Hong Kong exports enjoyed zero tariff access to the China market.19 As to the benefits from individualized travel, according to the Tourism Bureau, 21.8 million visitors came to Hong Kong in 2004, spending a total of 91.8 billion dollars, up almost 20% from the previous year. Of this spending, HK$69.6 billion represents consumption spending in Hong Kong. Mainland visitors accounted for about half of this, i.e., 38.6 billion.20 When it is realized that increase represents only a fraction of this and that only a fraction of any spending is value added in Hong Kong, such figures are simply too miniscule to account for the strong recovery of Hong Kong in 2004.

China’s Accession to WTO, RMB Reform and US Dollar Movements Since 1999, when the US-China WTO agreements were concluded, China’s share in world trade has exploded, from some 4% then to almost 10% now. Surging exports boosted the current account surplus, while continued inflow of capital maintained a surplus in the capital account as well. China’s foreign exchange reserves had kept rising, and pressures for the Renminbi (RMB) to appreciate continued to build up. On 21 July 2005, the People’s Bank finally decided to shift gear. The de facto link with the US dollar since late 1997 was abandoned, and the RMB was immediately devalued by 2.1%. According to the official statement, “China will reform the exchange rate regime by moving into a managed floating exchange

19 Ming Pao, 25 January 2005. 20 Ibid., 10 March 2005.

The Economy

rate regime based on market supply and demand with reference to a basket of currencies. RMB will no longer be pegged to the US dollar and the RMB exchange rate regime will be improved with greater flexibility.” Since then the RMB kept appreciating, though occasionally with some hiccups, suggesting that there was no basket link in a substantive sense. In early January 2007 the RMB yuan was actually valued higher than the Hong Kong dollar for the first time since 1994, when China merged the official exchange rate with the “Foreign Exchange Adjustment Centre” rate. The Hong Kong Monetary Authority, however, maintained that regardless of the movement of the RMB in the foreign exchange market, the Hong Kong dollar will not change its link with the US dollar. The rise of the Yuan against the Hong Kong dollar will put pressures on Hong Kong’s inflation rate but otherwise will benefit the economy by boosting its exports to the Mainland and tourism earnings. Investment from Mainlanders in Hong Kong is also expected to increase. Together with the more recent weaknesses in the US dollar, the Hong Kong economy is expected to continue to benefit from strong external demand and investment inflow. The outlook for the Hong Kong economy appears bright. It is however interesting to compare the economic growth of Hong Kong in 2000 with the more recent economic recovery since 2003. There is little doubt that CEPA as announced in 2003 and China’s accession to WTO in November 2001 benefited Hong Kong’s external trade. Hong Kong’s domestic exports, which had been falling steadily since 1992, started rising again in 2004, although there was a significant decline in the second half of 2006. (Table 2) Hong Kong’s total trade with the Mainland recorded 4 consecutive years of double digit growth since 2003. GDP grew by10% in 2000 but only 8.6% in 2004. The economic growth in 2000 was driven by very strong total exports, which rose 18%, as compared with only 16% in 2004. But strong growth in 2000 notwithstanding, housing prices had continued to decline, while the unemployment rate dipped only a while and then rose to new highs. On the other hand, the economic growth since 2003 has staying power. Housing prices rebounded, while the unemployment rate fell from a peak of 8.7% in the second quarter of 2003 to 4.5% by the

357

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

2003

2004

Month

Year

9,575.5 7,102.7 9,284.1 8,414.3 9,877.6 10,289.0 12,249.7 11,791.4 11,082.9 10,791.3 9,793.5 11,536.1 8,255.9 7,849.7 9,703.2 8,969.0 9,918.6 11,082.8 11,746.4 12,091.6 11,550.5 12,300.9 11,133.7 11,449.8

Domestic Exports

–6.8 –17.2 –8.4 –16.9 –7.8 –10.4 –7.1 –2.4 –6.9 –5.8 –3.0 +3.6 –13.8 +10.5 +4.5 +6.6 +0.4 +7.7 –4.1 +2.5 +4.2 +14.0 +13.7 –0.7

Year–on–year % Change 125,452.3 98,044.8 133,803.1 125,731.7 133,144.0 132,054.2 145,324.6 139,379.4 146,434.8 153,961.3 143,980.4 145,177.1 127,055.8 126,944.7 153,214.9 151,010.1 155,512.7 157,189.2 171,879.5 170,653.4 168,113.4 178,930.7 168,525.4 165,473.6

Re–exports +30.3 +13.1 +17.5 +11.3 +15.6 +16.5 +9.1 +7.9 +7.6 +10.7 +10.0 +16.9 +1.3 +29.5 +14.5 +20.1 +16.8 +19.0 +18.3 +22.4 +14.8 +16.2 +17.0 +14.0

135,027.7 105,147.6 143,087.3 134,146.0 143,021.7 142,343.2 157,574.4 151,170.7 157,517.7 164,752.6 153,773.9 156,713.2 135,311.7 134,794.4 162,918.2 159,979.1 165,431.4 168,272.0 183,625.9 182,745.0 179,663.9 191,231.6 179,659.0 176,923.4

+26.7 +10.4 +15.4 +9.0 +13.6 +14.0 +7.6 +7.0 +6.4 +9.4 +9.0 +15.8 +0.2 +28.2 +13.9 +19.3 +15.7 +18.2 +16.5 +20.9 +14.1 +16.1 +16.8 +12.9

Year–on–year Year–on–year % Change Total Exports % Change 133,224.9 115,984.1 154,211.6 141,302.1 145,795.7 146,368.6 159,883.0 152,917.9 162,163.8 168,970.6 161,762.2 168,167.6 134,472.5 154,645.8 177,986.8 175,993.1 174,786.6 177,809.6 189,261.3 185,960.1 186,158.8 191,478.0 179,906.2 185,843.6

Imports

Table 2: Hong Kong’s External Merchandise Trade Figures from January 2003 to November 2006 (HK$ Million)

+21.4 +18.3 +14.6 +8.4 +9.4 +11.5 +5.6 +6.0 +7.3 +10.2 +13.8 +17.9 +0.9 +33.3 +15.4 +24.6 +19.9 +21.5 +18.4 +21.6 +14.8 +13.3 +11.2 +10.5

Year–on–year % Change

358 The Hong Kong Special Administrative Region in Its First Decade

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11

2005

9,742.3 6,250.2 8,034.0 8,046.7 9,865.3 10,126.2 11,801.1 14,139.1 14,350.7 15,697.3 14,025.2 13,992.1 13,131.1 9,523.2 10,669.4 10,265.3 11,541.3 11,793.4 13,949.2 12,950.5 10,949.5 11,453.6 9,932.6

Domestic Exports

+18.0 –20.4 –17.2 –10.3 –0.5 –8.6 +0.5 +16.9 +24.2 +27.6 +26.0 +22.2 +34.8 +52.4 +32.8 +27.6 +17.0 +16.5 +18.2 –8.4 –23.7 –27.0 –29.2

Year–on–year % Change 172,705.7 121,276.6 160,647.1 164,441.9 183,508.6 179,353.0 186,635.2 191,798.2 195,814.3 197,806.4 186,325.4 174,778.5 176,888.8 144,094.5 182,795.7 178,518.8 181,705.4 190,383.7 205,621.8 213,293.9 209,140.2 218,932.2 218,943.6

Re–exports +35.9 –4.5 +4.9 +8.9 +18.0 +14.1 +8.6 +12.4 +16.5 +10.5 +10.6 +5.6 +2.4 +18.8 +13.8 +8.6 –1.0 +6.2 +10.2 +11.2 +6.8 +10.7 +17.5

182,448.0 127,526.8 168,681.1 172,488.6 193,373.9 189,479.2 198,436.3 205,937.3 210,165.1 213,503.7 200,350.6 188,770.6 190,019.9 153,617.7 193,465.2 188,784.2 193,246.7 202,177.1 219,571.0 226,244.4 220,089.7 230,385.8 228,876.2

+34.8 –5.4 +3.5 +7.8 +16.9 +12.6 +8.1 +12.7 +17.0 +11.6 +11.5 +6.7 +4.2 +20.5 +14.7 +9.4 –0.1 +6.7 +10.7 +9.9 +4.7 +7.9 +14.2

Year–on–year Year–on–year % Change Total Exports % Change 184,492.1 137,729.0 182,490.5 182,710.5 202,685.5 196,538.0 201,646.7 209,869.9 214,350.1 210,027.8 204,372.0 205,627.9 185,652.5 176,650.0 211,701.0 203,244.2 207,816.2 215,985.2 224,725.3 235,636.8 231,838.9 233,494.2 237,750.4

Imports

Note: Value of domestic exports and value of re–exports may not add up to the value of total exports due to rounding

2006

Month

Year +37.2 –10.9 +2.5 +3.8 +16.0 +10.5 +6.5 +12.9 +15.1 +9.7 +13.6 +10.6 +0.6 +28.3 +16.0 +11.2 +2.5 +9.9 +11.4 +12.3 +8.2 +11.2 +16.3

Year–on–year % Change

The Economy 359

360

The Hong Kong Special Administrative Region in Its First Decade

end of 2006. It appears that the change in housing policy as announced in November 2002 by Michael Suen has played an important part in the stronger staying power of the more recent recovery.

Conclusions We have reviewed the economic development of Hong Kong since the handover and have concluded that there has never been anything intrinsically wrong with the Hong Kong economy that ever needed a major surgery. There was indeed a speculative bubble in 1996 and 1997, but it was at least partly caused by the anti-speculation measures that momentarily suppressed demand in 1994–5 but that also stunted supply at the same time. While there is an ongoing economic restructuring going on, there has never been a need for the government to find a new direction for the economy. Hong Kong’s entrepreneurs have traditionally been able to cope with rapid changes, and have been quite capable of dealing with risks and of capitalizing on opportunities that emerge from time to time. Yet, in a very real sense Hong Kong is indeed at a crossroads. Notwithstanding a very bullish stock market, with daily turnovers breaking all historical records 21 (except the record set by government money going into the market on 28 August 1998), a falling unemployment rate, and strong economic growth, there are real concerns over the longer term stability of the Hong Kong society and economy. Over the ten years since the handover, income disparity has widened, and it is threatening the stability of the society and raising the question if the ongoing tendency toward even greater disparity is sustainable. The latest official figure for the Gini coefficient from the 2006 By-census was 5.33, up again from the 5.25 reading from the 2001 Census. Reflecting such trends is the increasing “narrowness of the tax base,” which was the main motive

21 On 27 October 2006, turnover topped 76 billion dollars, just a shade behind the 79 billion dollars on the day of incursion into the stock market, namely 28 August 1998.

The Economy

behind the proposal to introduce a Goods and Services Tax (GST) in Hong Kong. Although the GST has merits in its own right, to suggest that there is anything wrong with the tax system because the tax base is too narrow would be wrong. So far the government’s policy has been contributing to rather than reducing income disparity. With the fiscal budget running big operational deficits, the government had frozen hiring of civil servants but continued to recruit contract staff on non-civil service terms, and that means with much poorer pay and benefits. On 1 January 2001, the Social Welfare Department (SWD) launched the Lump Sum Grant Subvention Arrangement (LSGS Arrangement) for providing financial assistance to non-governmental organizations (NGOs). The subvented organizations, under the new arrangement, will not pay workers higher wages than they have to. Because there is an abundance of unskilled workers, their wages tend to be depressed, and with an imbalance of bargaining power, unskilled workers actually often have to work harder, thus increasing the effective supply of workers and putting further pressures on the wages of low skill workers. In many statutory bodies, there are complaints of “fattening the top and squeezing the bottom.” As a matter of fact, the top executives in these statutory bodies evidently are earning “economic rent” which were really not necessary. Evidence for this can be found in the fact that these positions often attract former civil servants who suddenly earn much higher than what they used to make as a civil servant. To decide if the salaries are adequate for such senior positions, the main consideration should be whether the current salaries are enough to attract or retain the talents who are needed to serve those positions. As pointed out by the Bauhinia Foundation Research Centre,22 a private think-tank, households in the lowest income bracket have seen a drop of 20% in their incomes from 1997 to 2005, but those in the highest income bracket have seen a rise of 20%. The richest 10% of households on average make an income equal to 23 times that made by the lowest 10%. This multiple was only 13 times in 1993.

22 Ming Pao, 10 January 2007.

361

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The Hong Kong Special Administrative Region in Its First Decade

Against this background, there is little wonder that the proposal to introduce the Goods and Services Tax (GST) met with staunch opposition. While the business sector thinks it is bad for business, most people are concerned about the regressive nature of the tax. The measures proposed by the Financial Secretary Henry Tang to alleviate the impact on the poor, such as refunds for households in the bottom 20% income bracket and cuts in rates and water charges, appear to be ad hoc and inadequate. In the end, the government yielded to public pressure and gave up the idea of introducing the GST, at least for now. To address the widely recognized poverty problem, in late 2006 the government came up with the idea of a “Child Development Fund,” under which the government, the business sector, or some NGO would contribute $1 for every dollar saved by the parents for their children’s future development. Henry Tang thinks that this approach to build up assets for children is better than giving handouts.23 However, it has been pointed out that supporting early child development may be far more effective than supporting developmental or educational needs at an older age.24 If parents have to, in order to generate the savings to build up assets, reduce spending that would have benefited the children at an early age, the harm so caused may be much greater than any benefit derived by higher spending when the child has grown older. In any case, for households in great poverty, asking parents to produce savings to help their children may be an additional source of frustration and distress. Mr Donald Tsang has promised that he will deal with poverty problems in his second term of office. Whether or not he can find an effective way to alleviate the income and wealth disparity problem in Hong Kong will prove crucial to the status of Hong Kong as a world city over the longer term.

23 See http://www.info.gov.hk/gia/general/200611/10/P200611100213.htm. 24 Proceedings of National Academy of Science, July 2006.

9 Hong Kong People’s Economic Attitudes 1997–2007 Michael E. DEGOLYER Hong Kong Baptist University

One assertion often encountered in Hong Kong studies is that Hong Kong people care about economic well-being, not politics. Beijing officials insisted Hong Kong is an economic, not a political, city well before the 1997 handover and continued repeating the mantra until today. In this chapter, I test the proposition against various objective and subjective data for apparent correlations. If economic well-being determines attitudes, one might surmise Hong Kong people’s satisfaction with life in general would be strongly associated with Hong Kong’s economic health. Establishing a baseline just before the 1 July 1997 return to China’s sovereignty, satisfaction could hardly have been higher. In the final days of British colonialism in June 1997, nearly 9 out of 10 said they were satisfied with their current lives in Hong Kong. A year on, 70% felt as satisfied, a sizeable fall in the satisfaction rate (Chart 1). At the worst point during the first decade of the SAR’s life, in November 2003, barely half – 51% – said they were satisfied with life in the city. Only in November 2006, nearly a full decade after the handover, did satisfaction with life in Hong Kong finally once again reach 8 in 10, matching the low point of satisfaction under colonialism. It took nearly a decade to once again gain a level of satisfaction with life not seen in Hong Kong since January 1998. So how closely with objective general economic performance data did these changes in attitude track? Has Hong Kong’s economy performed so poorly? 363

The Hong Kong Special Administrative Region in Its First Decade Chart 1 1 “Are you currently satisfied/dissatisfied with your life in Hong Kong?” 90 80 70 60 50 % 40 30 20 10 0 11-1991 02-1993 08-1993 02-1994 08-1994 02-1995 09-1995 02-1996 07-1996 02-1997 06-1997 01-1998 04-1998 06-1998 07-1998 10-1998 04-1999 07-1999 11-1999 04-2000 08-2000 11-2000 04-2001 06-2001 11-2001 04-2002 08-2002 11-2002 06-2003 11-2003 12-2003 04-2004 06-2004 07-2004 08-2004 11-2004 05-2005 07-2005 11-2005 02-2006 03-2006 11-2006

364

Time Satisfied

Dissatisfied

Don't know

These subjective feelings of dissatisfaction with life in China’s new Special Administrative Region at first do appear rooted in changed economic realities. Chart 2 shows while GDP growth (in percentage annual change terms) had averaged 5% per year during the 1990s up to 1997, in 1998 it plummeted to the lowest level recorded, when it shrank by over 5%. Could this unprecedented economic pain explain the precipitous drop in satisfaction with life in Hong Kong, and as will be seen below, with government performance?

1 All figures are in percentages unless otherwise stated from surveys conducted by the Hong Kong Transition Project. The project tracks Hong Kong people’s transition from British subjects to Chinese citizens, and has members at Hong Kong Baptist University, University of Macau, City University of Hong Kong and Lingnan University. The project is funded via a competitive grant from the Research Grants Council of the Hong Kong government (HKBU 2168/04H). None of the institutions mentioned above is responsible for any of the views expressed herein. Further details may be seen at http://www.hkbu.edu.hk/~hktp.

Hong Kong People’s Economic Attitudes 1997–2007 Chart 2 1961–2005 GDP and Per Capita GDP Percentage Annual Change at Constant (2000) Market Prices 20

15

10

% 5

0

-5

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004# 2005#

-10

Percentage change

Per capita

Source: Census and Statistics Department, Hong Kong SAR government.

This all-time low in economic performance does not explain the attitude changes mapped in Chart 1. The per capita GDP growth rate, which takes into account fluctuations in population and more reliably indicates wealth per head than general GDP, had been in decline since 1992, with no growth at all in 1996 and a recovery to less than 5% in 1997 before plummeting to unprecedented lows in 1998 when it shrank by 6%. Logically, if satisfaction with life rests upon economic performance, satisfaction should have been dropping from 1992 onwards. And it should have plummeted to the lowest – 51% – in 1998 with the unprecedented collapse. Yet satisfaction with life in Hong Kong stayed at very high levels until the British departed in 1997 and at high levels – 70% or more – all through the 1990s, even though it declined significantly during 1998 from its very high levels in early 1997. Thus there was some effect on public opinion from the unprecedented economic drop, but not as much as might be expected given its further and even steeper drop after the economy recovered. The persistence of high levels of satisfaction despite unprecedented declines in GDP performance

365

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The Hong Kong Special Administrative Region in Its First Decade

raises questions about the assumption that economic performance explains and/or dominates public opinion. The Tung administration and Beijing officials asserted the conjunction of economic dislocations following the Asian Currency Crisis of 1997–1998 with the handover was the main reason dissatisfaction rose after 1997. Chief Executive Tung argued, beginning in 1998, that the British had left behind a bubble, particularly in property prices, and that the handover had also marked the beginning of an economic transition in Hong Kong’s trade and business relations with the Mainland. Thus external economic factors beyond his control were responsible for Hong Kong’s poor economic performance post-handover, he insisted. Once again, the data do not seem to bear these arguments out. In per capita GDP terms, there appears little evidence for a bubble in the form of deviations from the norm of growth in the 1990s, which was already significantly lower than the average growth rates of the 1960s, 1970s, and even most of the 1980s. In 1999 per capita GDP rose nearly 4% and in 2000 per capita growth hit nearly 10%, a level not seen since 1987. Indeed, in the final decade of British rule per capita GDP exceeded 5% per year only twice. In the first decade of the SAR it exceeded 5% per year four times, and very likely five times (2006 figures from the budget address of 28 February 2007 show 6.1% per capita growth in real terms; the forecast for 2007 is between 4.5 and 5.5% growth in real terms). The British managed to achieve 5% per capita annual growth in real terms six times in the 1980s but only once between 1990–1997. True, the SAR’s economy took an unprecedented hit in 1998, but it recovered in 1999, spectacularly performed in 2000 and has continued to perform very well so far in the first decade of the twenty-first century, clearly beating the growth record of the British in the final five year term of their last Governor. Even compared to regional rivals like Singapore and Japan, Hong Kong has done well, but the data does appear different depending on whether one is comparing nominal terms or purchasing power parity. For example, in 2005 according to the International Monetary Fund (IMF), Japan was fourteenth in the world with a nominal per capita income of US$35,757. Singapore came in twenty-third with $26,836 and Hong Kong lagged at

Hong Kong People’s Economic Attitudes 1997–2007

twenty-seventh place with $25,493. 2 In contrast, in 1997 Japan ranked third at $39,687, Singapore thirteenth at $23,995 and Hong Kong sixteenth with $23,245 GDP per capita. Hong Kong thus fell eleven places while Singapore fell ten. If Hong Kong public opinion is driven by such nominal regional comparisons, there may be some basis for supposing economics explains the dissatisfaction with the SAR. In PPP (purchasing power parity) per capita terms, however, Hong Kong ranked eighth in 2005 at US$33,479, Japan sixteenth at $30,615 and Singapore well down the list, at twenty-second at $28,368.3 In 1997 in per capita PPP terms, Hong Kong was fifth highest with $22,620, Singapore sixth at $22,434 and then Japan at seventh place with $21,769. In other words, Hong Kong gained $10,859 income per head – or 48% – in GDP in PPP terms between 1998 and 2005. Meanwhile Singapore added only $5,934 per capita in PPP terms, that is, a 26% gain, over the same period.4 Hong Kong dropped the least number of ranks against its regional rivals in purchasing power terms. But instead of rising, satisfaction with life in Hong Kong continued to decline in 1999–2000 and stayed well below that under British rule until November 2006 when, for the first time in the SAR’s history, it matched the lowest level under British rule. The record shows much less correlation of attitudes and general economic performance than might be expected from the many claims made to the contrary. In the eleven times between 1961 and 2005 that annual per capita growth was below 1% per annum, eight occurred under the British, the last time in 1996. Three times occurred between 1997 and 2005, though the greatest per capita decrease of all came in 1998. However, comparing Chart 1 with Chart 2, satisfaction with life in Hong Kong hovered around 70% all through 1998 and 1999, and only plummeted to all time lows when the economy appears to have recovered or even outperformed the British record in the last decade of their rule.

2 International Monetary Fund, World Economic Outlook Database, September 2006, for the year 2005 3 Ibid. 4 1997 figures derived from The Economist Pocket World in Figures, 1998 ed. (London: Profile Books), pp. 24–25.

367

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The Hong Kong Special Administrative Region in Its First Decade

The tactic of blaming economic pain on a deliberate British bubble failed to persuade the public that the SAR government was performing well given the global circumstances of the Asian crisis, followed by the dot.com bust and then the 11 September 2001 attacks on the US as well as the supposed economic mismanagement of the previous regime. The objective economic performance data appears to show the Tung regime as performing quite well compared to its competitors in Japan and Singapore. Yet ratings and satisfaction with life in Hong Kong under the Tung administration continued to fall until late 2003. This appears anomalous with the claim Hongkongese measure everything in economic terms. It even fails the less universal claim that economics dominates Hongkongese attitudes toward their government. Failing the test initially, are there other data correlations of an economic nature that might save the assertion? In December 2006 the Bauhinia Foundation, a think tank closely associated with Chief Executive Donald Tsang, who replaced Tung Chee-hwa in March 2005 when the first Chief Executive stepped down early from office, produced a report analyzing Hong Kong’s economic performance in comparison with other regional economies also affected by the Asian Currency Crisis. The report, Review of Hong Kong’s Socio-Economic Progress: A Quantitative Assessment, was published in December 2006.5 This Report comes as close to a comprehensive official assessment and defence of the SAR government’s performance during its first ten years as is available at this time. Implicit in the report is the same assumption about correlations of economic performance with satisfaction with government performance and other aspects of life here. The Report asserts that “Hong Kong went through its worst recession during the past decade.” Real GDP, it reports, fell an unprecedented 5.7% in 1998, stock prices dropped 55% from their July 1997 peak over the following twelve months, and property prices fell 45% between May 1997 and October 1998. Deflation between 1998 and 2004

5 Bauhinia Foundation Research Centre, Review of Hong Kong’s Socio-Economic Progress: A Quantitative Assessment (Hong Kong: December 2006). Available online at http://www.bauhinia.org/publications/ HK-Strategic-Audit-English.pdf.

Hong Kong People’s Economic Attitudes 1997–2007

saw consumer prices drop by 15% and almost no growth in nominal terms in per capita GDP. However, the Report also notes that not all the economic news was bad or worse than other economies hit by the Asian Currency Crisis. Purchasing power parity measures show Hong Kong’s recovery from the crisis kept up with other Asian economies. 6 The overall home ownership rate rose from just under 46% in 1990 to 57% by 2005. Indeed, it rose almost every year from 1997. If people were so unhappy with life in Hong Kong and so uncertain about its economic prospects, why did more and more literally buy into it by purchasing homes in the city? And if economic performance was so poor or attitudes toward property so damaged by the drop in property values post-1998, why did so many take the risky step of investing in property? Some economic sectors even experienced a real boom after 1997. Tourism surged under the SAR, up 114% between 1995 and 2004, much faster than any other newly industrialized entity and far outdistancing any record of growth under the British.7 Labour productivity, a key measure and basis for improved living standards, rose 2.8% per annum on average between 1997 and 2005. Education standards rose, with the proportion of those with a tertiary education rising from 21.7% in 1996, the last full year of British rule, to 29.4% in 2005.8 By the official anniversary in July 2007 the proportion of population with a tertiary education will break through 30%. Compared to Singapore, the report noted, Hong Kong’s nominal wages fell more slowly during the economic slump following the Asian Currency Crisis. All this positive economic data again raises the question, if Hong Kong did so well both comparatively and objectively after 1997, why the dramatic fall in satisfaction with life in Hong Kong? It appears clear that the general and comparative economic data cannot answer the question, so we must look into sectoral performance if the proposition that economics determines public opinion is to be salvaged.

6 Ibid. slides 11 and 12. 7 Ibid. slides 17 and 24. 8 Ibid. slides 35 and 36.

369

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The Hong Kong Special Administrative Region in Its First Decade

One line of objective data correlates inversely with the subjective survey results above. Instead of lowering wages, Hong Kong employers cut payrolls (see Chart 3) and increased working hours (Chart 4) after 1998. Chart 3: Wages and Unemployment 1995–2005* Unemployment rate, %

Nominal wage index, 1995=100 145 HK nominal wage index (LHS) 140 HK unemployment rate (RHS) 135

9 8 7

130

6

125

5

120

4

115

3

110

2

105

1 0

100 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Chart 4: Working over 50 Hours per Week, Percent of Workforce* 45 40 35 30 25 20 15 10 5 0 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q1

Note: * Charts 3 and 4 are redrawn based on the charts in slide 37 of Review of Hong Kong’s Socio-Economic Progress: A Quantitative Assessment (Hong Kong: Bauhinia Foundation Research Centre, December 2006), with data obtained from the Census and Statistics Department.

Rising unemployment and increased working hours much more closely correspond to the changes observed in satisfaction with life in Hong Kong. Indeed, the objective data reporting good economic

Hong Kong People’s Economic Attitudes 1997–2007

performance in GDP terms also appears repeatedly unassociated with the data in the Charts 3 and 4. For example, GDP went up in 2003, but so did unemployment and working hours. It appears that despite an improving economy in real terms, employers increasingly exploited their workers. Meanwhile, the government appeared either unaware, or unconcerned about the increased pressure put on the employees. The two charts above also show strong association with changes in Hong Kong people’s views on the performance of the government and its handling of the economy, as seen in Chart 5 below. Dissatisfaction with the government rose almost in direct association as employers cut payrolls and lengthened workweeks. Chart 5: Satisfaction with Performance of Hong Kong Government 90 80 70 60 50

% 40 30 20 10

02-1993 08-1993 02-1994 08-1994 02-1995 09-1995 02-1996 07-1996 02-1997 06-1997 01-1998 04-1998 06-1998 07-1998 10-1998 04-1999 07-1999 11-1999 04-2000 08-2000 10-2000 11-2000 04-2001 06-2001 07-2001 11-2001 04-2002 08-2002 11-2002 06-2003 11-2003 12-2003 04-2004 05-2004 06-2004 07-2004 08-2004 11-2004 05-2005 07-2005 11-2005 02-2006 03-2006 11-2006

0

Time Satisfied

Dissatisfied

Don't know

As the Chart 6 from the Report shows, when compared with Chart 5, when unemployment falls in 2004–05, so does dissatisfaction. But changes in unemployment levels alone do not fully correlate in terms of timing of the changes in attitudes toward life in Hong Kong and the performance of the government. One begins to suspect that the increases in GDP and GDP per capita after 1997, and the burdens of responding to the 1998 Asian

371

372

The Hong Kong Special Administrative Region in Its First Decade Chart 6: Long Term Unemployment* Unemployment rate, 1997 Q1=100 700 Long-term unemployment rate 600 Overall unemployment rate 500 400 300 200 100 0 1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Note: * Chart 5 is redrawn based on the charts in slide 38 of Review of Hong Kong’s Socio-Economic Progress: A Quantitative Assessment (Hong Kong: Bauhinia Foundation Research Centre, December 2006), with data obtained from the Census and Statistics Department.

crisis, 2000 dot-com bust and post–September 11 downturn were not distributed fairly between employers and employees, and that employees became increasingly aware of this disparity, and of the discrepancy between an improving economy and worsening treatment and pay relative to profits. The Bauhinia Foundation Report notes that in 1996 the median income of the highest income decile group was 16.1 times that of the lowest decile group, whereas in 2005 it had risen to 23.3 times. The rise in dissatisfaction with the SAR may be, and is likely attributable to a growing realization that the rich were getting richer and workers were working much harder, for less income and less job security than under the British. As Chart 8 from the Report shows, the poor were also increasing in number and suffering disproportionately from the rise in unemployment. In other words, the unfairness of the system in terms of distribution of economic growth as well as in the pain suffered from the economic transition to China’s sovereignty and global shocks increased greatly after the British left in mid-1997. Chris Patten, Last Governor, was criticized by the business community and the central government for raising expenditures on welfare and increasing public benefits like education and university entitlements to supposedly unaffordable levels, thus necessitating the

Hong Kong People’s Economic Attitudes 1997–2007 Chart 7: Ratio of Median Income* Ratio of median income of households in the highest decile group to lowest decile group 26 24 22 20 18 16 14 12 10 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Chart 8 Population in Low Income Households and Their Unemployment Rate* Population living in "low-income households," % 20 18 16 14 12 10 8 1986

1991

1996

1998

2000

2002

2003

2004

2005

2003

2004

2005

Unemployment rate in "low-income households," (%) 35 30 25 20 15 10 5 0 1986

1991

1996

1998

2000

2002

Note: * Charts 7 and 8 are redrawn based on the charts in slides 41 and 42 respectively of Review of Hong Kong’s Socio-Economic Progress: A Quantitative Assessment (Hong Kong: Bauhinia Foundation Research Centre, December 2006), with data obtained from the Census and Statistics Department.

373

374

The Hong Kong Special Administrative Region in Its First Decade

steep budgetary cutbacks and mass reductions in the civil service undertaken after 1998. The growing shift of wealth to the wealthy and the increasing burdens put on the poor and the civil service appear to have raised disaffection in the population. Thus economics, not in the sense of overall economic performance, but in the sense of household economics and social distribution of wealth, do appear to have an effect on attitudes toward the public. This objective data from the government’s Bauhinia Foundation corresponds well with subjective data from the Hong Kong Transition Project. In November 2006 the project found that respondents from two groups, registered functional constituency (FC) voters and a random sample of the public, both held by large majorities that the government favoured the interests of some over others. Interestingly, elite functional constituency voters, dominated by professionals and business with higher education and higher incomes, held this view by 64% to 57% for respondents from all groups. Table 1 “Do you think the government currently makes policies in general fairly, helping or hurting all parties equally, or unfairly, favouring the interests of some over others?”

FC Very fairly

Group Random

2%

2%

29%

32%

Unfairly

53%

49%

Very unfairly

11%

9%

Don’t Know

5%

8%

Somewhat fairly

This result of elites feeling more widely that the system is unfair implies that class, per se, may not explain the assessments of unfairness of the system. In other words, hypothetically, highest income groups should be much more satisfied with the government and hold that it makes its policies fairly than lower income groups. Lower income groups are clearly bearing the burdens disproportionately; if the assertion that economics determines public attitudes is true, then those most economically disadvantaged should show

Hong Kong People’s Economic Attitudes 1997–2007

the most disaffection attitudinally. Table 2 shows these responses for the whole sample broken down by income groups. Table 2 Fairness/Unfairness of Policy-making by Class Lower 4 mg/L, which shows the general cleanness of sea water and compliance of Water Quality Objective 4 (WQO) .

3 Main source of information: 20 Years of Marine Water Quality Monitoring in Hong Kong, 1986–2005 (Hong Kong: Environmental Protection Department, 2006). 4 Main source of information: 20 Years of Bacteriological Monitoring of Bathing Beaches in Hong Kong, 1986–2005 (Hong Kong: Environmental Protection Department, 2005).

The Environment After 1997 Major environmental parameters

1997

Percentage of gazetted 24.4% bathing beaches of bacteriological quality graded as “Good” Number of red tide occurrence in Hong Kong waters, which indicates the concentrations of nutrients (e.g. nitrogenous and phosphorus compounds) in sea water and the extensiveness of 5 harmful algal blooms .

3. River water quality

2005 53.6%

12 6 Overall Hong Kong: 19 41 Tolo Harbour: 9

Southern Waters: 3

Comments implementation of the Water Pollution Control Ordinance, increasing influences come from the discharges of Pearl River Delta especially from the Guangdong side. Therefore, deterioration of water quality was observed in the Northwestern Waters, Southern Waters and the outer portion of Port Shelter while other localized areas had got general improvement in water quality.

6

Percentage of priority rivers of water quality index (WQI) at the range of good to excellent

Good: 14.3%** Excellent: 12.7%**

29.5% 51.3%

While most rivers in New Territories showed improvement trend over the past ten years, some major rivers especially those in the Deep Bay catchment are still suffered from fairly high level of pollution by livestock waste and unsewered village discharges.

5 Main source of information: Hong Kong Red Tide Net: www.hkredtide.org, hosted by the Agriculture, Fisheries and Conservation Department of HKSAR. (Updated 3 April 2007). 6 Main source of information: 20 Years of River Water Quality Monitoring in Hong Kong, 1986–2005 (Hong Kong: Environmental Protection Department, 2006).

635

636

The Hong Kong Special Administrative Region in Its First Decade Major environmental parameters

1997

2005

Comments

4. Noise control No. of population exposed to excessive level of traffic noise

~ 1 million

~1 million

Tonnes of municipal solid wastes (MSW) disposed of at landfills.

3170,000

3420,000

Tonnes of construction and demolition (C&D) wastes being reused for land reclamation or restored at public fill reception facilities.

8,010,000

Tonnes of MSW being collected for reused or recycling.

1,540,000

Despite the growth in population, kilometres of road and vehicles, the EPD has been able to maintain the number of population exposed to excessive traffic noise to around one million, which indicates the effectiveness in noise control and environmental planning.

4. Waste management While the total amount of waste arising had been increased due to 19,057,000 population growth and consumerism, increasingly high amount of MSW and C&D wastes had been recovered for reuse or recycling. 2,950,000

* Data of 1999. ** Data of 1998.

New Environmental Policies, Legislation and Programmes There were several milestones that signified the changes and implementation of new environmental policies and legislation during 1997–2006 (Appendix 1). Some of these milestones had promising

The Environment After 1997

impacts to the governance of environmental affairs, whereas a lot of them were controversial with the long-term influences being unclear. The sections below will highlight and give detailed discussions over these milestones under seven categories: air, water, waste, noise, environmental planning, conservation and energy.

Air In its mission statement, the EPD wished “to protect the health and well being of the community by achieving and maintaining satisfactory air quality through intervention in the planning process and by enforcing the controls in the Air Pollution Control Ordinance and the Ozone Layer Protection Ordinance”7. With continuous effects during the past 20 years covering the period of 1997–2006, however, this vision could hardly been achieved. Improving air quality in Hong Kong cannot be done in a short instance. Rather, it is a long-term job that requires the joint efforts of local government and community as well the cooperation with the government and citizens of the Guangdong side. Nevertheless, the poorer air quality in comparison with that of the 1990s has tightened the nerve of the general public because it relates to public health. The high occurrence of smog and increased amount of hazy days in the town centre have also caught the attention of international media. More and more people including the expiates complained about the impacts of poor air quality and expected worries about the sustainability of Hong Kong. For the senior government officials, they had an additional worry that poorer air quality would hammer the long-term economic development of Hong Kong. Overseas investments would be hesitated about Hong Kong’s long-term potential as an internationally financial city because expiates are uncomfortable to allow their families stationed here. To address the voices of air quality improvement, EPD introduced a number of policies, legislation and programmes to

7 Environmental Protection Department, Environment Hong Kong 2006, Chapter 6: Air (Hong Kong: Environmental Protection Department, 2006).

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control local air pollution. The most obvious and effective measure was regulating the emissions from taxis, buses and public light buses by the use of clearer fuels. With enthusiastic efforts from the EPD and major green groups, the plan of requiring taxis to fuel with Light Petroleum Gas (LPG) was piloted in 1997 and fully implemented in 2001. Now, more than 99% of the taxis on the roads are fuelled by LPG. Taking into account of the experiences of the LPG-taxi scheme, the government has further strengthened environmental legislation and assisted vehicles owners and drivers by provision of financial supports in recent years. More vehicle operators have shifted their vehicle engines with the use of cleaner fuel. Moreover, a lot of older vehicles had installed with advanced pollution control devices. The grants from the government in switching taxis and public light buses to cleaner fuel such as LPG, and fitting older diesel vans and trucks with pollution control devices totalled HK$1.4 billion during the past ten years. As result, there has been a significant improvement of air quality, particularly the respiratory suspended particulates, sulphur dioxide and nitrogenous compounds at street level. Between 1999 and 2005, nitrogen oxides (NOx) at street-side levels fell 17% whereas the respirable suspended particulates (RSPs) fell 14%. Besides motor vehicles, electricity power generation plants are Hong Kong’s main contributors to air pollution. In fact, power generation plants contribute 92% of Hong Kong’s sulphur dioxide (SO2) emissions, 49% of NOx and 51% of RSPs. Unfortunately, most people are unaware of the problems because energy prices are at an affordable range and the power plants are located in the remote areas. The government therefore has devoted considerable resources to controlling air pollution in the power plants at Castle Peak and Lamma Island. Both the China Light and Power Hong Kong Ltd. (CLP) and The Hong Kong Electric Company Ltd. (HEC) were requested strongly by the government to install low NOx burners to reduce emissions. Some power plants were also required for installing flue gas desulphurisation units. With the commissioning of a new power generation plant at Black Point in 1998, the CLP has around one-third of its power generated by natural gas which is considered a cleaner fuel in comparison with coal. However, the benefits of the various environmental control

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devices in power plants were greatly eroded by increased demand of electricity in the community, and so increased demand in power generation. Furthermore, the sky of Hong Kong is receiving increasing influences from the air pollutants emitted from the premises and vehicles of Pearl River Delta due its recent economic growth. Recognizing the problem, in 2005 the EPD requested the electricity companies to take up greater responsibility in reducing air pollution and control of greenhouse gases emission. One of the major measures of achieving the target was imposition of a cap on total emissions from local power plants. Prior to August 2005, power plants only licensed for the concentration of pollutants in emissions. From August 2005, electricity companies renewing their licences shall reduce also total emissions by complying with a set of emissions caps. This new policy aimed to urge power companies to source for cleaner energies. As result, the power generators of CLP at Castle Peak are using ultra low sulphur coal to reduce the overall sulphur content to 0.3%, as against a statutory limit of 1% sulphur. Moreover, the government also introduced the air pollutants emission trading scheme. This scheme encourages the CLP and HEC to adopt innovative technologies and contemporary approaches to tackle atmospheric pollution. A pilot emission trading scheme was worked out by the Hong Kong and Guangdong governments in late 2006. Both CLP and HEC indicated their willingness to discuss and explore this option as a means to reduce overall emissions. Nevertheless, some scholars take a more conservative view over the effectiveness of air pollutants emission trading with regard to environmental governance and market-building.8 The effectiveness of emission trading is constrained by the “one country, two system”

8 See Tao J., Ma X. L. and Mah N. Y. D., Final Reports of the Research on Guangdong and Hong Kong Cross-bordered Environmental Management Mechanism Chapter 5 (Guangzhou, China: South China Institute of Environmental Sciences, SEPA and Hong Kong Open University, 2006). The authors critically discussed the barriers to market-building for emissiontrading, using its pilot projects in China as illustration. They concluded that within the “one country, two systems” context, with regard to transboundary environmental governance there would be a number of challenges to be overcome if air pollutants emission trading between Hong Kong and Guangdong is implemented.

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policy which makes free-market trading extremely difficult. Moreover, the success of emission trading is closely associated with the initiatives in adopting cleaner technology in the region. Its effectiveness shall be critically audited in a few years after its launch. Volatile organic compounds (VOCs) is another component contributing to regional air pollution. They are emitted by consumer products such as paints, printing inks, hairsprays and aerosol insecticides. According to the agreement between the governments of HKSAR and the Guangdong Province, Hong Kong shall reduce VOCs by 55% by 2010, using 1997 as the baseline year. Legislation was enacted in early 2007 requiring suppliers of paints, inks and selected consumer products to test and register the VOC of their goods. Suppliers are also required for sourcing of replacement components to avoid further contamination by the VOCs of consumer products.

Water The central Victoria Harbour has long been criticized by the general public for its very poor water quality. The cross-harbour swimming contest, which signified the beauty and cleanliness of the harbour, was adjourned for more than 30 years due to the health risks of polluted seawater to swimmers. In 1988, the colonial government introduced the Strategic Sewage Disposal Scheme (SSDS) and claimed that the SSDS was an economic solution in resolving the water quality problems of Victoria Harbour by the uses of primary (physical) sedimentation of sewage and the natural forces of tidal dilutions. Nevertheless, once announced, the SSDS was strongly criticized by scholars and environmentalists because inland treatment, rather than tidal dilution, was believed the ultimate solution of protecting marine ecosystem. The SSDS was also unfortunately distorted by political debates in the pre-handover period due to the tremendous cost of its construction and operation. The delay of construction of Stage I of the SSDS, which intended to build a deep sewage tunnel underground of the town center and several chemically enhanced (with the use of ferric chloride as coagulant) sedimentation tanks in Stonecutters Island for treatment,

The Environment After 1997

was exaggerated by the various accidents during construction period. Not until late 2001, the Stage I of SSDS could be finally commissioned. Fortunately, the chemically enhanced sewage treatment plant at Stonecutters has operated smoothly. In early 2007, the sewage treatment plant at Stonecutters received and treated about 1.2 million tones of effluent everyday, which accounted for about 75% of total sewage in the catchment of Victoria Harbour, mainly come from houses and business of the Kowloon Peninsula and Tsang Kwan O New Town. In 1999, the former Chief Executive of HKSAR, Mr. Tung Chee-hwa, instructed that the planned Stage II of SSDS should be reviewed by a panel comprised of three international experts and three local specialists. After two years’ review period and another two years’ public consultation and specialists’ engagement, the final plan of cleaning up Victoria Harbour was endorsed by the Chief Executive in Council in 2004. The new sewage treatment proposal, re-titled as the Harbour Action and Treatment Scheme (HATS), plans to implement full sewage collection and treatment facilities in two phases. The funding for realizing the first phase of HATS was endorsed by the Legislative Council in 2005 with the target date of completion by 2013–4. According to the planning of Stage 2A of HATS, sewers for collecting sewages in the northern part of Hong Kong would be built for collective treatment at Stonecutters Island. Moreover, the present sewage treatment plant at Stonecutters Island would be installed with disinfection facilities to remedy the contamination of gazetted bathing beaches in the western shore of New Territories. However, whether Hong Kong should implement secondary (biochemical) treatment facilities, which is the controversial component for debates with regard to Stage 2B, would be determined by the EPD after commissioning of the Stage 2A and on the basis of future marine monitoring results. Cleaning up the Harbour and operating the sewage treatment plant at Stonecutters Island is extremely expensive. The next issue to the senior officials of EPD is: how are they able to secure sufficient amount of fund to pay for the cost of cleaning up the Harbour in a long-term. Therefore, in December 2006 the government announced a proposal on increasing the sewage charge steadily to recover full cost of operation at the Stonecutters Island. The charging of sewage

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treatment is based on the Polluter Pays Principle. That is, those who pollute have to pay the cost of cleaning up. The sewage fee is relatively mild in review of the present economic and social situations of Hong Kong. The heavy subsidy for sewage treatment at the present moment makes Hong Kong a place of relatively cheap sewage fee. Some scholars and environmentalists strongly criticized that the present policy could not encourage improvements in environmental awareness and environmental stewardship. It was suggested that the government shall inject environmental momentum by stepping up the Polluter Pays Principle which is an effective economic incentive to environmental protection.9 For inland waters, a lot of the watercourses in New Territories have been suffered from strong pollution from unattended sewage discharges, illegal industrial effluents and animal (pigs and poultries) wastes. Most village houses rely on septic tanks for treating domestic wastes. However, due to improper management, these septic tanks are most often a major source of pollution to groundwater and nearby streams. Sometimes, the bacteriological quality of bathing beaches was also affected by the polluted discharges from their hinterland. To tackle this issue, in 2004–5 the government allocated $1.8 billion to improve sewerage in New Territories such that more village houses could connect its septic tank effluents to a nearby sewer which links to the municipal sewage treatment plants. Furthermore, discharges of big animal farms have been regulated by licences under the Waste Disposal (Animal Wastes) Regulations. Together with the effective implementation and enthusiastic enforcement of the Water Pollution Control Ordinance in recent years, water quality in most of the rivers and streams in New Territories improved significantly from 1997–2006. Moreover, the percentage of gazetted bathing beaches of quality graded “good” nearly doubled from 1997–2006.10 However, increased efforts are still required for streams of the Deep Bay Water Control Zone

9 Ho, K. C.: speech delivered at the City Forum organized by the Radio and Television of Hong Kong (RTHK) on 31 December 2006, quoted by Ming Pao on 1 January 2007. 10 Environmental Protection Department, Beach Water Quality of Hong Kong 2006 (Hong Kong: Environmental Protection Department, 2007).

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which has a bigger coverage and more complicated social and environmental situations. With contrast to the water quality improvement in many of the local rivers and streams, increased concern has been given to the quality of our drinking water. With about 80% of local potable water supplied from Dongjiang (The East River), worries come from the deterioration of water quality due to rapid population and economic growth in the catchment of Dongjiang at the Pearl River Delta. While deterioration of water quality at Dongjiang was peaked in the late 1990s, the government of Guangdong Province responded actively to features stories and reports of media on sources and levels of contamination.11 New legislation was enacted and enforcement on illegal discharges was stepped up in the early 2000 in protecting the water catchment. Nevertheless, successful control and management cannot be done without the support from water engineers. In 2001, the governments of Guangdong Province and Hong Kong SAR agreed with a collaborative project in which a “closed” aquaduct was build in the Guangdong side to ensure cleaner water from the main channel of Dongjiang be imported to Hong Kong safely and to avoid further contaminated by the polluting discharges at the tributaries. The government of Hong Kong SAR assisted the construction of this aquaduct by giving the Guangdong government with an interest-free loan of 2.3 billion dollars, which was about half of the price of the construction works. According to the agreement, the loan would be returned to the government of HKSAR by multi-installment and would be deducted from the water prices paid to the Guangdong government in the coming years. This was considered a “win-win” scenario for both governments and had set good example of cross-border collaboration in regional sustainability.12

11 Ho K. C., Chow Y. L. and Yau J. T. S., “Chemical and microbiological qualities of the East River (Dongjiang) water, with particular reference to drinking water supply in Hong Kong,” Chemosphere, No. 52, (2003), pp. 1441–1450. 12 Ho K. C. and Hui C. C., “Chemical contamination of the East River (Dongjiang) and its implication on sustainable development in the Pearl River Delta,” Environmental International, No. 26, (2000) pp.303–308.

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Waste The most significant progress in waste management during the past ten years included implementation of the Construction Waste Charging Scheme and the announcement of the A Policy Framework for the Management of Municipal Solid Waste (2005–2014). To most of the people in Hong Kong, waste management is not an issue that needs particular attention to be handled in an urgent manner. Yet, waste loads in Hong Kong are growing at a much faster rate than the population. Over the past ten years, municipal solid waste loads increased by about 3% per year. With contrast, the population in Hong Kong increased only at an averaged rate of 0.9% per year. While the slogan of “3R” i.e. Reduce, Re-use, Recycle has been at the lips of the general public as well as environmental educators for a long time, people just cannot stop our habit of disposing a great amount of wastes everyday due to the influences of consumerism in modern society. However, we should not overlooked that the four strategic landfills in New Territories have been extended once but are going to be full in the coming five to ten years. New initiatives and policies should be introduced without further delay. In January 2005, the charging scheme for levering the disposal of construction waste at landfill was endorsed by the Legislative Council by enacting the Waste Disposal (Charges for Disposal of Construction Waste) Regulation. While the operators of construction industry generally agreed with the Polluter Pays Principle, detailed implementation plan had not been agreed that resulted with a delay of the construction waste charging scheme for more than ten years. The society strongly supported the implementation of the construction waste charging scheme because construction wastes accounts for around 40% of the total solid waste disposed of at landfills. From 20 January 2006, construction waste producers will be charged $27 per tonne to deposit inert waste at public fill reception facilities, $100 to deposit waste with more than 50% inert content at sorting facilities, and $125 to deposit waste containing 50% or less inert content at landfills. Construction waste with more than 50% inert content will not be accepted at landfills and will be diverted to public fill reception facilities or sorting

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facilities.13 It is anticipated that the introduction of construction wastes charging scheme would set precedent for future charging of household and other wastes. In December 2005 the EPD announced the “Policy Framework for the Management of Municipal Solid Waste (2005–2014).” It is the most comprehensive document in addressing the waste management issues in Hong Kong so far. More encouragingly, this policy framework discussed the various aspects of waste reduction, reuse, recycling, disposal and treatment in an integrated manner. Green groups generally welcomed this policy framework and have placed high hope on actualizing its goals, objectives, policies, programmes and action plans. However, some environmentalist also criticized the goal of the policy framework that targeted for reducing the sum of total municipal waste, including waste that is recycled and dumped in landfills, by only 1% per year from now until 2014 seemed to be too conservative. It is a consensus that effective implementation of the various programmes in policy frameworks shall be coupled with overall increase of waste recovery rate to 50% by 2014. Hence, the full support from the general public as well as the business sectors is the essence. Provision of supports to the waste separation and recycling industries is another crucial factor. In response to the urges from the society, the government allocated a piece of land of 20-hectare in Tuen Mun to be the future EcoPark. As planned, EcoPark will provide local recycling industry with a piece of suitable land at an affordable rent. It is hoped the EcoPark will help to advance innovative recycling operations in Hong Kong and the local recycling industry will reduce reliance on overseas factories, at least not much as a few years ago. With regard to the waste management policy framework, the government is promoting the Producer responsibility schemes (PRSs). The PRSs require manufacturers, importers, retailers and consumers to recover and recycle products that otherwise end up in the waste stream. The relevant Bill was introduced to the Legislative Council

13 Environmental Protection Department, Environment Hong Kong 2006, Chapter 8: Waste (Hong Kong: Environmental Protection Department, 2006).

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in late 2006. It is anticipated that by late 2007; relevant regulations on PRSs would be enacted. By 2008 the earliest, waste tyres, plastic shopping bags, electrical and electronic equipment, packaging materials and beverage containers would be regulated with the PRSs. It is also hoped that by 2009 the rechargeable batteries would also be regulated under the PRSs. After numerous consultancy studies, officials of the EPD affirmed that modern incineration would be a safe and environmentally acceptable option for final waste treatment in Hong Kong. This view is supported by the majority of scholars because similar types of incinerator have been safely operated in overseas including various countries in western Europe. Unfortunately, the programme of constructing a new incinerator in Hong Kong has been further deferred due to strong oppositions from rational green groups and the general public. No timetable on this issue has been confirmed so far.

Noise In a highly congested city such as Hong Kong, it is the great challenge for environmental officials for preventing citizens from exposing to excessive amount of noise. The major noise annoyance in Hong Kong comes from road traffic and aviation. Before the commissioning of the Hong Kong International Airport at Chek Lap Kok, more than two million of local residents were suffered from unacceptable to noise levels everyday because they were living under the air flight passages. Since the closure of the Kai Tak Airport in 1998, aviation noise has been significant reduced to legally acceptable level in most of the highly congested areas of the town. Yet, more highways have been build to address logistics issues especially the increased trade exchanges between Hong Kong the mainland of China. The efforts of EPD should be praised because a lot of resources and hard works have been imposed to address traffic noise. These included but not limited to: the adoption of good environmental planning practices, building of more noise barriers, good alignment of new roads and improvement of road surfacing. It was estimated that about 950,000 local residents (including around 690,000 people from reduced traffic noise) had enjoyed the benefits

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of these measures on noise abatement.14 For building noise barriers at roads, for example, has cost the government for more than $1.3 billion since 1990. The long-term approach of controlling traffic noise is prevention and reduction through environmental impact assessment (EIA). The EPD had developed a strategic plan of different phases to tackle noise pollution. The long-term measures include reviewing the noise practice note on design and development of residential buildings, using the EIA as a tool for good railway planning, retrofitting the machines of old vehicles and regulation of newly imported cars.

Environmental Planning and Assessment Knowing that prevention is better cure, before 1997 environmentalists in Hong Kong had urged the government strongly in incorporating the EIA in all land development and infrastructure planning processes. The Environmental Impact Ordinance (EIAO) which carried the great anticipation from environmentalists was enacted in April 1997 and implemented in April 1998. From April 1998 to March 2007, there have been 130 EIA reports received by the Director of Environmental Protection, the authority of the EIAO. Out of them, 126 were approved and 3 were under public consultation at the time of writing this report. So far, only one EIA report was rejected by the Authority that, to a certain extent, reflects the effectiveness of the statutory EIA process in incorporation of environmental considerations in the early planning stage of major developments. However, it was also criticized by some of the general public that the existing EIA process is simply a “rubber stamp” of the government because the Authority has seldom exercised the power in interfacing the conflicts between environmental protection and development. This is not really the case as the only rejected case, namely the Kowloon-Canton Railway Corporation’s (KCRC) Spur Line at Lok Ma Chau, has generated influential momentum to both the environmentalists and the developers (they are normally the

14 Environmental Protection Department, Environment Hong Kong 2006, Chapter 7: Noise (Hong Kong: Environmental Protection Department, 2006).

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proponents of infrastructure development). This case received extensive attention from the media as conservationists objected strongly to the original proposal of building a flyover for railway across the Long Valley, which is a piece of valuable freshwater wetland for migrating birds. The progress of the EIA of KCRC Spur Line at Lok Ma Chau was summarized in Table 2. Interestingly, the KCRC Spur Line at Lok Ma Chau was the first case to go through the EIAO appeal process. The end result, moreover, has set an encouraging precedent for other developers with regard to their enthusiasm in actualizing environmental and ecological protection measures. According to the new EIA, KCRC should modify its project to protect the sensitive habitat at Long Valley with advices from an environment committee formed by various stakeholders including green groups, academics and local residents. Various mitigation measures were also recommended by the new EIA to reduce the possible impacts during construction and operation phases of the new rail line. Generally, the EIAO has fulfilled its original aim and objectives in requiring the proponents in incorporating environmental considerations in the planning stages. With the implementation of the relevant Environmental Monitoring and Audit programmes, prevention and mitigation measures have been better controlled under the established frameworks of environmental assessment. Therefore, most of the damaging environmental consequences of new development projects have been reduced or minimizing with comparison to the pre-EIAO era. Therefore, the enactment of EIAO, with particular reference to the successful protection of the ecological habitats at Long Valley, can be seen as one of the key achievements to sustainable development in Hong Kong during the past ten years. Looking the way forward, development of statutory requirements and technical details of Strategic Environmental Assessment (SEA) seems to be the priority job of EPD. It is because the social and economic developments of Hong Kong have become increasingly relevance to the strategic planning of the Pearl River Delta. Therefore, mechanism on wider co-operation with authorities in Mainland China on environmental issues should be studied in-depth and implemented without delay. SEA is the major tool of

The Environment After 1997 Table 2 Significance Events of the EIA of KCRC’s Spur Line at Lok Ma Chau Date

Events

December 1998

Submission of EIA project profile to the EPD

February 1999

“Study Brief” approved by EPD and delivered to KCRC; on the basis of the Study Brief, EIA work was conducted by the consultants appointed by KCRC.

April 2000

Submission of EIA report by the KCRC

June – mid August 2000 EIA report displayed for public consultation including consulting the Advisory Council on the Environment (ACE). ACE however expressed strong reservation in endorsing the EIA report. Mid August – end of September 2000

On the basis of the enquiries raised by the ACE, academics, green groups and general public, EPD requested for more information from KCRC with regard to the recommended option of the EIA report.

16 October 2000

Director of Environmental Protection disapproved the award of Environmental Permit to KCRC

10 November 2000

Appeal raised by KCRC

4 April – 24 June 2001

Case received and debated at the EIA Appeal Board

30 June 2001

Appeal dismissed by the EIA Appeal Board.

Dec 2001

KCRC announced that new technology, including tunnelling at the Long Valley, would be applied to pursued the KCRC Spur Line at Lok Ma Chau. New EIA application was subsequently issued.

August 2001

KCRC re-submit the EIA report, recommending for a series of mitigating measures including the adoption of tunnel option, protection of groundwater at Long Valley, fish pond compensation at Lok Ma Chau and a well-managed Environmental Monitoring and Audit programme. The Study Brief was approved by EPD in October 2001.

March 2002

The new EIA report was endorsed by the Director of Environmental Protection with the Environmental Permit issued.

regional environmental planning. Its wider application shall be considered by policy-makers and town planners with regard to increasing amount of environmental deterioration in the Pearl River Delta during the past decade. Another contribution of the EIAO is its capability in engaging

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the general public in early stages of environmental planning. This helps significantly in promoting environmental awareness and public participation in community level. Under the EIAO, project proponents are required to conduct detailed studies and consult the public in a wide extent to avoid adverse environmental effects. Since 2002, the EPD has uploaded all information with regard to the EIAO and SEA onto to a page of its website – the CyberEIA (www.epd.gov.hk/eia/). Knowledge of EIA as well as all the EIA reports received by the EPD, the EIA guidelines and practice notes, local EIA examples and best international practices can now be delivered to the general public through the CyberEIA. The CyberEIA is also a platform for the general public to express views on certain EIA reports and the government’s environmental policies. The experiences of relevant public engagement measures had been shared with the officials of State Environmental Protection Administration (SEPA). Therefore, similar platform of EIA has been developed in the web site of the SEPA. In the near future, EPD will continue her efforts in EIA capacity-building with the engagement of not only the general public but also the politicians, community workers and professionals in town planning, architecture, landscaping, engineering etc.

Conservation Hong Kong citizens shall be proud of their government’s efforts in protecting tiny biological habitats and ecologically valuable species. Our country parks and special sites of scientific interest (SSSI) cover more than 43% of the land and waters of Hong Kong. Undoubtedly, conserving natural resources and the bio-diversity is beneficial to the present and future generations of the community. In November 2004, the government unveiled the New Nature Conservation Policy. This policy document reviewed the previous constraints of implementing conservation in Hong Kong with particular reference to the conflicts generated from land development, land ownership and the emerging interests of the general public on conservation. Notwithstanding this, the document set out the main policies in conserving the areas of significant ecological interests in Hong Kong and recommended for implementing the

The Environment After 1997

“Management Agreement (MA)” and “Private-Public Participation (PPP)” in managing lands of significant ecological importance. With an aim to create a win-win situation for both the landowner and the environment, the MA encourages non-governmental organizations (NGOs) to assist landowners to develop financial incentives in conservation activities with support of a grant allocated from the Environment and Conservation Fund. With contrast, the PPP requires land developers committing to a long-term conservation and management plan for the part of their sites which is of particular ecological interest. They may develop the rest of that site but detailed development plan should be endorsed by the government in advance. A total of 12 priority sites for enhanced conservation were identified in the New Conservation Policy document using a scientific scoring system. Since April 2005, three MA projects were approved by the EPD with a total of $4.6 million allocated to NGOs for funding the conservation activities with local residents. Two of these projects are in Long Valley. The Hong Kong Bird Watching Society has worked with farmers to increase biodiversity in relevant bird habitats and the Conservancy Association has worked with farmers to enhance diversity on abandoned agricultural lands. The third project is in Fung Yuen where the Tai Po Environmental Association has worked with landowners to derive good practices for butterfly protection. Unfortunately, so far the government has not approved any PPP plan although six applications for pilot scheme had been received. NGOs criticized strongly that there was lack of support from government officials and departmental conflicts within government has resulted with deferment of the PPP.15 With regard to implementation of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which has been an active role of the Agriculture, Fisheries

15 Ming Pao, 4 April 2007, p. A11. In response to various cases of illegal dumping of construction and demolition wastes at Long Valley and Mai Po, the Deputy Chairman of Hong Kong Birdwatching Society criticized the government for giving little attention to protection of valuable biological habitats in Hong Kong. While there were three pilot MAs being approved by the government, there had been no PPP being approved so far.

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and Conservation Department since 1976, work moved on smoothly with support of the relevant industries and the Custom and Excise Department. To enhance control of import and export of medicines made from endangered species, relevant legislation and regulations had been continuously amended to catch up with updated international trend. There has been increasing concern over tree conservation. This issue in Hong Kong is mixed up with recent movement on protection of cultural heritage because the existence of trees, similar to old buildings, is strongly threatened by rapid land development in the city. Many NGOs and political bodies had organized campaigns to protect “aged trees” in the town centre. Because of the concern raised by the community, the Planning Department, Civil Engineering and Development Department, Lands Department, Agriculture, Fisheries and Conservation Department and Environmental Protection Department paid particular care to conserve trees in development projects with several technical notes and guidelines being issued for developers’ reference. Unfortunately there is no legislation that focuses on conserving trees, particularly those with extraordinary historical and landscaping values. Therefore, in June 2006 the Honourable Choy So-yuk proposed the Forests and Countryside (Amendment) Bill 2006 in the Legislative Council. Having taken into account the views of the Secretary for Environment, Transport and Works and Counsel to the Legislature, however, the President of the Legislative Council ruled that the proposed Bill 2006 did not relate to political structure but related to the operation of the government and government policies only. The proposed Bill was not considered by the Legislative Council although most councillors were aware of such demand from community for conserving valuable trees. Yet, the momentum of conserving trees moves on and most of the developers are more alerted of the necessity in conducting tree assessment before works and spending money in mitigating the loss of trees, if any.

Energy There were increasing voices from the society for improving energy efficiency and use of renewable energy in Hong Kong. In particular,

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such demands have been enlarged since the ratification of the Kyoto Protocol into a formal international convention in 2005. Disappointedly, Hong Kong responded slowly to this global concern. The limited work done during the past ten years included the publication of an public-engagement document by the Support Group on Renewable Energy of the Sustainable Development Council in 2003 and the inclusion of a special session on energy policy in the “A First Sustainable Development Strategy for Hong Kong” published in May 2005. While the government claimed that she had set out a strategy on the development of renewable energy in Hong Kong, NGOs criticized the conservative target of the government on requiring only 2% of the city’s total electricity consumption for renewable sources by 2012. More disappointedly, the government remarked that the achievement of this conservative target was subject to regular reviews on technological advancement and the needs of the society. As a gesture of supporting the government’s policy on renewable energy, the two electricity companies agreed to set up wind turbines for demonstration and education purposes. Claiming the data collected from the demo wind turbines would be used for larger scale use of renewable energy in the future, the general public has yet seen a firm commitment from the government as well as the business sectors in stepping up the use of renewable energy in Hong Kong in the near future although we are experiencing increasing stresses of global climate change. More work has been done in energy conservation and improving energy efficiency. Since 1995, the government has been operating a voluntary energy efficiency-labelling scheme for 17 types of household and office appliances and vehicles. In March 2007, EPD introduced the Energy Efficiency (Labelling of Products) Bill to the Legislative Council with a view to encouraging the public to use energy efficient products that help reduce the emission of greenhouse gases and other pollutants. The Electrical and Mechanical Services Department (EMSD) had established guidelines and procedures on the use of energy efficient features and renewable energy in government projects. A special division was established in EMSD to promote energy efficiency and encourage the business sector and the general public in energy conservation. Yet, the

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general public was more familiar with government’s enthusiasm in adjusting output from air-conditioners to a temperature of 25.5oC, which is considered a gesture of public relation activity rather than of real effectiveness from environmentalists’ point of view.

Heading Towards Sustainable Development? Responded to increasing demand from the general public, the government established the Sustainable Development Unit (SDU) under the Administration Wing of the Chief Secretary for Administration's Office in April 2001.16 The main tasks of SDU are to facilitate the integration of sustainable development into new government initiatives and programmes and in the community generally. Furthermore, the SDU provides support to the Council for Sustainable Development. The government implemented the sustainability assessment system from December 2001. Under the system, all Bureaux and Departments are required to: • carry out sustainability assessments of new strategic initiatives or major programmes which may bring about noticeable or persistent implications on the economic, environmental and social conditions of Hong Kong; and • with effect from April 2002, include in their submissions to the Executive Council (ExCo) and/or the Policy Committee the sustainability assessment findings or results of their proposals. It is the responsibility of SDU to provide technical assistance to all Bureaux and Departments to facilitate the sustainability assessment. SDU also helps the ExCo and the Policy Committee to interpret the assessment findings in the submissions of government bureaus and departments.

16 Information of the SDU and Council for Sustainable Development was sourced from the official web site of SDU: http://www.sdu.gov.hk/

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In addition to trainings to government officials, the SDU also provided a Computer-Aided Sustainability Evaluation Tool (CASET) to help bureaus and departments to conduct sustainability assessment. The guiding principles, indicators and a social checklist used for the sustainability assessments can be downloaded from the web site of SDU. Unfortunately, the general public could hardly evaluate the contributions of SDU through her actual performance. While it is a common sense that sustainability assessment should be conducted at the early planning stage of a proposal to achieve its maximal benefits, most bureaus and departments had maintained their mentality that sustainability assessment was done at nearly the final stage of their decision-making process. Although sustainability assessment is able to figure out cross-sectoral issues and sensitive areas that require joint departmental efforts, from various cases such as the Harbour Reclamation Phase II, Development of the Cultural Centre at West Kowloon and conceptual design of South East Kowloon (redevelopment of the site at old Kai Tak Airport) we saw little collaborative efforts within government and representative end-products that are compliance to the criteria of sustainable development. The performance and output of the Council for Sustainable Development were also disappointing. The Council for Sustainable Development which is chaired by the Chief Secretary with members from different sectors of the society has the following terms of reference: a. to advise the government on the priority areas it should address in promoting sustainable development; b. to advise on the preparation of a sustainable development strategy for Hong Kong that will integrate economic, social and environmental perspectives; c. to facilitate community participation in the promotion of sustainable development in Hong Kong through various means, including the award of grants from the Sustainable Development Fund; and d. to promote public awareness and understanding of the principles of sustainable development.

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So far, the meetings of Council for Sustainable Development looked like common forums for leaders of different sectors of the society for view exchange. The general public is not able to see any “teeth” that a governmental body should have from the work of the Council for Sustainable Development. More disappointing, most of the general public even not aware of the existence of the Council for Sustainable Development ! More successful is the public engagement activities organized by the SDU. With the use of exhibitions, forum, community fairs and symposium, the message of sustainable development has been steadily infiltrated into the governmental departments and community. Furthermore, the various public-engagement documents written by the Support Groups of Sustainable Development Council e.g. those on urban living space, solid wastes management, renewable energy and population policy had attracted enthusiastic discussions by the general public. A systematic and transparent process is the essence of civil society, of which sustainable development is one of its main features. Like the public participation in EIA process, SDU has a non-reluctant obligation to educate the community with concepts of sustainable development and enhance the wide debates in society with regard to the implications to sustainability of various governmental policies. Although there has been little progress over sustainable development in Hong Kong with contrast to the situation in 1997, it is the general anticipation of the society that sustainable development may still the mission of the government and the track of future development in Hong Kong.

Regional Environmental Cooperation and Environmental Governance As discussed above, the environmental quality in Hong Kong has been increasingly influenced by the social and economic developments of the Pearl River Delta. Therefore, the scope of environmental protection should go beyond looking at localized sources but environmental issues at a regional level. For example,

The Environment After 1997

although Hong Kong has placed great efforts in improving local air quality by imposing religious controls on local vehicles and power generation plants, the effect was seriously eroded by the regional atmospheric pollution. While we had significant improvement in stream and river water quality due to stringent control over effluent discharges, there were increased eutrophication (most often represented by the increase in red tides) in the western and southern coasts of Hong Kong and the Deep Bay waters. It is a common sense that, without the joint efforts from the Guangdong government, our present hard work has little effect. It is glad to note that the Hong Kong–Guangdong Joint Working Group on Sustainable Development and Environmental Protection has held regular meetings to discuss the issues of environmental collaboration. Recognizing the need of cross-border collaborative efforts, the Environmental Protection Department (EPD) set up a Cross-boundary and International Division in 2005 to work focusedly on tackling regional and international pollution issues. Headed by a deputy director. This division also deals with international conventions in pollution control and environmental protection. Concern on cross-border environmental protection has also been emerged in the community level, as evidence by increased reports from the media on regional environmental quality and environmental safety. Yet, scholars found that the business sector that has great influences to the economic policies in Mainland China responded slowly to the urges of cross-border environmental protection. In fact, more than 60% of the polluting industries in Pearl River Delta are invested directly or indirectly by Hong Kong citizens.17 Their influences should not be overlooked. Scholars found that it is extremely important to mobilize the business sector in both Hong Kong and Guangdong to participate actively in the environmental movement, for the main stakeholder of pollution

17 Ho, K. C. and Hui, C. C., Chemical contamination of the East River (Dongjiang) and its implication on sustainable development in the Pearl River Delta, Environmental International, No. 26 (2000), pp. 303–308.

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control as well as waste management. 18 Therefore, it is of highest priority to create a market for trading of environmental-friendly products and generating economic incentives to business sector. Without the joint efforts from government, Business Sector and the General Public in both sides of the Shenzhen River, regional environmental governance cannot be achieved and our environmental quality will only be further deteriorated. In 2002 the Hong Kong and Guangdong governments disclosed the Pearl River Delta Air Pollution Study and worked out a plan for cutting pollution to acceptable level by 2010. Individually, each side should take considerable amount of actions in reducing the emissions from vehicles, industry and power plants. The two governments also agreed on the framework on trading the emission of air pollutants to be implemented in the near future. With regard to water quality protection, environmental management plans were formulated for the protection of Deep Bay (also known as Shenzhen Bay) and Mirs Bay (also known Dapeng Bay). These management plans target to protect the water quality, fisheries and ecological interests in the Pearl River Estuary. With the increase in social and economic developments in the Pal Pearl River Delta in the near future, environmental issues would be further extended to the relevant provinces. In 2005, an agreement was signed between the government of HKSAR and the governments of the reminding eight provinces (including Guangdong) and Macao. It was agreed that annual meeting should be held to discuss areas of environmental cooperation and regional control pollution. Furthermore, the general public is glad to note that EPD has worked proactively the State Environmental Protection Administration (SEPA) on national and regional environmental issues. Particularly, EPD and SEPA have cooperated closely on implementing environmental impact assessment. Such collaborative and cooperative efforts shall be maintained and further enhanced if allowable.

18 Ma, X. L. and Ho, K. C. (eds.), Final Reports of the Research on Guangdong and Hong Kong Cross-bordered Environmental Management Mechanism (Guangzhou, China: South China Institute of Environmental Sciences, SEPA and Hong Kong Open University, 2006).

The Environment After 1997

Environmental Awareness, Environmental Education and Public Participation Pollution and ecological deterioration are often linked to education. Getting people to change their actions and adopt greener habits is an on-going challenge. In addition to the environmental campaign which is initiated by the government, the green groups, community action groups, social services agencies, tertiary institutions and schools should, and have been actively participating in promoting environmental ethics and environmental awareness. Community environmental actions can be classified as three major kinds: (1) passive promotion and knowledge-based activities, such as programmes broadcasted in the media and delivered by simple educational kits; (2) professional training and co-operational engagement, such as training delivered by universities on environmental science and environmental engineering, implementing environmental management system, environmental auditing and sustainable development reporting at corporations and business sectors; (3) development of awareness and environmental ethics through steady and interactive change of the lifestyle and social values. During the past years, the Environmental Campaign Committee which is appointed by and with support from the government focused her works on (1). The various tertiary institutions and EPD have been enthusiastically training up skillful workers at professional and technical levels during the last ten years on (2). For the members of most schools, green groups and environment-relevant NGOs, the outcomes of their efforts can mainly be seen in (3). In fact, there is no superior or inferior for the three kinds of educational approaches. They are in fact complementary in promoting environmental awareness in Hong Kong. As discussed in the early part of this chapter, the environmental quality, and sustainable development of Hong Kong is most often threatened by the economic-driven social values. Nevertheless, for simple environmental actions like use less plastic bags and reuse of papers, environmental fairs and promotion campaign are far more effective than solely looking at the ethical issues and professional skills. Anyway, it is glad to note that there

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has been a general increasing trend in environmental awareness in Hong Kong during the past ten years due to the efforts of various levels of workers in the society. Interestedly, Ho noted that the environmental awareness of a group of student, as represented by the index of New Environment Paradigm (NEP), increased significantly after their active involvement in the EIA process of the KCRC Spur Line. 19 It was concluded that the EIA process had effectively mobilized the public participation in EIA, which consequently resulted with increased environmental awareness. In fact, the various interactive learning activities including site visit to Long Valley and enthusiastic discussion at CyberEIA had promoted significantly the environmental ethics and study interest of students. With this regard, we noted that public participation is crucial to promoting environmental awareness and environmental ethics. Furthermore, interactive study activities which allow students to obtain self-owned knowledge and hands-on experiences the essence of environmental education. The relevant research might provide inspiration to the future work of environmental education and community actions in Hong Kong.

Summary and Conclusion There have been numerous progresses in environmental protection during 1997–2006. Generally, local environmental quality had been slightly improved by the imposed controls over the fuels of vehicles and power plants, commissioning of the Phase I of the HATS, implementation of various noise abatement measures, promotion of waste reduction and management by means of the Polluter Pays Principle and relevant community programmes, development of the EIAO for earlier environmental planning at the initial stages of

19 Ho K. C., “Enhancing environmental education through the public participation mechanism of EIA,” in Proceedings to The Second International Conference on Environmental Education in China, Leadership for the Future (2002), Vol. I, pp. 35–41

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development project and disclosure of the Policy framework on waste management in the end of 2005. Furthermore, there is a hope the conflicts between land development, land ownership and conservation be reduced in the near future by means of the MA and PPP proposals of New Conservation Policy. Unfortunately, our pollution control efforts and enthusiasm in environmental education were eroded by the deteriorating environmental quality in the Pearl River Delta due to rapid population and economic growth in the Guangdong Province. Little progress has been seen in using more renewable energy in Hong Kong, while energy saving and energy efficiency have been continuously promoted by the government. The challenge ahead is whether we are able to enhance the concepts of sustainable development in future policies and planning, and whether we are able to develop partnership with the governments of Guangdong and other areas in the Pal River Delta in environmental cooperation. With regard to promoting environmental governance at local and regional levels, public participation, transparent of information and changing the common values and lifestyle of our society remain the crucial factors. Particularly, it is important to engage the business sectors in the movement of environmental protection and cross-border cooperation. “Our battle with environmental challenges cannot and should not be fought by the government alone. Individuals in the community have a vital role to play. Small contributions from every one of us taking care of the environment can make a significant difference.” Dr. Sarah Liao, Secretary for Environment, Transport and Works20 For Hong Kong, environmentally sustainable development is still a dream to be actualized although both the government officials and the general public have given enthusiastic environmental efforts in the past ten years.

20 Liao S., Environment Hong Kong 2006, Preface (Hong Kong: Environmental Protection Department, 2006).

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The Hong Kong Special Administrative Region in Its First Decade Appendix 1 Milestones of Significant Environmental Policies, Legislation and Management, 1997–2006 Year

Milestones

1997 • Enactment of the Environmental Impact Assessment Ordinance (EIAO) which is the framework for the controlling the environmental impacts of major development projects. • Launching the pilot scheme for liquefied petroleum gas (LNG) taxis to reduce air pollution. 1998 • Stated in the Chief Executive’s Policy Address, the government required all policy secretaries and directors of bureaux and departments to provide environmental reports for their organizations from 2000. • With effective from 1 April 1998, all projects designated under the three schedules of the EIAO will be regulated by the Environmental Impact Assessment Regulation. Designated projects without the Environmental Permit (PR) issued by the Director of Environmental Protection will be subject to prosecution if works commenced. • A Hong Kong–Guangdong Environmental Protection Liaison Group with its first job working towards removing all effluent from the Deep Bay catchment. 1999 • The former Chief Executive, namely Mr. Tung Chee-hwa, placed special emphasis on environmental protection and sustainable development in his Policy Address of 1999 with the theme on "Quality People, Quality Home". As an outcome of this Policy Address, a Council for Sustainable Development would be established to coordinate all efforts in relation to sustainable development. • Further to the LNG project of taxi, the government announced a comprehensive programme of measures to tackle motor vehicle emissions. 2000 • The Executive Council endorsed a new policy to redress noise impacts from existing roads by means of engineering and non-engineering measures e.g. building of more noise barriers, refining the construction materials of road surface to reduce traffic noises, strengthening the practical notes and code of practices in relation to the Environmental Impact Assessment Ordinance and works. • A Memorandum of Understanding between the State Environmental Protection Administration and the Environmental Protection Department on the control of hazardous waste imports and exports was signed. This memorandum signifies increased cooperation

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Milestones between the State government and the government of HKSAR in handling the issues of trans-boundary wastes disposal. • DEP rejected to award an Environmental Permit to the Kowloon-Canton Railway Corporation (KCRC) on its construction of the Lok Ma Chau Spur Line because the project was likely to cause adverse ecological impacts at the wetlands near Long Valley, New Territories.

2001 • To fulfil its mission on sustainable development, the government established the Sustainable Development Unit under the Department of Administration of government Secretariat in April. Furthermore, a Sustainable Development Council chaired by the Chief Secretary was formed and the government had allocated a big amount of money in establishing the Sustainable Development Fund which aims to promote good ideas and awareness of sustainable development in the community. • To tightened motor vehicle fuel requirements, the EPD introduced Euro III emission standards for newly registered vehicles in step with the European Union. Furthermore, all newly registered taxis have to be fuelled by LPG or petrol. • Stage 1 of the Harbour Area Treatment Scheme (HATS) [formerly known as Strategic Sewage Disposal Scheme (SSDS)] was commissioned after overcoming various political and civil engineering constraints. 2002 • A report on air quality in the Pearl River Delta region, through the work of a consultant company commissioned by Joint Working Group on Sustainable Development and Environmental Protection, was finalized. The report detailed the sources and quantity of air pollutants emitted from the Pearl River Delta including Hong Kong. It is the benchmark for formulation of further policies and legislation on tackling air pollution in a cross –border prospective. • The Chief Executive appointed Dr. Sarah Liao, a pro-environment environmental consultant, to be the “accountable” Secretary for Environment, Transport and Works. Green groups and environmentalists general welcomed this appointment and felt that it would a new opportunity of enhancing government’s attitude efforts over environmental protection. • After years of debates, the Waste Recycling Campaign in Housing Estates was enhanced. With the participation of 1 200 public and private housing estates covering some 1.5 million households, this campaign encouraged the government on more extensive engagement of community leaders and non-government organizations in promoting waste reduction, reuse and recycling.

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Milestones

2003 • While the whole society of Hong Kong was stressfully affected by the sudden occurrence of SARS, the EPD worked closely with other departments in the Team Clean and undertook joint efforts in improving environmental hygiene in the community. Specifically, emphasis was placed on regulating fly-tipping of waste, broken sewers and water pipes, illegal connections of drains and improperly maintained septic tanks. • The Regional Air Quality Management Plan for the Pearl River Delta region was endorsed by the Hong Kong–Guangdong Joint Working Group on Sustainable Development and Environmental Protection. 2004 • A Pearl River Delta Region Joint Air Monitoring Network established by the governments of the Hong Kong SAR Guangdong Province. It monitor air quality professionally discloses the regional air quality indices at regular intervals, every week in the period 2005–2007.

was and and say,

• The Legislative Council approved the Waste Disposal (Amendment) Bill No.2 2003, which allowed for charging the disposal of construction waste at waste disposal facilities and controlling of waste disposal by economic incentives under the Polluters Pay Principle. • The government announced and expressed enthusiasm in implementing the “New Conservation Policy”. It set out the main policies in conserving the areas of significant ecological interests in Hong Kong and recommended for implementing the “Management Agreement (MA)” and “Private-Public Sector’s Participation (PPP)” in effective management of lands of significant ecological importance. 2005 • The Chief Executive of HKSAR announced in his policy speech that the Harbour Action and Treatment Scheme (HATS) would be implemented in phases and Stage 2A of the HATS would proceed with targeted for completion in 2013. In December this year, the Finance Committee of LegCo approved an expenditure of $166.5 million for the environmental impact assessment, investigations and tunnel conveyance system design for Stage-2A of HATS. • For improving effectiveness and integration of environmental efforts between the policy bureau and executive departments, the government of HKSAR merged the Environmental Protection Department and the Environment Branch of the Environment, Transport and Works Bureau on April 1. The newly established environmental division in the Environment, Transport and Works Bureau is named Environmental Protection Department with the Permanent Secretary of Environment, Transport and Works Bureau (Environment) being as the Director.

The Environment After 1997 Year

Milestones • Signing of a statement on co-operation arrangement between the State Environmental Protection Administration and the Environmental Protection Department on air pollution. • The government set aside $5 million under the Environment and Conservation Fund to support the implementation of Source Separation of Domestic Waste in private housing estates, which was another step forward towards waste reduction and management in Hong Kong.. • The Environment and Conservation Fund Committee approved the granting of $4,620,000 to three non-governmental organisations to implement pilot conservation management agreement projects in Fung Yuen and Long Valley, to enhance conservation of ecologically important sites under private ownership. • The Regional Air Quality Index was first disclosed to the general public on 30 November . • The milestoned policy document on waste management, namely “A Policy Framework for the Management of Municipal Solid Waste (2005–2014)” was announced in December. This Policy Framework set out a comprehensive strategy for municipal solid waste management in Hong Kong for the ten years from 2005 to 2014. • The Construction Waste Disposal Charging Scheme was implemented after more than ten years’ negotiation with the construction and transport industries. • An incentive scheme encouraging the diesel light buses to make an early switch to clean light buses was announced in the last day of December.

2006 An “Action Blue Sky” campaign was launched by the Chief Executive of HKSAR in June. This signified the increased awareness of air quality protection in Hong Kong by the senior government officials, the business sectors and the general public because air pollution is considered a factor adversely affected the social and economic developments, and so sustainable development of this economic-driven city. 2007 • With effect from 1 April , the new VOC Regulation imposes maximum limits on the VOC content of architectural paints/coatings, printing inks and six selected consumer products i.e. air fresheners, hairsprays, multi-purpose lubricants, floor wax strippers, insecticides and insect repellents. It is expected that the VOC Regulation would help reduce about 8,000 tonnes of VOC emission a year that contributes significantly in reducing air pollution in the Pearl River Delta region.

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Milestones • As one of the continuous efforts of improving air quality, the government offered a time-limited one-off grant to vehicle owners to replace their pre-Euro and Euro I diesel commercial vehicles with new vehicles which comply with the prevailing statutory emission standard. • The government announced a plan for implementing Air Pollutants Emission Trading, which is considered an effective economic tool in pressing the major polluting business in the Pearl River Delat, including the power generation industry, to strengthen their emission control facilities and to use cleaner energies and technologies. • The government introduced the Energy Efficiency (Labelling of Products) Bill to the Legislative Council in March. The relevant legislation intends to encouraging the public to use energy efficient products that help reduce the emission of greenhouse gases and other pollutants. Under the he Bill, the government proposed to include refrigerating appliances, room air conditioners and compact fluorescent lamps in the initial phase of the mandatory Energy Efficiency Labelling scheme (EELS).

18 From Excitement to Disillusionment: The Lessons of Education Reform in Hong Kong, 1997–2007 IP Kin-yuen HKICC Lee Shau Kee School of Creativity

Michael H. LEE The Chinese University of Hong Kong

Introduction Education reform is no easy job. Large-scale education reform is particularly difficult. This is simply because education is a matter of culture,1 deeply related to how people live, the way they are brought up and the core values they uphold; all these help to shape the present world. Reforming the education system at a deep level inevitably touches on a change in life-styles, value systems and necessitates a reallocation of power and interests. They do change from time to time but they are difficult to reform. Like most reforms elsewhere, the latest round of large-scale education reform in Hong Kong started with great enthusiasm. In 1999, the release of the first education reform booklet attracted as many as 14,000 written responses from the community, one of the most remarkable in the territory’s history of policy consultation. People were filled with hope and thought that reform will bring about a promising system in which our younger generation will

1 See, for example, the elaboration by James H. Nehring in his article “Conspiracy theory: lessons for leaders from two centuries of school reform,” Phi Delta Kappan (February 2007), pp. 425–432. 667

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excel and will no longer need to suffer in a “traditional” system that was full of pain. Things change over time, however. In early 2006, a 10,000-strong rally by school teachers underpinned the general feeling of disillusionment towards the education reforms that had been taking place for more than half a decade. In early 2007, major education policymakers, having been accused by some in the tertiary education sector of abusing their authority by suppressing opinions about education reforms, became involved in an investigation by an independent commission assigned by the Chief Executive Donald Tsang Yam-kuen.2 Although it is still true that reforms do have general support from the community and remain a major concern,3 it is widely believed that the reform measures so far have been far from perfect. There are lessons to be learned from this experience. This chapter attempts to review the experience of the education reform in Hong Kong over the first decade since July 1997, when the Hong Kong Special Administrative Region (HKSAR) government was set up after Hong Kong’s sovereignty was returned to the People’s Republic of China. There are four sections in this chapter. The first section tells the story of how the reform evolved. The second section attempts to examine why the reform occurred. The third section discusses some of the most controversial issues related to the reform that brought about either excitement or disillusionment in the Hong Kong education system. The final section rounds up the discussion with a concluding remark.

A “Romantic” Beginning Education reform is not totally new to Hong Kong. In 1981, after consultation with members of the Secretariat of the Organization for

2 By the time when this manuscript is being prepared, the investigation, chaired by Justice Wally Yeung Chun-kuen, has not yet come to conclusion. 3 A survey conducted by a social group, Middle Class Power, in March 2007 found out that education reform (such as small class teaching) came after universal suffrage as the second most important issues the middle class wanted the HKSAR government to address. The third to fifth issues were wealth distribution, medical reform and job opportunity respectively.

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Economic Cooperation and Development (OECD), the government appointed a four-member international panel to review the Hong Kong education system. The visiting panel then published A Perspective on Education in Hong Kong: Report in November 1982. The report proclaimed utilitarianism had been influential in shaping Hong Kong education in which the education was principally to address the needs of economic development and vocational training. In addition, academic achievements have been overemphasized by schools which exerted a negative impact on most students’ personal development. At that time, the major problem of the Hong Kong education system was how to strike a balance between the demands of quantitative shortfalls and qualitative improvement.4 In response to the report and also the changing needs of the community, the Education Commission, the most important advisory body for education policy, was established in 1984 and piecemeal changes were adopted in the Commission’s serial reports, which were released between 1984 and 1997. Significant changes had been implemented, such as the “Targets and Target-Related Assessments (TTRA)” in the Commission’s Report No. 4 in 1990 and the establishment of the Hong Kong Institute of Education in Report No. 5 in 1992. Yet these are no comparison to the comprehensive reforms that started in 1997.

Tung Chee-hwa and Antony Leung The reversion of sovereignty to China in 1997 was one of the major drives behind this round of education reform. The newly-established post-colonial government was eager to prove that the administration without the British could do the same as the colonists, if not better. As soon as Tung Chee-hwa became the Chief Executive designate in 1996, education was identified as one of his three major policy areas of concern5 and Antony Leung Kam-chung was assigned to outline the new HKSAR government’s education reform agenda. His report, finished within six months and never published, formed the

4 Visiting Panel, A Perspective on Education in Hong Kong: Report by a Visiting Panel (Hong Kong, 1982), p. 11. 5 The other two areas were housing policy and elderly policy.

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backbone of Tung Chee-hwa’s first policy speech, given in 1998. Subsequently, Antony Leung was appointed as a member of the high-powered Executive Council as well as the chair of the Education Commission to lead the reform. As a leading banker at the time, Mr Leung was keen to raise the perspective of knowledge-based economy and stressed the importance of enhancing overall education quality if Hong Kong was expected to compete globally in the new era. The driving forces behind the reform will be further dealt with in a later section of this chapter.

Unique Consultation The consultation for education from early 1999 to mid-2000 was unique. It was a remarkably long consultation, with three consultation documents altogether. The consultation came to an end when the final document was released in September 2000. This prolonged process was described as a “romantic” period or “honeymoon” that was filled with ideas and ideals.6 “It was perhaps the first time ever in the public sector where the launch was managed as a campaign with large-scale public forums and constructive mobilization of the media,” as one of the reform leaders noted.7 Some other observers would, however, allege that this period was the beginning of systematic attacks on the teaching profession.8 In January 1999, the Education Commission released the first consultative booklet on education objectives. 9 It attracted wide-

6 Ip Kin-yuen, “The overwhelming education reform,” in Andy Ho, et al. (eds.), Hong Kong 2000: Social Trends and Policy Analysis (Hong Kong: ichanel.com Ltd, 2000), pp. 145–158 (in Chinese); Cheng Kai-ming, “Reinventing the wheel: educational reform,” in Lau Siu-kai (ed.), The First Tung Chee-hwa Administration (Hong Kong: The Chinese University Press, 2002), p. 164. 7 Cheng Kai-ming, “Reinventing the wheel,” p. 164. 8 Such as Ho Yuk-fun, Pilgrims’ Footmark on Drifting Sand: Perspectives on Education Tradition and Reform Through Cases of Teachers’ Oral History (Hong Kong: Step Forward, 2006), pp. 15–16. 9 Education Commission, Review of Education System: Framework for Education Reform – Learning for Life (Hong Kong, 1999).

From Excitement to Disillusionment: Education Reform in Hong Kong

spread attention in the public and received as many as 14,000 written responses, probably a historical record in Hong Kong. The booklet successfully brought about the general impression that education in Hong Kong lagged behind other places and was killing young kids’ talent and creativity. The conclusion was simply that reform was urgently in need. The second phase of the consultation started in September 1999 with the release of the second consultative booklet on reform proposals. Based on the earlier consultation, it concluded the overall education objectives to be adopted by the HKSAR government as: Our priority should be accorded to enabling our students to enjoy learning, enhance their effectiveness in communication, and develop their creativity and sense of commitment.10 The document further on put forward some ideas, most of which were conceptual yet appealing, such as: • reduce examinations and a through-train to be built for basic education from primary to secondary education; • reform of university enrolment criteria; and • establishment of community colleges. This document attracted 4,000 written responses, not as many as the previous one; nevertheless it was still a significant number. Interestingly, unlike most other policy consultation practices, the two reform documents did not set out a boundary for discussion. Neither did they look into the financial constraints. There was also no trace of a systematic review or rigorous study of the present situation. No planning or projection perspective was included. The Education Commission simply called upon people to express what they wanted in the future, for instance, students were going to have less homework, better language proficiency, fewer examinations, and excel in academic achievements. Some of the desires were

10 Education Commission, Review of Education System: Reform Proposals – Excel and Grow (Hong Kong, 1999), p. 2. In Chinese, the objectives were summarized in a four-word phrase: 樂善勇敢 , which has been frequently cited as the essence of the reforms.

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apparently in conflicts with each other. When it came to reality, it was simply difficult for a set of education reforms to embrace such diversified interests and ideologies in our society. Therefore it is not difficult to understand why the third consultative document in May 2000 that attempted to set out more concrete proposals which were to be implemented in reality received much less attention from the public. The actual proposals of course fell short when contrasting with the romantic ideals that once stipulated. No figure of written submissions was announced.

Why Reform? Hong Kong is not alone in heading for reforming education. In the United States, there has been a recurrence of education reform movements throughout the last century, switching to and fro the more progressive end and more traditional end of educational ideologies.11 In East Asia, education reform has been a sweeping phenomenon across different countries and regions from Korea, Japan, and Taiwan to the Chinese mainland and Singapore in the 1990s, and, interestingly, the emphasis in the East Asian region is by and large similar. 12 The simultaneity of education reform with similar direction can be attributed to the common challenges posed by the notions of globalization and knowledge-based economy, and at the same time, the critical self-evaluation of the East Asian educational tradition under the new circumstances. The nature of the reforms was very much determined by this background.

Globalization and Knowledge-Based Economy The notions of “globalization” and “knowledge-based economy”

11 See, for example, Larry Cuban, How Teachers Taught: Constancy and Change in American Classrooms 1880–1990 (New York: Teachers College Press, 1993). 12 See, for example, a synthesis in Ip Kin-yuen, “Feasibility of promoting small class teaching policy from the perspectives of international trends and recent studies,” Hong Kong Teachers’ Centre Journal, Vol. 2 (2004), 109–115 (in Chinese).

From Excitement to Disillusionment: Education Reform in Hong Kong

were two catch-phrases that justified the reforms. As suggested by the 2000 blueprint, “The world has changed. So must the education system!” 13 The education system must change not for internal educational needs but due to external challenges. The Education Commission put it this way: The world economy is in the midst of a radical transformation, and the industrial economy is gradually being replaced by the knowledge-based economy. Industries that rely on cheap labour are giving way to emerging industries founded on knowledge, technology and innovation. . . . The reaction, updating and application of knowledge have become the key to the success of industries, organizations and individuals. People’s lives are also undergoing momentous changes. Most jobs require a considerable amount of knowledge which needs to be constantly updated . . . . Therefore, in a knowledge-based society, people must keep on learning. Rapid developments in information technology (IT) have removed the boundaries and territorial constraints for trade, finance, transport and communication. As communication links become globalized, competition is also globalized.14 Unlike the “old” type of educational reforms that usually originated from the values upheld by progressive child-centred philosophy or psychology, these statements highlighted the importance of cross-border competitions, innovation, economic growth and employability and their impact on the education system. Logically, the “new” type of education reform came to the conclusion that we need lifelong learning to prepare ourselves to adapt to the ever-changing environment, and there is a need to

13 Education Commission, Learning for Life, Learning through Life: Reform Proposals for the Education System in Hong Kong (Hong Kong, 2000), p. 27. 14 Ibid. pp. 27–28.

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change our curriculum in order to nurture the sort of creativity needed. The emphasis on globalization and knowledge-based economy has generated much driving force behind the prevailing education reform. However, it has led to critiques from scholars and educators who uphold humanistic values about education. Local scholars like Choy Po-king and Ho Yuk-fun would argue that the notion of “globalization” is in fact the globalization of capitalism under which people are forced to be more flexible about work in the interest of the enterprises. This type of globalization has nothing to do with liberating people, but has actually extended and strengthened the bureaucratic control much beyond what it used to control through the creation of a quasi-market and the imposition of a system of measurements in the education system.15

Dissatisfaction with the Existing System Another driving force behind the reforms was the widespread dissatisfaction with the existing system. In the Education Commission’s 2000 blueprint, it was put in this way, . . . Nevertheless, we must address the inadequacies within the existing system to enable the majority of Hong Kong people to achieve lifelong learning and all-round education. All in all, despite the huge resources put into education and the heavy workload endured by teachers, learning effectiveness of students remains not very promising; learning is still examination-driven and scant attention is paid to “learning to learn.” School life is usually monotonous, students are not given comprehensive learning experiences and have little room to think, explore and create. The pathways for lifelong learning are not as

15 Choy Po-king, “Education: Sacrifice on the altar of globalized capitalism,” in Choy Po-king & Wong Ka-ming (eds.), Education Reform in the Perspective of Ordinary People, pp. 215–227; Ho Yuk-fun, Pilgrims’ Footmark on Drifting Sand, pp. 20–22.

From Excitement to Disillusionment: Education Reform in Hong Kong

smooth as they should be. To make up for these weaknesses, we need to uproot outdated ideology and develop a new education system that is studentfocused.16 The above criticism was not groundless. Tradition in East Asia typically required students to be obedient and engage in rote learning, which made students too passive and learn without real understanding. However, some of the statements are subject to further debate. For example, when talking about learning effectiveness, one must not forget the excellent results earned by Hong Kong students in international competitions such as the Trends in International Mathematics and Science Study (TIMSS) and the Programme for International Student Assessment (PISA). There are also recent academic studies that pay high regard to the merits of the East Asian education culture. The tendency of neglecting the existing system in the above quotation was worrying, at least for many teachers. Moreover, the idea to “uproot out-dated ideology” and replace it with a new system was somewhat frightening for current teachers who by then were perceived as “out-dated.” It was especially frightening when teachers realized that different non-education sectors when large number of businessmen and parents were called into the consultative sessions to speak up against the conventional educational practice when the reform started. Some critical analysts pointed out that the whole reform movement attempted to divide the society into two separate camps of “pro-reform” and “anti-reform,” and teachers usually belong to the latter.17 Certain conspiracy theories gradually found ground among the teaching profession which conceive the whole education reform as a kind of anti-teacher campaign. The conception was further strengthened in the conflicts derived from the new benchmark requirement for English teachers in 2001, and the “culling of schools” thereafter.

16 Education Commission, Learning for Life, Learning through Life, p. 29. 17 See for example, Choy Po-king and Wong Ka-ming (eds.), Education Reform in the Perspective of Ordinary People; Ho Yuk-fun, Pilgrims’ Footmark on Drifting Sand.

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New Excitement Abolition of Academic Aptitude Test The Education Commission’s blueprint did bring about excitement to the community. In July 2000, before the final document was published, it was announced that the Academic Aptitude Test (AAT) would be abolished. AAT ranks all Primary 6 leavers, according to their ability to reason rather than their actual academic performance, for the allocation of secondary school places. The public welcomed this decisive move, believing AAT was the major source of pressure for drilling at primary school level,18 and its abolition would lead to a happier life and more pleasurable learning. Nevertheless, Primary 6 leavers are still allocated to different secondary schools under the banding system, which divides students into three (originally five) bands according to their academic ability. As a result, the long term solution was yet to be worked out. In fact, the major parts of the Commission’s blueprint dealt with the school place allocation and examination systems at various levels, i.e. the Primary One Admission (POA) exercise, the Secondary School Places Allocation (SSPA) exercises, the two public examinations at senior secondary school level, and to a lesser extent, the university enrolment policies. By reducing the number of “high-stake examinations” (such as the Hong Kong Certificate of Education Examinations, HKCEE, and the Hong Kong Advanced Level Examinations, HKALE) and reducing the written test for school places allocation system, the Education Commission was optimistic that it would bring about a system where students would have plenty of opportunity to grow freely in a well-rounded education context in which pressure and drilling was minimized. It was widely believed that after the abolition of AAT, teaching and learning in primary schools did enjoy a more relaxed atmosphere. In 2001–2006, Primary 6 students were allocated

18 “Drilling” is a teaching approach commonly employed in Hong Kong that uses frequent tests, quizzes and exercises to strengthen students’ memory of certain subject contents by repeating the information with or without making sense out of it.

From Excitement to Disillusionment: Education Reform in Hong Kong

secondary school places according to the fixed academic results earned by their predecessors in 1998–1999 and 1999–2000. Schools had the spare capacity and incentive to try out new teaching approaches, before the shrinking primary school enrolment began to surface around 2003 and 2004. This resulted in serious mutual distrust among major stakeholders in the reforms.

Curriculum Reform The 2000 blueprint was in fact incomplete. Two major parts, at least, were missing. One was the curriculum reform and the other was the academic restructuring for “3+3+4” (three-year junior secondary plus three-year senior secondary plus four-year university education) reform. Both were outlined in the 2000 blueprint but the final plans came to existence only in 2001 and 2004, respectively. If the proposals set out in 2000 were the reforming of the framework of the overall school system, the curriculum reform in 2001 was the attempt to reform the substance of schooling: what was to be taught, why and in what delivery mode. The major curriculum reform document was published in June 2001. 19 It started with something prominent in recent curriculum movements abroad, such as Australia; some, however, were unfamiliar to the local teaching profession, including: 1. The 8 key-learning areas (KLAs) that served as the structural framework for school curriculum – Chinese language education; English language education; mathematics education; personal, social and humanities education; science education; technology education; arts education; and physical education. 2. The 9 generic skills that were fundamental skills to help students learn and are transferable – collaboration, communication, creativity, critical thinking, information technology, numeracy, problem-solving, self-management, and study skills.

19 Curriculum Development Council, Learning to Learn: Life-long Learning and Whole-Person Development (Hong Kong, 2001).

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3. The 4 key tasks during 2001–2006 – moral and civic education, reading to learn, project learning, and using information technology. From 2002 onwards, numerous news reports were published in relation to attempts to employ new teaching approaches, such as project learning, and with the abolition of the AAT, primary schools were particular active in engaging new teaching approaches. New positions, such as curriculum development coordinator were opened in schools to facilitate the reform process. Despite this new level of interest and excitement, the new curriculum framework also disturbed some practitioners, especially ideas such as key-learning areas, which were not at all clear for many schools. The idea of generic skills was accepted by the profession, in general, but why the 9 types of skills were identified but not others is unclear. More importantly, how these generic skills are to be taught is also unclear. Most teachers, teacher-trainers and even curriculum developers were not brought up in that way.

Continuous Increase in Education Expenditure Tung Chee-hwa’s commitment to education was generally believed to be a genuine one. In January 1998, the five-billion-dollar Quality Education Fund was established to subsidize various education initiatives, a bold step accounting for the sudden increase in education expenditure in the 1997–1998 financial year (see Table 1).20 Although it was not made clear how the Fund would enhance the overall quality of the education system, the public welcomed the government’s commitment. Education expenditure kept on increasing throughout the Tung administration (1997–2005) despite the adverse economy and the shrinking government revenue during the period. The percentage of government expenditure on education to GDP rose from 3.0% to 3.9% between the 1995–96 and 2006–07 financial years (the decrease since the 2004–05 financial year was mainly due to pay

20 Education Commission, Education Statistics, December 2006 (Hong Kong, 2006), pp. 6–7.

From Excitement to Disillusionment: Education Reform in Hong Kong

cuts in January 2004 and 2005). 21 The generosity of the Tung administration towards education provided extremely favourable conditions for the implementation of the reform. Table 1 Government Expenditure on Education, 1995–2007

Government expenditure on education ($ million)

Government expenditure on education as percentage of total government expenditure (%)

Government expenditure on education as percentage of GDP (%)

1995–96

33,875

19.8

3.0

1996–97

38,220

20.6

3.0

1997–98

47,402

23.0

3.5

1998–99

48,900

21.4

3.8

1999–00

50,744

22.6

3.9

2000–01

51,846

23.0

3.9

2001–02

52,676

22.0

4.1

2002–03

55,247

23.3

4.3

2003–04

56,948

23.4

4.6*

2004–05

54,123

22.9

4.1*

2005–06

55,576

24.0

3.9*

2006–07

56,450

23.0

3.9*

Financial year

Notes: Figures of the 1995–96 to 2004–05 financial years have been adjusted in view of the harmonization of pre-primary services and changes on GDP figures. Sources: * Census and Statistics Department; figures on GDP are subject to revision.

“3+3+4” Reform Hong Kong used to follow the UK example and adopted the “5+2+3” (five-year secondary plus two-year matriculation plus

21 Ibid. p. 6.

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three-year university education) model, a system quite different from most other parts of the world. Students usually study for five years in a secondary school before taking the HKCEE. Only about one-third of the Secondary Five graduates will be able to go to the two-year matriculation classes (or the “sixth form”) operated within secondary schools. Then the matriculation graduates will need to sit for another public examination, the HKALE. Up to now, the student intake at local universities is largely dictated by the results obtained in the HKALE. For most undergraduate programmes, a bachelor’s degree takes three years. Senior secondary schools devote most of their time to examination preparation. They are asked to avoid excessive extra-curricular activities and reading outside the examination syllabus. Emotional and other needs of the youngsters are neglected. Students are usually divided into two distinctive streams, including the arts stream and the science stream (a minor stream would be the commercial stream). This academic structure at the senior secondary level is generally thought to be too narrow and the curriculum should be broadened. From the outset, the Education Commission was in support of changing the “5+2+3” model to the “3+3+4” model, which was closer to the prevailing system in the Chinese mainland and the US. For students to receive well-rounded education the number of public examinations would have to be reduced and the period of study at university lengthened. But the government has taken four years to finalize its final proposals on restructuring the academic system at the senior secondary and university education levels. In late 2004, the Education and Manpower Bureau (EMB) finally published the final report.22 It was well received by the public. However, many hurdles would need to be overcome before such changes can be put in place. These hurdles include: 1. Financial problem. More students will be promoted to Secondary Six. (Currently, almost two-thirds of Secondary Five students are screened out). Moreover, the unit cost of

22 Education and Manpower Bureau, The New Academic Structure for Senior Secondary Education and Higher Education (Hong Kong, 2004).

From Excitement to Disillusionment: Education Reform in Hong Kong

university education is much higher than Secondary Seven. In 2001, the unit cost for a Secondary Seven student is around HK$50,000 (approximately US$6,000) per year, whereas university undergraduate is about HK$200,000 (approximately US$25,000). The change, therefore, has a far-reaching financial implication that the government has to overcome. 2. As the two public examinations (HKCEE and HKALE) would need to be merged, many worry that too large a population is going to take one high-stake examination in which most will be screened out as failures. It is doubtful whether this is an effective way to reduce examination pressure. 3. Finally, the restructuring and redesign of the curriculum of both senior secondary and university levels will take time and consume lots of energy. This is particularly worrying when Liberal Studies was made a compulsory subject for both teaching and examination in the new senior secondary curriculum. Whether teachers will be adequately prepared is a matter of debate and great concern.23

Lessons to be Learned Why did the excitement gradually turn into disillusionment? There are important lessons to learn here. Some observers argue that it was due to implementation and coordination problems. 24 Others attribute it to the dominance of neo-liberalism that forbids real participation from below.25 In fact, the over-concentration of power

23 Ip Kin-yuen, Problems and Reforms of Secondary School to University Transition: The Case of Hong Kong, paper presented at the Eight Nation Education Research Project, Seoul, 23–26 September 2003. 24 Such as Cheng Kai-ming, “Reinventing the wheel: educational reform,” pp. 157–174. 25 Choy Po-king and Wong Ka-ming (eds.), Education Reform in the Perspective of Ordinary People; Ho Yuk-fun, Pilgrims’ Footmark on Drifting Sand.

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within the bureaucracy and its inability to adapt to changes in a pluralistic society seems to be highly problematic. Michael Fullan, a world-renowned scholar in educational studies, says education reform and change is a journey. It cannot be reduced to a rational mean-end process in which everything is well-planned and prescribed ahead. This is particularly true in a pluralistic society where the goals and appropriate means to those goals are open for interpretation and re-interpretation. Apart from a clear purpose and sense of direction, lively reform should, therefore, be an open system which is dynamic, responsive and frequently negotiating with the environment. It has to receive a constant stream of feedback from within and without, and adapt in order to obtain the optimal state of survival. Over-concentration of power is often undesirable as it can easily stop decision-makers from getting crucial information that might help them to make sense of reality. At the dawn of the new century, due to a series of structural reforms, power has been gradually concentrated into the hands of a few top officials in the EMB. The advisory system has subsided. The government dominates the interpretation of the meaning of educational reforms, and resources are concentrated in such a way that has enabled high-handed top-down measures to be initiated by government officials. Professional autonomy is not on the agenda any more. Instead, top-down control has been exerted through a bureaucratic accountability system in the form of complicating performance indicators, a quasi-market system that was designed, and is easily manipulated by, decision makers. In addition, allocation, or no allocation, of resources as means of reward or punishment is in place. As a result, political disputes have become constant since the turn of the new century.

Over-Concentration of Power A major structural change in the education-related executive and advisory bodies took place in early 2000s. The Education Department (ED) was abolished in late 2002 and its function and establishment was merged into the EMB which used to be a policy

From Excitement to Disillusionment: Education Reform in Hong Kong

bureau without executive power. Before the merger, there were frequent rivalries between the administrative officers–led EMB and the professional officers-dominated ED, which, from another perspective, can be perceived as providing a series of checks and balances. After the merger, the EMB not only continued to formulate policies as it used to, it also enjoyed fiscal resources and the manpower to implement them. The new EMB was still dominated by administrative officers who had little actual experience in schools. There was also unconfirmed evidence that the University Grants Committee (UGC), which was supposed to be a buffer organization between government and the eight UGC-funded higher education institutions, was actually under greater influence from the EMB.26 The Education Commission, which was supposed to be the most important advisory body for education policy, was gradually marginalized after the departure of Antony Leung, who was appointed as Financial Secretary in 2001. Its influence was further weakened when Arthur Li Kwok-cheung, who was formerly the Vice-Chancellor of The Chinese University of Hong Kong, was appointed as the Secretary for Education and Manpower in the first cohort of political appointments in 2002. Unlike his predecessors who used to take up the deputy position, he no longer served in the Education Commission. Since then, the Education Commission has no obvious leadership role in the education reforms. Another major advisory body, the Board of Education, which was a statutory body, was eventually abolished along with many other advisory bodies for education policymaking. The Board, made up of mainly teaching practitioners who represented major educational bodies, used to advise the Education Department on a routine basis. Although it seldom challenged the government proposals, it did serve as a checkpoint where most policy initiatives were scrutinized and commented on. The reason for that was to simplify the administrative structure and to reduce the excessive workload of the ED. As a result, many new policy initiatives went

26 The EMB’s overwhelming influence over the UGC was revealed in the 2007 investigation into the allegation related to the Hong Kong Institute of Education but has yet to be confirmed.

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directly from the EMB to the Legislative Council without consulting the opinions of the teaching profession, and thus provided no guarantee that the policy-makers would actually take care or even listen to the voice of the profession. Participation from below became rarer compared to the early stages of reform in the late 1990s when a large number of school principals, teachers and scholars were heavily involved.

Submissive Professionalism In the past thirty years, there has been a growing concern for the social and professional status of Hong Kong teachers, and a call for more autonomy has often been neglected. In response, the government tended to impose the need for increasingly higher qualifications and other requirements. The government once considered setting up a professional body for teachers. For instance, in the early 1980s, a visiting panel from the OECD recommended establishing a General Teaching Council that would look after the benefits of the teaching profession and facilitate communication between teachers and the government.27 The recommendation was not accepted. In return, a Hong Kong Teachers’ Centre aimed at providing educational resources to support learning and teaching was established in 1986. Then the Council on Professional Conduct in Education was also established in 1994 to advise the government on measures to promote professional conduct in education and to draft operational criteria defining the codes of practice for the teaching profession in Hong Kong. However, the Council was not an autonomous professional body standing for the interests of the teaching profession in Hong Kong. It was not only in 1997 that the proposal was accepted for the first time. In his first Policy Address in 1997, Tung Chee-hwa committed his government to “setting up a General Teaching Council (GTC), a professional body for teachers” within two years.28 However, it was never realized.

27 Visiting Panel, A Perspective on Education in Hong Kong. 28 Tung Chee-hwa, Policy Address 1997 (Hong Kong, 1997).

From Excitement to Disillusionment: Education Reform in Hong Kong

The same also happened to the “all graduate and fully trained” policy for school teachers. In 1998, this was accepted by Tung Chee-hwa as a drastic measure to upgrade teacher qualifications and standards. However, “the recommendations were held up, apparently because of the salary implications, and were implemented only with very small and slow steps,” and there was “no sign that the desired upgrading of teachers could be fulfilled in the foreseeable future.”29 However, this does not mean the government did not want to improve the quality of the general teaching force. It did have its own agenda. In fact, among all the education reforms recommended in Tung Chee-hwa’s first Policy Address in 1997, the measure to establish language benchmarks for teachers had real significant impact on teachers. From 2000–01 onwards, new English and Putonghua teachers have to be benchmarked through the Language Proficiency Assessment (LPA) tests by 2004. Teachers of both languages should be benchmarked by 2005 through either examinations or by attending accredited training courses by 2006.30 The proposal led to open conflicts between the government and the Hong Kong Professional Teachers’ Union (HKPTU) in the early 2000s. The government won the support of many parental groups, but antagonism between teachers and the government deepened. Apart from the LPA or benchmark requirements, there were yet further requirements for English teachers in particular, such as the need to have majored in the language they were going to teach and they were also required to be subject trained in teacher preparation programmes. The requirements seemed to be growing endlessly. On top of language assessments, teachers were also required to be competent in using information technology in teaching. Since the information technology assessment was an internal assessment rather than a public examination like the language assessment, it has

29 Cheng Kai-ming, “The quest for quality education: the quality assurance movement in Hong Kong,” in Joshua Mok Ka-ho and David Chan Kin-keung (eds.), Globalization and Education: The Quest for Quality Education in Hong Kong (Hong Kong: Hong Kong University Press, 2002), p. 45. 30 Ibid.

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not aroused much resistance and objection from the education sector.31 Furthermore, the government had also proposed continuing professional development (CPD) frameworks for principals and teachers. A consultation paper was published in 2002 on principalship. It outlined the professional development requirements for aspiring principals, newly-appointed principals and serving principals, respectively. The newly-appointed principals, for instance, were required to complete a designated programme in the first two years of principalship. The designated programme comprised four components, namely the Needs Assessment for Principals in Hong Kong, an induction programme, a school leadership development programme, and an extended programme. Serving principals needed to complete a minimum of 150 hours of CPD over a three-year cycle.32 In 2003, the Advisory Committee on Teacher Education and Qualifications (ACTEQ) published another document on a teacher competencies framework and the teachers’ continuing professional development policy in which the principles of teachers’ CPD framework were stated as follow: 1. as professionals, teachers are responsible for their own professional growth through lifelong learning; 2. teachers should be professionally up to date and well-equipped with subject and pedagogical knowledge, professional skills and supporting attitudes and values; 3. teachers as members of the school, their professional development should be regarded as an important force in school development as well as a facilitator of the professional growth and development of their colleagues; 4. teachers’ professional development should meet the needs of individual teachers as well as the needs of schools with the

31 Law Wing-wah, “Globalization as both threat and opportunity for the Hong Kong teaching profession,” Journal of Education Change, Vol. 4, No. 2 (June 2003), pp. 149–179. 32 Education Department, Continuing Professional Development for School Excellence (Hong Kong, 2002).

From Excitement to Disillusionment: Education Reform in Hong Kong

priority being between individual teachers and individual schools; 5. individual teacher can choose to specialize or excel in particular dimensions of schoolwork as they grow in professional maturity.33 ACTEQ proposed that all teachers, irrespective of their rank and capacity, should engage in CPD activities of not less than 150 hours in a three-year cycle, including three school-organised staff development days and studies or professional development activities such as short-term training programme, seminars, conferences, talks, workshops, undergraduate programmes and postgraduate programmes in education.34 Undoubtedly, the government has tried very hard to enhance the overall quality of the teaching profession. However, the government was not interested in establishing an autonomous professional body for teachers. Keeping things under the government’s control seemed to be one of the major concerns of the policymakers. However, this type of control was not empowering teachers. In the course of reform, putting teachers in a submissive role might be good for keeping things in order, but it is difficult to empower the teachers to own the reform.

Bureaucratic Accountability The issue of quality education can be conceived as a matter of accountability. In the course of reform, one might notice that the notion “quality” was to a very large extent determined by the bureaucrats. Often the indicators were set out by the bureaucrats, the inspections carried out mainly by the bureaucrats, and reports written by the bureaucrats, along the lines they had laid down. Without a sense of ownership shared among educators, the accountability system simply produced a great deal of anxiety and alienation.

33 Advisory Committee on Teacher Education and Qualification, Towards a Learning Profession (Hong Kong, 2003), pp. 13–14. 34 Ibid. pp. 14–16.

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The switch from emphasis on quantity to quality can be traced back to the early 1990s. It was clearly put forward by the Education Commission Report No. 7 (ECR 7) in 1997.35 “Quality education” recommended in the report was equivalent to providing an education service in an effective, accountable and cost-effective way.36 It was regarded as evidence of introducing techniques and an ethos of business management, in which the ideas of quality assurance, management, accountability, competition, costeffectiveness and value-added have been applied to the education sector. In response to the fundamental requirements about the quality of teaching and learning and management stated in ECR7, the ED set up school quality assurance framework in September 1997, following the mindset of total quality management. The two-pronged approach to quality assurance, comprising internal quality assurance by schools and an external quality assurance mechanism by non-education practitioners, was adopted. The former should be achieved through self-evaluation by schools and the provision of improvement plans for sustainable development while the latter is a kind of inspection to monitor and raise the quality of school education. The external quality assurance would follow the schools’ self-evaluation and make recommendations for their further improvement and development. The mechanism was named Quality Assurance Inspection (QAI) that started inspecting and evaluating schools’ internal operation and overall performance based on a set of performance indicators in 1998. In 1997–2000, inspections were conducted in 113 schools. Based on past experience, the government has introduced the school self-evaluation and external assessment mechanisms in recent years. In order to increase the transparency and accountability of schools to the general public, the Committee on Home-School Cooperation has published kindergartens, primary and secondary schools annual profiles since 2000. Schools were required to

35 Education Commission, Report No. 7 (Hong Kong,1997). 36 Tse Kwan-choi, “Conflicts, paradox and effectiveness in Hong Kong educational reform,” (in Chinese) Hong Kong Journal of Social Sciences, Vol. 20 (2001), pp. 1–55.

From Excitement to Disillusionment: Education Reform in Hong Kong

evaluate themselves according to a set of performance indicators. Then the external reviewers came to check whether the self-evaluation process was conducted properly. The gravity of work was switched from the external QAI to the schools’ internal self-scrutiny. There were reports of excess work, with one school producing boxes of documents. Given the uncertainty over the results, the entire exercise brought tremendous pressure to some schools in the 2000s. As a large number of quality indicators were adopted in these evaluations and reports, the public and media naturally shifted their foci to inter-school comparisons and classifications. Even though quality assessments and indicators were targeted at schools’ strengths and weaknesses in order to enhance quality, they became a vicious competition which might have an adverse impact on long-term school development. Especially one must bear in mind that schools are different in their own characteristics and settings. The one size for all approach can do more harm than good.

Quarrels over School Governance The idea of school-based management (SBM) has been generally accepted by the public after years of try-out in Hong Kong since the early 1990s. It was unexpected and unprecedented that quarrels over SBM led to almost total breakdown of mutual trust between the government and the Diocesan Church, a major sponsoring body that governs about half of the subsidized schools in Hong Kong. The policy of SBM, widely implemented by schools in Europe, the US and Australia in the 1980s, is a kind of school management model embracing the ideas of decentralizing governance from the central authority to the school level. School principals are fully accountable for their school management and traditional management practice in the existing education system relies heavily on the central authority which exerts much of the control over school management and internal school operations. Under the SBM model, schools are empowered with greater autonomy and flexibility to accomplish education objectives and to meet students’ individual needs. The basic SBM principle demands the government

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to delegate more power as well as the responsibility of managing school to public sector schools. The decentralization or devolution of school governance power is aimed at achieving more effective use of human resources and also more effective management. In short, school management reform has two implications: one is to decentralize the power from the central authority, and the other is to develop professionalism and enhance accountability as an indirect participation of the government in school management.37 In Hong Kong, the idea of SBM, which was put in the name of the “School Management Initiative (SMI),” was first introduced in 1991 by the government echoing public sector reform.38 Starting with a pilot scheme involving 21 schools that volunteered for the SMI project in 1992, it expanded to cover 199 primary, 148 secondary, and 18 special schools in 1997.39 Following recommendations made by the Education Commission in the ECR 7 in 1997, the government made a decision that SBM would be adopted in all aided-schools in 2000. In the same year, a consultation document40 on the SBM was published by the government. It focused on the role of school management committees (SMCs) of aided schools, but also kicked off debates on the composition of the SMCs. An Education (Amendment) Bill 2002 was introduced in 2003, proposing to restructure the SMCs so that they would be registered as incorporated bodies comprising new membership other than representatives from the school sponsoring bodies (SSBs), including the principal as the ex-officio member, not less than one teacher, one parent, one alumni and one independent manager. Managers nominated by the SSB should not exceed 60%

37 Cheng Yin-cheong, School Effectiveness and the Mechanism of School-Based Management Development (Taipei: Psychological Press, 2001). 38 Education Department, Hong Kong government, School Management Initiatives: Setting the Framework for Quality in Hong Kong Schools (Hong Kong, 1991). 39 Cheng Yin-cheong and Chan Ming-tak, “Implementation of school-based management: A multiple-perspective analysis of the case of Hong Kong. International Review of Education, 46 (3/4) (2000), pp. 205–232. 40 Advisory Committee on School-based Management, School-based Management: Transforming Schools into Dynamic and Accountable Professional Learning Communities (Hong Kong, 2000).

From Excitement to Disillusionment: Education Reform in Hong Kong

of the total voting membership.41 The Bill was fiercely objected to by some major SSBs, namely, the Diocesan Church and Hong Kong Sheng Kung Hui,42 in the fear that it was a conspiracy to reduce the churches’ influence in the community after the reversion of sovereignty to China. In response, a counter-proposal of creating a two-tier system, which left the SSBs’ superiority in the SMCs unchallenged but also allowed representatives outside the SSB to participate in committees at the working level, was offered by the Church. However, the government did not accept such a proposal and resisted making any concessions in its original bill. Although the Bill was ultimately passed by the Legislative Council in July 2004, a lawsuit was subsequently initiated by the Diocesan Church to review the legitimacy of the law in light of the Basic Law, which safeguards the rights and freedoms enjoyed by religious organizations to run schools and offer education services in post–1997 Hong Kong. It was a pity the SBM bill put too much emphasis on the change of SMC membership rather than the main issue of devolving governance power from government to school principals and teachers, which was supposed to be the core issue. The mutual distrust between the government and SSBs, such as the Diocesan Church and Hong Kong Sheng Kung Hui, might have a far-reaching impact on Hong Kong education development. However, such a stalemate over the SBM policy was avoidable if neither side had taken such a hard line.

Issue of Privatization Apart from the aspects discussed above, it is also noteworthy to examine the plurality of the mode of school advocated by the government in recent years, in particular the Direct Subsidy Scheme (DSS). The initiation of DSS creates variables to the Hong Kong education system which has long been dominated by government

41 Education & Manpower Bureau, Education (Amendment) Bill 2002 (Hong Kong, 2002). 42 See, for example, then Bishop Joseph Zen, “Can we organize schools according to Catholic beliefs any more?” Kung Kao Po, 28 September 2003, p. 23.

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and aided-schools. But at the same time, it has also created a potential problems in terms of social inequality. The DSS was first recommended by the Education Commission in its Report No. 3 (ECR 3) in 1988. It proposed that instead of regarding private schools as a means to provide insufficient places in government and aided-schools, the government should develop a strong and independent private school sector. 43 The subsidy allocated to individual DSS schools, which is based on the average unit cost of an aided or government school place, varies according to the student intake. The subsidy the school receives is reduced accordingly if the school fees exceed the limit set by the government. In fact, the school fee was not the only difference between DSS schools and other public schools, including government and aided ones. There are also differences in the mode of school management and the formulation of school policies. DSS schools have much more autonomy in several areas such as curriculum planning, student admission, staff deployment, and the allocation and use resources.44 At the time when DSS was launched in 1991, only five private “patriotic” schools and four international schools joined the scheme whereas none of the aided-schools switched to DSS. In 2004–05, the number of DSS schools increased to 55, comprising 44 secondary (including senior secondary schools), 10 primary and one “through-train” mode schools. 45 The rapid expansion of DSS schools could be partially attributed to the change in the funding model. At first, it was stipulated that the school fee of a DSS school could not exceed one-third of the average unit cost of an aided-school place. No significant changes were reported until 2001. In order to gain broader support from aided primary and secondary schools as well as new sponsoring bodies, the DSS income banding system was revised. As a result, a DSS school would continue to receive a full recurrent subsidy from the government until its fee

43 Education Commission, Report No. 3 (Hong Kong, 1988). 44 Tam Man-kwan, “Private school in Hong Kong,” in Gu Mingyuan and To Cho-yee (eds.), Past and Future of Hong Kong Education (Beijing: People’s Education Press, 1999), pp. 547–566. 45 Website of Education & Manpower Bureau, http://www.emb.gov.hk/ FileManager/TC/Content_175/schlist2004-05(fees)_c1.pdf

From Excitement to Disillusionment: Education Reform in Hong Kong

level reaches 2.33 times the average unit cost of an aided school place. For instance, with reference to the average unit cost of an aided-school place in the 2001–02, the maximum school fee for a DSS primary school was $48,000 per annum while a DSS secondary school was $68,000. Although schools with school fees within a certain range were required to set aside funds for scholarships or financial assistance schemes to ensure equal opportunities of study for students from low-income families, it is argued that more affluent families would be able to enjoy more opportunities to send their children to study in traditionally prestigious and famous DSS schools because they can afford higher tuition fees. This posed a threat to the egalitarian principle that school places in the public domain are allocated according to one’s academic achievement based on the principle of meritocracy rather than in terms of money.46

Pressure and Stress Many reform initiatives mentioned above came together and resulted in huge pressure on school teachers. The initiatives did not come from the educational professionals. Instead, most of them were initiated by a small group of government officers and the business sector. The enthusiasm behind the reforms was fueled by the idea of enhancing the quality of the workforce in order to meet the challenges of an increasingly globalized and competitive knowledge-based economy. Other reasons included the growing distrust on the teaching profession which led to attempts to enforce some sort of accountability system for various aspects. Unfortunately, this was further complicated by incoherence and even disconnection between different policy items. As a result, teachers experienced frequent changes in the expectations imposed on them.

46 Education Department, General Circular No. 210/2001 (2001). See also Ip Kin-yuen, “Trends and the issue of social equality regarding public schools converting to DSS schools in Hong Kong,” Xueshu Yanjiu (Guangzhou), Vol. 3 (2003), pp. 104–107 (in Chinese).

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A bigger problem was that there seemed to be a lack of an effective feedback loop that could help the decision-makers to understand more about the realities at the school and classroom levels so that they could adjust the pace and direction of reforms. Apparently without such a feedback loop, the new reform initiatives were almost insurmountable. Teaching in Hong Kong has long been well-known for its excessive workload. In a comparative study, it was found that the teaching load of Hong Kong school teachers was double that of their counterparts in Taiwan, Shanghai and Beijing, and they had to take care of an additional 20 to 30% of students.47 On top of that, in an influential speech delivered at a principals conference in 2004, Cheng Yin-cheong, an expert in educational studies in Hong Kong, compiled a list of new reform initiatives, including curriculum reform, inclusive education, SBM, school self-evaluation and external audits, language benchmarks and continuous professional development, and questioned whether such the working conditions of school teachers had improved because of these reforms. Finally, he concluded that there was a serious bottle-neck in which there were too many new initiatives taking place within a short period time, overwhelming Hong Kong school teachers, who have long been overloaded.48 Another problem was job security in the teaching profession. In recent years, there has been a surplus of teachers, particularly at the primary school sector, but now hundreds of teachers have been forced out of the schools they original worked in, either to get jobs in other schools, or to become “substitute teachers.” More teachers are expected to lose their jobs in the coming years when the “culling school” phenomenon will spread from the primary to secondary levels.

47 Wu Guozhen and Ora Kwo, “A comparative study on time and characteristics of teachers’ activities in Hong Kong, Macau, Beijing and Shanghai,” Hong Kong Educational Research Journal, Vol. 18, No.1 (2003), pp. 113–131. 48 Cheng Yin-cheong, “The bigger picture of Hong Kong educational reform,” paper presented in the First Principal Conference in the Hong Kong Institute of Education on 19 March 2004 (in Chinese).

From Excitement to Disillusionment: Education Reform in Hong Kong Table 2 Surveys on Teaching Profession in Hong Kong, 2004

Stress Tendency to quit job

*CUHK

*HKPTU

*HKFEW

25.2% (Mental illness)

6.6% (extreme) 51.9% (serious)

18.8% (extreme) 52.9% (serious)

56.5%

41%

36.9%

Tendency to commit suicide

4%

Working hours per day

11.8 hours

Sources of pressure

5.2% Over 11 hours (68%)

• Education reform (7.84)

• Ever-changing policies (97.6%)

• Education Reform (88.4%)

• School evaluation by government (7.64)

• Non-teaching duties (95.8%)

• Administrative duties (64.7%)

• Teaching duties (92.6%)

• In-service learning requirement (62.4%)

• Administrative duties (6.81) • Student behavioural problems (6.76) • In-service learning, or language benchmark test (6.68)

• Over expectation by the community • (Deteriorating) (92.5%) professional prospect (56.6%) • In-service learning, or language benchmark test (90.5%)

• Pressure derived from teaching (49.2%)

*10 point scale

*CUHK

= Hong Kong Mood Disorders Centre, The Chinese University of Hong Kong *HKPTU = Hong Kong Professional Teachers’ Union *HKFEW = Hong Kong Federation of Educational Workers

There were two reasons for the “surplus teacher” phenomenon. On the one hand, there has been a significant drop in the birth-rate since the mid-1990s and, subsequently, total school enrolment is estimated to decrease from 13,433 classes in 2001 to 9,600 classes in 2010. On the other hand, the government did not respond positively to the popular request for implementing the policy of “smaller class teaching.” Up to early 2007, the government still upheld its existing policy of maintaining large class size with 32–37 pupils per class in primary schools and 40 per class in secondary. It

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was expected that the situation would get worse in the years to come if the government was not going to change its policies. Cheng Yin-cheong summarized a few survey reports on the current situation facing the teaching profession in 2004 by various organizations, including two major teachers’ union and a university in Hong Kong (See Table 2). His conclusion was that the teaching profession in Hong Kong was in a serious crisis.49 From what was revealed in the surveys, the situation facing the teaching profession in Hong Kong was obviously alarming. To sum up, expectations on teachers was on the rise, but reforms were taking place without adequate human resources to alleviate both teaching and non-teaching workloads. Fewer teachers were feeling satisfied with the on-going changes in the schooling system within the context of education reform. Both the mental and physical health of teachers was deteriorating. In the long run, the plight facing teachers might make it more difficult to recruit bright graduates to join the teaching profession and work for sustainable development of education in Hong Kong.

Conclusion This chapter commenced with a brief overview of the development of education reform in Hong Kong since 1997, followed by an investigation into how it ignited some excitement and how that excitement gradually turned into disillusionment. It was argued that some of the major problems were an over-concentration of power, a lack of effective feedback mechanisms that informed the decision-makers about what was happening in the frontline working place, and the incapability of the government to recognize the problems and adapt to changes in the education sector. This is not to suggest that the education reform was a total failure. It had triggered quite a number of experiments in which

49 Cheng Yin-cheong, “The teaching profession is in crisis,” Ming Pao, 25 November 2004 (in Chinese).

From Excitement to Disillusionment: Education Reform in Hong Kong

educators could try out new educational ideas.50 Quite a number of primary schools have experienced a more relaxed environment since the early 2000s, facilitating more experimental teaching. Yet there are several lessons to be learned. If education reform is a kind of social reform that changes people’s mindsets, we cannot count on a small group of leaders in the business sector or policymakers in the government bureaucracy. We need a joint effort and collaborations from different walks of life or different stakeholders in society. Moreover, we need deeper reflections on how we have been teaching, learning, and living. Without serious and in-depth reflection, reforms are likely to go nowhere.

50 See, for example, cases reported in Leila Chan, Education Reform: Beginning from a Dream (Hong Kong: Ming Cheung Press, 2000). One recent example is the school which one of the authors of this chapter is currently serving, the HKICC Lee Shau Kee School of Creativity, which is a senior secondary school with special features in arts and creativity. The establishment of the school received much support from senior officials who led the education reform.

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19 Housing (1997–2007) Adrienne LA GRANGE City University of Hong Kong

Introduction At the time of Hong Kong’s handover to China in 1997, of market economies the territory had one of the largest public housing programmes relative to its population. Nearly half the housing stock had been provided by the government, mostly in the form of public rental housing (36%), with a small but growing assisted home ownership sector (11%). The private sector comprised just over half the stock, mostly owner occupied. House price inflation was high through most of the 1980s and 1990s, with a spectacular property bubble developing in the early to mid 1990s. The Housing Authority (HA) accelerated public provision of housing as fast as possible to provide affordable rental housing and help satiate the frenzy for buying flats in a rapidly rising housing market. Public rental housing (PRH) was sought after and expanding. But the programme with the highest profile was the Home Ownership Scheme (HOS) which enabled wealthier public tenants and private tenants to buy units in newly constructed estates in a shared equity arrangement with the HA which reduced the cost burden of ever escalating prices in the private sector. The HA had a large professional staff to manage and maintain its numerous housing estates and was a large scale owner of commercial property including shops, restaurants, car parks and medical and other facilities, which served its estates. This was indeed the heyday of the Housing Authority and the public housing sector. It was the new SAR government’s misfortune to inherit Hong Kong within months of the Asian Financial Crisis. While Hong 699

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Kong had avoided most of the financial market excesses of other Asian countries it was hit hard by the fallout, and housing was particularly affected. Within months house prices had plummeted 50% from their peaks earlier in the year and languished at around 40–60% of these peaks for several years; the housing market was beginning to recover when Severe Acute Respiratory Syndrome (SARS) broke out in 2003 which led to another downward jolt. Since then house prices have improved somewhat in line with general improvements in the economy although many home owners would still sell their houses today for less than they paid a decade ago. A great deal has changed in public housing provision over the last decade. In many respects the HA is a shadow of its former self. While its public rental programme is intact, it has bowed out of the home ownership market altogether, shed many of its staff, divested itself of the bulk of its commercial premises and contracted out much of its estate management functions to the private sector, many of whose staff are ex-HA personnel. It has indeed been a tumultuous and unhappy decade for the HA, and, with less publicity, for the Housing Society. This chapter reviews developments in public housing in the first decade after the handover. It also assesses the sector’s achievements and failures and consider issues and prospects.

Housing Policy Before 1997 Before 1954 government involvement in housing provision was minimal, restricted to the introduction of public health controls and building regulations (honoured more in the breach than the observance) and limited support for organizations providing low income housing. The Hong Kong Government has been massively involved in housing provision since the mid-1950s, when it initiated a large scale programme to re-house squatters in resettlement blocks. By the mid-1970s nearly half the population lived in public housing, most in small, cramped flats on estates with relatively few amenities. In 1976 the HA introduced the Home Ownership Scheme (HOS) to build estates for sale to wealthier public tenants and lower middle

Housing (1997–2007)

income and middle income private tenants. The HOS was a shared equity scheme whereby purchasers received a considerable discount (up to 50%) on the market price, to be repaid to the HA if the owner sold, sublet or re-mortgaged the property. The mid 1970s was a watershed in public housing provision and represented a shift from ad hoc involvement to sustained and planned intervention. The ambitious goal of the Ten Year Housing Programme (1973–1983) was to eliminate the housing shortage and improve the quality of public housing. Although this was a decade of impressive achievements in public housing provision, this goal was not met. In 1987 the Hong Kong Government presented the Long Term Housing Strategy (LTHS) which provided a blueprint for meeting Hong Kong’s housing needs to 2001. It had two main goals: to promote the equitable and efficient use of scarce resources, and promote social stability and a sense of belonging to Hong Kong. The LTHS identified a continued need for large-scale public rental housing production. It also sought to promote home ownership among wealthier public tenants who no longer needed large rental subsidies but could not afford to buy homes in the private sector. The successful implementation of the strategy would result in a significant redistribution of housing stock from the public to the private sector, and from renting to owning, primarily through the mechanism of interest free loans to help families buy in the private sector, rather than provide HOS units to all those who could not afford private sector prices. Public housing however would remain one of the two pillars of Hong Kong’s housing delivery system. By the 1990s Hong Kong’s economy was in full swing and it was becoming increasingly apparent that the public rental sector was housing a large number of wealthier tenants, particularly those families who fortunes had improved considerably over the duration of their occupation of their heavily subsidized public flats. The HA turned its attention to reorienting public rental subsidies from wealthier tenants and sought to target rental subsidies more closely to families in need. In 1992 it introduced the Rent Assistance Scheme which provided a rent reduction for low income households, many of whom were elderly, and encouraged low income tenants to apply for Comprehensive Social Security Assistance (CSSA). In 1996 it introduced the Policy on Safeguarding Rational Allocation of

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Public Housing Resources requiring wealthier tenants to pay double rent and tenants with high incomes and high net assets to vacate their public units. By the mid 1990s the HA was increasingly becoming a victim of its own success as its housing stock, both for rental and ownership, was seen to be an attractive alternative to private sector housing available particularly to lower and lower middle income households, and indeed the middle classes, as rents and house prices continued to rise. In 1994 the HA presented the Mid Term Review of the LTHS which confirmed the broad direction of the LTHS, and in particular endorsed a number of recommendations to smooth the transition to greater private sector involvement in housing provision. It should be noted that transition to private sector involvement was a response to pressure to keep expanding the public housing sector as private sector prices rose and rose. In 1996 the Housing Branch prepared an outline strategy as part of the process of preparing a Green Paper on housing policy for Hong Kong, the LTHS Review. The strategy emphasised the need to scale down the public rental sector by the following means: reducing eligibility for public housing; reducing, if not eliminating, the future production of new rental flats and meeting forecast demand through increased turnover of refurbished flats; as well as rationalizing rent levels and housing subsidies. These policies would enable housing offers to be made to eligible applicants within two years of their initial application for housing in spite of reducing public rental housing construction. In the main the outline strategy reiterated and expanded the Housing Authority’s prevailing policies towards home ownership, in particular the emphasis on promoting assisted home ownership to sitting public tenants and utilizing private sector expertise and capacity to supply subsidized sale flats.

Housing Policy 1997–2006 The new SAR government took over the administration of Hong Kong from the British within months of the Asian Financial Crisis, which began in mid 1997. Before the financial crisis Hong Kong’s

Housing (1997–2007)

housing problems were closely associated with boom times – rising incomes, rising aspirations, a shortfall of new housing stock caused by a shortage of formed sites, and house prices spiralling out of control. A year later the circumstances were very different – rising unemployment, falling rents, house price declines in the region of 50%, and a moratorium on all government land sales. However there was a certain inertia in policy making in the first year of the new administration as the Tung government sought to demonstrate leadership by tackling the housing problems associated with spiralling property prices and a shortage of housing stock.1

Building Hong Kong for a New Era – Chief Executive’s Policy Address to the Legislative Council (8 October 1997) The first public presentation of the new government’s housing policy was the Chief Executive’s Policy Address in October 1997. He identified three main targets for housing provision for the new administration. One was to build at least 85,000 flats a year in the public and private sectors. The second was to achieve a 70% home ownership rate for Hong Kong within ten years. The key means to achieve this would be the sale of about 250,000 public rental flats to their sitting tenants complemented by the construction of additional HOS flats and an increase in the number of Sandwich Class Housing Flats, to a total of 50,000 units a year by 2006. Other initiatives included an Option to Buy or Rent Scheme (eligible public tenants would be given priority to buy HOS flats and skip the PRH step of the housing ladder) and a new Home Starter Loan Scheme. A pilot Mixed Development Scheme was also proposed whereby developers would be invited to tender for selected sites subject to the requirement that at least 30% of randomly selected completed flats be handed over to the government. The third target was to reduce

1 La Grange A., “Economic transformation and public housing reform in Hong Kong,” Journal of Comparative Asian Development, Vol. 1, No. 2, (2003), pp. 21–46.

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the average waiting time for public rental housing from six and a half to under five years by 2001 and to less than three years by 2005.2

Long Term Housing Strategy Review (1998) An important policy document followed shortly after the handover, namely the Long Term Housing Strategy Review. This was presented to the public in three parts: a consultative document, a report about the outcome of the consultation process and a White Paper on the LTHS Review. The consultation document, Homes for Hong Kong People: The Way Forward: Long Term Housing Strategy Review Consultative Document, reaffirmed the broad direction of the decade-old policy, particularly with regard to meeting the outstanding demand for housing, promoting home ownership, harnessing the resources of the private sector to help meet housing demand, and rationalizing subsidies. It also chronicled the major difficulties in realizing the purpose of the LTHS and proposed detailed recommendations to resolve them. The objectives of the LTHS Review were: to provide a steady and sufficient supply of land and supporting infrastructure; to create the conditions to enable the private sector to make the fullest contribution to meeting the demand for housing; to implement subsidized housing schemes to enable those in the relevant income groups to buy their own homes; to provide quality public rental housing at reasonable rents for those who could not afford any other type of housing; and to monitor the private housing market, and, where necessary, introduce measures to curb speculation.3 The public consultation process had very little impact on the LTHS Review. This might well have been a timing problem as the 1997 Chief Executive’s Policy

2 Hong Kong Special Administrative Region, Building Hong Kong for a New Era, Address by the Chief Executive the Honourable Tung Chee-hwa at the Provisional Legislative Council Meeting, 8 October 1997 (Hong Kong, 1997). 3 Housing Branch of the HKSAR government, The Long Term Housing Strategy Review (Hong Kong, 1997).

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Address, which mirrored the major proposals of the Review, was actually presented before the Consultation Report was released. The White Paper, presented in early 1998 built on the earlier reports summarized above, and provided additional technical information about how the main objectives of the Chief Executive’s Policy Address would be implemented. Of note, it confirmed the government's commitment to meeting the demand for public rental housing. It also emphasized the importance of increasing land supply and proposed to generate sufficient formed sites, co-ordinate and accelerate the provision of housing related infrastructure (such as community facilities, roads and sewerage systems), streamline public works procedures, and shorten development procedures. Moreover, it endorsed the Mixed Development Scheme, and highlighted efforts to facilitate urban renewal, including the creation of an Urban Renewal Authority, with greater statutory powers to expedite urban redevelopment than the Land Development Corporation which it would replace. The White Paper reiterated the Chief Executive’s target of 70% home ownership by 2007, and identified the Tenants Purchase Scheme (TPS), the Option to Buy or Rent Scheme, the Home Starter Loan Scheme, and permitting public tenants to buy Sandwich Class Housing flats as important initiatives to achieve this. The government and the Housing Authority moved quickly to realize the reform agenda. An impressive start was made with the quick implementation of the TPS introduced in 1998. It was proposed to sell estates built between 1985 and 1992 (the Trident blocks) providing sitting tenants with options of a 50%, 60% or 70% discount. Resale restrictions were less onerous than the HOS. A sinking fund comprising a one-off contribution of about 8% of total sales proceeds was established. The HA also provided a seven-year structural guarantee on all structures. The TPS showed that the HA had learned valuable lessons from the failure of the short-lived Sale of Flats to Sitting Tenants Scheme introduced in 1991. The provision of home purchase loans was extended and consolidated to accelerate home purchase among sitting public tenants. The Home Starter Loan Scheme introduced in 1998 provided low interest loans to eligible families to buy their first homes from the Housing Society. The Buy or Rent Scheme was

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introduced in the same year. The Sandwich Class Housing Scheme was extended to allow sandwich class families to buy flats built by the Housing Society. Complementing efforts to promote assisted home ownership among sitting public tenants, additional reforms to rationalize the public rental subsidies have also been implemented that go well beyond the Extra Rent Policy (1992) and the Market Rent Policy (1997). The Paper presented policies that would restrict the extensive “private property” rights enjoyed by public tenants, rationalize the continuous improvement to public rental housing and tighten eligibility to the sector. In this way, more flats could be allocated to Waiting List families. These policies together would reduce the waiting time for public rental housing and target flats more closely to needy families. It was also proposed to pay particular attention to the housing requirements of special needs groups such as single person households, the elderly, new arrivals from Mainland China, bed-space apartment and rooftop dwellers and squatters.

Review of the Institutional Framework of Public Housing (RIF Report) (2002) By the turn of the century it was apparent that the effects of the Asian Financial Crisis were severe and would be long lasting. The first major housing policy initiative to deal with the very changed circumstances of the new millennium was the RIF Report. Its recommendations indicated the government’s intention to move away from the traditional method of public housing assistance – the physical construction of public flats – towards a more flexible system based on direct fiscal subsidies. The government pledged to offer 50,000 publicly assisted housing opportunities a year (as opposed to housing units) representing more than half the projected demand. This would comprise public rental housing, rental allowances, subsidized home ownership flats and housing loans. About half of the 50,000 total would be made available in the form of new public rental flats or rental allowances; the balance in the form of an appropriate mixture of subsidized home ownership flats

Housing (1997–2007)

and housing loans, as decided by the government. The increasing use of housing loans and rental allowances would facilitate the adjustment of the annual number of subsidized housing opportunities offered to match actual annual effective demand.4 The RIF Report represented a quite startling shift in policy thinking by proposing the provision of housing vouchers to eligible families in place of rental units directly. According to the RIF Report the Government would progressively reduce the level of subsidized homes ownership flat production to “the minimum required to provide insurance against unforeseen changes in the economic situation. Instead adequate loan finance will be made available to allow eligible households to purchase flats in the private sector. The benefits to the families concerned will be paralleled by the benefits to the public purse.”5 A residual programme, of 2,000 flats a year, roughly equivalent to one average public housing estate, would be prudent insurance against possible unforeseen economic changes by enabling it to retain a readily available stock of subsidized home ownership flats.6 The RIF Report also formed part of the Chief Executive’s commitment to implement a system of accountability for Principal Officials (POs). Under the new system the existing policy functions of the Housing Bureau and Planning and Lands Bureau is under the aegis of a new Secretary of Housing, Planning and Lands. POs will be supported by senior civil servants in Policy Bureaux, to be re-titled Permanent Secretaries. The HA and HS continue to exist, although with different roles from those they had previously. Control over housing policy is vested in a PO, subject to direction by the Chief Executive acting on the advice of the Executive Council. The Housing Bureau and Housing Department has been merged into a single organization with a unified chain of command and responds through the Permanent Secretary to the PO, although many of their constituent parts remain the same. The PO is chair of the HA.

4 Hong Kong Special Administrative Region government, Review of the Institutional Framework of Public Housing in Hong Kong, (Hong Kong: 2002), p. 26. http://www.info.gov.hk/hplb-h/eng/pubr/p_reports.htm. 5 Ibid. p. 5. 6 Ibid. p. 22.

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According to the RIF Report, the role of the HA will evolve in several ways: it will acquire a wider advisory remit covering both the public and private sector as well as strategic policy issues; its executive functions will be streamlined and ultimately transferred to the new housing organization; and as its financial position is unlikely to be sustainable, the return of responsibility for the financing of the public housing programme to the Administration will be required.7 Simply put, the HA will lose its powers to make public housing policies and instead will advise the new minister. Its executive functions such as setting rents for public estates, deciding prices of HOS flats and planning building programmes will no longer exist. The Housing Society will partner the Urban Renewal Authority and will no longer administer home loans; loans will be centralized under the new housing body.8

Shifts away from the RIF Report The government has remained steadfast in its support of the PRH programme. However other recommendations of the RIF Report turned out to be short lived. In March 2001 the government took its first steps to implement a housing voucher scheme by making payments to 500 elderly applicants to rent in the private sector. There was talk at the time that this would be extended to other private tenants eligible for PRH. However the pilot programme was quickly wound up and there is no intention to introduce new housing vouchers programmes. House prices had risen rapidly through most of the 1990s and as a consequence the HA had accelerated its HOS construction programme to meet the demand for assisted home ownership as calculated by its Housing Demand Model. As a consequence the HA had a large stock in various stages of development as prices declined precipitously. Although there had been an uneasy relationship between the HA and private developers since 1997, by 2001 private

7 Hong Kong Special Administrative Region government, Review of the Institutional Framework of Public Housing in Hong Kong. 8 South China Morning Post, 21 June 2002.

Housing (1997–2007)

sector opposition to the HOS and the HA was both fierce and relentless. In the face of rumours that the government would announce a cut in the sale of subsidized flats by half, from 20,000 to 10,000 units a year, in September 2001 the Chief Secretary announced an immediate ten month freeze on HOS sales until June 2002. Thereafter, he announced, sales would be in the region of 9,000 flats a year until 2005/06. He indicated the government’s intention to reduce HOS sales radically in the longer term. To compensate for the loss of HOS supply an additional 12,000 home loans would be made available to eligible families, an increase in the quota from 4,500 to 16,500.

Suen’s Nine Measures (2002) Within a year the government was looking at more radical policy responses to the perceived crisis in the private housing market, including the announcement of the termination of the HOS. This quite radical departure from long standing policy to promote home ownership by building HOS estates formed part of the new Secretary for Housing, Planning and Land’s policy agenda, unveiled in 2002. In late 2002 Michael Suen, the new Secretary for Housing, Planning and Lands, presented the direction, philosophy and principles of the new SAR government. To pump-prime the deflation-battered economy a major overhaul of housing policy had been conducted to restore the public’s confidence in the housing market. While the government would continue to provide PRH to needy families, it would halt the production and sale of subsidized flats and reduce its share in overall housing production. The government dropped the target of a 70% home ownership rate for Hong Kong and declared instead that ownership was a matter of personal choice and affordability. Instead of the rolling annual public housing construction programme, production would be adjusted to keep the waiting list time at about three years. The quota for the Home Assistance Loan Scheme would depend on actual demand and the HA’s resources. Overall three major policy directions were identified: to provide subsidized rental housing for the needy; to minimize intervention in the market and focus on land

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supply and provision of rental assistance; and promote the sustained and healthy development of the private market. These three principles were broken down into “Suen’s Nine Measures”: • to suspend all scheduled land auctions and the Application List for one year in 2003; • to exclude any railway property developments for tender for one year; • to adjust the PRH production programme according to housing demand of low income families, turnover of PRH tenants and the general acceptability of the proposed rental allowance scheme and maintain the average waiting time for PRH at three years; • to cease the production and sale of HOS flats indefinitely from 2003 onwards; • to continue to offer loans to help eligible families and sitting PRH tenants to buy their own homes through the new Home Assistance Loan Scheme; • to stop all the mixed development projects, including the Flat for Sale Scheme operated by the Housing Society and terminate the Private Sector Participation Scheme; • to halt the further sale of PRH units under TPS on completion of Phase 6 of the programme; • to review the Landlord and Tenant (Consolidation) Ordinance to free up the private rental market; • and to remove the restriction on internal sales in the private sector and the restriction that each purchaser can only buy one residential unit together with no more than two parking spaces.9

Review of Domestic Rent Policy (2006) The most recent policy issue to be tackled by the government has

9 Suen M. M. Y., A statement on Housing Policy by Hon Michael M Y Suen, GBS, JP, Secretary for Housing, Planning and Lands, (2002). http://www.housingauthority.gov.hk/hdw/content/document/en/aboutus/policy/ press20021113.pdf.

Housing (1997–2007)

been domestic rents. The HA decided to undertake a comprehensive review of its domestic rent policy in 2001. An ad hoc committee was established to map out a rent policy that was affordable, flexible, provided greater choice to tenants and contributed to the long term sustainability of the public housing programme. In 2002 two PRH tenants applied for judicial review of the HA’s decision to defer rent reviews in October and November 2002. The judicial review arose in the context of the Housing Ordinance’s requirement that the HA review rents every three years and ensure that the Median Rent to Income Ratio (MRIR) not exceed 10% of tenant incomes. Hong Kong had entered a period of falling incomes and deflation in the years after the Asian Financial Crisis, and in response to this the HA waived rent increases approved in 1998 and 1999 and has conducted no rent reviews since. (Rent reviews are conducted over a two year period.) In spite of rents remaining at 1995 and 1996 levels the MRIR has been increasing gradually, exceeding 10% for the first time in 2000 and peaking at 14.7% in 2004; it remains at about 10%. The Court of First Instance and the Court of Appeal respectively ruled in favour of the appellants and the HA. The Court of Final Appeal ruled in November 2005 that the HA was not under a statutory duty to review rents and revise them to ensure that the MRIR did not exceed 10%; and upheld the Ordinance’s requirement that the HA ensure that revenue from its estates are sufficient to meet its recurring expenditure; estates ran at a loss from the mid 1990s to the mid 2000s. (It is noted that the 10% MRIR requirement only applies to older estates; the MRIR for newly constructed estates is 15% or 18.5% depending on the size of the unit relative to the number of residents).10 While investigations and consultations continued the committee waited on the findings of the Final Court of Appeal as this would have a major impact on the HA’s domestic rent policy one way or another. Indeed it deliberated on quite different policies that could accommodate either a positive or negative outcome of the court case for the HA. (As an example it had been noted that the overall MRIR

10 Housing Authority, Review of the Domestic Rent Policy Consultation Paper, (2006). http://www.housingauthority.gov.hk/hdw/content/document/en/aboutus/ resources/publications/public_consultation.pdf.

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could be reduced by permitting all tenants in receipt of CSSA payments to live rent free as their rents were paid by the Department of Social Welfare.) In March 2006 the HA published a consultation paper setting out the initial findings of the Ad Hoc Committee. Consultation ran from March to June and the Committee submitted its final report in November 2006, which was endorsed at the HA’s meeting in the same month. The Report identifies the major factors that explain the rise in the MRIR over the last decade. This includes a sharp rise in the number of CSSA recipients, who do not have a rent affordability problem because they receive a rent allowance that covers their rent but this increase in CSSA numbers does raise the overall MRIR. There has been a large increase in the number of small and elderly households, who usually have lower incomes than larger households – but are not necessarily poorer. There has been a significant improvement in space allocation standards (average internal floor area per person is now 12 square metres as opposed to allocation space of 7 square metres) and while bigger flats are popular with tenants they attract higher rents. Finally, 185,000 PRH tenants have left the sector, most of whom would be wealthier tenants, to participate in the various assisted home ownership schemes. While decanting wealthier public tenants to lesser subsidized assisted home ownership units and freeing up rental flats for poorer families was one of the major objectives of the promotion of home ownership it did reduce the average income and thus MRIR of those remaining.11 With certainty provided by the verdict of the Court of Final Appeal, the Committee made a number of recommendations regarding domestic rent policy. It recommended that the HA develop an income index tracking the movement of PRH tenant household income to guide future rent adjustments; provide an across-the-board rent reduction of 11.6% which would ensure the most favourable starting point for all tenants for new rent levels; exclude double rent paying tenants and CSSA tenants as they distort the MRIR; and continue to adopt the MRIR benchmarks of 15%

11 Housing Authority, Review of the Domestic Rent Policy Consultation Paper.

Housing (1997–2007)

and 18.5% for respective allocation standards of 5.5 square metres and 7 square metres internal floor area per person. Pre-empting the findings of the Committee but endorsed in the Committee’s report, the HA has relaxed the conditions of the Rent Assistance Scheme. In 2002 income eligibility criteria of elderly households were reduced from below 50% to below 60% of WLIL and the rent to income ratio threshold from exceeding 25% to 20%; both elderly and non-elderly tenants affected by redevelopment could apply for rent assistance immediately upon rehousing to new or refurbished flats; and the grace period after which beneficiaries of rent assistance are required to move to cheaper flats was extended from 2 to 3 years (elderly and disabled tenants being exempt.) In 2005 the RAS was relaxed again so that elderly tenants had to meet either the income or RIR requirement rather than both requirements as was the case previously (Subsidized Housing Committee Memorandum 72/2005). In 2006 the RAS was relaxed again to cover all low income tenants. Non elderly applicants are eligible for a rent reduction if they have incomes below 50% of the WLIL or their RIR exceeds 25% or their incomes are between 50–60% of the WLIL and their RIR exceeds 15%. Elderly households are eligible if their incomes are below 60% of the WLIL or their RIR exceeds 20%.12 In summary, the HA has a stock of about 650,000 rental units, housing about 2 million people, a third of Hong Kong’s population. The Housing Society has about 67,000 units in its portfolio, housing about 156,000 people. While the PRH sector remains robust the government has dismantled its assisted home ownership programmes and is currently in the process of disposing of its remaining HOS units. Similarly the well received TPS has been closed down after the recent completion of its final sales phase. The HA has also initiated a series of measures to privatize its estate management functions and has recently sold off much of its commercial property (180 retailing and car parking facilities) to the Link REIT, established in 2005. What does this all mean for the present and future of public housing in Hong Kong.

12 Housing Authority, Review of the Domestic Rent Policy Consultation Paper.

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The Hong Kong Special Administrative Region in Its First Decade

Achievements and Failures Public Rental Housing In many other parts of the developed world public housing is increasingly stigmatized and residualized and treated by even poor people as housing of last resort, if they can get access to the sector at all. The Hong Kong government has remained committed to meeting the need for public rental housing. PRH houses about a third of the city’s population under circumstances that have generally been improving steadily over the last four decades and have continued to do so in the last difficult decade. Table 1 shows that on average between 1996/07 and 2004/05 a total of 206,900 new flats were constructed and a total of 109,200 demolished. This is an average production rate of 23,000 flats per year and a net increase of nearly 100,000 units over the nine year period. Flats that replace demolished units are larger so the net increase in living space is bigger than the net increase in units. Rents remain affordable, ranging between $250 and $3,810 per month, with an average at $1,470 per month. Some 61% of tenants pay less than $1,500 monthly.13 The recent relaxation of the Rent Assistance Scheme makes it difficult to sustain the view that the HA is gauging its tenants. While the quality and space standards of public housing is easy to criticize its quality needs to be placed in the context of quality and size of private housing units affordable to low income and not such low income families. Large public housing estates have long lead times and the planning for much of this development would have occurred in the heady days of the pre-1997 era. However according to the HA’s proposed budget for 2007/08 in the five years between 2006/07 and 2010/11, the HA will build an average of more than 15,000 flats per annum at an average construction expenditure of $6 billion per year to produce sufficient PRH units to maintain the waiting time at about three years.14 The HA has reported a significant decline in the

13 Housing Authority, Review of the Domestic Rent Policy Consultation Paper. 14 HA’s Press Release, 23 January 2007.

Housing (1997–2007) Table 1 Number of New PRH Flats Constructed (1996/97–2005/06) and Demolished Year

No of new flats

Demolished

1996/07

14,900

14,800

1997/08

17,900

14,800

1998/09

9,600

15,500

1999/00

27,700

5,900

2000/01

46,800

13,600

2001/02

29,800

32,400

2002/03

20,400

6,500

2003/04

15,100

5,200

2004/05

24,700

500

2005/06 (up to Sept 2005)

11,400

0

Source: Review of Domestic Rent Policy Consultation Paper, 2006, pp. 16–17

waiting time for public housing over the last decade. There are about 90,000 households on the waiting list and the government has achieved its target of maintaining the average waiting time at three years. While construction targets for the next five years are lower than the average construction rate of the previous period, if waiting lists are maintained at three years, the government shows commitment to meeting the demand for PRH. The HA has also spent heavily on maintenance and improvement over the last decade and its stock is generally in a good state of repair.15 Living space has increased over the last decade. Average living space has increased 28% from 9.3 square metres Internal Floor Area (IFA) per person in 1996 to 11.9 square metres in 2005. For newly let units it has now reached 12.3 square metres.16 This increase has

15 Lau K. Y., “Creating social stigma or a socially-mixed community: policy considerations and impacts of public housing policies for the needy in Hong Kong,” paper presented at the International Housing Conference in Hong Kong, Housing in the 21st Century: Challenges and Commitments, Hong Kong, 2–4 February 2004. 16 Housing Authority, Review of the Domestic Rent Policy Consultation Paper.

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resulted from the conversion of a significant number of surplus HOS flats into PRH, an increase in the number of one-person households, the demolition of smaller flats under the Comprehensive Redevelopment Programme, reduction in household size following moving out of family members, and other factors. While this is a very low space consumption standard for such a wealthy city, space standards in the private sector for all but the wealthy are notoriously low as well. The percentage of overcrowded families as defined by the HA (i.e. less than 5.5 square metres per person) is now less than 1%.17 It is noted that most families rehoused in PRH achieve a significant increase in living area after rehousing. In 2000 their median living density increased from 5.7 square metres to 10.8 square metres per person.18 Age of housing stock is a simple and relatively reliable indicator in Hong Kong of housing quality because of the rapid functional obsolescence and physical deterioration of the city’s housing stock. Table 2 shows that about a third of the HA’s rental units are less than ten years old, an indication of the successful implementation of its Comprehensive Redevelopment Programme that rehoused a million public tenants in new blocks. It remains to be seen however whether the HA will retain its commitment to redeveloping its obsolete stock, which will have a major impact on the attractiveness of housing in this sector in the coming decades. The HA’s declining financial fortunes as a consequence of the termination of the HOS and likely difficulties in maintaining and expanding its access to well located sites will make any future redevelopment on a large scale problematical and have serious consequences for the long term viability of the sector. There is international evidence of the benefits of a socially heterogenous population of public tenants and for that matter socially mixed communities generally. In some developed countries public housing estates have become dump estates or sink estates which warehouse disadvantaged and troubled families. Lau (2004) investigated whether PRH was housing increasingly only low

17 Ibid. 18 Lau K. Y., “Creating social stigma or a socially-mixed community.”

Housing (1997–2007) Table 2: Age of Housing Authority’s Public Rental Units Age in years

2001 (thousands)

2006 (thousands)

0–5

124

158

6–10

101

85

11–15

111

92

16–20

140

83

21–25

84

132

26+

92

133

Total

653

682

Source: Housing in Figures (2006). Table 3: Distribution of Public Rental Households According To Income Decile 1981, 1991 and 2001. PRH households as percentage of Hong Kong’s overall total Income decile

1981

1991

2001

Lowest

2.97

3.42

0.69

2

2.71

4.33

4.91

3

3.18

4.72

3.70

4

3.71

4.83

2.25

5

3.74

4.64

2.51

6

3.55

4.05

3.72

7

3.48

3.60

3.52

8

3.38

3.23

4.22

9

3.05

2.55

4.53

Highest Total Total number of PRH households Overall domestic households in Hong Kong

1.31

0.93

0.58

31.10

36.29

30.62

387,093

574,249

627,139

1,244,738

1,582,215

2,048,078

Source: Analysis of data provided by the Census and Statistics Department to the Research Team on Public Housing, Economic Change and the Shaping of Family Housing Histories of the City University of Hong Kong and cited in Lau, “Creating social stigma or a socially-mixed community.”

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income and disadvantaged households – internationally a reliable indicator of residualization of the sector. Public tenants’ median household income is lower than the median income for Hong Kong overall (a decline of 81% in 1991 to 67% in 2001) and it would be surprising if it were not. However Table 3 shows that PRH does not only house the poorest but rather houses a cross section of Hong Kong’s income distribution, clearly skewed but not restricted to the lower end. Lau also notes that a sizeable minority of PRH tenants have incomes above the WLIL, suggesting a heterogeneous population.19 The findings of the Domestic Rent Review present recommendations that seek to take account of the changing nature of the HA’s tenant body and the need for the HA to generate income to fund the maintenance and management of its housing stock while also being sensitive to the low incomes of most public tenants. It is too early to know the practical effect of the recommendations but they do suggest on face value that they are geared to balancing affordability of tenants with revenue generation for the HA.

Assisted Home Ownership The history of assisted home ownership over the last decade has indeed been a bleak one. Since its inception in 1976 to the late 1990s the HOS was an enormously popular government programme with families waiting anxiously on the outcome of lotteries to know whether their bid for a flat had been successful. In 2002 the HA terminated the HOS, making plans to dispose of its last 10,000 units as conversions to guesthouses, government quarters, and PRH flats. In 2006 the HA decided to offer for sale its unsold and returned HOS flats from 2007 onwards. There will be two phases per year of about 2,000 to 3,000 flats per phase to sitting tenants and eligible private tenants. The remaining surplus HOS flats will be sold by 2010/2011. The Mixed Development Scheme, designed to address concerns about the quality of HOS flats, had a short life span between 1998 and 2002. The Tenants Purchase Scheme (TPS) aimed

19 Lau K. Y., “Creating social stigma or a socially-mixed community.”

Housing (1997–2007)

to sell some 250,000 within a decade. In the first five phases 92,000 tenants (69% of those eligible) purchased their flats and by the final phase more than 100,000 had done so. The scheme was suspended in 2002 although Phase 6, the final phase, has only recently been completed. Home loan schemes came and went over this decade. Schemes such as the Sandwich Class Housing Scheme, the Home Purchase Loan Scheme and the Home Starter Loan Scheme were superseded and wrapped into the Home Assistance Loan Scheme which was introduced in 2003 and suspended a year later. At this time the government does not subsidize home ownership. Does this matter? There is a widely held view that in terminating the HOS (and the TPS) the government was caving in to large developers, whose view was, that with a 50–60% decline in property prices HOS and private sector prices had converged and the government was unfair competition in a very tight housing market. This competition was exacerbated by the HA’s decision not to reduce the income eligibility limit for HOS in line with its Housing Demand Model, but rather to wait a year to see if the housing market improved. Selling TPS flats did not help the situation. Why then did the HA not respond to this overlap between the HOS and the private sector by quickly cutting back the programme? In practice it was as difficult for the HA to cut back its production as it was for the private sector. It had a massive supply of HOS flats coming on stream and the process by which demand and supply for HOS is determined is slow and cumbersome. It was also under pressure to sell HOS flats to be seen to be making good use of public resources. By the time the decision was made to terminate the HOS the developers’ view that the public and private home ownership market had converged and the government was being very slow to do anything was not an unreasonable one. In the short term there appears to be no major concern about the decision to terminate the HOS. Private sector flats are more or less the same price and offer considerably more choice for prospective home owners. There is also clear evidence that many Hong Kong families have lost their nerve about participating in the property market and have been deeply shaken by the long term and debilitating effects of the Asian Financial Crisis, such as rising unemployment, declining real incomes and considerable job

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insecurity. There is also a large stock of private sector dwellings for sale in both the primary and the secondary market. While prices jumped quite spectacularly at the top end of the property market in the years immediately following SARS much of the market has remained subdued and does not yet inspire confidence. Under these circumstances the HOS is not being publicly mourned. A positive feature of policy changes, by default if not design, has been a shift away from the government ideology of home ownership as an innately desirable tenure that promotes a sense of belonging, good citizenship and well maintained housing, towards a more balanced view of tenure in the housing delivery system. In the past solving the “housing problem” and promoting home ownership was seen by the government as being, to a large degree, one and the same thing. Nowadays there is an emphasis, for example, on revising tenant landlord relations to promote the private rental sector and treating the decision to buy as a private decision rather than a government target. This raises the issue however of the consequences of another property boom in Hong Kong. To date people have been reluctant to invest in the property market in spite of rising wages and a significantly improving economy. But if Hong Kong’s past experiences are anything to go by a boom could well develop considerable momentum if house price inflation increases substantially. Hong Kong will then face the problems experienced by many western countries where home ownership is unaffordable to a sizeable minority, especially of younger people, who struggle to save for a deposit in a situation of rapid house price inflation and find it difficult to commit to mortgage payments because of the rising extent of the casualization of work of even skilled and well paid jobs. Failure to climb onto the home ownership ladder (and preferably under favourable circumstances) has serious consequences for many households over a lifetime of working and saving. Addressing these problems by making home ownership affordable for lower middle income families was a major advantage of the HOS in spite of the rhetoric about promoting social belonging and a sense of commitment to Hong Kong. The problem with programmes like the HOS is that once they are terminated they are difficult to start up again.

Housing (1997–2007)

Issues and Prospects Financing Public Housing The HA has recently announced that its financial circumstances in the short and medium term are reasonably healthy, mainly due to the sale of surplus HOS flats from 2007 to 2010/2011 and the proceeds from the divestment of its properties to the Link REIT. However this does sound rather like balancing the household budget by selling the family silver and raises questions about the implications for public housing in the longer term if the HA does not have a continuous stream of HOS flats to sell to offset the cost of building and maintaining PRH. The termination of the HOS fundamentally alters the financial relationship between the HA and the government and the financial basis of the public rental construction programme. In the past the HA had considerable autonomy to develop rental and HOS housing because the former financed the latter and house prices rose through most of the 1980s and 1990s. This meant that the HA both decided the demand for rental housing and funded its construction from a secure source of revenue. Money required for the programme was depoliticised and did not compete with other public programmes such as health, education or transfer payments to groups such as the unemployed and the elderly. The public housing programme could also be presented as cost neutral. It never was of course, but it did not draw directly on tax revenues. There is pressure on the government to contain the cost of public spending, and very little public appetite for big public works programmes, which raises the question of the likelihood that the public rental programme will become a target of budget cuts in the future. While the HA was periodically accused of empire building – and the greater the proportion of the population that lived in public housing the greater was the empire – it has been a powerful protector of public tenants and a powerful and committed champion of the public housing programme. The public rental sector will now be much more vulnerable as it competes for resources with other constituencies and interest groups within a government that is fiercely committed to privatisation based on what appears to be in

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The Hong Kong Special Administrative Region in Its First Decade

part an ideological hostility to the public sector. While the outcome is uncertain none of this bodes well for public tenants, who represent an increasingly vulnerable segment of Hong Kong’s population.

Competition for Sites A positive aspect of Hong Kong’s public housing programme has been the distribution of its housing stock. Sites for public housing were administratively allocated. Early public housing estates were located in core urban areas and the government has continued to make well located sites available. The HA’s massive programme to redevelop its obsolete estates has also meant that public rental and HOS estates are often of high quality and well located. But competition for good sites between the public and private sector became more acute after 1997. The private sector is trying to produce flats the public is willing to buy and good sites are a big help. Hong Kong is a mature city and well located sites are rare. Obsolete private sector housing is notoriously difficult to redevelop primarily because of multi-ownership of high rise buildings. By comparison the HA has been able to redevelop its sites more easily essentially because its estates are in single ownership and it has been able to offer tenants inconvenienced by redevelopment the prospect of much nicer homes at an increase in rent not commensurate with the market difference between the original and redeveloped units. The decrepit buildings in Hong Kong’s core urban areas are not public housing blocks. Land was a big motivator in the relentless pressure from private developers to see the HOS and the PRH construction programme at least wound down significantly. For example a 2001 study prepared by the Breakfast Group of non-affiliated legislators (and committed to persuading the government to abolish the HOS) purported to show that the government could generate $46.8 billion if it sold all 38 sites allocated for the construction of HOS flats over the next four years. These kinds of calculations are always dubious if only because they do not take account of the impact on price of greatly increased supply; but they are politically alluring. The study also purported to find that 12 of the 38 sites were located in the New

Housing (1997–2007)

Territories while the rest were in expensive urban areas.20 Without the HOS and a smaller scale PRH construction programme better urban sites would be available to private sector developers. Significant policy changes have already been made. Now the HA will hand over land from demolished old housing projects to the Planning, Housing and Lands Bureau, and subsequently to a special committee led by the Chief Secretary, before a final decision is made on its use. This compares to the previous arrangements where the HA retained control of its redevelopment sites and thus had a steady supply of well located sites.21 Control of sites also meant that the HA could engage in negotiations about land swops from a position of strength. The HA has already returned 17 sites to the government for private residential and school development after it decided to suspend flat sales, which were among the 25 sites on which HA had planned to build HOS flats. It was proposed that the remaining eight would be used for public rental flats.22 If the HA has to return all sites that are cleared of obsolete rental estates and bid for sites with private developers and others, this must lead to a deterioration of the HA’s position with regard to accessing sites for new public housing. It has long been a private developer view that well located sites are “wasted” on public housing and should be leased to the highest bidder instead. This will particularly affect the low income elderly generally and the single elderly specifically, who are concentrated in older but centrally located estates and are often very reluctant to move to the New Territories or indeed anywhere. This group would be very dependent on neighbourhood ties and friendships and suffer most from relocation23.

Social Aspects Twenty years ago Hong Kong’s public rental sector housed a more

20 See report in South China Morning Post, 15 August 2001. 21 HK iMail, 27 March 2002. 22 Ibid., 14 March 2002. 23 Chow N. and Chi I., “Catering for the elderly,” in Yeung Y. M. and Wong T. K. Y. (eds.), Fifty Years of Public Housing in Hong Kong (Hong Kong: The Chinese University Press, 2003).

723

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The Hong Kong Special Administrative Region in Its First Decade

heterogenous population than it does today. Policy initiatives were successfully introduced to persuade wealthier tenants to vacate their PRH flats primarily by increasing their rents and offering very attractive home ownership opportunities. Over the last ten years about 186,500 PRH tenants bought homes with subsidies and gave up their PRH flats. Tenants turned home owners usually have higher incomes than those remaining. Added to this is the more than 100,000 tenants who have bought their PRH flats as sitting tenants and formally left the PRH sector if not their flats. It has been suggested that TPS units are small, 38% below 40 square metres (saleable area) and 55% between 40 and 49.9 square metres. As long as purchasers of TPS units remain in their flats they make a valuable contribution to increasing the heterogeneity of these estates because they are wealthier than the remaining tenants. However they are likely to seek to buy bigger flats in due course, selling their TPS units to poorer families, i.e. closer in income to the remaining tenants24. As suggested above while PRH is not a stigmatized and residualized tenure for the poor, Hong Kong’s lower income and disadvantaged population is becoming increasingly concentrated in this sector. Table 4 shows that the medium monthly incomes of those remaining in PRH are declining. The number of CSSA recipients has increased substantially from 53,400 in 1996 to 133, 200 in 2005. This reflects in part the ageing of PRH tenants as the elderly are an important constituent of the CSSA. Elderly households (i.e. all members are 60+) increased from 9.7% in 1996 to 14.3% in 2005. There has also been a substantial rise in the proportion of small households (many of whom would be elderly households) from 20.9% in 1996 to 34% in 2005. These changes are occurring at a time when the public rental sector is considerably more vulnerable than in the past, primarily because the HA has lost its secure source of income to fund the construction, maintenance and management of PRH, namely the sale of HOS flats, but also because the government is increasingly hostile to government intervention in the economy. This is a time when PRH is taking on

24 Lau K. Y., “Creating social stigma or a socially-mixed community.”

Housing (1997–2007)

an increasingly social work function as it looks after a larger proportion of the elderly and especially the low income elderly. International experience suggests that taxpayers are not interested in their tax dollars being spent on providing services they don’t use – and the appetite for funding decent public housing often declines when lower middle income and middle income households move to (subsidized) home ownership. Another model is that governments continue to provide decent social services when the beneficiaries are increasingly disadvantaged households because it promotes social cohesion at a time when incomes and communities are polarizing and moderates many of the harmful effects of a globalizing economy. Although prospects look quite bright it is too early to say which model the Hong Kong government will follow in the longer term. Table 4 Median Monthly Household Income PRH Households 7/1995 to 6/2005 Year

Income

1995/96

12,000

1996/97

13,000

1997/98

13,500

1998/99

13,000

1999/00

12,500

2000/01

12,600

2001/02

11,600

2002/03

10,900

2003/04

10,500

2004/05

10,500

Source: Review of Domestic Rent Policy Consultation Paper, 2006, p. 32

The prospect of the stock of PRH has become more complex in recent years. TPS estates were targeted to be good quality, well constructed stock, excluding poorer quality flats at one end and new, but fewer high quality flats at the other. It is likely that any new PRH estates will be built in the New Territories as private developers monopolize the more valuable sites closer to the core urban area. Hong Kong to date has not experienced the full force of

725

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The Hong Kong Special Administrative Region in Its First Decade

gentrification of inner city areas because of the public housing programme and difficulties in redeveloping obsolete private stock. The Urban Renewal Authority has a more realistic remit than did the Land Development Corporation to accelerate urban renewal and this, in conjunction with changes in public housing policy, are likely to see accelerated processes of gentrification. In the medium term new public housing policies are likely to have a very negative impact on social and spatial mobility which will exacerbate the processes of differentiation and fragmentation already accelerating as the Hong Kong economy matures. This reduced social and spatial mobility will occur at precisely the time when Hong Kong’s low income households (and arguably in due course the structurally unemployed) most need the advantages of social capital to help them get ahead and get by. There is already clear evidence that the changing role of the family means that families are less able to cope with these circumstances within Confucian traditions of family mutual support. Another concern is the potential impact of proposals to freeze new redevelopment initiatives to succeed the Comprehensive Redevelopment Programme until the housing backlog has been eliminated. Firstly, there are no guarantees that this will be accomplished in the near future. Further, while it is unknown at this time what the impact of this policy will be on the overall quality of the Housing Authority’s rental stock, a withdrawal of political commitment to ongoing development can only be damaging to the long term prospects for quality housing in this sector. Redevelopment, after all, is so much a matter of political will.

Conclusion The Hong Kong Government has been involved in public housing provision on a large scale since the mid 1950s and by the time of the handover in 1997 had produced nearly half the city’s housing stock, mostly public rental housing (36%) and a small but sizeable assisted home ownership sector (11%). In the run-up to 1997 Hong Kong had experienced extraordinary levels of house price inflation and the HA was under tremendous pressure to produce rental and assisted home ownership units to meet the demand for affordable housing

Housing (1997–2007)

from Hong Kong’s lower and middle income groups. In spite of a privatization agenda formulated in the 1980s demand for public housing continued to expand and the HA responded to that demand. Shortly after the Asian Financial Crisis house prices plunged by about 50% and rents declined as well. The Housing Authority found itself not complementing but competing with the private real estate sector which pressured the government at least to reduce substantially if not terminate the HOS. In spite of the new Chief Executive’s pledges to meet the demand for PRH and HOS, promote home ownership and reduce the waiting time for public housing to three years, much of the 1997 policy agenda for housing has been reversed. At this time the HA remains committed to meeting the demand for public rental housing although it has withdrawn completely from assisted home ownership, has sold off most of its commercial premises to the Link REIT and contracted out a large part of the management and maintenance of public rental estates. Public housing has changed enormously within the first decade of Hong Kong’s return to China. The government has remained committed to meeting the demand for PRH. It has maintained waiting list times at three years. Rents are affordable. Living space has increased substantially albeit from a low base. The Comprehensive Redevelopment Programme ensured that much of the PRH stock is new and of good quality. Although low income families, particularly small and elderly families are increasingly concentrated in this sector, PRH remains socially heterogeneous. In spite of its massive popularity before 1997 the government’s decision to terminate the HOS and withdraw from all other assisted home ownership programmes has been met with almost indifference by the community. This is primarily because private sector house prices are similar to HOS days of old and offer wider choices to buyers. The community is also very leery about entering the home ownership sector in spite of relatively low prices by Hong Kong standards and an improving economy. So far so good. A longer term issue is the funding of PRH if the HA has to compete with other interest groups for public funds rather than having a secure source of income from the sale of HOS units. This has implications for the future redevelopment of obsolete

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The Hong Kong Special Administrative Region in Its First Decade

public rental housing blocks. It is also likely that in the current political climate the HA will not compete very successfully for well located sites with private developers, and as a consequence of these and other processes, PRH tenants will become marginalized in the evolving built environment of the city. The community has been very sanguine about the decision to terminate the HOS. It is likely however that another property boom will leave many families unable to climb on the first rung of the home ownership ladder with significant long term consequences for their financial security. For an avowedly free market economy Hong Kong has had an enormously successful public housing programme. In the last decade major elements of this programme have been dismantled. It is uncertain what the long term implications of this are for the community.

20 Transport Policy Rebecca KWOK City University of Hong Kong

Introduction Hong Kong is one of the leading world cities1 and much of its success is contributed by its efficient transport system. In recent years, it is a global challenge to governments of how to keep up the transport efficiency while at the same time maintaining a sustainable development. Adding the fact that Hong Kong has experienced political change and financial turmoil in the past decade, it is interesting to review how these changes affected Hong Kong’s transport sector and how the sector reacted to these changes. In this chapter, the transport policy in the past decade and the responses to the changing environment will be examined. A very dominant characteristic of Hong Kong’s transport is its heavy reliance on public transport. Having a wide network of public transport system which comprises railways, buses, minibus and trams etc., moving around in Hong Kong by public transport can be regarded as very convenient. A survey conducted in 2002 indicated that the proportion of total trips by public transport was 89%.2 One of the major background reasons of this reliance is that the usable land in Hong Kong is very small. Out of its total area of 1,107 square kilometres, most of the areas are hilly regions and only about

1 Taylor P J, “Leading world cities: empirical evaluations of urban nodes in multiple networks,” Urban Studies, Vol. 42, No. 9, (2005), pp. 1593–1608. 2 Transport Department, Travel Characteristics Survey 2002: Final Report (2003), p. 14. 729

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The Hong Kong Special Administrative Region in Its First Decade

24% are developed areas.3 The concentration of population in a small area has made it cost-effective to operate public transport. Besides, it has been the government’s policy to develop public transport in Hong Kong since its first White Paper in 1979. The Hong Kong government did its first comprehensive transport planning in the 1970s. The first Comprehensive Transport Study (CTS-1) was completed in 1976, and the first transport White Paper was issued in 1979. In the White Paper, it upheld three principles: a. improvement of the road system; b. expansion and improvement of public transport; and c. more economic use of road system. The second Comprehensive Transport Study (CTS-2) was completed in 1986, and it was followed by the second White Paper on Transport Policy in 1990. The transport policy was founded upon three main principles which were quite similar to the previous ones: a. improving the transport infrastructure; b. expanding and improving public transport; and c. managing road use. In both of the above two policy papers, improvement of public transport was one of the principles. In the latest transport strategy paper, Hong Kong Moving Ahead 4 in 1999, it inherited the preceding transport policy paper, the 1990 White Paper, and indicated that it should continue the development of Hong Kong’s transport system under the three-pronged approach. To do this, it has identified its focus on five main strategies. They are: a. better integration of transport and land use planning. b. better use of railways as the back-bone of our passenger transport system. c. better public transport services and facilities.

3 Planning Department, Broad Land Usage (Hong Kong, 2004). Available online at http://www.pland.gov.hk/info_serv/statistic/landu_e.html. Accessed 1 February 2007. 4 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future, (Hong Kong, 1999).

Transport Policy

d. better use of advanced technologies in transport management. e. better environmental protection. This document is the most important transport strategy paper of the last decade. Though basically it follows the previous approaches in promoting public transport, it has a greater emphasis on environmental protection in its rationale. The origin of this document is the third Comprehensive Transport Study (CTS-3). In view of the increasing call for environmental protection and sustainable transport development in the late 1990s, it was the first time a Strategic Environmental Assessment (SEA) was made in line with the planning study.5 Based on these five strategies, a series of work have been done by the government.

Hong Kong Moving Ahead Better Integration of Transport and Land Use Planning Objective: Transport infrastructure will be provided in a timely and cost-effective manner, with due regard for the environment. Initiatives to be pursued include: • Siting intensive developments and employment centres within easy pedestrian reach of rail stations. • Pedestrianizing selected roads, and providing grade-separated walkways, to reduce the number of short motorised trips and the conflict between pedestrians and vehicles. This will increase mobility, enhance road safety and improve local air quality. • Encouraging through the planning process non-polluting travel such as walking and cycling which will reduce the need for motorised travel 6 at the local level.

5 In the SEA report, the environmental cost and benefits of various transport development options were evaluated. 6 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future.

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The Hong Kong Special Administrative Region in Its First Decade

The relationship between transport and land use is well recognized. The decisions in land use affect various transport decisions such as trip decision, route choice and modal choice. And this is not a one-way story. The transport decisions and travel pattern, on the other hand, also affect land use through the provision of a “surface” of accessibility.7 According to Wegener,8 it is just like a feedback cycle that transport and land use affect each other. In view of these, the Hong Kong government also sees it essential to adopt an integrated planning approach. In the past, the government has made use of integrated approach to carry out the transport and land use planning in various exercises, such as the Port and Airport Development Strategy, the Territorial Development Strategies, and Metroplan. Most of these studies are long term and broad-brush based of projects, and have employed algorithmic-based transport models which forecast the future trend of transport pattern by historical data. The so-called integrative approach was regarded as still an orthogonal plan in which the objective of the planning process is focused on justifying the allocation of space to the provision of roads.9 Besides, transport problems are normally mingled with other urban issues when they appear. The sectoral approach in many of these studies was considered not good enough to cope with the urban problems which involve various aspects of issues. Better integration is therefore called for to deal with the dynamic social-spatial phenomenon. Since the CTS-3, the transport studies undertaken were basically on district level only, and therefore yet to testify how better integration can be achieved in the territorial level of transport and land use planning. On the district level, the more eye-catching

7 Westerman Hans L., Cities for Tomorrow: Integrating Land Use, Transport and the Environment (Resource Document), (NSW: Austroads Incorporated, 1998), p. 22. 8 Wegener M., “Reduction of CO2 emissions of transport by reorganisation of urban activities,” in Hayashi Y. and Roy J. (eds.), Transport, Land-Use and the Environment (Dordrecht: Kluwer Academic Publishers, 1996). 9 Robb B. D. and Kam A. W. Y., “Modelling land use/ transport interaction at the territorial level,” in H. T. Dimitriou and A. H. S. Cook (eds.), Land-use/Transport Planning in Hong Kong: The End of an Era (Aldershot: Ashgate, 1998) pp. 173–201.

Transport Policy

transport planning issue in the past decade was the Central – Wan Chai Bypass. The planning of Central–Wan Chai Bypass has caught the attention of the public for the reason that it may involve further reclamation of the Victoria Harbour. When the government first announced the planning of the bypass and its adjoining areas, there were strong objections from the green groups. In response to the society’s concern, the Harbour-front Enhancement Committee (HEC) was established in 2004 to advise the government on the planning issues along the harbour-front. The government has subsequently accepted the recommendation by the committee that an enhanced participation should be adopted during the planning process. The government has set out three stages for the planning of Wan Chai Bypass, together with the land use planning around the area. The three stages are the envisioning stage, realization stage and finally the detailed planning stage. A series of public forums and exhibitions have been held to collect public opinions. It is the first time for the government to conduct such comprehensive consultation before the detailed plans are made. Public inputs regarding their visions in the area then become inputs to the land use and transport planning. This is a good example of public consultation, though may be regarded late by some groups, as well as the adoption of integrated planning approach. The planning of land use and the planning of transport were done together and each part will be changed in relation to the change of the other. Another major proposal in this strategy is to promote pedestrianization and encourage walking and cycling to replace motorized travel. Pedestrianization was implemented in Europe since the 1960s. Hong Kong is well-known in its crowdedness in many areas of the city. It is in fact strange to see that pedestrianization was not widely implemented until the twenty-first century. In 2000, Transport Department started implementing pedestrian schemes in several areas, including Causeway Bay, Central, Wan Chai, Mong Kok, and Stanley. The government’s objectives in these schemes are: • to improve pedestrian safety and mobility; • to promote walking as a transport mode;

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The Hong Kong Special Administrative Region in Its First Decade

• to discourage access for non-essential vehicles; • to reduce air pollution; and • to improve overall pedestrian environment congested areas around the territory.

in

the

The closure of roads from motor vehicles can reduce conflicts between pedestrians and vehicles, and as a result improve the overall walking environment. According to the government, the first year implementation of pedestrianization in areas like Mong Kok, Tsim Sha Tsui and Causeway Bay has led to a reduction of traffic accidents by 25% and a reduction of air pollution by about 11%. However, these schemes are basically small in scale and fragmented. For that reason, walking of this nature can hardly replace motorized trips. The government is recently looking into the feasibility of implementing the pedestrianization in a larger scale. Hopefully, this study can formulate a development framework setting out guidelines and standards for more comprehensive planning for pedestrians at different levels of planning.

Better Use of Railways as the Back-bone of Our Passenger Transport System Objective: Railways will form the backbone of Hong Kong’s transport system. Railway “trunk lines” will be supplemented by “feeder” services using other public transport modes. Park-and-ride facilities will be developed. The existing railway network will be expanded over the next five years by about 40% to more than 200 kilometres. And planning has already begun for the next generation of railway projects to meet Hong Kong's needs up to 2016. By that time it is expected that 40 to 50% of all public transport journeys will be made on the environmentally-friendly railway 10 system, compared to 33% at present.

It has long been the Hong Kong government’s policy to make better use of public transport systems. In the White Paper on

10 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future.

Transport Policy

Internal Transport Policy published in 1979, one of the three principles in transport policy was “expansion and improvement of public transport.” In the Second White Paper on transport policy published in 1990, again, one of the three principles was “expanding and improving of public transport.” It also indicated that there should be more and better use of the efficient mass carriers. The mass carriers mentioned at that time included both railways and buses. In Hong Kong Moving Ahead published in 1999, it is the first time the Hong Kong government explicitly indicated that railways should be the backbone of the city’s transport systems while supported by other public transport modes as feeders. Currently, there are two railway companies in Hong Kong. They are the Kowloon-Canton Railway Corporation (KCRC) and Mass Transit Railway Corporation Limited (MTRCL). The first rail line of KCRC came into service in 1910 and its major role was to link Kowloon to the border in Canton. With the building of more new towns, this role has evolved and KCRC, together with the opening of MTRC in 1979, became the two operators of urban railways in the territory. Railways are normally regarded as more environmental-friendly than road-based transport. Given the large population relative to the small area of usable space, such a mass carrier is necessary to move people along the major corridors. Since 1997, there were gradual openings of railway lines that link new towns such as Tung Chung, Yuen Long/Tuen Mun, Tseung Kwan O and Ma On Shan. The total length of railways has doubled from about 110 kilometres in 1997 to more than 230 kilometres in 2006. The opening of these railway lines can connect the large population in these new towns to the urban areas in Kowloon Peninsula and Hong Kong Island North. As a result, the percentage of travel by railways has increased from 33.2% in 1997 to 37% in 2006. And it is expected by the government that the rail share in public transport will increase to 43% in 2016.11 In spite of this, the opening of more railway lines is not without argument. The policy of railway as backbone of the city’s transport

11 Transport Bureau, Railway Development Strategy 2000 (Hong Kong: Hong Kong government, 2000).

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The Hong Kong Special Administrative Region in Its First Decade Table 1 Percentage of Trips by Mode of Transport

12

Year

1997

2006

Railways*

33.2%

37.0%

Franchise bus

35.0%

34.5%

PLB

16.2%

15.4%

1.7%

1.4%

11.8%

9.3%

2.0%

2.4%

100.0%

100.0%

Ferries Taxis Others Total

*Railways include heavy rail, light rail and tramway

system was criticized by the other transport operators as an act of favouring the railway companies. This is because when the railway lines were opened, some road transport routes had to be abandoned in order not to duplicate with the railway services. Some citizens also complained the compromise of transport choices when a new railway line was launched. The overall idea of making railway as the backbone of the city’s transport system is that the main trunk should be complemented by feeder services efficiently. If the interchange penalty is high, it will deter people from taking railways, and as a result, people will prefer choosing the point-to-point transport service of buses or residential coaches. This explains why many residents in Yuen Long and Tuen Mun are still going for the road-based transport instead of the West Rail. The location of stations in the centre of the catchments area is of paramount importance. This also highlighted the significance of integrated planning between land use and transport. If lands are not reserved for building of transport infrastructure at an early stage, subsequent resumption of land will be costly, if not impossible.

12 Transport Department, Monthly Traffic and Transport Digest (Hong Kong: Hong Kong government, 1997 & 2006).

Transport Policy

Better Public Transport Services and Facilities Objective: Public transport services should be operated efficiently by the private sector, or public corporations, without direct government subsidy; and should be well co-ordinated to maximise efficiency. The system needs to be upgraded by rationalising and improving co-ordination of public transport services to better match demand, minimising wasteful competition and duplication of effort and curtailing, in some cases, low demand services. Convenient and comfortable interchange facilities at transport hubs, especially railway stations, will be included in plans for new and major land-use or transport developments. Existing interchange facilities will be upgraded. For the various transport modes : • Public transport service providers are expected and encouraged to improve service standards and maintain reasonable costs. • Healthy competition among service providers will be maintained to 13 ensure commuters choice.

In Hong Kong, despite the high GDP per capita when compared with other countries, most people rely on public transport in their daily travel. This characteristic matches very well with the call for sustainable transport development. The government is well aware that public transport is a very important network of the society and therefore aims at providing better public transport services and facilities in the transport policy. For buses, they have been the most important mode of public transport in Hong Kong for many years. The franchised bus operation in the past was on regional basis, that is, the Hong Kong Island was served by the China Motor Bus (CMB) Company while the Kowloon Peninsula and the New Territories were served by Kowloon Motor Bus Limited (KMB). The government, seeing the disadvantages of monopolistic operation demonstrated by China Motor Bus Company, in 1998 decided to discontinue the franchise with CMB and opened the bus services to competition. Therefore, routes are subject to bidding by companies’ merits instead of by

13 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future, (Hong Kong: Hong Kong government, 1999).

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The Hong Kong Special Administrative Region in Its First Decade

regional franchise. This has created more competition within the franchised bus industry itself. The competition has on one hand improved the service level of buses, has on the other hand resulted in long queues of empty buses lining up on the main roads. The congestion created by buses especially in major corridors, has made it necessary for the government to rationalize the bus routes. Adding the fact that Hong Kong was affected by the Asian financial turmoil by the late twentieth century, there was pressure to the bus companies to provide some concessions to the passengers. With the congestion problem and the pressure to provide concessions, the rationalizing of bus routes plus the Bus-BusInterchange (BBI) scheme were launched in 1999. This arrangement was also made possible by the Octopus fare card which can record the information of the preceding trips. In the scheme, some BBI stops are set up at the periphery of central areas, or at the cross junctions of major corridors. When passengers change from one bus route to another bus route at these BBI points, they can enjoy some discounts from the bus companies. With the cooperation by different bus companies, passengers’ accessibility by bus can be widened. As at end of 2005, about 660 bus trips passing through Central and 150 bus trips passing through Causeway Bay per day were removed. On the Kowloon side, about 350 bus trips per day were removed from Nathan Road.14 Under this scheme, some congestion problem can be solved. However, as for the economic benefits, out of the 4.2 million daily trips by franchised buses in 2003, it was reported that only 110,000 trips could enjoy from the BBI scheme.15 Public light buses (PLB) also play a very important role in public transport in Hong Kong. PLB can serve the public by filling the service gap in that it has a higher frequency than buses, and provide a more point-to-point service than railways and buses, while being less expansive than taxis. Its market share was 28% in 1976. However, due to its low capacity, it is considered to play only a

14 Transport Department, Environmental Report of Transport Department 2005 (Hong Kong: Transport Department, 2005) 15 “Criticism by Councillors: Benefiting only 6,000 people in the New BBI Scheme is too little” (in Chinese), Ming Pao (Hong Kong), 30 March 2004.

Transport Policy

supplementary role in the industry. The number of PLBs has been capped at 4,350 by the government. With the rapid and continued expansion of rail and bus capacity, the market share declined to about 16% in 2006 with its average daily patronage of about 1.8 million. In recent years, what PLBs concern the society most is its safety level. Although the government has carried out a series of safety measures, as long as the incentive of PLB drivers to drive faster is higher than the incentive to follow safety regulations, the safety hazard is still there. Therefore, an integrated approach should be taken in order to deal with the safety problem. While enacting laws and regulations, how the structure of the industry affects the daily operation should also be looked into. There are three types of taxis in Hong Kong, which are urban taxis, New Territories taxis and Lantao taxis in accordance with its main areas of operation. The later two types of taxi appeared because there was demand for taxi services in the remote areas when most populated were concentrated in the urban areas in the past. These three types of taxis have no conflict of interest if there are no overlapping areas in between them. However, with the increasing population in the New Territories and the Lantao Island, and better transport linkage among these areas with the urban centre, there were more and more cross-districts travelling. As a result, there were arguments of serving areas among the different taxi industries. And people started to query whether it is appropriate to have different types of taxis within such small area in Hong Kong. With the various modes of public transport in Hong Kong, it is important to coordinate them in order to maximize the functions. Though the government has implemented some interchange schemes between railway and the other modes of transport, the schemes were of rather small scale. For bus-rail interchange, most of the interchange appears in West Rail which is proactively attracting more passengers. As for minibus-rail interchange, the number of interchange routes available to MTR, West Rail, Ma On Shan Rail and East Rail were 20, 7, 12 and 4 respectively as at end of 2005.16

16 Transport Department, Environmental Report of Transport Department 2005.

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The Hong Kong Special Administrative Region in Its First Decade

Given these figures, obviously more coordination of public transport modes can be explored.

Better Use of Advanced Technologies in Transport Management Objective: The use of new technologies will be encouraged to increase the efficiency of traffic management, improve the overall capacity of the road system, and enhance road safety. Intelligent Transport Systems will be investigated for a range of applications including: • Passenger information to help public transport users make an informed choice on route planning. • Driver information to give drivers updated traffic bulletins and route guidance to avoid over-burdening congested areas. • Automated tracking and dispatch systems to improve the productivity of commercial and public transport fleets, and to reduce congestion. • Traffic signal, speed, lane and ramp control systems to help alleviate congestion and improve road safety. • Extended use of common payment systems such as the Octopus card. Road safety will continue to be promoted through a three-pronged approach: traffic engineering measures; legislation and enforcement; 17 publicity and education.

With the advance in high-tech applications, information technologies have been used extensively in transport around the world. As early as 1970s, the Hong Kong government had used Area Traffic Control (ATC) and Closed Circuit Television (CCTV) to monitor road situation. In the last two decades, the government has also employed Traffic Control and Surveillance Systems, Automatic Toll Collection Systems, Octopus Cards and Electronic Parking Metres. In order to integrate the various systems, the government issued an Intelligent Transport Systems (ITS) Strategies Review in 2001.18

17 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future. 18 Transport Department, A Smart Way to Travel and a Smart Way for Transport Safety and Efficiency (Hong Kong, 2001).

Transport Policy

According to the ITS Strategies Review, the government has identified four ITS objectives to achieve: 1. to create greater efficiency in traffic management; 2. to make better and more informed choices by providing road users with access to real-time information; 3. to provide better interaction among people, roads and vehicles; and 4. to better utilize existing transport infrastructure. The review recommends an ITS Strategy which focuses on two main initiatives, namely “A Smart Way to Travel” and “A Smart Way for Safety and Efficiency.” Under the “A Smart Way to Travel” initiative, a transport information system (TIS) serving as a centralized data warehouse was planned to set up by end 2003. The TIS adopts spatial information and web-based technologies, and is able to support real-time updating and retrieval of transport and traffic information. Under “A Smart Way for Safety and Efficiency” initiative, it focuses on comprehensive traffic control and surveillance coverage over the territory. This can be done by developing territory-wide coordination among control centres for traffic and incident management. For the second initiative “A Smart Way for Safety and Efficiency,” the government has expanded the scope of ATC and it was reported that more than 75% of the signalized junctions in Hong Kong should have been controlled by ATC systems when the systems were completed in Tai Po and North Districts in 2005. However, for the first initiative, “A Smart Way to Travel” which was originally scheduled for completion in 2003, since there were problems during the process of contracting out, it is now expected that the implementation of the TIS will be delayed to 2008. To the Hong Kong people, they concern more on the information of public transport since most of trips are taken in public transport modes. With the delay in the TIS, people have to rely on the information provided by individual private operators. The problem of relying on individual private operators is that each company only has database of their own routes, a combined search is impossible. Therefore, there is a genuine need for coordination of a centralized database. Furthermore, the existing focus of the

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The Hong Kong Special Administrative Region in Its First Decade

government’s Public TIS (PTIS) on pre-trip information can only serve part of the passengers’ needs. During a trip by public transport, there are a lot of uncertainties which include the arrival time of the next vehicle, and the estimated journey time to the destination. These on-trip information are equally important as the pre-trip information.

Better Environmental Protection Objective: Transport infrastructure and services will be provided in an environmentally acceptable manner to ensure the sustainable development of Hong Kong. The quality of life in Hong Kong is directly related to the quality of the environment. On the transport front, air pollution and noise pollution are the two major concerns. Various measures can mitigate the environmental impact of transport activities. These include: • Priority for efficient, environmentally friendly transport modes such as railways and greater emphasis on pedestrian facilities. • Further tightening of vehicle emission controls. • Using alternative fuel vehicles, which includes the mandatory use of LPG for all new taxis registered from 2001 and LPG for public light buses subject to a successful trial scheme. • Implementing noise reduction measures in all new highway projects and, where possible, retrofitting existing highways with low-noise road surfaces and noise barriers. • Traffic management measures, such as park-and-ride schemes, area restrictions and pedestrianization, and rationalising the number of bus stops in busy areas. • Other possible measures include strengthening vehicle inspection and maintenance programmes, strengthening vehicle pollution control enforcement, and introducing additional vehicle restraint measures if needed. 19 • Exploring the feasibility of introducing trolley buses to Hong Kong.

Road vehicles are the second largest source of air pollution in Hong Kong and they contribute about 25% and 27% of emissions of RSP and NOx respectively in the territory. To reduce emissions from motor vehicles, the government has taken the following measures:

19 Transport Bureau, Hong Kong Moving Ahead: A Transport Strategy for the Future, (Hong Kong, 1999).

Transport Policy

a. adopting stringent motor fuel and vehicle emission standards; b. retrofitting in-use diesel vehicles with particulate removal devices; c. replacing in-use diesel vehicles with cleaner alternatives; d. promoting better vehicle maintenance; and e. enhancing enforcement against smoky vehicles. The government, in order to eliminate lead emissions, implemented the Euro II standards in 1997 and introduced the Euro III standards in 2001. Euro IV standards was mandated to diesel vehicles in 2002 and to petrol vehicles in 2005. A programme to replace diesel taxis was also introduced in 2000. Under the programme, a one-off grant of $40,000 was offered to each diesel taxi which converts to liquefied petroleum gas (LPG) one. As a result, in 2005, almost all taxis have been converted. A similar programme was launched for diesel light buses to encourage the early replacement of diesel light buses with LPG or electric ones. However, this conversion programme was less successful. So far, only about half of the diesel light buses have been converted. Implementation of environmental measures should come with the backup of necessary facilities. Since the implementation of conversion schemes, there were complaints from the commercial vehicle drivers that there were insufficient LPG refilling stations. For the taxis, since they are more flexible in operation, they can select the refilling station and can afford to wait for the refilling. However, for the PLB drivers especially the green light buses, they have scheduled timetable and routes. Insufficiency of refilling station has caused much inconvenience to them. For that reason, without an integrated approach between the policy setting and the policy implementation, and without an integrated approach between the transport sector and its related sectors, problems will still easily arise despite we have a good policy in hand.

Environmental Changes in the Past Decade Transport system is by no means a standalone system, but is affected

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The Hong Kong Special Administrative Region in Its First Decade

by its environment such as political, economic and social aspects. Therefore, it is insufficient if measures are taken only along the pre-planned strategy. In the past decade, Hong Kong has faced changes both locally or internationally and these changes have posed challenges to the transport system.

Change of Sovereignty First of all, the biggest change locally is the handover of sovereignty from British government to Chinese government in 1997. Political and government structures often impose impacts to the decision making process. During the first few years after the transfer of sovereignty, the government had inherited the colonial system that all positions in the government, including those policy makers, are filled by civil servants. Some criticized this system as outdated since the policies are made by generalist bureaucrats who have unrelated portfolios. Besides, the policy bureaux are normally lack of communication which resulted in little cross over between related policy areas.20 The Long Valley incident has highlighted the lack of communication between government bureaux and departments. In 1999, the KCRC announced the building of Lok Ma Chau spur line to relieve the congestion in the only rail border at Lo Wu. This announcement was made before the Environmental Impact Assessment (EIA) was completed. In June 2000, the EIA report showed that the route alignment will cause significant damage to the ecological environment of Long Valley. Together with the campaigns launched by the green groups to object building of the railway line, the Environmental Protection Department formally refused to issue an environmental permit to KCRC. On the one hand, the Transport Department supported the government-owned rail company to build the rail line, on the other hand, the proposal was dismissed by another government department. Millions of dollars had been spent to appeal the case but failed finally. This case

20 Loh C., “Air Pollution: So much to do, so many road blocks,” in A. Chan, A. Hedley, P. Hills and J. Zhong (eds.), The Air We Breathe: Air Pollution in Hong Kong (Hong Kong: The University of Hong Kong, 2002), pg. 49–57.

Transport Policy

has signified the value of EIA, but at the same time demonstrated the disintegration of government departments. The government reform shortly after this has given hope to a better coordination between transport planning and environmental protection. Seeing the general discontent over the government policy and the impression of weak government in the first few years of handover, Chief Executive Tung Chee-hwa, in 2002 introduced the Principal Officials Accountability System (POAS). Under this government reform programme, some policy bureaux were combined and were headed by officials appointed politically. In the transport sector, the formerly Transport Bureau was combined with the policy bureaus of public works and environment and formed the Environment, Transport and Works Bureau. The merging of the transport policy bureau and the environment bureau has shed light to the better planning of transport issues which relates to environment. When the society is demanding more sustainable transport development, the merge between the environment-related bureau and transport-related bureau seems to be a right direction to go. How the merge has melted the organization barrier between the two policy bureaux still takes time to see. But at least, the two policy bureaux are now headed by the same secretariat who can oversee the priority of policy decisions. The impact of government structure in policy making is further demonstrated in the Legislative Council. Since the handover, the Legislative Council consists of members from geographical constituencies and members from functional constituencies. There are 30 members who are elected by universal suffrage from geographical constituencies, while another 30 who are elected from functional constituencies. Some argued that this kind of composition has set barrier to the decision making involved in sustainable transport21. It is because the transport functional constituency has a direct voice in the legislature, and the commercial vehicles are represented indirectly by other business functional constituency. In case an environmental solution is proposed, their concerns can be

21 Ibid.

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The Hong Kong Special Administrative Region in Its First Decade

reflected in the Legislative Council. While for the concerns of the majority of the society over health and air pollution are less reflected in the Council.

Growing Environmental Concern Traditionally, the major task of transport planners is to provide sufficient transport infrastructure to meet the demand of the society in order to enhance the society’s economic growth. The approach adopted is therefore to predict and to provide. This approach is recently realized to be wrong in that transport demand will never be fulfilled. According to a Nobel Laureate,22 “An iron law of economics states that demand always expands beyond the supply of free goods to cause congestion and queues. Drivers caught in traffic jams on the freeway in and around major cities of the world regularly run afoul of this law.” Thus, instead of trying to supply what is demanded, the planners need to consider adopting other approaches and make sure the provision is sustainable in terms of economic, social, and environmental aspects. In Hong Kong, a report entitled Towards Sustainability, The Third Review of Progress on the 1989 White Paper, Pollution in Hong Kong – A Time to Act, was published by the government in 1996. It is a useful starting point for developing an appropriate definition of sustainability for Hong Kong. It presented a broad spectrum of environment-related issues and set out a number of qualitative, environmental policy targets for Hong Kong. Upon the call from this report, a consultancy called Sustainability and Development for the 21st Century (SUSDEV21) was launched by the government in 1996. One of the main tasks of SUSDEV 21 is to develop some sustainability indicators for Hong Kong. In its first

22 Becker G., “Good-Bye tollbooths and traffic jams,” Business Week, (Industrial/Technology Edition, 18 May 1998), pp. 26.

Transport Policy

public consultation in 1998, the guiding principle relating to transport was that “Hong Kong should provide safe, accessible and efficient transport systems and pedestrian facilities along with an efficient transport network for the movement of goods and facilitation of services for the community.” And the SUSDEV21 Indicators relating to transport were: • Average travel distance: the unit if such a measure is passenger distance travelled, i.e. the distance in kilometres travelled by passengers to get to work by all major groups of transport modes. • Average Network Speed; i.e. the average network speed of travel across all major groups of transport modes both public and private and which reflects the proportion of passenger use (calculated as total passenger kilometres divided by total passenger hours). • The cost of freight transport; the cost of charges and operating costs as a percentage of GDP. After consultation, the indicators above were found insufficient in reflecting the sustainable mobility scenarios of the city. A revised set of indicators was therefore designed in its second consultation: • Percentage of people using public transport to commute to/from work. • Percentage of flats within one kilometre of train stations. • Percentage of vehicles using environmentally friendly fuel (e.g. LPG). • Kilometres of bicycle only lanes and bus only lanes. Apart from the SUSDEV21, another initiative the government has taken was the implementation of Environmental Impact Assessment Ordinance in 1998. The purpose of the Ordinance is “to avoid, minimize and control the adverse impact on the environment of designated projects through the application of the environmental impact assessment process and the environmental permit system.”23

23 Environment Protection Department, Hong Kong, http://www.epd.gov.hk. Accessed 1 February 2007.

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The Hong Kong Special Administrative Region in Its First Decade

Under this ordinance, most large-scale projects must go through the EIA process and require environmental permits for their construction and operation. To understand the environmental impacts caused by a series of transport plans, the Strategic Environmental Assessment (SEA) is necessary. SEA is defined as “the process of identifying, assessing and mitigating the environmental effects of a policy, plan or programme (PPP) and its alternatives, preparing the written report on the findings, consulting the public regarding the findings, and taking the findings and public comments into account during PPP decision-making.”24 In the CTS-3, it was the first time SEA was incorporated into the transport planning to assess the scenarios. Despite the above, the measures in sustainable transport development were criticized as window dressing only.25 An analysis of Hong Kong’s transport system according to definitions of conventional and sustainable transport planning showed that Hong Kong is still largely following the conventional approach. It was suggested that fundamental changes be sought in the technology, design, management and financing of transport systems. And institutional changes within the government will be equally important to allow public participation and more cooperation between government departments.26

Global Trend of Privatization Transport in the past has mostly been a public sector activity. Since the 1980s, many governments in the world started to privatize the

24 Therivel R., “Strategic environmental assessment in the transport sector,” in Banister, D. (ed.), Transport Policy and the Environment, (London : E & FN Spon, 1998). 25 Hopkinson L., “Sustainable Transport,” in T. Motterhead (ed.), Sustainable Development in Hong Kong (Hong Kong : Hong Kong University Press, 2004). 26 Ibid.

Transport Policy

transport infrastructure and operations. The British is one of the leaders in the privatization process. Being a British colony at that time, Hong Kong government has inherited this policy. In the transport sector, there are basically four approaches of privatization. 27 The approaches are simple privatization without other measures, privatization plus regulation, privatization plus deregulation and franchising. Which approach to adopt depends very much on the expected effects of monopolistic operation and availability of competition after privatization. In Hong Kong, it is the belief of the Hong Kong government that we should maintain “big market, small government.” This means that the government should not intervene into any sector of the market, which the private sector can sustain on its own. The government will only respond to the needs of the market and support and promote economic development within the limits of a small government. Nearly most of the transport operators are from the private sector. And the government is considering privatizing the remaining operations such as KCR and the Airport Authority. The MTRC was the first attempt of the government to privatize public assets in Hong Kong. In 2000, the government put up the shares of MTRC through public offering to local and overseas investors. Since then, the company has been operating under the provisions of the Mass Transit Railway Ordinance following a prudent commercial approach. However, it is doubtful as to how much commercial approach the railway companies need to adopt. The MTR in Hong Kong is one of the very few railway lines in the world that is not directly subsidized by the government.28 When most of the railway companies in big cities are receiving direct government grants to cover at least 60% of the construction costs, the MTR in Hong Kong receives no direct grants at all in its

27 Nash C., “Privatization in transport,” in J Kenneth and D A Hensher (eds.), Handbook of Transport Strategy, Policy and Institutions (Amsterdam: Elsevier, 2005), pp. 97–113. 28 Barron B., Hg S. K. W. and Kwok V. M. C., Financing Mass Transit Railways: An International Survey (Hong Kong: Centre of Urban Planning and Environmental Management, University of Hong Kong, 2001).

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construction.29 The existing lines are financially viable since the lines are operated in the very high density areas. However, this commercial approach of operating railway lines cannot be possible in less densely populated areas. There were arguments that the financial feasibility cannot reflect the actual cost to the society. A more complete picture to analyze whether a railway line is necessary should take into account the social costs and benefits. In the planning of Southern Island Line (SIL), it is suggested that the element of externalities, such as employment benefits, be added to weigh the costs and benefits.30 It is considered that the building of SIL can preserve the natural environment, create more employment opportunities, and thus benefiting to the society. In view of the fact that the benefits of using railway are not solely enjoyed by the fare-paying passengers, it is worth considering whether the commercial approach should be continued. Besides, since the road operators are subsidized by the government in the free provision of roads, there is unfair competition between the rail companies and the bus companies. The Hong Kong government believes that railways should form the backbone of Hong Kong’s transport system. To uphold this principle, it is essential that the assessment of railway projects should take into account those non-financial items. In this case, leaving the investment decision to the market mechanism cannot ensure that the society can be benefited. In recent years, the government is considering privatizing KCRC as well by merging the two railway companies. And the merged company will be granted a franchise to operate the MTR and KCR railways for an initial period of 50 years. There will be an Operating Agreement which stipulates the specific regulatory provisions including those on the service and safety requirements and matters relating to fares. Railways, being the backbone of our transport system, will affect the large public significantly through its cost and

29 Ibid. 30 Barron B., Ng S., Ho B., Ogus S. and Taylor A., Selected Employment Benefits: West Island Line/South island Line (Hong Kong: CUPEM, HKU, 2004).

Transport Policy

performance. It is a challenge to the government to identify her role, and balance between monitoring the performance level of the railway service and being a small government as stated in her philosophy. Besides privatization, there are also divided opinions as to whether the government has to intervene the operation of transport service providers in terms of fare concession to the people will disabilities (PwD). The discussion of whether to provide public transport fare concession to PwD has been made for many years in Hong Kong. So far, there is still not such a provision yet. The government’s excuse is that public transport services are provided by private entities. In accordance with the spirit of free enterprise, it is not appropriate for the government to direct the public transport operators to offer fare concessions. The operators are of the opinion that the concessions will lead to rising operating cost of public transport services and legal implication, therefore they restated that they have difficulties in providing fare concession to PwDs. Besides, the two railway corporations are required to operate according to prudent commercial principle. They consider that the fare concessions they provide to the general commuters will also benefit the PwDs. In cases above, there are contentious views of government intervention. When the government considers what role she should play in the transport sector, she should adopt an integrated approach and balance between the commercial benefits and social benefits.

Economic Crises Shortly after the handover of sovereignty in 1997, the Asian region suffered from financial turmoil. From 1998 to 2004, Hong Kong has suffered from a deflation of over 10%. During this period when most Hong Kong people were dropping their income, there was an incessant call for lower public transport fare. The contradiction of this wish and the response from the transport operators has highlighted the incompetence of the fare adjustment mechanism. Under section 13(1) of the Public Bus Services Ordinance, the

751

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The Hong Kong Special Administrative Region in Its First Decade

scales of bus fares are determined by the Chief Executive in Council. When a bus company submits an application for fare adjustment, the government takes into account a Basket of Factors (BOF) which includes: a. changes in operating costs and revenue since the last fare adjustment; b. forecasts of future costs, revenue and return; c. the need to provide the operator with a reasonable rate of return; d. public acceptability and affordability; and e. the quality and quantity of service provided. The major advantage of the BOF approach is its flexibility. The government, when examining the fare adjustment application, can take into consideration the different circumstances of bus operators as well as changes in the economic and business environment. However, in the existing bus franchise agreements, there is no provision which makes the bus operators apply for fare reduction during deflation. Given the past experience on difficulties involved in fare increase applications, it is understandable that the operators did not opt for a fare cut despite the deflation. Instead, the operators provided fare concessions as a reply to the society’s call. Since July 2002, a total of 39 fare concession schemes including bonus rides, return trip fare discount and bus-bus interchange (BBI) schemes have been introduced. These concessions were offered on a voluntary basis. To protect the passengers, there is a pressing need to review the fare adjustment mechanism to address the changes in economic conditions. In the end of 2002, the government started a study to develop a more objective and transparent process for the adjustment of bus and railway fares. It was proposed to adopt the price-cap model in which a formula was drawn up based on the rate of inflation/deflation, i.e. change in Composite Consumer Price Index (CCPI), and takes into account productivity change. There was also a trigger mechanism which ensures that operators would review their fares during deflationary as well as inflationary environment. In early 2006, the Executive Council decided that the formula should not operate as an automatic determinant of fare adjustment

Transport Policy

outcome. There should be flexibility by applying the formula with the BOF approach in considering bus fare adjustment. In the renewal of franchises in 2006, the government sets out explicitly the power of Chief Executive-in-Council to adjust bus fares upward or downward and to reflect the inclusion of an additional factor of change in price of the cost elements and productivity improvement of the franchised bus industry in the new fare adjustment arrangement. Apart from the buses, the revised fare adjustment mechanism is also planned to impose on the railways. During the period discussing the merge of KCR and MTR in 2006, the new fare adjustment mechanism was included as one of the conditions for the merge. However, since the formula allows ten percent flexibility to the transport operators, there were worries that the flexibility will be abused.

Increasing Interaction with Neighbouring Regions There are currently four land crossings, namely, Lo Wu, Lok Ma Chau, Man Kam To and Sha Tau Kok. Since the handover, there were increasing commercial and social interactions between Hong Kong and Mainland China. Cross-boundary passenger and vehicular traffic has sustained significant growth in the past ten years. Land-based passenger traffic has increased from 64.92 million passengers in 1997 to 150.76 million passengers in 2006, representing an increase of 132%. The annual vehicular traffic has also increased by 57.7% from 9.51 million vehicles to 15 million vehicles over the same period.31 The government has to improve transport facilities to cope with the increase in passenger traffic. At the same time, it is an urgent task for the government to facilitate the efficient movement of cross-border commercial vehicles in order to maintain its status as a regional logistics hub.

31 Transport Department, Monthly Traffic and Transport Digest (Hong Kong: Hong Kong government, 1997 & 2006).

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The Hong Kong Special Administrative Region in Its First Decade

Hong Kong’s container port has been ranked number one in the world for many years. The government sees logistics as one of the four pillars of Hong Kong’s economy.32 China’s economic reform and open-door policy have resulted in very rapid increases in the volume of its foreign trade. A substantial fraction of its trade has been channelled through Hong Kong. However, with massive investment, the container ports in Shanghai and Shenzhen developed rapidly and climbed up to the world’s third and fourth container port respectively in 2005. In order for Hong Kong to maintain its competitiveness to serve the foreign trade of China, it is a pressing need to lower the related costs. Border barrier is an important cost element affecting the choice between Hong Kong’s port and China’s ports. To facilitate efficient movements of people and goods across the boundary, the government has conducted improvement schemes like new boundary bridges, additional kiosks and road improvements. The Lok Ma Chau crossing was opened round-the-clock for goods vehicles since November 1994 and for passenger traffic since January 2003. These improvement schemes, to a certain extent, can ease the pressure of cross-border passenger flow. However, to the logistics industries, these measures were considered piecemeal. Additional infrastructures were called for to solve the problem. Nevertheless, it was not until 2007, a fourth vehicular boundary crossing between Hong Kong and the Mainland will be opened. The Hong Kong-Shenzhen Western Corridor, linking Northwest New Territories in Hong Kong and Shekou in Shenzhen, will host only one control point at Shekou. The co-location arrangement for both passenger and cargo clearance will be implemented to streamline procedures. As a result, vehicles between the two places are expected to shorten their travelling time since they no longer need to pass through the busy major roads within Shenzhen city centre. Another major cross-border infrastructure under discussion is the Hong Kong–Zhuhai–Macao Bridge (HZMB). In 2003, a study entitled “Transport Linkage between Hong Kong and Pearl River

32 Chief Executive of HKSAR government, Policy Address 2003. http://www.policyaddress.gov.hk/pa03/eng/p17.htm. Accessed 1 February 2007.

Transport Policy

West”33 was completed. The report points out that the transport linkage between Hong Kong and Pearl River West is weak and it suggests building the HZMB to shorten the travelling time between the two places. However, since the bridge will involve Shenzhen, Macao and Hong Kong, this has increased the complications in various matters including the layout, environmental aspect and financial aspect. Seeing the disputes over the regions, in January 2007, the Central Government announced the establishment of the HZMB Task Force to help push the project ahead and the Task Force is headed by the National Development and Reform Commission. Apart from road transport, railway is another major mode for freight transport. However, the existing East Rail is already heavily loaded and cannot afford to carry freight loads in large scale. As a result, only minimal amount of Hong Kong’s cross-border freight takes the railway. In the Second Railway Development Strategy,34 it was suggested to build a Port Rail Line to link Mainland and the ports of Hong Kong directly. However, not much concrete decisions have been made so far.

Growth of Traffic Congestion Hong Kong’s roads are among the most heavily used in the world. There are more than 540,000 vehicles while the total road length is 1,955 kilometres, with 436 kilometres on Hong Kong Island, 449 kilometres in Kowloon and 1,070 kilometres in the New Territories.35 Since most built-up areas in the Hong Kong Island are located along the northern shore, there are serious congestion problems in this region especially near the Central Business District (CBD). The roads near the CBD serve many purposes which include

33 The report conducted by the Institute of Comprehensive Transportation which was commissioned by the National Development and Reform Commission and the Hong Kong government. 34 Transport Bureau, Railway Development Strategy 2000 (Hong Kong, 2000). 35 Highways Department, Hong Kong, http://www.hyd.gov.hk/eng/public/ publications/factsheet/doc/factsheet.pdf. Accessed 1 February 2007.

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The Hong Kong Special Administrative Region in Its First Decade

key east-west link for Hong Kong Island North, distributor road providing north-south connections to various local districts, and access road to its adjacent areas. Adding the fact that the busiest harbour crossing is just next to this region, congestion around the area is not limited to the typical peak hours, but can be regularly observed from 8 a.m. to 8 p.m. during weekdays.36 The existing roads in this region are already operating beyond its design capacity. Regular traffic queues are found inside and outside of the CBD. Gridlock of the whole CBD happens when there are incidents in the region. Despite the commissioning of Eastern Harbour Crossing (EHC) in 1989 and Western Harbour Crossing (WHC) in 1997, more than half of the cross-harbour traffic still concentrates at the Cross-Harbour Tunnel (CHT). Everyday, there are long traffic queues at both entrances of CHT. The daily traffic in CHT has already far exceeded its designed capacity, while WHC and EHC are having spare capacity (Table 2). Table 2 Design Capacity and Daily Traffic 37 of the Three Cross-harbour Tunnels Tunnel

WHC

CHT

EHC

Designed capacity

118,000

70,000

78,500

Daily Traffic in 2005

42,000

122,000

60,000

$40

$20

$25

Toll for Private Car

36 Expert Panel for Sustainable Transport Planning and Central-Wan Chai Bypass, Report on Sustainable Transport Planning and Central – Wan Chai Bypass (2005). http://www.harbourfront.org.hk/eng/content_page/doc/ report_of_the_expert_panel.pdf. Accessed 1 February 2007. 37 Ibid.; see also Tam C. M., “Build-operate-transfer model for infrastructure developments in Asia: reasons for success and failures,” International Journal of Project Management, Vol. 17, No. 6 (1999), pp. 377–382; Transport Department, Central Wan Chai Bypass Expert Forum Supplementary Note 3 (2005). http://www.harbourfront.org.hk/eng/ content_page/doc/SN-en.pdf. Accessed 1 February 2007.

Transport Policy

The unbalanced traffic flow is partly due to the difference in tunnel tolls. WHC charges the highest toll level and therefore the spare capacity is also the highest. However, since WHC was built under the Build-Operate-Transfer (BOT) project, there are laws to govern the toll adjustment mechanism. Given this mechanism, the tunnel company has the right to apply for toll increase when the profit level cannot reach a certain level. The company, when applying for toll increase, considers mainly on a commercial basis. And it is natural that the problems of congestion in CBD and the problem of unbalanced traffic are not their consideration. BOT has been a successful fund raising approach in Hong Kong when building tunnels.38 However, one of the drawbacks is that sometimes commercial return should not be the only consideration. Given the constraints of the BOT contracts in hand, the government still has to find ways to solve the congestion problem. One of the suggestions was that the utilization of the three road harbour crossings should be rationalized. In 2005, the Bureau of Environment, Transport and Works suggested various options to solve the problem 39 and they believed that a combination of franchise extension and toll rationalization is worth further consideration.40 It will take time to see how the government finally manages to rationalize the traffic among the three tunnels. To solve the congestion problem near CBD, the government also plans to build the Central Wan Chai bypass to serve as the key east-west link for Hong Kong Island North and reduce the pressure of the existing roads. At the same time, it was suggested to consider Electronic Road Pricing (ERP) in the CBD after the bypass road has

38 Tam C. M., “Build-operate-transfer model for infrastructure developments in Asia: reasons for success and failures,” International Journal of Project Management, Vol. 17, No. 6 (1999) pp. 377–382. 39 Bureau of Environment, Transport and Works, Enhancing the Distribution of Traffic at the Three Road Harbour Crossings, [LC Paper No. CB(1)1298/04–05(03)] (2005). http://www.legco.gov.hk/yr04-05/english/ panels/tp/papers/tp0422cb1-1298-3e.pdf. Accessed 1 February 2007. 40 Bureau of Environment, Transport and Works, Progress Update on Possible Measures to Rationalise Utilisation of Build-Operate-Transfer Tunnels [LC Paper No. CB(1)526/05-06(02)] (2005). http://www.legco.gov.hk/yr05-06/ english/panels/tp/papers/tp1219cb1-526-2e.pdf. Accessed 1 February 2007.

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The Hong Kong Special Administrative Region in Its First Decade

been built. 41 ERP is one of the pricing policies of transport management, and unlike the vehicle registration tax, is directly charging the road usage instead of the vehicle ownership. ERP is in line with the “user pays principle” and internalize the externalities into the users’ cost. It has been discussed in the city since the 1980’s. However, the measure has not been successfully implemented in Hong Kong at that time mainly due to political reasons. In view of the serious congestion problem, it was raised again shortly after the handover. In late 1998, field trials were conducted at both off-street and on-street test sites for a period of two months. However, since it was the moment when Hong Kong was experiencing economic downturn, it was considered not the right time to implement the economic measure. In 2001, a study on ERP estimated that 40% of car trips in the morning peak will be diverted to public transport and 10% will change time of travel if ERP is to be implemented. The estimated net economic benefit resulting from time and cost savings is about $2 billion per year42 . Despite the benefits, public acceptability is a critical element when implementing electronic road pricing. It will be another big challenge to the government when it is implemented. Integrated approach should be adopted and the ERP should be implemented in along with other transport measures.

The Way Forward The government published the strategy paper Hong Kong Moving Ahead in 1999 and highlighted the various transport strategies the government should adopt. This paper focuses on how we should provide the public transport and improve the environment. A main theme of the strategies is therefore environmental protection, and this, in fact, responds to the global call for sustainable transport development. The transport policy in Hong Kong was regarded as

41 Ibid. 42 Transport Department, Feasibility Study on Electronic Road Pricing: Final Report, (Hong Kong, 2001).

Transport Policy

The Period of No Policy before 1965, The Period of Structural Evolution from 1965 to 1979, The Period of Expansion and Democratization from 1979 to 1989, and The Period of Incompatibility and Politicization from 1989.43 Since the announcement of the strategy paper in 1998, Hong Kong can be regarded as moving into the period of environmental awareness. On planning level, the government has incorporated the SEA to identify impacts to the environment. There were also EIA for planning transport projects. On strategy level, most of the strategies are aiming at environmental protection. However, setting of policies is quite different from implementation of policies. Policies can be set to address environmental concerns. However, whether such policies can be implemented effectively and whether the society can really move towards the targeted direction, depends on a lot of other factors. In the strategy of using railway as our backbone, it faced difficulties when we considered the financial aspects. And it encountered complications when the interests of the shareholders, livelihood of other modes of transport were considered. On policy level, when the government wished to promote public transport, there was limitation by the small government philosophy which required the government to do less, including intervening the private sector in investment and service provision. On implementation level, when we tried to improve the environment by encouraging the PLB drivers to convert to environmentally friendly fuels, though having passed through the financial difficulty, there were complications regarding the abundance of refilling facilities, which in turn was related to the operation mechanism of another industry. Summing up from the above, there can be various conflicts such as those among policies, among different modes of transport, between policy and implementation etc.. With these conflicts, no matter how much the plans are aiming at sustainable transport development, it can never be reached if the implementation is ineffective. Thus, in the past decade, we can only say that we are in

43 Leung C. K., “The process of transport policy making,” in H. W. Liang and A. G. O. Yeh (eds.), Keep a City Moving: Urban Transport Management in Hong Kong (Tokyo: Asian Productivity Organization, 1993).

759

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The Hong Kong Special Administrative Region in Its First Decade

the period of environmental awareness in which the society started to realize the importance of environmental protection. However, we are still yet in a stage to actualize our plans effectively. With the increasing deterioration of our air quality, the environment will continue to be a main concern in the transport sector. The government has generally been in the right track in policy setting level. How the policy can be effectively carried out is the challenge ahead. Another major challenge ahead is the link with the Mainland China. The relationship between Hong Kong and its neighbouring regions is crucial. It involves a change of mindset, and cooperation with China should start from the early planning stage. The development in Mainland China has been very fast recently and there were massive construction of railways and road networks. Traditionally, Hong Kong’s planners only considered the transport planning locally. With the increasing interaction between Hong Kong and China, it is essential that integrated planning procedures be set up with the Mainland to achieve efficient regional movement. Notwithstanding the above, during the planning process, it is essential to understand the impact of improved connection towards Hong Kong’s travel behaviour. At present, most of the trips in Hong Kong are taken in public transport. This has to thank partly to the geographical limitation in Hong Kong. The dense urban setting allows the easy provision of public transport. As a result, although many people in Hong Kong can afford to own a car, they still opt for the convenient public transport modes and give up the less convenient private vehicles. However, in future when the road connection to Mainland China has been improved, the accessibility by private transport will also be better. There will then be a normal tendency for more people to own a car. Once people own a car, there will certainly be more private car trips, both externally and internally. Thus, when improving the infrastructure of regional connection, care should be exercised to make sure it will not cause too many induced demand for private passenger transport. As noted above, the implementation of transport policies in some cases encountered difficulties when interacting with other policy areas, or conflicts occurred when various modes of transport were involved. These conflicts happened when the values and

Transport Policy

interest at different stage or from different parties differed. In order to improve communication between different modes of transport, and between different policy areas, an integrated approach is suggested. The integrated approach has been advocated by several government agencies,44 and according to May, Kelly and Shepherd, it can occur in five broad areas:45 1. integration between policy instruments involving different modes; 2. integration between policy instruments involving infrastructure provision, management, information, and pricing; 3. integration between transport measures and land use planning measures; 4. integration with other policy areas such as health and education; 5. integration between authorities with a conurbation. Integration can be done in different levels and aspects. In case policy instruments can be used to strengthen the tie, it will be helpful to explicitly state what integrated policies are expected. This integration approach can be applied in Hong Kong’s transport sector in many aspects including management of the public transport modes, coordination of transport policies with other policy areas, and planning of the cross-border transport. For integration between different modes, it involves integrated network planning so that, to a passenger, it will become seamless transfer between different transport systems. This involves the preparation of agreements between different companies and the government authority. Information flow between different companies is also important so that each company can keep track of

44 U.K. Department of Environment, Transport and the Regions, A New Ideal for Transport: Better for Everyone (London: The Stationery Office, 1998). See also European Commission, European Transport Policy for 2010: Time to Decide (Brussels, EC, 2001). 45 May A. D., Kelly C. and Shepherd S., “Integrated transport strategies,” in K. J. Button, D. A. Hensher (eds.), Handbook of Transport Strategy, Policy and Institutions (Oxford: Elsevier, 2005), pp. 237–254.

761

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The Hong Kong Special Administrative Region in Its First Decade

all flows and incidents in the operation. And when an incident happens, the passenger can be adequately taken care of by contingency planning.46 For integration between the transport infrastructures locally and in the Mainland, the criteria for freer cross-border transportation are interoperability, interconnectivity and intermodality.47 For interoperability, we have to make sure the operating equipments, for example trucks, trains and ships, can operate on either side of the border equally efficiently. This means common technical specifications and institutions. Without these features, there is the need for passengers to change carrier even they are using the same mode. For interconnectivity, it is largely an infrastructure matter. For example, railways require the same power system in order to operate in both side of the border. Roads must be of comparable quality to carry heavy trucks. There are also operational considerations, such as timetables for public transport modes of transportation need to be coordinated across boundaries for full efficiency. For intermodality, it concerns the efficient interchange between modes. Since borders are always the point when people need to change mode, for example, airport and seaports, therefore, efficient interchange should be ensured to make the border less visible. With increasing regional traffic and growing concern of the environment by the society, sustainable development will still be an important issue of Hong Kong’s transport sector in the coming decade. In order to continue as a leading world city, the government has to sustain the transport development both locally and regionally. The path towards sustainable transport development is challenging. Making good use of the integrated approach is one of the ways out.

46 Viegas J. M., “Integrated transport systems: public-private interfaces,” in K. J. Button, D. A. Hensher (eds.), Handbook of Transport Strategy, Policy and Institutions, pp. 135–154. 47 Button K. J., “Cross-border traffic,” in K. J. Button and D. A. Hensher (eds.), Handbook of Transport Systems and Traffic Control (Oxford: Pergamon, 2001), pp. 359–373.

21 Review of the Health System Grace CHENG

This chapter sets out to examine the issues and challenges for Hong Kong’s health systems arising from the transitions in global and local environments. Based on a comprehensive review of the literature and publicly available documents, it assesses the needs and developments of health care delivery systems in the first decade of the Hong Kong Special Administrative Region (HKSAR) with a view to suggesting the direction for future health reform.

Health, Health Care and Health Determinants Health is used to be defined narrowly as the “absence of disease,” and health care has been focusing on the curative model to eradicate illness. The medical profession focuses on the biomedical model to improve diagnostic and therapeutic capabilities, very often resulting in an unprecedented expansion of health care expenditures throughout developed economies in recent decades. Other equally important goals from the patient or the community perspective – the restoration of functional capacity, the relief of pain and suffering, the prevention of illness, injuries or death, the promotion of health and the care for the “incurable” – have been played down.1 The World Health Organization (WHO) broadened its

1 Institute for the Future, Health and Health Care 2010: the Forecast, the Challenge. 2nd ed. (Princeton, NJ: Jossey-Bass, 2003). 763

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The Hong Kong Special Administrative Region in Its First Decade

definition of health (1979) as “. . . a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.” The Declaration of Alma-Ata 19792 spelt out health in the social and economic contexts, and declared that primary health care was the key to attaining the target of health for all by the year 2000 in a spirit of social justice. Health is recognized not only as a technical, but also a social enterprise. Many have views that “health” should include mental, social and spiritual well-being. The socio-economic determinants of health have become a pervasive and important factor for government health care policy making. The Canadian LaLonde Report (1974) 3 goes beyond the practice of medicine, and looks to the environment, personal lifestyle and healthcare organization as the four key determinants of health. The British Black Report (1980) 4 found a statistical association between infant mortality rates, life expectancy and educational, occupational and income classes. Since the mid-1990s, there was consensus through WHO and European Communities initiatives that determinants of health are not only restricted to socio-economic status or personal behaviours alone, but also due to government policies and actions. In the wake of these initiatives, advanced economies such as those of the UK, Sweden, the Netherlands, Australia, New Zealand conducted health impact assessments on the potential effects of government policies or programmes on the health of the population and the distribution of those effects within the population. 5

2 The Alma-Ata Declaration (Geneva: World Health Organization). http://www.searo.who.int/sitemap/aboutsearo.htm. Accessed 24 February 2007. 3 LaLonde M., A New Perspective on the Health of Canadians [The LaLonde Report] (Ottawa: Minister of Supply and Services, 1974). 4 Inequalities in Health: Report of a Research Working Group (UK: Department of Health and Social Services, 1980). 5 Lock K., “Health impact assessment,” British Medical Journal, Vol. 320, No. 7246 (2000), pp. 1395–98; and Birley M., “A review of trends in health-impact assessment and the nature of the evidence used,” Environmental and Health, Vol. 13, No. 1 (2002), pp. 21–39.

Review of the Health System

Challenges of the Demographic, Socio-economic and Epidemiologic Environments The ageing population (with higher elderly dependency), the increase in an economically active population particularly in the low income group, the widened gap between the rich and poor and the increase in the one-person elderly households pose a challenge for policy makers for its potential destabilizing effects on society and the likely increase in disease burdens, especially chronic conditions from the low income groups.

Demographic Context The Hong Kong population experienced a number of changes in the last decade (Table 1). Like other countries, Hong Kong’s ageing population foreseen earlier became more pronounced with the ageing of the baby-boomers, as shown by the 2006 By-census.6 The median age rose from 34 in 1996 to 39 in 2006, and the elderly dependency ratio increased yet again from 142 (per 1,000 aged between 15 and 64) in 1996 to 168 in 2006. The natural growth of the population has slowed down with late marriages and child birth, lower fertility rate and improved mortality with age. The lower child dependency ratio (401 in 1996 to 353 in 2006) contributed to the lower dependency ratio overall (despite higher elderly dependency ratio). This resulted in the fall of the annual population growth rates in the last ten years from 1.8% in 1996 to under 0.4% in 2006.

Population Shift to the North (New Territories and China) The 2006 By-census showed a clear trend in the shift of population to the less densely populated areas in the New Territories from the older and more densely populated areas on Hong Kong Island and Kowloon. New Territories residents now accounted for over half of the total population (3.57 million out of 6.86 million) in Hong

6 Hong Kong Census and Statistics Department, 2006 Population By-census: Summary Results (Hong Kong, 2007).

765

766

The Hong Kong Special Administrative Region in Its First Decade Table 1 Major Characteristics of the Population: 1981–2006 Population (’000) Mid-1981 1986

1991

1996**

2001**

2006**

5524.6

5752

6412.9

6708.4

6804.3

1.3

0.8

1.8

0.9

0.6

Natural increase (‘000)

278.1

219.4

112

23.4

As % of growth

(81.5)

(96.5)

(38.7)

(53.3)

Population (’000) 5183.4 1. Population Average annual growth rate (%)

Net migration ('000)

63.1

As % of growth

(18.5)

8

177.4

(3.5)

(61.3)

20.5 (46.6)

2. Population composition 0–14 (%)

24.6

23.1

20.8

18.5

16.5

13.7

15–64 (%)

68.7

69.3

70.4

71.4

72.4

73.9

65+ (%)

6.6

7.7

8.7

10.1

11.1

12.4

Child Dependency Ratio*

358

332

295

259

229

185

Elderly Dependency Ratio

97

111

125

142

154

168

Total Dependency Ratio

455

443

420

401

383

353

Median age

26

29

32

34

36

39

3. Dependency ratios

*Note: The child dependency ratio (DR) is expressed as children under 15 per 1,000 people of working age (15–64). The elderly DR is expressed as persons aged 65 years or older per 1,000 persons of working age. ** Sources: (1) 1996-2006 statistics are derived from 2006 Population By-census. (2) Hong Kong: Census and Statistics Department, 1987–2007.

Kong. The needs of the shifted population in housing, health care, education, employment and transport have been quite apparent in the past few years and require the urgent attention of policy makers.

Socio-economic Contexts in Hong Kong Economically, the actual number of income earning households has increased from 1.85 million (1996) to 2.23 million (2006). The median domestic household income (per month), however, stayed at roughly the same level in 2006 (HK$17,250), compared with 1996, while it has in fact slightly dropped compared with five years ago

Review of the Health System

(HK18,705) despite the apparent improvement in the Hong Kong economy particularly in the last few years, with positive growth in per capita Gross Domestic Product (GDP) of over 5% (in constant 2001 prices) except in 20017 (Table 2) . Table 2: Monthly Domestic Household Income, 1996–2006 Monthly Domestic Household Income (HK$) Below 10,000 10,000–39,999 ≧40,000 Total Median Monthly Domestic Household Income (HK$)

1996

2001

Number

%

Number

441,680

23.8

493,502

2006 %

Number

%

24.03

620,211

27.9

1,135,170

61.18

1,183,116

57.62

1,227,862

278,703

15.02

376,794

18.35

378,473

17

2,226,546

100

1,855,553

100

17,500

2,053,412

100

18,705

55.1

17,250

Sources: Hong Kong Census and Statistics Department, 2006 Population By-census: Summary Results, p. 62.

More people have become economically active. The decade saw a net increase of 387,887 employees, which is in fact contributed largely by the growth of female employees (384,651). 8 Local Hongkongers account for 82,000 of them, followed by domestic helpers from the Philippines, Indonesia and Thailand (about 83,000) and workers from Mainland China (200,000). Most of the last group were married to Hong Kong men and had come here under the One Way Permit Scheme. 9 The median ages of both sexes, however, are rising (male ages from 37 in 1996 to 41 in 2006; female ages from 33 in 1996 to 37 in 2006). With the increase in low paid jobs, the percentage of households in the lowest income bracket (below $10,000) increases from 23.8% to 27.9% (Table 2). Similar to some other developed countries such as the US and Japan, the income distribution has become more

7 Hong Kong Census and Statistics Department, Annual Digest of Statistics (Hong Kong, 2006). 8 Hong Kong Census and Statistics Department, 2006 By-census, Summary Results (Hong Kong, 2007), p. 51. 9 “M-shaped society,” (Editorial), Ming Pao (Hong Kong), 26 February 2007.

767

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The Hong Kong Special Administrative Region in Its First Decade

polarized. The percentage of the highest income groups ($40,000 and above) increased from 15% to 17%, while in the middle income brackets ($10,000 to $39,000) falls from 61.2% to 55% (Table 2). This “M-shaped” income distribution shows a widening gap between the rich and the poor and is further backed up by the steady rise in the Gini coefficient factor over the past decades (from 0.451 in 1981 to 0.525 in 2001)10 for Hong Kong. Other socio-economic trends include an increase in one-person households from 14.9% in 1996 to 16.5% in 2006 and the continuing but gradual erosion of vertically integrated nuclear families living in the same households (from 9.9% in 1996 to 7.4% in 2006).11 Of concern is that 40% of the single house-holders are over 60-years-old. These are further challenges for the policy makers in that the social security, and control enjoyed by Hong Kong society with traditional care given in the extended family environment, is loosening. Research shows that the overall health status of the population worsens when income disparity widens among the population.12 Overseas studies also found close connections between social cohesion and wellness, and between poverty and health status. A 13-year large-scale study found that socially isolated and depressed persons, compared with those who were not, were four time more likely to have a heart attack. 13 Another study, on 232 elderly patients who had elective open heart surgery, found those isolated individuals (who did not participate in groups or had no religion) were three times more likely to die.14

10 Hong Kong Census and Statistics Department, Annual Digest of Statistics, 1992, 2002, 2006. 11 Hong Kong Census and Statistics Department. 2006 By-census, Summary Results. (Hong Kong: the Department, 2007). 12 Wilkinson RG, “Income distribution and life expectancy,” British Medical Journal, Vol. 304 (1992), pp. 165–68. 13 Pratt L.A. et al., “Depression, psychotropic medication and risk of myocardial infarction,” Circulation, Vol. 94 (1996), pp. 3123–29. 14 Oxman T.E., Freeman D.H. and Manheimer E.D., “Lack of social participation or religious strength and comfort as risk factors for death after cardiac surgery in the elderly,” Psychosomatic Medicine, Vol. 57 (1996), pp. 5–15.

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Trends in Disease Burdens In the past few decades since the 1960s, disease prevalence in the developed world (including Hong Kong) was characterized by a shift away from acute diseases to chronic conditions. This trend is expected to continue with global immunization becoming effective in reducing morbidity levels in children. It was projected that by 2020, the major diseases in the world were ischaemic heart disease, unipolar major depression, cerebrovascular disease and chronic obstructive pulmonary disease.15 Leung16 pointed out in his study on disease burdens in Hong Kong that the same trend is occurring – four out of the top five disease killers immediately after World War II were infectious in origin, while major killers at the beginning of the twenty-first century were non-infectious chronic conditions (cancers, heart diseases, cerebrovascular disease). Table 3 compares leading causes of death in Hong Kong and those in Murray and Lopez’s global study. Lifestyle-related degenerative chronic diseases represent a huge proportion of human illness and were currently the major killers in Hong Kong (Table 4). The leading causes of death in 2005 included cancer (31.8% total deaths), heart diseases (15.2%), chronic lower respiratory diseases (5.8%).17 Hong Kong is no different from the rest of the world18 in this area. Chronic illness has been associated with degenerative functions of the elderly, which consumes more health care services. Among those dying of cancer, for example, 68.3% of them were 65 years or over. With deaths caused by heart diseases and chronic lower

15 Murray C.J.L. and Lopez A.D. (eds.), The Global Burden of Disease: a Comprehensive Assessment of Mortality and Disability from Diseases, Injuries and Risk Factors in 1990 and Projected to 2020 (Cambridge, MA: Harvard University Press, 1996). 16 Leung G.M., “The challenge of chronic conditions in Hong Kong,” Hong Kong Medical Journal, Vol. 8 (2002), pp. 376–78. 17 Hong Kong Census and Statistics Department, Annual Digest of Statistics 2006. 18 Horton R., “The neglected epidemic of chronic disease,” Lancet, Vol. 366, No. 9496 (2005), p. 1514.

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respiratory diseases, the percentages of the elderly were much higher, 87.6% and 93.8% respectively.19 It was found that one in four elderly patients have five or more chronic conditions.20 Table 3: Leading Causes of Death/Disability in Hong Kong and the World

Five leading causes of death in Hong Kong 1947 1.

Pneumonia

2.

1996 Malignant neoplasms

2005

Five leading causes of disability – adjusted life-years (mortality) in the world 1990

2020

Malignant neoplasms

Lower respiratory tract infections

Ischaemic heart disease

Tuberculosis Heart disease

Heart diseases

Diarrhoeal diseases

Unipolar major depression

3.

Perinatal / neonatal conditions

Pneumonia

Pneumonia

Perinatal conditions

Road traffic collisions

4.

Enteritis and diarrhoea

Cerebrovascular disease

Cerebrovascular disease

Unipolar major depression

Cerebrovascular disease

5.

Violence

Injury & Poisoning

Chronic lower respiratory diseases

Ischaemic heart disease

Chronic obstructive pulmonary disease

Sources: Hong Kong Department of Health; and Murray and Lopez, The Global Burden of Disease, 1996.

It is worth noting that respiratory diseases have become increasingly prevalent as the leading causes of death in the past decade. The recent study at the Chinese University of Hong Kong found significant associations between mortalities for all respiratory diseases and ischaemic heart diseases and the concentrations of all pollutants when analysed singly21. According to Hedley, Hong Kong

19 Hong Kong Census and Statistics Department, Annual Digest of Statistics 2006. 20 Chu L.W. and Chi I., “Organization of care: long-term care and hospital care for the elderly,” presented at the International Symposium (on) Hong Kong Health System: Reflections, Perspectives and Visions, University of Hong Kong, July 2006. http://www.hku.hk/facmed/mhrn/event/16-17jun 2006-prog.html. Accessed 17 January 2007. 21 Tse L.A., Yu I.T., Leung C.C., Tam W. and Wong T.W., “Mortality from non-malignant respiratory diseases among people with silicosis in Hong

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air quality has deteriorated in the last 15 years (according to the visibility reports from 1978–2004), and pollutant aerosols “contributes to at least 2000 to 3000 excess deaths a year.”22 Table 4: Leading Causes of Death in Hong Kong, 2005 (by Age Groups) Cause of Death

All Ages

%

659 5.4%

3,213 26.1% 8,410 68.3%

100%

15

0.3%

113 1.9%

595 10.1% 5,142 87.6%

100%

9

0.2%

57

1.3%

192

100%

6

0.2%

73

2.1%

346 10.1% 3,008 87.6%

5. Chronic 2,261 100% lower ( 5.8% of all respiratory causes ) diseases

2

0.1%

15

0.7%

123

3. Pneumonia

%

No.

%

65 & over

0.2%

12,310 100%

No.

45–64

26

2. Disease of heart

%

15–44

No.

1. Malignant neoplasms

No.

14 & under

No.

%

( 31.8% of all causes )

5,868 ( 15.2% of all causes )

4,291

4.5%

4,032 94.0%

( 11.1% of all causes )

4. Cerebrovascular diseases

3,434 ( 8.9% of all causes )

5.4%

2,121 93.8%

Sources: Hong Kong Census & Statistics Department, Annual Digest of Statistics 2006.

Changing Paradigm in Health and Health Needs It can be seen earlier that the socio-economic, demographic and epidemiological conditions in Hong Kong are not much different from developed economies in the West. There is a need to shift from biomedical model of care to an expanded, multi-factorial view of the health and shared care centred around the patient in the community setting.

Kong: exposure-response analyses for exposure to silica dust,” Occupational and Environment Medicine, Vol. 64, No. 2 (Feb 2007), pp. 87–92. 22 Hedley A., “The role of public health in social justice: the next steps in Hong Kong,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System: Reflections, Perspectives and Visions (Hong Kong: Hong Kong University Press, 2006), p. 128.

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Increased life expectancy led some to believe that the prevalence of chronic disease and disability will indeed increase, leading to a “pandemic of mental disorders and chronic diseases,” particularly in those aged 85 and over. 23 Some however believe that the “compression of morbidity” factor will come into play, which means that long-term disability occurs into a shorter period of one’s life due to new therapies and improved life styles.24 Studies in developed economies reveal that socio-economic and environmental determinants of health – social isolation, social class, depression – in fact affect health, or lead to illness, disease or mortality.25 Chronic conditions are closely related to lifestyle and socio-economic status. Recent studies show that in the absence of a set of risk factors, middle-aged men of 55 have a higher probability of survival in healthy state until 85 (69%), and among those alive at 85 years free of disease and cognitive impairment (55%).26 The risk factors include hyperglycaemia, hypertension, high alcohol consumption (more than three drinks a day), low education, overweight, high triglyceride level, low grip strength and being unmarried. The US nurses’ health study on behavioural risk factors (n=122,000) and heart disease yielded similar results.27 Reducing the risk factors would lower disease burdens and improve quality and duration of life. Such chronic conditions or illnesses could be avoided and prevented in the first place by lifestyle (e.g. healthy diet, exercise) and behaviour changes (e.g. smoking cessation) or improvements in the environment (e.g. cleaner air, hygienic living conditions). Chronic conditions especially with the elderly are characterized

23 Cassel C.K., Rudberg M.A. and Olshansky S.J., “The price of success: health care in an aging society,” Health Affairs, Vol. 11, No. 2 (1992), pp. 87–90. 24 Fries JF, “Natural death and the compression of morbidity,” New England Journal of Medicine, Vol. 303, No. 3 (1980), pp. 130–35. 25 Gruman J., “Introduction for superhighways for disease,” Psychosomatic Medicine, Vol. 57 (1995), p. 207. 26 BJ Willcox et al., “Midlife risk factors and healthy survival in men,” JAMA, Vol. 296 (2006), pp. 2343–350. 27 Stampfer M.J., “Primary prevention of coronary heart disease in women through diet and lifestyle,” New England Journal of Medicine, Vol. 343 (2000), pp. 16–22.

Review of the Health System

by the presence of co-existing illnesses,28 the frequent re-admissions to hospitals when complications arise, and the need to follow up on long-term medications and continued investigations,29 thus affecting the utilization of health services. There is a paradigm shift from regarding cure as an uncompromised goal to adaptations of interventions to diseases for which there is no cure. Integrated disease management strategies include long-term, continuous, shared care centred around primary care, and the focus on designing a health system to focus on adherence to treatments and patient compliance facilitation. Episodic care around the hospital setting would in fact be inappropriate and costly.30

Health System Developments Before 1997 The formulation, development and implementation of health care policy and system are shown to have substantial impact on health outcomes in advanced economies.31 A health system, which governs the ways of organizing and delivering health care, can save life at reduced costs and reverse the spread of an epidemic. 32 Health systems matter by focusing on the conditions under which human individuals operate, rather than blaming personal frailties. 33 A system approach in clinical governance would avoid such errors the Shipman murders and the Bristol debacle on paediatric cardiac

28 Westert G.P., “Patterns of comorbidity and the use of health services in the Dutch population,” European Journal of Public Health, Vol. 11, No. 4, pp. 365–372; Wagner EH, “Meeting the needs of chronically ill people,” BMJ, No. 323 (2001), pp. 945–46. 29 Cheah J., “Chronic disease management: a Singapore perspective,” BMJ, No. 323 (2001), pp. 990–93. 30 Leung G.M., “Hospitals must become ‘focused factories’,” BMJ, No. 320 (2000), pp. 942–43. 31 Morris J.N., “Are health services important to the people’s health?” BMJ, Vol. 280 (1980), pp. 167–68. 32 World Health Organization, World Health Report 2000: Health Systems: Improving Performance (Geneva: The Organization, 2000). 33 Reason J., “Human error: models and management,” BMJ, Vol. 320 (2000), pp. 768–770.

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surgery34 by reducing human variability, as believed by advocates of the system approach.35 “Not much has been done” in the period before 199736 in terms of the setting up of the health policy and system. The 1964 white paper “The Development of Medical Services in Hong Kong”37 was the first attempt by the government to quantify public sector commitment by setting specific targets to provide public clinics and hospital services for those who could not afford them (Table 5). In the preceding decades, health policy was not clearly stated. The health reform approach tended to be incremental and avoided controversies. The two decades from the mid-1960s to the mid-1980s were characterized by the vigorous expansion of hospital and clinic construction programmes and improvement in environmental hygiene through government taxation. With the expansion in beds, staff and finances, hospital wards remained overcrowded with long queues, and hospital services were regarded as poor. The HKSAR government has no formal policy machinery in the government secretariat until 1983. Two developments in the 1980s were believed to have led to the subsequent fragmentation of primary and hospital care. 38 After the Scott Report review in 1985,39 hospital services were rationalized through the setting up of the statutory Hospital Authority (HA) in 199040 with a view to

34 Mohammed M.A., Cheng K.K., Rouse A. and Marshall T., “Bristol, Shipman, and clinical governance: Shewhart’s forgotten lessons,” Lancet, No. 357 (2001), pp. 463–67. 35 Kohn L., Corrigan J. and Donaldson M. (eds.), To Err is Human: Building a Safer Health System (Washington, DC: Institute of Medicine, National Academy of Sciences, 1999). 36 Leung G.M. and Bacon-Shone J., “Organisational, management and quality of care issues,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System: Reflections, Perspectives and Visions (Hong Kong: Hong Kong University Press, 2006), p. 138. 37 Hong Kong Medical and Health Department, Development of Medical Services in Hong Kong [White Paper] (Hong Kong, 1964). 38 Bacon-Shone J. and Leung G.M., “History, ethics and forces of change,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, p. 21. 39 Scott W.D. & Co., The Delivery of Medical Services in Hospitals: a Report for the Hong Kong Government (Hong Kong, 1985). 40 Hong Kong: a Review of 1991 (Hong Kong, 1992), p. 145.

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contain cost through annually negotiated fixed budget.41 Around the same time, the government-appointed Working Party on Primary Health Care reported the “absence of a clearly defined and up-to-date overall health care policy” and urged the government to emphasize on primary care, which had hitherto been neglected in favour of public hospitals. 42 The government’s Department of Health was set up in 1989 to take over primary care clinics and public health infrastructures. That “no one should be deprived of adequate medical treatment through lack of means” appeared no more than a general guiding principle in the early nineties. This statement first appeared as a policy statement when the government issued the 1993 Rainbow Report, Towards Better Health (Table 5), to “ensure that the existing policy – that no-one should be denied adequate medical treatment through lack of means – remained paramount.” The existing system of access by all was retained. The Rainbow Report43 proposed healthcare financing options, the registration of private health insurance and the introduction of semi-private beds in public hospitals. The Report recommended some form of “rationing” by the government in funding only catastrophic conditions, certain drugs (according to a prioritized list) or technologies (cancer, bone marrow transplants), and in charging different fees for different types of hospitals based on different operating costs, accommodation standard, insurance level, etc. It failed to win public support, however. In the period preceding 1997, health care was still reliant on government funding derived from taxation, and the good economic conditions in Hong Kong. There was no urgent financial need, and extra resources from the government were available to satisfy the increasing demands on health care. The services of public hospitals improved after the setting up of the HA. They did not turn away

41 Leong C.H., “The evolution of the healthcare system in Hong Kong,” Annals of the College of Surgeons of Hong Kong, Vol. 6 (2002), pp. 61–64. 42 Bacon-Shone J. and Leung G.M., “History, ethics and forces of change,” p. 21. 43 Hong Kong Secretary for Health and Welfare, Towards Better Health: a Consultation Document (Hong Kong, 1993).

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The Hong Kong Special Administrative Region in Its First Decade Table 5 Pre-1997 Health Policy Developments and Implementation – A Chronology 1964

Hong Kong Medical and Health Department, Development of Medical Services in Hong Kong [White Paper]. Vigorous public hospital and clinic construction programme ensued.

1985

The Scott Report reviewed (in 1983) and recommended dissolution of the then Medical and Health Department and the setting up of a hospital authority.

1989

New Department of Health set up to take over public health and general out-patient clinics. The government- appointed Working Party on Primary Health Care Report urged the government to give greater emphasis on primary health care.

1990

Hospital Authority Ordinance passed to take over management of government and subvented hospitals.

1993

Hong Kong Secretary for Health and Welfare, Towards Better Health: a Consultation Document. (Hong Kong, 1993.) This Rainbow Report presented health care financing options but failed to win public support. The Hong Kong Academy of Medicine, an independent statutory body, was inaugurated in December to approve, assess and accredit all post-internship medical training.

1994

Hong Kong Health and Welfare Branch, The Summary of Public Views on Reforms Options (Hong Kong, 1994). Document prepared for members of the Legislative Council by the Health and Welfare Branch, Hong Kong.

patients, and captured over 90% of the total in-patient admissions, while the primary care clinics run by the Department of Health used the daily quota system as control and covered under 20% of all out-patient admissions. At this point, the government, apart from issuing an explicit statement in 1997, “The government’s health care policy is that no one should be denied adequate medical treatment through lack of means. To this end, it provides a range of services and facilities to complement those available in the private sector and to meet the needs of the less-affluent patients.”44

44 Hong Kong: A New Era: A Review of 1997 (Hong Kong, 1998), p. 155.

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has neither explicitly defined its financial responsibilities, nor spelt out the role of the public sector within the health care system.

Health System Consultations in the First Decade After 1997 In the decade after the changeover, there have been a number of consultations on the health care system and financing options (Table 6), but none of them has resulted in the major reform of the health system. Table 6 Post-1997 Health Policy Developments – A Chronology 1999

The Harvard Team (Hsiao W., Yip W., et al.), Improving Hong Kong’s Health Care System: Why and for Whom? With Special Reports No. 1: Estimates of Domestic Health Expenditures 1989/90 to 1996/97. Chinese Medicine Ordinance enacted.

2000

Hong Kong SAR Health and Welfare Bureau, Life Long Investment in Health: Consultation Document on Health Care Reform. Selective proposals to address specific issues in financing – raising fees, productivity enhancement on the supply side.

2003

SARS Expert Committee Report, issued on the aftermath of the virulent infectious disease outbreak infecting 1,755 patients in Hong Kong, March–May 2003.

2004

Health Care Financing Study Group, Hong Kong SAR Health, Welfare and Food Bureau, A Study on Health Care Financing and Feasibility of a Medical Savings Scheme in Hong Kong: Final Report.

2005

Health and Medical Development Advisory Committee (HMDAC), Hong Kong SAR Health, Welfare and Food Bureau, Building a Healthy Tomorrow: Discussion Paper on the Future Service Delivery Model for our Health Care System.

2006

Policy address – little on health care reform and financing. Focus on food poisoning, the handling of Mainland pregnant women.

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The Hong Kong Special Administrative Region in Its First Decade

The Harvard Consultancy Report 1999 Immediately after the change of sovereignty, the new HKSAR government sought external help by inviting the consultants from the Harvard School of Public Health. They were to “develop financing, delivery and payment options” that were better integrated with the present ones.45 Regarded by peers as technically competent but politically doomed, the 1999 Harvard Report described the Hong Kong health policy as a “policy of benign neglect.” Adopting the patients’ perspective and an evidence-based, consultative approach in its evaluation, the Report found both strengths and weaknesses with the health care system in Hong Kong. It lauded the Hong Kong health system as a “relatively equitable system,” in terms of access and utilization, resource distribution, and financing. The public system could be used by all patients regardless of financial means. Using proxy data, it found that the HA, established in 1990 as a result of the public hospital system reform, had made improvements in specific aspects of quality (e.g. environment and facilities) and efficiency (e.g. drug procurement). Evidence (health expenditure/infant mortality comparisons) also suggested that the cost-effectiveness of the Hong Kong health system was similar to its Asian neighbours (Japan, Taiwan)46. There were three major weaknesses in the Hong Kong health system identified in the Harvard Review in around 1997: highly variable quality of care, inefficient allocation of public funds, and questionable financial and organizational sustainability of the system.

Variable quality of care The Review found a system-wide problem that Hong Kong lacks available information on quality of care and the regular routine or mechanism to collect and review information to ensure that

45 Hsiao W., Yip W., et al., Improving Hong Kong’s Healthcare System: Why and For Whom? (Hong Kong: Hong Kong SAR Government, 1999). 46 Ibid. pp. 48–51.

Review of the Health System

standards on patient management are met. If they were available, they were not made public. The Report employed Donabedian’s framework in measuring quality in terms of outcomes, structure/input and process. Since no data or information on care outcomes both from the public or private sectors were available, the Report used mortality rate as proxy outcome data, which showed declining trends. On the input factor, the review found inadequate continuing medical education especially for the general practitioner (GP), the minimal independent review of medical practices and drug prescription patterns, and the lack of professional self-regulation particularly in private hospitals (or in the case of the HA, any evidence of its impact) through clinical audit or risk management mechanisms. In terms of clinical process, the doctors’ drug prescription behaviours based on fee-for-service in the private sector was also criticized as being sensitive to financial incentive. The Upper Respiratory Tract Infection (URTI) Study pointed to the over-prescription of antibiotics, inadequate medicine labelling and information provided to patients. The duration of clinical encounter was too short (5 minutes or less) and the queuing time excessively long. The Team pointed to the significantly higher private physician fees and earnings. There was also concern with the general lack of information on quality and publicly available provider performance for patient choice and questioned the “value for money” for Hong Kong. The Report also highlighted the “lax disciplining system” coupled with inadequate checks and balances from external review exacerbated the quality issues. 47

Questionable financial and organizational sustainability The Report had doubts if the system could be financially sustainable in the long-term.48 While the gate-keeping function by prevention,

47 Harvard Team, “Hong Kong patient studies summary report,” in Hsiao W., Yip W., et al., Improving Hong Kong’s Healthcare System. 48 Ibid. pp. 3–9.

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The Hong Kong Special Administrative Region in Its First Decade

primary out-patient or nursing care or family doctors has been widely acknowledged to be a more cost effective model of care in the West, Hsiao and Yip49 found that the Hong Kong health system was compartmentalized and dominated by the hospital sector in terms of health care expenditure distribution (55% of public expenditures50). By 2016, it was projected that the health care expenditures might take up to 20–22% of the total government budget. In organizational sustainability, they criticized the system for the lack of communication between different levels of care, from primary care doctors to secondary, tertiary and quarternary care providers. There was no integration between public or private care either. Private hospital sector was left to market forces with minimum government intervention. Patients might have to undergo duplicated investigations, diagnosis or treatment, resulting in inefficiencies, redundancies, frustration or suboptimal care of patients. There was allocative inefficiency, with patient unable to make informed choices on hospitals, physicians, treatments or drugs due to insufficient medical knowledge, less than open communication of information, lack of time to “shop around,” especially with acute conditions. Furthermore, Western medicine and alternative or Chinese medicine were practiced as separate processes, without due consideration of their potential complementarity or interaction, and their likely impact on the patient.

Proposed options and outcomes The identified strengths were attributed to government’s commitment and institutional reorganization leading to the establishment of HA. The weaknesses were due to the government’s policy of benign neglect and the traditional privilege enjoyed by the elitist and medical profession (with superior medical knowledge and the ensuing socially-endowed authority) to self-regulate without strong checks and balances from an external organization. Although the medical profession’s good intentions were never in

49 Ibid. 50 Ibid. p. 76.

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doubt, the maturing social and political developments in Hong Kong called for transparency and accountability to the community at large. According to the review, Hong Kong should have a coherent policy for financing and managing health care from the patients’ perspective. The Harvard team proposed financing, delivery and payment options through the concepts of “shared responsibility between government and residents” and “money follows the patient.” All employees and their employers should have health insurance cover and contribute 1.5% to 2% of their salary to a mandatory social health insurance fund (a Health Security Plan) for long-term care. The HA’s existing dual role as supplier and purchaser should be separated for better accountability. Hospitals should be organized into regional groups contracting with private practitioners and competing with other private hospital groups to provide services at pre-defined fees. The objective was to link primary care with hospital services so that patients could move through the system easily. The community did not take the proposal too well and saw the contribution as a tax in disguise. The concept would encourage the overuse of medical services, drive up the entire health care cost of the community, and involve much inter-generation subsidization and pressure on younger generations. It would rely on substantial co-payments and deductibles as demand management tools to maintain its financial viability. In Hong Kong, the proposed options to use the “money-follows-patient” approach, especially the financing ones, were seen to be radical and politically unpopular at that time.

Health Care Reform Consultation Document of the HKSAR Government, 2000 In 2000, the government on the belief that “the situation may not turn out to be as predicted”51 produced its own version of health

51 Hong Kong Health and Welfare Bureau, Life Long Investment in Health: Consultation Document on Health Care Reform (Hong Kong, 2000).

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The Hong Kong Special Administrative Region in Its First Decade

reform in its consultation document Life Long Investment in Health. The government favoured the development of an integrated health care service, including continuing professional training for all health care professionals, improved public-private interface and patient complaint mechanisms, and options for financing. It proposed specifically to raise fees for public services to balance the books, and to raise productivity on the supply side (5% cut in recurrent funding allocations over three financial years to HA from 2000). The revenue funding model would still remain, while a medical savings account scheme (a Health Protection Account HPA) to finance acute care after 65-years-of-age was proposed, but had received mixed response from the community. There was a general consensus to look for additional funding sources to the health care system, and to conduct further studies on the concept's feasibility.

The SARS Report 2003 The SARS crisis in 2003 revealed a number of weaknesses in the health care sector. There was inadequate coordination of the activities of the Department of Health, the HA and the private sector. The report of the SARS Monitoring Committee recommended that there should be better information infrastructure, including linking up electronic patient records between public and private sectors, and more transparency and a better relationship with the media.

Health Care Financing: Medical Savings Scheme, 2004 After the new minister for health took office in 2004, the reconstituted Health and Medical Development Advisory Committee (HMDAC) released a number of papers. The study on health care financing and feasibility of a medical savings scheme (July 2004)52 was conducted by the Health Care Financing Study Group. The study concluded that regular review in fee structure and

52 Health Care Financing Study Group, Hong Kong Health, Welfare and Food Bureau, A Study on Health Care Financing and Feasibility of Medical Savings Scheme in Hong Kong (Hong Kong, 2004).

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cost containment measures should be in place. It reinforced the previous idea of a medical savings scheme in Hong Kong and its role as a complementary measure in the overall health care financial arrangement. HPA was proposed to collect 1–2% of salary from 40–65 year old employees, and the fund can only be used after 65 years-of-age. There are divergent views from various stakeholders, most of which reflect naturally points of views from their own interests. The Legislative Council (LegCo) members believed that health financing with HPA alone is not sufficient and have again urged the government to establish the central medical insurance scheme. This would have to be accompanied by rigorous cost containment efforts in the public sector. Furthermore, HPA should not be implemented during economic difficulties. The health care sector raised doubt on HPA’s operational efficiency with its inherent administrative overheads and wondered if the HPA could address the financial situation of the HA immediately (being in the red for a few years then). Some HA Board members, in particular those from the business sector, are urging the government to further revise the fees structure as a demand management tool to reduce inappropriate use and misuse. The academic community has also emphasized the need for an urgent reform in health care financing, and stated that our health care system would not be sustainable if the present low-tax, high-subsidy and high-quality policy is to be continued. This view echoes with many in the healthcare profession who wish to see reform measures that would encourage more patients to use private services, as they argue that this would reduce both the financial and workload burden on the public sector. Some members of the profession have also urged the public health care sector to stop providing some non-life saving or less urgent treatments. The business sector (viz the Hong Kong General Chambers of Commerce) urged the government to reduce the present high subsidy rate to services provided by the public sector. The private insurance industry (e.g. the Hong Kong Federation of Insurers and the Hong Kong Confederation of Insurance Brokers) welcomed the savings concept, and looked forward to explore with the government new insurance products that would fit into the concept.

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The Hong Kong Special Administrative Region in Its First Decade

The patient groups and the social work sector are concerned that the savings scheme might create another financial burden on the low income group, and the likelihood of a fee hike when the scheme is being implemented by the government. They would like the current fee waiver mechanism to be enhanced accordingly to alleviate the burden on the financially vulnerable group. They were also worried that their medical care after retirement might be affected with the savings scheme, and would like to be more involved in the decision process. The community in general, especially the middle and higher income groups, agrees that there is a need to address the health care financing issue. As they are shouldering a larger share of the tax burden and enjoying few social benefits, the idea of having to contribute additional savings to the system is perceived to be unfair.

Discussion Paper “Building a Better Tomorrow,” 2005 In 2005, HMDAC issued another discussion paper “Building a Better Tomorrow” on a new service delivery model in both the public and private sectors and long-term financing options.53 The public response54 was mixed, with some questioning the need for reform. The paper was too conceptual and had not provided “sufficient statistical data to justify the case for reform.” 55 The public however supported the paper’s advocacy of preventive care, professional training on role diversification, more rigorous public health education and free flow of patient records.

53 Hong Kong Health and Medical Development Advisory Committee, Building a Healthy Tomorrow. Discussion Paper on the Future Service Delivery Model for Our Health Care System (Hong Kong SAR Government, 2005). http://www.hwfb.gov.hk/hmdac/english/dis_papers/files/hmdac_paper.pdf. Accessed 7 March 2007. 54 Hong Kong Legislative Council Panel on Health Services, “Public response to the Health and Medical Development Advisory Committee discussion paper Building a Healthy Tomorrow,” LC Paper No. CB(2)603/05-06(06) (Hong Kong: Legislative Council, 2006). Accessed 12 January 2007. 55 See Note 53.

Review of the Health System

Primary and preventive care The paper suggested strengthening primary and preventive care services and promoting the family doctor concept as the gatekeeper to specialist and hospital services. The direction of public/private collaboration to redress the imbalance was supported. The public was not familiar with the family doctor concept, however, and was concerned with the transparency of private doctors’ fees and the standard of practice. The Bureau was to look at educating the public about these issues and to review the feasibility of contracting out primary care using the benchmarking tool and reviewing the fee transparency issue. For preventive health, the Department of Health has launched a public health information system to capture social, environmental and population health data and the Centre for Health Protection has embarked on population wide campaigns on healthy living.

Public hospital services The public supported the strategies and direction of change for future public hospital services to focus on four major priority areas or types of services: acute or emergency or acute care, low income or underprivileged groups, illnesses that entail high costs, advanced technologies or multidisciplinary team work and the training of health care professionals. Some was concerned with the issue of equity for the middle income group as they had been paying more taxes and should not be deprived of public hospital care. The issue of discharging medically stable chronic patients from specialist clinics to primary care or family doctors received different views. The patient group had reservations in general. It was suggested that the Bureau is of the view that the issue could be resolved by the adoption of referral protocols and share-care programmes by the public and private sectors. The HA has already implemented some share-care programmes on a limited scale.

Tertiary and specialized services Although not much feedback was received, there was support for increasing the patient co-payment element of these services. The Bureau stated that it would “maintain the principle of providing

785

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The Hong Kong Special Administrative Region in Its First Decade

these services at a relatively higher subsidy rate because of the high costs of such services, and should cap the percentage of the patient’s income and assets for the co-payment.” It would also consider engaging private sector doctors to practice in public hospitals on a part-time basis and to rely on the HA to draw up a set of rules on clinical practice and code of conduct to guide the private doctors to ensure high standards of practice.

Elderly, long-term and rehabilitation care There was general support for a change from hospital-based to community model of care for the elderly, long-term and rehabilitation care services which rely on home care with community outreach and professional support. The government would focus on two fronts: the code of practice in the Residential Homes for the Elderly to engage more doctors to be involved in the care of the residents, and the Community Nursing Care in the HA to expand their scope of services.

Healthcare financing The public expressed diverse views on other aspects of health financing: some supported the “user pay” principle, but would like to see the availability of a safety net. There were views for and against mandatory contributions by workers. Some suggested better regulation of the existing medical insurance market for the aged and those with pre-existing illness and the introduction of tax incentives for private insurance. The government emphasized that the discussion paper only spelled out the direction conceptually and required careful considerations on implementation. In the government’s Annual Report in the same year, the long-standing principle “Ensuring that no one is denied adequate medical treatment through lack of means . . .” is still being upheld, while it admitted officially that “Maintaining the continuity of primary and secondary health care is also of central importance.”56

56 Hong Kong SAR Government, Hong Kong Report (Hong Kong, 2006).

Review of the Health System

In the concluding chapter of the HMDAC paper, the Committee indicated that they would present recommendations on healthcare financing options in later 2005/early 2006, but this has not taken place, apparently due to the anticipated election of HKSAR Chief Executive in early 2007. In the mean time, study visits were made by LegCo members, and a number of seminars had been held in the academia and the community. The Chief Executive of the HKSAR, during his election campaign in early 2007, promised that health care reform would become one of his most important jobs in 2007–08.

Health System Developments Since 1997 After several rounds of papers for consultations and discussions, there had neither been any clear cut proposals, nor a definite timetable for health financing reforms in the past decade. Changes in health systems organization have been sporadic and incremental, and apparently occurred largely in the public sector (Figure 1). Under the new accountability system, the Health Welfare and Food Bureau of the Government Secretariat headed by a political appointee was formed in 2002 to oversee the entire health system including food and food safety. Under it, the Department of Health was reorganized and the Centre for Health Protection was created in 2004 in the aftermath of SARS to focus on disease surveillance and control. In the private sector for personal health care, managed care in various forms has grown in the last decade largely through beneficiaries’ employment, but its penetration has been limited in size and scope (largely in in-patient care).57 Their impact has not been noticeable.

Health Care Financing Situation in Last Decade Despite what has been discussed in many rounds of reports and consultations, health care financing situation in Hong Kong in the

57 Wong N., “The emergence of managed care,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 209–221.

787

Laboratories (2%)

Upper and middle classes (except for Chinese medicine users)

Western Chinese Dental medicine medicine (7%) (72%) (19%)

80% (1997)

Outpatients: 70% ( episodes 2001)

5–10% (bed-days)

Health maintenance organizations

Private insurers +

Employers

Private

Access by all

Largely Western medicine Chinese medicine clinics started 2005

20 % (1997)

Outpatients : 30% ( episodes 2001 )

90-95% (bed-days)

General population

Department of Health and Centre for Health Protection (2005) 1. Disease prevention and control, health education 2. Tobacco control 3. HIV/AIDS service 4. Tuberculosis service 5. Maternal, child, elderly, student health

Government general revenue

Hospital Authority (1990) – Hospitals – Clinics (general out-patient (since 2003) & specialist care) Inpatients :

Public Health Public (Health, Welfare and Food Bureau)

Minimal (2% cost), increased fixed per diem fee charges paid out of pocket or from private insurers (limited)

Personal Health Care

Notes: – 1997–2007 developments underlined. – Adapted from Leung G. and Bacon-Shone J., Hong Kong's Health System, p.140.

Consumers / users

Providers

Out-of-pocket payment

Purchasers

Inpatients:

Individuals

Funding sources

Sector

System

Figure 1: Hong Kong Health System, 2007

788 The Hong Kong Special Administrative Region in Its First Decade

Review of the Health System

post-1997 decade was not much different from the years before. Calling the Hong Kong Health Financing System a “non-system,” Hsiao and Li describe the system as pluralistic, with a two-tiered health care financing structure. The government general revenue financed “HA with a budget cap that pushes the cost increases to other stakeholders” by increasing user fees, and leaving the private sector to fill in the void.58 The financing sources (according to available data on Domestic Health Accounts (DHA) for 1999/2000) are basically the same: from government revenue, with out of pocket payments of 31%.

Health expenditures and GDP The DHA released for the first time in 2004 showed the latest health expenditures from 1989–90 and up to 2001–02 only. Domestic health expenditure grew at an average annual rate of 7% from HK$30 billion in 1989–90 to HK$70 billion in 2001–02, in real terms at constant 2000 prices while GDP grew at 4% throughout the period. At constant prices, per capita health expenditure shows an annual increase of 3% to 6% through 1997–98 to 2001–02.59 Total health care spending as a percentage of GDP increased from 3.8% to 5.5% during the period. This level is still low when compared with Taiwan (5.8%), UK (7.5%), Australia (9.1%), Canada (9.4%) and US (13.9%) and other OECD countries. The share of total expenditure on health over public spending is also on the rise, from 48.2% from 1991 to 56.9% in 2001.

Public/private share The increase in DHA was largely attributed to the rise in public spending, which has increased two-fold from 1989–90 to 2001–02, while private spending rose at only 76% over these years. The share

58 Hsiao W.C. and Li K.T., “Global trend in health financing and Hong Kong’s choice,” presented at the International Symposium (on) Hong Kong Health System. 59 Hong Kong Bureau of Health Welfare and Food, Domestic Health Accounts: 1989/90–2001/02 (Hong Kong, 2004). http://www.hwfb.gov.hk/statistics/ download/dha/en/a_what_dha.pdf. Accessed 18 January 2007.

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The Hong Kong Special Administrative Region in Its First Decade

of public spending grew from 43% (1989–90) to 52% (1997–98) to 57% (2001–02) of total health expenditures (Figure 2). Figure 2: Public and Private Share of Total Domestic Health Expenditure, 1989/90 and 2001/02

57%

54%

52%

53%

51%

51%

50%

48%

48%

45%

45%

44%

43%

Private

20 01 /0 2

56%

20 00 /0 1

55%

19 99 /0 0

55%

19 98 /9 9

52%

19 97 /9 8

52%

19 96 /9 7

50%

19 95 /9 6

49%

19 94 /9 5

49%

19 93 /9 4

47%

19 92 /9 3

48%

19 90 /9 1

57%

46%

19 91 /9 2

43%

19 89 /9 0

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Public

Figure 3: Total Health Expenditure by Source, 1989/90–2001/02 60% 50% 40% 30% 20% 10%

Government

Employers

Insurance

20 01 /0 2

20 00 /0 1

19 99 /0 0

19 98 /9 9

19 97 /9 8

19 96 /9 7

19 95 /9 6

19 94 /9 5

19 93 /9 4

19 92 /9 3

19 91 /9 2

19 90 /9 1

0% 19 89 /9 0

790

Households

Source for figures 2 and 3: Hong Kong’s Domestic Health Accounts (HKDHA) – Estimates of Domestic Health Expenditure, 1989/90–2001/02 (Hong Kong: Health, Welfare and Food Bureau). http://www.hwfb.gov.hk/ statistics/en/dha.htm. Accessed 14 February 2007.

Private expenditures continue to derive from out-of-pocket payments from households (70%) while employers and insurance accounted from 28% in 2001–02. Through this period, the weight of private insurance has become more important while the relative weight of household expenditures on health care have declined (Figure 3). The Thematic Household Survey (2002) shows that one-third of the population has private insurance or benefits scheme

Review of the Health System

coverage, mostly through employment based programmes.60 Some “income protection plans,” which offer as health riders on existing insurance schemes, charge only a small premium but pay out less than HK$1,000 per hospitalized day. Such insurance would not properly protect the individuals for health insurance, but apparently is targeted to insured persons who remain in the public hospital sector.

Expenditures by providers/functions There was a decrease of spending at ambulatory services (shrunk to 30%) while expenditures at hospitals increased by 18% to reach 45% of total spending in 2001–02 (Figure 4). Public expenditures are incurred mostly at hospitals (70%). It can be seen that spending at public hospitals slowed since the early 1990s (due to earlier capital works spending at public hospitals), while the relative proportion of hospital spending has been growing afterwards. This suggests that recurrent operational spending has taken over the budget previously allocated for new facilities and hardware. Figure 4: Total Health Expenditure by Provider, 1989/90 and 2001/02

2001/02

2000/01

1999/00

1998/99

1997/98

1996/97

1995/96

1994/95

1993/94

1992/93

1991/92

1990/91

1989/90

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Hospitals Nursing and residential care facilities Providers of ambulatory health care Retail sale and other providers of medical goods General health administration and insurance

Source: Hong Kong’s Domestic Health Accounts (HKDHA) – Estimates of Domestic Health Expenditure, 1989/90 –2001/02.

60 Hong Kong Census and Statistics Department, Thematic Household Survey, Report No. 12: Health Status of Hong Kong Residents, Doctor Consultation (Hong Kong, 2003).

791

The Hong Kong Special Administrative Region in Its First Decade Figure 5: Health Expenditure by Provider, 1989/90–2001/02 5.1 Public 80% 70% 60% 50% 40% 30% 20% 10%

/0 1

/0 0

/9 9

/9 8

/9 7

/9 6

/9 5

/9 4

/9 3

/0 2 20 01

20 00

19 99

19 98

19 97

19 96

19 95

19 94

19 93

/9 1

/9 2

19 92

19 91

19 90

19 89

/9 0

0%

5.2 Private 80% 70% 60% 50% 40% 30% 20% 10% 0% 19 89 /9 0 19 90 /9 1 19 91 /9 2 19 92 /9 3 19 93 /9 4 19 94 /9 5 19 95 /9 6 19 96 /9 7 19 97 /9 8 19 98 /9 9 19 99 /0 0 20 00 /0 1 20 01 /0 2

792

Hospitals Nursing and residential care facilities Providers of ambulatory health care Retail sale and other providers of medical goods General health administration and insurance

Source: Hong Kong’s Domestic Health Accounts (HKDHA) – Estimates of Domestic Health Expenditure, 1989/90–2001/02 .

Review of the Health System Figure 6 Public and Private Share of Health Expenditure by Function, 2001/02

Curative care

Inpatient curative care Day patient hospital services Ambulatory services Home care Rehabilitative and extended care Long-term care Ancillary services to health care Medical goods outside the patient care setting Prevention and public health services Health programme administration and health insurance Investment in medical facilities 0%

20% 40% 60% 80% Percentage of total health care expenditure

Public share

100%

Private share

Source: Hong Kong’s Domestic Health Accounts (HKDHA) – Estimates of Domestic Health Expenditure, 1989/90–2001/02.

In the private market, there are only small increases in expenditures on hospitals, retail sales (pharmaceuticals) and insurance (Figure 5). Leung61 attributed this trend to the rise of HA in the ambulatory market from 15% to 30%. Private expenditures are incurred mostly by providers of ambulatory services (56%) in 2001–02. It is worth noting that the proportion as well as the actual amount of expenditures on ambulatory services shrank from 1996–97 (66%) to 2001–02 (56%) (Figure 5). Analysis of the relative public/private share of health expenditures by function (Figure 6) in 2001–02 indicates that the public/private share (%) for hospital in-patient care was 79:21, that for ambulatory services 38:62, that for long-term care 90:10 and that for rehabilitation and extended care 96:4.

61 Leung G.M. and Bacon-Shone J., “Commentary: health financing reform,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, p. 363.

793

794

The Hong Kong Special Administrative Region in Its First Decade

Integration of Care Vertical integration of care started to take shape in the public sector when the General Out-patient Clinics have been transferred from the Department of Health to the HA in 2003, thus one step closer to the vertical integration of primary and secondary care in the public sector. The clustering of hospital management with the appointments of Cluster Chief Executives has been introduced to consolidate hospital organization and management and to introduce accountability at the regional level. In the last decade, the market share of outpatients (in terms of number of episodes) for the public sector has increased from 20% to 30%. For in-patient care, the public sector share has remained more or less at the same level, i.e. 90% to 95%.62 With horizontal integration between the public and private sectors, the HA has put in place patient data set for identifying community-wide disease burdens and developing targeted disease prevention programmes. Hand-held patient records based on the Clinical Management System in HA had been piloted in HA’s general out-patient clinics. With a view to develop territory-wide information system for carers, a steering committee had been formed to oversee the development of the proposal. A pilot scheme has been introduced to integrate electronic patient record system in public/private sectors. Efforts are being made to maintain a list of private doctors for referral of willing patients. The first steps have been taken to integrate Chinese medicine (deemed to be suitable for health maintenance) into the public health care system. The development of Chinese medicine was approached on three fronts: the enactment of the Chinese Medicine Ordinance in July 1999, which provides a statutory framework for regulation of Chinese medicine in Hong Kong; the introduction of full-time degree course in Chinese medicine in three tertiary institutions in 1998; the setting up of nine Chinese medicine clinics in HA (from 2001 up to early 2007) with the collaboration of

62 Leung G.M. and Bacon-Shone J., “Organisational, management and quality of care issues.”

Review of the Health System

non-government organizations and the tertiary institutions. The emphasis was on the enhancement of research and training with a view to integrate Chinese medicine into the public health care system.

Performance and Quality of the Health System The performance of the government and that of the community in the health system in this period as a whole has been mixed. Despite failures of the Harvard review (1999) to effect any far reaching reform changes, the Report has had a lasting impact on health care in the area of health accounting. Hong Kong’s first set of DHAs was launched, and has been updated by the University of Hong Kong to fall in line with the recent changes and developments in OECD in this area. The Harvard review (1999) found that information on measures were either not routinely collected and acted upon, or made publicly available. To date, there is room for improvement for a systematic and routine collection, evaluation and reporting of the measures of quality of care and patient outcomes for informing the management of care process and activities.

Health outcomes Some information on health outcomes can be found to a limited extent in the literature and publicly available reports. Health status indicators have been frequently cited in the literature on Hong Kong health care as one of the proxy measures of the quality of care. In this aspect, health indices continue to compare favourably with those of most developed countries.63 Infant mortality rate continues with its downward trend – 2.4 per 1,000 registered live births in 2005 compared with 4.4 per 1,000 ten years ago. Similarly, maternal death rate fell to all time low in 2005, 3.5 per 100,000 registered live births, compared with 7.5% ten years ago. Life expectancies at birth have improved yet again, from 76 years for

63 Poullier J.P., OECD Health Systems (Paris: OECD, 1993).

795

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The Hong Kong Special Administrative Region in Its First Decade

men and 82 years for women to 79 years for men and 84.7 for women.64 It is noted earlier that mortality indicators or health status are not necessarily due to the health system alone, but to other socio-economic, demographic, and environmental factors. Attempts are being made in the public hospital sector on reporting performance measures. In a recent Chief Executive’s published Progress Report to the HA Board, two performance-related proxy indicators of care quality were reported and published on HA’s website 65 – the two were unplanned readmission rate (%) for general inpatients and Accident and Emergency waiting time. The outcomes of a self-audit exercise conducted at the HA were reported in 2005 using a modified UK protocol on the management of hypertension in a general out-patient clinic,66 it was found that most standards were reached, as in the assessment of risk factors with the participation from nurses. However, “the rate of assessment of symptoms and signs of target organ damage was far from target standard.” Only 7.4% of patients had been assessed for retinopathy and peripheral vascular disease and only about half of the patients had been assessed for angina, heart failure and renal disease. They attributed to the failure to a limitation of consultation time. Only 57.1% of patients were appropriately referred for specialist assessment. Limitations were found in the audit as there were confounding factors, different study samples, and the quality of some consultation notes. It was understood that further outcome indicators of quality are

64 Hong Kong Census and Statistics Department, Annual Digest of Statistics, 1997, 1998, and 2006. 65 Hospital Authority, Chief Executive’s Progress Report on Performance Indicators, Hospital Authority Board Paper No. 99, presented to the HA Board Meeting on 21 December 2006 (Hong Kong: Hospital Authority, 2006). http://www.ha.org.hk/hesd/nsapi/?MIval=ha_visitor_index&intro=ha%5fvie w%5ftemplate%26group%3dAHA%26Area%3dBNC%26Subj%3dHAB% 26Topic%3dPAP&ustamp=2007%2d03%2d22+20%3a20%3a45%2e313. Accessed 4 February 2007. 66 Chan P.F. and Chao D.V.K., “An audit on management of hypertension in a Hospital Authority general outpatient clinic,” The Hong Kong Practitioner, Vol. 28 (2006), pp. 507–518.

Review of the Health System

being developed in the HA at the time of writing, but it is not clear if the information would be made publicly available, or if the information would show that these programmes have been effectively implemented. Lieu, pointing also to the lack of information on the outcomes of medical services and the performance of providers, recommended an independent Office for Quality Assurance in order to achieve a coherent, transparent and responsive improvement strategy.67

Indicators of input/workload Based on preliminary evidence produced by Yuen (2006)68 drawn from age-adjusted workload indicators for doctors and nurses and (in HA) income per population unit (from 1993, 1996, 2002, 2005), Yuen is of the opinion that resource level (in public hospitals) today is “much better than that of 1993.” Workload indicators for doctors have in fact improved from 7.73 beds per doctor in 1996 to 5.75 in 2005. Similarly patient days per doctor had decreased from 1,654 per doctor in 1996 to 1,077 in 2005. Nurses’ workload in terms of beds per nurse had gone up slightly (1.5 beds per nurse compared with 1.3 in 1996) while patient days per nurse had gone down marginally (275 patient days per nurse compared with 289 in 1996). After adjusted for age, population units served by each doctor had gone down while that per nurse had gone up.

Regulation of medical practice and patient complaint mechanisms The Harvard Report attributes the deficiencies in health care quality partly to the ineffective complaint mechanism for patients. 69 Complaint mechanisms were dominated by physicians, as in the case

67 Lieu G., “Quality indicators and health targets,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 302–326. 68 Yuen P.P., “Health care financing reform for Hong Kong: a basket of incremental measures,” presented at the International Symposium (on) Hong Kong Health System. 69 Hsiao W., Yip W., et al., Improving Hong Kong’s Healthcare System, p. 59.

797

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The Hong Kong Special Administrative Region in Its First Decade

of the Medical Council of Hong Kong (MCHK) which has only four laypersons compared to 24 medical professionals as members 70 elected by medical professionals. Their nominations by professional medical organizations are open to doubt about their independence, accountability and impartiality as “medical professionals have been reluctant to criticize or judge one another professionally.” The domination by health professionals in the membership is still the case with the MCHK – no changes in the membership composition occurred in the past ten years in the MCHK council. Chu is of the opinion that the complaint investigation procedure of the MCHK who has jurisdiction over only individual practitioners does not lend to transparency or accountability.71 All complaints have to be first screened by the Chairman and if appropriate also by the Deputy Chairman who are doctors to determine if the cases should be heard by the Preliminary Investigation Committee (PIC) which will then refer to the MCHK for disciplinary inquiry. Table 7 shows that the total number of cases handled by the MCHK has doubled between 1995 and 2005, although the total cases referred to the PIC for hearing is still a minority. A yet small part (ranging from 3% to 8% in the last ten years) of complaints were ultimately channelled for disciplinary inquiry by the MCHK. The definition used for misconduct – “something . . . regarded as disgraceful, unethical or dishonourable by his professional colleagues of good repute and competency” – is vague and no explicit yardsticks have been used for the assessments. In regard to the public health care complaint mechanism, a review of the HA Public Complaints Committee (HAPCC) membership shows that as at March 2007, the majority are lay members with different community backgrounds. The HAPCC is the final appeal body within the HA, handling complaints against public hospital services when complainants are not satisfied with the

70 The composition is stipulated in Section 3 of the Medical Registration Ordinance. 71 Chu Y.M., “Quality of care and patient redress: a patient perspective,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 276–284.

Review of the Health System

handling at the hospital level. The HAPCC has been reporting to the HA Board regularly and its reports are available for public scrutiny on HA corporate website.72 As part of the corporate governance framework, the HAPCC states that it is aware of the importance of factors such as independence, competence, timeliness, effective communication and right attitude towards complaint management for an effective complaint handling system.73 Table 7 Number of Cases Handled by the Medical Council of Hong Kong, 1995–2005 Number of cases Nature

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Total cases considered by Chairman and Deputy-Chairman of PIC

177

168

190

245

230

227

236

287

350

311

397

Total cases heard by PIC

78

42

44

56

39

58

80

76

108

112

123

Total cases referred by PIC to Council for disciplinary inquiry

14

9

10

7

17

15

18

14

22

25

31

Percentage of Total Cases (1) Total cases referred by the PIC to the Health Committee for inquiry

(8%) (5%) (5%) (3%) (7%) (7%) (8%) (5%) (6%) (8%) (8%)

–

–

–

–

2

–

–

–

1

–

–

PIC = Preliminary Investigation Committee Sources: (1) Chu Y.M., “Quality of care and patient redress,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong's Health System, p. 276. (2) Newsletters, Medical Council of Hong Kong.

72 Hospital Authority, Annual Report of the Public Complaints Committee – Executive Summary, Hospital Authority Board Paper No. 104 (Hong Kong: Hospital Authority, 2006). http://ha.org.hk/. Accessed 17 March 2007. 73 Hospital Authority Public Complaints Committee, Progress Report of the Hospital Authority Public Complaints Committee, Hospital Authority Board Paper No. 71 (Hong Kong: Hospital Authority, 2004).

799

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The Hong Kong Special Administrative Region in Its First Decade

Table 8 summarizes the complaints on medical services handled by the HAPCC since 1998. No statistics were available on the number of appeal cases received by HAPCC, but according to the available data on the number of cases concluded by HAPCC, there has been a six-fold upsurge over 1998, or two-fold increase over 5 years ago. Amongst the concluded cases, the proportion of those found unsubstantiated increased from 70% in 1998, 87% in 2001, to 89% in 2006. The HAPCC attributed the increases to the higher expectations of the standard of hospital services and the increasing awareness of the feedback and complaint channels. Table 8: Complaints Received by All HA Hospitals, 1998–2006 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total complaints received by HA Hospitals Concluded by HAPCC (Total) – Not substantiated – Substantiated – Partially substantiated

1969 1706 1642 1650 1744 1882 2148 2242 2208 30

59

77

87

104

(100%) (100%) (100%) (100%) (100%)

152 100%)

173

166

187

(100%) (100%) (100%)

21

44

64

69

88

139

156

147

166

(70%)

75%)

(83%)

(79%)

(85%)

(91%)

(90%)

(89%)

(89%)

4

3

6

10

4

3

3

2

6

3

8

6

7

8

5

2

7

8

1

–

2

2

1

(10%)

– Withdrawn

–

1

1

1

– Incapable of determination

1

3

–

–

–

–

2

3

–

– Outside PCC ambit

1

–

–

–

3

5

6

5

6

HAPCC = Hospital Authority Patient Complaints Committee Sources: Hospital Authority, Progress Report of the Hospital Authority Public Complaints Committee, Hospital Authority Board Paper No. 59 (Hong Kong: Hospital Authority, 2003). http://ha.org.hk/. Accessed 17 March 2007; and Hospital Authority, Annual Report of the Public Complaints Committee – Executive Summary.

There has also been a steady shift in the nature of complaints from administrative to medical (Table 9). In 2006, the number of complaints on medical services increased by 41% over a five-year-period. The proportion of medical complaints over total complaints has also increased from 38% in 1998 to 42% in 2001, and to 45% in 2006. The HAPCC reported that since 1998, the

Review of the Health System

majority of appeal cases handled by it are highly complex medical complaints. In 2006, the “feedback” incidences (first reported in 2003) on medical services increased 133%. Since no definition of feedback has been provided, it is not clear how “feedback” data are differentiated from complaint when they are being tabulated or how they can be interpreted. Appreciation of medical services showed similar level when compared with the figure ten years ago, but declined from its once higher level in 2001. Table 9 Complaints and Feedback on Medical Services Received by All HA Hospitals, 1998–2006 On medical services

1998

2003

2004

2005

2006

Appreciation

8,683 11,147 11,785 11,033 10,425 5,951

8,243

8,760

8,685

Feedback

#

Total complaints received by HA hospitals Medical complaints (number) (% of medical over total complaints)* Concluded medical cases by HAPCC

2000

2001

2002

–

–

–

–

–

1,345

2,729

3,183

3,131

1,969

1,706

1,642

1,650

1,744

1,882

2,148

2,242

2,208

750

660

731

695

784

782

914

1,006

983

(45%)

(42%)

(45%)

(42%)

(43%)

49

67

75

87

103

127

(7%)

(9%)

(11%)

(11%)

(13%)

(14%)

(13%) (13%)

(60%) (83%)

(87%)

(86%)

(84%)

(68%)

(73%)

(77%) (68%)

(38%) (39%) 18

(% of complaints on (2%) medical services)* (% of concluded medical cases)*

1999

(45%) (45%) 128

127

# Collection of feedback statistics started in January 2003. Definition of feedback and how it is differentiated from complaint are not stated in the report. * Percentages do not add up to 100% due to rounding of decimals. Sources: Hospital Authority, Progress Report of the Hospital Authority Public Complaints Committee, Hospital Authority Board Paper No. 59 (Hong Kong: Hospital Authority, 2003). http://ha.org.hk/. Accessed 17 March 2007; and Hospital Authority, Annual Report of the Public Complaints Committee – Executive Summary.

It can be seen that improvement efforts have been made in improving the transparency of the patient complaint and redress mechanism in the public sector health care in the last ten years, but

801

802

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less could be said of the private health care sector. The accountability mechanisms are largely unchanged. Chu, a former member of HAPCC, in his analyses of patient redress mechanism in Hong Kong,74 cited the high profile medical mishaps of the mobile phone colonoscopist and the inappropriate use of steroids by a neurosurgeon as examples of deficiencies in the system. From the patient perspective, he is of the opinion that though channels are available, the system is not transparent as neither the complainants nor the public are informed about the justification for a ruling.

Clinical governance The Harvard review reported in 1999 that there was a lack of available information on assessing the quality of care in Hong Kong. Since then, efforts had been made to draw on overseas experience in system- or organization-wide quality improvement and risk management in the public and private sectors. Relating to public hospital quality, the HA reported on their experience in implementing clinical governance, which in the UK advocates clear lines of responsibility and accountability, management of risks, quality improvement activities and identifying and remedying poor performance.75 The HA activities include the setting up the infrastructures and processes in clinical audit, health technology assessments and risk management (the HA Clinical Audit Committee, specialty co-ordinating committees and the recent Head Office Clinical Audit Department). With the setting up of a risk management office in the HA, the incident reporting mechanisms, through the Advanced Incident Reporting System (AIRS), have seen a two-fold increase in the voluntary reporting of medical incidents compared with ten years ago. The mechanism identified common medication errors and

74 Chu Y.M., “Quality of care and patient redress: a patient perspective.” 75 Wong V., Liu H.W. and Poon H., “Clinical governance and quality management,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 327–336; and Wong V., “Clinical governance: past, present and future in quality of care,” presented at the International Symposium (on) Hong Kong Health System.

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underlying causes for learning and targeted alerts to clinicians. A system-wide audit of the public complaints cases received by HAPCC from 2000 to 2002 had been carried out at the HA.76 The findings yielded useful demographic data, and important insight into the reasons for complaint, and suggested that evidence-based targeting of particular task factors may lead to better management. It was acknowledged that “what we can see from the complaints received is only the tip of the “complaints iceberg.”77 To complete the quality cycle, feedback mechanism and motivation from the bottom up at the clinical level to better respond were needed. Leung commented that this has barely scratched the surface of the much more important problem of medical errors, but the move was a “gratifying” start and important step towards quality improvement.78 Some clinical practice guidelines and technology assessment reports have been developed and made available through the HA’s internet website and its knowledge portal, the e-Knowledge Gateway (eKG) for sharing with private health care practitioners. There have been occasional presentations about patient outcome-based clinical audits at the annual HA conventions from front-line clinicians. In 2000, the Private Hospital Association in Hong Kong reported on their clinical governance initiatives in engaging the UK Trent Hospital Accreditation Board to conduct biennial survey of its 12 member hospitals. The Board found areas of improvements which included a lack of coordinated clinical audits and inadequate documentation by visiting doctors. A code of Practice for Private Hospitals was introduced in 2003, and acted as a measure for

76 Choy K.M., Lau A., Li E., Lai F. and Ko W.M., “The evolution of complaint management in the Hong Kong Hospital Authority, Part 1: complaints management – a tool for system change?” Hong Kong Medical Journal, Vol. 10 (2004), pp. 290–92. 77 Choy K.M., Wong P. and Ko W.M., “The evolution of complaint management in the Hong Kong Hospital Authority, Part 2: the ‘complaints’ iceberg,” Hong Kong Medical Journal, Vol. 10 (2004), pp. 362–64. 78 Leung G.M. and Bacon-Shone J., “Organisational, management and quality of care issues.”

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doctors applying for their admission privileges. 79 Some have in collaboration with HA embarked on the adverse incident reporting mechanism to reduce medical errors. Yet very little further information could be available to the public on the result of the impact of the changes. For ambulatory care in the public sector, Wong80 reported on the introduction and use of clinical processes and outcome indicators in the HA’s general out-patient departments, including “prescribed items per encounter,” referral rates,” URI prescriptions, diabetes complications, etc.

Continuous medical education and continuous professional development In specialist medical training, the Hong Kong Academy of Medicine is to organize, monitor, assess and accredit continuing medical education and continuous professional development (CPD) of its Fellows. Since the Medical Registration Ordinance was amended in 1996, the Academy has played a more active and significant role in the accreditation of continuing medical education for the purpose of specialist registration. Fifteen constituent specialty Colleges and 55 specialties are currently contained within the Academy, all of which run their own structured training programs. By 2006, the status of the Fellows at the Academy has been recognized by Mainland China and bilateral arrangements have been made in specialist training, accreditation and registration. Practising GPs were not required to engage in continuous medical education (CME) until the early twenty-first century. In October 2001, the MCHK, in response to the Consultation Document on Health Care Reform (2000), introduced CME first as a voluntary programme based on a “credit point system” with credit points (and a certificate) awarded for participation in CME activities recognized by the Medical Council. The objective is to keep GPs

79 Fang D., “The private-public interface,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 199–208. 80 Wong V., “Clinical governance: past, present and future in quality of care.”

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up-to-date on current developments in medical practice so as to maintain a high professional standard. It was observed that an initial MCHK requirement to complete a three-year cycle of 90 credit points (30 in each year) before the issue of a certificate is recently changed. If doctors have gained at least 30 credit points per year, they will be awarded a certificate to state that they have achieved a satisfactory level of CME activity. Such a certificate can be displayed inside the doctor’s office. In addition, it has been discussed that those practicing doctors who have accumulated at least 90 credit points during a three-year cycle will be allowed to use the title “CME certified” on their visiting cards for a validity period of three years. The number of non-specialist doctors receiving a certificate in a year ranged from 1,758 (2001–02) to 1,413 (2003–04), roughly about half of the GPs practising in Hong Kong.81 The outcome of the status of this CME programme is not clear as in March 2007. The original intention of the MCHK was to make the CME programme mandatory after the first voluntary three-year CME cycle at the end of 2004 and to link the programme with the renewal of practising certificates. Owing to the objections of major professional bodies (the Hong Kong Medical Association, Hong Kong Doctors’ Union, Practising Estate Doctors Association and the Association of Licentiates of MCHK) and much debate in the Legislative Council in 2004–05, the Bureau of Health, Welfare and Food decided in April 2005 to defer the plan for further discussion and dialogue within the profession to come up with a grace period for implementation.82 Although CME/CPD has been known to be effective in other developed countries for quality improvement, how well the system is working in Hong Kong or whether a registered doctor has actually been sanctioned for failing to meet minimum CME/CPD

81 The Medical Council of Hong Kong website, http://www.mchk.org.hk/. Accessed 17 January 2007. 82 Hong Kong Special Administrative Region, Legislative Council Panel on Health Services, Continuing Medical Education for Medical Practitioners [supplementary information paper], LC Paper No. CB(2)120/05-06(01) (Hong Kong: HKSAR government, Health, Welfare and Food Bureau, 2005).

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requirements are not obvious. Some Hong Kong studies found medical training had no effect on over-prescription of antibiotics for patients presented with URTI symptoms. There is no difference in prescribing between those who had received vocational training or not and those with or without higher qualifications in family medicine/general practice.83

Drug prescription behaviours The Upper Respiratory Tract Infection (URTI) Study referenced by the Harvard study revealed the over-prescription of antibiotics, inadequate medicine labelling and information provided to patients. In the last ten years, medication errors still occur and were reported in the press from time to time. The latest was the wrong dispensing of diabetic drug (diamicron) instead of an antacid (simethicone) to 152 patients in 2005 by the unqualified “nurse” in the private clinic, leading to the death of four patients. Statistics on disciplinary cases handled by the MCHK have been rising by 68% over a five-year period (2001–05). 84 The results of subsequent studies on drug prescription patterns of primary care doctors confirmed inappropriate and over-prescription of drugs still persists. The antibiotic study by Lam and Lam (2003)85 showed that more than half respondent doctors declared that they would be likely to prescribe antibiotics when they encounter patients presenting with URTI clinical factors (purulent nasal discharge, purulent sputum, looking unwell, exudates on the throat, etc.) that had proven to be not benefiting (or least benefiting) from antibiotics. One in four doctors was likely or very likely to do so to meet patients’ expectation of antibiotics. The major reasons given were “to satisfy the patient or his/her

83 Lam T.P. and Lam K.F., “Why do family doctors prescribe antibiotics for upper respiratory tract infection?” International Journal of Clinical Practice, Vol. 57, No. 3 (2003), pp. 167–69. 84 Medical Council of Hong Kong, “Statistics on disciplinary cases handled by the Medical Council: complaints received by the Medical Council,” Newsletter of The Medical Council of Hong Kong, No. 12 (March 2006), p. 23. 85 See Note 83.

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carer” and “fear of medico-legal problem if the patient deteriorates would make them very likely or likely to over-prescribe antibiotics for patients with URTIs.” Public doctors might over-prescribe “in order to save time” (so that they do not have to take time to explain to patients), whereas private doctors might do so in order “to keep patients in their practice.”86 Those who have graduated in Hong Kong or work in private practice were more likely to prescribe antibiotics, while Fellows of the College of Family Medicine were less likely to do so. Another work by Dickinson and Chan (2002) 87 had similar findings on antibiotic use of doctors and concluded that doctors in Hong Kong have different prescribing habits from those doctors of other developed economies. The study on steroid use by Wong and You88 by primary care doctors also pointed to some poor prescription patterns. Steroids were prescribed in 7% of all patient encounters mostly for dermatological and respiratory diseases. A third of patients with respiratory tract infections were prescribed steroids although it as it is commonly understood that the management of URTI should be limited to symptom relief, as steroids are known to enhance viral growth in experimental rhinovirus infections89 and might increase the burden of disease. It was found by the study that younger (less than 44 years) doctors were more likely to prescribe steroids. Although the separation of drug prescription and dispensing was proposed in the past, it was resisted by the private doctor groups in the guise of professional autonomy. A study of physicians’

86 Lam T.P. and Lam K.F., “What are the non-biomedical reasons which make family doctors over-prescribe antibiotics for upper respiratory tract infection in a mixed private/public Asian setting?” Journal of Clinical Pharmacy & Therapeutics, Vol. 28, No. 3 (2003), pp. 197–201. 87 Dickinson J.A. and Chan C.S.Y., “Antibiotic use by practitioners in Hong Kong,” Hong Kong Practitioner, Vol. 24 (2002), pp. 282–291. 88 Wong W.C.W. and You J.H.S., “The all-powerful and ‘happy’ drug: the use of steroids among primary care doctors in Hong Kong,” Journal of Clinical Pharmacy & Therapeutics, Vol. 31 (2006), pp. 173–78. 89 Gustafson L.M., et al., “Oral prednisone therapy in experimental rhinovirus infections,” Journal of Allergy & Clinical Immunology, Vol. 97 (1996), pp. 1009–1014.

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and patients’ opinions on the issue by Chan (2003)90 indicated that patients’ attitudes, beliefs and behaviours have a part to play in sustaining the phenomenon. Patients want to be free of symptoms and the illness quickly. Another study found that patients believe that if URTI symptoms are not suppressed early, it will lead to more serious illness.91 In comparing a morbidity survey in Hong Kong conducted in 1995, Wong concluded that the number and types of problems in his study were similar those a decade ago.92 Current world standards on dispensing through professional pharmacists who can facilitate the coordination of care and guard against overprescribing, drug-drug interactions or drug overlaps are not considered viable in Hong Kong. Some authors alluded to the financial motive behind to explain such resistance to change. No major action or change was undertaken by the administration in these ten years on the issue. Indeed a public health agency should have better oversight and peer assessment of the delivery of care, which “has remained opaque and closely guarded by the profession to date.”93

Access to care The Harvard Report acknowledges that HKSAR government has lived up to its principle that no one should be deprived of care for lack of means in providing everyone with equitable “access to essential health care regardless of their financial means.” The operationalization of living up to this principle however is increasingly difficult when the problem of rising demand and health care costs exacerbate in the last ten years.

90 Chan T.K., Separation of Prescription and Dispensary in Hong Kong: Opinion Survey for Physicians and Patients, Family Medicine Report (Hong Kong: Department of Community and Family Medicine, the Chinese University of Hong Kong, 2003). 91 Wong W.C.W., Dickinson J.A. and Chan C.S.Y., “Cough mixtures: rational or irrational prescribing in Hong Kong?” Family Practice, Vol. 22 (2005), pp. 381–82. 92 Wong W.C.W. and You J.H.S., “The all-powerful and ‘happy’ drug,” p. 177. 93 Leung G.M. and Bacon-Shone J., “Commentary: health financing reform,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System.

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Duration of consultation and queuing / waiting time and doctor shopping In the public sector, the use of first-come-first-served quota system accompanied by efficiency measures meant a less than ideal clinical management of patients. The Harvard study found that the duration of clinical encounter was too short (5 minutes or less) and the queuing time excessively long. The Team also pointed to the significantly higher private physician fees and earnings. Other earlier studies echoed the prevalence of the doctor-shopping behaviour (defined as changing of doctors without professional referral in the same illness episode)94 in nearly 40% of patients under study at the public general out-patient clinics. During the past ten years, efforts have been made in HA hospitals in influencing, diverting or managing the demand of services – engaging nurses in triage at emergency departments, upward revisions in hospital fees and limited shared care and community programmes for the elderly and community nursing services, preventive services enhancements, and the education of patients. The evidence of the impact and outcomes of these initiatives is not known or publicly available. What is known recently is that the HA revealed that demand for health care in the public hospital sector had been increasing continuously both in terms of the inpatients treated as well as Specialist Out-patient attendances – a 2.7% underlying demand per annum by 2001. 95 As a result, waiting times for specialist out-patient clinics had been rising, for example, from around 11.7 – 13.8 weeks in 1996–97 to over 20 weeks in 2005–06 in the specialties of Surgery and Orthopaedics. Specifically, the waiting

94 Lo A., Hedley A.J., Pei G.K., Ong S.G., Ho L.M., Fielding R., et al., “Doctor-shopping in Hong Kong: implications for quality of care,” International Journal for Quality in Health Care, Vol. 6, No. 4 (1994), pp. 371–381; and Lee R.P.L., “Change of doctors among different segments of urban population in Hong Kong,” Journal of the Hong Kong Society of Community Medicine, Vol. 13 (1982), p. 207. 95 Solomon S., “Organizing and managing health care,” presented at the International Symposium (on) Hong Kong Health System.

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time for cataract surgery was over 30 months in 2005, compared with 10 months in 2000. A study conducted by the Chinese University of Hong Kong revealed that there was a high level of utilization of Accident and Emergency (A&E) Services in hospitals for cases that should have been seen by GPs due to the perceived better quality of hospital services (rather than costs). Over half of the A&E attendances are true non-urgent cases. The study estimated that if the current A&E attendances of 2.2 million visits could be cut by half, it would save HK$300 million per year, which is 3% of the total public health expenditure, or 1.6% of the total health expenditures in Hong Kong.96 In another study of A&E supply chain, Johnston alluded to the patients’ perception of need for this service was higher than the A&E physician, thus 53% of the A&E attendances were self-directed, rather than by referral from the GP (7%).97 Many saw a physician for the same problem. A&E in part generates its own work and contributes to the work of specialist out-patient clinics. There was a low level of need but high levels of referral, resulting in patients defaulting Specialist Out-patient Department (SOPD) appointments. She found that 25% of patients “doctor shop” at SOPD and another 25% do not attend booked appointments. With those who attended, they were seldom discharged, and the interquartile length of stay ranges from two to five years. She suggested a better control of the outflow, by preventing unnecessary follow-up. These are symptoms of a systemic problem arising from the fragmented and episodic health care structure. Many believe that they are due to a number of factors – highly subsidized lower fees for public sector care, accessibility of (or no access to) care at certain

96 Lee A., Hazlett C.B., Chow S., Lau F.L., Kam C.W., Wong P., et al., Why Patients Utilize Accident & Emergency Department Services with Conditions that Would be Treated by General Practitioners? (Hong Kong: Chinese University of Hong Kong, 2004). http://www.cuhk.edu.hk/med/cmd/ research_recent.html. Accessed 24 February 2007. 97 Johnston J., “Evidence from 10 years of health services research in Hong Kong,” presented at the International Symposium (on) Hong Kong Health System.

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time of day, the care structure – invariably problem of access in the health system. Yuen cautioned that “budget deficits, long waiting time, pressure on staff are management problems and NOT resource level problems.”98 Long waiting lists were due to the presence of “perverse incentives” in that quality services in the public sector had attracted more patients without bringing in more resources, while poor services were not financially penalized. He opined that “long waiting time can be used as a bargaining tool for more resources.”99

Issues and Discussions The changes arising from the health reform policy and initiatives have been sporadic, incremental, rather than far reaching. First steps have been made in integrating primary/secondary care in the public sector and collaborating in risk management activities and electronic patient records between the public/private sectors on a limited scale. Despite the good intentions, these initiatives do not address the wider issues where Hong Kong health system still faces problems of financial sustainability and fragmentation of care as it did in the last decade. Without doubt, with the continuous rise in public health expenditure burden, the community realized the need to address these issues together with the quality of care issues highlighted above. The government had to admit in its HMDAC website: “It has been more than ten years since the issue of health care financing was first discussed widely in the community . . . Given the many vested interests of stakeholders, how such goal can be realized remains a challenge.”100 Some critics are of the opinion that the HMDAC approach of appointing separate working groups (primary,

98 Yuen P.P., “Health care financing reform for Hong Kong: a basket of incremental measures,” presented at the International Symposium (on) Hong Kong Health System. 99 Ibid. p. 10. 100 Hong Kong Health and Medical Development Advisory Committee, Heath Care Financing Previous Public Discussions from 1993 to 2004, Discussion Paper. http://www.hwfb.gov.hk/hmdac/english/dis_papers/dis_papers_hcfppd. html. Accessed 15 January 2007.

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secondary, tertiary care) did not help with solving the problems with care fragmentation. The lack of major progress in health system reforms especially in financing and care structure has been attributed to a number of factors: professional dominance in policy decisions, the power imbalance between professionals and the community, as well as the difference in perceptions and community values.101 There is also a belief by some that current cost efficiencies are already achieved; public inertia and a lack of publicly available measurement of care outcomes also pose as barriers to informed decisions and consensus building.

Professional Dominance in Policy Decisions Some authors believe that the Hong Kong health system has inherited from its colonial past the collectivist view of the British system of providing healthcare for all. The government has also been content as before to let the profession guide the quality of health care and the course and pace of reform. Similar to the Australian case of Medicare,102 interest groups in Hong Kong do work together structurally within the policy-making system to oppose or to promote change. It has been generally acknowledged that the medical profession’s role is critical in shaping and constraining health policy in Hong Kong.103

Power Imbalance between the Professionals and the Community Another reason may be that individual consumers of health care, the patients, their families and the community are unable most of the time to distinguish between good and poor quality services, unlike consumers of other goods and services. This is due to the complexity

101 Leung G.M. and Bacon-Shone J., “Organisational, management and quality of care issues.” 102 Palmer G.R. and Short S.D., Health Care and Public Policy: An Australian Analysis. 3rd ed. (South Yarra, Vic.: Macmillan Publishers, 2000), p. 57. 103 Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System.

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of health care and the expertise required to understand the nature, course and impact of care and care systems despite the efforts of some health professionals to impart more information on care. Medical knowledge is, though imperfect, highly complex and specialized, thus affecting communication and contribution of solutions to expedite reforms.

Public Inertia There is a low level of community involvement in the discussions about health policy and financing. Health reform was not regarded as the top three priority issues by the public opinion polls during the election campaigns of the 2007 election of the HKSAR Chief Executive. This may be attributed to the general contentment with a health system that has provided better organized service (compared with 1980s and before) and apparently higher visibility in the past years when compared with other key issues such as education and the environment.

Difference in Perceptions and Community Values Furthermore, the community tends to see differently from health providers health care matters especially those that often involved life and death situations, since these matters often involve psychological stresses, value judgement, as well as community (and personal) expectations. Little research has been done in this area. It was commented by community leaders that stakeholders’ opinions are largely ignored. It is not clear if the government and the community at large have arrived at a consensus on the optimum level of public/private share in expenditures.

Belief in Current Cost Efficiencies Recent health spending projections to 2033 came to the conclusion that although substantially higher future projections are forecasted to be above the current 5.5% of GDP, it is possible to limit the level to below 10% of GDP by 2033, which would be low by international standards. Furthermore, it was found that technology diffusion (reflected in the excess health care price inflation rate) is

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the major cost growth driver. To slow the growth, global budgeting, demand management and technology assessment may be attempted, but may not yield effective results as the health care provider can always be caught up by the imperative to pursue higher quality care and innovations.104

Lack of Publicly Available Measurement of Care Process and Outcomes As shown earlier in this chapter, there is general lack of publicly available information and very few reliable instruments to measure the appropriateness or the effects of care in Hong Kong health care. There is also a lack of well-developed theories and evidence linking input to health status and consumer satisfaction. As Peter Drucker put it, “If you can’t measure it, you can’t manage it.” The lack of such information acts as barriers to informed debates, decisions and consensus building within the community. Patients have little active participation in their own care and the future of care.

Health Reform – The Way Forward The government must address the fundamental problems relating to the health needs of the ageing population with chronic illnesses, the escalating costs in health care, the public-private imbalance, and the episodic, non-integrated health care model still practiced in Hong Kong. It is also tantamount upon the HKSAR government (and other governments as well) to intervene through evidence-based/research-based health policies in areas that require a balancing of the stakes of the health care communities and the interests of the patients and the community. The roles of the HKSAR government in financing systems, regulating and monitoring health systems through collaborating research and evaluation of the real issues through community engagement are inseparable.

104 Leung G.M., Tin K.Y.K. and Chan W.S., “Hong Kong’s health spending projections through 2033,” Health Policy, Vol. 81 (2007), pp. 93–101.

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Evidence-based Policy Making through Community Engagement The laissez-faire policy in allowing free market supply and demand to achieve optimum level of prices and services cannot be applied to the delivery of health care services and the health care “market” for various reasons. The knowledge imbalance between the patient consumer and the provider in health services and their outcomes, the unpredictable onset of illness, accidental injuries, or emergencies, and the spillover effects of infectious illnesses to the public call for the government’s active involvement in health policy making, organiza- tion, subsidies and even the outright provision of health care services for this public good. Economic consideration alone without due regard to ethics and the values of the community will be futile. As resources are finite while health needs are not, the community should be engaged in determining health priorities, as they are the main current and potential recipients (consumers) of care. The government should encourage and/or facilitate the participation of all stakeholders (health care professionals from multiple disciplines, policy makers, patients and their families, the public) in discussions and the building of consensus on health policies and priorities based on open and accessible information. There is a need for strong leadership to steer the community in its decisions on what Hong Kong values as an equitable financing system, with coherent incentives for the patients, health care professionals, hospitals and ambulatory care providers in both the public and private sectors. Health policy decision making process should be transparent and the community’s and patients’ voice must be heard. Important questions such as what criteria should be used for prioritization should be openly and vigorously discussed and determined. Based on the agreed priorities, there is a need to develop important targets and valid performance measures to illustrate the success of the policy actions taken to address these priority areas and to regularly monitor progress of the reforms. Hong Kong should invest and develop skills and resources to capture high quality information and generate intelligence in health for the

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formulation of health policies that are appropriately and quickly responsive to current ills and problems. Such information and knowledge should be available free of charge to all bona fide users, to inform public opinion, health policies and actions. “Hong Kong must fund public health intelligence or it will pay an even higher cost.”105 In conjunction with the changing paradigm shift, a new system of measuring health status is called for, rather than merely measuring mortality rates, the impact of premature death and disability, e.g. disability adjusted life years, has been proposed by the academia. Leung106 emphasizes the needs to invest in research and development with a view to expand the local public health knowledge base and to focus research on the underlying structural determinants of social and economic deprivation in order to address inequalities in health status found within populations.

Meeting the Needs of the Chronically Ill and the Aged The prevalence of chronic diseases poses a high burden on society and different challenges to health and health care systems around the world. It was estimated that if there was a target to reduce deaths from chronic disease by 2% annually, 36 million deaths would have been prevented by 2015.107 They include cancer (32% of Hong Kong deaths in 2005), heart diseases (15%), chronic respiratory diseases (6%).108 These are associated with underlying risk factors (tobacco, obesity, environmental pollution, socio-economic deprivation, etc) involving population and region wide control strategies. These are the gaps that more research is

105 Hedley A., “The role of public health in social justice: the next steps in Hong Kong,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health Systems, pp. 131–33. 106 Leung G., “The challenge of chronic conditions in Hong Kong,” Hong Kong Medical Journal, Vol. 8, No. 5 (Oct 2002), pp. 376–78. 107 Strong K., Mathers C., Leeder S. and Beaglehole R., “Preventing chronic diseases: how many lives can we save?” Lancet, Vol. 366, No. 9496 (29 October 2005), pp. 1578–582. 108 Hong Kong Annual Digest of Statistics 2006, pp. 309–310.

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called for in the prevention, control and upstream management of chronic diseases in the Hong Kong context. Chronic patients often have combinations of chronic conditions especially in aged population (1 in 4 aged patient had 5 chronic diseases) and 50% of the HA inpatients are over 65-years-of-age in 2004.109 They use a variety of services concurrently (GPs and/or home care and/or physiotherapists and/or specialists and/or hospitalization) in a given period.110 Chronic conditions need care to be integrated, rather than episodic and compartmentalized into primary/secondary/tertiary care types, and differentiated as public or private care structures. For the elderly, long-term care in residential care homes and community support services, besides medical care, are essential. It was proposed that patient management programmes should include the promotion of self-management, the education of patients and families, re-engineering of the care process (as distinct from acute disease management), and the adoption of evidence-based protocols, which then should be supported by the implementation of information technology infrastructure.111 Other innovations on this front may include “information prescriptions” which are to be written as part of doctors’ prescriptions to patients, call centres to support chronic care patients. There is also evidence that a team approach (doctor, pharmacist, etc.) as well as patient education are the pre-requisites to the continuity of care and patient compliance with medication, factors which are pre-requisites to the effectiveness of treatments for chronic conditions.112 To avoid duplication of investigations among

109 Chu L.W. and Chi I., “Organization of care: long-term care and hospital care for the elderly,” presented at the International Symposium (on) Hong Kong Health System. 110 Westert G.P., Satariano W.A., Schellevis F.G. and van den Bos G.A., “Patterns of comorbidity and the use of health services in the Dutch population,” European Journal of Public Health, Vol. 11, No. 4 (December 2001), pp. 365–372. 111 Cheah J., “Chronic disease management: a Singapore perspective,” BMJ, Vol. 323 (2001), pp. 990–93. 112 Chan J.C.N., Wu J.Y.F., Chan G.M.C., Leung W.Y.S. and Lee B.S.C., “Promoting the appropriate use of chronic medications,” Hong Kong Medical Journal, Vol. 12, No. 6, supplement (December 2006), pp. 11–14.

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providers (which is common place in an episodic system), early intervention, and assessment of chronic conditions, care coordination in the community, early supported discharge from hospital, as well as acute hospital care whenever needed are all part of the new health care model for chronic conditions (elderly people) in the twenty-first century.113 It can be seen from above that health care policy is closely related to social policy. A chronic disease prevention and management model on a share care (public/private) basis, and how it can be organized to provide preventive, integrated and patient-centred holistic care to the patients in need (the aged, the chronically ill, the socially disadvantaged, the incapacitated) and delivered in the Hong Kong context including medical and social care should be studied and developed as a priority programme.

The Public Health Imperative To reduce the impact of chronic conditions, it is the prerogative to reduce disease burdens in the early phase and to prevent them in the first place. Upstream intervention and management of diseases are being recognized by the medical authorities, policy makers and funding sources as the way forward.114 Disease prevention through public education, open and transparent information dissemination, improved patient involvement and participation in one’s own care have become public health imperatives. Instead of focusing only in curing individuals, increasing attention is paid to defined communities and populations for interventions. Interventions to reduce the common risk factors such as obesity and smoking by advocating the change into healthy diets and life styles should be pursued. As there is a strong association between environmental pollution and chronic respiratory illnesses,

113 Philp I., A Recipe for Care: Not a Single Ingredient – Clinical Case for Change (London: Department of Health, 2007). http://www.dh.gov.uk/ prod_consum_dh/idcplg?IdcService=GET_FILE&dID=85995&Rendition= Web. Accessed 14 February 2007. 114 The Institute for the Future, Health and Health Care 2010 (San Francisco: Jossey-Bass, 2000).

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improving the environmental conditions such as air quality can help reduce morbidities in the long- term. Overseas experience found that poor adherence to medication was associated with low health literacy, insufficient information and even misleading information sometimes from the Internet. It was shown in randomized control trial that patient participation through access and use of their record to negotiate care with the physician improves achievement of goals and changes patient (and physician) behaviour.115 Educating patients, their families and the community is important so that they can take health in their own hands. Improving the community’s awareness and knowledge of diseases can help address the power imbalance between doctors and patients, between experts and the community. Educating the media is paramount so they can be well-informed and become a health advocate and a partner in health promotion.

Financing Care is a Shared Responsibility Many authors agree that there are many financing options and the so-called “best” combinations of financing options may exist in more than one form to meet the needs of the community and the economy. Ho advocates the introduction of the “Universal Excess Burden Health Insurance Plan” which requires users to pay all direct costs up to a threshold, and the government will cover the rest.116 It was regarded by critics to be theoretically elegant but impractical. Yuen 117 recommends a basketful of incremental measures including private insurance registration accompanied by tax incentives, introduction of long-term care financing and delivery

115 Hall J.A. and Doman M.C., “What patients like about their medical care and how often they are asked: a meta-analysis of the satisfaction literature,” Social Science Medicine, Vol. 27 (1988), pp. 935–39. 116 Ho L.S., Health Care Delivery and Financing: A Model for Reform [Hong Kong Economic Policy Studies Series] (Hong Kong: Commerce, Industry and Technology Bureau). http://www.info.gov.hk/bspu/ehtml/paper_ economic_content3.htm. Accessed 18 January 2007. 117 Yuen P.P., “Health care financing reform for Hong Kong: a basket of incremental measures,” presented at the International Symposium (on) Hong Kong Health System.

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plans, low-medical savings contributions for use in higher-class beds in public hospitals and private hospitals with exemptions for the low-income group, removal of the perverse incentives with “money-follows-patient” approach, and tax reforms. The prepaid nature of health insurance encourages more use of the health system in general. Higher co-insurance rate and out-of-pocket limit may dampen demand for health care, but will become unpopular with the community. The real reasons why health care costs so much (in the US) has been attributable to the corporatization of medicine – as a result, insurance companies, drug firms and device makers have more say than doctors and consumers in matters of care.118 The concept of savings that are earmarked for one’s personal use for future health care may be perceived as “fair” and would be better received by the Hong Kong Chinese people who are used to the “saving-for-the-future” psyche. Personalized savings plan (money-follows-patient approach) may entice patients to take rational actions (not doctor-shop so often) in seeking care. In the long run, Hong Kong should investigate if long-term care financing should tie in with Mandatory Provident Fund (MPF) comprehensive retirement schemes, according to some leaders in the community. The current scope, network and procedures of MPF will produce economies of scale for risk pooling, reduce administrative overheads and save costs due to its non-profit-taking nature. Such a plan is simple to implement (with an additional marginal increase in percentage point) and can cover the standard benefits. The government should offer safety net for those who are outside the mandatory savings plan, including the disadvantaged, the poor and the aged in form of subsidized care. On top of the mandatory savings plan, the insurance industry can offer additional and diversified insurance plans on health care to provide choice to individuals who could afford better quality care, e.g. for first or second class wards. This will also offer more choice for patients.

118 Mahar M., Money-driven Medicine: the Real Reason Why Health Care Costs So Much (New York: HarperCollins, 2006).

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On the Seamless Health Care Delivery System Primary care led system is demonstrated to produce more effective clinical outcomes at lower costs for the management of chronic diseases. 119 Though evidence points to the fact that specialists possess better knowledge of chronic conditions,120 yet primary care clinician (with the family doctor approach) as gatekeeper is regarded by many as the way forward to improve effectiveness and quality of care and to reduce rapidly escalating health care costs. If a primary care led system funded by medical savings can be instituted in the long-term, patients should be allowed to choose a defined group of primary care doctors who will then determine the best care delivery protocol and path to specialists and hospital services. These primary care doctors should adopt the family doctor approach in delivering care and to upgrade their skills and knowledge. Patients and “consumers of health care” should be educated for astuteness to choose doctors and have the information about care outcomes and performance to assist them in their choice of providers.

Systemic Approach to Appropriate Use of Health Services In conjunction with medical savings, an oversight authority or a health organizational network with seamless care structure should be instituted between public and private care providers, and between primary, secondary, tertiary and quarternary care givers. Better vertical and horizontal integration and organization of care would reduce the number of self-directed visits to the hospital emergency departments, and subsequent unnecessary referrals to ambulatory care clinics and wasteful medical appointment defaults. As the patient volume is reduced, so will the waiting time. The public/private sector, primary/secondary care givers and the

119 Starfield B., “Primary care: is it essential?” Lancet, Vol. 344 (1994), pp. 1129–133. 120 Harold L.R., Field T.S. and Gurwitz J.H., “Knowledge, patterns of care, and outcomes of care for generalists and specialists,” Journal of General Internal Medicine, Vol. 14 (1999), pp. 499–511.

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related health care and social professions can collaborate in the development of the chronic disease management model for chronic patients. As one in two patients admitted to HA hospitals is over 65 years old, following the new primary-care focused treatment protocol could relieve pressure on public hospitals. If an explicit and rational targeting of health priorities to be funded or heavily subsidized by the government is in place, the management of demand on hospitals or care providers can be better facilitated by rationalized fee structures that correspond to predefined priorities. This fee structure, combined with an integrated health care delivery system, would go a long way in rationalizing and smoothing patient flows through the system.

Enhancing Safety and Public Accountability of Health Services Hong Kong is behind in implementing a number of measures deemed to be reasonable in overseas countries to ensure patient safety. As an increasing number of complex medical cases have been brought to light, it requires more than the good will of public organizations to further improve medical services, but rather a serious review by the government on the effectiveness of existing mechanisms. A transparent complaint management and public reporting mechanism goes a long way to ensure checks and balances. We need to ask: How can private health care be developed to meet standards of care in a transparent and auditable system? Is reliance on self regulation sufficient? Should laypersons’ participation be enhanced or should there be more regulatory mechanism with direct investigative power in place? Would the existing part-time community participation in making decisions on complex medical cases be efficient, effective and sufficient or should more independent assessment by external experts be sought?121 Some advocate “a health ombudsman to provide a one-stop complaints system with a fully independent mandate that is not

121 The UK General Medical Council has moved to increase its lay membership component from 25% to 50%, and its chair taken up by a lay member.

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influenced by existing organizational and fiduciary relationships.”122 To create an effective feedback mechanism to improve patient safety, they also suggest that such an ombudsman should be given the authority to conduct direct investigations and the right to represent complainants and to access the relevant information. To enhance the public accountability of care providers, the community should be informed of the clinical outcomes and quality measures to make informed decisions. More regulation of high-risk medical technologies and practices, and over-the-counter nutri-ceuticals is called for. The CPD/CME process should be made compulsory for all practicing doctors in Hong Kong, particularly when they have opted to be part of the new delivery system based on the family doctor approach in which few doctors have been trained.

Conclusions The over-emphasis of the health policy on curative medicine has been criticized as inefficient and ineffective from the public health advocates’ perspectives (for example, Cochrane, 123 McKeown, 124 Taylor 125 ). Significant improvements in health status cannot be achieved through medical means alone. 126 Health problems are increasingly examined within the social, economic, historical and environmental changes where these problems originate.

122 Chu Y.M., “Quality of care and patient redress: a patient perspective,” in Leung G.M. and Bacon-Shone J. (eds.), Hong Kong’s Health System, pp. 271–90. Such groups include for example the Hong Kong Human Rights Monitor. Hong Kong Human Rights Monitor, Submission to the Pre-sessional Working Group of UN Committee on Economic, Social and Cultural Rights Regarding the Report of the HKSAR of the PRC (May 2000). 123 Cochrane A.L., Effectiveness and Efficiency: Random Reflections on Health Services (London: Nuffield Provincial Hospitals Trust, 1972). 124 McKeown T., The Role of Medicine: Dream, Mirage or Nemesis? (Oxford: Basil Blackwell, 1979). 125 Taylor R., Medicine Out of Control: the Anatomy of a Malignant Technology (Melbourne: Sun Books, 1979). 126 Dubos R., Mirage of Health (London: Allen & Unwin, 1960); and Dubos R., Man, Medicine and Environment (London: Pall Mall, 1968).

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Future challenges in improving health may include the eradication or reduction of the causes of morbidities or mortalities – poverty and societal injustice, environmental pollution, socio-economic environment, or even global climatic change. Are we expecting too much of the government and not enough of ourselves? Can we survive in the globalization of everything, including diseases and healthcare? Should we merely look at diseases as burdens, or should we broaden our outlook to focus on health expenditures as investments in the economy for the wellness of the population and potential generators of GDP? These are the questions we must ask ourselves. Finally, it must be emphasized that the “core predicament of medicine” is uncertainty.127 Nearly half of the interventions under review were found to be of unknown effectiveness and one in six ambiguous, ineffective and harmful.128 Both physicians and patients are faced with many unknowns and uncertainties129 and these must be openly acknowledged and accompanied by realistic expectations on health care. Health policies are cultural constructions produced by different groups of individuals and organizations. Community engagement and political determination are needed in the long-term health reform. Ultimately, health care is about the care of the people by the people. The health policy must “first do no harm,” and the regulatory framework free from vested interests. The educational system and institutional framework should adopt a “people strategy” to educate its health care workers to possess a receptive, honest and diligent attitude towards the knowledge of care. Health care professionals should be lifelong learners capable of communicating and working in multisectoral teams, and be dedicated to the welfare of patients and the community. The patients and the community should be educated to be a literate

127 Gawande A., Complication: a Surgeon’s Notes on an Imperfect Science (New York: Henry Holt, 2002). 128 Clinical Evidence Concise 14 (December 2005). http://www.clinicalevidence.com. 129 Schneider C., The Practice of Autonomy: Patients, Doctors and Medical Decisions (New York: Oxford University Press, 1998).

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“consumer” of health care, to know the difference between valid evidence and noise. They must also be educated and incentivised so as not to overuse/abuse the more expensive hospital system for their own convenience or perceived advantage at the expense of more needy patients. In Western democracies, the window of opportunity for reform usually occurs in the broader political arena by changes of government, election commitment, or budgetary considerations.130 The last major changes in the HKSAR political leadership (1997, 2005 and 2007) had not brought about successful health care reforms, especially in regard to health care financing. It is hoped that the next five years under the renewed term of the HKSAR Chief Executive and the strong financial position of the government will open up another window of opportunity for health care reform in Hong Kong. Author’s note: All views and opinions expressed in this chapter are those of the author’s, and do not represent the views and opinions of the organization in which the author works.

130 Palmer G.R. and Short S.D., Health Care and Public Policy, p. 57.

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22 The Radio Phone-in Talk Show as the People’s Council in Postcolonial Hong Kong* Clement Y. K. SO The Chinese University of Hong Kong

Alice Y. L. LEE Hong Kong Baptist University

In the ten years since the transfer of the sovereignty, or handover, of Hong Kong from the United Kingdom to the People’s Republic of China, Hong Kong has experienced a number of major events concerning which there have been intense interactions among the mass media, the government, and the public. Following the handover, the development of a more competitive media market led to sensationalism and the invasion of privacy, and the change of media ownership sparked concern over self-censorship. The incompetence of the HKSAR government under the Tung Chee-hwa administration resulted in an unprecedented level of public grievance and on 1 July 2003, half a million Hong Kong people participated in a protest march. The structurally handicapped legislature had been so ineffective that some of its functions had been taken over by the media, especially those functions that involve setting the public agenda and monitoring the government. The Central People’s Government had no choice but to replace Tung with Donald Tsang

* The

authors gratefully acknowledge funding support for this study by Competitive Earmarked Research Grants (CUHK4320/01H) from the Research Grants Council of Hong Kong. 827

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as the new Chief Executive in the middle of Tung’s second term in office. These events form a fascinating narrative and there are many lessons to be learned in the relationship among the aforementioned three social subsystems. With this context in mind, this chapter does not attempt to describe every major event or name all of the possible characters. We hope to focus on one single but important media phenomenon – the radio phone-in talk show – which could highlight the intertwining relationships among the media, the polity, and public opinion formation in the past ten years. We propose that in the postcolonial media landscape in Hong Kong, apart from the rapid rise of the Apple Daily, the radio talk show is the unmistakable landmark of the new era. Although the twenty-first century can be regarded as the age of new media, the traditional radio talk show still plays a very significant role in formulating public opinion. In the United States, over the years talk radio has developed a large national audience and is pervasive in presidential election campaigns and national dialogues such as the war on Iraq. In Hong Kong, radio phone-in programmes have even been noted as the most influential public forum in the postcolonial period, particularly during the SARS epidemic. The importance of the radio talk show has long been recognized by many related studies. However, most of the previous studies focus on analyzing the demographic characteristics of the radio talk show audience and the motives of listeners and callers for participating in the show. Scholars have not yet developed any useful theoretical frameworks for understanding the role of the phone-in programme in the political communication process.1 This study examines the political role of radio talk shows in Hong Kong. Through an investigation of the functions of these shows in a macropolitical sense, it aims to explore the relationship between the government and the media in the changing social context of postcolonial Hong Kong. We put forward the concept of a “people’s council” to serve as a guiding theoretical framework to summarize

1 Herbst S., “On electronic public space: talk shows in theoretical perspective,” Political Communication, 12 (1995), pp. 263–274.

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the influence of radio talk shows on public opinion formation in the two different periods after the 1997 handover. The first is the Tung period, in which the government was weak and the level of social grievance was high, while the second is the Tsang period, in which the government is stronger and the level of social grievance is lower than in the previous period.

“Big Media,” “Small Government,” and Radio Talk Shows Public participation in broadcast public affairs programmes has a long history and can be traced back to a variety of radio “town meetings” that were created in the 1930s.2 However, not until the 1990s did talk radio grasp the attention of the American public and political communication researchers and became a staple of American political discussion. Talk radio played a very essential political role in the 1992 presidential election and the 1994 House, Senate, and gubernatorial elections.3 People began to recognize that talk radio had become not only an important source of information on current affairs, but also a powerful force in influencing public opinion. In Hong Kong, public affairs phone-in shows started in the colonial period in the early 1970s, but not as an outlet for the expression of public opinion. After the 1967 riots, the British colonial government tried to improve its communication with the general public and introduced a phone-in programme broadcast by a government station. The phone-in programme was mainly used by people for making complaints about government departments, releasing their grievances, and making inquiries about applying for

2 Chase F., Sound and Fury: An Informal History of Broadcasting (New York: Harper, 1942); Herbst S., “On electronic public space”; Munson W., All Talk: The Talk Show in Media Culture (Philadelphia: University of Pennsylvania Press, 1993). 3 Bolce L., De Maio G., and Muzzio D., “Dial-in democracy: talk radio and the 1994 election,” Political Science Quarterly, 111 (1996), pp. 457–481; Laufer P., Inside Talk Radio: America’s Voice or Just Hot Air? (Carol Publishing Corporation, 1995).

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government public housing. The programme was in fact a means for strengthening colonial rule. It took almost two decades for local radio phone-in programmes to evolve into arenas for the expression of public opinion. Similar to the case in the United States, the major change in the role of talk radio in Hong Kong took place in the 1990s. In 1992, three celebrities, who were known as the “famous mouths,” hosted a television talk show programme called “Dragon Gate Forum.” The freshness of the format and the critical discussion among the hosts about public affairs as well as issues of the handover of Hong Kong to China immediately brought the programme great success and high ratings. One of the hosts, Albert Cheng, started a phone-in radio talk show called “Teacup in a Storm” at a local commercial radio station in 1995. The critical style of Cheng toward public affairs and the discussion of issues of the handover quickly made his radio talk programme the most popular show in Hong Kong. Since the handover in 1997, the success of “Teacup in a Storm” has not only generated more radio talk programmes in the city, but also turned these shows into powerful formulators of public opinion and even an influential political force. A local media analyst used the statement “opinion rules the airwaves” to describe the prominence of talk radio4. The emergence of the radio talk show as a popular political player in Hong Kong in the mid-1990s was highly related to the political impotence of the local government and the escalation of social grievance. In the last few years of its rule, the British colonial Hong Kong government could no longer play a strong administrative role as it was known that the United Kingdom would soon be relinquishing the sovereignty of Hong Kong to China. Unfortunately, the new HKSAR government that was led by Chief Executive Tung Chee-hwa performed poorly and could not win the trust of the Hong Kong people. For example, the administration’s ill-conceived housing policy triggered the collapse of the local property market and turned many middle-class people into property

4 Ho A., “Opinion rules the waves,” South China Morning Post, 4 November 1997; Lee F. L. F., “Radio phone-in talk shows as politically significant infotainment in Hong Kong,” Press/Politics, 7, 4 (2002), pp. 57–79.

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owners of “negative assets.” The Chief Executive also failed to fulfil his promise of building Hong Kong to become a competitive force in the region – “Asia’s World City.” In fact, the Hong Kong Legislative Council faces many political and structural constraints and basically is unable to take major initiatives. Although its members are publicly elected in various ways, it cannot fully claim that it fully represents the Hong Kong people. As a result, the Legislative Council is incapable of making a significant contribution to help the HKSAR government to run Hong Kong well. Therefore, the HKSAR government remains weak and is always under heavy criticism by the media. Radio talk shows, in the hands of politically outspoken talk show hosts, have taken the lead to air the deep grievances of the Hong Kong people and critically comment on a wide range of public policies. In the past decades, Hong Kong has developed into a pluralistic modern city with a high degree of freedom of the press but a limited degree of democracy. Although a fully institutionalized democratic system has not yet been instituted in Hong Kong, the notion of “government by public opinion” is deeply embedded in the political culture of Hong Kong.5 This did not change significantly after the handover. To effectively maintain social stability and resolve social conflicts, the HKSAR government is obliged to follow the political tradition of responsiveness to public opinion. The Chief Executive of the first administration of the HKSAR repeatedly emphasized the need to listen to the voice of the Hong Kong people. What is worth noting in the political arena in the post-1997 period is that the inability of the HKSAR government has heightened the importance of the media, which can better reflect and shape public opinion. Chan and So argue that the Hong Kong media have played an important “surrogate democracy” function in the political communication process: the media are instructing the government

5 Chan J. M., and So C. Y. K., “The surrogate democracy function of the media: citizens’ and journalists’ evaluations of media performance,” in S. K. Lau, M. K. Lee, P. S. Wan, and S. L. Wong (eds.), Indicators of Social Development: Hong Kong 2001 (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, 2003), pp. 249–276.

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what to do and what not to do. 6 Local media analysts simply describe this political phenomenon as “big media/small government,” indicating that the current weak government is under the constraint of the strong media. As talk radio can create instantaneous communities over the territory among those with coexistent interests and passions, it is particularly prominent among the various forms of mass media in leading the public to challenge the government. It is in this political context that the radio phone-in talk show has become the primary platform for the expression of public opinion.

Theorizing the Radio Talk Show: The Concept of a “People’s Council” The role of radio talk shows is highly related to the political culture in which they operate. In Hong Kong, since the mid-1990s talk radio has been operating in an environment that is characterized by an outspoken media, weak government leadership, an impotent legislature, and great social grievance due to the poor economy and shrinking political autonomy. Against this background, we hypothesize that the radio phone-in talk show in Hong Kong plays the role of a “people’s council”; that is, talk radio is not only an arena in which public opinion is formulated and circulated but is also a surrogate political institution. As the postcolonial government fails to lead and the Legislative Council is politically castrated, the radio phone-in talk show occupies the power vacuum and has become a substitute for the Legislative Council. The concept of “people’s council” here refers to the coming together electronically of radio talk show hosts, callers, listeners, government officials, and other public figures to form a gathering for political deliberation, like the elected councillors and government officials in Legislative Council meetings. In the United States, a “citizens jury” is a special way to allow for public participation in important issues. The citizens jury process uses

6 Ibid.

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random selection to impanel a group of people to study specific public policy issues (e.g., environmental protection and nuclear waste facilities) or to review candidates.7 The notion of “people’s council” here is similar to that of the citizen jury, but the participants of the people’s council – the talk show callers – are self-selected rather than randomly selected. Like those who serve on a citizens jury, callers to radio phone-in programmes have a chance to come together as the “people’s council” to discuss public issues. They also have opportunities to question government officials and representatives from various interest groups. This kind of political expression and participation leads to a sense of empowerment. Table 1 conceptualizes how the format of talk radio facilitates the political role of the radio talk show as the “people’s council” in a big media/small government political context. First, radio is a very personal medium. A radio talk show usually has a celebrity with a strong personality and charisma who serves as the programme host (Ng, personal communication). The audience of the show can easily feel in rapport with the host through participating in and listening to the show. An outspoken talk show host is influential in setting social and political agendas, particularly when the government is weak and the government leader is not popular. The talk show host acts like a council chair in the legislature, taking control of what will or will not be discussed. Radio talk shows allow unstructured and free verbal expression.8 For many people, such as those who have no particular expertise or have little education, a radio talk show is an excellent way for them to air their views. Moreover, the radio format allows callers to remain anonymous. In a society with a high level of social grievance, talk shows provide sites for laypeople to engage in mass dialogue about public affairs and challenge the authority of the experts. Because their identity is unknown, callers can freely make criticisms without worrying about backlash or retribution.

7 Crosby N., “Citizen juries: one solution for difficult environmental questions,” in O. Renn, T. Webler, and P. Wiedemann (eds.), Fairness and Competence in Citizen Participation: Evaluating Models for Environmental Discourse (Boston: Kluwer Academic, 1995), pp. 157–174. 8 Herbst S., “On electronic public space.”

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The Hong Kong Special Administrative Region in Its First Decade Table 1 The Radio Talk Show as the People’s Council in a Big Media/Small Government Political Context Characteristics of the Medium of Radio

Radio Talk Show in the Political Context

People’s Council

Personal medium

Interpersonal communication between host and audience; Celebrity talk show host with popularity shapes public discussion agenda and forms public opinion

Personal interaction between chair and council members; Council chair as critical agenda setter

Unstructured outlet and openness in participation

Free discussion for audience across gender and class (facilitates grassroots participation, expression of opinions, and release of grievances)

Free exchange on social and political issues among council members who come from all walks of lives

Interactivity

Radio forum

Council meeting

Instantaneous community formation

On-air community

Council members’ community

Infotainment style

Infotainment programme with high popularity

Non-rigid and informal political discourse

Immediacy and updated content

Current hot topics

Council agenda with high relevancy to social and political realities

The interactivity of the talk radio format facilitates public participation, and the critical commentary that is typical of the talk show hosts makes these shows more suitable than other media to perform the functions of the legislature. The interactions among the host, callers, guests, government officials, and other public figures constitute an electronic forum, like a council meeting, at which issues are discussed and debates are conducted. The radio talk shows are open for all and broadcast to all. They are able to reach a large number of people and a community is

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formed. Although the community is built in a disorganized way, its significance is no less than that of a community council. Many researchers value the community formation role of talk radio, and state that listeners “come together electronically for the distinct purpose of political communication” and “build informal social networks” which in turn are influential in affecting the political participation of individual listeners.9 Many radio talk shows take the form of infotainment. Some commentators and researchers have grave reservations about the possible positive effect of talk radio on the political communication process, and state that radio talk shows provide no substantial or useful political messages.10 Some even criticize talk programmes as “talking trash.”11 However, other researchers find that talk radio serves as a forum for political deliberation and that it is capable of influencing political activity, such as the appointment of top government officials and voting in elections.12 In Hong Kong, Lee concludes that radio talk shows are politically significant infotainment.13 He argues that it is important not to conceptualize information and entertainment as necessarily competing elements. The infotainment format is able to attract a large audience, including lower-income people, to pay attention to the important social and political issues that are discussed on the radio shows. Particularly when people are not satisfied with the government, a critical, cynical, and provocative style of infotainment is appropriate.

9 Barker D. C., “The talk radio community: nontraditional social networks and political participation,” Social Science Quarterly, 79 (1998), pp. 261–272; Herbst S., “On electronic public space,” p. 272. 10 Blumler J. G., and Kavanagh D., ”The third age of political communication: Influences and features,” Political Communication, 16 (1999), pp. 209–230. 11 Cappella J. N., Turow J., and Jamieson K. H., Call-in Political Talk Radio: Background, Content, Audiences, Portrayal in Mainstream Media, a report published by Annenberg Public Policy Center, University of Pennsylvania, (1996). See also Laufer P., Inside Talk Radio. 12 Bolce et al., “Dial-in democracy”; Page B. I., and Tannenbaum J, “Populistic deliberation and talk radio,” Journal of Communication, 46, 2 (1996). pp. 33–54. 13 Lee F. L. F., “Radio phone-in talk shows as politically significant infotainment in Hong Kong.”

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The notion of the radio talk show as the “people’s council” suggests that talk radio takes on most of the tasks of a council. Summarizing the powers and tasks of the United Kingdom Parliament, the United States Congress, and the HKSAR Legislative Council, the functions of a council can be grouped into the following categories.14 (1) Law making: To enact, amend, or repeal laws; to examine and approve budgets; and to approve taxation and public expenditure. (2) Appointment: To endorse the appointment and removal of judges and major government officials. (3) Monitoring the government: To review, influence, and direct the administration. This includes: to receive and debate the policy address; to raise questions on the work of the government; to debate any issue that concerns the public interest; to receive and handle complaints from people; to call for special hearings; to serve as a “shadow government.” (4) Expression: To be the voice of the people. (5) Political education for the public: To inform and instruct the public. Previous talk radio studies have already indicated that radio talk shows are effective in challenging government and channelling complaints. Lee, for example, demonstrates that talk radio is a forum for criticizing power holders. 15 Hollander states that the nature of talk radio is to spread cynicism about government16 while Bolce and his colleagues call talk radio a grievance network 17 . Previous studies also indicate that while talk radio is a venue for the expression of the views of people, listeners of talk radio are also seeking political information from these shows.18 In this study we

14 Adonis A., Parliament today (Manchester: Manchester University Press, 1993); Committee on the Promotion of Civic Education, The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong, 1997); Fitzgerald J. L., Congress and the Separation of Powers (New York: Praeger, 1986). 15 Lee F. L. F., “Radio phone-in talk shows as politically significant infotainment in Hong Kong.” 16 Hollander B. A., “Talk radio: predictors of use and effects on attitudes about government,” Journalism and Mass Communication Quarterly, 73 (1996), pp. 102–113. 17 Bolce et al., “Dial-in democracy.” 18 Hofstetter C. R., and Gianos, C. L., “Political talk radio: actions speak louder than words,” Journal of Broadcasting & Electronic Media, 41 (1997),

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examine how the radio talk show performs in the following eight categories: discussing government bills and budgets, discussing the appointment and dismissal of officials, providing a channel for complaints and the discussion of matters of public concern, questioning government officials, monitoring the government, expression of public opinion, and educating the public. We attempt to address the following research questions and discover if they can be adequately answered by empirical evidence. RQ1: In a big media/small government society with a high level of social grievance, the radio talk show is the most influential channel for the expression of public opinion. RQ2: Citizens see that the radio talk show performs the functions of the legislature well. The performance of the radio talk show is particularly outstanding in the areas of “monitoring the government,” “expression of public opinion,” and “ educating the public.” RQ3: The radio talk show is a force in political activism and democratization. People who are not satisfied with the government or the Legislative Council are more likely to listen to the talk shows than are those are satisfied with the government and the Legislative Council. These listeners have a higher tendency to support freedom of speech and a quicker pace of democratization. RQ4: The radio talk show goes beyond being a venue for the expression of public opinion as it also influences public policies, and thereby serves the role of the “people’s council.” This will be studied by a case study of the SARS epidemic. This study tries to argue that when the media become very strong while the government is weak, the media actually turn themselves into a powerful surrogate political institution, and are no longer limited to being public opinion venues and government watchdogs. The radio talk show in Hong Kong is bold in crossing the boundary by playing a major role in the political domain. pp. 501–515. See also Hollander, B. A., “Fuel to the fire: talk radio and the Gamson hypothesis,” Political Communication, 14 (1997), pp. 355–369.

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Methodological Note This study employs several methods to collect the data. The first method is a telephone survey, which is good for understanding the habits of those who listen to the phone-in talk show programmes and detects the various functions of the people’s council. The survey fieldwork was conducted from 11–17 June 2004, just after the departure in May of three popular radio talk show hosts (Albert Cheng, Yuk-man Wong, and Allen Lee) from their programmes. Hong Kong households were randomly selected by using the latest residential telephone books. A total of 1,004 respondents were successfully interviewed, with a response rate of 52.1%. Another method is the case study of the SARS epidemic in 2003, which illuminates the role of a phone-in programme in the case of a major crisis and the relationship of the show with the government and the public. The phone-in programme “Teacup in a Storm” that is considered in the study was hosted by Albert Cheng, whose programme played a part in the whole process of the SARS crisis. Cheng subsequently published a two-volume report that documents the full transcripts of the programmes that were related to SARS. 19 This study makes use of these transcripts to analyze the role and functions of Cheng’s phone-in programme for illustration. A supplementary method that is employed by this study is an in-depth interview of some selected informants in May and June of 2004, including radio news personnel, former radio talk show hosts, and government officials. Their views and comments on the phonein programmes complement the survey data and the case study.

Radio Talk Shows in the Tung Period Our first research question addresses whether the radio talk show is the most influential channel for the expression of public opinion in a big media/small government society with a high level of social

19 Cheng A., SARS in the Storm: Public Report, Volume 1 (Hong Kong: TOM (Cup Magazine) Publishing, 2004); Cheng A., SARS in the Storm: Public Report, Volume 2 (Hong Kong: TOM (Cup Magazine) Publishing, 2004).

The Radio Phone-in Talk Show as the People’s Council

grievance. In the survey, we ask the respondents about their satisfaction with the performance of the HKSAR government, the Legislative Council, and the mass media after the handover, and the satisfaction percentage levels are 9.9%, 10.4% and 30.6%, respectively. People are clearly disappointed with the performance of the government and the Legislative Council, and they think that, comparatively speaking, the media are performing better. We can compare the HKSAR government, the Legislative Council, and the mass media in terms of several major functions. Table 2 shows that although the Legislative Council is strong in terms of its ability to affect government policy, the mass media better represent public opinion. The mass media are also able to lead the social agenda, and they do a much better job than the Legislative Council and the HKSAR government (either individually or combined). Table 2 Comparing the Mass Media, Legislative Council, and Government in Three Areas Affect Government Represent Public Lead Policy (%) Opinion (%) Social Agenda (%) Mass media

38.7

64.6

51.6

Legislative Council

50.3

19.5

23.0 20.4

Government

–

–

All of them

6.8

4.4

None of them Total (N)

2.7

4.3

11.4

2.3

(933)

(927)

(913)

Table 3 shows different forms of media channels and compares them with the Legislative Council and the HKSAR government in terms of the expression of public opinion. Radio talk shows (52.5%) are far ahead of newspapers (29.0%). The offices of the legislative councillors (8.5%) and the various government departments (6.2%) look almost useless in comparison. The radio talk show is clearly the most effective channel for the expression of public opinion when compared to all of the other forms of media and government channels.

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The Hong Kong Special Administrative Region in Its First Decade Table 3 The Most Effective Channel for the Expression of Public Opinion (%) Radio talk show

52.5

Newspaper

29.0

Legislative Councillor’s office

8.5

Government department

6.2

All of the above

0.9

None of the above

3.0

Total (N)

(939)

The second research question concerns the role of the radio talk show in relation to the functions that are performed by the Legislative Council. It proposes that the radio talk show takes on many of these functions and is particularly prominent in the areas of “monitoring the government,” “expression of public opinion,” and “educating the public.” The findings of the survey support the conjecture and even provide vivid evidence that highlights the importance of the radio talk show in performing legislative functions. Table 4 shows how people rate the importance of the eight functions and the actual performance by the radio phone-in talk show in these eight categories. A closer look at categories reveals that there are roughly four tiers. The first tier is “providing a channel for complaints,” and 87.1% of the respondents say that this function is either “important” or “very important.” The second tier consists of “discussing matters of public concern” and “expression of public opinion,” and these scores are also very high (81.1% and 78%, respectively). The third tier includes “educating the public” (73.2%), “questioning government officials” (70.3%), and “monitoring the government” (69.2%). There are two items in the fourth tier, “discussing government bills and budgets” (65.1%) and “discussing the appointment and dismissal of officials” (53.6%). These two functions are perceived to be less important for the radio talk show, as they are usually seen as functions of the Legislative Council.

The Radio Phone-in Talk Show as the People’s Council Table 4 People’s Evaluation of the Importance and Actual Performance of Radio Phone-in Talk Shows for Eight Functions Importance of This Function

Actual Performance Rank

Difference in Importance & Performance (%)

Providing a channel for complaints

87.1 (N=725)

1

68.0 (N=711)

1

19.1

Discussing matters of public concern

81.1 (N=722)

2

66.1 (N=702)

2

15.0

Expression of public opinion

78.0 (N=725)

3

61.7 (N=717)

3

16.3

Educating the public

73.2 (N=724)

4

52.6 (N=707)

5

20.6

Questioning government officials

70.3 (N=714)

5

55.2 (N=696)

4

15.1

Monitoring the government

69.2 (N=734)

6

51.6 (N=708)

6

17.6

Discussing government bills and budgets

65.1 (N=714)

7

44.4 (N=694)

7

20.7

Discussing the appointment and dismissal of officials

53.6 (N=711)

8

37.3 (N=682)

8

16.3

Function

(% saying “important”)

Rank

(% saying “good”)

One item worthy of note is “providing a channel for complaints,” which is recognized by the public as the most important function of the radio talk show. Although this is a usual function that is performed by mass media, we might not think that this is the top function that is served by the media. This evaluation by the public reflects that there are some serious problems with the government, and that other proper channels such as the Legislative Council have not been functioning well. Also, “discussing matters of public concern” and “questioning government officials” should be considered routine functions of the Legislative Council. Now the radio talk show takes on these two functions, which reflects the overlap between the institutions of the Legislative Council and mass media. Table 4 also shows the evaluation of respondents of the actual

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The Hong Kong Special Administrative Region in Its First Decade

performance of the radio talk show in these eight functions. The most striking feature is the high similarity between the rank-order of importance and the rank-order of actual performance. There is a consistent difference (in the range of 15% to 21%) between the importance of a function and its actual performance, which signals that people have in fact higher expectations of the radio talk show in performing these functions. Our third research question suggests that the radio talk show is a force in political activism and democratization. Specifically, people who are dissatisfied with the political situation are more likely to listen to radio talk shows than are those who are satisfied with the political situation, and they tend to support freedom of speech and democratization. Our survey data show that the radio talk show listeners tend to be middle-aged (35–49) locally born males with a higher education, high household income, and high news media use. Lee finds that before 1997, radio talk show listeners were mainly lower-income people. 20 However, the situation has changed and now many listeners are middle-income people who are interested in politics and current affairs. Table 5 shows that listeners of radio talk shows usually have a higher regard than have non-listeners for the eight functions. In terms of importance, the differences in five out of eight of these functions are statistically significant. In other words, listeners think that the radio talk show plays an important role in performing the various functions as summarized by the notion of the people’s council. Compared with non-listeners, listeners are especially keen on the importance of “monitoring the government” and “educating the public.” For the actual performance of these functions by the radio talk show, the listeners and the non-listeners are similar in their views except in two functions, “monitoring the government” and “expression of public opinion.” In an earlier study by Lee in 1998, he could not find any evidence that the radio talk show in Hong Kong “is a forum for articulating and mobilizing support for democratization.” 21 Six

20 Lee F. L. F., “Radio phone-in talk shows as politically significant infotainment in Hong Kong.” 21 Ibid. p. 72.

The Radio Phone-in Talk Show as the People’s Council Table 5 Difference between Listeners and Non-listeners in their Evaluation of the Importance and Performance of Radio Talk Shows Importance

#

Performance

#

Providing a channel for complaints

87.0 / 87.5 .093 (n.s.) 68.1 / 68.1 .101 (n.s.)

Discussing matters of public concern

81.4 / 80.7 .058 (n.s.) 66.0 / 66.4 .056 (n.s.)

Expression of public opinion

80.5 / 72.8

.123*

64.5 / 54.2

Educating the public

77.6 / 64.3

.163*

53.4 / 51.1 .041 (n.s.)

Questioning government officials

73.6 / 63.8

.121*

57.9 / 49.5 .111 (n.s.)

Monitoring the government

83.8 / 78.9

.202***

57.2 / 39.9

Discussing government bills and budgets

68.3 / 58.8

.116*

45.5 / 41.9 .073 (n.s.)

Discussing appointment and dismissal of officials

56.1 / 48.5 .097 (n.s.) 37.2 / 37.2 .057 (n.s.)

.148*

.170*

#

Difference in percentage for listeners and non-listeners who said this function is “important” or its performance is “good.” * p < .05, ** p < .01, *** p < .001, n.s. = not significant. All correlations are in Cramer’s V.

years later, the situation was different. We found that radio talk show listeners tend to favour a quicker pace of democratization (64.8% vs. 50.6%, CV = .115**), and a significantly higher proportion of them were participants in the 1 July demonstrations that were held in 2003 (28.9% vs. 9.7%, CV = .201***) and 2004 (21.0% vs. 3.8%, CV = .198***). Although we do not have direct evidence to show a causal link that these talk shows actually influence their listeners to believe in democracy or participate in pro-democratic activities, the existence of such an association is unmistakable. At the very least, these talk show programmes attract people who are in favour of democracy in society.

The Case of SARS The fourth research question looks at whether the radio talk show actually influences public policy and thus serves as a “people’s

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The Hong Kong Special Administrative Region in Its First Decade

council.” A case study of the SARS epidemic is used for illustration. The SARS outbreak in Hong Kong in 2003 was a major medical crisis that shook Asia and scared the world. The virus was first discovered in Mainland China and was spread to Hong Kong by a travelling patient. Due to ignorance of the disease and the slow response of the government to the epidemic, there was a full-blown outbreak in the community. Schools were closed and tourists stopped travelling to Hong Kong. The epidemic was finally brought under control but not before 299 people had died of the disease within a few months of the first reported case. There was a public outcry over the incompetence of the government in dealing with the issue, and the Secretary for Health and the Chairman of the Hospital Authority were forced to resign after several commissions that had been set up by different authorities to investigate the incident released their reports. The news media in general and the phone-in radio talk show that was hosted by Albert Cheng in particular were pivotal in matters such as informing and educating the public, providing a platform for discussion and complaint, and monitoring and criticizing the government. The two books that were published by Albert Cheng document that between 4 March and 28 May 2003, his radio show included discussions about SARS on 52 days. 22 A total of 220 people were on the show, and some spoke more than once. People from all sectors of society (some at special invitation) spoke on his programme, including high-ranking officials, medical doctors and nurses, other frontline medical workers, legislative and district councillors, academics, SARS victims and their family members, people who were involved in SARS-related events, and a number of ordinary Hong Kong people. In view of the inadequacies of the government, Albert Cheng used his programme as a platform from which to launch a number of campaigns, including “One Person, One Facemask,” “One Person, One Orange,” and “One Person, One Gown.” He was able to raise close to four million dollars in a few days and bought tens of thousands of surgical masks, oranges, and gowns for the medical

22 Cheng A., SARS in the Storm, Vols. 1 & 2.

The Radio Phone-in Talk Show as the People’s Council

staff in the hospitals. He said that his mission was to “monitor the government and ma[k]e sure it did its job well.”23 He criticized some high-ranking government officials as “dog officials”24 and was not afraid of retaliation. Cheng said that “as a media worker, I was fully involved in the SARS incident, actively played a role in monitoring the government, [and] organized various social forces in support of frontline medical workers’ jobs.”25 He opined that “the mass media, in particular the swift and agile radio, can really understand the needs of the people, close in on the social pulse, reflect public sentiment, and lead public opinion.” 26 A radio executive once described Cheng as playing several roles simultaneously, including current affairs host, news agenda-setter, and social activist.27 With regard to the eight functions, the radio talk shows provided the public with a channel for complaints, almost on a daily basis. Programmes included much discussion on various aspects of the SARS epidemic and gave the public the opportunity to express their views. The hosts of the shows also educated the public about the disease by inviting medical experts and scholars to talk on their programmes. Not only did the hosts monitor the work of the government and the medical community, they also questioned government officials and medical staff at various levels and from different departments. The shows also criticized the action (and inaction) of the government and its financial commitment to fight the disease, and openly advocated the dismissal of certain high-ranking officials. To sum up, radio talk shows performed most if not all of the eight legislative functions, and clearly acted as the “people’s council” in this event. Albert Cheng was called the “Chief Executive before 10 a.m.” (his show ended at 10 a.m.) and also the “61st legislative councillor” (there are 60 seats in the legislature).

23 24 25 26 27

Ibid. Vol. 2, p. 12. Ibid. Vol. 2, p. 105. Ibid. Vol. 2, p. 314. Ibid. Vol. 2, p. 316. Yiu W. O., Media in the Storm: The Truth about Gagging of Hong Kong’s Famous Talk Show Hosts (Hong Kong: Ming Pao Publishing Co., 2005), p. 121.

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The Hong Kong Special Administrative Region in Its First Decade

Radio Talk Shows in the Post-Tung Period Tung Chee-hwa became the Chief Executive on 1 July 1997, and he was reappointed to a second term of five years in 2002. However, continual social crises and Tung’s consistently low popularity ratings prompted Beijing to make the drastic decision to replace him before the end of his term. Officially, Tung resigned on 10 March 2005, due to “health reasons” and Donald Tsang was appointed as his replacement on 21 June 2005. Tsang’s leadership style is anything but similar to Tung’s, and he quickly turned things around through his administrative skills and more decisive measures. Of course, he was also helped by external factors such as the improving economy. In the media scene, there was a bizarre occurrence in 2004. It was rumoured that at that time, Beijing authorities did not like the influence of “one newspaper (Apple Daily), one magazine (Next Magazine), and two microphones (Albert Cheng and Yuk-man Wong)” on Hong Kong society, especially with regard to the Article 23 legislation and the 1 July protest march in 2003.28 In March 2004, Wong was attacked by some gangsters and as a result he left Hong Kong. He announced his resignation from his radio programme in May. Also in March, Cheng’s office was vandalized and he decided to take a sabbatical of several months from his radio show. Cheng and Wong’s work contracts were subsequently terminated by Commercial Radio Hong Kong in July 2004 and July 2005, respectively. Allen Lee also walked away from his radio show in May of 2004. The three “famous mouths” disappeared from the radio scene at approximately the same time, and their replacements were unable to achieve the same level of popularity and support from the public. This was the beginning of the decline of the radio talk show in Hong Kong. Another reason for the decline may be due to the deliberate change in policy by the radio stations regarding the style of the radio

28 Ibid.

The Radio Phone-in Talk Show as the People’s Council

talk show hosts. There had been some criticism of the harsh style of Cheng and Wong, who often went to extremes and even openly humiliated government officials on their programmes. Despite the enormous popularity enjoyed by these shows, the radio stations must have faced tremendous pressure from both the audience and the government to change their policies. The highly subjective and sensational style of talk shows also hinders rational discussion in a civil society. The abrupt evaporation of the programmes from the air signalled that this type of “scolding culture” was over, and that the radio stations had been forced to offer a more feeble style of programme hosting. The pendulum started to swing back to the other end and this was not conducive to the continuous social influence of radio talk show programmes on the formation of public opinion. Apart from the aforementioned two internal factors, there were external factors that led to the decline of radio talk shows. One possible but never substantiated factor was the political pressure that was exerted by the Central Government, which naturally did not want to see that the HKSAR government had lost control of public opinion formation to the “people’s council” as represented by the radio talk shows. Our survey data show that 55.9% of the public thought that the three talk show hosts quit their jobs due to political pressure. Also, 59.8% of the respondents believed that the incidents were a blow to freedom of speech in Hong Kong. The second external factor was the direct impact of the change of the Chief Executive. Donald Tsang is less out of touch with the general public and he is much more skilful in handling daily government administration and the media. As Chief Secretary for Administration, Tsang issued an internal order to all departmental chiefs in which he urged them to actively respond to the media about matters of public concern before 10 a.m. 29 When Tsang became the Chief Executive in 2005, he immediately hired two high-profile media political commentators to serve as spin doctors. A third factor was the improvement in the economy of Hong Kong, which started in 2004 and has picked up since then. To sum up, the progress in both the political and economic arenas lowered

29 Ming Pao, 4 September 2004, p. A6.

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the level of social grievance. On the structural level, a stronger HKSAR government coupled with a lower level of social grievance had the direct result of diminishing the role of the radio talk show. What are the implications of the decline of this radio genre in Hong Kong? For some people, this changing radio scene can be considered as just a return to “normalcy,” that is, the talk shows are playing the role that they are supposed to play. This can be good for society as a whole, as the media need not become instigators and mobilizers of political action. The decline of the radio talk show signifies that the government is doing a better job and that social unrest is curbed. However, despite its diminishment, the radio talk show in Hong Kong still remains the most direct and influential channel for people to make their views known. The phone-in tradition, established since the mid-1990s, is still very much alive in Hong Kong, and talk radio is active in monitoring the government and competing with other media channels as well as the Legislative Council as a channel for the voicing of public concerns. Moreover, it is an essential player in the process of democratization in Hong Kong. It enables people to know more about public affairs and provides a forum for discussion. The radio talk show is among the more visible components in the “fourth estate” and the government cannot treat it lightly. The radio stations will continue to highly value this type of programming as it is still popular, socially influential, and, because it is relatively inexpensive to produce, economically successful.

Discussion The surrogate democracy function of the mass media is best exemplified by the ability of the radio talk show to function as a people’s council. 30 This virtual, on-air council expands the function of the media, exerts political influence, and takes on social problems. Of our respondents, 90.3% said that if the Legislative Council is not

30 Chan J. M., and So C. Y. K., “The surrogate democracy function of the media.”

The Radio Phone-in Talk Show as the People’s Council

doing a good job in reflecting public opinion, the media should do more in this regard. Also, 80.2% of respondents said that the radio talk show programmes serve as society’s safety valve by giving people the opportunity to speak out. Media as the people’s council can be understood metaphorically. The phone-in callers are all councillors in the sense that they speak and comment on various social and political issues. The programme hosts act as both veteran councillors (as they are very much opinionated) and chairmen of the people’s council. The motions and agenda are set by the council chairmen and followed by the listening public and the government. Each radio talk show programme is itself a people’s council and the different radio shows constitute a larger council for society. The government officials are invited to speak at the people’s council personally (as they are asked to do in the Legislative Council) or via telephone. The electronic people’s council meets almost every day (except Sundays). According to some media analysts, the other media, including newspapers and TV news stations, also participate in the ongoing cycle of the opinion game. The newspapers feed information and topics to the radio talk show programmes every morning, and newspaper and TV reporters then follow up on certain issues that have been picked up and featured in the radio talk shows. Various government departments allocate staff members to closely monitor the radio talk shows and prepare for departmental members to be summoned to the shows. This media loop expands and keeps the issues alive, making the people’s council even more powerful. In the Tung period, both the government and the legislature were weak whereas the media were strong. The media took over many functions from the legislature and they led the social agenda as well as influencing and airing public opinion. Some government officials even said that “the media are ruling Hong Kong.”31 As a result, society was psychologically unstable and people wanted change in the political arena. The blurring of the boundary between the media and the Legislative Council was actually a signal of the

31 So C. Y. K., and Chan, J. M., “Hong Kong media: ‘irresponsible director’ vs. ‘objective reflector’,” Media Digest (August 2002), pp. 2–4.

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bad state of society. There were certain structural and performance problems of the legislature and the government that needed to be addressed. The public were longing for a change but they did not get it. This had negative consequences for the stability and development of society. While the legislature and the media overlap in certain functions and they constantly compete with each other, there should be some sort of division of labour so that the “fourth estate” performs its proper role in the betterment of society. In the mid-1990s as the political role of the radio talk show intensified, the political authorities felt threatened. The resignation of the three popular radio talk show hosts signified the danger to freedom of speech. The demise of the “radical” phone-in radio talk show also brought down the unpopular government and significantly changed the political landscape as Tung was discharged from the post of Chief Executive. The role of the radio talk show as the “people’s council” in the Tsang period is somewhat diminished as the new political administration is stronger and the role of the media weaker. The functions of the “people’s council” should be rightfully reabsorbed by the Legislative Council, and the media should primarily play the watchdog role. It is a valuable lesson to learn and a strange chapter about the mighty political role of the media in a specific context. The mass media reflect society and interact with various social components with which they are in contact. The news media in general and the radio talk show programmes in particular are still very influential in the process of public opinion formation in Hong Kong. The legendary rise and subsequent dip in the popularity of the radio talk shows in the post-handover period serves as an interesting episode. The media and the government are in a constant battle fighting over public opinion leadership and discourse, and this tug of war over the hearts and minds of the people goes on endlessly. The radio talk show genre in Hong Kong has to find a balance point regarding its style. A host cannot be sensational or radical just to try to please and maximize the audience base of the programme. If so, the host will be denounced as having bad taste and may even face pressures of all sorts. But the host cannot be bland for then the programme will lose listeners and be unable to play the role of social agenda-setter and opinion facilitator. As pointed out by Yiu, the

The Radio Phone-in Talk Show as the People’s Council

phone-in programmes in the post-Tung period may be less entertaining and provocative but they are more constructive in handling the discussion of news.32 The content of the programmes is considered to be broader in scope and more diverse in views. The story of talk radio in Hong Kong is naturally linked to the concern over the freedom of speech in the crown jewel of China. Our survey shows that 63.9% of the respondents agree that talk radio is an indicator of freedom of speech in Hong Kong. Looking into the future, the freedom of speech in Hong Kong depends very much on a few factors. The first and foremost factor is the form and extent of the influence of the authorities of the Central People’s Government. For some, the extent to which the Central People’s Government allows Hong Kong people to rule themselves still remains something to watch and empirically verify. This factor is related to the second factor, namely, the continued monitoring of the Hong Kong situation by the international community. Even after the handover, the whole world is still watching Hong Kong, especially its crises and uncertainties. The “one country, two systems” model is an ingenious idea that offers some protection of the autonomy of Hong Kong. The third factor is the level of diversity of the media outlets in Hong Kong. This is not only about the number of media organizations that are available but also about their political stance and whether they can adequately represent the interests of the people of Hong Kong. The fourth factor is the institutional structure and strength of the Hong Kong government and the Legislative Council. If the government is doing a good job and the legislature is functioning properly, the level of social grievance is low and public opinion channels are effective. Media do not need to perform the additional “surrogate democracy” function, and freedom of speech is therefore well protected. The spectacular journey of the radio talk show in the past ten years is quite revealing about the overall situation of Hong Kong in the postcolonial period. Both the media and Hong Kong society have had their ups and downs. Both have been affected by political, economic, and social factors from within and without. They have

32 Yiu W. O., Media in the Storm.

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gained some experience, learned a few lessons, and are looking forward to a brighter future. They are important in their own right and never cease to draw the attention of each other.

23 The Catholic Role in Hong Kong SAR’s Governance: Past and Present Beatrice LEUNG University of Hong Kong

Camoes TAM University of Macau

Marcus CHU The Open University of Hong Kong

There are no better perspectives to explain the first decade after the political handover of Hong Kong as vividly and objectively than Chaos Theory. Although the development of this theory was aimed at explaining a particular phenomenon of physical science, it has been widely utilized in various disciplines of social sciences both in tackling methodological questions and in the theoretical perspective.1 In this chapter, Chaos Theory will be merely taken as a framework of reference to explain the political landscape of the first decade after the handover of Hong Kong, and then critically illustrate the roles the local Catholic Church has been playing under the chaotic situation in its advocacy for Hong Kong’s democratization. Before an analysis can be made, it is necessary to have a brief but systematic explanation of the ontology of Chaos Theory to which the social sciences have referred.

1 Douglas Kiel and Euel L. Elliot, “Introduction,” in Douglas Kiel and Euel L. Elliot (eds.), Chaos Theory in the Social Sciences: Foundation and Applications (Ann Arbor: University of Michigan Press, 1996), pp. 1–18. 853

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Chaos is a particular stage in the human historical system. This stage is observable and thereby can be deduced by casual explanation. The World System School has given a concrete study that chaos commonly occurs before the formation of every new system. Tensions of system volume and its dynamic density are the prime factors that contribute to chaos. 2 World System scholars include such factors as unfair competition in the global economic circle, disharmony among social groups, and class struggles between nations into the Chaos Theory.3 When the numbers and speed of the tensions are not properly controlled, its unstoppable expansion will be beyond the capacities of current hegemonic orders and eventually the power will be dominated by unregulated social actors.4 This is when chaos emerges. Secondly, chaos is not a long-lasting condition of freedom from order. From the regular development of the human historical system, scholars conclude that chaos has the capacity to undergo re-moralization. In other words, chaos has the instinct of reflexivity.5 Although the power has been dominated by and was in the hands of unregulated social actors, human rationality makes each of them still seek a solution or solutions for the purposes of safeguarding their own interests and benefits. To reshape a condition of uniformity therefore becomes their common ground, and most importantly, actors will automatically contribute their efforts not only in handing over the power they hold, but in advocating the legitimacy of the new public order as well. In this occasion, chaos begins to retreat. Thirdly, the end of the chaos indicates that a new order has

2 Emile Durkheim, The Rules of Sociological Methods (New York: Free Press, 1964). 3 Giovanni Arrighi and Beverly J. Silver, “Introduction,” in Giovanni Arrighi and Beverly J. Silver (eds.), Chaos and Governance in the Modern World System (Minneapolis: University of Minnesota Press, 1999), pp. 1–36. 4 Ranajit Guha, “Dominance without hegemony and its historiography,” in R Gupta (ed.), Subaltern Studies 4 (New York: Oxford University Press). pp. 210–315. 5 Ulrich Beck, Anthony Giddens, and Scott Lash, Reflexive Modernization: Politics, Tradition and Aesthetics in the Modern Social Order (Cambridge: Polity Press, 1994).

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

begun to take shape. In terms of the discourses of the World System scholars, they suggest that when a fusion with high discipline has been rebuilt, as a consequence, the formation of a new hegemony is completed.6 The actors who have suffered under the chaos would instinctively imitate the doctrines of the order and their consciousness and behaviour are eventually re-normalized. In other words, a new order is formed as a result of lessons learned from the chaos. In order to integrate the new social system with widely recognized harmony and consensus7, the new order must protect the interests of different actors, and more importantly, create more opportunities for the purposes of satisfying their unlimited desires in both material and spiritual aspects. Chaos will emerge again if the new order is not able to address the needs of the majority. In 1841, the British came to Hong Kong to rule a multi-cultural society that is a blend of the East and the West. The efforts of individual traders of various nationalities in this barren island constituted a history that records how the society of Hong Kong fermented from confusion to law and order as described by Chaos Theory.8 At its various stages of development a limited scale of chaos was found and the situation was later smoothened over by political factors until the process was complete in its development from a fishing village to a metropolitan city, and before it changed its political status as a Special Administrative Region under the sovereignty of Beijing. The brewing of social and political chaos in Hong Kong SAR can be traced back to its unique colonial legacy before the political handover in 1997, but it emerged under Tung Chee-hwa, the first Chief Executive of the Hong Kong Special Administrative Region. The many failures in policy-making and implementation intensified conflicts between economic classes, among social groups, as well as

6 Giovanni Arrighi, Hui Po-keung, Krishmendu Ray, and Thomas E. Reifer, “Geopolitics and high finance,” in Giovanni Arrighi and Beverly Silver (eds.), Chaos and Governance in the Modern World System, pp. 37–96. 7 Talcott Parsons, “Some reflections on the place of force in social process,” in H. Eckstein (ed.), Internal War (Glencoe: The Free Press, 1964), pp. 33–70. 8 David Faure (ed.), Hong Kong: A Reader in Social History. (Hong Kong: Oxford University Press, 2003).

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disputes within political parties. Although Tung raised hopes to re-vitalize his reputation through the implementation of his self-planned political reform,9 the voices that were asking him to leave office and those demanding democracy were still very strong sentiments among the public. This chaos eventually transformed the culture of the city from traditional political apathy to what can be seen today as a growing ideological sensitiveness. The fight for democracy made coherence out of the mess and therefore it will result in a new social order which now is emerging. At different stages of Hong Kong’s development, the local Catholic Church has played its role in assisting the society to transform from chaos to order during the British rule. Under the Chinese rule, it also is playing an active role to facilitate the reshaping of the new order during this chaotic period. Its contributions are mainly from Cardinal Joseph Zen Ze-kiun’s personal charisma in which he loftily criticized Tung’s political performance and openly advocated acts of civil disobedience in some sensitive political issues such as the Right of Abode, AntiLegislation of Article 23 of the Basic Law, and the Administrative Reform in Education.10 The laity of the local Catholic Church also played an active role to facilitate the reshaping of the new order during this chaotic period. Contributions made by Church leaders like Cardinal Zen, we argue, not only to wake up local Catholics to put the Church social teaching into practice, but also the majority of Hong Kong people, to realize the administrative mess of Tung’s regime and the illegitimate interventions from Beijing, and more importantly, to form one of the disobedient forces lighting up the citizens’ concerns for morality in politics and the public sphere of Hong Kong. This

9 Chris Yeung, “Civil servants ‘Freed to Advise’,” South China Morning Post, 19 April 2002. 10 Ambrose Leung, “Discordant voice in the Church choir,” South China Morning Post, 8 January 2002; Howard Winn, “An ideal man,” The Hong Kong Standard, 7 October 2002; Jimmy Cheung, and Chloe Lai, “Bishop and the bar go on the offensive as the war of words escalates,” South China Morning Post, 17 February 2003; Ambrose Leung, “Bishop Zen calls for universal suffrage in Hong Kong,” South China Morning Post, 17 June 2003.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

acted as cohesion and its power built up the collective consciousness of the Hong Kong general public, from the economic tycoons, political figures and social celebrities, to the ordinary masses. Eventually this facilitated to break out the critical point of the chaos which occurred on 1 July 2003, the day of the sixth anniversary of Hong Kong’s handover. Through our research we argue that the impact of Bishop Zen’s courage and frankness, the Vatican’s policies toward China, Catholic political figures and the power of Hong Kong media are all critical in studying the role of the Catholic Church in the democratization of Hong Kong. This is because as early as 1965, the Catholic Church in the modern era has emphasized (a) the role of the Church in the modern world, and (b) the role of the laity which, apart from the clergy, is an indispensable block in building up the Church.11 The systematic analyses are as follows.

Catholic Role in the Early Establishment of Hong Kong (1841–1945) The growth of Hong Kong from a fishing village in 1841 to a metropolitan city when it returned to China in 1997 was mainly due to the inflow of immigrants. 12 In the history of Wanchai’s development of Hong Kong Island, where the oldest Catholic settlement was first established, one can trace the earliest relationship between church and society in what was a chaotic Hong Kong society immediately after the arrival of the British. As early as the 1840s Wanchai had a shifting population of different ethnic groups. Its neighbourhood consisted of foreigners of the low and middle classes some of whom married Chinese people. It was a low economic group and mixed racial heritage with

11 “Dogmatic constitution on the Church,” and “Decree on The Apostolate of the Laity,” in Walter Abbott (ed.), The Documents of Vatican II (London: Geoffery Chapman, 1966), pp. 9–108, 486–525. 12 Solomon Bard, Voices From the Past: Hong Kong 1842–1918 (Hong Kong: Hong Kong University Press, 2002); Steve Tsang, A Modern History of History (New York: Tauris Book, 2004), pp. 56–83; Faure (ed.), Hong Kong: A Reader in Social History.

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Macanese, Goan, African, Filipino, and South Indian roots. 13 Among these foreigners was a group of respectable Catholic Portuguese coming from Macao, whose moving in was due to the decline of Portuguese trade in Macao. From the time Wanchai was developed and with a Catholic presence, it became a centre of Chinese converts. The Catholic Church then opened a school for abandoned children helping them to recover their self-respect.14 When the Canossian Sisters from Genova, Italy arrived in 1860, there were 40 foreign children waiting for them to teach English and Portuguese. At the same time there were three Chinese orphans waiting for shelter. This inspired the Italian sisters to recruit Chinese Catholic girls who formed their Third Order to help them serve the Chinese.15 This cohort of the Third Order of Canossian Sisters in 1922 was transformed as an independent religious order of the Chinese Precious Blood Sisters of the Hong Kong Catholic Diocese.16 The Canossian Sisters also set up in 1869 its first service centre with a hospital, a hospice for the old and infirm, a girls’ school and a refuge for “fallen women” in Wanchai.17 The same kind of social and educational service were offered by the French St Paul Sisters de Chartres at Wanchai and later moved to Causeway Bay in 1848, its present address.18 Three months after the French Sisters of St Paul de Chartres arrived at Hong Kong in September 1848, they picked up 170 abandoned infants, when the total population was 2,200. This led the them to think that establishing an orphanage which included a girls’ school should be a top priority in their agenda for Hong Kong.19

13 Carl Smith, “In Search of an identity: Wanchai,” in Faure (ed.), Hong Kong: A Reader in Social History, pp. 157–207. 14 Ibid. 15 梁 潔 芬 , “ 香 港 國 籍 修 女 ： 耶 穌 寶 血 女 修 會 的 誕 生 ” (unpublished manuscript in Chinese). 16 Ibid. 17 Carl Smith, “In search of an identity: Wanchai.” 18 Sergio Ticozzi, Historical Documents of the Hong Kong Catholic Church (Hong Kong: Hong Kong Catholic Diocesan Archives, 1997), pp. 66–67. 19 Sisters of St. Paul de Chartres, Almost as Old as Hong Kong (Hong Kong: Sisters of St. Paul de Charters, 1973), p. 3 quoted by 張學明, “香港聖保祿修會 的慈善服務,” 張學明及梁元生編, 歷史上的慈善活動與社會動力 (香港: 香港教育圖書, 2005), 頁 237–258.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

These Catholic services reveal that the Catholic Church helped the colonial government in tackling the chaotic situation and preventing social disruption by caring for the underprivileged and, in effect, stabilizing the society. In the education history of Hong Kong, Christian Churches had been the major providers of Hong Kong Education before the Second World War. William Robinson who served as governor of Hong Kong from 1891 to 1898, asked Catholic missionaries to set up the “West Point Reformatory” to shelter juvenile delinquents. His successor revealed that the expenses of the missionaries’ service were only one-fourth of that of the government.20 The colonial government showed its appreciation and cooperation with missionary education by giving them financial aid in education. Among the prestigious secondary schools, the Protestant-run Diocesan Boys School, Diocesan Girls school, together with the Catholic-run French Convent School (St. Paul’s Convent School), La Salle College, Maryknoll School, Wah Yan College, and St Mary’s College were on the list of 19 schools aided by Hong Kong. 21 The government’s appreciation of Church assistance in stabilizing the society to keep it from chaos by helping the lowest stratum of the society was expressed not only by granting financial aids, but also by inviting two Catholic educationists to participate in the Education Council which was responsible for policy-making in educational matters in the colony.22

Catholic Role in Hong Kong After World War II After the Second World War, the development of Hong Kong took a new paradigm which was closely related to the British Cold War strategy on the one hand, and the inflow of Chinese refugees on the other. Being a close ally of the US, Britain stood on the side of the capitalist pole and ordered Hong Kong to campaign against the

20 “The West Point Reformatory (1863–1908)” in Sergio Ticozzi, Historical Documents of the Hong Kong Catholic Church. 21 Hong Kong Public Record Office (HKPRO) series 147 2/1. 22 HKPRO, series 147 2/2 (2).

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infiltration of communism and communist activities.23 The flooding in of Chinese refugees needed immediate social service in medicine and education. Christian churches were able to help the government resolve the dilemma with its Christian doctrine which allows Christianity to provide immunity to atheist communism. Therefore catering to the needs of Chinese refugees was entrusted to Christian churches. From the 1950s to the 1970s, Christian churches were encouraged by the government to provide educational, social and medical services to the wider community when they helped the government from falling into chaos by providing extra manpower resources to assist immigrants coming from China to join the work force.24 However, Christian missionaries including Catholic missionaries provided the needed services on humanitarian grounds not for the British but following the teaching of St James the Apostle who taught: “Faith is like that: if good works do not go with it, it is quite dead.”25 The British in Hong Kong actually did not have such a warm relationship with the Catholic Church as with the Anglican Church. The Hong Kong Catholic leaders who were Italians were viewed by the Hong Kong British with contempt. It was because the British fought the Italian fascists and the German Nazis in the European front in WWII, and the defeat of the Axis led the British to pay no respect to Italians. On the other hand, the pillars of Hong Kong Catholic education, the Irish Jesuits, had no good feelings with the British either, when they had been colonized by the British more than 400 hundred years until 1922, before the Independence of Ireland. The Hong Kong Irish Jesuits had another reason to be unfriendly with the British when their plan of setting up a Catholic tertiary education institute, was thwarted by the Hong Kong British government in 1922. In 1951, within this same cohort of Irish Jesuits, one wrote an article in a school magazine criticizing Hong

23 Anthony Sweeting, A Phoenix Transformed: The Reconstruction of Education in Post-War Hong Kong (Hong Kong: Oxford University Press, 1993), p. 199. 24 Ibid. Chapter 4. 25 James 2:15–6.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

Kong going against the British tradition for appointing judges from the Civil Service, a practice which did not reinforce the independence of the judiciary. The Hong Kong Government prosecuted the author for contempt of court on the grounds that his article was likely to bring Hong Kong’s administration of justice into disrepute. This Jesuit was found guilty and fined.26 In the 1960s and 1970s Church leaders confronted the colonial government on societal issues. Hong Kong in the 1960s saw the emergence of a more confrontational attitude within the community, which the churches were to reflect. 27 The Catholic Church was inspired by the Second Vatican Council (1963–65) to encourage the local church to participate more on social issues and integrated Christian faith into daily life. However the colonial government resented the churches’ new social role based on Christian teaching. Sir David Trench, the Hong Kong Governor, was rude to religious leaders and resented Church involvement in social issues in the colony.” 28 The Christians of Hong Kong, including Catholics, ignored the governor’s warning. Hong Kong’s first Chinese Catholic Bishop, Francis Hsu Cheng-pin, a graduate of Oxford University, enlisted help from Irish Jesuits in the territory to prepare a document for public discussion on Hong Kong’s political, economic and social situation, and Trench’s attack failed to dissuade the Catholic Church from pressing ahead with a series of public

26 Patrick Yu Shuk-siu, Tales from No. 9 Ice House Street (Hong Kong: Hong Kong University Press, 2002), pp. 1–12, 57. The incident was quoted by Leo Goodstadt, “Introduction: faith, citizenship and colonialism in Hong Kong,” in Beatrice Leung and Chan Shun-hing (eds.), Changing Church and State Relations in Hong Kong: 1950–2000 (Hong Kong: Hong Kong University Press, 2003). 27 Leo Goodstadt, “Introduction: faith, citizenship and colonialism in Hong Kong.” 28 Sir David Trench, the Hong Kong Governor, was rude to religious leaders: “We are all familiar with – and often admire – people of strong religious conviction whose hearts are so full of love that it unfortunately impairs their judgment in practical situations. It is ethical, more than political, guidance that we all need from the churches; with great respect, church government does not have a very happy history and your cloth gives you no special expertise in the detailed solution of governmental problems.” As reported by David Baird, “Thy will be done,” Far Eastern Economic Review, 29 January 1970.

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meetings to debate these issues.29 This document was regarded as menacing to the established order because it called for dialogue with the Communist Party of China (CPC) and “indicts everything from lack of labour protection to the capitalist-orientated Legislative Council. One observer described its tone as more savage than even the effusions by local communists.”30 In reality, Bishop Hsu had no ambitions to incite political or social revolution but was simply responding to widespread resentment of social abuses, government corruption and official complacency.31 In the late 1970s and 1980s the Hong Kong government tried to create the image that it was more “liberal” by absorbing more social elites as extended members of the Legislative Council. A Catholic Jesuit priest, Fr Patrick Terrence McGovern, who had been active in the labour movement in Hong Kong was named a member of the Legislative Council in 1976 together with a female Protestant pastor, Rev Joyce Bennett. McGovern seemed to be on the side of workers without actually having any real activities in these councils. In general, officials even found him pro-government without speaking for the issues related to the welfare of workers.32 In contrast to McGovern’s silence, Rev Joyce Bennett spoke more openly for the underprivileged including the workers in the Legislative Council. She sharply and firmly asked about the government’s delay in installing traffic lights and posting traffic police in the Kwun Tong, then a manufacturing area of Hong Kong. She pressed the government to pay more attention to the road safety in that area which was

29 Hong Kong Diocesan Convention, Social Dimension of the Church (Hong Kong: Diocesan Convention, n.d.). See also Sergio Ticozzi, Historical Documents of the Hong Kong Catholic Church, pp. 186–90. 30 David Baird, “Hong Kong: Christian in revolt,” Far Eastern Economic Review, 21 May 1970. 31 Leo Goodstadt “Introduction: Faith, Citizenship and Colonialism in Hong Kong.” 32 McGovern’s unconcern to the welfare of workers can be reflected by his absolute silence to the following issues such as “Compassionate Housing Scheme,” “Management Assistance for Trade Union” and “Fire Prevention in Factory-Building” which related to the welfare of workers and the safety working environment. Cf. Official Report of Proceedings, Hong Kong Legislative Council (15 March 1978), pp. 611–612, 615–618, 619–620.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

crowded with workers.33 By comparing their political behaviour in the Legislative Council, the Protestant candidate had recoursed more to the Christian social teaching than the Catholic candidate in their concern about the underprivileged and the poor. However, in the Catholic Church, apart from Bishop Francis Hsu, the implementation in Hong Kong of the Church’s social teachings as advocated by the Second Vatican Council (1963–65) was initiated by Fr James Hurley S.J., the spiritual director of the Federation of Catholic Students in the 1970s. 34 The Federation, under Father Hurley’s leadership, became the cradle for Catholic graduates who became forerunners in bringing the Church’s social teaching to the Hong Kong Church, preparing the ground for Cardinal Joseph Zen in the 1990s to campaign for human rights and religious freedom which are the essence of Catholic social teaching.35 In general, the Hong Kong Catholic Church did not cogently pursue the implementation of these Christian social teachings in the 1970s for fear that the translation of these teachings into action might embarrass the colonial rulers and jeopardize the contractual relationship with the government in offering social and educational services.36

Catholic Political Involvement in the Transitional Period (1984–1997) The ideological clash between the Communist Party of China (CPC) and religions in general and Catholicism in particular is the clash between dialectic materialism with religious idealism.37 It was the

33 Official Report of Proceedings, Hong Kong Legislative Council (15 March 1978) pp. 604–606, 617–619. 34 One of the authors worked with Fr James Hurley in that period within the Federation of Catholic Students. 35 Ernst Troeltsch, The Social Teaching of the Christian Churches Vols. I and II (New York: Macmillan, 1911 (1950)). 36 Beatrice Leung and Chan Shun-hing, Changing Church and State Relations in Hong Kong, pp. 23–46. 37 Beatrice Leung, “Communist Party-Vatican interplay over the training of religious leaders in China,” Journal for Scientific Study in Religion Vol. 40.4 (December 2001), pp. 657–73.

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“China factor” which constituted the major reason for the Hong Kong British to grant democracy at the last stage of British rule and encouraged political participation of Hong Kong citizens.38 It was the same China factor that led Hong Kong Catholics to be more involved in politics during the transitional period and after. Around the time of the signing of the Sino-British Agreement on the handing over of Hong Kong to Chinese rule, Cardinal John Baptist Wu issued a public statement to support the change of the sovereignty of Hong Kong as a gesture to accommodate to the new situation. During the transition period (1984–97), however, the Church had more political involvement. It was because Hong Kong Christians would like to preserve their religious freedom and lifestyle through an autonomous system promised by the “one country, two systems” policy. In the lead up to the handover of Hong Kong to China on 1st July 1997, the churches became increasingly involved in politics and social action against the wishes of Beijing.39 In the late transitional period, the constitutional reform suggested by Chris Paten, the last Hong Kong Governor, was to root the ill-defined autonomy promised by the Basic Law in the right of all citizens to select their own political representative. 40 Beijing vowed not to accept this reform which would enable a fully elected Legislative Council in 1995, because it caused a twofold danger to Beijing. 41 However, due to their anti-communist feelings, Hong Kong Catholics have been supporting Hong Kong Democrats in

38 Foreign Affairs Committee Report of the British Parliament p. xxxvi, para. 126. 39 Beatrice Leung and Chan Shun-hing, Changing Church and State Relations in Hong Kong, 1950–2000. 40 See: Steve Tsang, “Re-alignment of power: the politics of transition and reform in Hong Kong,” a paper presented at the international conference on Hong Kong in Transition: Political Order, International Relations and Crisis Management, held at Lingnan College, Hong Kong, 18–19 September 1996; Sussane Pepper, “Hong Kong in 1994: democracy, human rights and the post-colonial political order,” Asian Survey, Vol. 35, No. 1 (January 1995); Sussane Pepper, “Hong Kong in 1995: institution-building and citizenship between two sovereigns,” Asian Survey, Vol. 36 (January 1996), pp. 25–32. 41 Sussane Pepper, “Hong Kong in 1994.”

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

elections aiming at protecting religious freedom through the pursuit of greater autonomy.42

The Bridging Endeavour: Complicated Hong Kong Church-State Relations Hong Kong Catholics were reminded more than once by the high officials in CPC that after 1 July 1997 Hong Kong Catholics should “cooperate” with the HKSAR government, also that Hong Kong Catholics should not “interfere” with the Catholic Church in the Mainland after the transfer as they have been doing in their capacity as the “bridge.”43 In other words, the financial and manpower aids catering from or through Hong Kong for the revival of the Chinese Catholic Church should face a turning path. It is because the revival of religious activities in China does not coincide with the political mood of the CPC which is now tightening up ideological matters, and regarding Christianity as a means by Western powers to “Westernize” and “divide” China.44

42 For Catholic’s choice for Democrats in 1991 and 1995 Legislative Council elections see: Beatrice Leung, “The Catholic voter” in R. Kwok et al. (eds.), Votes Without Power: The Hong Kong Legislative Council Election, 1991 (Hong Kong: Hong Kong University Press, 1992); C. P. Chan and Beatrice Leung, “The voting behaviour of Hong Kong Catholics,” in C. H. Kuan (ed.), The 1995 Legislative Council Election in Hong Kong (Hong Kong: Hong Kong Institute of Asia-Pacific Study Centre.) 43 The first hint was given by Ye Xiaowen, Head, Religious Affair Bureau, Chinese State Council when he visited Hong Kong in June 1996. See: Sunday Examiner (Hong Kong Catholic Weekly), 5 July 1996. Then one of the authors (Beatrice Leung) got these messages from Beijing when she accompanied a group of religious women based in Hong Kong to visit various departments dealing with religious affairs in the Central Government upon the invitation of Catholic Church in China (28 December 1996 – 4 January 1997). 44 This political mood was revealed in an internally circulated document of Ye Xiaowen, Director of State Bureau of Religious Affairs in which he expressed this view of the CPC to the trainees of the Party School. See Ye Xiaowen, “Dongqian woguo di zongjiao wenti” (“The contemporary religious questions of the motherland”), in Zonggong Zongyang Dangxiao Baocao Xuen (Selected Reports of the Central Party School), Vol. 101, No. 5 (1996), pp. 9–23.

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Thus quite a number of Catholic agents engaged in the work of the “bridge” are moving away from the colony.45 Also, Hong Kong Catholics have the tendency to refrain from political involvement. The slight drop of Catholic voting rate from 86% in 1991 to 83% in 1995 Legislative Council elections is a reflection of this tendency. 46 Also the removal of a politically active and pro-Democrat priest from a public post, and putting him to work among heaps of ancient documents in the diocesan archive was interpreted as a move to distance the Hong Kong Catholic Church from politics. In October 1996, two Chinese priests, Fr Joseph Zen Ze Kiun and Fr John Tong Hon were consecrated as the Bishop Adjutor (the successor) and Auxiliary Bishop of Hong Kong to assist John Baptist Cardinal Wu Cheng-chung to administer the Hong Kong Catholic Diocese. The two new bishops have spent long years in working for China. The order of appointment came to Hong Kong less than a year before the transfer, and this was interpreted as a step to strengthen the top leadership of the Hong Kong Catholic Church with persons who had experience about China. These two China hands were expected to deal with the complicated and subtle church-state relationship with Beijing after the transfer. With the Sino-Vatican dispute since 1951, the effort of bridging the Hong Kong Catholic Church and the Catholic Church in the mainland added a new dimension to the already complicated Catholic-HKSAR relations after 1997.47 The bridging effort which aims at the revival of the Catholic Church in China was not for the interest of the CPC whose religious policy has been for the elimination of the development of religion 48 when ideological

45 The Hong Kong based Union of Catholic Asian News (UCAN) which used to issue a great deal of news on the Catholic Church in China (including the unofficial and official sectors of the Church) moved to Bangkok from Hong Kong. The Jesuit office dealing with China affairs moved to Macao. 46 For Catholics’ voting rate in 1991 and 1995 Legislative Council elections see: Beatrice Leung, “The Catholic voter,” and C. P. Chan and Beatrice Leung, “The voting behaviour of Hong Kong Catholics.” 47 Beatrice Leung, “Catholic bridging efforts with China,” Religion, State and Society, Vol. 28, No. 2 (June 2000), pp. 185–196. 48 Ye Xiaowen, “Dongqian woguode zhongjiao wenti,” pp. 9–23.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

conflict of the CPC with religions is generic.49 In fact, among all the overseas bridging efforts from overseas Chinese Catholics, Hong Kong’s bridging endeavour reaped the most fruit.50 Shortly before the handover of Hong Kong, Beijing’s religious cadres on various occasions privately reminded Hong Kong Catholics that the bridging effort for the revival of the Catholic Church in China should be restricted after July 1997.51 It seemed that Hong Kong Catholics, by following closely the Vatican’s policy in aiding China, refused to put the wish of China into serious consideration.

Catholics’ Relations with the HKSAR Government Even when the transfer was just around the corner, the Hong Kong Catholic Church had not formulated a positive attitude and warm relationship with Beijing. To cope with the ever changing political scene of Hong Kong at the late stage of the transfer, Catholic authorities moved to a new direction. In 2002, Bishop Joseph Zen Ze-kiun, a Shanghai born priest who had been critical of the government’s policy on Right of Abode, succeeded the late John Cardinal Wu Cheng-chung to lead the Hong Kong Catholic Church entering into a socio-political landscape which was facing a series of challenges when it left the colonial identity behind and took up a new one as a Special Administrative Region of China.52

49 Ibid. 50 Leung, “The Catholic bridging effort with China,” pp. 195–95. 51 The author (Beatrice Leung) was privately reminded by a religious cadre in this issue when she visited Beijing with a group of Precious Blood Sisters in December 1996. She also learned that many Hong Kong Catholics had the same reminder from Beijing on halting the bridging endeavour to help the revival of the Chinese Church. 52 From studying the process of Zen’s appointment, he was favoured by the Vatican whose official would like him to head the Hong Kong Church after 1997. According to the source close to the Vatican, Zen was not on the list of the diocesan recommendation of bishop candidates in the first round of the nomination exercise. In the second round, the Vatican recommended a couple of names including Zen. Zen was picked by the Pope from the nomination list of the second round.

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Ideological incompatibilities led to repeated clashes in Communist Europe, the Soviet Union and China between those who sought atheist communism and those who sought religious beliefs. The hierarchical structure of the Catholic Church also posed extra challenges to the rule of the Communist Party. 53 It was the incompatibility between Marxist-Leninism and Christian teaching over which Catholic Church in HKSAR in the last ten years, led by Cardinal Zen, 54 directly clashed with Hong Kong’s Chinadominated regime as crystallized in at least four major sociopolitical issues on Provisional Legislative Election (1997), the Right of Abode (1999), the Legislature of Article 23 Basic Law of HKSAR (2002), and the Educational Reform in launching School-Based Education Administration (2000–2006). The Church-led Zen challenged the legitimacy of the Provincial Legislature and its anti-democracy approach on its morality and legitimacy.55 In the issue of Right of Abode, Zen directly called upon humanitarianism and human rights based on Christian teaching to challenge the government’s harsh measures on children parented by Hong Kong and Chinese citizens. In the abortive legislature of Article 23, Zen acted as a moral supporter to legal professionals to combat the government against the legislature of Article 23 which undermines the “one country, two systems” which is a screen blocking the infiltration of Chinese measures on human rights including freedom

53 Michele Dillon, Catholic Identity: Balancing Reason, Faith and Power (Cambridge: Cambridge University Press, 1999); Robins and Robertson, Church-State Relations: Tension and Transition (Oxford and New Brunswick: Transaction Books, 1987); G. Moyer, (ed.), Politics and Religion in the Modern World (London: Routlege, 1990); Eric Hanson, Catholic Church and World Politics (New Jersey: Princeton University Press, 1987); Eric Hanson, Catholic Politics in China and Korea (New York: Orbis Books, 1980); H. H. Stehle, Eastern Politics of the Vatican, 1917–1979 translated by S. Smith (Ohio: Ohio State University Press, 1987); Beatrice Leung, Sino-Vatican Relations Problems of Conflicting Authority, 1976–1986 (Cambridge: Cambridge University Press, 1992). George Weigel, The Final Revolution: The Resistance Church and Collapse of Communism (New York: Oxford University Press, 1992). 54 Bishop Zen was elevated as a Cardinal by the Pope in March 2005. 55 One of the authors (Beatrice Leung) participated in the consultation meetings with Catholic laity held in May 1996, and had in-depth discussions with priests and nuns on this subject.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

of religion. He simply translated the orthodox teaching of the Catholic Church in Summa Theologica into simple modern language that “any law should be for the human good, but not for other motives.”56 In the long struggle to preserve the intake of Catholic education in the de-colonization of Hong Kong education, Zen has been fighting a losing battle with the SAR government in the School-Based Management issue which aims at transferring the power of supervising the schools from the school-sponsoring bodies to the Incorporated Management Committee which is a challenge to infiltrate government dominated members.57 With the launching of the controversial “Selection Committee,” for the first time in the history of the Hong Kong Catholic Church, all levels of consultations were sought from priests, nuns, Catholics leaders and grassroots Catholics. The result of the consultation is: most Catholic laity leaders expect that the Catholic Church would take up a prophetic role to advocate justice and morality in politics. By not sending any Catholic candidate to the Provisional Legislative Committee, some Catholic laity expect the Church to challenge its morality and legitimacy.58 However, the clergy and the top level church management thought of other ways and launched out a compromised policy of nominating Catholic candidates. A policy was formulated in this issue that the Catholic diocese would endorse Catholic candidates but that these candidates would campaign as independent individuals. In the ten years of HKSAR elections there were Catholic leaders joining the Elections Committee but no active cooperation from the Catholic hierarchy led by Zen. Even the Hong Kong Catholic diocese regards Catholic education on the top of the agenda for consideration. When one-tenth of Hong Kong children go to Catholic education institutes, Hong Kong Catholic authorities know very well that it is impossible

56 It was revealed by Zen in an interview with one of the authors in August 2004. 57 Beatrice Leung, “Catholic Church relations with the Hong Kong SAR government: the paradigm shift,” in Wong Yiu-chung (ed.), “One Country, Two Systems” in Crisis (New York: Lexington Books, 2004). pp.113–136. 58 One of the authors (Beatrice Leung) participated in the consultation meetings with Catholic laity held in May 1996, and had in-depth discussions with priests and nuns on this subject.

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for any government to leave the enterprise of shaping the minds of the younger generation to any institute whose ideology is opposite to the government. Nevertheless, new policies on Catholic education have been set up. These are: (a) to keep up Catholic education institutes in Hong Kong as long as possible in lieu of economic difficulty, (b) to change the language of instruction from English into Chinese in Catholic schools, and (c) to put more emphasis on civil education in the context of patriotism. This policy is a compromise with the command of China which criticized the unpatriotic nature of Hong Kong Catholic education.59

The Limit of Political Development: Internal Political Control of Hong Kong by the Basic Law Political development is an activity not to be held in the void, but to be held in the political landscape with its traditional establishment which is identified by democrats or reformers as internal limits. These internal limitations come from many directions including existing elements handed down from the British rule with its particular political culture, political ideology, political system, public opinion, political communication, election system, voting behavior, political parties and parties system, political structure, political authority and political processes (legislative, executive, administrative, and judicial). The external limitations mainly come from intervention from the Central Government in Beijing and political pressure from the international community, i.e., other states or governments and international organizations. For example US officials in foreign service on semi-open occasions express that they hope that the political development of Hong Kong would go along with the interest of the US.60

59 For the last few years, Chinese officials have openly expressed this view on Catholic education in Hong Kong. One of the authors (Beatrice Leung) met the Hong Kong and Macao Offices of the State Council in December 1996; its cadres repeated the same criticism. 60 It was recalled by a former democratic Legislative Councillor who was presented on that occasion when the officer of United States in Hong Kong made this remark.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

The framework of Hong Kong’s political development cannot go beyond what has been stipulated in the Hong Kong Basic Law, which was based on the Hong Kong Charter, including Royal Instruction and Letters Pattern during the colonial period (1841–1997). The Hong Kong Basic Law was drafted and revised between 1985 and 1990, and passed by National People’s Congress in April 1990. The basic approach of the Hong Kong Basic Law is formulated according to the so-called “highest instruction” of the former Chinese paramount leader Deng Xiaoping. This was written down as the following: “ . . . Some requirements or qualifications should be established with regard to the administration of Hong Kong affairs by the people of Hong Kong. It must be required that patriots form the main body of administrators, that is, of the future government of the Hong Kong special region. Of course it should include other Chinese, too, as well as foreigners invited to serve as advisers. What is a patriot? A patriot is one who respects the Chinese nation, sincerely supports the motherland’s resumption of sovereignty over Hong Kong and wishes not to impair Hong Kong’s prosperity and stability. “Those who meet these requirements are patriots, whether they believe in capitalism or feudalism or even slavery. We don’t demand that they be in favour of China’s socialist system; we only ask them to love the motherland and Hong Kong.”61 Even before the handover of Hong Kong to Chinese rule in 1997, there was a written agreement that in Hong Kong SAR, only

61 Deng Xiaoping, “Remarks on ‘One Country, Two Systems’ (22–23 June 1984),” in Important Documents concerning the Hong Kong SAR Basic Law of People’s Republic of China (Beijing: The People’s Press, 1990), p. 6. The English translation is available at the Peopls’s Daily Online website, http://english.people.com.cn/ dengxp/vol3/text/c1210.html.

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Beijing’s political leaders are entitled to exercise their authority to classify who is patriotic and who is not. In reality whose who were recognized by the grassroots as patriots were, in the eyes of Beijing, very much “unpatriotic.” Therefore preventive measures were designed into the Basic Law not to allow any one from the ‘unpatriotic’ cohort to get a seat in the office of Chief Executive of Hong Kong SAR. The most obvious stipulations are in Articles 43, 44, 45, 46, 47 and 52; Appendix 1 and 2; and the Election Ordinance of The Chief Executive Election. These legal documents state that any person who is a candidate in the election for chief executive needs at least 100 members’ nominations from the Election Committee, which is composed of a majority of leftists. It is then extremely harsh for the “unpatriotic candidate” to overcome this obstacle in this complex process because the electoral system with electoral regulations and laws are all designed not under the principle of political equality but for the interest of Beijing. In the near future, Hong Kong democrats perceive that they have a little chance to see the realization of the system of Dual Universal Suffrage as stipulated in Article 45 of the Hong Kong Basic Law, and to have their own elected Chief Executive and all legislators based on “one vote for one man.” With the current political mood, Hong Kong democrats are fighting an up-hill battle for the implementation of the Dual Universal Suffrage system. During the last ten years of the governance of HKSAR, the political structure was designed in such a way that the executive-led approach making the Chief Executive who is accountable to the 800 members of the Electoral College (most of which are pro-China) have no legislator to rely on to pass the bill. The passing of the bill in the Legislative Council depends on whether the bill will be acceptable by Beijing. Then the Chief Executive has to lobby to pro-China Legislators for any bill which has no obvious relation with Beijing. Democrats who come from the middle class and from professionals cannot bring the will of the public to the legislature. The rally of 1 July 2003 attracted more than half a million to the streets in protest against the Article 23 legislation and they demanded for democracy. The rally itself was the tip of the iceberg of the dissatisfaction of the people on a number of socio-economic policies of the Tung Chee-hwa administration. The introduction of

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

the housing policy and the Principal Officials Accountability System, just to mention a few, proved to be Tung’s administrative failures.62 The stepping down of Tung Chee-hwa could not resolve the problem of internal chaos in the areas of policy-making and bureaucratic management. On the one hand, the policies do not always reflect the will of the public, but are simply compromises for the interest of tycoons; on the other hand, the bureaucratic management does not always follow the principles and regulations of the western type of public administration and for the public interest. 63 The recent unpredictability of social issues 64 and government deployments reflects the chaos both in policy-making and bureaucratic management. The democrats regarded the introduction of the Dual Universal Suffrage system would give legitimacy to the Chief Executive who in days to come would not lobby the tycoons for bill passing, when both the legislature and the Chief Executive will be elected with full fledged legitimacy. The delay in Beijing’s granting of the Dual Universal Suffrage reflects that the outcome of this kind of election is never predictable and never under Beijing’s control; and this is why the Hong Kong democrats are struggling for the Dual Universal Suffrage as vaguely promised by the Basic Law. The long march in this uphill battle begins with Alan Leong Kah-kit’s campaigning for the post of Chief Executive, with the cooperation of democrats in various sectors. In this chapter, we try to illustrate and discuss that with the spiritual support of transcendental religious belief, some local

62 Joseph Cheng (ed.), The July 1 Rally: Interpreting a Historical Event (Hong Kong: City University of Hong Kong Press, 2005). 63 The typical case is the appointment of Fanny Law to be the head of the Independent Commission Against Commission (ICAC) which is a department mainly to deal with corruption and economic irregularity. However, Fanny Law’s brother is Fan Hung Ling who is the head of CITIC Pacific Limited, the leading company with China capital with Hong Kong as the head quarters engaging in international trade. Fanny law’s relationship with China companies might affect the anti-corruption investigation which is renowned to be vigorous and thorough in the British time. Fanny Law’s appointment diminished the credibility of HKSAR government. 64 The occupation of a cohort on protection of cultural heritage in the demolishing site of the Star Ferry Bell Tower in December 2006 is the most recent issue of this kind.

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democrats in general and the political leaders in particular would not lose their hearts in their long-term struggle for universal suffrage and the democratization of Hong Kong. In other words, the perseverance generated from religious belief is an important element in preserving these political activists in their almost “impossible mission.” In comparison to the other religions like Buddhism and Taoism, which advocate relatively passive views about life and with less religious involvement in life, Christianity and Confucianism, with different sources of teaching authority constituting different world views, promote a more positive view of religious involvement in life. This Christian attitude of socio-political involvement is influential and crucial among Hong Kong political activists since most local democracy advocates are embedded in these two religious beliefs, Christianity and Confucianism, from their adolescence because many of them received education from Christian schools.

Christianity and the Chinese Cultural Tradition of Hong Kong The Confucian culture and Christian churches, including both Roman Catholic and Protestant, are essentially the driving force behind the democrats in demanding for political reform by Hong Kong people. The nature of the demand coming from two parallel systems of transcendental beliefs which sometimes become compatible with local traditions, sometimes oppose the latter while at other times even transform traditional political practice. In dealing with secular issues, Confucian teachings and the Christian belief have plenty of elements in common. The doctrines of “investigating things, extension of knowledge, to be sincere, rectifying the hearts, cultivating their persons, regulating their families, governing well their states, and illustrating illustrious virtues throughout the kingdom” 65 in the Confucian tradition, which seek the ideal of a “Philosopher King” (King of Saint), whose connotation parallels to “Thy kingdom come, Thy will be done on

65 “Great learning,” (1:4–7) in James Legge (ed.), The Four Books (Hong Kong: Kwong Ming Bookstore, 1963), p. 1.

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earth, as it is in Heaven” in the Lord’s Prayer. From the view of sociology of religion, Confucianism is regarded as a secular religion and generates a similar function as what Christianity does in Western societies. However, we do not totally agree that Confucianism shares the same doctrine of advocating “activeness” and “social involvement” as much as Christianity does. We found that Confucianism is less active in social involvement in comparison to Christianity in the areas of overcoming the inequality and fighting for social justice. For instance, St Paul mentioned that “I have fought the good battle, I have completed the race, I have kept the faith. From now on the crown of righteousness is reserved for me, which the Lord, the righteous judge, will give me on that day, and not only to me but also to all who have longed for His coming.” (2 Timothy, 4:6–8). However, Confucianism has a passive approach in interpreting life when it teaches that “One will not enter a tottering state, nor dwell in a disorganized society. When righteousness prevails in the kingdom, one might make himself known; but when righteousness prostrates, one should keep himself concealed.” 66 “When good government prevails, language and action may be lofty and bold. When bad government prevails, the actions may be lofty and bold, but the language might have reservation.”67

Traditional Elites and Christian Education According to the criteria stipulated by the Elite Theory of American sociologist C. W. Mills,68 the ruling class of Hong Kong has the

66 Confucian Analects (Book VII, Chap 4, 13:2), ibid. p. 61. 67 Confucian Analects (Book VIII, Chap 4), ibid. p. 117. 68 The original classifications on US society, by C. Wright Mills, are political, economic and military elites. Cf. C. Wright Mills, The Power Elites (New York: Oxford University Press, 1956); C. Wright Mills and Hans Gerth,

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following features. Under the colonial rule, the British forbade local Chinese to be involved in Hong Kong’s military service. Also important political or administrative posts were not given to local Chinese except to a very few leading Chinese who were naturalized into British nationality and they served as middlemen between the local Chinese community and the ruling British. From the 1950s onwards, more local Chinese had the chance to be educated, which opened the chance for the traditional Chinese elite in Hong Kong to emerge in economic, political and mass media circles. This new class structure lasted until the 1997 handover. Many of the elite were educated in British governmental schools, while the rest of them were graduates of Church-run elite schools who have been offering the best education in the colony while allowing Christian teachings to be internalized among their students resulting in forming their world view and value systems. The Second Vatican Council (1963–65) advocates that the Church should be more integrated in the modern world.69 Some of the new generation of Hong Kong people who have been educated by the Church’s schools, were socialized by Christian social teaching and they share a different standpoint and possess different values of social life in comparison to people who did not come from the Christian education system. The literature shows that both the Roman Catholic Church, which came to China during the late Ming Dynasty, and Protestant Churches, which arrived during the late Qing Dynasty, are traditionally good at providing western type school education.70 Although school education was not an effective means of shaping the consciousness of all Hong Kong people within a short span of time,71 however, in the long run, cultural and religious influence Character and Social Structure (New York: Harcourt, Brace & World, 1964). 69 Austin O.P. Flannery (ed.), “Vatican Council II: The Conciliar and Post Conciliar Documents,” (New York: Costello Publishing Company, 1975), pp. 515–532. 70 Cf. Lee Chi-kong (Rev.), The Early Period Propaganda History of Christian Belief in China (Taipei: Taiwan Commercial Press, 1998), pp. 1–53, 201–238. 71 Cf. Shearon Lowery and Melvin L. De Fleur, Milestones on Mass Communication Research: Media Effects (New York: Longman, 1983), pp.

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eventually made the reaping of fruits in the socio-political arena possible.72 In Hong Kong, apart from family and office, education offered by Christian denominations eventually became one of the important agents that shaped the collective consciousness of the local public towards freedom and basic human rights.

The Church’s School and the Pursuit of Secular Justice73 Jackie Hung, the programme director of Justice and Peace Commission of the Hong Kong Catholic Diocese, expressed that the majority of Hong Kong Catholics are comparatively conservative, and they wish to keep the status quo of Hong Kong society. Jackie says that Hong Kong Catholics rarely participate in political activities. However, as they are motivated by Catholic teaching and are engaged in political activities, they believe that behind the Natural Law of this world, there is a transcendental Being who constitutes the ultimate authority of the Law coming from the Ultimate Being – God. Therefore, in the context of “justice,” some state laws and regulations should be regarded “evil” or “unjust,” and ought to be fought against or revised, because these kinds of laws do not promote human rights. She expressed that the “Right of Abode of Hong Kong” and the legal interpretation of the law by the National People’s Congress are classical examples. Jackie admitted that even though she was born in a Catholic family and educated in a Catholic school, she did not participate in 148–175, 176–203; Wilbur Schramm and Donald F. Roberts (eds.), The Process and Effects of Mass Communication,” revised edition (Urbana: University of Illinois Press, 1980), pp. 517–636. 72 Austin Ranney, Governing: Introduction to Political Science, 8th ed. (New Jersey: Prentice Hall, 2001), pp. 53–59. 73 The main content of this paragraph was summarized from the interviews of three Hong Kong famous political activists, all of them were educated in primary or secondary School of Hong Kong Catholic diocese. They are Mr Wong Yuk-man, a famous host and commentator of TV and radio talk show, convener of political party “League of Social Democracy”; Ms Jackie Hung Ling-yu, programme director of “Justice and Peace Commission of the Hong Kong Catholic Diocese”; Ms Gloria Chang, former Hong Kong student leader, energy programme director of “Green Peace.”

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politics. However, after the 4 June 1989 Massacre at Tiananmen Square, she became convinced that if there was no democracy in a society, injustice would prevail. She was awakened by the injustice issues in Hong Kong and these resulted in her participation in activities of “non-violent political disobedience” which was inspired by Christian social teaching. Gloria Chang, the Energy Programme Director of “Green Peace,” has been a political activist since her days as a student leader at the University of Hong Kong. She points out that her Catholic beliefs makes her understand that one should obey the law of God vis-à-vis “injustice.” She admitted that her conscience told her that it is right to do away with injustice by engaging in various kinds of social campaigns. She also expressed that Catholic teaching had a long-term influence on her so much so that she had no choice but to follow her own conscience by plunging herself into various campaigns related to social issues. This is why many Christians in Hong Kong are concerned about social and political issues, and she could not distinguish which behaviour was influenced by Catholic beliefs or by other factors. For her, the Catholic teachings have become a natural part of herself.74 Wong Yuk-man, convener of the political party “League of Social Democracy,” has been a popular star on TV and “radio talk shows.” He attracts many audiences from all walks of life. He says that the meaning of, “In front of God, all humans are equal,” and, “In front of the law, all humans are equal,” are just the same. The former is from the teaching of a non-secular religion, the latter is from the secular world. This idea of “all humans are equal” is conversely and absolutely in conflict with the Chinese traditional theory of secular social relationships, which advocates that “all humans are not equal,” and is based on the Five Relations which constitutes a hierarchy of “Heaven, Earth, Emperor, Father and Teacher.” Wong said that he was educated in a Catholic school, and became a Protestant a few years ago. He also claims that in his

74 The veteran democrat Martin Lee as early as in 1990s when he was interviewed by Beatrice Leung held the same view with these rising figures in agitating democracy.

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

campaign against “injustice” in Hong Kong, he cannot clearly distinguish whether his ideological orientation was influenced by the education of Catholic school or from Confucian teachings. But, he always remembers the words of St Paul: “I have fought the good fight, I have finished the race, and I have kept the faith.” Wong said that he deeply understands the implementation of the core value of Christianity into actions that require sacrifice and devotion. Therefore, he believes that when Christians face the oppression from the government, they will have more strength to resist the pressure and carry on the campaign with persistence than other people without religious faith. These Catholic social activists like Gloria Chang, Jackie Hung and Wong Yuk-man together with the senior democrat Martin Lee explicitly show that the Christian social teachings which they acquired from an early age in their Catholic education in high school have been so integrated into their life values that the emphasis on justice, peace and human rights have sprung naturally from their own political values and which they embrace more firmly than those without transcendental beliefs.75 Jackie Kung and Gloria Chang said, the example of Cardinal Zen’s support for “democratic development” and for the “underprivileged groups” of Hong Kong have given tremendous encouragement to Catholic political/social activists, even though some Catholics criticize Zen for his radical political stance. Traditionally, Catholics respect their presbyters/priests; therefore, Cardinal Zen’s radical political stance has also gained the support of many Catholics and have encouraged many to do the same. Wong Yuk-man says that in some circumstances, people cannot criticize the Church because she cares too much about politics. When “justice” is undermined, the Church must stand to protect “justice,” this is the core value of Christianity, and it is what has been done by the Church in former Communist Poland and some Latin American countries today.

75 These were the reports from the interview from Martin Lee by Beatrice Leung in March 1984 when they first met at the University of Hong Kong. Then when Camoes Tam interviewed Gloria Chang, Jackie Hung and Wong Yuk-man, he got the same message of these activists in January 2007.

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Catholic Involvement and the Church Recruits Help from the Laity The newly established Civil Party is headed by a Catholic political scientist Kuan Hsin-chi, and many of its members are Catholics including rising political stars like Leong Kah-kit and Yu Yuet-mei, and a senior political scientist Joseph Cheng Yu-shek. Leung Kakit’s campaign for Chief Executive is an endeavour dubbed as an “impossible mission,” when he knows very well that he has no chance to win in this unfair electoral system. However, his campaign is taken as a conscientization of the public requesting them to be aware of an unfair political system. As a matter of fact, as early as 1965, during the Second Vatican Council, the Catholic Church openly announced that the Church has to rely more on the laity. The Council wrote a document entitled Decree on the Apostolate of the Laity76 to signify the determination of the Church to turn away from clericalism. This means that from that time the rising of the laity will lead to the sharing of power with them and the clergy who have traditionally dominated a leading position in the church hierarchy. The Hong Kong Catholic Diocese first under the leadership of Cardinal John Wu, then later by his successor Cardinal Joseph Zen, realized that more lay involvement in the Church would be its future approach. Then more and more, the Hong Kong Catholic Church realized the need for more involvement of Catholic laity both in its operation and policy-making. The newly set up Diocesan Committees that deal with contemporary social questions such as bioethics and family life are headed by prominent Catholic professional laity with all laity members except for one or two members from the clergy. The Diocesan Pastoral Commission for Marriage and the Family, is headed by a lay Catholic marriage professional and together with twelve other able hands in marriage counselling with a priest, and a sister as members. The Diocesan Committee for Bioethics is headed by a prominent medical doctor

76 “Decree on the Apostolate of the Laity,” in Walter Abbott (ed.), The Documents of Vatican II (London-Dublin: Geoffrey Chapman, 1966), pp. 489–525

The Catholic Role in Hong Kong SAR’s Governance: Past and Present

advised by an emeritus Catholic medical professor and a senior barrister as medical and legal advisers together with lay medical and legal professionals as members except for one priest.77 This reveals that the Church relies on the assistance of its Catholic lay professionals on issues related to bioethics and family life. Prominent Catholic academics and professionals were invited to join some major policy-making committees to share major decision-making on important issues such as parish building and development, and the financial management of the diocese. In the Diocesan Building and Development Commission there are twelve lay people including the chairman and they work with three priests to decide the development of the parish as well as in church construction and renovation.78 As a rule the prelate of the diocese is the one holding the purse of the diocese, advised by a handful of senior priests. Traditionally no non-clergy knows about the financial matter of the diocese. Recently, there have been four laity together with five clergy who exercise the financial control of the diocese.79 The Catholics’ participation within and outside the church on socio-political issues, together with the vocal Cardinal Joseph Zen, won the favour of the Vatican who took Hong Kong as one of the most important diocese in their eyes.80 In short, it is not always obvious that Hong Kong Christians are politically active when they are facing secular injustice in Hong Kong. This tendency for the pursuit of secular justice is a potential and is implicit, which is hard to be break out without any external influence. According to our observation, after the tragedy of the 4 June Massacre in Tiananmen Square in 1989, this potential and implicit tendency of Christians has been automatically elicited and conducted to the direction of seeking the aims of democracy, such as “direct election,” “universal suffrage,” etc., even though the practice of democracy is so hopeless and always ends up in frustration.

77 Catholic Truth Society, Hong Kong Catholic Church Directory 2007 (Hong Kong: Catholic Truth Society, 2007), pp. 68–70. 78 Ibid. p. 63. 79 Ibid. p. 69. 80 It was the view of one of the Vatican officials who was interviewed in 2004 by Beatrice Leung.

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Conclusion Hong Kong Catholics both under the British rule and Chinese rule, at various stages have seen playing a role to stabilize the chaos, or play an decisive role in the transitional stage of the development of chaos. At Hong Kong’s early stage of the development, the Catholics helped to offer service to the needed starting from Wanchai in the nineteenth century. The church represented by the missionaries offers such a service which transform its society from possible chaos to a stabilized one. The political landscape of Hong Kong coloured with Britain’s Cold War strategy, with possible chaotic undercurrents threatened by possible communist infiltration and subversion, the ideological insulation of Christian churches offered to help the government to render education and social services to Chinese refugees. In the transitional period from British rule to Chinese rule, the role played by Christian churches, although not prominent, was significant because it revealed the Catholic political stance. In the ten years of HKSAR, Cardinal Joseph Zen had played a critical role in the chaotic situation in the unpopular process of legislation of Article 23 of the Basic law, and the “Right of Abode” issue. Under Zen’s leadership the transformation from an uncertain system to a new system was possible. The Catholic influence over political activists cannot be ignored. It was because, propelled by the social teaching of the Church, in the agitating for the Dual Universal Suffrage, it plunged into impossible missions in the campaign for the Chief Executive election. The impossible mission was supported and became a sustainable campaign for democracy. If we regard the realization of the Dual Universal Suffrage as a transformation from the chaotic situation of the executive-led system to a new system, then the role played by Hong Kong Catholic political activists has its special contribution to its success.

Authors Grace CHENG has been the Chief Librarian/knowledge manager of the Hong Kong Hospital Authority since 1992. She is a Fellow of the Australian College of Health Services Executives, the Hong Kong College of Health Services Executives, and a past president of the Hong Kong Library Association. She has extensive experience in information and library management, and in teaching knowledge management. Her doctoral research focused on the information behaviour model of healthcare professionals. She has published on informatics, information-seeking behaviours, and won award for her article on the shifting information ecology. She has diverse research interests including, inter alia, knowledge representation, the role of value-added information in knowledge transformation, evidence-based health care and performance measurement. Joseph Y. S. CHENG is Chair Professor of Political Science and Coordinator of the Contemporary China Research Project, City University of Hong Kong. He is the founding editor of the Hong Kong Journal of Social Sciences and The Journal of Comparative Asian Development. He has published widely on political development in China and Hong Kong, Chinese foreign policy and local government in southern China. He has recently edited volumes on The July 1 Protest Rally – Interpreting a Historic Event and Challenges and Policy Programmes of China’s New Leadership. Since 2005, he has been serving as the founding president of the Asian Studies Association of Hong Kong. Marcus CHU completed his undergraduate degree (with first class honours) in political science and sociology from Lingnan University, Hong Kong, M.A. in international relations from the University of Nottingham, and is going to kick off his Ph.D. thesis in Chinese foreign policy at the University of Durham, UK. Currently he is tutoring social research methods in the Open University of Hong Kong. 883

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Michael E. DEGOLYER is Professor of Government & International Studies at Hong Kong Baptist University. Earning his Ph.D. from Claremont Graduate University in 1985, he is Director of the Hong Kong Transition Project (1993 to present), a recent expert contributor to the Economist Intelligence Unit Hong Kong Country Reports (1996–2006), a regular columnist for The Standard, a China regional business daily and current President, Hong Kong Political Science Association. The Hong Kong Transition Project tracks political development of Hong Kong people from British subjects who had no formal representation in the negotiations of 1982–84 to citizens of the HKSAR of China with power to amend the Basic Law and fully directly elect legislators and Chief Executives. See http://www.hkbu.edu.hk/~hktp . John D. HO is an Associate Professor at the School of Law, City University of Hong Kong. He has a Ph.D. in economics from the University of Minnesota and a J.D. from the University of California at Davis. He is a member of the State Bar of California. He was Vice Chairman, Consumer Council (1997–2001), Chairman, Management Committee of the Consumer Legal Action Fund (1998–2001), Deputy Chairman, Review Body on Bid Challenges under the World Trade Organization Agreement on Government Procurement (1999– 2004), and is currently a Panel Member of the Telecommunications (Competition Provisions) Appeal Board. HO Kin-chung is the Acting Dean of School of Science and Technology and Programme Leader in Environmental Studies and Applied Science of The Open University of Hong Kong. He worked in the Environmental Protection Department of Hong Kong government (1991–1992) and was involved in a number of public and social services. His research interests include: the distribution and impacts of harmful algae in the polar regions, formation mechanism of red tides, river and marine water quality, environmental education and, the mechanism of cross-border environmental cooperation. He was awarded the Bronze Bauhinia Star badge of the HKSAR to honour his outstanding contributions

Authors

to environmental protection and environmental research, and was awarded the “Excellent Worker in Environmental Science & Technology Award” by the Chinese Society of Environmental Sciences (2006). Lok Sang HO, Professor of Economics and Director of the Centre for Public Policy Studies, Lingnan University, is the author of Principles of Public Policy Practice and Health Care Financing and Delivery: A Model for Reform, and has published over 80 academic papers in journals and book chapters. He has been active in community and professional services, and has been President of the Hong Kong Economic Association and an Advisor for the Hong Kong Institute of Monetary Research since 1999. He has been a Council member of the People’s Council for Sustainable Development since 2004. He had also served as a member of Hong Kong Committee of the Pacific Economic Cooperation Council and the Central Policy Unit of the Hong Kong SAR government. HUNG Ching-tin is currently Managing Director of midTop Research Co., a research-based strategies consultancy firm founded in 1988. He obtained his B.Soc.Sc. in sociology, statistics, economics and political science (HKU) in 1975, M.A. in translation (CUHK) in 1986 and Ph.D. in economic thoughts (Wuhan University) in 2001. He has published approximately 3,000 Chinese and English articles and 10 books amounting to approximately four to five million words on socio-economic, political and cultural topics of Hong Kong, Mainland China, Taiwan and Singapore. He has 30 years of working experience in corporate and institutional management, media, as well as research and consultancy. He is a pioneer in introducing survey research to socio-political and cultural studies in Hong Kong, having undertaken 300 research projects and researchbased consultancy. IP Kin-yuen is the principal of the HKICC Lee Shau Kee School of Creativity. He has been an editor, social worker and school teacher before he served at the Hong Kong Institute of Education as a

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lecturer in education policy for eleven years. He has been actively participating in education policy debates and contributing to newspaper commentaries. He was part-time member of the Central Policy Unit of the SAR government and a seconded member of the Decision Support Unit of the Education Department. He was also the President of the Comparative Education Society of Hong Kong, and is currently an advisor to a centre on small class teaching at the Hong Kong Institute of Education. His publications include Those Time of Teaching (1996), What’s Worth Fighting for in Your School? (Co-translator) (1999), and Everchanging Chinese Characters (2000). Olivia IP is Associate Professor in the Management Department at the City University of Hong Kong. She works on human resource management and labour market studies. She has published articles on human resource management, trade unions, and manpower in Hong Kong and Mainland China. Alex Yui-huen KWAN is a Professor and Acting Head at the Department of Applied Social Studies, City University of Hong Kong. He obtained his M.A. from University of North Dakota, M.S.W. from University of British Columbia, and Ph.D. from Louisiana State University. He has taught in Taiwan, Malaysia, the United States and Hong Kong for nearly three decades. He has written numerous journal articles on elderly issue. He is the author of Ageing Hong Kong – Issues Facing An Ageing Society (2002), and editor of A Reader on Integrated Services on Caregivers (in Chinese) (2004), and A Reader on Quality of Life of Elderly in Hong Kong (in Chinese) (2007). His research interests include social gerontology, ageing welfare policies and services, and social problems. Rebecca KWOK is Assistant Professor in the Department of Public and Social Administration at the City University of Hong Kong. She received a M.Sc. degree from the Civil Engineering Department of the National University of Singapore, and a Ph.D. degree from the

Authors

Centre of Urban Planning and Environmental Management of the University of Hong Kong. She specializes in transport policy, and her major research interests include sustainable transport development and urban transport policy. She is a member of the Chartered Institute of Logistics and Transport in Hong Kong and is also an appointed member of its Education and Training Committee. Adrienne LA GRANGE is an associate professor at City University of Hong Kong, where she has worked for the last ten years. Previously she worked as a planner in the public, private and non profit sectors in Australia and South Africa. She has undergraduate and postgraduate degrees from the University of the Witwatersrand (Johannesburg) and a Ph.D. from the University of Hong Kong. Her research interests are housing and urban policy in South East Asia. Alice Y.L. LEE is an Associate Professor at the Department of Journalism, Hong Kong Baptist University. She worked for various media organizations (including Ming Pao Evening News, Hong Kong Economic Times, Asia Television Limited, Information Office of The Chinese University of Hong Kong) before she received her doctorate from the University of British Columbia. Her major research interests include media education, new communication technology, and news websites. She teaches courses in critical studies of mass media, TV news reporting, media management, etc. She has published a number of book chapters as well as academic articles in the areas of media education and online journalism both locally and abroad. She has been actively involved in promoting media education in Hong Kong. She is now the vice-chairperson of the Hong Kong Association of Media Education. Michael H. LEE is Instructor of the Department of History, The Chinese University of Hong Kong, and Visiting Research Fellow of the Centre for Research in Pedagogy and Practice, National Institute of Education, Nanyang Technological University, Singapore. His research interests focus on education policy and reform, comparative education, higher education studies, and modern

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history of Hong Kong, Singapore and Malaysia. His publications appear in international journals such as Asia Pacific Education Review, Asia Pacific Journal of Education, Australian Journal of Education, Education and Society, Higher Education Policy, Higher Education Research and Development and International Higher Education. Beatrice LEUNG was awarded a Ph.D. degree from the London School of Economics and Political Science in 1988. She had served as the chief editor of Kung Kao Po (the Chinese Catholic Weekly) as well as the founding executive secretary of the Holy Spirit Study Centre of the Hong Kong Catholic Diocese. Currently she is the honorary associated professor of Department of Politics and Public Administration, University of Hong Kong. She has published more than 40 academic papers on Church-State Relations of the Greater China in international academic journals, and has edited and written seven volumes. Her most recent publications include The Chinese Catholic Church in Conflict: 1949–2001 (co-authored with William T. Liu) (2003) and “China’s religious freedom policy: an art of managing religious activity,” The China Quarterly 184 (December 2005). Mark K.Y. LI is currently Assistant Professor of Social Work Department, Hong Kong Baptist University. He obtained his B.Sc. (Econ.) from University of London, M.S.W. from University of Alabama, M.P.A. from University of Hong Kong and Ph.D. from Sheffield University. He has been working with non-governmental organizations for more than 25 years before joining the university. His professional interests include public administration, social policy, social movements, elderly service, youth work and rehabilitation. He involves in local politics and is an elected District Councillor of East Hong Kong District Council. He also helps as voluntary committee members of Hong Kong Down Syndrome Association, Hong Kong Rehabilitation Alliance, Stewarrds and Oxfam Hong Kong.

Authors

Sonny LO is an Associate Professor in Political Science at the University of Waterloo. He has formerly taught at the Hong Kong University of Science and Technology, Lingnan College, University of East Asia (Macau) and the University of Hong Kong. His books include The Politics of Democratization in Hong Kong (1997), Political Development in Macau (1995), and Governing Hong Kong (2001). His forthcoming books are The Politics of Cross-Border Crime in Greater China and Political Change in Post-Colonial Macao. MA Ngok is currently Associate Professor at the Department of Government and Public Administration, Chinese University of Hong Kong. His research areas include party politics and elections in Hong Kong, state-society relations in Hong Kong, comparative politics, and democratization. He is author of Political Consequences of Electoral Laws: The Hong Kong Proportional Representation System (City University of Hong Kong Press, 2003), and Political Development in Hong Kong: State, Political Society and Civil Society (University of Hong Kong Press, 2007). Mee Kam NG is an associate professor at the Centre of Urban Planning and Environmental Management, the University of Hong Kong. As a Sir Edward Youde Memorial Fund Fellow, she earned her Ph.D. at UCLA. She is one of the pioneers in developing “planning for real” workshops in the local planning curriculum. A founding member of the Hong Kong People’s Council for Sustainable Development and Citizen Envisioning@Harbour, she also serves in other boards and committees. Her research interests include urban planning and sustainability issues. She has been invited to lecture in universities worldwide. She is in the editorial board of three international journals: Town Planning Review, Planning Theory and Practice and DisP. She has published widely in various international refereed journals and her publications have received merits and awards of the Hong Kong Institute of Planners.

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NG Sek Hong is Reader in the School of Business at the University of Hong Kong. He attended the London School of Economics and Political Science of the University of London for an M.Sc. degree in industrial relations and later, also for his Ph.D. specializing in the field of industrial sociology. He teaches and has published several books and a number of articles in the area of employment and labour study, industrial relations and human resources. Raymond M. H. NGAN is Associate Professor at the Department of Applied Social Studies, City University of Hong Kong. He had been a former Chairman of the Committee on Social Security, Hong Kong Council of Social Service and the Chief Editor, Hong Kong Journal of Social Work. He has been the Vice-president, Hong Kong Association of Gerontology since 1992. His writings have been published by the Social Development Issues, International Journal of Social Welfare, International Social Work, Social work in Health Care, Journal of Aging and Social Policy, Journal of Gerontological Social Work and Social Security (Beijing). His research interests are in social security, comparative welfare, social development and long-term care. He was awarded the Outstanding Research in Gerontology in 1997 by the Hong Kong Association of Gerontology. Baozhi QU obtained his Bachelor’s and Master’s degree of economics from the Renmin University of China in Beijing in 1994 and 1996 respectively. From 1996–1998, he worked as a lecturer at the Business School of the Renmin University of China. After he obtained his Ph.D. in economics from the University of Pittsburgh (US) in 2004, he joined the City University of Hong Kong and is currently an Assistant Professor at the Department of Economics and Finance. He teaches both undergraduate and graduate courses including economies of Hong Kong and China, banking, and risk management. His research interests are mainly in the areas of corporate finance and governance, risk management and development economics.

Authors

REN Yue (Ph.D., Columbia University) is a Professor at the Law School, Shantou University, China and an Honorary Associate Professor in the Department of Politics and Public Administration, the University of Hong Kong. His publications focus on East Asian international relations, international law, political psychology and foreign policy. Ming SING is an Associate Professor at the Department of Public and Social Administration, City University of Hong Kong. He has published on various aspects of democratization in Hong Kong and is the author and editor of two books: Hong Kong’s Tortuous Democratization: A Comparative Analysis (2004), and Hong Kong Government & Politics (2003). His third book will focus on the governance problems in Hong Kong which have unfolded in the last few years. His articles have appeared in Journal of Contemporary China, Government & Opposition, Democratization, East Asia, China Information, Chinese Law & Government, Journal of Contemporary Asia and elsewhere. He has been conducting several projects on democratization in East Asia and the world. In the first half of 2007, he was a visiting Fulbright Scholar at University of California, San Diego. Clement Y.K. SO is currently Director of the School of Journalism and Communication, The Chinese University of Hong Kong. He was deputy editor-in-chief of Vancouver’s Ming Pao Daily News and reporter of World Journal, and marketing researcher of HKTVB. He graduated with a bachelor’s degree (sociology) and a master’s degree (communication) from The Chinese University of Hong Kong, and a Ph.D. degree from the Annenberg School for Communication, the University of Pennsylvania. His major research interests include: Hong Kong press, news sociology, citation analysis, and development of the field of communication. His major publications include Global Media Spectacle: News War over Hong Kong; Press and Politics in Hong Kong: Case Studies from 1967 to 1997; Mainland, Hong Kong and Taiwan Journalists in Changing

891

892

The Hong Kong Special Administrative Region in Its First Decade

Contexts; and Television Program Appreciation Index: Hong Kong Experience. TAM Chi-Keung (Ricardo Reis da Camoes Tam) is a Portuguese Chinese Catholic of Macao. He obtained his Ph.D. degree from National Cheng Chi University (NCCU) of Taiwan. He is a senior correspondent of Greater China for about 22 years, as well as a famous commentator of Phoenix Satellite TV and talk show host of Radio and TV programmes in Hong Kong and Macao. He is also a part time instructor of University of Hong Kong, Hong Kong Shue Yan University, University of Macau, Institution of Inter-University of Macau, and Macau Millennium College. His publications include: “Nationalism and/or Pragmatism: an inquiry to the future of Hong Kong,” “Disputes concerning Macau’s sovereignty between China and Portugal,” and about twenty academic papers concerned. TING Wai graduated from The Chinese University of Hong Kong and obtained his Ph.D. in political science and international relations from the University of Paris-X (Nanterre), France. Formerly Research Fellow at the Institute of Southeast Asian Studies, Singapore, he is now Professor of the Department of Government and International Studies, Hong Kong Baptist University. His research interests include domestic politics and foreign policies of China, and theories of international relations. He has published extensively on Chinese diplomacy, Sino-American relations, SinoEuropean relations, China and Korean Peninsula relations, China and Indian-Pakistan relations, Chinese nuclear strategy, MainlandHong Kong relations, external relations and international status of Hong Kong, and so on. He was invited to the US and EU visitor programmes, and is a member of the editorial advisory board of four academic journals. WAN Po-san is Research Officer and Co-director of the Social Indicators and Social Development of Hong Kong Research Programme of the Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong. Her major research interests are

Authors

the quality of life, social problems, and patterns of social change in Hong Kong. Her recent books include: Trends and Challenges of Social Development: The Experiences of Hong Kong and Taiwan (2006); Indicators of Social Development: Hong Kong 2004 (2005); Society and Politics in Hong Kong (2004); and Social Stratification in Hong Kong, Taiwan and Mainland China (2004), which she coedited with S. K. Lau et al. WONG Siu-lun obtained his Bachelor of Social Sciences degree at the University of Hong Kong in 1971, his M.Phil. degree at The Chinese University of Hong Kong, and his B.Litt. and D.Phil. degrees at the University of Oxford. His academic career began with teaching in the Department of Sociology at the University of Hong Kong where he was later appointed Professor and Head of Department. He is currently the Director of Centre of Asian Studies at the University of Hong Kong. His research interests include the study of entrepreneurship, business networks, migration, social indicators, and the development of sociology in China. He is the author of Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong (1988), and co-editor of Indicators of Social Development: Hong Kong 2004 (2006). Timothy Ka-ying WONG received his Ph.D. in sociology at the University of Manitoba, Canada. He is currently a Research Associate Professor and Associate Director of Public Policy Research Centre of the Hong Kong Institute of Asia-Pacific Studies at The Chinese University of Hong Kong. His major research interests include social and political development in Taiwan and Hong Kong. He has published a number of books and book chapters and has contributed to such academic journals as Nations and Nationalism, Journal of Contemporary China, Asian Perspective, Social Development Issues, Democratization, Social Policy and Society, International Journal of Social Welfare, and Social Indicators Research.

893

894

The Hong Kong Special Administrative Region in Its First Decade

Victor ZHENG obtained his B.B.A. (Marketing), M.Phil. and Ph.D. degrees at the University of Hong Kong, and joined the Centre of Asian Studies in 2003. His research interests include the study of the development and inheritance of Chinese family business, social indicators and social development in Hong Kong and Macao, social and business history of rice trade and stock market, and the transformation of Hong Kong people’s identity. He is the co-author of A History of Hong Kong Stock Market: 1841–1997 (2006), A History of Hong Kong Rice Trade (2005), and Hong Kong Identity Card: A Perspective (2004).

Index

A

657, 663–666, 731, 760, 771, 819 Alliance in Support for the Patriotic Democratic Movement of China (ASPDMC), 54, 60 altitude towards the government, 15, 497–498, 507–508, 513 also see satisfaction with the performance of government anti-competitive practice, 345, 421, 423–424, 427–430, 432–436, 438, 439 Apple Daily, 212, 828, 846 Article 23 legislation, 1, 26, 28, 42, 59, 60–63, 84, 111, 120, 152– 153, 167–169, 180–181, 186, 189, 192, 196, 203, 205, 208, 211–212, 215, 224, 227, 251– 252, 291–292, 311, 478, 511, 611, 846, 856, 868, 872, 882 Article 45 Concern Group, 14, 67, 209, 252 Asia’s World City, 269, 341, 362, 421, 442, 602, 604, 625, 762, 831 Asian Financial Crisis, 54, 76, 83, 95, 188–189, 197, 275, 285, 296, 313, 322, 338, 348–349, 383, 393, 408, 510, 536, 538–539, 548, 552, 599, 613, 699, 702, 706, 711, 719, 727 assisted home ownership, 699, 702, 706, 708, 712–713, 718, 726– 727 atypical employment, 455, 458, 460, 472, 487–489, 491

academic aptitude test, abolition of, 676 accountability, 25, 33, 40, 46, 84, 111, 115, 120–121, 131–133, 158, 162, 167, 169, 192, 195, 270, 289, 682, 687–690, 693, 707, 781, 787, 794, 798, 802, 822–823, 873 Action Agenda (of Donald Tsang), 15, 20, 23–24 activist church, 42 human rights, 95, 212, 224 political, 54, 61, 200, 203, 206, 220, 224, 312, 477, 874, 877–879, 882 social, 71, 72, 212, 610, 630, 845, administrative officers, 257, 683 admission of Mainland professionals, 462–463 Admission of Talents Scheme, 462– 463 Admission Scheme for Mainland Talents and Professionals, 463 Advisory Committee on Teacher Education and Qualification, 686–687 ageing, 8, 33, 47, 461, 550, 565–566, 571, 572, 575, 580, 583, 585– 588, 604–605, 724, 765, 814 air pollution, 343–344, 633–634, 637, 638, 639–640, 658, 662– 663, 665, 734, 742, 746 air pollution index, 634 air quality, 344, 632–634, 637, 638, 895

896

The Hong Kong Special Administrative Region in Its First Decade

B

C

Basic Law, 1, 27, 49, 53, 56, 59, 60, 66, 75, 81–82, 84, 95, 109–110, 112, 120–122, 124–125, 152– 153, 165, 167–169, 172, 179– 180, 184, 186–189, 192, 196, 202–205, 207–212, 215, 223– 224, 227, 252, 291, 305, 309, 310–312, 314, 318–319, 321– 322, 325–326, 428, 450, 470, 478–479, 496, 511, 522, 558– 559, 691, 836, 856, 864, 868, 870–871 Bauhinia Foundation Research Centre, 361, 370 Beijing, 1–2, 11, 17–19, 24, 26–31, 33–35, 41, 43, 46–48, 53–54, 62–66, 73, 76–77, 81, 84–85, 95–96, 102, 104–107, 115, 121, 123, 171, 179–182, 184, 186– 188, 191, 193–212, 215–219, 222, 224–230, 240, 249–250, 252–254, 262, 266–267, 269, 272, 280, 290–291, 294, 300, 303, 313, 320, 363, 366, 380, 418–419, 479, 511, 631, 694, 846, 855–856, 864, 866–867, 870, 872–873 Beijing leaders, 19, 63, 65, 182, 846, Beijing officials, 363, 366 benchmarking, 447, 479, 488, 491, 578, 785 Bishop/Cardinal Zen see Zen Ze-kiun, Joseph, Board of Education, 683 brain-drain, 523, 526–527 Britain, 51, 82, 179, 222, 236, 238– 239, 240, 242, 244, 251, 290, 488–489, 523, 859, 882 Build-Operate-Transfer (BOT), 756–757

capitalism, 233–234, 259, 448, 479, 487–488, 674, 871 care, continuum of , 571, 577, 579, 581–582 care facilities, long term, 575–576 caregiver support, 584 Catholic Church in Hong Kong, 266, 865, 867, 882 bridging endeavour, 865–866 Central Government / Central People’s Government, 1–2, 11, 20–21, 28–29, 49, 60, 62, 63, 64, 66, 68–69, 73, 110, 122, 124, 137, 170–172, 179, 181, 189, 193–194, 198, 202– 204, 295, 266, 291, 309, 314, 325, 372, 411, 495, 755, 827, 847, 851, 865, 870 Central Liaison Office, 30 Central People’s Government (CPG)– SAR relations, 310–311, 313 central waiting list, 577 Certificate of Hong Kong Origin (CO), 397–399, 402 Chan Fang On-sang, Anson 17, 25, 190–191, 217, 253, 270 changing demography of population, 461 chaos, 118, 241, 247, 854–857, 859, 860, 873, 882 Chaos Theory, 853–855 Cheng, Albert, 181, 203, 205, 830, 838, 844–846 China factor, 53, 263, 291, 320, 864 China Institute of City Competitiveness, 17 China’s 11th Five-Year Plan, 15, 20, 234, 256, 341, Chinese General Chamber of Commerce, 20 Chineseness, 228, 267, 268, 280

Index church-state relations, 865–866, 868 Civic Party, 70, 252, Civil Human Rights Front, 42 civil liberties, 1, 49–50, 52, 57, 60, 73, 84, 111–112, 115–116, 119–120, 124, 131–133, 151– 152, 156–157, 163, 177, 185, 196, 205, 211, 218, 224, 226, 228–229, 479 civil service, 17, 48, 80, 82, 89, 98, 100–103, 105, 181, 185, 189, 191–192, 289, 361, 374, 380– 381, 424, 426, 447, 477, 481, 861 civil society, 49, 52, 59–61, 65, 74, 213, 227, 231, 266, 290, 299, 452, 479, 488, 594, 610, 613, 621, 625, 629, 656, 847 class, 495 lower class, 192, 200, 498–503, 506, 508–510, 513, 514–516, 518–519, 522–524, 526–527, 530–532 middle class, 3, 11, 25, 27, 50, 55, 71, 197, 239–240, 248–249, 257, 328, 337, 375–376, 450, 452–455, 462, 498, 500–502, 503, 506, 508–511, 513–519, 522, 524, 525–527, 530–532, 668, 702, 788, 830, 857, 872 upper class, 498, 501, 510 working class, 190, 197, 212, 475 class size (school), 695 Clean Air Charter, 344 Closer Economic Partnership Arrangement (CEPA), 28, 77, 181, 198, 216, 221, 302, 313, 341, 356–357, 387, 393–398, 400–405, 410, 417–418, 514 collaborative planning, 591, 638 colonialism, 239, 363, Commission on Poverty, 535, 538,

547–548, 551, 554–556, 561, 563 Communist Party of China (CPC), 183, 193, 224, 228, 256, 259, 264, 266, 862–863, 865, 867– 868 community support services, 572, 573, 576, 817 community unionism, 473–474 competition authority, 140, 423, 425–426 competition law, 111, 114, 116–119, 136, 140, 299, 334, 345, 422– 426, 428–429, 437–440, 442 competition legislation, 299 competition policy, 114, 136, 345, 421–427, 429, 433–434, 437– 442 Competition Policy Advisory Group (COMPAG), 345, 421, 426– 427, 430–434, 437, 439, 442 Competition Policy Review Committee (CPRC), 421–422, 438–439, 442, competitiveness, 8, 15–17, 24, 48, 111–114, 116–117, 119, 124, 132–133, 136, 138, 148–149, 150, 256, 260, 289, 296, 330, 332, 352–353, 394, 403–404, 422, 428, 462, 467, 481–483, 603–605, 612, 754 Comprehensive Social Security Assistance (CSSA), 542–546, 550, 554–555, 557, 559, 561, 570, 585, 701, 712, 724, Comprehensive Transport Study (CTS), 730–732, 748 conservation, 317, 605–606, 609, 612–614, 617, 619, 624, 626, 632, 637, 648, 650–653, 661, 664–665, conservatism, 76, 222, 227, 518

897

898

The Hong Kong Special Administrative Region in Its First Decade construction waste charging scheme, 644, 664–665 Consumer Council, 117, 345, 346, 422–425, 427, 432, 435, 439 consumption oriented mass culture, 445 continuous medical education, 804 convergence, 179–180, 182–186, 188, 191, 193, 195, 197, 199, 207, 211–212, 219, 221, 223– 230, 253, 263, 446, 448, 451, 492, 493 co-opt, 194, 219–220, 477 cultural blind spot, 246, cultural deficiencies, 241, 245, 247, 248 curriculum reform, 213, 677, 694

D de-class syndrome, 452 de-colonization, 450–451, 869 Democratic Alliance for the Betterment of Hong Kong (DAB), 14, 31, 43, 142, 145, 154, 160, 174, 190–192, 195, 200, 206–207, 213, 250–251 democratic development, 42, 49, 50– 53, 58–59, 62–63, 83, 85–86, 99, 101, 103, 106, 111, 121, 124, 131–133, 518–519, 879 Democratic Party, 11, 14, 30, 35–37, 40, 54–55, 67, 136, 139–140, 142, 151–153, 158–159, 164, 166–172, 185, 206, 299, 627 demographic size, 566 Deng Xiaoping, 182, 184, 229, 257, 267, 403, 871 depression assessment, 582 de-regulation, 488–489 dialectical interactivities, 243–244 Direct Subsidy Scheme, 691–693,

disease burdens, 765, 769, 772, 794, 818 District Council, 43–44, 46, 57, 66– 67, 70, 122, 170, 190, 229, 379, 381, 476, 546, 574, 627, 844 District Council elections, 30, 43, 45–46, 63, 166, 170, 187 divergence, 179–180, 184, 198–200, 211, 218, 227–230, 375, 492 Dongguan, 30–31, 206, 405 dual universal suffrage, 872–873, 882

E East Asia, 236–237, 239–240, 247– 248, 293, 443–445, 448–453, 489–490, 493, 538, 563, 608, 672, 675 East Asian Confucism Circle, 248 economic altitudes, 363 economic crisis, 95, 197, 296, 349, 522, 552 economic dependence, 216, 221–222, 225, 230 economic integration, 18–21, 216– 219, 226–227, 303, 383, 405, 410–411, 417, 419, economic relation, 189, 216, 263, 313, 405, 419, Education and Manpower Bureau, 466–467, 576, 680 Education Commission, 669–670, 671, 673–674, 676, 680, 683, 688, 690, 692 Education Department, 682–683, 686, 690, 693 education expenditure, 678 education reform, 189, 491, 667, 668–669, 672–675, 677, 682– 683, 685, 695–697 elder suicide, 581

Index elderly abuse, 581 elderly project, 572, 574 Election Committee , 44, 46, 49, 56, 66–67, 81, 125, 192, 201, 219, 869, 872 subsectoral elections, 70 electronic road pricing (ERP), 757 elite and masses, 244 empowerment, 42, 62, 593–596, 628, 833 energy, 653, 656, 661, 666, 681 entrepôt, 289, 292, 384 environment, 631 education, 659, 660, 661 legislation, 638 planning and assessment, 632, 647 policies, 632, 636, 650, 662 environmental impact assessment (EIA), 615–616, 619, 621, 625, 647–650, 656, 660, 662, 744– 745, 747–748 environmental protection, 38, 306, 416, 562, 606, 615–616, 625, 631–632, 642, 647, 649, 656– 657, 660–665, 731, 742, 744– 745, 758, 759–760, 833 Environmental Protection Department, 615–616, 632, 652, 657, 662, 664–665, 744 Europe, 114, 236, 261, 264, 272, 275, 278, 290, 292, 295, 298, 299–301, 308, 320, 324, 346, 405, 408, 439, 449, 488–489, 546, 555, 646, 663, 689, 733, 761, 764, 860, 868 European Union (EU), 264, 272–278, 283, 290, 299, 301, 323–324, 546 examination, 671, 674, 676, 680– 681, 685 executive-led system of government, 27, 48, 116, 122, 123, 189,

204, 591, 598, 601, 608, 683, 882

F fairness of policy making, 375–376, 378 Falungong, 1, 188, 291–292, 300, 319 financial centre, 262, 268, 303, 341–344 financialization, 336 foreign direct investment, 11, 272, 299, 388–389, 406–408, 411 fourth estate, 848, 850 fragmentation (of democratic movement), 53, 55 free market, 21, 50, 295, 318, 331, 333, 342, 383, 422, 428, 437, 640, 728, 815 free society, 236, 263 freedom of speech, 83, 85, 87–88, 97–98, 100–103, 154–155, 205, 269, 291, 312, 318, 837, 842, 847, 850–851 free-trade agreement, 387, 393 Friedman, Milton, 21, 234 front shop, back factory, 409 functional constituencies (FC), 43, 49, 56, 81, 109–113, 122–125, 128, 133, 148, 173–174, 197– 198, 201, 204, 207, 374, 382, 470, 745

G General Teaching Council, 684 generic skills, 677–678 gentrification, 726 geographical constituencies, 37, 43, 81, 110, 116, 119, 121, 125, 131, 173–174, 201, 477, 745

899

900

The Hong Kong Special Administrative Region in Its First Decade Gini coefficient, 9–10, 360, 456–457, 551–552, 768 globalization, 3, 9, 15–16, 19, 213, 236, 265, 304, 306, 308, 333, 336–337, 340, 444–448, 450– 451, 456, 461, 491–493, 535, 538, 557, 613, 620, 672, 674, 685–686, 824 Goods and Services Tax (GST), 34, 361–362 governance, 24, 33–34, 38, 50, 61– 62, 65, 73, 77, 85, 115, 135, 180, 199, 235, 254–255, 257, 259–260, 268, 289, 341, 382, 466, 478, 483, 497, 531, 597, 601, 608, 625, 628, 637, 639, 690, 773, 853–854, 872 clinical, 773, 802–804 corporate, 341–342, 392, 799, environmental, 656–658 problems/crisis, 62, 65, 73, 121, 179–180, 182, 185, 191, 193, 199, 224, 249, rating, 86 school, 689–691 Greater PRD Region, 406, 408, 410–412, 417 green groups, 615, 618, 638, 646, 648–649, 659, 733, 744 Guangdong, 18–20, 28, 31, 143–144, 205, 215, 223, 380, 385, 388, 397, 404–415, 418–419, 503, 605, 635, 637, 639–640, 643, 657–658, 661–662, 664

H H5N1, 561 Hadden-Cave, Philip, 233–236, 331 Hang Seng Index, 336, 350–351 Harbour Action and Treatment Scheme (HATS), 641, 660, 663– 664

Harvard Consultancy Report, 778 health care, 34, 160–161, 334, 561, 580, 588, 763–764, 766, 769, 773, 775–778, 781–784, 786– 787, 791–795, 803, 813–816, 818, 820–822, 824–825 financing, 776–777, 782–784, 787, 789, 797, 811, 819, 825 insurance, 781, 783, 786, 790– 793, 819–820 quality, 797–798, 812 reform, 781, 787, 789–790, 804, 812, 825, determinants, 763–764, 772, access, 808 expenditures, 763, 780–781, 793, 808, 821, outcomes, 780, 795, 797, 804– 805, 809, 812, 814, 821, 823 policy, 764, 773, 775–776, 815, 818, 823–824, herd behaviour, 331–332, 348, 350– 351 heritage, 71–72, 601, 603, 605–606, 612–613, 620–624, 626, 629, 652, Home Assistance Loan Scheme, 709– 710, 719 Home Ownership Scheme (HOS), 31, 191, 338, 611, 617, 699– 700, 701, 703, 705, 708–709, 712, 716, 718–724, 727–728 Home Starter Loan Scheme, 703, 705, 719 homes for the aged, 576–577 Hong Kong Asia’s World City, 269, 341, 362, 421, 442, 602, 604, 625, 762, 831 external relations, 261–264, 266, 270–271, 275, 303, 309, 321, 324–326

Index Hong Kong (Continued) an international city, 261–262, 269–270, 304 mainlandized, see mainlandization provincialization, 304 sinicization, 265, 268 Hong Kong 2030, 602–608, 610– 613 Hong Kong and Macao Affairs Office (of the State Council), 181–182, 194, 205 Hong Kong Confederation of Trade Unions (CTU), 14, 54, 472, 477–478, 487 Hong Kong Democratic Development Network, 42 Hong Kong economy, 8, 23, 61, 114, 226, 322, 327–328, 332–334, 336, 342, 351–352, 357, 360, 383, 393, 428, 454, 500, 510, 516, 527, 550, 726, 767 free and open economy, 346 myths, 333, structural problems, 329–330 dependence on China, 216, 221– 222, 225, 230 Hong Kong Federation of Trade Unions (FTU), 14, 207, 470, 472–475, 477–478 Hong Kong General Chamber of Commerce, 20, 335 Hong Kong Jockey Club, 239 Hong Kong Monetary Authority, 23, 350, 357, 430, 447 Hong Kong phenomenon, 237 Hong Kong system, 240–241, 249, 253–257 Hong Kong Transition Project, 364 “Hong Kong, China”, 314, 316–317, 321, 324–325 Hongkongese, 97–98, 100, 102–103, 212, 214, 368, 586, 767

housing, 699–728 Housing Authority, 191, 348, 431, 610, 614, 617–618, 699, 702, 705, 711–715, 717, 726–727 Housing Society, 579, 700, 705–706, 708, 710, 713 housing voucher, 707–708 HSBC, The Hong Kong and Shanghai Banking Corporation, 239, 408 Hu Jintao, 28, 180, 182, 194, 197 humanism, 235, 242 Hunghom Peninsula, 31, 65, 610– 611, 614, 617 Hutchison Whampoa Ltd, 239

I identity, 72, 96–103, 214–215, 224– 228, 231, 247, 257, 300–301, 303–304, 444, 603, 867–868 impact index, 417–418 income distribution, 9, 442, 718, 767–768 Independent Commission Against Corruption (ICAC), 239 Individual Travel Scheme, 28, 77, 387, 403, 514 infotainment, 830, 834–835 integrated approach, 732, 739, 743, 751, 758, 761–762 Intelligent Transport System (ITS), 740–741 international conventions, 309, 312, 317–319, 325–326, 657 international financial centre, 15, 303, 341–343, 354, 623, International Monetary Fund, 9, 366–367, 548, 560 Ip Lau Suk-yee, Regina, 26, 60, 63, 189, 196, 310

901

902

The Hong Kong Special Administrative Region in Its First Decade

J Japan, 3, 9–10, 22–33, 47, 236, 248, 264, 271–274, 276–277, 279, 283, 291–292, 295–296, 298, 300, 323, 330, 366–368, 384, 405, 408, 432, 445, 450, 457, 488–489, 672, 767, 778 Jiang Zemin, 182, 184, 186, 193– 195, 270 July 1 Rally (2003), 1, 27, 30–31, 35, 42–43, 46, 60–62, 65, 68, 76, 84, 115–116, 153, 169, 180– 181, 189–190, 192–194, 197– 198, 203, 205, 212, 215–216, 218, 221, 224, 250, 312, 455, 491, 496, 827, 843, 846, 857, 872

K key-learning areas , 677–678 knowledge-based economy, 166, 467, 540, 542, 548, 551, 559, 562, 588, 670, 672–674, 693 Kowloon Canton Railway Corporation (KCRC), 614–615, 647, 648, 649, 660, 663, 735, 744, 750 Kyoto Protocol, 653

L labour legislation, 444, 483 labour market challenges, 444, 461 labour policy, 479, 485 laissez-faire philosophy, 16, 24, 117, 233–235, 333, 422–423, 428, 815 land, 329–330, 333–334, 336, 339, 353–354, 615, 618, 620, 645, 651, 704, 709, 722–723 development, 599, 633, 636, 647,

650, 652, 661, 705, 726 monopolization, 333, 591–592 price, 334, 352, 406, 562 sale, 599–600, 611, 618, 703, 710 supply, 334, 348, 352–353, 705 use, 603–604, 620, 729–733, 736–737, 761 “landmines” thesis, 11 language proficiency assessment for teachers, 685 Lee, Allen, 181–182, 203, 205, 838, 846 Legislative Council (LegCo), 2, 10, 30, 49, 53, 55–59, 63, 66–67, 71, 73, 80–82, 89–91, 95, 97– 98, 100–103, 105, 123, 158, 164–165, 167, 169–174, 187, 200–202, 204, 206–207, 209, 220, 226, 229, 268, 300–301, 310, 312, 380, 422, 425, 470, 474–475, 477, 519, 522, 611, 620–621, 625–626, 641, 644– 645, 652–654, 664, 666, 684, 691, 703, 745–746, 776, 783, 787, 831–832, 836–837, 839– 841, 845, 848–851, 862–864, 872 Legislative Council elections, 30–31, 37, 43, 45–47, 53, 55, 59, 64, 66, 198, 201–202, 206, 519, 865–866 Leong Kah-kit, Alan, 46, 70, 209, 252–253, 627, 873, 880 Leung Kam-chung, Antony, 26, 63, 196, 669–670, 683 Li & Fung Group, 239 Li Kwok-cheung, Arthur, 683 liberalism, 233, 235, 239, 242, 259 Link REIT, 31, 65, 199, 501–502, 532, 713, 721, 727 Long Term Housing Strategy (LTHS), 701–702, 704

Index Long Valley, 612–614, 617, 648– 649, 651, 660, 663, 665, 744 low income, 2, 335, 373, 536–537, 547, 550, 553–554, 587, 693, 700–701, 710, 713–714, 718, 723, 725–727, 765, 784–785, 820

modernity, 233, 246, 256, 259–260, 444–446, 448–449, 451 modernization, 50, 183, 236, 246, 256, 260, 262, 445 modes of SAR participation in international organizations, 314 money-follows-patient approach, 781, 820

M Ma Si-hang, Frederick 26 Mainland China, 5–6, 16–18, 20–21, 24, 30, 33, 75, 117, 179–180, 182, 185, 215, 217, 220–222, 224, 226–228, 231, 262, 266, 271, 275, 277, 301, 305, 330, 383–390, 392–397, 400, 402– 405, 408–409, 411, 417, 419, 551, 560, 562, 586, 631, 648, 657, 706, 753, 760, 767, 804, 844 Mainland–Hong Kong relations, 83, 85, 87, 98, 101, 103–104 mainlandization, 179–180, 185–187, 191–192, 197, 200, 207, 221, 223–225, 227–230 Mandatory Provident Fund, 8, 480, 586, 820 manufacturing centre, 404–405, 408 Mao Zedong, 259, 263 Marxism, 233 Marxist-Leninists, 1 Mass Transit Railway Corporation (MTRC), 735, 749 materialism, 451, 863 post-materialism, 72 medical, 34, 817, 819 see also health care meritocracy, 239, 241–245, 248, 693 minimum wage law, 460, 478, 485, 490 Mixed Development Scheme, 703, 705, 718

N National People’s Congress (NPC), 36, 95, 110, 181, 186, 204, 311, 871, 877 Standing Committee (NPCSC), 95, 172–174, 179, 202, 204 NPCSC interpretation/verdict, 62– 64, 66, 173, 204, 209–211 neo-liberalism, 538, 681 New Nature Conservation Policy, 650 noise, 632–633, 636, 646–647, 660, 662, 742, non-sovereign entity, 292, 305, 307, 308, 313, 319 non-sovereign international actor, 305–309, 324–325

O OECD Visiting Panel, 669, 684 Ohmae, Kenichi , 3 “One Country, Two Systems”, 18, 75, 77–78, 82–83, 93–97, 102– 106, 152, 167, 182, 188, 199, 215, 221, 223, 227, 229, 231, 233, 264, 266–267, 270, 280, 293, 296, 300–301, 309, 310– 312, 317, 324–326, 341, 403, 443, 445, 496, 639, 851, 864 Opening-up Policy, 259 Opium War, 238, 247, 258

903

904

The Hong Kong Special Administrative Region in Its First Decade outsourcing, 458, 460, 484, 487 outward processing, 385 overseas investment, 392

P Pan-PRD region, 405, 411, 413, 415–417, 463 Pan-PRD regional co-operation, 19 partial vision of democracy, 50–51 patriot/patriotic, 123, 186, 188, 193, 200, 205–206, 213–214, 224– 227, 266, 476, 692, 870–872 patriotism propaganda, 62 Patten, Christopher, 15, 109, 191, 195, 200, 251–252, 372, 422, 449, 451, 496, 523 Pearl River Delta (PRD), 8, 16–17, 19, 30, 217, 296, 313, 385, 404–411, 464, 633, 635, 639, 643, 648–649, 656–658, 661, 663–665 pedestrianization, 733–734, 742 people’s council, 827–828, 832–834, 836–838, 842, 845, 847, 849– 850 political society, 51–52 pollution, 317, 331, 342–344, 474, 632–635, 637–640, 642, 647, 657–659, 661–663, 665, 734, 742, 744, 746, 816, 818, 824 positive interventionism, 235–237 positive non-interventionism (PNI), 20–21, 24, 233–238, 248, 252– 253, 255–256, 260, 331–332 Post-1997, 240–241, 249, 253 post-industrial modernity, 444 poverty, 76, 89, 334, 362, 484–485, 487, 531, 535–539, 542, 544– 551, 554–557, 559–563, 585, 768, 824 power dependence, 51 Power for Democracy, 42

Pre-1997, 240, 252–253 Principal Officials Accountability System (POAS), 84, 158–159, 192, 195, 289, 707, 745, 873 privatization, 338, 691, 727, 748– 749, 751 pro-Beijing, 28, 30–31, 41, 43, 46, 63–64, 69–70, 110, 116, 124, 131–132, 187–188, 190–192, 194–195, 197–198, 201, 206– 207, 213–214, 217, 219, 225– 226, 249–250, 252–253, 255, 518 productive welfare, 560 professionals, 20, 70–71, 123, 184, 203, 216, 239–240, 244–245, 247–248, 252, 254–255, 257, 317, 374, 378, 393, 403, 450, 454–455, 462–463, 582–583, 622, 625, 650, 686, 693, 782, 785, 798, 812–813, 815, 824, 868, 872, 881 pro-government, 43, 58, 70, 71, 112, 115, 129, 133–134, 191, 198, 201, 207, 862 proportional representation (PR), 41, 55, 56, 57, 64, 201 Provisional Legislative Council, 57, 200, 425–426, 704 public health, 159, 583, 637, 700, 771, 775–776, 783–785, 788, 793–795, 798, 808, 810–811, 817–818, 823 public opinion, 12, 26, 34, 38, 62, 64, 67–68, 71, 85, 111, 122– 123, 152–153, 168, 301, 365– 367, 369, 382, 511, 619, 733, 813, 816, 828–832, 834, 837– 845, 847, 850–851, 870 public rental housing (PRH), 328, 348, 699, 701–706, 708–718, 721–728

Index public transport, 137, 142–147, 623, 729–731, 734–735, 737–742, 747, 751, 758–762

Q qualification framework, 468, 482, 487 quality assurance inspection of school, 688–689 Queen’s Pier, 625–626

R radio talk show, 30, 828–851, 878 railway, 613–615, 647–648, 663, 730, 734–739, 742, 744, 749– 753, 755, 759–760, 762 Rainbow Report, 775–776 real estate, 8, 25, 76, 329, 333, 337– 338, 353, 392, 395–396, 399, 454–455, 501, 541, 599, 727 recolonization, 179, 222, 224, 230 re-commercialization and deindustrialization, 448, 465 red tide, 635, redevelopment, 609–610, 612, 614, 618, 655, 705, 713, 716, 722– 723, 726–727 Renminbi (RMB), 342, 356 rent, 337, 339, 346, 349, 562, 645, 701–703, 705–706, 708, 710– 715, 718, 722 economic rents, 337, 339, 361 market rent, 339, 706 rent, quasi-rent, 339 rent assistance scheme, 701, 713– 714 representativeness, 44, 110–111, 113, 123 residential care places, 578, 587 residential care services, 574–577

retirement security, 585 Review of Domestic Rent Policy, 710, 715, 725 Review of Institutional Framework of Public Housing (RIF) Report, 706–708, right of abode, 856, 867–868, 877, 882 rule of law, 15, 50, 95, 111, 115– 116, 152, 159, 166–167, 185, 210, 215, 222, 227, 236, 241– 242, 244–246, 248, 259, 262– 263, 267, 269–271, 282, 286– 287, 290–292, 299, 318, 321, 341–343, 479, 517, 519, 522, 601

S satisfaction with life, 363–365, 367– 369, 379 satisfaction with performance of government, 371, 380 school management initiative, 690 school-based management, 689–690, 869 Scott Report, 774, 776 sectoral approach, 119, 345, 732 self-care hostels, 576–577 self-censorship, 185, 221, 319, 827 senile dementia, 584 service improvement measures, 575 service trade, 387 services for the elderly, 571–586 Severe Acute Respiratory Syndrome ( SARS), 26–27, 59, 61, 84, 159–162, 181, 190, 218, 250, 317, 327, 355, 383, 393, 496, 511, 536, 539, 543, 548, 561, 586, 613, 664, 700, 720, 777, 782, 787, 828, 837–838, 843– 845

905

906

The Hong Kong Special Administrative Region in Its First Decade sewage charge, 641 Shanghai, 17, 19, 31, 205, 223, 238– 239, 267–268, 286, 288, 288, 290, 313, 329, 389, 408, 418– 419, 496, 622, 694, 754 Shenzhen, 15, 17, 19, 20, 197, 209, 215, 217, 433, 612, 658, 754– 755 Smith, Adam, 234, 238 social agenda, 839, 849–850 social grievance (p. 3–4, 22), 829– 830, 832–833, 837, 848, 851 social indicators and Hong Kong society, 495, 498 social investment, 535, 538, 557, 558, social mobility, 239, 242–244, 248, 255, 441, 497, 499–502, 506– 508, 530–531 social policy, 537, 563, 818 social security, 33, 544–545, 568, 570, 585, 768 social transformation, 530 social welfare, 38, 181, 208, 311, 508, 535, 538, 545, 554, 556, 558–559, 568–570, 580 sovereignty, 83, 109, 179, 200, 203, 251, 253, 261, 263–265, 289, 291, 295, 304, 307–309, 315– 317, 320, 322, 325–326, 363, 372, 423, 443, 470, 495–497, 500, 506, 527, 668–669, 691, 744, 751, 778, 827, 830, 855, 864, 871 speculation, 334, 348, 354, 360, 704 Standing Committee of the National People’s Congress (NPCSC) see National People’s Congress Star Ferry Pier, 71, 72, 610, 614, 619, 621, 623–627, 629, 873 stock market, 9, 215, 221, 328, 336, 348, 350–351, 360, 393, 501,

522, 599 stock market, incursion, 348, 350– 351, 360 Strategic Development Committee, 69 Strategic Environmental Assessment (SEA), 648, 650, 731, 748, 759 Strategic Sewage Disposal Scheme (SSDS), 640–641, 663 surrogate democracy, 831, 848, 851 sustainability assessment, 654–655, sustainable development, 601, 603– 604, 606–609, 611, 615, 617, 627, 631–632, 643, 648, 653– 657, 659, 661–665, 688, 696, 729, 742, 762 Sustainable Development Council, 653, 656, 663 sustainable development strategy, 602, 607–610, 612–613, 653, 655 Sustainable Development Unit, 607, 654–656, 663 sustainable transport development, 731, 737, 745, 748, 758–759, 762

T Taiwan, 3, 8, 10, 22, 23, 33, 44, 51, 83, 85, 87–88, 98, 100–103, 182, 199, 202–203, 215–216, 231, 236, 248, 253, 266, 274, 276, 278–279, 308–309, 330, 403, 408, 448, 457, 477, 672, 694, 778, 789 Tang, Yenry, Financial Secretary, 362, 547, 553, 583, 587 targets and target-related assessment, 669 teachers’ stress, 693, 695 technocrats, 240, 245

Index Tenants Purchase Scheme (TPS), 328, 338, 349, 355, 705, 710, 713, 718–719, 724–725 The Heritage Foundation, 21 The Hong Kong Monetary Authority, 23, 350, 357, 430 the labour movement, 469–470, 472–473, 477, 862 trade and investment facilitation, 394, 400 trade relation, 326, 385, 387 traffic congestion, 620, 755 Tsang Yam-kuen / Donald Tsang, 2, 9, 11, 15–16, 20, 23, 31–35, 44, 46, 65, 68–69, 70, 85, 89, 93, 180, 187, 192, 194–195, 199, 210, 219, 221, 228, 233–234, 249–252, 335–336, 362, 368, 379–380, 438, 513, 515, 526, 539, 611, 668, 827, 846–847 Tung administration, 1, 11–12, 15– 16, 18, 24–28, 30–31, 35, 40– 43, 46, 65, 76, 89, 180–181, 186–187, 190, 195, 198–199, 203, 206, 211, 225, 228, 268, 366, 368, 511, 513, 522, 678– 679, 827, 872 Tung Chee-hwa, 1, 11–12, 33, 35– 36, 43, 60–61, 76, 80–81, 84– 85, 89, 92, 111, 122, 159, 169, 180–182, 184–195, 197–203, 207–208, 212, 215–217, 219, 221, 223–229, 233–260, 265, 268, 284, 289, 292, 300, 311– 313, 327–328, 343, 348, 366, 368, 495, 510, 511, 513, 518– 519, 522, 524, 531, 537, 539, 558, 615, 641, 662, 669–670, 678, 684–685, 703, 745, 827– 830, 835, 846, 855–856, 872– 873

U UK, 279, 283, 321, 546, 624, 628, 679, 761, 764, 789, 796, 802– 803 unemployment, 3, 7, 9, 33, 36, 76, 118, 206, 280, 288, 335, 357, 360, 370–373, 393–394, 444, 453, 454, 456, 459–460, 465, 467, 471, 490, 510, 513–514, 535–545, 548, 550, 553, 561– 563, 585, 703, 719 union density, 471 United Democrats of Hong Kong, 54 United Democrats of Hong Kong (UDHK), 54 United States (US), 264, 271–272, 277, 279, 283, 285, 290–295, 300, 303, 330, 356–357, 368, 431–432, 439, 772, 789, 859, 870 United States (US), 6, 9–10, 117, 209, 261, 263, 267, 274, 292, 307, 323, 384, 387, 393, 408, 447, 457, 539, 548, 553, 555, 672, 680, 689, 767, 820, 828, 830, 832, 836, 870 universal suffrage, 28, 43–45, 62–69, 73–74, 84, 95, 107, 122–123, 158, 164–167, 169–174, 202, 204, 300, 312, 519, 668, 745, 872, 874, 882 dual universal suffrage, 872–873, 882 University Grants Committee, 683 unskilled workers, 340, 361, 461, 546–548, 550, 553 Urban Council and Regional Council, 56, 202 urban planning, 591–592, 601, 613, 624–625, 628–629, 630 urban subclass, 455–456, 458 utilitarian familism, 50

907

908

The Hong Kong Special Administrative Region in Its First Decade

V Vatican, 266, 857, 861, 863, 866– 867, 876, 880–881

W wage protection movement, 335, 485, 490 waste, 608–609, 632–633, 635–637, 642, 644–646, 656, 658, 660– 661, 663–665 Policy Framework for the Management of Municipal Solid Waste, 644–645, 665 water quality, 634–635, 640, 643, 658 drinking water, 643 marine water quality, 634 river water quality, 635, 642, 657 welfare expenditure, 545, 558, 568 Wen Jiabao, 28, 180, 197 West Kowloon Cultural District, 31, 611 wetland, 610, 613–615, 617, 648, 663

Wong Yuk-man, 181–182, 203, 205, 877–879 World Health Organization (WHO), 315–317, 763–764 World Trade Organization (WTO), 19, 237, 272, 289, 297, 302– 304, 313, 315, 322, 356–357, 387, 394–395, 402, 410, 437, 479, 492

Y Yam, Joseph, 23 Yeoh Eng-kiong, 26, 189

Z Zen Ze-kiun, Joseph, Cardinal/Bishop, 68, 187, 196– 197, 212, 691, 856, 863, 866– 869, 879–882 Zeng Qinghong, 31, 63, 180 Zhu Rongji, 25, 329