Coping with a regional malady

Hong Kong has celebrated the first anniversary of its return to Chinese rule with quiet confidence, although the economic turmoil that the region is passing through cast a shadow over the occasion.

RASHEEDA BHAGAT
recently in Hong Kong

AS Hong Kong celebrated last fortnight the first anniversary of its return to Chinese sovereignty, what struck one was the string of ironies that stared at the fledgling one-year-old Special Administrative Region (SAR) of China.

The greatest of them all was that 365 days after its transition from British to Chinese sovereignty Hong Kong's biggest problem was not one of political or individual freedom, over which the world - mostly the West - had made such gloomy forecasts, recalling the Tiananmen Square incidents of June 1989, but one pertaining to the economy.

ANAT GIVON / AP
Chinese President Jiang Zemin and Hong Kong Chief Executive Tung Chee-hwa listen to the national anthem at the start of Hong Kong's first anniversary celebrations on July 1. At left is Chinese Vice-Premier Qian Qichen, second left is Wang Yeting, wife of Jiang Zemin, and at right is Betty Tung.

The swagger and bluster were missing from Asia's economic powerhouse. The people had just digested the news that this year's budget would have a deficit of HK $21 billion. The news must have hit them hard, for this is their first deficit budget in 15 years - and last year's budget had a surplus of HK $82 billion!

The unemployment rate has gone up from last year's 2.8 per cent to 4.2 per cent and experts forecast that this may touch 5 per cent. The stock market is depressed; tourist arrivals are down by 24 per cent with the inflow of Japanese tourists, the biggest spenders in Hong Kong, dwindling by 50 per cent; the property market has crashed by nearly 50 per cent and across-the-board surveys show people losing their faith in the Tung Chee-hwa administration.

As Hong Kong got ready to mark one year of 'freedom', the note was distinctly dignified and subdued. The amount sanctioned for the festivities was HK $10 million compared to the HK $250 million allocated for the handover extravaganza. A discernibly depressed Tung, who went to Beijing on June 29 to invite and escort Chinese President Jiang Zemin, the star of all the anniversary meetings, admitted that Hong Kong was passing through economically turbulent times. He hoped that the HK $44-billion package ann-ounced by the Hong Kong Government the previous week to bail out the economy would get some quick results.

It was left to President Jiang, beaming and confident after playing the ideal host to his high-profile guest, U.S. President Bill Clinton (story on page 60), to infuse some confidence into the people of Hong Kong. Expressing the optimism that the "clouds over Hong Kong would lift soon", he made it clear that "Hong Kong people have full control over their future and if they work together and support the Government, they will pull through" and Hong Kong would "have a much better future under Chinese rule."

Apart from serving as a morale-booster, the message in his speech was clear. Beijing had no intention of meddling in the affairs of SAR. It had not done so in the past one year and had no plans to do so in the future.

IT was but natural that on the midnight of July 1, 1998, Hong Kong and its people looked back with nostalgia at one of the biggest and most spectacular events of the 20th century - the territory's transformation from a British colony to an SAR of China.

RASHEEDA BHAGAT
Martin C. Lee, chairman of the Democratic Party.

The images that sprang up before the mind's eye were those of a sombre-looking Prince Charles participating in the glittering midnight handover bash; a tearful Chris Patten, the last British Governor of Hong Kong, lowering his head to hide his tears; a triumphant Jiang Zemin and a beaming Tung Chee-hwa, the new Chief Executive of Hong Kong, assuring the 6.5 million people of the Asian powerhouse that nothing much will change in Hong Kong after the handover.

For China, it was clearly a major prize and hence the promise that the SAR Government would be free to govern Hong Kong as it wished, as Beijing turned a benign eye to what most certainly was its window to the world. If political and economic freedom in Hong Kong remained unchanged, then a modern and investor-friendly Beijing could continue to be a good bet for international companies to put their investments into.

The British left Hong Kong a thriving economy. The stock market was buoyant, the property market was booming, retail sales were soaring, tourist arrivals were brisk at a spot which had been marketed as a truly exotic region where East met West.

Addressing a press conference for the nearly 8,000 foreign journalists covering the event last year, Hong Kong's Financial Secretary Donald Tsang had dared them to find a "bad story" in the confidence "that you won't find any. Instead you will discover our efficiency, our vibrancy and our resilience. You'll discover that we've had 5.5 per cent annual economic growth, our forex reserves are (U.S.) $86.6 billion, we have a zero debt rate at present, and, by and large, we have survived all the pessimistic forecasts which have been made about Hong Kong's future over the last 10 years."

But today he has had to put his job at stake on maintaining the Hong Kong dollar's peg to the U.S. greenback. What has wrecked the anniversary party as well as such optimism is the dismal economic scenario in Hong Kong. Of course, even the worst critics of China, like chairman of the Democratic Party Martin C. Lee, admit that Hong Kong's reversion to China has nothing to do with the economic gloom of today's Hong Kong. With a sound economy, Hong Kong held on for quite a while as an economic paradise even as the economies of South-East Asian countries crumbled.

But the Asian flu finally caught up with this global economic giant. As the chief economist of the Hong Kong General Chamber of Commerce, Ian K. Perkin, explained to this correspondent, "The Asian crisis hit us in October. We thought we might escape, but once the liquidity got very tight in Asia, Hong Kong stood out as a place where people could replenish their liquidity and so we got it. At the moment asset prices are down, share prices are down, domestic consumption is poor and interest rates have gone up...it's a bad time."

Whether it was the bird flu, which hit Hong Kong pretty badly, or the crash in property prices, which wiped out or severely diluted people's savings invested in housing, critics point their finger at the leadership of Tung. He is being squarely blamed for failing to deal effectively with issues ranging from the bird flu to the economic turmoil.

Surveys done by various agencies like the Social Science Research Centre of the University of Hong Kong and the South China Morning Post have revealed that Tung's popularity, which was as high as 74 to 79 per cent at the time of the handover, has come down to 59 per cent.

Derisive references are being made by experts as well as the man in the street to Tung being too much of a 'nice guy' to be an effective leader. Martin Lee finds Tung "a nice and sincere guy" but sans leadership qualities. "Whenever he sees a problem, he backs off and keeps himself away from the public eye. The chicken flu was a big problem but the Government dilly-dallied and did not deal with it in a resolute way. The Chief Executive just hid himself for a few weeks, he was nowhere to be seen, until all the chicken in Hong Kong - over one million - were slaughtered. He then made an appearance in the marketplace. But that was too late."

Another shortcoming he finds in Tung is that he is too old-fashioned. "He calls himself a conservative but I told him to his face it is not true because conservative parties all over the world support democracy, human rights and the rule of law. But if you mention these things to Tung, he is not interested. He feels that the economy and livelihood issues are more important."

THAT brings one to the debate raging in Hong Kong: are the people interested only in making money? That politics is important to them was proved when braving pouring rain, they turned up in huge numbers - over 50 per cent compared to the previous election in 1995 - this May to vote in the Legislative Council elections.

The Democratic Party and its allies swept all the 20 seats for which elections were held. The other 40 seats are not filled through popular vote and as Lee never tires of repeating, "the irony is that with two-thirds of the popular vote, we have only one-third of the LegCo seats."

According to Lee, experience had shown that every 10 years the pendulum in China had swung from left to right and back. When it swung to the right, as at present, "things get better, including the economy and freedom of the Chinese people, except for the dissidents, who are thrown into the prisons or out of the country." The test for Hong Kong will come when the pendulum changes direction as it did in June 1989, he adds.

RASHEEDA BHAGAT
Michael Horsburgh, hotel executive.

But a greater test Hong Kong faces at the moment is getting out of the economic slump. The first quarter this year has seen a negative growth rate of 2 per cent and Perkin forecasts that this year Hong Kong is likely to see three negative quarters, "something awful for Hong Kong because ever since 1961 when we started measuring GDP (Gross Domestic Product), Hong Kong has had only five negative quarters. This year we'll have three. That gives you an idea of the dramatic nature of the downturn. But the really key thing is that this is the first recession we are having as a services-based economy. The other recessions occurred when we had a large manufacturing base. Now that is down to 7 per cent."

For an Indian, it is important to know the effect of the nuclear blasts and the resultant economic sanctions in the SAR of China. Indian Consul-General Veena Sikri says that she had a lot of explaining to do but the "Hong Kong people and the media showed remarkable understanding of our position." She feels that the sanctions have not really dampened investor sentiment.

Mile Michael Horsburgh, general manager of the Holiday Inn Golden, sums up the average citizen's mindset when he says, "Nothing in the world affects Hong Kong too much. It is small, and everybody is making money, and whether somebody is trying out a bomb in a desert somewhere or there is an earthquake somewhere else, it doesn't make much waves here. Life just goes on."

He is happy that he can answer in the negative the "ridiculous questions people ask me in London: Are the tanks on the streets? Are the PLA (People's Liberation Army of China) soldiers out on the roads?" He feels the visit to Hong Kong of Bill Clinton "will open the world's eyes that all this is not true. And Hong Kong under China is the same as it always was. Yes, we have an economic turmoil, but that will pass."

Chairman of the Indian Chamber of Commerce M. Arunachalam echoes this optimism when he says, "Hong Kong could not escape from the Asian economic crisis. But you will see that Hong Kong will be the first to recover and bounce back."

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