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A Retrospect of the Hong Kong Handover

A major historical event took place just three years before the turn of the millennium. This was Hong Kong’s handover to the Chinese government, after some one hundred and fifty years of British colonial rule. Decade hence, the question that begs to be answered is did China handle Hong Kong well as indicated by the economic and political situation of the territory? My position is that China did a good job in the sense that they did not do harm to Hong Kong and was able to preserve the liberal economic and political spirit of the place.

For most locals, the handover was a source of anxiety, and rightfully so, because for generations, the British were the only rulers that Hong Kong citizens ever knew. While most of the locals like me are of Chinese descent, our way of life was very different from life in mainland China. And this way of life is something that can very difficult to give up or change. This concern among the Hong Kong people is not altogether unfounded, especially in light of the fact that China has long been under a Communist system while Hong Kong is known for its free market economy.

How can you possibly reconcile two very different systems without one side suffering any loss? It is only natural for the local Hong Kong community to worry whether the handover signifies the end of their democratic way of life. As it is, the discussion whether Hong Kong should have been given back to Hong Kong is null and void. As such, this paper does not intend to resurrect that issue. Hong Kong is now ruled by China, and the more important issue now is whether China has been making good on their promise to maintain Hong Kong’s status quo as a progressive and dynamic leader in Asia’s economy.

It has not been that long ago, and indeed a decade is too short to gauge whether Hong Kong is better or worse from the handover. Such things are better left for history to judge. But after reaching this milestone, Hong Kong needs to stop, look back, and evaluate itself. This evaluation is done not so much as to judge who is the better government, but to check whether China has lived up to its promise of keeping the prevailing situation in Hong Kong intact, and whether the policies and changes that the handover has brought has been beneficial to the people of Hong Kong.

This paper aims to look at the changes, if any, that have taken place since the handover, and hopefully from there, be able to glean how these changes have affected Hong Kong for better or for worse, particularly in the economic and political aspect of the place. And from there, be able to prove that China’s rule over Hong Kong has been exceeding the expectations that it will fail in the endeavor. Looking for verifiable sources upon which to base my paper will not be difficult at all.

Since the handover took place on midnight June 30, 1997, many articles and books have been written about it, and more will be written as the world watches how China and Hong Kong will affect one another. There are also a number of websites that I can use to help me in my research. The impact of the handover to Hong Kong is better understood when taken in the context of its historical past. Hong Kong is a small piece of coastal island below mainland China. Its strategic location made it an important port for the trading of goods and is regarded as an ideal base for military and tactical operations.

From a small fishing village, Hong Kong emerged as one the modern world’s most important financial hubs, and enjoys one of the world’s highest gross domestic products. Hong Kong’s economy is fueled by its stock market, banking, and other services-based businesses which serves the world’s top companies. Everyday, its port generates a big amount of traffic, a testament to Hong Kong’s importance as a major economic gateway in the region. The businesses operating in Hong Kong provide jobs to millions in mainland China as well as in the neighboring countries.

Indeed, in spite of its very small size which is smaller than most North American states, Hong Kong stands among the world’s economic giants. Historically, Hong Kong has always been part of China. While artifacts show human activity as early as 5000 BC, evidence points to formal assimilation as a Chinese territory at around 200 BC. However, Hong Kong still remained an isolated outpost, with the small group of inhabitants relying on fishing and salt production for their livelihood. By the mid-nineteenth century Britain and China were engaged in trade, with China trading silver for tea.

This trade allowed illegal opium to enter China, which most Chinese officials opposed. They took this issue with Queen Victoria which resulted in the Opium wars between the two countries. China lost the Opium wars, and with it, the territorial right over the island of Hong Kong. It was obvious to historians that Britain’s annexation of Hong Kong was driven by economic concerns. (Ngo, 1999, p. 4) The biggest surprise is that Hong Kong remained stable and showed consistent growth although the place was predominantly inhabited by Chinese.

It was indeed a unique situation where people from two different cultures met on common ground. The locals and the British rule were able to cooperate to the mutual benefit of the two parties concerned. (p. 5) This amicable settlement allowed for an environment that advanced economic growth. And while little was known about this small island during Chinese rule, Hong Kong found a place on the world’s map when Britain took it as its own; from a small, backwards town, Hong Kong gradually and steadily flourished, even as Britain was able to keep tabs of its trade interests in the region.

Hong Kong is truly a phenomenon; with the locals able to keep its traditions and old-world Chinese identity, and at the same time, have the free market values of the Western world. When Britain took over Hong Kong, the main issues were the poor sanitary conditions of the environment, and the resultant health complications that it brought upon the locals. Britain immediately addressed these areas, in the belief that improving the physical condition of Hong Kong would spur development. As Agnes Ku, et al maintains,

The colonial institutions, organized around the axes of sanitation, health and order, were critical to the development of the development of Hong Kong… Fitting dwellings and efficient drainage seemed to be the most crucial projects for early colonialism in Hong Kong. (2004. P. 38) Thus, after these sweeping physical reforms, Hong Kong was all set to play a major role in Britain’s trade relations in the region. Hong Kong never looked back. The financial importance of Hong Kong has been carried over into modern times, until the time came when Hong Kong must be returned to its historical motherland.

In the 1980’s, China began to take steps towards softening its hard line Communist stance, and began opening itself up to the global market. This renewed openness paved the way for discussions between China and Britain over Hong Kong’s sovereignty. Britain was hoping for the continued presence of Britain in Hong Kong, which would lapse in 1997. China did not agree to extend the treaty, thus, Britain’s mandate over Hong Kong would soon be over. It was just a matter of time when Hong Kong would revert to Chinese rule.

The formal Sino-British Joint Declaration was signed on December 19, 1984 in Beijing by the Prime Ministers of China and the United Kingdom. Since the Joint Declaration, preparations have been made to make the transition as smooth and seamless as possible. More importantly, preparations had to be made to help the locals adjust to the change with very little disruption to their lives. And so it went that on July 1, 1997, Hong Kong, one of the world’s strongholds of the free market, was formally handed over to a traditionally authoritarian China.

The world watched and worried, notwithstanding the pledge from Beijing that it will leave intact the basic freedoms that have buttressed the territory’s sustained economic success. (Manning, 1997) Accounts of life in Hong Kong right after the Handover are varied, depending on whose perspective you are taking. However, the general consensus is that the Handover did not cause the major political and economic upheavals that many feared it will. While there is a slowing down in the economy, it was not at the level expected.

Most people feared the worst about the Handover and they were bracing for a life-altering experience; and as a result, they were pleasantly surprised when the change was milder and more subtle. Callick, an Australian reporter who chronicled Hong Kong shortly after the Handover wrote, Yet much about Hong Kong has also remained constant since the British flag was first raised there in 1841, even through such massive dislocations as the change in sovereignty and the economic downturn of late 1997.

(1998, p. 10) Businesses in Hong Kong, which many feared would lose interest and relocate their operations somewhere else, were able to ride the change with barely perceptible difficulties. Hong Kong was able to generate loyalty from the multinational companies based there, and this loyalty was able to transcend political upheavals. So the corporate face of Hong Kong took to the Handover just as they would a change in their management; for them it was business as usual.

The reaction of the business community more or less reflects the reaction of the locals to the Handover. While the locals may have harbored concerns about the handover, they were resolved to keep their lives as normal as possible. Thus, the Handover generally caused very little disruption in the lives of the Hong Kong people, who have adapted the business world’s way of thinking: life as usual. Since the Handover, China implemented landmark policies regarding Hong Kong; the first is the “one country, two policies” and “Hong Kong people administering Hong Kong”.

These two policies have allowed Hong Kong’s Special Administrative Region (SAR) government a free hand to implement decisions with respect to Hong Kong’s political and economic environment. (Masuyama, et al, 1999, p. 312) Some people might contend that the economic slowdown of Hong Kong is a sign of the bad shape of things to come with China on the driver’s seat. However, the truth is that the slowdown was a direct result of the Asian economic crisis that the region was experiencing at that time.

In fact, Hong Kong was one of the least affected compared to other countries in the Asia-Pacific region, and was one of the first to bounce back from the depression. As Masuyama, et al, furthers, Despite the negative impact of the Southeast Asian Crisis, Hong Kong has maintained its status as an international financial centre. Hong Kong weathered the crisis with a stable foreign exchange rate and its local economy fared better than its neighbors did. (1999, p. 312) The Hong Kong SAR government rose up to the double challenge of the Handover and the Asian economic crisis.

To survive both, the SAR government initiated reforms to maintain its economic vitality and improve the business environment to keep it attractive to the international corporate community. In 1998, the government, just two years after the Handover, made a landmark decision to bolster economic growth by increasing public spending and reducing tax. (Ash, 2003, p. 38) Such a move proved to be effective because it kept businesses in Hong Kong even as it became more attractive venue for operations to other multinational companies.

That Hong Kong was able to ride the Asian economic slowdown with little turbulence is testament to sound political leadership and economic policies. Hong Kong was able to take timely interventions that allowed the place to weather the economic storm and recover without so much as a scratch. This is a clear indication that China allowed the SAR an independent political structure that encouraged economic stability. That the SAR had the financial control is evidence of China’s good handling of the Hong Kong Handover.

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