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The Williamsburg Conference 1997

Keynote Address

Hong Kong: A City of Opportunity

The Honorable Mrs. Anson Chan, CBE, JP

I am delighted to be here this evening and wish to warmly congratulate you on two accounts. Firstly, on your excellent choice of venue and secondly, on the Conference attaining its silver anniversary.

I am very honored indeed to have this opportunity to address such a distinguished and influential audience at this important juncture in Hong Kong's history. And I am also very pleased that you will have an opportunity to see for yourselves how we are preparing for the change in sovereignty in just 45 days from now.

Before I embark on my speech proper, I should like to pay a personal tribute to the group of Asian and American leaders who first launched this Conference. As you know, they met way back in 1971 in Williamsburg, Virginia to discuss and promote the Asian/American relationship. Since then, discussions have continued to thrive and have generated much interest in the two communities. The active encouragement to develop fresh thinking, taking due account of the many different views and perspectives, has greatly enhanced the value of the Conference, and I trust that this valuable process will continue in Hong Kong over the next few days.

You come to Hong Kong at a fascinating and significant time in our history. In a little over six weeks, China will resume sovereignty over Hong Kong. What does that mean? In simplistic terms, the Hong Kong flag will change alongside that signifying our sovereign power. Some of the more obvious changes have already taken place. For example, new coins and definitive stamps have already been issued, although you might for the time being still find a coin picturing the Queen's head in your pocket. But on a more serious note, we will for the first time in modern history have a Hong Kong person in charge of our affairs, Mr. Tung Chee-hwa. He is a well-respected figure in the community and is totally committed to implementing the unique concept of "one country, two systems" on which our future is based.

What is Hong Kong today? Well, we are rated by the U.S. Heritage Foundation as the freest economy in the world. In fact, we have proudly held this position for the past three years. The World Economic Forum has ranked Hong Kong as the second most competitive economy in the world. Our GDP per capita stands at US$24,500, amongst the highest in Asia. Hong Kong is small but global. Let me quote a few examples. We have a population of 6.3 million people, a tiny 0.1 percent of the world's total, and yet we generate 3.6 percent of total world trade, and we are the eighth-largest trading entity in the world. Our total GDP is US$155 billion, a mere 0.5 percent of the world's total, and yet the external transactions of our banking sector are the fifth largest in the world; the average daily turnover of our foreign exchange market is the fifth largest in the world; and the market capitalization of our stock market is the seventh highest in the world.

These impressive facts demonstrate that Hong Kong is a modern, dynamic, and successful community. Asia is generally seen by most commentators as the economic powerhouse for the global economy in the next century. The World Bank has estimated that taken together Asian economies can be expected to surpass those of Europe or North America by 2010. Hong Kong, as a leading city in Asia, is well positioned to take advantage of and contribute to the realization of this goal.

As Michael Enright and his co-authors make clear in their recent book, The Hong Kong Advantage<D>, Hong Kong provides a wide range of business-related services, not just for China but for the entire Asian region. As a result, it has earned a well-justified reputation as the premier center for intra-Asian trade and investment.

Our buoyant economy, which has seen average real annual growth in GDP of 6 percent between 196575, 8.5 percent in the following decade, and 6.5 percent since 1985, has enabled us to divert substantial resources into improving our social environment. Education now accounts for a large portion of the government's total budget. In 199798, our total expenditure on education will exceed HK$45 billion, up 7.7 percent in real terms over last year. Over 21 percent of recurrent public expenditure goes to education. I believe this is money well spent, for if Hong Kong is to continue to be successful then we need a well-educated workforce. A similarly impressive story can be told on the welfare front. Expenditure on welfare has increased by 88 percent in real terms over the past five years and will rise by a further 9 percent this year to HK$21.2 billion. We are also proud of our medical and health services. We enjoy one of the lowest infant mortality rates and longest life expectancy rates anywhere in the world.

Despite all these successes, we realize that we cannot stand still. We have to continue to invest in our future, not only by providing resources for our human infrastructure but also by developing our physical infrastructure. A few examples: we are building a new airport which is initially designed to handle up to 35 million passengers and 3 million tons of cargo a year. This will open in April next year, and I very much hope that when you next travel to Hong Kong you will be able to enjoy the new facilities. Many of the projects associated with the airport have already come on stream, and you may have seen media reports on the opening of the Lantau Link, the world's largest suspension road and rail bridge, last month. We are also embarking on a series of comprehensive improvements under the Railway Development Strategy, massive reclamation schemes to form new land for development, expansion of the container port to meet future demands, and expenditures in excess of HK$3 billion on major environmental projects. So in the sense of looking forward and continuing to make economic and social progress, 1997 is not a factor.

On July 1, 1997, Hong Kong will become a Special Administrative Region of the People's Republic of China. This is the result of the Joint Declaration signed between Britain and China in 1984. In reality, we have had 13 years in which to prepare for the transition. In 1990, another milestone was reached when the National People's Congress of China passed the Basic Law, which will be Hong Kong's future constitution. Many in Hong Kong provided detailed input to the drafting of this law, which essentially provides for the continuation of Hong Kong's capitalist system and way of life for at least the next 50 years. Hong Kong will continue to enjoy a high degree of autonomy with China's direct responsibility limited to defense and foreign affairs.

Under the Basic Law

  • the people of Hong Kong will run Hong Kong;
  • the English common law system and independence of the judiciary will be retained;
  • fundamental human rights will continue to be protected by law;
  • the Hong Kong dollar will remain the sole legal tender, separate from the Chinese currency and backed by separate reserves;
  • Hong Kong will continue to determine its own monetary, fiscal, and financial policies;
  • our tax system will remain simple and predictable (the present low tax rates will be maintained and no taxes will be paid to China);
  • Hong Kong's free-trade philosophy will continue;
  • Hong Kong's civil servants (including non-Chinese) will continue to work and serve the community; and
  • Hong Kong will continue to have autonomy in the conduct of its external commercial relations. This means, for example, that we shall continue to sit as a separate contracting party in the World Trade Organization and as a full member of the APEC forum.

I shall spare you the details of all 160 articles in the Basic Law. But suffice to say that the ingredients for Hong Kong's continued prosperity and success have been clearly laid out and essentially reflect maintenance of the existing situation, or "business as usual."

The question that everyone asks is, "Will it all work?" Will the provisions of the Joint Declaration and the Basic Law be honored? Ultimately the only honest answer one can give to that is, "Wait and see." But there are several powerful reasons to be confident. First, it is in no one's interests, least of all China's, that Hong Kong should fail. For China, it is a matter of honor that Hong Kong thrive under Chinese sovereignty as it has under the British. It is also a matter in which China has a huge economic and commercial investment. Second, we have now had nearly 15 years of solid negotiations about our future, beginning with the Joint Declaration and subsequently agreeing in detail how its provisions should be implemented. It is hard to believe that hundreds of people on both sides should have dedicated themselves to this work if they had not been serious about honoring the agreements that resulted from it. Third, the people who will be running Hong Kong under the chief executive's leadership are the people who are running it now. The civil service which I lead, my senior secretaries, the police commissioner, the commissioner against corruption, all of us will remain at our posts when the flags change. We have been part of the negotiations, we know what has been agreed and why; we know how to make it work and we know that it can work. If I did not believe that I would not be here now. Fourth, our economy is strong, and there are formal constitutional guarantees that Hong Kong will remain committed to a capitalist system, free trade, and competitive markets. Hong Kong has enjoyed 35 years of unbroken increases in real GDP. Our GDP is expected to rise by 5.5 percent in real terms in 1997-98, with a forecast budget surplus of US$4 billion. The Special Administrative Region will start life with total government reserves equivalent to US$42 billion, excluding foreign exchange reserves of over US$65 billion.

This is not to say there are no problems. It will be obvious to you from what you have read over the past months and what you may have heard while you have been here that confidence in the future is mixed. Broadly speaking, confidence about the economic future is stronger than confidence about the political future.

The first point to make is that this is not surprising. This was always going to be the period of maximum uncertainty, and let us not forget that "one country, two systems" is an extraordinary concept. It is not easy for anyone who has not lived with the idea for years to believe that it will work. And even for those in Hong Kong who have been preparing since 1984, it is still a very significant change that will occur in six weeks' time.

On top of this general concern there are specific worries, for example about the future shape of our civil liberties legislation. The Chinese National People's Congress has struck down certain elements of our existing legislation effective July 1. The chief executive's office has completed a public consultation exercise on the question of how to replace that legislation. This whole episode has given rise to considerable criticism in the overseas press and dire predictions about our future. But it is important to note that here in Hong Kong virtually every newspaper, numerous professional and political groups, and many individual commentators spoke out in defense of our civil liberties. It is very clear that the Hong Kong community values its liberties and does not wish them to be curtailed. That, to me, is a cause for optimism about the future, because Hong Kong's success will depend upon the determination of this community to maintain its way of life.

As a result of the strong views expressed by the public, the chief executive's office has just announced modifications to the original proposals to amend our civil liberties laws. These go some way toward addressing public concerns and are a welcome move. The debate over civil liberties will undoubtedly continue in the days and years ahead. I am sure the chief executive's office and the future SAR government will continue to take into account public views on this sensitive issue. It is important to bear in mind that like so many places in this region the Hong Kong community has handled massive changes in recent yearseconomic and social transformation as well as democratic political development. It has done so remarkably smoothly, avoiding many of the more extreme problems that so often accompany such transformationsocial and economic dislocation, labor unrest, student unrest, political extremism, and so on. We have a society in which debate and behavior, though lively, are quite moderate. Our law and order situation compares well with anywhere in the world.

On July 1 the present Legislative Council will be replaced by the Provisional Legislature, which will exist for no longer than one year until fresh elections can be conducted. New electoral laws are currently being drawn up. The community expects that the new laws will provide for open and fair elections for a new legislature as soon as possible after the handover. We need a credible legislature that enjoys the support of the community and to whom the executive can be held accountable.

The community also values its large and lively press. There have been many reports about self-censorship by the press. That may well be happening in some areas, but those who practice it are doing themselves a serious disservice in a place with 65 daily newspapers and numerous other sources of information. Whatever self-censorship may or may not have taken place, Hong Kong gets all the news there is out there and gets it quickly. We are a place that needs and uses information as an integral part of our business scene. We know that if we become a sterile news environment we will become a sterile environment for business services, which are our bread and butter.

Those who count Hong Kong out reckon without the Hong Kong community. Hong Kong people are a lively lot wedded to a dynamic way of life. We in the civil service, our colleagues in the police, all of us who help run Hong Kong today, believe strongly in the open, clean, and efficient business and administrative environment.

But ultimatelyas I said beforethe answer to all the questions is "wait and see." Or, for those of you visiting, come back and see whether Hong Kong is as great a place as ever in 1998 and beyond.

Before closing, I should also like to briefly touch on the Hong KongUnited States relationship, which is of particular relevance to this gathering. America has a significant and long-term interest in Hong Kong's continuing success. A few facts:

  • Over 1,200 American firms operate from here, with more than 450 running regional headquarters from Hong Kong;
  • American firms have almost US$14 billion invested here;
  • Hong Kong is the home of the largest overseas American Chamber of Commerce anywhere in the world;
  • Hong Kong is a strong market for U.S. exports (US$14 billion last year);
  • 37,000 American citizens live in Hong Kong;
  • Hong Kong has the largest U.S. Consulate General in the world; and
  • over 750,000 Americans travelled to Hong Kong last year.

All of these factors lend credence to the notion that we have an exceedingly close relationship. We also like to think that we share certain key philosophies such as free trade and open markets, the basic freedoms enjoyed in civilized societies, the rule of law, and so forth.

But despite this there is, as always at this time of year, a large black cloud on the horizon associated with the annual debate on renewal of China's most-favored-nation status. As I, and many of my colleagues in the civil service and indeed friends in the private sector, have emphasized, withdrawal of China's MFN trading status would be a telling blow to Hong Kong's future economic prosperity and stability. We estimate that up to 86,000 jobs would be lost in Hong Kong and our GDP growth rate halved if this unfortunate scenario were to materialize. This assessment excludes the impact of any retaliatory action China might take. Clearly, all of this would be very damaging indeed, especially coming at such a critical time for Hong Kong. The general morale and resilience of the community would be hurt, and our capacity to respond effectively to challenges in other areas would be curtailed.

Naturally, we are concerned about any suggestions of extending China's MFN status with conditions directly or implicitly linked to what may or may not happen in Hong Kong after next month. We value the continued demonstration of U.S. interest in our transition. But basing China's MFN status upon Hong Kong's transition would jeopardize rather than reinforce our way of life. It would create uncertainty at exactly a time when we need stability more than ever, and weaken us when we need to be strong.

The people of Hong Kong, who have the most stake in China's benign behavior toward Hong Kong, unanimously support the unconditional renewal of China's MFN status. We hope any actions or decisions taken by the United States will serve to strengthen and not to undermine Hong Kong's stability. Because of the importance of this decision to Hong Kong, the governor, the financial secretary, and I have written to President Clinton, Secretary of State Albright, and U.S. congressional leaders to emphasize the importance of a full-year MFN extension to us. We will continue to drive home Hong Kong's concerns until the issue is settled.

Our transition is a long-term enterprise, and we need the United States to stay engaged. The U.S.Hong Kong partnership has developed over a long period of time and will, I believe, continue to strengthen. I look forward to groups such as the Williamsburg Conference and the Asia Society contributing to this process.

To conclude, the one country, two systems concept which will be applied to Hong Kong is unparalleled in history. There are no signposts to follow. Nevertheless, I remain confident that it can be made to work if the people of Hong Kong are so minded. We shall no doubt encounter some difficulties along the way but such is the resilience and determination (the can-do factor) of the Hong Kong people that I'm sure Hong Kong will continue to thrive into the next millennium. The motto on Williamsburg's Coat of Arms, "states flourish through virtue and toil," is a useful reminder of what we must do in the months and years ahead.

I sincerely hope that you will all return to our city and see for yourself how well we will fare under Chinese sovereignty. But please do not wait another 20 years before returning the Conference to Hong Kong!

I wish you all a productive and enjoyable stay in Hong Kong.