1 July 2012, 12:02

Hong Kong and China: who benefits more?

Hong Kong and China: who benefits more?
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Professor Andrey Ostrovsky who is Deputy Director of the Institute for Far Eastern Studies in Moscow, talks about Hong Kong’s economic potential and the policy of Beijing towards Hong Kong.

As for Hong Kong, I can say that there are some problems in Hong Kong because the growth rates in the Chinese People’s Republic, in mainland China are higher than in Hong Kong because Hong Kong’s economic possibility just is not enough because there are some problems with the Hong Kong’s economic potential. For example, as far as I know, there are only two or maybe three branches of economy, I mean light industry and textile industry. And Hong Kong earlier was just a hub for trade, trade market for Englishmen, there are heights more or less safe from typhoons and winds.

China was eager to receive Hong Kong because now as far as you know there is a stack exchange market and Hong Kong banking system and they were a kind of a link between the CPR or mainland China and the capitalist world. Now there is another situation and after the handover of Hong Kong to China there is a special management system of Hong Kong, I mean “one country and two regimes”, 一國兩制 in Chinese. And now for fifteen years we have this situation when China and Hong Kong are developing side by side with the features of this coexistence.

Professor, who benefits more – Hong Kong from being a part of China or China having Hong Kong as a part of it?

Maybe both of them but China has much more advantages than Hong Kong.

You know, a couple of years ago I was at the borderline between Hong Kong and the province of Guangzhou, and I saw that near the checkpoint there were so many people bringing food stuff and utensils from China to Hong Kong. It was sort of shock for me.

In China prices are much lower than in Hong Kong as far as you know. If you visit the checkpoints in Russia you will see the same situation.

Does it mean that the common people in Hong Kong still have problems?

But their salaries are higher than in China.

And the prices are higher.

Prices are higher and salaries are higher, and wages are higher.

And still it is impossible for a common Chinese to go freely to Hong Kong. They need special documents, special visas.

Yes, a special permit. Every citizen of China must have a special permit for entering Hong Kong.

Why is it so?

We have already said that now there is a situation of “one country, two systems”.

Professor, tell me what is the policy of Beijing towards Hong Kong because, strangely enough, certain surveys indicate that the popularity of the Chinese Communist Party has been falling over these fifteen years. Just let me quote, in a poll this month by Hong Kong University researchers “37% of Hong Kongers say they distrust Beijing”. And this is definitely the highest level since the 1st of July 1997. So, what is the policy of the Party?

Yes, on Wednesday the Central Government announced a huge package of policies to boost economic and cultural relations between Hong Kong and the mainland. And it is really important, for example the Central Government will encourage foreign investors to use China’s currency – the yuan.

Yes, for the last two or three years China encourages foreign investments to use yuan in order to invest money into Chinese economy.

It also covers cooperation and trade, finance, education, science and technology, and tourism, and especially cooperation between Hong Kong and the neighbouring Guangdong province. So, do you think Hong Kong needs China’s help now, maybe because of the financial crisis?

It is naturally it needs Chinese help because if you saw the Hong Kong city, I mean buildings and now they are a little shabby because after Hong Kong handover to China there were not so much investments into Hong Kong’s economy because Hong Kong should use their own budget but it is not so much. And it is very difficult to compare the budget of Hong Kong with the budget of the Chinese People’s Republic, with the central budget or maybe even with the budget of the Guangdong province.

But I think Hong Kong is also very important for China as a window.

Naturally! Just from the beginning of our discussion I’ve told you about the Hong Kong’s role, for example the financial role, cultural role and maybe transport role because Hong Kong is a local point for China for keeping connections with the outer world, with the international market.

Well, but then it means that Beijing should exert more skills in trying to contain Hong Kong uneasiness because definitely Hong Kong is, it is only fifteen years since the handover was performed. And in these fifteen years the popularity ratings of the Chinese Government are going down, the wealth gap is growing and prices are up. So, definitely it is an impact of the economic crisis but on the other hand there are certain challenges that still need to be tackled. And I still keep wondering whether money alone could do the trick.

Yes, naturally there are some challenges for Hong Kong and even for China in its relations with Hong Kong. But nevertheless what could Hong Kong do with this situation.

Professor, tell me what is the general Beijing policy towards the neighbouring territories?

As far as you know for a long time Hong Kong was a kind of laboratory for Taiwan. Now, when China has negotiations with Taiwan they used to say that Hong Kong is developing. And do you agree with our position – one country, two systems – and Hong Kong is just an example of this situation, and now the situation is as follows that if Hong Kong people do not believe in Beijing authority, that’s why maybe there are some problems with Taiwan, with joining Taiwan.

That’s the point I’m trying to make.

Some people say that China makes Hong Kong a sort of showcase for the entire world but first and foremost for Taiwan as a symbol of its “one state, two policies system” or simply saying a carrot, that this big tasty carrot can be used for Taiwan. But it isn’t absolutely so because they apply their special policies towards Taiwan and almost at the same time President Hu Jintao brings this package of incentives to Hong Kong. Another package was announced in Beijing especially for Taiwan – easing visa restrictions in both directions, encouraging tourism and particularly encouraging more capital investment from the island to mainland.

Which is more important Beijing opened a credit line of $95 billion for Taiwan to go to China. And right now there is one million of people from Taiwan working in China already. Taiwanese are almost split half to half on the possibility of a peaceful reunification with China. I think that what is going on in Hong Kong and what will be going in Taiwan will result in a peaceful reunification of China and creation of the so called Greater China, there is a special term “Greater China”. And Greater China will mean almost the same as Great China. But I think the prospects of peaceful reunification with Taiwan are not very bright because of this containment of China policy, because right now there is no security agreement between China and America. But still Americans look at Taiwan as sort of unthinkable aircraft carrier. And I’m sure that if the problem of returning Hong Kong under the Chinese jurisdiction was existing today, Americans wouldn’t encourage Great Britain to do it, they would object giving Hong Kong…

They would advise them not to do that because it is an important strategic location.

It is a good port American aircraft carriers used to enter and it is their sort of intelligence hub.

That is a unique deepwater port, if I’m not mistaken.

Yes, exactly! Good for pirates in 18th century and good for aircraft carriers in the 21st century.

The warships have changed a little bit over that time.

Yes, but Hong Kong is still there.

And their deepwater harbors, don’t they?

Yes.

That’s very interesting!

Yes. But now fifteen years have passed and we can make some conclusions on this issue.

What kind of conclusions are you arriving at?

The results of this handover to China. Is the situation in Hong Kong now is better than earlier, what kind of advantages does Hong Kong received – that’s the problem. And now on the one hand Hong Kong has received some advantages in comparison with the period before. But the other hand there are some problems for Hong Kong, I mean in the political sphere because earlier there were a lot of parties and now, in spite of the fact that there are some parties, everybody knows that the Chinese Communist Party is a leading and ruling party there, in spite of “one country, two systems”.

Professor, but if Hong Kong would have stayed British, do you think their economic situation would be better than nowadays?

It would be better because the economic situation in Hong Kong, its economic position is very important for China because Hong Kong is a kind of a link with the whole world. For example I can name a few figures on China’s investment. More than 70% of China’s inward investment from abroad is from Hong Kong, and China’s investment into the international market is more than 67% and that is their investment into Hong Kong’s economy. And that is a statistical data for today.

More than 60% of foreign investment…

2\3 of investments from abroad and to abroad. And that is the connection of China and Hong Kong.

It is very important then!

Yes, it is very important. And that’s why China will do its best to solve Hong Kong’s problem and that’s why Hu Jintao is due to arrive in Hong Kong. And now the CPR will implement some measures in order to speed up the economy of Hong Kong because it is very important for China.

Right! Professor, thank you so much. And just to remind you our guest speaker was Professor Andrey Ostrovsky – Deputy Director of the Institute for Far Eastern Studies in Moscow, Russia.

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