Hong Kong Glen W. Sparrow School
of Public Administration
and Urban San Diego,
Hong Kong is not a city of antiquity - it traces its roots back little more than 150 years; it is not a city of noteworthy traditions - its people are a people of tradition living in a city of the present; it is not a city that has been planned or executed with regard to any grand design - it is a city that grew pragmatically; it is not a city of great rulers who have had a significant impact on the world; it is neither the centre of an empire nor the seat of a significant government. It is a city of commerce, and it is commerce and trade that have necessitated its creation, dominated its growth, and with industry, shaped and defined it. To understand Hong Kong one must start with its economy. This article views the economy through two prisms: Hong Kong’s impending transition to PR China and the dominance of land-use planning in the control of the city-state.
helps to explain how Hong Kong produced an average compound rate of growth of almost eight percent per year in the period from 1966 to 198S.3 The strength and dynamism of this city-state is apparent throughout the territory (Figure 1): from the skyscrapers of the financial district in Central (Figure 2); on the waters of the harbour, where one of the busiest ports in the world operates 24 hours a day; along the sweeping curve of the mainland of Kowloon. following the Mass Tansit rail line (one of the most modern in the world) from the industrial estates of Kwong Tong at the east end of the harbour, past the Kowloon-Canton Railway yards at Hung Horn, along the ‘Golden Mile’ of luxury shopping arcades in Tsim Sha Tsui, past the shipbuilding and repair yards on Tsing Yi Island and the container port at Tsuen Wan, and along to the new town at Tuen Mun on the western
Hong Kong is much more than the city familiar to tourists; it has one of Asia’s most modern, dynamic, export-oriented manufacturing economies. It includes one of the largest banking, insurance and financial investment centres in Asia, and its strategically located harbour is home to one of the world’s major entrepbt trades;’ it contains the fourth largest shipping industry in the world, and is the third most affluent society in Asia (after Japan and Singapore), with a per capita income of US$6311 in 1985. All this
estates of Mong Kok (determined to be the most densely populated spot on earth) and the textile plants of Lai Che Kok; along the Canton-Kowloon rail line (which eventually leads to PR China), through the mountains into the New Territories with their contrasts of greenery, mountains and open space alongside the density and activity of the new towns of Shatin, Tai PO, and Fanling and their rapidly expanding factories, industrial estates, recreational facilities, and housing
‘Aladin Ismail, ed, Hong Kong 1987, Government Information Service, Hong Kong, 1986, pp 67-68. ‘Asia i987 Yearbook, Far Eastern Economic Review, Hong Kong, 1987, p 6. %erek Jones, ‘Hong Kong as a partner in world trade’, in Aladin Ismail, op tit, Ref 1, 1986, Chapter 1.
Figure 2. The skyline of the financial district, with Kowloon in the background
perfect trading commodity; one in which they enjoyed a monopoly, which could easily be smuggled into China. and for which there was a ready and constantly expanding market - opium. Buying opium from the East India Company these merchants set up a triangle of trade between the UK, India and China which proved to be immensely profitable. Steadily, British traders increased the amount of ‘foreign mud‘ being illicitly smuggled and traded in China. But, by the early 19th century, the Imperial Court could no longer close its eyes to this violation and ;I ban on opium, formerly ignored, was suddenly enforced. The British traders were expelled from their only trading port in Canton and had large quantities of opium expropriated. The silver loss in the opium trade was substantial and in addition the primary suppliers of tea to the UK lost access to their source of supply. The British Navy responded to the Emperor’s action, and the resulting ‘Opium Wars’ produced a substantial victory for western naval power. In the
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Treaty of Nanking (1842) six Chinese ports were opened to trade. trading rules wcrc liberalized, compensation was rccovercd for the opium confiscated. British domination of China was implied and, almost as an afterthought, Hong Kong Island was ceded to the British in perpctuity. The British Navy, anticipating the treaty, had claimed the Island in January 1x41. The Second Opium War. again the result of British military support for trading ventures, concluded with the Convention of Peking in 1X60. With this treaty the southern portion of the Kowloon Peninsula opposite Hong Kong Island was acquired. This was necessary, according to the British military, to provide an adequate &fence for the Island which was rapidly becoming the major British colony and trading port in Asia. By IX08 Britain saw the need for more land, and in the Convention of 189X it extracted from ;I now weakened and corrupt Dynasty the remainder of what is today considered Hong Kong. This comprised the remaining 350 square miles
called the New Territories and 234 islands. On this occasion however, probably due to pressure from other European powers now watching over their interests and the ‘balance of power’ in China, the British had to sign a 99-year lease for the area. Needless to say, the acquisition and colonization of Hong Kong has not been a particularly bright spot in Chinese history or for Sino-British relations. And, regardless of wcstcrn political and legal interpretation, the Chinese view of
‘the Declaration ceded all of Hong Kong. . . to Chinese control’
“A Draft Agreement between the Government of the United Kingdom of Great Britain and Northern lreland and the Government of the People 3 Republic of China on the Future of Hong Kong, The Government Printer, Hong Kong, 26 September 1984, p 1. Wp tit, Ref 1, p 55.
the status’of Hong Kong has always been the same. Through the remaining years of the Chi’ng Dynasty, continuing into the Republic and the era of Nationalist rein. the revolution in 1949 and the ComrnLlnist regime. and regardless of the ideology of their leaders. the position of the government in power has been consistent: Hong Kong is Chinese territory and its current, ‘temporary’ status is due to ‘unequal treaties left over from history’.’ The Communist government. following its assumption of power in 1949, allowed the continuation of British control and administration of the territory. This led sonic IHong Kong residents (and British diplomats) to believe that the arrangement might bc pcrmancnt. Howcvcr, informal talks in 1979 led to the Sino-British .loint Declaration, signed in Beijing (Peking) on 26 September 19x4. The Declaration ceded all of Hong Kong, not merely the portion leased in I X9X, to Chinese control.
Tllc ccw~onz~~.The symbiotic relationship bctwccn government and business which is critical to the success of Hong Kong began in IX41 when the first commander declared Hong Kong a free port. and continues to the current ‘basically free enterprise. market disciplined’ gov130
ernmental policy which simply states: ‘The primary role of the government is to provide the necessary infrastructure and a stable legal and administrative framework conducive to economic growth and prospcrity’.5 Additionally, the social and political stability provided by the colonial government has made Hong Kong one of the most desirable capital investment markets in Asia. Hong Kong has few natural resources and limited usable land within its 400 square miles, yet it is the 13th largest trading entity in the world. In addition to a benign public sector (largely controlled by a combination of the business plutocracy and British trained bureaucrats) which supports and promotes the private sector, Hong Kong’s success is also due to: the best protected harbour on the Chinese coast: its strategic location, which has made it the primary entrepcit port serving PR China; its role as the point of transit for many Chincsc refugees (among them a resourceful. diligent. hardworking band of survivors who, over the years, have fled PR China bringing to Hong Kong their skills. cntreprcncurial zeal, intelligence and industry); and ii fortuitous world economy
‘the Hong Kong of 1988 is successful’ which, early on, absorbed Hong Kong’s cheap exports. thereby allowing the industrial sector to ‘take off‘ in the 1960s and which has sustained it since. The Hong Kong of IWS is successful in industrialization, investment and its CO~F tinual search for markets and retains its place as a major participant in the world’s economy. The economy of Hong Kong is composed of four major sectors. Due to its limited natural resources, its economic success depends primarily upon the import of raw materials or unassembled parts, the transformation of these, and the export of finished products. In one way or another, the primary sectors of
the economy operate in relation to this trade-dependent existence. The manufacturing sector is the major contributor to the total economic output of Hong Kong. Since the second world war, a combination of manpower, capital and entrepreneurial dynamics have recreated in Hong Kong the textile industry which, prior to the revolution, had been located in Shanghai. The manufacture of textiles and clothing still anchor this
‘Hong Kong is the world’s leading producer of watches and clocks’ sector but the plastics industry, supplying toys and flowers to the world, is rapidly overtaking it. Movement into electronics has also occupied Hong Kong’s entrepreneurs. In addition to computers, appliances and other apparatus, Hong Kong is the world’s leading producer of watches and clocks. A second contributor to Hong Kong’s economy is the financial sector. The importation of capital funds, the reinvestment (through modern technologically sophisticated stock, commodity and futures exchanges), the presence of a centre for international banking and other financial transactions (supported by one of the most modern communications systems in the world), make Hong Kong an important regional financial centre. While not on the level of New York, London or Tokyo, Hong Kong attracts foreign capital and channels funds into its own capital-hungry economy as well as into Third World countries. The economy was initially and is still additionally dependent upon its entrepot role, especially its export and re-export trade with PR China. The port of Hong Kong, one of the busiest in the world, overtook New York in 1986 as the second most active container port in the world and is expected to surpass Rotterdam to become the biggest in 1988. The location of Hong Kong, its excellent harbour facilities (including shipyards, container
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facilities, wharfs, longshoremen and equipment) and its manufacturing sector, requiring imports and producing exports, all combine to make the transport sector a key to the city-state’s economic survival. The fourth sector important to the economy of Hong Kong is tourism. In 1986, 3.7 million tourists entered Hong Kong, leaving behind over two billion US dollars, an increase of 20% over 1985 levels. The 88% occupancy rate in the city’s hotels has encouraged a building boom which will further fuel the economy and lead to thousands of new rooms in the next 10 years. The location of Hong Kong as the major port of entry into PR China will provide a continuing flow of tourists, as the Chinese rush to increase their foreign exchange through tourism.h The economy of Hong Kong is an impressive success story, but it is not an automatic or guaranteed condition. To understand Hong Kong’s economy is to understand the fragile nature of the system. to realize that any number of changes, many beyond its immediate control, could upset the delicate economic balance. In addition to such factors as world recession, Third World debt and energy price/quantity manipulation which affect all economies, Hong Kong has its own set of concerns: 1. its ability to continue to compete against the Asian Tigers (Singapore, Taiwan, South Korea, Japan) in a contest for world markets; 2. the threat of First World protectionism - a threat that Hong Kong has considered most critical to its economy in 1986 and 1987; 3. the love-hate relationship of the government’s non-interventionist policy which helps industry in its ‘free market’ aspects on the one hand, but will not create an industrial policy to encourage and assist high technology industries on the other - Hong Kong’s entrepreneurs must compete alone against the Asian Tigers who have aggressive public sector support for research and development; 4. the continuing ability of Hong Kong
eopcit, Ref I,
to be flexible and responsive in order to remain on the leading edge of world demand for consumer products and to be able to develop or adapt methods of manufacturing to enable it to compete ins market demands change; 5. to continue to irttract capitd into the city-state ;IS world-wide dem:~nd for venture ;ind investment capit:ll grows: h. ;~nd finally, the variable unique to Hong Kong and most open to speculation :rnd therefore anxiety for I long is the issue of the Kong residents. performance of the economy. first for the next IO yenrs 21nd then over the long haul during the period following the return to PR Chin:1 in lc)c)7.
70p tit, Ref 4. ‘Op cit. Ref 4,
Trru7sirior7. On midnight .30 J~lnc 1007 Hong Kong ceases to be ;I British colony 21nd becomes 21 Special Administrative Region (SAR) within the sovereignty of PR China. To transform the government of Hong Kong from one which for ;I century 21nd ;I half has been ruled by :I plutocracy representing the v:lrious economic sectors and :I benign British bureaucracy, to one acceptnblc to PR Chin:). without upsetting the stability :md prosperity that typifies Hong Kong, is the task confronting the combined wisdom of London. Beijing :rnd Hong Kong. The starting point is the Sine-British Joint Declaration, the document which outlines the agreement reached regarding the transition and future condition of Hong Kong. This treaty is the result of substantial negotiation between the UK and PR China.’ Exhibiting all of the sc;lrs of ;i difficult compromise. the Joint Declaration tends to be vague, imprecise ;md unenforceable. While it does provide for :I certain frumework of govermmce and some vaguely worded gu:lrantecs. its imprecision leaves the structuring of the future government more to chance than most western lawyers would be comforttrble with. ‘One country. two systems’ is the term the Chinese leader Dcng Xiaoping has coined to describe PR China’s rela-
tionship with Hong Kong :lftcr lY47. According to the Joint Declaration, ;IS an SAR the territory will be given spcci:tl status under Article 31 of the Chineye Constitution :rnd is insured of the maintenance of this stiltus for SO years. For ex:unplc, the Hong Kong SAR is insured that its ‘previous capitalist system and life-style shall remain unchanged’. that although being ‘directly under the ;IL~thority of the Central People’s Govcrnment of the People‘s Republic of China’ it ‘shall enjoy a high degree of ;lutonomy’ :~nd that ‘except for foreign 21nd defence affairs’ it ‘shall be vested with executive. legislative :~nd independent judicial power’.” As the first Chinese SAR it is unclc:tr :IS to the exact status of Hong Kong. or what the :tbove phriises mean. or if there is any enforcement power in the event of
‘Hong Kong will become some sort of semiautonomous enity under Chinese rule’ non-compliance. There :rre no preccdents, the rules for the governance of the territory. vaguely spelled out in the Joint are being interpreted by ;I Declaration, Chinese dominated commission drafting the governing document termed the Basic Law. This will not be ;i constitution or even ;I ‘basic law’, but something that would be akin to ;I set of ‘bylaws’ for the SAR. There is no question of sovereignty or independent self-government: Hong Kong will become some sort of semiautonomous entity under Chinese rule. A degree of governmental Linci economic ‘self control’ is anticipated, but its form and amount ;u-e unknown. A dr:lft of the SAR Basic Law is scheduled for complction and release in 101%. Since the future of Hong Kong depends upon the direction and tenor of the Chinese Communist government. the following are among the unresolved issues
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which contribute to the apprehension the people of Hong Kong:
the ability of the Marxist/Leninist/ Maoist Communist ideology to accept the presence of a capitalistic society within its midst; the problematic nature of PR China’s ‘modernization’ campaign; the uncertainty (somewhat alleviated at the recent 13th Communist Party Congress) of the direction of economic and social policy in either the short or the long term; the individuals who will provide the leadership in Beijing. Given the dominance of the economy, the concern voiced most often by the business leadership, the government, and the press is the need to maintain the cornerstones of the city-state’s economic success: the ‘stability and prosperity’ of
‘there is much solicitude among Hong Kong residents’ Hong Kong. It is continually noted that such indicators as a smooth transition (a convergence of the present system of governance with that created under the Basic Law), a lack of rancour in the process, and a consensus of interests will prove to the world’s investors that Hong Kong presents a stable climate for business as usual and therefore, maintenance of prosperity. This is also the apparent desire of the leadership in London and Beijing where, it is hoped, there will be little overt dissent which could upset the delicate balance as capitalist rule changes to communist. Yet, regardless of the desire and the attempts for a smooth slide into the change, there is much solicitude among Hong Kong residents. Land-use planning. As a British colony clinging to the southern coast of PR China, Hong Kong provides a unique combination of western style governance and administration imposed upon an eastern culture. The British bureaucracy
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has produced a stable society as an imperialist caretaker which the Hong Kong Chinese appear to stoically accept. Regardless of the compromising nature of the relationship, both the British and the Chinese seem satisfied by the resultant product of economic prosperity. Thousands of years of governance by emperors of the various dynasties, the more recent attempts by the republicans of Sun Yet Sen and the Chinese Communist Party, leave the impression that the Chinese have come to accept govcrnment as a necessary evil, not as a popular or democratic institution. Chinese history has shown government, from the mandarins to the cadres, to be the province of a special class. Given this background, the acceptance of a benevolent British bureaucracy in Hong Kong has presented no particular problem. The consensus that has evolved over the years between the business community (now largely dominated by Hong Kong Chinese and the increasingly emerging influence of investment from PR China) and the British administrators has created a city-state who’s shape and style reflect its eclectic origins and its economic base. The physical shape and style of Hong Kong can be termed ‘guided pragmatism’. It is based upon topography, population, profit-taking and contemporary need, most of which are controlled or at least monitored through the government’s control of land. The British, upon assuming control of the island in 1X41, declared land
‘all land utilized for private use is leased’ Crown property; to this day, all land utilized for private use is leased. The holding of the land provides the government with the ability to control its use, thus easing the problems that arise from regulating land use in most democratic, capitalist countries. Land-use planning in Hong Kong is guided by market forces (leaseholds are
offered at public auctions), the limited amount of usable land, and the need for housing. By controlling the supply of land and the timing of its release onto the market the government can coordinate the development of the infrastructure, thcreforc rationalizing the planning/ implementation process. With less than 30% of the land in the colony available for habitation, in addition to determining the use of available land, the govcrnment. through reclaimation. can artificially determine the direction of growth. While Hong Kong is reputed by some observers to be the free enterprise capital of the world, the government regulates
‘public housing estates are found throughout the territory’
90pcit,Ref1,p151. ‘“Opc&Ref1,p151. ’ ’ Op tit, Ref 1, p 168.
significant portions of the economy, and in the area of housing, provides an example of a social service state. In 19X6 the government devoted about one-third of its total annual capital expenditure to public housing efforts. Approximately 47% of the population (2.6 million people) live in rental or home ownership public housing. Building at a rate of over 35 000 flats per year the government is barely able to meet the back log of demand.“ The government began its strong move into the housing arca following a fire in the squatter settlement at Shek Kip Mei in 195.1. The major impact of housing policy during the first 20 years was in the Kowloon area (Figure 3). Currently public housing estates are found throughout the territory, many alongside the private sector estates, espccially in the new towns where a mix of been planned an d housing has provided. “I The government has viewed the New Territories (with its available land) as the area in which to relocate its population. It is here that one finds the new towns. rising out of the former rice fields and built on land made usable through the flattening of the mountains and the infill-
Figure 3. Mong Kok district, Kowloon. Early style public housing estates.
ing of the ha&our. Starting in the immediate post-second world war era the government began planning for a new town scheme. Eventually a series of eight new towns will be completed, and these are expected to house 3.5 million people. In 19% the first generation new towns of Tsuen Wan, Shatin and Tuen Mun contained 1.4 million residents compared with a population of less than half a million in 1970” (Figure 4). The new town programme of the Hong Kong government is an example of a programme of physical and social planning which appears to be working. The new towns in operation and those being built contain a mix of residential, industrial, commercial, recreational and educational facilities. They have adequate (for the present at least) transportation facilities and have no problem attracting residents to the mix of subsidized home ownership scheme and public supported housing which exist along with the private housing (Figure 5). One key to the success of the new towns is the back log of demand for housing (especially for the
Figure 4. Shatin new town, showing in the foreground.
land in the background
larger flats available in the new towns) and the desire to leave the density of the Kowloon peninsula; another is the availability of, and substantial acceptance of, mass transit. Vital to the success of the new towns programme is the ability of the government to dominate the planning and implementation process, being able to force the location of industrial estates through its land control policies and, because of the dependence of close to 50% of all inhabitants on publicly subsidized hous-
‘Hong Kong is a city that works’ ing, attract families to the housing estates of the new towns. The domination of land use, demand for housing, and economic prosperity all act to make the new towns succeed. All of these factors are ultimately controlled by the government. Cotdusiotl. In many ways, and by most measures of a city’s success, Hong Kong
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is a city that works: a transportation system that integrates virtually all means of travel from a modern mass transit underground to trams and ferry boats; a public housing programme that provides shelter for almost 50% of the population; a programme of economic development that is envied by the western world; stability and order which mean that almost six million people can live in one of the most densely populated cities on earth in relative security; a service delivery structure that would rival most First World cities in quality and cost; and the glorious setting of one of the world’s most exotic cities. This is accomplished in a nondemocratic setting by a governance process which is best described as benign, plutocratic/bureaucratic dominated colonial. The city operates comfortably, on the surface at least, integrating east and west, continuing to expand economically, and moving strongly towards the creation of a stable middle class. A successful institutionalization of government serving business seems to be working and the
Figure 5. Shatin new town. Public, homeownership lack of representativcness appears to not be overly troubling to the majority. The cloud
on the horizon is of course the lYY7 to PR China. It is impossible to
and private housing estates. predict with any upon Hong Kong.
accuracy the impact but it certainly pro-