New Regime Takes Over in Hong Kong

Flags came down. Flags went up. Monsoon rain drenched Prince Charles as he officially parted with Britain’s richest colony. Applause bathed China’s President Jiang Zemin as he triumphantly gathered it back into the embrace of "the motherland.

New Regime Takes Over in Hong Kong

Flags came down. Flags went up. Monsoon rain drenched Prince Charles as he officially parted with Britain's richest colony. Applause bathed China's President Jiang Zemin as he triumphantly gathered it back into the embrace of "the motherland." But as Hong Kong changed from colony to Special Administrative Region last week, one symbol spoke with equal eloquence under both regimes: money. In the soaked ceremony marking the end of British rule, it appeared in both cash and plastic, with young performers bearing oversized coins in various currencies and costumed as credit cards. In the extravagant celebration of China's renewed sovereignty the following night, illuminated floats circled Victoria Harbor representing a tree laden with coins and the golden unicorn of fortune. So perhaps Tung Chee-hwa spoke from - and to - the heart when he declared, in his inaugural speech as the territory's chief executive, "Our foremost task is to enhance Hong Kong's economic vitality."

Certainly that is what international business, as well as Hong Kong's new masters in Beijing, are counting on. Hong Kong already has plenty of wealth: its $120 billion in currency reserves make it the fourth-richest place on the planet. But it is not without problems. Tung went on to list some he plans to tackle, including care for the elderly - there is no government pension plan - and improved education. He also promised "a stable, equitable, free, compassionate society, with a clear sense of direction." But the two subjects that Tung will be judged on above all others came late in his address: a resolution to alleviate Hong Kong's intensifying housing crisis and steady movement towards full democracy. How he handles them will say much about the "high degree of autonomy" Beijing has promised - and where Tung's true sympathies lie.

The two issues place the crew-cut chief executive painfully between his backers - both in the business community and in Beijing - and the expectations of Hong Kong's 6.5 million people. And Tung must begin to deliver on both almost immediately. Seven months after a Beijing-appointed panel chose him for the job, says political scientist Joseph Cheng Yu-shek of City University of Hong Kong, "Mr. Tung's honeymoon is already over."

Small and densely settled, Hong Kong is obsessed with real estate. Property development underpins roughly half the territory's wealth - as measured by its stock exchange - and virtually all of its large private fortunes. For many residents, the search for more and better living space is a daily preoccupation. But as the population has expanded ahead of predictions in recent years, the scramble to accommodate everyone has fuelled fierce speculation in private apartment units, sending prices into the stratosphere. While mansions on Victoria Peak fetch kings' ransoms (one sold recently for $130 million), even postage-stamp flats easily command $500,000. That has left a growing number of people unable to afford a home of their own.

Against that backdrop, 29-year-old Artemis Lam has done well. A customer service agent for an airline, she has lived until now with her parents and three brothers in a 400-square-foot apartment in a public housing complex in Kwai Chung, near the remote end of the subway line. Earlier this year, however, she pooled her resources with her youngest brother to enter a government-run lottery for a chance to buy a flat near the new Chek Lap Kok airport. When their number came up, Artemis and her brother secured a unit slightly larger than their parents', which they hope to occupy in September. In exchange for a limited right to resell, the pair will pay a below-market mortgage from their combined income of about $5,300 a month. "I feel lucky," Lam says. "Everyone would like to have a flat of their own. If you own your own flat, at least you have shelter."

But many are not so lucky. There are 150,000 names on the waiting list for public housing units, and the delay can be as long as seven years. Tung has promised action both to cool speculation and to increase the number of apartments built. But he faces political roadblocks. One lies in the Hong Kong civil service, which devised many of the development-hindering regulations Tung may now seek to relax. Yet that may require some heads to roll - and meddling with Hong Kong's highly respected senior civil servants will carry its own price. "That will be disaster," asserts political scientist Li Pang-kwong. "The continuity of the civil service system carries symbolic meaning. It is one of the foundations that Hong Kong people rely on for stability."

Any attempt to rein in the real estate market will also pit Tung against the handful of powerful property tycoons responsible, in many eyes, for keeping private-sector housing prices artificially high. Says Li: "There is very strong business pressure lobbying him in the opposite direction." At the same time, too sharp a drop in prices could ricochet dangerously through the rest of the economy, alarming Beijing. "Once you have a downturn in property," notes Ian Perkin, staff economist of the Hong Kong General Chamber of Commerce, "you're talking about a whole array of other negative effects. You have problems in the stock market, problems in the banks."

Effectively, Tung is damned if he does, damned if he doesn't. Failure to act could also prove perilous, as well as unpopular. Unless "tough, credible measures come out of Mr. Tung's office within one or two months," warns economist Tsang Shu-ki of Hong Kong Baptist University, "the speculative bubble will simply balloon and then there will be a crash."

If all eyes in Hong Kong will be on Tung's approach to the housing market, the world will be watching his steps towards political reform. In his speech, Tung promised "to move resolutely forward to a more democratic form of government." But his actions even before he took office seemed to lead in the opposite direction. In a round of appointments announced in late June, Tung expanded several key municipal boards by adding Beijing loyalists. Many had previously been rejected in elections for the same posts. Tung defended the move, saying that it served to better reflect a range of political views.

The same rationale will likely surface again within weeks, when Tung unveils the rules for an election to be held by mid-1998 for a new legislative council. The elected body will take over from a controversial Beijing-appointed provisional council sworn in after the handover last week. The provisional legislators replaced a set elected in 1995 under British rules that China did not accept. The new rules are expected to rely on proportional representation and more indirectly elected seats to ensure that the pro-democracy parties win far fewer spots than they have in the past under Canadian-style first-past-the-post rules. "The whole arrangement," says political scientist Cheng, "is to limit the influence of pro-democracy groups, to make sure they don't get more than 30 per cent of the seats."

The gambit may curtail Hong Kong's vocal liberal groups, but it is unlikely to silence them. In a dramatic gesture in the early hours of the handover, Martin Lee, whose Democratic Party dominated the now-dissolved 1995 council, mounted the colonnaded second-storey balcony of Hong Kong's colonial legislature to address thousands of cheering supporters. Promising to contest next year's election on whatever terms Tung offers, Lee echoed U.S. General Douglas MacArthur's famous undertaking, declaring several times: "We shall return."

In some areas, Tung seems ready to bend to Hong Kong's political pluralism. Asked in a CNN interview whether he would use new, stricter protest rules to ban future rallies in memory of the 1989 Tiananmen Square massacre, Tung replied: "All lawful, peaceful demonstrations will be permitted in Hong Kong. Demonstration is part of our culture." Still, it is a part that may test the tolerance of China's Communist rulers. President Jiang last week repeated that China would respect the principle of "one country, two systems," negotiated with Britain. "Hong Kong residents," he added, "will enjoy their rights and freedoms according to law." But in another potential challenge to democracy, the government must still enact new laws to define "treason, sedition, subversion and separatism" - all of which will become political crimes in Hong Kong. It will fall to Tung to defend those measures to Hong Kong's people - many of whom have bitter personal experience of mainland repression. "The role of Mr. Tung," says Li, "is to balance the demands of the Beijing government against Hong Kong society at large. If he manages that well, he will be successful."

It is a daunting task. Facing the press last week after 36 hours of ceremony and official meetings, the exhausted new chief executive quipped: "What is the biggest constraint I have to encounter? I have to have more sleep." Rest, however, may be the one thing that Tung cannot count on.

Maclean's July 14, 1997