Saturday, June 23, 2007

Hong Kong Doing Well 10 Years Later

One week from now, it will be the tenth anniversary of Hong Kong's transition from British to Chinese rule. There were many then who feared China would wreck the place. As this article puts it:

"There were fears Chinese troops would be goose-stepping down the streets, muzzling any whisper of political dissent. Masses of peasants would stampede across the border, filling the city with beggars and thieves. And the most talented Hong Kongers would become "yacht people," fleeing to Australia, Canada, America and other places welcoming their business savvy, workaholic ways and cash.

Fortune magazine's headline, two years before the British flag came down, proclaimed "The Death of Hong Kong.""

But this didn't happen:
"Ten years later, the soldiers are here, but are rarely seen in uniform on the streets. Mainland Chinese are pouring in, but as big-spending tourists buying Rolex watches and shark-fin soup. Many rich Hong Kongers are back, resettled in a booming city, happy that their fears have proved groundless."

Although the article points out that many news papers seem to practice self-censorship, there is none of the direct repression that you see in the mainland.

Hong Kong has in the latest decade seen two economic downturns-the first triggered just after the handover by the general Asian financial crisis in 1997-98. The second being triggered by the outbreak of SARS in 2002-03 in places with large ethnic Chinese populations-and that includes Hong Kong of course. Yet Hong Kong recovered quickly and strongly from these brief recessions, with double digit growth following the recessions.

For the period as a whole growth have been fairly strong, significantly stronger than in the West, although far weaker than in the mainland. The economy has continued its transformation with less and less manufacturing and into trade, shipping and financial services. It has taken over Tokyo's position as Asia's financial centre and last year it surpassed New York in initial public offerings, being second only to London in that aspect.

So, things are going fairly well in Hong Kong, as Hong Kong have kept its low tax low spending laissez faire oriented policies. And they will likely continue to do so if China's leaders continue to respect the "one country-two system" principle they agreed to in their deal with Britain in 1984.


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