Chairman Brownback and Members of the Subcommittee:

 

Thank you for the opportunity to appear before you today to discuss U.S. policy towards Hong Kong in the broad context of America's interests in China and East Asia. Mr. Chairman, your outstanding efforts to put the expansion of freedom and democracy at the top of America's agenda and to help repressed peoples of countries like Iran, North Korea, and Burma, are a tremendous contribution to American foreign policy. I hope that today's hearing on Hong Kong will serve to remind Beijing's leaders that their commitments to preserve Hong Kong's freedoms were not just to the people of Hong Kong but enshrined in an international agreement that is deposited with the United Nations, and that the world's democracies have a stake in the survival and success of Hong Kong.

 

Thirty Years of Hong Kong Watching

 

My first professional glimpses of Hong Kong came thirty years ago as a vice consul based in Taipei working on U.S. visa and immigration matters, and after serving nearly a decade in Taiwan and China, I returned to Hong Kong as deputy chief of the Consular Section at the US Consulate General. After the Tiananmen Incident in June 1989, I was the Deputy Consul General in Guangzhou, with responsibility for all State Department political and economic reporting from south China, including the Special Economic Zones (SEZs) of Shenzhen and Zhuhai which are adjacent to Hong Kong and Macao in China's prosperous Pearl River Delta. From Guangzhou, I was transferred to the State Department in Washington where I was chief of China Analysis in the Bureau if Intelligence and Research. I retired from the foreign service in 1994 and later worked for a year as a vice president of RJR Nabisco China based in Hong Kong, and then did private consulting work on China Business opportunities. I have been with The Heritage Foundation since June 2001 as a resident fellow in China research.

 

I tell you this because I have watched Hong Kong evolve from the West's peephole on Maoist China in the 1960s and 1970s, to China's most important financial, trade and shipping center in the 1980s and 1990s. Since the Retrocession of Hong Kong to China in 1997, I have seen Shanghai move in to rival Hong Kong as China's commercial nerve center, and I expect Hong Kong's importance in East Asia to diminish as two dynamics take place.

 

First, the Central People's Government in Beijing will continue to make Shanghai ever more attractive to international businesses -- not to mention Chinese commercial enterprises -- with ever expanding telecommunications, transport, shipping, aviation, electric power and water infrastructures.

 

Second, Hong Kong will gradually merge with China's adjacent Special Economic Zones and become seamlessly integrated with the Pearl River Delta economy and with South China's political and defense structures.

 

Hong Kong, a dimming beacon of Freedom to China

 

If these two processes continue unchecked, it will likely mean that by the year 2047, Hong Kong will have merged totally with China, politically and strategically as well as economically and socially. The ultimate effect, all things being equal, will be the disappearance of Hong Kong as an entity distinct from the rest if the People's Republic. Of course, this was not what was contemplated by the United Kingdom, nor the people of Hong Kong or the international community at the time the UK-PRC Joint Declaration of 1984 was signed. At the time, China's leader Deng Xiaoping reassured the world that after 1997, "Hong Kong People would rule Hong Kong," and that for "fifty years, there would be no change."

 

Since 1997, however, China's policies toward Hong Kong have undermined both those pledges. The other witnesses today will certainly give more eloquent testimony than I can to that effect. My modest contribution to this hearing will be to consider some of the ways that this affects America's broader strategic interests in East Asia.

 

First and foremost, America's primary strategic interest in Asia must be the democratization of China. As Secretary of State Colin Powell said Tuesday March 2 in his B.C. Lee lecture at The Heritage Foundation, "We believe, too, that if the democracies of Asia can be consolidated and strengthened, and if new Asian democracies join them, then when China comes inevitably to accept systematic political reform, its leaders will see democracy in the same light that they have seen market economics."

 

15 years ago, China watchers in the United States, both in and out of government, saw Hong Kong as a beacon of freedom for China and an inspiration to political reform. Indeed, their hopes were justified by the vibrant political debates in China, especially in South China where I was reporting, in the year or so before the Tiananmen crackdown. Not only had Hong Kong's mature legal system been an anchor for contracts and business agreements that facilitated outside investment in the Pearl River area, but Hong Kong's legal guarantees for broader civil and human rights began to change the way Chinese thought about governance. Hong Kong's influence was subtle.

 

When I first arrived in Guangdong, Hong Kong's Cantonese language television and radio programs were wildly popular, and South China's 63 million Cantonese speakers vastly preferred Hong Kong programming to domestic Chinese broadcasts. I recall watching a rerun of an American detective series called "Hunter" in which a malefactor was collared by the police and read his "Miranda" rights, the right to remain silent, to have an attorney, and the caution that anything said could be used against him. The program was faithfully dubbed into Cantonese with Mandarin subtitles. And by the time I left Guangzhou three years later, this sort of exposure to Western legal procedures was standard fare for South China television viewers.

 

But it was about that time that the Central Government in Beijing began to take measures that ensured Hong Kong's "well water" would not interfere with China's "river water" after 1997. China resolutely prohibited British attempts to push Hong Kong's political institutions toward full, universal suffrage, and in the end even disbanded the last Hong Kong Legislative Council that was supposed to provide the "through-train" across the July 1, 1997 transition to Chinese sovereignty. After 1997, self-censorship in Hong Kong's news media became commonplace (although Hong Kong still boasts several popular printed journals that continue a lively political debate, even on the ultra-taboo topic of Taiwan). Television and radio programming is tame and even halfway daring programming is punished -- by the media owners themselves.

 

In 2002, at Hong Kong's flagship English newspaper, the South China Morning Post, for example, the independent-minded editor, Jonathan Fenby, was replaced, followed by the features editor, Charles Anderson, and then Willy Lam, the China editor and prominent China-watcher, who was replaced by an editor trained at the mainland's China Daily. Other dismissals followed. The paper's Beijing correspondent, Jasper Becker was fired for "insubordination" when he described Chinese President Jiang Zemin's unimpressive performance at a joint press conference with President Bush.

 

Last year, the Hong Kong Broadcasting Authority fined a popular talk-show host for expressing the opinion that the city's deputy director of housing was a "dog." Multi-national satellite TV corporations carefully water-down their Chinese language programming out of Hong Kong to permit their transmission into China. And proposed anti-sedition legislation under "Article 23" of Hong Kong's Basic Law would have permitted the Hong Kong government to silence a journalist who questioned the government's mishandling of the SARS epidemic.

 

The latest controversies over the "Article 23" legislation and demands for constitutional reforms in Hong Kong are now under full-scale assault from Beijing and Beijing's appointees in Hong Kong's government. In short, Hong Kong has not proved to be the beacon of democratic values into China that we once thought it might be. If Beijing's tactics are successful in cowing legitimate dissent in Hong Kong, and if the international community sits on its hands in acquiescence, China will instead become the beacon of authoritarian control to Hong Kong.

 

"One Country, One System"

 

Similarly, those who argued that Hong Kong's successful transfer to Chinese sovereignty under the so-called "one Country, two systems" model would reassure democratic Taiwan that it too would be free to thrive and run its own affairs in a similar "one country, two systems" structure, must surely be embarrassed.

 

When I was in Guangzhou in 1992, Beijing's overt strategy for the Shenzhen SEZ was "internationalization." The Shenzhen SEZ could claim special privileges because ingress and egress from the rest of China involved transiting a "soft line" border-crossing between the SEZ and Guangdong Province. Beijing's ultimate goal was to strengthen that "soft line" while lowering the "hard line" between Hong Kong and the SEZ.

 

By 2002, the Hong Kong government began to ease barriers to economic flows with mainland China, particularly those affecting the flow of "people, cargo, capital, information and services" from China back into Hong Kong. As such, Hong Kong's labor force, which lost 650,000 manufacturing jobs to mainland China over the past decade, began to feel the pain of integration with China's lower-cost manufacturing and services base. Integration will also equalize property values (further depressing Hong Kong's real estate market), enable Chinese from Shenzhen to compete directly in the Hong Kong labor market, and begin the process of gradually integrating Hong Kong and Shenzhen into one seamless zone.

 

Many Hong Kong businesses still urge the government to streamline traffic across the border and better coordinate infrastructure development with Shenzhen. Last year, China began to implement a "Closer Economic Partnership Agreement" (CEPA) which basically sealed Hong Kong's demise as a manufacturing base. But with it immigration rules barring Chinese workers from migrating to Hong Kong were relaxed, so that Chinese were treated equally with all other foreigners. Restrictions on Chinese tourists coming to Hong Kong were eased and the amount of money they could spend in Hong Kong was more than doubled. The result has been a dramatic influx of cash that has returned the color to Hong Kong's anemic economy, but at the same time has encouraged an inflow of PRC citizens.

 

The degree of integration between Hong Kong and the rest of China raises serious concerns that blurring the line makes it increasingly difficult to justify keeping the two jurisdictions separate for export purposes, particularly the export of advanced technology products that have dual civilian-military uses. Such separate treatment is authorized by Section 103(8) of the Hong Kong Policy Act of 1992. It is no secret that People's Liberation Army front companies operate extensively in Hong Kong, and I have heard concerns that they make use of Hong Kong's special status to import denied technology that is unavailable via other channels. Because export licenses are not required for advanced technology shipments to Hong Kong, there is no record-keeping, much less verification or follow-up, on such exports.

 

Although, I have heard nothing but praise from U.S. officials who interact with their Hong Kong counterparts in the Customs and Excise Service and Trade and Industry Department. It is too much to ask even of these dedicated and professional law enforcement officers to enforce Hong Kong's regulations against the interests of Beijing's military and security services.

 

I have heard only the highest praise for the professionalism and cooperation of Hong Kong's Joint Financial Intelligence Unit in sharing its intelligence on money-laundering. Indeed, Hong Kong's participation in the Financial Action Task Force's Asia/Pacific Group on Money Laundering and the Egmont Group of financial intelligence units. Hong Kong has proven itself to be the Asian linchpin for terrorism-related money-laundering intelligence.

 

In general, Hong Kong's participation in international criminal, terrorism and narcotics intelligence has set the standard for Asia. Some argue that Hong Kong's participation has also resulted in more professional participation by China, although the State Department's latest report on "Money Laundering and Financial Crimes" indicates that China's cooperation in such activities remains comparatively weak.

 

 

Conclusion

 

Following Hong Kong's 1997 handover to China, the Special Administrative Region suffered twin blows from the Asian Financial Crisis and the 2001 global recession. Its manufacturing base has basically migrated to China, its position at the center of Asian finance has been eroded by steady competition from Singapore, and its role as the "Gateway to China" has been supplanted by Shanghai. There is a marked trend toward integrating the Shenzhen SEZ with Hong Kong via "internationalization", the CEPA and the lowering of immigration and customs barriers with China. China has begun the process of imposing its defense, internal security and intelligence priorities on Hong Kong via the so-called "Article 23" legislation. Finally, the idea of "Hong Kong People Ruling Hong Kong" has been debased by Beijing's reneging on the spirit of its pledges in the Basic Law to implement "universal suffrage" in the period "after 2007".

 

Hong Kong is already fully integrated into China with the CEPA, and all indications are that the trend is toward a Hong Kong SAR that is integrated into China politically. At bottom, this is the essence of "one country, two systems."

 

Recommendations

 

I am not sure there is much left that can be done for Hong Kong's people. Hong Kong is already under Chinese sovereignty, and there is little to be done that goes beyond the merely symbolic. If the United States is serious about giving the people of Hong Kong leverage in their bid for a government responsive to the people via universal suffrage election, then our political leaders must take action.

 

1) Rhetorically, the Administration and Congress should

 

-- make China's implementation of its promises for democratization in Hong Kong a touchstone of our overall strategy toward China. (Unfortunately, the Administration does not seem to have a clear strategy for China aside from watching and waiting.)

-- Adopt Secretary of State Powell's language on Taiwan as a model. The Secretary has declared that "whether China chooses peace or coercion to resolve its differences with Taiwan will tell us a great deal about the kind of role China seeks with its neighbors and seeks with us." China's leaders must be made to see that, like Taiwan, "how China chooses to realize its pledges on universal suffrage and democracy for Hong Kong will tell us a great deal about China's respect for democracy in the rest of Asia."

 

-- Refrain from calling China a "partner in diplomacy to meet the dangers of the 21st Century." This is how the Administration now refers to China despite China's massive military build-up opposite Taiwan.

 

-- Use sticks as well as carrots. Just this past Tuesday Secretary Powell noted "half a million brave people marched through the streets of Hong Kong to peacefully oppose legislation that would have curbed their civil liberties," and proclaimed that "it is important to all those who cherish democracy that Hong Kong remain open and tolerant, and that's its political culture continue to thrive under the 'basic law' with China." But he offered no "or else."

 

2) Give substance to your verbal expressions of concern. A persuasive message would reside in an informal cessation of Presidential or Vice Presidential visits to or from China until the progress of Hong Kong's democratization in the spirit -- not the letter -- of the UK-PRC Joint Declaration and the Basic Law is clear. The Congress could also adopt a similar stance, either explicitly in a resolution that House and Senate leaders refrain from visits to China while Hong Kong's continued processes of democratization is in question, or implicitly as senior members fine it "inconvenient" to visit, or to host visits from Chinese counterparts.

 

3) As another small demonstration of concern, the Congress should mandate that the Commerce Department reexamine the integrity of our dual-use and advanced technology exports to Hong Kong. It may reflect that Hong Kong's law enforcement agencies are indeed capable of maintaining the insulation between the SAR and China necessary to satisfy the United States that such technologies are protected from improper use or re-export.

 

4) Finally be realistic in our China policy. At some point, the scales must fall from our eyes, and China must be dealt with as she is, not as we hope she might possibly become someday. Unless China sees that its stranglehold on Hong Kong's autonomy and the political and civil rights of its people results in a downturn in overall US relations with China, Beijing's leaders will be encouraged to ever-harsher measures to control Hong Kong.