Eleanor Albert, Online Writer/Editor, Council on Foreign Relations–
Hong Kong is a special administrative region (SAR) of the People’s Republic of China (PRC) with certain political and economic freedoms based on the notion of “one country, two systems.” The former British colony is a global financial capital that has thrived off its proximity to China, but in recent years many in Hong Kong have become frustrated by growing economic disparities in the city and weary of delays in democratic reform.
What is Hong Kong’s political status?
Hong Kong is an SAR of China that is largely free to manage its own affairs based on “one country, two systems,” a national unification policy developed by Deng Xiaoping in the 1980s. The concept was intended to facilitate the reintegration of Taiwan, Hong Kong, and Macao with sovereign China while preserving their unique political and economic systems. After more than a century and a half of colonial rule, the British government returned Hong Kong in 1997. (Qing Dynasty leaders ceded Hong Kong Island to the British Crown in 1842 after China’s defeat in the First Opium War.) Portugal returned Macao in 1999, and Taiwan remains independent.
The Sino-British Joint Declaration of 1984 dictated the terms under which Hong Kong was returned to China. The declaration and Hong Kong’s Basic Law, the city’s constitutional document, safeguard the city’s “capitalist system and way of life” and grant it “a high degree of autonomy,” including executive, legislative, and independent judicial powers for fifty years (until 2047). Chinese Communist Party officials do not preside over Hong Kong as they do over mainland provinces and municipalities, but Beijing still exerts considerable influence through loyalists who dominate the region’s political sphere. Beijing also maintains the authority to interpret Hong Kong’s Basic Law.
Freedom of the press, expression, assembly, and religion are protected rights. Hong Kong is allowed to forge external relations in certain areas—including trade, communications, tourism, and culture—but Beijing maintains control over the region’s diplomacy and defense.
What is Hong Kong’s economic connection to the mainland?
A metropolis of more than seven million people, Hong Kong is a global financial and shipping center that has prospered from its proximity to the world’s second-largest economy, ranking first in the world in trade as a percentage of GDP. Relatively low taxes, a highly developed financial system, light regulation, and other capitalist features make Hong Kong one of the world’s most attractive markets and set it apart from mainland financial hubs like Shanghai. Hong Kong continues to take top spots in global economic competitiveness reports, ranking fourth in the World Bank’s 2016 Doing Business report and first in the world on the Heritage Foundation’s 2016 Index of Economic Freedom. Most of the world’s major banks and multinational firms maintain regional headquarters in the city.
Hong Kong’s economic power has diminished relative to the mainland—its GDP fell from 16 percent of China’s after the handover in 1997 to just 3 percent in 2014—but commercial ties remain extremely tight. Hong Kong is China’s second-largest trading partner (after the United States), accounting for more than 8 percent of China’s total trade in 2016. The city is also China’s largest source of foreign direct investment (FDI) and a place where Chinese firms raise vast amounts of offshore capital—more than nine hundred mainland enterprises list on the Hong Kong stock exchange.
Meanwhile, Hong Kong relies heavily on the mainland. China, the top destination for Hong Kong exports, accounted for more than half of the city’s total trade in 2015. More than half of the mainland’s outward FDI stock is destined for Hong Kong, though much of this investment is later channeled overseas. Hong Kong’s seemingly growing economic dependence on the mainland market signals that any economic hiccups in China will bear repercussions in the southern economic hub.
What are the political tensions between Hong Kong and Beijing?
Beijing’s reluctance to allow Hong Kong to develop into a full-fledged democracy with free and fair elections is a perennial bone of contention. Experts say a source of the problem is ambiguity in the Basic Law, which Beijing continues to reinterpret. The document states that Hong Kong’s chief executive “shall be selected by election or through consultations held locally and be appointed by the Central People’s Government,” and that “the ultimate aim is the selection of the chief executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.” The nature and timing of electoral reforms are unclear.
Michael F. Martin, an Asian affairs specialist for the Congressional Research Service, says when Beijing proposed universal suffrage, it used the word 可以 (keyi), which translates widely to “can,” “may,” “possible,” or “able to,” thus making it difficult to discern whether Beijing’s decisions comply with the Basic Law.
Some analysts say China’s decisions in 2004, 2007, and 2014 to put off a popular vote for Hong Kong’s leader are an indication that Beijing will drag its feet on reforms indefinitely. China’s legislature ruled in August 2014 that only candidates vetted by a nominating committee chosen by Beijing will be allowed to run in 2017. In June 2015, Hong Kong’s lawmakers rejected a bill that would have introduced “universal suffrage” of the chief executive from a selection of pre-approved candidates.
Pro-democracy factions were winners in the September 2016 elections for the city’s legislative body, the Legislative Council. Localist politicians, focused on preserving Hong Kong’s autonomy and local culture, won six seats out of the thirty-five geographic constituencies chosen by a popular vote and combined secured nearly 20 percent of the vote. Controversy erupted later in November 2016 when China’s National People’s Congress Standing Committee made a rare intervention in local court proceedings, passing a new interpretation of Hong Kong’s Basic Law provisions that require new legislators to take an oath of office. The ruling disqualified two pro-independence lawmakers who altered the language of the oath by pledging to defend a “Hong Kong nation.”
Additionally, the mysterious disappearances of a handful of Hong Kong booksellers and media executives in the fall of 2015 and the vanishing of a Chinese billionaire raise concerns about the independence of Hong Kong’s legal system and authorities. The media is believed to have been targeted by Chinese state agents for publications critical of Beijing. The alleged abduction of Xiao Jianhua, one of China’s wealthiest financiers, who has reported links to Chinese President Xi Jinping, stokes fears that Hong Kong’s autonomy is eroding further.
“What so-called Taiwan independence and so-called Hong Kong independence have in common is that they are hell-bent on destroying the country and bringing disaster to its people, under the banner of freedom and democracy.” —People’s Daily editorial
What are Beijing’s plans for Hong Kong?
Beijing and Hong Kong have benefited economically from the 1997 handover. As reforms have been delayed, frustration has built among Hong Kongers with what they deem to be actions taken to limit the city’s independence and an erosion of the “one country, two systems” principle. Since the handover, chief executives have been selected by an election committee, first composed of four hundred, then eight hundred, and now 1,200 members from four main sectors