China's Hong Kong Experiment

...There are very solid reasons for Peking to make such dangerous commitments...

...The bustling industrial center and port boasts a formidable reputation for enterprise that goes hand in hand with a per capita income six times greater than the rest of China's...

...Moreover, as George Brock-way has pointed out, laissez faire would have fallen on its face without exploiting poorly paid workers...

...for the country lacks the ability to...

...Whatever its components, the miracle wrought by Asian capitalism becomes all the more impressive when Hong Kong is contrasted with mainland urban areas possessing comparable characteristics—plus assets like iron ore, coal, and abundant farmland...

...David Bonavia even envisions the whole mainland becoming a mere "hinterland" to Hong Kong—increasingly oriented to the profit motive, more adept at using modern methods, and less insistent upon intellectual and moral conformity...

...Both mainland centers had much better access to all sorts of resources, enjoyed extensive contacts with foreigners before 1948, and participated in a common traditional culture...

...Bauer and Alvin Rabushka credit old-fashioned virtues—fiscal responsibility, low taxes, free trade, the absence of wage and price controls and of barriers (or bureaucratic incentives) to investment, and the ability to remove profits at will...

...Reared in an atmosphere where the press is not only free but disputatious, the people of Hong Kong will distrust official propaganda...

...Some specialists attribute China's relative backwardness to the problems engendered by sheer size...

...Roy Hofheinz and Kurt Calder stress the contribution of Confucianism, with its emphasis on savings, frugality, diligence, planning for the future, and the maintenance of the family and a stable social order...

...Still, their economies have lagged behind that of Hong Kong, and so has their reduction of the disparities between rich and poor...

...Outside the wealthiest class, most Hong Kong Chinese believe that the mainland-ers will become more and more like them...

...The "Gang of Four," which tried to seize power in Peking after Mao's death, all came from Shanghai...

...Conditions are better than they were before the coming of the People's Republic...

...Shanghai factories, the most productive in the land, turn out one eighth of all goods and a fourth of all exports...

...Since 1945, when it had a mere 250,000 residents, an influx of 40,000 illegal immigrants a year has combined with the birth rate to push up the population 20-fold...

...They even say that they will not attempt to shackle the press or curb public debate...

...Taken individually, each of these explanations is flawed...

...And it holds up after allowance is made for unnatural disasters that have at times put China's economy into reverse, like Mao Zedong's Great Leap Forward and Cultural Revolution...

...According to the State Statistical Bureau, $351 in public services, as well as free education, medical care and old-age pensions, supplement a per capita income of $276...

...Governed by outlanders and lacking the supposed prerequisites for industrialization, the 5.3 million strivers who live here have nonetheless done what most so-called developing nations have utterly failed to do...

...Consequently, 1997 could mark the merging of two quite diverse ways of life, two forms of economic enterprise and two different political orders...

...As late as 1980, when grain imports reached an all-time high of almost 14 million tons, the government shipped most of its purchases to the towns...

...Mao Zedong often sacrificed modernization to revolutionary goals, and some future Party boss may be disposed to follow his example...

...There is no reason to doubt that after 1977, as before it, Hong Kong will continue to cast a spell over the men and women of south China, perhaps eventually altering Canton's lifestyle...

...Today, Shanghai continues to hold out unusual opportunities for personal initiative and innovation...

...Food is so abundant that some restaurants stay open 24 hours a day...

...Free enterprise has failed miserably, for example, in resource-rich Zaire...

...Yet any Chinese regime bent on modernization will need their skills—as well as their leadership—and will have to treat them with caution if not tenderness...

...THE TAIL THAT MAY WAG THE DOG China's Hong Kong Experiment BY WILLIAM MCCORD Hong Kong Communist China's recent draft agreement with Britain reportedly promises to preserve "all the rights and freedoms which the people of Hong Kong now enjoy" for at least half a century after this crown colony reverts to mainland control in 1997...

...It offers rights and protections absent not only in China but in South Korea and Taiwan...

...The Bank"— the Hong Kong and Shanghai Banking Corporation—alone has assets amounting to twice the GNP...

...In fact, it has never had timber, iron ore, minerals, rubber, precious metals, or local sources of energy...

...The first governor, depressed by his lowly assignment, similarly dismissed the place as a "pile of barren rocks...

...The official apparatus provides jobs and fairly inexpensive housing...

...Deng has reportedly commented that he could have reproduced Hong Kong's prosperity "if I had to deal merely with Shanghai...

...Indeed, its citizens have benefited from extensive schooling and public services, as well as heavily subsidized housing...

...Besides a common language, the Cantonese and the majority of Hong Kong's people share a commercial background and memory of foreign domination...

...Nor is militant nationalism likely to get in the way: In 1977, when Portugal offered to return Macao—the adjacent small, less prosperous territory—Peking politely refused to take it back, apparently fearing that if it did, skilled workers, investors and trade might be frightened away from Hong Kong...

...London's Economist expects Hong Kong to become merely another " Party-run slum...

...Deng, consciously emulating Hong Kong, is trying to end the practice...

...Next to Japan, its people are the best off in the Far East...

...In this context it is worth remembering that Athens, Rome, Venice, and Amsterdam have already shown that a small city state can change the destiny of a continent...

...They are exempt from the central plan, are run by young entrepreneurs, and currently absorb nearly half of Shanghai's high-school graduates...

...pectancy and adult literacy, China scores 69, HongKong86...

...Peking would seem to have good reason to accept the present legal system and the economic and personal liberties that come with it, since these helped to make the bustling port a potential national asset worth bargaining for...

...And at every level the colony, one of the last redoubts of genuine laissez faire, wins...

...But others, among them David Bona-via, foresee "the boldest experiment in mixed socialist-capitalist enterprise in any country of the world...

...Once reunion is accomplished, the city's technocrats could well spread out through south China, assuming positions of trust and power...

...These neighborhood workshops, in effect experiments in private enterprise, produce much of the local goods and services...

...So far, they have promised to let it keep its own currency, legal system, free port, and free-wheeling economy...

...in 1984 it costs HK $4,000...

...Possibly, just possibly, the doom-sayers are wrong, and common interests will bring about a peaceful and profitable relationship...

...Clothing is better and more colorful than in the south, and many workers own TV sets...

...During the Cultural Revolution it proclaimed a "People's Commune" that sought to open up civic institutions and decentralize the bureaucracy...

...Nonetheless, the colony has retained an irresistible attraction for budding capitalists, political dissidents, individuals pursuing wider opportunities, and talented people generally, strengthening Peking's conviction that reunion was imperative...

...Interestingly, China's rulers are now establishing industrial estates in neighboring Guangdong Province to sell labor at one fifth its Hong Kong price...

...That threat to the established order lasted only 17 days...

...Nevertheless, concern about what will happen here persists...

...develop its petroleum deposits alone—a point illustrated this year by the sinking of a costly oil rig that its Navy had been towing from Japan...

...Shanghai has its own lures...

...Yet absent a first-rate harbor, the colony could not have participated fully in export markets...

...So are a number of old China hands, including Chalmers Johnson, who predicted the collapse of the local economy, a new wave of refugees and a "vast tragedy...

...A high score reflects broad educational opportunity, excellent health care and good nutrition for all, so capitalism's outpost has clearly attained a reasonable state of collective well-being...

...In 1983, hardly the most propitious of times, its exports rose by 10 per cent and accounted for nine tenths of total production...

...Conservative economists P.T...

...China has exploited its millions without the same results...

...The New York Times suggests that the regime cannot permit the island to be more free than the mainland...

...Land prices, predictably, have soared astronomically: A square foot of land in North Point cost no more than HK $10 in 1948...

...It must import from the mainland all of its raw materials, much of its food, and its water...

...Behind the play of the headlines, then, the real issue is not China's influence on Hong Kong...

...For Hong Kong, as its neighbors next door could not help noticing, has been a remarkably successful experiment in Oriental free enterprise...

...Furthermore, Hong Kong has managed to leap ahead without marked inflation, high unemployment, foreign aid, forced savings, or totalitarianism...

...On the other hand, barring a development of that kind, Hong Kong may be the stage for a unique union of political and economic opposites that ultimately could have a startling impact on China...

...Oil exploration in the South China Sea makes these assets especially important...

...Canton is an important industrial center, contributing to China's position as the world's largest textile manufacturer, to its number two ranking as a producer of radios, and to such high-tech undertakings as computers, electron microscopes and missiles...

...As in Canton, workers have medical insurance, factory-subsidized apartments, a two-hour "siesta," recreation facilities, and lifetime jobs —that in Shanghai they can sometimes pass on to their children...

...The security notwithstanding, life is drab and dreary by "bourgeois" standards...

...Westernized and educated, they will add a leaven of disturbing individualism and dissonance to collectivist uniformity and complacency...

...To begin with, capitalism has worked because of the stable investment climate provided under the Union Jack...

...It is prompted, quite understandably, by the question of whether Party boss Deng Xiaoping and his successors can permit one kind of society in Hong Kong while trying to maintain a very different kind on the mainland...

...Its startling commercial explosion has taken place in an atmosphere of unbridled competition...

...Taken together, though, the different theories put forward do help to account for Hong Kong's fabled progress...

...Various Asian ports have withered...

...The Kowloon district's downtown area packs more than 150,000 people into each square kilometer...

...As for the "Confucian ethic," it has played a role resembling that of the Protestant Ethic in Europe and North America...

...These visits, encouraging dreams of wealth, change and liberation, help generate a daily flow of illegal immigration that neither the Chinese nor the British have been able to stem completely...

...Prime Minister Zhao Ziyang has gone so far as to claim that mainland investments in the colony exceed its outflow...

...Accustomed to the protections of British law, they will view the activities of the secret police with resentment, perhaps resistance...

...The Communists are and will continue to be cautious about taking radical steps that could threaten these various sources of money...

...The 40,000-strong elite of Chinese and British businessmen advocates complete freedom of imports, foreign exchange, prices, wages, and outside investment...

...Feeding and ruling 1 billion men, women and children, only 20 per cent of them urbanized, is certainly a greater burden than administering a territory of 399 square miles...

...thus the liveliness and consumerism of Hong Kong are constant temptations...

...Mao preferred to divert investment elsewhere, yet productivity grew more quickly in the "decadent" metropolis than in the urban centers favored by revolutionary zealots...

...Anticipating a marriage of yin andyang, Communist officials have publicly declared their intention of preserving Hong Kong as an autonomous and capitalistic region...

...Peking's stake in HongKong's shipping, real estate, cold storage, and oil-supply industries, to cite a partial list, brings in an annual income of HK $400 million...

...But China's venerable leaders, now embarked on an awesome building effort, may have something more radical in mind...

...In addition, it has become the single most crowded spot on earth...

...Judging from the fact that it is rapidly exporting capital and already has spent roughly $1 billion on New York real estate, the enclave's elite seems pessimistic about the future...

...Migrants frequently visit with tales of good fortune and bearing such gifts as shoes, Walkmen, wristwatches, television sets (which can be connected, illegally, to the colony's TV stations), and even baskets of food originally exported from Canton...

...But no one, including Deng, denies the colony's superior performance...

...When the colony was founded in 1842, by opium traders, Lord Palmer-ston described it as " a barren island with hardly a house upon it...

...Thanks largely to a flood of jobless, educated young people who have escaped from the peasant communes where they had been forced to work until 1976, Shanghai is still restless...

...Yet millions of mainland-ers, especially from Shanghai and Canton, have opted to make the dangerous trek to greater prosperity...

...Others point to the availability of unlimited cheap labor, to the superior port, and to the abundance of technical skills...

...When Deng triumphed, the city sprouted posters demanding the "Fifth Modernization" (constitutional democracy), further economic reforms and the granting of civil liberties...

...This unexpected bias adds to the validity of comparing communism in China with capitalism in Hong Kong by focusing on Canton and the mainland's most advanced port city, Shanghai...

...Japan stands at 96...

...Media commentators generally incline toward the negative assessment...

...The returnees seek secure, well-paying positions, ration coupons and residence permits...

...The comparison constitutes the most objective test possible of the relative advantages of capitalism and communism in this part of the world...

...True, they work hard, lack the total job security of their counterparts across the border, and sometimes suffer brutal employment conditions...

...They will also want to take advantage of—and therefore must protect—Hong Kong's abundance of technical expertise and its extensive foreign contacts...

...Virtually everyone in Canton has relatives who have escaped, often by swimming the treacherous currents that separate the two cities...

...Public opinion polls indicate that 95 per cent of them would stay on if China respected their civil and economic rights...

...Pure Maoists view Shanghai as a seedbed of problems, starting with its origin as half-breed offspring of traditional China and dynamic 19th-century capitalism...

...Alarmed by the emergence of a class of unemployed (who have sporadically staged riots and sit-ins), the Deng regime imitated Hong Kong in setting up a number of "urban collectives...

...Private companies are the matrix of economic and social life...

...The colony's Western trading partners—notably the United States, the recipient of 40 per cent of its exports and the largest overseas investor—will surely press the mainland government to respect the legal and economic status quo, too...

...The match, reflected in an exciting string of skyscrapers built on mud flats, produced a vibrant political, economic and intellectual atmosphere—encouraging a reputation for urbane, modern, conniving ways and attracting the country's most talented, if opportunistic, people...

...The yardstick also offers clues to the probable impact of reunification on the country as a whole...

...Of course, given China's history of sudden convulsions, it is always possible that a new Leftist cabal could cancel any Sino-British agreement that guarantees this city's Western institutions...

...More dangerously, it has been a haven for liberalism and rebellion...

...Foreign A/fairs is unable to find a "truly just" resolution of the colony's predicament...

...The entrepot provides a third of China's foreign exchange, helping to offset a huge imbalance with Japan, the mainland's major trading partner, and is the source of substantial direct revenues...

...From the 1940s onward, its gross national product has expanded at an average of 9 per cent a year—twice the real growth rate of the advanced countries...

...On a combined "quality of life" index covering infant mortality, life exWilliam McCord, a professor of sociology, is spending this academic year at the National University of Singapore...

...No one, least of all the British, predicted that this tiny corner of the globe would be such an astonishing success story...

...It is Hong Kong's influence on China...

...Nor has Confucianism had a corresponding effect in nearby Canton, despite its virtually identical cultural background...

...In sum, it should not be surprising that the practical Deng now appears quite willing to allow pecuniary interests to prevail over ideology...

...What will that mean in practical terms after Hong Kong's master changes in 1997...

...To be sure, the current Communist government can make a few boasts of its own: much improved health services, the creation of a manufacturing base, the spread of literacy and higher education, and agricultural productivity that has kept pace with demographic pressures...

...Strong Western influences in the past, a high level of schooling and skilled management account for a good deal of this relative wealth...

...At $5,000, the island's annual per capita income is more than double Shanghai's, China's richest city, and four times Canton's, Hong Kong's linguistic twin...

...The free-trade zones and industrial estates in Guangdong, and the free-enterprise collectives in Shanghai, show that China is willing to learn from its window on the West...

...Add to this a suffocatingly crowded agglomeration of 11 million human beings and you have what is probably the fairest mainland comparison with Hong Kong...

...Not until 1977, Nicholas Lardy has found, did the country return to the level of food production before the Japanese invasion in the 1930s...

...Perhaps most significant from Peking's viewpoint, this Western enclave also has achieved far higher growth and per capita income than its "sister" cities, Canton and Shanghai...

...Be that as it may, Fox Butterfield has shown that contrary to myth, prior to 1977 the regime invested twice as heavily in urban areas as in the countryside, where peasants received one fifth of a city dweller's income...

...The colony's inhabitants have little choice except to seek a reconciliation with the land of their ancestors, since the British Nationality Act of 1982 denies them residence in the United Kingdom despite the British passports they hold...