Countdown to a Crisis

By Jay D. Palmer

Britain dickers with China over the future of Hong Kong

Even for the vague, elliptical world of international diplomacy, it was a desultory summit. After a ritual wiping of hands and sipping of tea, the two leaders spent 2 1/2hours (about half of it in translation) exchanging contrary views and, for all intents and purposes, agreeing only to disagree. Then, in an unfortunate conclusion to the visit, Prime Minister Margaret Thatcher left her final meeting in Peking with China's senior leader, Deng Xiaoping, only to stumble face first on the broad stairs. The unintended symbolism of the spill in full view of television cameras was not missed. On her arrival in Hong Kong Sunday, on the last leg of a two-week Asian tour, the Prime Minister faced a barrage of local criticism that she had got off on the wrong foot in the opening round of Sino-British talks over the future of the crown colony.

That future, in the eyes of Hong Kong's 5.5 million nervous residents, has never seemed more in need of clarification. From the luxurious mountaintop mansions of "the peak" to the factory floors of Kowloon, from the shimmering office towers of the business district to the wretched squatter camps near Aberdeen, the consuming topic of conversation nowadays is what exactly will happen to Hong Kong before July 1, 1997. That is the date when more than 90% of Hong Kong's land area, the 373-sq.-mi. New Territories, will revert to China under the terms of the 99-year lease that imperial Britain wrested from the tottering Qing Dynasty in 1898. Although earlier treaties gave Britain the remaining 34 sq. mi. in perpetuity, that area depends on the New Territories for food and water and cannot survive alone. Literally overnight, Kai Tak international airport, half of Hong Kong's new subway system, and most of the colony's housing would no longer exist under the shadow of the Union Jack, but rather under the five-star flag of the People's Republic.

In Hong Kong, where the most authoritarian portrait on public display shows the eyes of an anonymous Asian woman commanding citizens not to litter, the rising if still distant threat of reunification has hit like a typhoon. After Thatcher's visit, share prices on Hong Kong's stock market crashed 21% last week, while the Hong Kong dollar dropped by 4 1/2%to U.S. $0.16, a new low. To deepen the gloom, Hong Kong's Financial Secretary, John Bremridge, announced last week that the colony's economy has been faring far worse this year than expected. Real economic growth will measure only 4%; it was 11% in 1981. Exports of goods produced in Hong Kong will decline 2%. And investments will rise only 3%, after reaching 13% last year. Said a concerned businessman: "Today Hong Kong has double trouble: economic and political."

It was partly to shore up a slumping level of confidence that Britain suggested to China earlier this year that it was time to discuss the colony's future. When the Prime Minister arrived in Peking, she ran into a diplomatic impasse. China's leaders insist that they do not recognize any of the earlier treaties and demand full sovereignty over the entire colony. The British, fresh from a victorious war of sovereignty in the South Atlantic, have adopted an equally hard stand. As Thatcher said in Peking: "We stick by our treaties, unless we agree on something else. At the moment, we stick by our treaties."

The most the two sides could come up with was a joint pledge to continue negotiations aimed at maintaining "the stability and prosperity of Hong Kong." That was not especially reassuring for the residents, who, perhaps unrealistically, had expected Peking's guarantee that it would preserve the colony's aggressively capitalist character. To compensate, Thatcher went out of her way last week to assure wary residents that Britain was aware of its "moral obligation to the people of Hong Kong. Our differences can be reconciled," she insisted. "We can reach a solution acceptable to China, the people of Hong Kong and Britain." Most Hong Kong residents remained unconvinced. Said Newspaper Columnist Margaret Ng: "People here are not confident that the Chinese government or the British Prime Minister will put the interests of Hong Kong people first."

China, Britain and the colony itself have little to gain if the status quo is disturbed. For China, that could mean losing its main source of foreign exchange and capitalist know-how. For Britain, a Chinese takeover could spell the loss of one of the mother country's biggest Asian trading partners. For the colony, it could mean the end of an economy that last year racked up a gross domestic product of $22 billion and ranked in the top 20 of the world's trading nations.

The latest indications from Peking are that China's idea of sovereignty includes a formula giving the People's Republic some measure of political control over the colony. In a shrill attack late last week, Xinhua, China's official news agency, declared that "unequal treaties forced upon the Chinese people provide an iron clad proof of British imperialism's plunder of Chinese territory. It is a sacred mission," the report added, "of the Chinese government and people to claim sovereignty over Hong Kong." But however mild, such control would mean an end to Hong Kong's special nature. "The Chinese have to admit," noted London's Financial Times, "that, in effect, they can not run Hong Kong because if they did, it would not be Hong Kong." Added a Chinese businessman in Hong Kong: "The problem is that there are some officials in Peking who believe they could run Hong Kong, that they could somehow have a Communist administration and a capitalist economy. They don't understand what makes this place tick."

Other possible solutions include a gradual transfer of authority from Britain to China over a 15-to-30-year period, or joint rule by a two-nation committee. Another way out of the impasse would be a deal that makes an artificial but face-saving distinction between the recognition of sovereignty and its actual exercise. Britain could recognize Peking's claim, fly the Chinese flag alongside the Union Jack over Government House and make other symbolic concessions while maintaining its present administrative control. Noted a British diplomat: "This would replace the fiction that Hong Kong is part of Britain with the fiction that it is part of China." That is as good an idea as any. Indeed, with that characteristic Hong Kong mix of greed and imagination, vendors are already selling T shirts emblazoned with the message "2096 OK" next to a crossed-out "1997."

-- By Jay D. Palmer.

Reported by Sandra Burton and Ross H. Munro/ Hong Kong

With reporting by Sandra Burton and Ross H. Munro/ Hong Kong

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