In 1984, the conditions were established for the future transition of Hong Kong from its status as a colonial holding of the British empire to resume its former status as a sovereign holding of the People’s Republic of China (Chan & Postiglione 4). The Sino-British Joint Declaration set a date for the transfer of power as July 1, 1997, and established some of the basic terms of the transition so that the twin goals of the reunification and economic prosperity of both Hong Kong and China could be facilitated (Chan & Postiglione 4). The most important of these terms, and the guiding philosophy underlying the pre- and post-transition processes is what is referred to as the “One Country, Two Systems formula” (Chan & Postiglione 4; Flowerdew 1551). According to this formula, Hong Kong and China would be considered a unified country, with Hong Kong being called a “Special Administrative Region” of China (Chan & Postiglione 4). Nonetheless, Hong Kong would retain its own unique political, economic, and social systems, which all stakeholders agreed had served Hong Kong admirably over the years.
In fact, one of China’s central objectives for the transition period was to determine how some of Hong Kong’s prosperity could be spread and shared with the mainland Chinese. This would occur, China anticipated, not by patterning any of its own economic and business initiatives after Hong Kong’s successful models, but by entering into a lateral and mutually beneficial relationship with Hong Kong. Specifically, China would be in a better position to negotiate and influence trade and partnership agreements, thereby solidifying its position as an emerging superpower. China would certainly exert influence over Hong Kong, but would avoid substantial interference in governance for at least fifty years; this condition was specifically included in the Sino-British Joint Declaration document (Chan & Postiglione 4).
Clearly, one of the most important implications of the Sino-British Joint Declaration would be economic in nature. For many years prior to the handover, Hong Kong enjoyed unparalleled economic prosperity and relative economic stability and a high standard of living compared to most, if not all, of the neighboring Asian countries, including China, which greatly exceeds Hong Kong in terms of both land mass and population density (Chan & Postiglione 182). Given Hong Kong’s unique and long-lasting relationship with Britain, the country enjoyed robust international investment, both in terms of literal cash flow and in terms of significant infrastructure initiatives that other Asian countries had little, if any, hope of achieving (Meyer 2).
Consider, for example, that the United States alone has more than 900 businesses with regional headquarters or offices in Hong Kong (American Chamber of Commerce, Hong Kong, 2005), representing an enormous stimulus to the local and international economy. Indeed, Hong Kong is one of the most important world players on the financial stage. As Meyer observes, “Traders and financiers in Hong Kong [have] always operated in multitiered national, world-regional, and global economies” (2). The potential impact of the transition, then, portended serious implications not only for China, but for Hong Kong itself, and the world economic markets at large.
The colonial relationship with Britain, despite some obvious problematic aspects, had other economic benefits for Hong Kong as well. One of the reasons that foreign investors and companies were so confident in establishing a presence in Hong Kong was because of its ties with Britain. For many Western nations, Hong Kong represented an attractive and relatively safe entry into a region where the United States, in particular, did not enjoy many positive relationships. Consider, for instance, the cases of China and Japan. The two biggest countries in terms of size and population density, as well as in political power and might, had both endured hostile wars—both militaristic and ideological– with the United States in the twentieth century. The trust and business relationships between the United States and each of these countries had been severely compromised, and suspicions still abounded on both sides that would likely preclude the United States from establishing any serious and profitable presence in either of these countries.
Then there was the case of Vietnam. While not known for its economic prosperity, Vietnam was clearly not a viable market for the United States to enter, even for industrialization purposes; the resentment over the war would linger for years to come. Hong Kong, by comparison, had no obvious political or ideological differences or disputes with the United States, which made it a particularly attractive locale for business in the Asian region. As more and more businesses, whether North American or otherwise, established a presence in Hong Kong, local systems of transportation, telecommunications, and other elements of business infrastructure were improved quickly and dramatically, thereby providing still more incentive for other countries to invest in Hong Kong in terms of their presence and with their cash.
Another related reason why Hong Kong proved so attractive to foreign investors and companies was that it was perceived as a country that valued an international presence, and which protected and promoted international values and civil liberties. Hong Kong, unlike the neighboring Asian countries named above, had not been directly involved in any international conflicts or human rights scandals. In fact, it maintained a relatively low profile. Many of the same people who were investing in Hong Kong would probably have been hard-pressed to explain anything they knew about Hong Kong apart from its impressive business atmosphere conducive to international trade. While the rest of the world was busily engaged in wars and conflicts, Hong Kong was busy making money.
The emphasis on money-making should not be underemphasized or misinterpreted. The accumulation of wealth and the promotion of prosperity, on both an individual and a social level, has long been considered very important to the people of Hong Kong, even to the exclusion of other political and social involvement and accomplishments. As Cheung and Sing note, “The pursuit of wealth has long been a common goal in [Hong Kong]” (843). Cheung and Sing go on to explain that “The first base of legitimacy for the Hong Kong government has [always] been prosperity” (843). Cheung and Sing trace this yearning for material comfort back through Hong Kong’s modern history, pointing out that “A substantial proportion of the older generation in Hong Kong were economic and political refugees fleeing from mainland China to Hong Kong in pursuit of prosperity and freedom” (843). Understandably, this quality has always been attractive to outside investors who are hungry to pursue and collect their own benefits, and there is probably a particular resonance for American investors, who share an ideological and philosophical approach to money-making as a tool for attaining freedom.
There is yet another variable that explains Hong Kong’s investor magnetism. Hong Kong also enjoyed an enviable degree of self-determination and autonomy with respect to its own economic affairs while it was a British colony (Feder 18). Feder explains that pre-handover, Hong Kong had what could be characterized as a “pro-market economy,” which he defines as a system in which “government neither impedes nor advances enterprise” (18). In this sense, the Hong Kong government mirrored the colonial relationship itself, taking a laissez-faire approach to overseeing the economy, and allowing business to drive its own destiny and set its own standards. This pro-market economy was one of the most important defining characteristics that contributed to Hong Kong’s economic prosperity, and Feder contrasts this model with the “pro-business economies of other Asian nations” (18). He observes that the inherent neutrality of the pro-market economy has been the “key to the city’s [Hong Kong’s] phenomenal success” (Feder 18).
