By Lee Tak Lim*
Chinese leader President Xi Jinping attended Hong Kong’s 25th anniversary of the city’s return to China on July 1, 2022. This was his first trip outside the Mainland since the onset of the pandemic. The importance of this ceremony cannot be overstated. It was the perfect occasion for Mr Xi to convey a message, not just to Hong Kong and Macau, but also to the world.
Mr Xi spoke at the ceremony and he has sent the clearest message of China’s unwavering commitment to the “One country, two systems.” Mr Xi’s emphasis has sparked speculations that the policy might outlast the 50 years in which Hong Kong’s and Macau’s political and economic systems were guaranteed to remain unchanged. .
“One country, two systems” was architectured and introduced by Mr Deng Xiaoping, the then Chinese leader, in the 1980s during the negotiation between China and the United Kingdom over Hong Kong. China was a socialist country and its guarantee to Hong Kong and Macau, both are free market economies, was innovative, bold and unimaginable.
Is China’s guarantee to Hong Kong and Macau an impromptu tactics or a prescient grand strategy. What would happen to Hong Kong and Macau after 2047 and 2049 respectively? Was the road map for these two Special Administrative Regions already designed more than 2 1/2 decades ago?
The initial negotiations between China and the United Kingdom have flared up a wave of confidence crisis. At the time, China’s political and econ c systems were very different from, if not totally incongruous with, Hong Kong and Macau. Fearing that these two cities would be immediately integrated into China, the financial markets panicked.
The Hong Kong dollar plunged 15% to a historic low at HK$9.6 to US$1 on 24th September 1983. There was also a run on foodstuff.
On 17th October 1983, the Hong Kong Government pegged the Hong Kong dollar with the US dollar at HK$7.8 to US$1. The pegged rate still prevails after almost 39 years
The 50-years-guarantee has worked its magic and the confidence crisis subsided. The handover of Hong Kong and Macau to China was met with no resistance. There were some who did not believe that China would live up to its guarantee. They chose to leave only to find out their mistrust on China’s commitment turned out to be an expensive mistake.
Halfway to the 50-years guarantee, China has proved to the world that it has abided to its commitment. Even the most critical and fault-finding opponents, in their hearts, could not challenge otherwise.
Why 50 years, not longer or shorter, in the first place? A question no one dared to openly ask and the Chinese leaders also have never openly discussed the subject, let alone disclosed the original aspiration. What were in the minds of the Chinese leaders?
At the time when China began to negotiate with the United Kingdom and Portugal in the 1980s, its economy was very primitive. Would the 50 years be the time estimated and required by China to grow its economy, in terms of per-capita GDP, to a level more comparable with the two Special Administrative Regions at which time integration would be less resistant? Some have speculated.
China started to open up its economy in 1978 when its per-capita GDP1was US$156. In 2021, its per-capita GDP increased 80 times to US$12,558.
China’s astronomical growth in just 43 years was astonishing and surprised the world. More astonishing to the West, it happened in a socialist country.
China is now the second largest economy after the United States. China’s rise and its leading position in some technologies have triggered an unprecedented hostile response from the United States.
United States, for some time, has viewed China as a threat. It is not a secret. It was only when Donald Trump became the president that the United States started a broad-based trade war against China. President Joe Biden doubles down by not just trying to choke China’s technological advances but also engaging its so-called allies to geopolitically confront China. Would this end up in a war – a military war?
The book “Can America and China Escape Thucydides’s Trap?” authored by Graham Allison, a historian at Harvard, is frightening if what happened in the past would repeat in the present world.
Mr Allison’s review of the past five hundred years in which he has identified sixteen cases in which a major rising power has threatened to displace a major ruling power. Twelve of these sixteen rivalries ended in a war.
In the present context, the United States is the ruling power and China is the rising power. A military war is not likely, especially between these two biggest economies. But a war in a different form – sanctions – has been ongoing.
The United States has blacklisted many Chinese high-tech companies and prohibited American companies purchasing from some Chinese companies. It even abused its soft power to sway some Western countries from selling advanced equipment to China.
The United States has the penchant for imposing sanctions on countries, corporations and individuals. Reported by Atlantic, the United States has 7,967 sanctions as of May 3 2019.
The sanctions by the United States against Russia after it started a war against Ukraine are shocking. The United States used its currency dominance as a reserve currency and a trade currency to block Russia’s access to the financial and capital markets. These sanctions can be labelled as a “financial war” – a war that is devastating to an economy.
Would China be the next target?
The justifications of the United States in imposing tariffs on Chinese goods, sanctioning Chinese companies and rallying its allies are all but a disguise to defend its world leadership. Despite China’s repeated communiqué that it has no such intention, the United States under the leadership of President Joe Biden is fixated on containing our Country. What the United States and its western allies are afraid of?
China is a communist-turned socialist market economy, one with state owned enterprises existing in parallel with market capitalism and privately owned enterprises. This unique political and economic model has propelled China to become the biggest exporter and the second biggest importer in 2020.
The success of China’s model is exemplary, especially for those developing countries which want a fast lane of stable development. They realize and have started to understand that the West-styled democracy is not the solution to recuperate their economies and lift their people out of poverty.
The confrontation, or cold war, between the US-backed NATO and Soviet Union-backed Warsaw Pact, decades ago, was an ideological contest between capitalism and communism.
The dissolution of the Warsaw Pact, comprising communist countries, in 1989 gave the US-led West a taste of victory – capitalism conquering communism. The hostility of the United States-led West towards communist countries is deep rooted.
China, once a communist country, has reinvented itself into a socialist country. China calls it socialism with Chinese characteristics. I think the West still consider China a communist country, though not the same communist country decades ago.
Is China hostile to capitalism when it governs with a different, if not conflicting, political and economic system from the West? The answer is a definite NO.
The answer was already there when China first promised that Hong Kong and Macau could carry on their everyday life unchanged for 50 years. This is no better proof than explicit approval by a mother, China, of her two sons, Hong Kong and Macau, to govern with a totally different regime from her and for so long.
Do you think it is possible that the West would allow one or more of their cities to govern under an opposing regime? The answer is also a definite NO.
China’s “One country, two systems” is visionary and pragmatic in reasserting its sovereignty over Hong Kong and Macau. It is also China’s most convincing demonstration to the world that China does not consider capitalism a rival.
Hong Kong and Macau have more to play under the “One country, two systems” and full autonomy granted by China. The Greater Bay Area is where they can showcase the successful blending of their capitalism with China’s socialism to the world.
China has always contended that the world should be multipolar and its political and economic model could coexist with the West. China has repeatedly said that there are many areas for cooperation, not just for their benefit but also for the benefit of the world. And competition is not a zero-sum game.
The successful play out of the “One country, two systems” will accomplish a result that “One country, two systems” is more than one country, two systems.
*The author is a local retired banker