Hong Kong's Growing Economic Integration With Mainland China Since 1997: Validating Its Impact On Political Autonomy

From the time span of 1983 to 1997, Hong Kong cherished its political autonomy after it was relaxed from the enlistment of United Nation’s list of non-self-governingterritories At this time span, Hong Kong saw a mass departure of emigrants to foreign countries, especially at the wake of 1989 during the Tiananmen Square Crackdown, when millions of Hong Kong citizens joined to support the student protest in Beijing (Sherlock, 2017). The crackdown of 1989 quickly gave rise to anti-Beijing sentiments and gradually led to the emergence of the democracy movement locally which in turn catalyzed democratization prior to and after the year of 1997 (Ma, 2015).

Economic links between Hong Kong as a Special Administrative Region (SAR) and Mainland China mushroomed in the late phases of 1980s and the beginning phases of 1990s, due to the fact that Hong Kong (SAR) was one of the most vital trade center and the center for international fund expanding factor for Mainland China. Later, the economic links between the two got strengthened since SAR Hong Kong returned in 1997 to Chinese sovereignty (Wang & Liang, 2022).

This paper attempts to discuss the validity of the statement ‘Hong Kong’s growing economic integration with mainland China since 1997 has undermined its political autonomy.’ with relevant references regarding the topic. In the later section, first this paper discusses the history of the Hong Kong China equation briefly and then the paper discusses the validity of the above quoted statement and at the end it draws a concise conclusion.  

The British Government occupied Hong Kong in the year of 1841. The territories of Hong Kong including the new ones were conceded permanently by Britain and went on a 99 years of lease to Britain in the year of 1860 under the sequence of Convention of Peking (Dicks, 2017). Even though the then Chinese Government initially desired to take back those territories of Hong Kong after the lease period ended, the British Government continued to rule over those territories of Hong Kong in 1945 and afterwards after World War II, in that war Hong Kong was occupied by Japan for more than three years. Since the post war period, there has been indications towards decolonising Hong Kong from the ruling of the British Government, however the unsuccessful movements towards the notion due to the lack of significant support from the general public, colonization existed even after 1960.

Later, during the late 1970s and beginning of 1980s the question of political autonomy of Hong Kong emerged as the end of the lease by British rule was being approached. Hong Kong was removed from the United Nation’s list of non self-governing territories; the territories in this list would have had the right to be independent.

There were certain sections of the population who advocated the independence of Hong Kong, a major section of the population in Hong Kong among whom few were political or economic or war refugees from the Civil War of China who liked to keep up with the status-quo. In 1984, the Chinese and British Government signed a mutual declaration called the Sino-British Joint Declaration that stated that the political autonomy of Hong Kong should be handed over to the People’s Republic of China on and from July1, 1997 and the declaration also announced that Hong Kong could experience an intense system of autonomy under the “one country, two systems” principles (Fong, 2017).

Discussion on the validation of the Statement

China had decided upon to preserve the unique political idiosyncrasy of Hong Kong when the then British Government handed over the nation more than two decades ago. The Chinese Government said it would provide Hong Kong 50 years of political autonomy announcing the framework known as “one country, two system” undertakings (Financial Times, 2022). Hong Kong has experienced an immense transition as the British Government and Chinese government negotiated on the political future of the nation which eventually dropped to the climax of China’s continuation of sovereignty over SAR Hong Kong since July 1997 (Lui, 2018).

The Special Administrative Region (SAR) Hong Kong saw substantial economic growth with rising national income and almost a full-employment labor market economy for years until 1997. Ever since SAR Hong Kong returned to Chinese political autonomy in 1997, the economic integration between these two nations became more prominent, especially, Mainland China centric port to port trade had continued to grow at a faster pace. Notably, a huge amount of share of the foreign currency reserves of China were accumulated due to the presence of SAR Hong Kong’s economic, international trade and thereby financial market integration. Eventually, the growing density and pace of multidimensional economic activities started merging with the activities across the border. Nonetheless, these activities in SAR Hong Kong were mostly becoming Mainland China centric economic and financial activities. This happened due to the relocation of the majority of the manufacturing industries to Mainland China in the time span of late 1980s and early 1990s. At this phase, SAR Hong Kong went through a significant structural transformation as soon as the economic activities of Hong Kong integrated with that of Mainland China over several dimensions at a much deeper level.

The policy inclination of CEPA (Closer Economic Partnership Agreement) had provided the businesses and other economic and professional activities of SAR Hong Kong with the access to markets of Mainland China under the condition of China’s commitments to the WTO (World Trade Organization) (Trade and Industry Department, 2022). Certainly, Hong Kong’s growing economic integration with mainland China since 1997 had made Hong Kong face several economic and political challenges and had eventually undermined Hong Kong’s political autonomy. The following discussion is on the factors and paths of challenges that Hong Kong had to face since 1997 due to loosening political autonomy after the deepened economic integration with Mainland China (Lee et. al., 2017).

The continued growing integration of SAR Hong Kong with Mainland China had proved to be double edged for having the scopes of both favorable as well as unfavorable consequences (Wong & Zheng, 2016). The double edges can be explained in a way that the integration had prompted to deflationary effect through the convergence of the price levels under the exchange rate system of mainland China, which in turn reflected on declining pressures on factor prices and thereby the costs of the goods and services in SAR Hong Kong (Woo, Lee & Shum, 2021), however on the other hand, Hong Kong loses its political autonomy and thereby the democratic system.

Hong Kong had experienced additional challenges over its traditional methods, position and advantages of trade due to the above specified integration and fast pace advancement in the competitiveness among the neighboring regions of SAR in Mainland China such as Shenzhen and Guangdong cities. Traditionally, SAR Hong Kong used to be the intermediary of the Mainland oriented trade. Therefore, when the Mainland’s restrictions over trade were lifted, the direct export and import relations took place between the important trade provinces of China and the Mainland, which made the Mainland eventually attract more foreign businesses and investments to be set up and proliferate in the Mainland itself and consequently, the traditional trade position of SAR Hong Kong diminished and followed up to a significant trade competition with the neighboring regions. The further analysis of economic and financial integration between the two reveals that the integration had imposed some serious structural adjustments in the economic activities and some significant modifications in the policy implications for SAR Hong Kong. Precisely, Hong Kong’s traditional market policies were to be augmented by macroeconomic policies. Evidently, the political autonomy of SAR Hong Kong was at the verge of being distorted.

The fiscal position of SAR Hong Kong had gotten weaker and deteriorated since 1998. Hong Kong had a fiscal revenue system based on assets, especially land and investment incomes related to property assets. Now after the burst of land price bubble in the year of 1997 and additional decline in land related fees and charges the fiscal revenue of the government had fallen substantially in the fiscal year of 1997 and 1998. This major fiscal deficit outlook could be restored through alternative medium term fiscal policy implications by modifying the limitation of the size and role of its government in its economic and social matters. Nonetheless, this economic downturn even more prompted the integration of SAR Hong Kong and Mainland China.

Another major impact of economic integration of SAR Hong Kong and Mainland China in regards to the disruption of political autonomy of SAR Hong Kong was on sector specific reallocation of labor and thereby the effect on income distribution. As mentioned earlier as well, prior to the integration with Mainland China, SAR Hong Kong used to mostly operate over a full employment economy of production. This had features of better levels of wage growth especially growth rate in wage of particularly the skilled laborers. Later, the integration with Mainland China and its inclination towards the value-added and skilled services and the driving force of the same generated the outsourcing of the manufacturing and low skilled services, which in turn gave rise to the structural unemployment in SAR. Furthermore, this had an impact structural shift in wage level inequality among the Hong Kongers. Analysis of the various experts would suggest that this level of unemployment and wage level inequality could be tackled by upgrading the skills and capabilities of the candidates of the labor force.

The “One Country, Two Systems” formula had seen an unprecedented political economic and social experience at the integration with Mainland China over the formulation of semi-autonomy. After SAR Hong Kong was handed over by the British Government, SAR maintained both the political features of People’ Republic of China and the United Kingdom, which means Hong Kong operated over the constitutional status as a SAR of China as well as the capitalist status grabbed from British rule (Yuen & Cheng, 2020).

Conclusion

Following the discussion in the above section it can be concluded that, prior to the deep integration of SAR Hong Kong with Mainland China, SAR’s economy strived on a decent amount of fiscal reserves, low unemployment rate and rather full employment production and thereby significantly advanced growth and development of the economy. Apart from that, in regards to human rights and press or media freedom, Hong Kong was pretty relaxed and used to respect the political freedom of every Hong Kongers, unlike Mainland China, for which the civil society of Hong Kong used to remain colorful and full spirited. Therefore after the integration between SAR and Mainland China, the political reforms took place and Hong Kong moved away from the semi-autonomy democratic to a uni-authoritarian political status that eroded civic and political freedom. This disruption in the political economy of SAR Hong Kong as a result of economic integration with Mainland China came about quite promptly and significantly.

References

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