TEXT: U.S. CONSUL GENERAL 2/27 REMARKS ON HONG KONG'S FUTURE
(Transition working, but U.S. has "serious concerns")

Washington -- The United States expects Hong Kong will continue to be a stable, prosperous and free society after its return to Chinese sovereignty June 30, but the Clinton administration has some "serious concerns about a few key areas," according to Richard A. Boucher, U.S. Consul General in Hong Kong.

Speaking February 27 at the National Press Club, Boucher described a vibrant Hong Kong with strong business, commercial and cultural ties to the United States. "It has been estimated that U.S. companies employ 10 percent of Hong Kong's work force," he said. "So promoting our economic and commercial ties to Hong Kong is very important to us. U.S. companies are in transportation, telecommunications, entertainment, energy, high tech manufacturing, finance, marketing, engineering, media, retailing, in fact we're at the leading edge of a leading edge city."

Boucher pointed out that the city has attracted $14 billion in U.S. investment and another $14 billion in annual U.S. exports, cooperates closely with U.S. law enforcement authorities, hosts an average of 65 annual visits of U.S. Navy ships, and sends 14,000 students per year to study in U.S. schools, colleges and universities.

With the handover to Chinese rule close at hand, Hong Kong has achieved a higher profile in U.S. foreign policy, Boucher said, pointing out Secretary of State Albright's recent comment that "the Chinese must realize that, for their own sake, preserving the possibilities of Hong Kong for them in terms of trade and Hong Kong's window to the world is very important."

Boucher explained that the United States is concerned about two aspects of China's takeover of Hong Kong, specifically the question of how a free press, and a free and active legislature, will be maintained.

"Hopefully those concerns will be resolved over time by the continuation of an active press and the election of a new, representative legislature as early as possible," Boucher said, adding "our basic view is that many things are going well at this crucial and confusing time, but we have serious reservations about some key elements" of the transition.

The U.S. government is doing a number of things to contribute to a successful transition and future for Hong Kong, Boucher said, including making clear public statements on U.S. policy, maintaining an active consular presence in Hong Kong, reporting formally to Congress on the progress of the transition, and concluding bilateral agreements for the period after the handover.

"We do all of these things to ensure that we play a positive role in the transition for the people of Hong Kong, and to ensure that U.S. interests are preserved through the change of sovereignty," Boucher said.

Following is the official text of Boucher's speech:

(begin text)

CONSUL GENERAL RICHARD A. BOUCHER

FEBRUARY 27, 1997

THE UNITED STATES AND HONG KONG'S FUTURE

Thank you for inviting me here today and giving me an opportunity to talk about the future of the United States and our interests in Hong Kong, a topic which is taking up more and more of the American public's attention. I am asked about it everywhere I go.

I think you all know that Hong Kong, which has been a British colony for the past 155 years, will be returned to the sovereignty of China at midnight on June 30 this year. That much is fairly straightforward and simple to understand. How this is really going to work, how a series of unique pledges is going to be implemented, and what it means for all of us is understandably murky. Many of the people I talk to have made some assumptions about what that handover is actually going to mean, and those assumptions won't necessarily prove true. Indeed, many of the predictions about Hong Kong which I remember from my time in China 10 or 15 years ago have proven very wrong. Remember? Hong Kong was supposed to be a ghost town with no industry, no people, and low property prices. So, I want to take this opportunity to give you a fresh assessment of what is happening in Hong Kong, and use that to consider, as best we can, the factors that will determine what's going to happen, how it is likely to effect U.S. interests, and what we are doing about it.

Most often the question I'm asked is: am I confident that Hong Kong after the handover will really continue to be a stable, prosperous and free society? That is not an easy question to answer. Basically, the answer is yes, but we need to look carefully at a number of factors to get a full picture. I will also say clearly that we have some serious concerns about a few key areas.

When I consider what has made Hong Kong into one of the world's most modern cities, with cutting edge industry and services, with an active political life, a large and established foreign presence, and soaring property and stock markets, there are ten factors which seem most important:

How these ten factors fare will continue to determine how Hong Kong does in the future.

First let's set the scene a little, particularly for those of you who may not be personally familiar with Hong Kong.

What kind of a place is Hong Kong? Those of you who have visited there lately can conjure your own memories. Incredible dynamism is at the top of my list. I think almost immediately of the way Hong Kong blithely undertakes projects of such huge scale that they would make any other community in the world blanch. How about the new airport project, over US$20 billion of train track, roads, new underground stations, a new cross-harbor tunnel, a new bridge that many equate with San Francisco's Golden Gate, a new island, terminals and a new town to go with the airport itself! Or, how about the largest container port in the world, moving over 12 million containers (T.E.U.) a year? Or the thousands of small entrepreneurs setting up factories in China and elsewhere and selling to the world? How about the Hong Kong investors, sometimes with American partners, building power plants throughout China and increasingly elsewhere in the developing world?

Do you remember the old adage that advised us all to invest in real estate "because they aren't making any more of it?" Whoever gave that advice had never been to Hong Kong, where losing your harbor frontage and losing your view is a daily occurrence. New land provides sites for ever more housing, offices and a brand new convention center. The handover ceremony itself will take place on ground that wasn't even there two years ago. On the other hand, the old adage is still correct -- in the sense that property values have never been higher.

When I look at the business of Hong Kong, I realize that I'm looking at the city of the future, it's already here today. It's a service-based economy (83%), technologically advanced, driven by information and where information -- some of it true, come of it not so true -- drives markets. Wired to the rest of the world, it offers customized service, flexible production, overnight efficiency, modern communications, and intelligent, efficient managers and workers. It's lifeblood is openness, transparency, flexibility, and especially the free flow of information.

All that's very nice for Hong Kongers, but what does it mean for the United States? What do we see in one city of six million people on the other side of the world?

In fact, we have a lot of really concrete interests there. Hong Kong is a tremendous international center for business. It has attracted about 14 billion U.S. dollars of U.S. investment, and another 14 billion in annual U.S. exports. About 1200 American companies maintain offices in Hong Kong, and over 450 of those are regional headquarters. It has been estimated that U.S. companies employ 10 percent of Hong Kong's work force. So promoting our economic and commercial ties to Hong Kong is very important to us. U.S. companies are in transportation, telecommunications, entertainment, energy, high tech manufacturing, finance, marketing, engineering, media, retailing, in fact we're at the leading edge of a leading edge city.

Another important interest, and one which you might not hear about as much as it deserves, is in the area of law enforcement cooperation. Hong Kong crime fighters routinely work with U.S. law enforcement agencies to combat drug trafficking, illegal alien smuggling, organized crime, counterfeiting, credit card fraud, and proliferation of weapons. What we do in Hong Kong can significantly affect Americans' safety and security.

Speaking of security, Hong Kong hosts an average of 65 visits each year by ships of the U.S. Navy. Our ships' sailors and marines contribute about 50 million dollars to Hong Kong's economy annually. Hong Kong is a perfect place for servicemen and women, and their families who fly down to visit, to enjoy shore leave in an environment famed for its opportunities for shopping and good dining. At the same time, the ships themselves can be reprovisioned from Hong Kong's abundant resources.

Those of you interested in international educational exchange may be interested to know that, each year, about 14,000 Hong Kong students are enrolled in U.S. schools, colleges and universities -- many of them paying their own fees. Significant numbers of Hong Kong's university leaders and faculty are either American citizens or received their educations here. There are many government and private linkages between Hong Kong and U.S. institutions of higher learning. In the wider cultural sphere, Hong Kong and U.S. visual and performing artists visit each other's stages, galleries and concert halls on a regular basis. In addition, there are many, many family ties and personal visits between us. In 1996, the U.S. Consulate General issued 170,000 business and tourists visas to Hong Kong residents to come spend money in the United States. No less than 700,000 U.S. travelers visited Hong Kong last year.

Lastly, as we draw nearer to the handover, Hong Kong has achieved a higher profile in U.S. foreign policy considerations. It is a major factor in U.S.- China relations. Both President Clinton and Secretary of State Albright have addressed the question recently. As Secretary Albright said on "Meet the Press" soon after assuming office, "The issue here is that the Chinese must realize that, for their own sake, preserving the possibilities of Hong Kong for them in terms of trade and Hong Kong's window to the rest of the world is very important. I think the Chinese will realize this." Hong Kong is vital to China's development: half of China's foreign trade and almost 60% of its investments comes through Hong Kong.

So, given our desire to see all this preserved under the new sovereign -- China -- how well do we think Hong Kong's way of life is going to weather the transition? Let's look now at that list of ten confidence factors I mentioned a few minutes ago and see which ones are in good shape, and which ones seem to be faring not so well.

First of all, let's examine China's commitments, the basic legal framework. It's important to note that Hong Kong is not going to become a part of China in the same sense that cities like Shanghai or Guangzhou are parts of China. It is going to become a Special Administrative Region that retains a high degree of autonomy in all matters except foreign affairs and defense.

There is still going to be a tightly controlled border between Hong Kong and China. People from Hong Kong will carry a different passport from those carried by other Chinese. There will be no mass migration of Mainland Chinese people into Hong Kong, the limit will remain at approximately 150 per day who can come in to live.

Hong Kong and China will remain different legal jurisdictions. We will have a separate extradition treaty with Hong Kong, for example, which will forbid fugitives returned from the U.S. to Hong Kong from then being transferred to China.

The government of the Hong Kong Special Administrative Region will be in the hands of people from Hong Kong. The Chinese Ministry of Foreign Affairs and the People's Liberation Army will have representatives in Hong Kong to handle the foreign affairs and defense matters which are reserved to the Central government in Beijing. But all other issues -- housing, education, welfare, commerce and foreign trade, judicial matters, shipping, law enforcement, aviation, immigration, visas and the things that affect the everyday lives of people -- are going to be decided by Hong Kong people. Taxes collected in Hong Kong will be spent in Hong Kong, not in China; its entire financial system and currency will be separate from the Mainland's. Hong Kong will maintain its own currency, the Hong Kong dollar, its own monetary policy, and its own currency reserves.

These pledges by China are all laid out in two documents. One is the Sino- British Joint Declaration of 1984, in which both the departing sovereign and the incoming one agreed on the principles that are to ensure Hong Kong's way of life would continue after the handover. The second is the Basic Law, in effect Hong Kong's future constitution, which was adopted by China's National People's Congress in 1990. So China has officially signed on to the principles I've mentioned above, along with others, like progressive democratization and eventual universal suffrage in direct elections for the chief executive and the legislature. If we're just looking at what China has said it will do in these documents, there's very little to quarrel with. So the Chinese commitments make a positive contribution toward Hong Kong's future.

Economic prospects also look glowing. Hong Kong's economic indicators are all in good shape, growth this year should be in the range of five and one half percent, not surprising with the hotels full for most of the year, major construction continuing on the airport and related projects, an economic upturn expected in China, and continued growth in the US market. The stock exchange and property market are booming. The most recent business confidence survey by the American Chamber of Commerce in Hong Kong indicated that 95 percent of U.S. companies consider the future environment as "very favorable" or "favorable", a four-percent increase from the previous year. We need to allow a little wiggle room for rising costs and declining domestic exports but we should still see economic prospects as a positive factor when we try to foresee Hong Kong's future.

The social and business environment is another factor. Society is stable. The crime rate is low, about like Singapore's. As President Clinton observed, Hong Kong today is almost the perfect open market. The Heritage Foundation rates Hong Kong the freest economy in the world. Hong Kong does have violent criminal groups, underemployment and people in need, but the overall social environment is still a positive influence on feelings of confidence about Hong Kong.

Another key factor in Hong Kong's current way of life is its exemplary civil service. Hired and promoted by merit, the men and women who carry out the work of the Hong Kong government are widely admired for their ability and impartiality. These people form the backbone and the conscience of Hong Kong's future, and are firmly committed to a low level of government interference. In the Special Administrative Region, they will continue to be chosen and promoted on merit and from Hong Kong. In my book, they constitute a solid positive factor in Hong Kong's future, an especially positive one given the new Chief Executive's decision last week to keep all the eligible current policy Secretaries in place through transition.

As Hong Kong approaches the handover, one factor often cited as a key point of concern is the encroachment of corruption. Hong Kong stands conspicuously apart from most of its neighbors in Asia in that bribery or the abuse of government connections are actively investigated and punished in its society, and certainly are not an institutional part of it. At one time, Hong Kong did have a very serious corruption problem, but it has been tightly reined in, largely through the activities of a unique organization, the Independent Commission Against Corruption. Under the incoming Special Administrative Region government, the Commission will continue to have full powers to maintain a Hong Kong free from rampant bribery, graft, and abuse. It's got a tough job, but the Commission also is a positive factor for Hong Kong, again especially given the naming last week of a new Commissioner who has extensive prior experience in the Commission.

Next we come to the question of a free press. Here, I cannot be so sanguine. Both the Joint Declaration and the Basic Law guarantee freedom of the press, along with a quiverful of other liberties which we would think of as First Amendment freedoms. In reality, though, freedom of the press in Hong Kong has already been limited by the self-censorship practiced by some journalists and editors, especially when reporting on China or on topics the Chinese government considers sensitive. Senior PRC officials have said that Hong Kong papers could not print personal criticisms of Chinese leaders after the handover, nor should they print "rumors and lies". Some editors say privately that they think China would retaliate for unfavorable reporting or editorials by swinging advertising dollars away from them to their more compliant competitors. Still, Hong Kong's journalists are active, competitive, and determined. The production in Hong Kong of unbiased foreign media, including the Asian Wall Street Journal, CNN, Time and Newsweek, as well as the presence of numerous other American media representatives, encourages an open information environment. So, Hong Kong's free press is not a thing of the past, but as a factor for the future, we'll have to see.

A free and active legislature, able, like the press, to investigate and ensure that no one can get away with any shenanigans, is an essential part of Hong Kong's open environment. I'm afraid there's a lot to be concerned about here. The present elected Legislative Council will come to an end at midnight on June 30, to be replaced by a provisional legislature, a group of 60 people (33 of whom are on the present legislature) selected by the Selection Committee, which, in turn, was chosen by the Beijing-appointed Preparatory Committee. The provisional legislature will handle transitional matters but is itself to be replaced by an elected legislature within one year of the handover. The problem is that the Joint Declaration and Basic Law make no mention of a provisional legislature and, in our terms, a body elected by a million is being replaced by a body selected by four hundred. The original idea was that the present Legislative Council would continue through the transition, but unresolved disputes over how to elect it finally led the British to hold the 1995 election without Chinese concurrence about the election rules. China served notice that no body elected without its agreement would be allowed to continue after the handover. The result of this running dispute is a provisional legislature which our government views as unnecessary and unjustified. For as long as it exists, Hong Kong will have a legislative assembly which was not elected by, and therefore is not fully responsible to, the people of Hong Kong. There is in the end a commitment to an elected legislature, a promise that an open election will be held within a year, and a promise that the legislature will have full powers to legislate and investigate. Overall, this is a disconcerting picture, and, until an elected legislature is in place, one which has a negative effect on confidence about the future.

Hong Kong's judicial system is also guaranteed continuation under the Joint Declaration and the Basic Law. It will remain separate from the PRC judiciary and continue the common law tradition. Most observers cite maintenance of the rule of law as the crucial factor if Hong Kong's way of life is truly to continue. It is certainly one of the top factors in keeping business confidence aloft, and in keeping ordinary Hong Kong citizens feeling optimistic about their freedom after July 1. The Court of Final Appeal will be in Hong Kong, not in Beijing. In almost all cases, it will have the definitive say in legal actions after the handover; however, courts must refer to Beijing whenever necessary for interpretation of the Basic Law when it comes to matters which are the responsibility of the Central Government. Some in Hong Kong worry that this could be a major loophole in the independence of the Hong Kong judiciary. In addition, we are all concerned by the current effort to water down civil liberties in Hong Kong. Overall, however, we can consider the continuation of the judiciary and the common law legal system a positive factor.

Another important element in preserving Hong Kong's way of life is its status in relation to a wide variety of international agreements and arrangements. After the handover, Hong Kong is to maintain its separate identity in such bodies as the World Trade Organization and the Asia-Pacific Economic Cooperation Forum. It will remain a separate customs territory. It will continue to issue its own currency free from foreign exchange controls. Hong Kong is bound by many international standards and practices, and reciprocal arrangements with other governments. We have negotiated a series of agreements ourselves with Hong Kong on everything from Civil Aviation to Prisoner Transfers. Hong Kong's international status and support is certainly a positive influence.

The tenth and last factor to consider is the overall international environment. Here the signs are good. Asia is peaceful and prospering. Relations between the major powers, especially the United States and China, are improving. Hong Kong, often caught in the middle of our disputes, benefits from this benign environment as well as from the trade which it generates. For China itself, Hong Kong is a big challenge and a big opportunity. It is an opportunity to show the international community and the international media that it does understand the commitments it has made and how to live up to them. It is an opportunity to show the people on Taiwan that it respects its pledges of "one country, two systems." Nothing is predictable, but the overall environment for Hong Kong and the rational incentives all those involved have to support Hong Kong's future mean that this factor also has a positive effect for Hong Kong.

If you look back over all ten factors I've covered, you'll see a basically positive picture with some important issues unresolved. And that's our basic view -- many things are going well at this crucial and confusing time, but we have serious reservations about some key elements. Hopefully those concerns will be resolved over time by the continuation of an active press and the election of a new, representative legislature as early as possible.

Let me add a few words about what your government is doing to contribute to a successful transition and future for Hong Kong. We're not just standing by and playing rating games.

First of all, we make our interest in Hong Kong's future clear. We do this in private discussions and negotiations, but we also do it in public statements. You'll find that both the President of the United States and the Secretary of State commented on Hong Kong's future during the very first week of the second Clinton Administration. Secretary of State Albright has done so repeatedly. Other Cabinet members and many members of Congress have done the same, and I know they will continue to speak out and raise questions.

Second, we intend to maintain an active Consulate presence, encompassing all the areas of economics, business, law enforcement and ship visits which we handle now. Just as our firms intend to participate in the future of Hong Kong, so do we as a government intend to act as a responsible and full partner to the government of the Special Administrative Region of Hong Kong in all the areas of its responsibility. We're not pulling the plug on Hong Kong.

Third, the Department of State regularly reports formally to Congress on the progress of Hong Kong's transition. The next report will be delivered to Congress on March 31 and will be available on the Internet soon after. This is one of the requirements of the U.S.-Hong Kong Policy Act of 1992. The series of reports which have been issued over the years cover all the areas of U.S. interest which I have discussed here today, and provide a chronological account of both positive and negative movements toward the handover, as seen through official American eyes.

Fourth, we have also demonstrated our confidence in Hong Kong's future and our intentions by concluding bilateral agreements for the period after the handover, which necessarily assume Hong Kong's continued autonomy and establish standards for our future cooperation. I had the pleasure of signing such an agreement last December, for the surrender of fugitive offenders. Other agreements are in the process of final approval or negotiation.

Fifth, we also continue to perform the broad array of services and functions that are within the ambit of the U.S. Consulate General in Hong Kong: From passport services to U.S. citizens, to tracking down currency counterfeiters; from promoting U.S. exports of goods and services, including agricultural products, to facilitating U.S. Navy Ship visits.

Finally, the U.S. government also encourages and supports the continued development of the democratic institutions of Hong Kong, as we do around the world. We do this by organizing government exchanges and facilitating private ones, by providing a wealth of information about democratic institutions in the United States.

We do all of these things to ensure that we play a positive role in the transition for the people of Hong Kong, and to ensure that U.S. interests are preserved through the change of sovereignty. We don't ignore the difficulties of the transition, the unprecedented nature of the undertaking, and the problems which have already arisen, nor do we underestimate the historic importance of Hong Kong's return to China. At the same time, we don't neglect Hong Kong's strengths. Hong Kong is a unique and wonderful place, with tremendous resilience, one of those places that shows what wonders men and women can create when they pour their vision and energy into the effort. We believe Hong Kong can and should go on showing the rest of us its beautiful, vibrant face. It is a unique city and can, if it continues along its present path, set an example for the rest of us -- an example of openness, farsightedness, flexibility, and endurance. We intend to be part of its future.

Thank you very much.

(end text)

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