NCPA - National Center for Policy Analysis

Sun Sets On Hong Kong

June 30, 1997

Tonight the greatest experiment in free market economics in history comes to an end. At midnight (12 noon Eastern Daylight Time), Hong Kong will cease to be a British colony and become a province of the People's Republic of China -- Communist China. China has promised that Hong Kong will be able to retain its free market economy for the next 50 years. But experts have serious doubts that it is really capable of maintaining the freedoms that made Hong Kong unique, and one of the most prosperous places on earth. They believe that tonight's handover is the beginning of the end for Hong Kong.

One of the most skeptical experts is Alvin Rabushka of the Hoover Institution at Stanford University. In a new essay, Rabushka predicts that China will "decimate the political, civil, and economic liberties that define Hong Kong's way of life." The reason is because economic, political, religious and other freedoms are ultimately tied together. Although China has moved a long way toward adopting economic freedom, it still remains ruthless in its suppression of other freedoms. Rabushka believes it is inevitable that China will move to crush free speech, a free press, religious tolerance and other non-economic freedoms. Eventually this will erode the spirit that made Hong Kong special.

Perhaps the central difference between Hong Kong and China, in Rabushka's view, is their differing views on the rule of law. Hong Kong adheres strictly to the Anglo-Saxon view that the judiciary must be absolutely independent, all citizens are equal before the law, that the law must be enforced impartially, and that citizens have rights no government may violate. China, on the other hand, has no such traditions and in fact views rights as synonymous with anarchy.

If, as Rabushka suspects, Chinese control will destroy the rule of law in Hong Kong, this inevitably will undermine many of the institutions that underpin the economy. What will happen to contracts, private property, and the Hong Kong dollar, for example? Rabushka notes that the Hong Kong dollar is linked directly to the U.S. dollar, meaning that the Federal Reserve really runs Hong Kong's monetary policy. He thinks it is unlikely that China will continue to tolerate such interference with its sovereignty for long.

Rabushka concludes that the outlook for freedom in Hong Kong is bleak. Civil liberties will be restricted, the economy will increasingly become dominated by firms with connections in China, and the cosmopolitan character of the city will gradually erode. In the end, money will still be made, but everything that made Hong Kong unique will be gone.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, June 30, 1997.


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