US: Hong Kong And Beijing: The Future Of Economic Freedom – by Alejandro Chafuen

US: Hong Kong And Beijing: The Future Of Economic Freedom – by Alejandro Chafuen

Over the last few years I have seen student protests in the United States, Spain and Venezuela. I never expected, during my recent trip to Hong Kong, that I would witness a new “Occupy” movement. But, the leaders of “Occupy Central with Love and Peace” are not complaining about the lack of economic freedom. In fact, according to the Economic Freedom Index prepared by the Heritage Foundation, Hong Kong’s economic freedom score is 90.1, making it the top-rated economy for the 20^th consecutive year. This includes the years that have elapsed since Hong Kong reverted to the mainland. In the Human Freedom index, produced by Cato, Fraser Institute and the Liberales Institut, which includes personal freedoms, Hong Kong still qualifies with an enviable third spot in the rankings.



The movement I saw in Hong Kong is prompted by the fear and frustration that the powers in Beijing will erode the strength of the institutions which led this tiny place on earth, to become a rock of liberty and prosperity. The central business district of Hong Kong, targeted by this “Occupy” movement, is seen as the headquarters of the business power elite. It is this elite which has played a relevant role in creating and preserving the strength and freedom of today’s economy.
Is the frustration based on overvaluing the voting aspects of democracy? That seems to be the belief of those who defend the decision of the National People Congress Standing Committee (NPCSC) who are restricting the number of candidates to the two or three approved by 1,200 electors who were selected by—and are loyal to—Beijing.
A relevant player, C.H Tung, resurfaced to defend the decision of the NPCSC. Tung was the first chief executive of Hong Kong, from the transfer of sovereignty in July 1997 until March 2005, when he stepped down before completing his term. Tung’s main message to those who want more democracy could be summed up by “be patient” or “count your blessings.” Although most freedom champions, especially those from abroad, concentrate on the limited choice allowed by the recently approved electoral law, Tung asks them to reflect that “in the short span of just 20 years—Hong Kong would have moved from having Britain parachute a governor into Hong Kong to having five million voters choosing their own leader.” Claudia Rosett however, of the Foundation for Defense of Democracies and a Forbes contributor who spent many years in Hong Kong, argues that comparing the nomination of Hong Kong governors by Great Britain, with its tradition of rule of law and democratic processes, with the nomination process by Beijing, with its authoritarian and dictatorial track record, is misleading.
Tung also praised the NPSCS decision as a “well-deserved fruit of our desire for democracy” and a “glittering achievement.” He revealed the political philosophy behind his position when he stated “Democracy doesn’t have a final destination. And to fight for democracy is far from being the whole story in improving people’s livelihoods which, after all, is the ultimate test of good governance.” As he is well versed on how the West understands freedom, Tung knows that he is being provocative. For more than a decade, Tung was a member of the Board of Overseers of the Hoover Institution atStanford University. The statement by Larry Diamond, a senior fellow at Hoover, after the NPSCS announcement, that “it was a sad day for Hong Kong, and for democracy” must not have come as a surprise to Tung.
In the late 1980s, free-market champions based in Hong Kong founded the Hong Kong Centre for Economic Research (HKCER) and C.H. Tung was one of the first to send money for support. His willingness to defend Beijing’s decision was again reaffirmed when he made an all-out defended China’s reform efforts at the gathering of the Mont Pelerin Society (MPS). Tung defended China’s record and goals not only on the economic arena but on human rights, the environment, and even describing Beijing’s government as a major force in the search for peace. Many MPS members were not pleased with his remarks.
Y.C. Richard Wong, a Chicago Ph.D. who has been the director of HKCER since its founding, played an important role in trying to liberalize and democratize the electoral process. He was one of the most active members of a Group of 13 experts (G-13) who recommended opening the nominating committee for the chief executive election in 2017 to public participation and making it more democratic. They proposed doubling the size of the existing election committee from 1,200 to 2,400 members, with the expanded members being elected by registered voters in Hong Kong. When I asked him about the G-13 proposal his answer can be described as realistic fatalism. He said, “Our G-13 proposal now is in the wastepaper basket, we have a new law and we have to respect it.” It was clear that for Wong the decision was not ideal, but engaging in a major battle to oppose it might, in his mind, create more barriers to the move towards a more extended and transparent democracy.
What is next for the relationship between Hong Kong and the mainland? Businessmen and economists tend to focus on economic incentives. The more trade the less the chance for conflict. Speaking at a private function organized by the Reason Foundation, Louis-Vincent Gave, a Hong Kong based money manager and author of Too Different for Comfort highlighted that 15 percent of China’s trade takes place in renminbi, RMB, up from almost zero percent in 2009 and likely to increase. Hong Kong is the most important RMB center outside the mainland. During the last five years, RMB deposits in Hong Kong had surged tenfold to approximately RMB 900 billion. Gave believes that the increased RMB internalization will provide another boost to Hong Kong’s role as a leading financial center for China. Hong Kong is important to China for several other economic reasons. Despite that its economy represents only 3 percent of that of the mainland, Hong Kong is its second largest trading partner, representing over 9 percent of total trade. It is also the largest source of foreign investment and the largest recipient of Chinese external investment.
But not everything is economics, John Greenwood, a founder of HKCER and a member of the Hong Kong currency board, believes that the prime driver of these last and the coming decades is Chinese national pride. Regaining control of Macau and Hong Kong was essential, but only a first step to bring Taiwan to their fold. They will make major efforts to avoid messing up the integration of Hong Kong in a way which would endanger a peaceful reunification with Taiwan.
The relationship between China and Hong Kong is not simple, one freedom champion, such as Greenwood can testify that the government never pressured or criticized HKCER, even when the studies contradicted “party line.” Another, such as publisher Jimmy Lai, feels political pressure to tone down his support for political liberties. Andrew Shuen, of the Lion Rock Institute argues that “the goal is to maintain the balance that allows the continuity of economic flourishing and a gradual enhancement of political liberties, which will be best achieved by the people learning continuously from the consequences of choices made when exercising those very liberties.”
The road might be longer than some expected, but I sense that a majority will help them maintain the course.
* Alejandro Antonio (Alex) Chafuen, Ph.D., has been president of Atlas Economic Research Foundation since 1991. A member of the board of advisors to The Center for Vision & Values and a trustee of Grove City College, he is also the president and founder of the Hispanic American Center of Economic Research. Dr. Chafuen serves on several boards including the Chase Foundation of Virginia, the Acton Institute, the Fraser Institute (Canada), and is an Active Honorary Member of the John Templeton Foundation.