Leaving the empire: Whither Hong Kong?

IN 1997, Hong Kong will leave the British Empire and revert to China. In theory, nothing important will change. China basically says it will permit Hong Kong to run its own affairs except defense and external relations. At first, the agreement to return Hong Kong to China sent shock waves through the business community. Then business picked up and went on - almost as usual - and Hong Kong's economy is now booming. But deep down, something is different.

According to one survey, about 50 percent of Hong Kong's educated, professional class intends to emigrate before 1997. Already, thousands have left for Canada, Australia, or the United States. But for the vast majority of Chinese poor or working class, there are no alternatives to staying.

At first glance, there could be no greater contrast between the affluence and capitalism found in Hong Kong and the professed communism in Peking. The simplistic view is that Hong Kong is doomed. It will slowly metamorphose into a pale imitation of its former self as 1997 approaches and thereafter.

Yet, if one travels in southern China - especially Canton, Shanghai, and the so-called ```special economic zones'' established by the reformist Communist Party leaders under Deng Xiaoping - the impression is that Hong Kong is taking over China. Substantial development in the region is spurred by either trade with Hong Kong or by investment from the crown colony. There is also increasing disparity in southern China between the new rich and those outside the boom. Food prices are quickly rising. But overall economic progress in the area has been significant. Living standards are much improved.

Hong Kong's entrepreneurial spirit is taking over Shanghai's streets, which are filling up with ``private'' shops and businesses. It is no secret that many wealthy businessmen live in China and their numbers are growing as China continues to open to the West.

Close ties already exist between Hong Kong's wealthy and their mainland Chinese business and financial counterparts. Without Hong Kong, China's economic miracle would have been only a shadow of its present reality.

Hong Kong banks raised more than $1 billion in loans for projects in China during the first half of this year - more than double the figure recorded for the whole of 1985. And China's property holdings in Hong Kong are officially valued at $1.3 billion, but may be twice that amount. Thus, it is in China's interest not to destroy Hong Kong's prosperity.

China has tried hard to reassure Hong Kong's entrepreneurs that they will be able to carry on as usual after 1997. One major unknown is the desire by many of the crown colony's inhabitants to achieve democracy and local self-government before the turnover. This may prove to be a serious clash between the two societies, since there appears to be little tolerance in Peking for true political diversity.

Hong Kong is a house of cards held together by confidence in the behavior and predictability of Chinese authorities over a very long period. Political upheavals, or a disruption in progress toward reforming and opening China's economy, would certainly undercut faith in Hong Kong's destiny.

The future of both Hong Kong and China is tied to the Chinese Communist Party's ability to continue steady progress toward reform, to contain popular resentment against growing disparity in wealth, and to restrain ``conservative'' revolutionaries in China who fear the influence of Western decadence and rampant capitalism on domestic communism. The results of the recent party congress indicate that reform remains the country's top priority. But the Congress also showed that opposition still exists and that the future is less than certain.

The question for Hong Kong and China is, Will the marriage bring about what they both want?

Harry Blaney and Julia Moore write frequently on foreign affairs and have recently returned from a trip to China and Hong Kong. Both are former research associates at Georgetown University's Institute for the Study of Diplomacy.