China's Fist Shakes Up Hong Kong

Goodwill tour of US turns into damage-control mission for British colony's trade secretery. FOREIGN TRADE

IT was a tough selling job for John Chan. There was something singularly difficult, even poignant, about Mr. Chan's whirlwind mission to Washington and other United States cities last week. He was here to convince officials, policymakers, businessmen - anyone who would listen - not to write off his own land because of China's troubles.

Mr. Chan is secretary for trade of Hong Kong, which is scheduled to become part of China by 1997. While China's brutal crackdown on dissent stunned and saddened most of the world, it sent a collective tremor through Hong Kong.

Not surprisingly ``the US is now focusing on Hong Kong as never before,'' Chan says. ``We've not seen any evidence of pulling out of investment that is already there,'' he says. Mirroring the concern, however, the Hong Kong stock market plunged but has been gradually moving up, he says. ``we've recovered more than half of the lost ground,'' Chan says.

The day after the Chinese government massacred demonstrators in Tiananmen Square, the chief index of the Hong Kong stock market dropped from 2700 to 2100 points. The index was down 11.1 percent since the beginning of the year, as of last Friday. Most other nation's markets have risen significantly during the same period.

``I would not be surprised if there is a certain slowing down [among future investors], if people accept a wait-and-see attitude,'' Chan says.

Hong Kong has a lot to lose if already-edgy foreign investors begin to pull the economic plug. Its economic dynamo is packed into a 1,066 square-kilometer (412 square mile) patch of British colonial land, adjoining the Chinese province of Guangdong. Hong Kong Island and a sliver of mainland territory belong to Britain permanently. But 92 percent of Hong Kong is only under lease to Britain, and the lease expires on July 1, 1997.

With its powerful economy, Hong Kong is considered one of Asia's Four Tigers - four newly industrialized powers that also include Singapore, South Korea, and Taiwan. Each has been scrambling to emulate Japan's success. But in 1984, the British and Chinese governments created some uncertainty when they approved a joint declaration transferring most of the colony back to Chinese sovereignty.

The agreement with China hinges on the assumption that the resulting union will be ``one country, two systems.'' That is, it provides for a quasi-autonomous ``special administrative region'' of Hong Kong that will remain as a capitalist enclave in a communist China for another 50 years beyond 1997.

The declaration stirred intense controversy in Hong Kong and Britain, with the result that tens of thousands of Hong Kong residents left in the five years since it was signed. Now, China's ruthless crackdown on its nascent democratic reform movement has, in some eyes, thrown a long shadow over Hong Kong's future. Chan was here to offer a bit of light.

For two years, from 1987 until March of this year, Chan was the Hong Kong government's chief liaison with China, charged with working out many details of the transfer of sovereignty. As secretary for trade and industry, he is now charged with shoring up confidence with Hong Kong's outside investors and trading partners.

Not surprisingly, he chose the US for his first major foray abroad. The US is Hong Kong's single biggest export market, and US investment in the colony tallies more than $6 billion. What was planned beforehand as a routine goodwill visit, however, developed into a damage-control exercise as the situation in China deteriorated.

With a candor that is certainly disarming, although not completely comforting, Chan tries to counter investor skepticism.

``I told them confidence in Hong Kong had been badly shaken,'' he says, in his clipped British accent. ``We hope our friends all over the world will recognize Hong Kong's situation,'' he says.

``We would like business people and investors ... to look at Kong Kong on its own merits,'' he adds. Nevertheless, many people are preoccupied with the coming reunification with China, he admits. ``Of course, right at the moment, the situation is not entirely clear in China,'' he says.

Hong Kong's government strategy has been to stress the positive elements of the agreement transferring Hong Kong to China. But it is a plan born of necessity, and it is not clear if it will succeed.

Chi-Kwan Ho, associate coordinator of the Federation of Overseas Hong Kong Chinese, told a Washington press conference earlier that Hong Kong residents have come to accept that reunification is ``inevitable.'' But, she said, any ``gradually built-up sense of belonging ... is now serious endangered by the Beijing massacre.''

William Kennedy, formerly a strategic analyst at the US Army War College, used more passionate language in a column published in the Washington Post.

``A new windrow of dead mocks us,'' he wrote. ``What awaits the Hong Kongese and their notion of freedom has been spelled out on every television screen in the noncommunist world.''

The joint declaration spelling out Hong Kong's future contains extraordinary language in a legally binding document, on file at the United Nations. It essentially decrees that China's socialist economic system will not apply to Hong Kong, and that Hong Kong residents will continue to enjoy various civil, legal, and international rights. Hong Kong's civil laws and government would remain in place, and a separate legislature and judiciary would continue to function.

The declaration also provides for ``autonomy'' of Hong Kong's banking and financial system, prohibits any imposition of exchange controls, and guarantees that the Hong Kong dollar (currently tied to the US dollar in international exchange rates) will continue to be freely convertible.

The basic law that will govern Hong Kong after 1997 is now being drafted by a joint commission of Hong Kong and People's Republic of China officials. ``People are now waiting to reassess the entire draft, and look at it even more critically,'' Chan says.

But if the transition should falter, Hong Kong's residents have few options open to them - unless other nations change their attitudes. Some 3.2 million of Hong Kong's 5.6 million inhabitants are British subjects. But their special status - British Territory Dependent Citizens - does not allow them the right to reside in Britain itself.

Congressman John Porter (R) of Illinois says the US should pressure Britain to codify ``basic human rights guarantees'' in the basic law that will govern Hong Kong after 1997. If China resists, he says, then Britain ought to threaten to repudiate the agreement and turn Hong Kong into a United Nations protectorate.

Oddly, it is easier for many Hong Kong residents to emigrate to the US, Canada, or Australia than to Britain. Porter has introduced legislation to increase the annual US immigration quota for Hong Kong Chinese to 50,000 - a tenfold increase.

``The US can do more,'' says Francis Ng, a member of the Federation of Overseas Hong Kong Chinese. It can use international pressure to force China to think about human rights before it acts against reformers.

The US should also insist on a set of international guarantees protecting Hong Kong, he says.

``Even though we have a beautifully written basic law,'' says Mr. Ng, ``the military won't respect it.''