The Economist: Still one state, two systems?

July 2, 2003

Perhaps it was na ve of the reformers to have expected that the cathartic effect of SARS would jumpstart political reform. After all, over the past two decades of sweeping economic reform in China, there has been plenty of talk of political reform, but little action. Instead, two anniversaries this week were occasion for disappointment rather than celebration by reformers. Despite widespread speculation that Hu Jintao, who replaced Jiang Zemin as Chinese president in March, would outline plans for low-level party democracy in a key speech, he did no such thing. On the same day, as many as half a million people took to the streets of Hong Kong to protest against a new anti-subversion law. Critics claim that the legislation would strip away from Hong Kong the liberties that the former British colony was supposedly guaranteed when it reverted to Chinese rule six years ago. The protests took the shine off celebrations marking the sixth anniversary of the handover, attended by Wen Jiabao, the Chinese prime minister. As if the demonstrations weren't enough to unsettle Tung Chee-hwa, Hong Kong's unpopular chief executive, Mr Wen conspicuously failed to heap comradely praise on him while visiting the territory.

Hong Kong's new law is, according to the government, a national security measure. Under the draconian proposals, which have been criticised by America, among other foreign governments, people can be jailed for life if convicted of subversion, treason or forcefully advocating secession from China. The new law also gives police sweeping search powers without court order. Critics worry that it is a sign that the territory's pro-Beijing government is getting ready to stamp out groups it considers to be a threat, such as the Catholic church and the Falun Gong spiritual movement, which practises freely in Hong Kong but is banned in China.

The marchers, including many first-time protesters, were also angry about the government's handling of the economy and SARS. Hong Kong's once-lively economy has stalled and its sky-high property prices have plummeted since its handover to China. The slowdown is not merely due to fears about democracy. Cities on the Chinese mainland, such as Shanghai and Shenzhen, are increasingly seen as the gateway to China, but without Hong Kong's high costs. Hong Kong's currency is pegged to the American dollar at quite a high level, while the Chinese yuan is more loosely pegged and widely regarded as undervalued, so the only way for Hong Kong to become competitive again is via painful deflation. The marchers are also unhappy about SARS, which killed around 300 in the territory, though the rapid spread of the virus had less to do with incompetence in Hong Kong than with China's initial lack of openness about the disease, which started in the mainland province of Guangdong.

Despite the size of the protests--the biggest since 1989, when a million took to the streets to demonstrate against the shooting of pro-democracy activists near Tiananmen Square--Mr Tung is going to press on with the new law. This is probably because he is worried that if left until later, it could have an impact on elections to Hong Kong's 60-member legislative council next year. In these elections, the number of directly elected seats will rise from 24 to 30, giving critics of Mr Tung and Beijing a chance to gain a majority in the hitherto overwhelmingly pro-government council.

However, Mr Tung did let it be known that he was "very concerned" at the size of the demonstration and that an emergency cabinet meeting had been held on July 2nd. The official line from Beijing, promulgated via a state-backed newspaper, is that the march had been "orchestrated by some forces with ulterior motives" and could exacerbate a growing social split in Hong Kong. The government has released the full draft of the new law but the pro-democracy camp says it has not given enough time over to public consultation.

David Chu, a Hong Kong legislator as well as a member of China's parliament, says that Tuesday's protest signifies the emergence of a "new political force" in Hong Kong. "Gradually the establishment will have to recognise this new force" and pay more attention to public opinion, says Mr Chu, whose views often coincide with China's. If it ignores public sentiment, he argues, the government risks fueling a "dramatic" backlash in the form of large-scale protests, which in turn could undermine China's image in Taiwan (which China wants to win over by demonstrating that all is well in Hong Kong) and the rest of the world. Mr Chu's proposed remedy--not favoured by the fiscally cautious administration--is a reflation package that would involve ending the government's austerity measures and removing the currency's peg with the dollar.

If it has worries about Mr Tung's ability to lead Hong Kong, the Chinese government, by encouraging the new security legislation, is only making his predicament worse. Hong Kong officials "have really made the people angry", says Bishop Joseph Zen, the head of Hong Kong's Catholic church, who joined Protestant church leaders in support of the protest. He accuses the government of lying "without showing any remorse" about the proposed bill. Bob Allcock, Hong Kong's solicitor-general, rejects such criticisms and says there are numerous safeguards built into the law to prevent it being used to curb human rights.

In Beijing, meanwhile, Mr Hu has disappointed reformers whose hopes had been raised by a new openness in the wake of SARS. China had been so humiliated by the criticism it endured for initially denying the extent of the danger posed by the disease (and thus hastening its spread) that the government declared a new policy of transparency in matters of public health. But that openness has not spread to other areas of government policy. Caijing, an influential fortnightly magazine, felt emboldened enough to carry an article by Wu Jinglian, one of China's best-known economists, saying China could either reform in the wake of SARS, or let "the inertia of traditional thinking" push it back on the "old road". But that edition of the magazine was soon pulled off the news-stands. Observers feel that Mr Hu is being deliberately cautious while his predecessor, the more conservative Mr Jiang, retains control of the armed forces. It looks like Chinese reformers will have to continue to practice the Confucian virtue of patience. Those in Hong Kong do not seem to have much patience left.

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