July 1st, 1997:

The Return of Hong Kong & the Capitalist Road in China

Revolutionary Worker #912, June 22, 1997



At the stroke of midnight, as July 1, 1997 begins, Hong Kong will return to be part of China.

For years, then months and days the "countdown" has gone on. School children all over China have been starting every morning by calling out the numbers in unison. Major radio and TV broadcasts open with the count. Internet web sites in Hong Kong have featured the same flashing numbers--the days, minutes and seconds left until Hong Kong is no longer a colony of Britain.

This change has a two-fold character. On the one hand, a great, great historical injustice is finally being reversed. On the other hand, new chains of enslavement are being enforced.

From the Opium War to 1984 Declaration

More than 150 years ago, Hong Kong was stolen by British imperialism after the Opium War. In the early 1800s, the British empire was desperate to increase its earnings from foreign trade in Asia. They found a solution in the incredibly profitable trade of opium. The Chinese government outlawed the use of opium, other than for medicinal purposes. But in one of the great imperialist crimes of history, the British systematically pushed opium on the Chinese people. And American merchants were also involved in this ugly trade.

Between 1820 and 1835 opium was smuggled into China--resulting in the addiction of some 12 million people throughout China. When the Chinese people began to resist this opium trade, Britain went to war and was able to overpower China with its superior navy, and in 1841 they won the Opium War and maintained the right to keep importing opium into China. Then, in 1842 the Treaty of Nanking was signed, establishing Hong Kong as a separate colony of Britain. This was only the beginning of "unequal treaties" which allowed Britain to steal land from China. The Kowloon Peninsula was seized next in 1860. And then in 1898 the rural New Territories--an area on China's mainland next to Kowloon--and 235 islands, was added to the British colony under a 99-year lease. This "lease" is what expires on July 1, 1997.

In 1984 China and Britain signed a Joint Declaration, setting the terms for the return of Hong Kong to China. According to the Declaration, on July 1, 1997, Hong Kong will become "a Special Administrative Region" (SAR) of the People's Republic of China.

The Declaration stipulates that Hong Kong will have a high degree of autonomy, except in foreign policy and national defense. It will have executive, legislative and independent judicial powers, and the current laws will remain unchanged. Hong Kong will maintain its own economic and cultural relations and conclude agreements with states, regions and international organizations. The British army, navy and air force will be replaced by a People's Liberation Army garrison up to 10,000 strong. But internal security will remain the responsibility of the Hong Kong police.

The Declaration states that the "socialist system and socialist policies shall not be practiced in Hong Kong and that Hong Kong's previous capitalist system and life-style shall remain unchanged for 50 years." This is in line with China's policy of "one country, two systems" and "mutual non-subversion"--where China does not subvert Hong Kong and Hong Kong does not attempt to subvert China.

After July 1, 1997 Hong Kong will be run by the Beijing-authorized Provisional Legislature, a group made up of the rich and powerful elite in Hong Kong. One provisional legislator, Yeung Chun-Kam--a textile manufacturer known locally as "the King of Trousers"--is a member of no fewer than 211 corporate boards. Another, David Li Kwok-Po, sits on 86 boards of directors. Twenty-four of the 60 legislators own property overseas.

Tung Chee Hwa, as Chief Executive, will be the new head of Hong Kong. He was born in Shanghai, left China when Mao came to power in 1949, relocated in Taiwan and then Hong Kong. He runs a $1.7 billion shipping business he inherited. And his views are often indistinguishable from the official line coming out of Beijing.

The incoming ruling body in Hong Kong has announced it will implement new repressive laws against civil liberties and protest. Now many people are saying that the same Chinese government that carried out the Tiananmen Square massacre will take away civil rights in Hong Kong. But for 150 years, Hong Kong has been run as a colony of British imperialism with a British governor who appointed the members of Hong Kong's Legislative Council, insisted on his right to approve public gatherings, scrutinized the local press for evidence of treason and threw editors in jail for objecting to British colonialism. In 1967 when massive rebellion broke out in Hong Kong against British rule, the government waged a vicious crackdown. Riot police fired on demonstrators, killing some and wounding hundreds. Trade unions were attacked and hundreds were arrested.

The people of Hong Kong have long been denied civil rights under British colonial rule. It was only two years ago, in 1995, that Britain decided to have elections -- and then, only because Hong Kong was about to return to China.

The Chinese government under Deng Xiaoping (and now Jiang Zemin) is indeed a repressive regime that's carried out great crimes against the Chinese people. And they are quite capable of brutally crushing political dissent in Hong Kong. But the Chinese government wants Hong Kong to continue playing its key role in the capitalist development of China and the integration of China into the world economy. And this means Hong Kong must be allowed to maintain a certain amount of economic and political autonomy. At least for now, it is not in China's interest to force a showdown with the U.S. and other western powers and risk economic and political instability by waging a major political crackdown in Hong Kong.

Some people think after July 1, China might force Hong Kong to make its economic and political system socialist. But the Chinese government is not interested in establishing Hong Kong as a part of a socialist country--because China is no longer socialist itself!

Under the leadership of the great revolutionary Mao Tsetung, China was liberated in 1949 and became an independent socialist country. Imperialist powers that had dominated and exploited China were kicked out and for over 25 years the masses of Chinese people consciously worked to revolutionize society and get rid of exploitation and oppression. But after the death of Mao in 1976, a reactionary coup took place, led by Deng Xiaoping and capitalism was restored. Since then, China has been increasingly opened up, once again, to imperialist domination and exploitation. And China sees the return of Hong Kong as part of furthering and deepening the capitalist economic integration of Hong Kong and China.

The Role of Hong Kong in the Global Economy

What is the value of Hong Kong to China? It is a key factor in developing capitalism in China and providing a doorway for further imperialist penetration. It serves as a mediator between China and the world economy and provides an entry point for technology, capital, and management skills. A look at Hong Kong's role in the global economy shows why China is so anxious to integrate Hong Kong more fully into the development of capitalism in China.

Hong Kong is a main entrepôt in the world--a place where international trade and big financial deals are put together, managed and coordinated. It is a place where goods are stored and distributed. And a place that concentrates the special skills needed to coordinate seller, product, buyer, transportation and financial terms.

With the globalization of production, the role of entrepôts like Hong Kong have become even more important. In the world market, a large number of countries are sellers and virtually all countries are buyers. The selection of products to be bought and sold ranges from raw materials to toys to petrochemicals to sophisticated software. As an entrepôt Hong Kong's crucial role may be to connect a Hitachi tape recorder manufactured in China by a Japanese company to a buyer in South America.

More than ever, imperialist companies compare investment costs and opportunities on a world scale. And in the search to cheapen costs, these companies need to more easily and quickly move investment capital to wherever profits are highest. Hong Kong serves as a huge financial center which facilitates this process. It is the world's third largest major financial center in terms of the number of banks--it has 525 banking institutions, including 181 foreign banks and 223 insurance companies. And multinational companies use Hong Kong as a base for raising international funds for capitalist ventures.

Hong Kong has thousands of local firms with international operations and/or sales. Many companies doing business in Asia have regional headquarters in Hong Kong. And over 1,800 overseas firms have offices or operations in Hong Kong.

K-Swiss, the maker of upscale athletic shoes based in California, is typical of many companies using Hong Kong as a springboard and headquarters for capitalist ventures inside China. While more than half of K-Swiss shoes are made in China, in Hong Kong the company taps into a service and transportation network that can place orders with factories across the border, coordinate the delivery of laces, soles and fabric, handle the export paperwork and get the finished product to Hong Kong for shipment to the United States, Japan and Europe.

The Hong Kong-China Connection

Mao's revolution in 1949 liberated China from foreign domination. But with the restoration of capitalism, Deng Xiaoping instituted a program of capitalist reform--designed to open China to imperialism and sell the country to the highest bidders. Hong Kong, as an international financial center right across the border, has been the obvious funnel for finance and expertise into China.

Hong Kong used to be a major center of low-cost manufacturing. But with the restoration of capitalism in China, it started moving production sites into southern China. It has now become the manager of manufacturing in southern China and throughout Asia, in this way, its role in global manufacturing has increased tremendously. Manufacturing in China has been expanding faster than anywhere else in the world, and the export of goods produced in China is mainly handled by Hong Kong. Fifty percent of China's exports and 80 percent of exports from Guangdong province in southern China are handled by Hong Kong. By 1991 most HK manufacturing had moved across the border into China and 83 percent of the Hong Kong economy was in the service sectors (financial, insurance, retail and administrative services and professional and high-tech services).

Hong Kong has become like a corporate center for bosses, accountants and planners while China has become the factory site. From a country of only 6 million people, Hong Kong manufacturers employ more than 5 million people in southern China! One survey shows that 60 percent of the exports of Hong Kong manufacturing and trading companies were manufactured in China and 30 percent were manufactured in other countries.

As soon as Hong Kong began to provide the organizing center and entryway for companies wanting to set up in China, Hong Kong's trade with the United States began to boom and direct investment flooded in. Many large American corporations established regional headquarters in Hong Kong and over 800 firms were in operation there by the mid-1980s.

Hong Kong has been by far the largest source of direct foreign investment in China--60 percent of all foreign investment in China comes from Hong Kong. Goods produced in China in Hong Kong-financed factories constantly flow back across the border. They are then processed and shipped through Hong Kong. The container port in Hong Kong, the busiest in the world, already handles more than half of China's sales to the world. Twenty miles north of Hong Kong, there are three main crossing points into China. Last year, Hong Kong's border police say 4.5 million vehicles made this crossing last year and that about 80 percent of this traffic was container trucks.

China also has extensive investments in Hong Kong--estimates range from $25 billion to $45 billion. There are about 10,000 companies operating in Hong Kong with Chinese capital. Almost every Chinese provincial government has a company in Hong Kong. The Bank of China holds 25 percent of all Hong Kong bank deposits. And China's People's Liberation Army is thought to be the largest investor in Hong Kong--a large number of the estimated 20,000 companies under its control worldwide are believed to be in Hong Kong.

The capitalist system operates in both China and Hong Kong. And both China and Hong Kong are integrated into the world economy. But in order for Hong Kong to play its special role in relation to China and in the world economy, it will have to maintain its own legal and financial institutions and practices. This is the reality of the so-called "one country, two systems."

The Hong Kong-U.S. Connection

The U.S. imperialists support the reunification of Hong Kong with China because it serves their political and economic needs. It tightens the integration of the world market with China and provides an even deeper foothold for foreign capital in China.

The U.S. is a huge investor and trading partner in Hong Kong. And the economic link between Hong Kong and the U.S. has gotten tighter as more U.S. companies use Hong Kong as a base for setting up capital investments in China and other Asian countries.

U.S. interests in Hong Kong are substantial. There are more than 1,100 American companies with regional bases in Hong Kong. About 36,000 U.S. citizens live and work in Hong Kong, and every year U.S. Navy ships make 60 to 80 calls to its port along China's southeastern coast. The United States also has the FBI, DEA, Customs Service, INS, Secret Service and the State Department's Bureau of Diplomatic Security in Hong Kong. Leading up to July 1, the U.S. has been rushing to protect its interests by negotiating separate agreements with Hong Kong, underscoring its plans to still treat Hong Kong as a distinct, autonomous entity in economic and trade matters.


A quarter of the world's population were once on the socialist road in China--creating a new revolutionary society, where the masses of people worked to get rid of classes and class society. This was the most liberated and liberating society that has ever existed in human history. But today, capitalism has been restored in China. And the dire consequences of this can be seen, perhaps most sharply, in the developed capitalist areas in southern China which border Hong Kong.

The global economy--which combines up-to-date technology with the exploitation of cheap labor in poor Third World countries--has arrived in Suzhou:

Located in southern China, Suzhou used to be a farm town. Today it is the site of new factories where young women in white gloves and jackets snap together pieces of plastic to produce computer mouses. About 40 percent of these devices are exported to the U.S., including four of every five computer mice sold with Apple computers. The women at this factory, run by a Taiwan subsidiary of Swiss-based Logitech International, earn an average of only $75 a month. Logitech's business, by combining local labor with imported parts and management is growing fast. In 1994, the year the Suzhou factory opened, exports were $500,000. In 1996, exports had zoomed to $160 million.

All along China's coast and inland as well, thousands of companies are churning out simple electronics like the computer parts produced at Logitech.

For international finance capital, for the capitalist roaders of China, and for the corporate elite in Hong Kong--the growing integration of Hong Kong and China is a source of great riches. But for the masses of people throughout China, this development has brought staggering unemployment, poverty and a growing gap between rich and poor.

This article is posted in English and Spanish on Revolutionary Worker Online
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