Speeches and Articles by Former Consul General James B. Cunningham

AN AMERICAN VIEW OF HONG KONG'S PROSPECTS

Remarks by James B. Cunningham
Consul General of the United States of America
to The American Chamber of Commerce /
The Hong Kong General Chamber of Commerce

July 11, 2008

(As prepared for delivery)

Thank you for inviting me to share some thoughts with you today about Hong Kong's future. For an American, this is a fitting time of year to look ahead. Within the past two months, millions of American college and high school students, at graduation ceremonies in every city and town in the United States, have been encouraged by countless speakers to draw lessons from the past, and develop a vision of their own future.

I enjoy attending these ceremonies, as some of us have done here in Hong Kong in the past weeks. They are occasions for reflection on values, on the importance of commitment and hard work, and for optimism as well as cautionary advice about the future. They serve to mark important points of transition, and of new beginnings.

Societies, as well as individuals, try to understand the past, and what has worked, or not. Perhaps it is even more important to be inspired about the future, to work for a better future and not just wait for it to happen. Today, as people and as societies, we are facing the most rapid pace of change that history has ever seen. That pace is accelerating, making the future ever more difficult to predict, and to prepare for.

Hong Kong is a society in transition, blessed with tremendous assets. Over the past year it may have graduated in a sense, moving to a different period in that transition. Eleven years after Hong Kong's return to Chinese sovereignty, "one-country, two systems" is generally considered to be a success. Hong Kong today plays an important role in one of the most rapidly changing parts of the world, in one of the most important countries on Earth. But what of the next 10 years? Hong Kong faces important challenges, many of them similar to those all developed economies face in the globalized world. Others of those challenges, however, are unique, due to Hong Kong's particular circumstances. The prospects for Hong Kong will be shaped in part by forces its people cannot control. But they will also be shaped by decisions that its people, its business and political leaders, and its government will take in the coming years.

Thinking about the future is an uncertain exercise. More than a decade ago observers far more knowledgeable about Hong Kong than I were warning of Hong Kong's imminent demise. Before the 1997 return of Hong Kong to China, there was a surge of concern in the international press over the territory's future: dire predictions and expressions of worry were common. In June of 1995, Fortune magazine ran the famous cover story: "The Death of Hong Kong."

Happily, such gloomy predictions were quite far off the mark. I say "happily" from an American, not a Hong Kong, perspective. Just as a prosperous, stable and confident China is in the U.S. national interest, so also is a prosperous, stable, and successful Hong Kong. As Asia's world city, Hong Kong plays a role which benefits China, the U.S. and many others in the globalized, interdependent 21st century.

As I look at Hong Kong's prospects, I look at Hong Kong's role as the most developed part of China, and in the context of our relationship with China and of American interests in Asia.

China and the United States share both a vital interest and clear responsibility for building peace and stability in Asia. The United States has been a Pacific power since the early 20th century, and over the years our interests have grown. We see the 21st century in Asia as a great, historic opportunity to unleash enormous prosperity and development that will benefit the entire world.

Many Americans, and I assume many Chinese, wonder whether our future is one of competition and cooperation, or of confrontation. Despite our differences, and difficulties in understanding each other, I am optimistic. Our relationship with China is very complicated and sometimes difficult. We have different views on important issues like human rights, religious and press freedom, rule of law, and democracy. But the ability, or inability, of America and China to work together already impacts events around the globe, and will certainly become one of the central factors of this century. There is no inherent reason why we should be in conflict, and President Bush and many Americans believe that China's rise can be a good thing for both our countries, and for Asia. Increasingly, we are finding ways to work together, and to promote the safe, prosperous and dynamic Asia that is in both our interests. And I expect this positive trend in our relationship will continue regardless of who wins next November's U.S. elections.

The global impact of the American and Chinese economies is a fact of life. Between 2002 and 2007, half of all global economic growth came from the U.S. and China. Millions of Chinese have been raised from poverty as China's economy has grown 10-fold over almost three decades. And in 2007, China became the third-largest market in the world for U.S. exports, after Canada and Mexico. This is the result of reform and opening up, of unleashing market forces and human potential. Americans tend to believe that only with continued and more rapid reform does China have the prospect of producing the continued growth and social harmony it seeks. The United States has a huge stake in China's development. We are not afraid of competition, as long as it is fair. We have always had competitive relationships with even our closest allies, and are better for it.

We Americans have long had direct interests in Hong Kong, and over the past decade Hong Kong in its China context have become even more important to the international community. Hong Kong's talent, values and capital, the China context under "one-country, two systems", and the role of international expertise and finance proved a potent combination that the skeptics in 1995 underestimated. As a result, Hong Kong today is not only thriving -- its real GDP is up 7.1% in the first quarter, and unemployment is down -- but full of promise.

That promise rests on a foundation that has worked, and which bodes well for the future if Hong Kong can build on it. Hong Kong remains a Chinese society based on values that make it resilient and competitive: the rule of law, free and fair market principles, entrepreneurial spirit, respect for freedom and human rights, the importance of education, and growing public participation in civic and political affairs.

"One country, two systems" has been a success for Hong Kong and for China. With a few exceptions, the Central Government has generally respected its commitment in Hong Kong's Basic Law to preserve a "high degree of autonomy" for Hong Kong and to maintain the integrity of its distinct economic, legal and social systems. Once again in 2007 for the 13th straight year, the Heritage Foundation recognized Hong Kong as having the highest level of economic freedom in the world, and other international observers continue to give it top ratings in the areas of competitiveness, internationalization, and finance.

Its basic values, respect for "one country, two systems," and its competitiveness, make Hong Kong uniquely capable of working with people all over the world to contribute as an international city to its own vibrant and sophisticated society, to China, and to the rest of the world.

We have an excellent example of the unique capability Hong Kong brings to this region with our own environmental initiative, Pollution Prevention & Energy Efficiency (P2E2). This unique Hong Kong based model is entering a new phase as major Hong Kong banks, insurance and international loan guarantors, and investors have now come together to provide flexible financing arrangements to facilitate the cleanup of enterprises large and small, from India to China. I hope that within the next few years we will see thousands of P2E2 projects underway in China, all based on this Hong Kong platform. Just one major corporation, Wal-Mart, following up on a much smaller, but very successful meeting here in Hong Kong, is arranging another larger scale P2E2 seminar in Shenzhen at the end of July for its suppliers in China. Wal-Mart is also bringing together close to 1,000 of its suppliers and other stakeholders in October in Beijing to pursue the greening of its supply chain. Among other tools, P2E2 can make a major contribution. It takes expertise, finance and experience working in China to make this international project work. That combination could only be assembled in Hong Kong.

But as in the stock market, past results are not guarantees of future success. Hong Kong faces the difficult issues that all modern societies grapple with: Economic, political and demographic. And with an economy that is based on services, logistics and tourism, it will face constant competition to maintain its value-added.

In a rapidly changing global economy, success will go to those who are able continually to adapt, and to place themselves on what a mentor of mine called "the right side of history." Tony Blair in a speech in Hong Kong last November used the term "permanent modernization" to describe this phenomenon of change as a constant factor of life. This is quite new. All of us, and most especially our children, will have to learn to deal with it.

When we look at Hong Kong's prospects, the question becomes whether it is capable and willing to continue to adapt and evolve. Hong Kong is, after all, a unique historical experiment. It has survived and thrived over the years by repeatedly meeting the demands of changing economic and political circumstances, and redefining itself. It will have to continue to do so if it is to remain stable, prosperous and competitive.

Competitive -- that is a crucial word for Hong Kong. When I arrived here three years ago, people were discussing whether Shanghai was becoming more "competitive" than Hong Kong. I don't hear that much any more, but today there are other issues which impact Hong Kong's competitiveness: Inflation, the environment, health care, an aging population, the need to attract talent, tougher standards and rising costs on the mainland, and stiff, persistent economic competition from its neighbors -- to name just a few.

In this rapidly changing world, the status quo is not enough to succeed. For any developed society to meet the demands of constant change, difficult decisions need to be made, and executed. Hong Kong is no exception.

This brings us inevitably to the political issues that confront Hong Kong. Hong Kong's economy is a living example of the success brought by freedom, competition, and individual choice. In developed economies around the world, economic success has been supported by democratic political systems. The political legitimacy and accountability that comes from democratic political life are core components of modern, competitive and stable societies. They provide the support political leaders need to take difficult decisions, and to have them accepted.

Over time, good governance and stability without democracy are illusory. Hong Kong is unique in many respects, and its experiment is far from over. The question is not whether Hong Kong should be democratic, but whether it can continue to prosper without becoming so. As Dr. Larry Diamond pointed out to the Savantas Institute this spring, he counts 120 electoral democracies in the world today. Hong Kong has a higher level of development than 100 of them. Indeed, it is the richest and most developed society in history that is not governed by an electoral democracy.

My government has long supported universal suffrage in Hong Kong, as promised in the Basic Law. We believe that greater democracy, now in Hong Kong and over time in the rest of China, will support China's peaceful development. There is no one way to build democracy, and it will be more difficult on the mainland than in Hong Kong. But building democracy will contribute to Hong Kong's enduring stability and prosperity, and that is of value to China itself, and this region of the world.

Important developments over the past year signal that a page is turning, however slowly. While the 2007 Chief Executive selection process limited participation by the people of Hong Kong, the fact that it was competed, with active campaigning and live debates on television, demonstrated an important change in Hong Kong's political development. In December, the Chief Executive's Report and the National Peoples' Congress Standing Committee response established for the first time a timetable for universal suffrage.

We have supported the early establishment of a timetable, and had hoped that the Standing Committee response would provide room for the Hong Kong people to achieve their aspirations for democracy as soon as 2012. Now, with 2017 as the date for election of the Chief Executive by universal suffrage, followed by election of LegCo in 2020, it will take genuine dialogue to determine how universal suffrage can be achieved with the broad support of the people of Hong Kong, in order to produce a consensus that will endure.

The response also opens the way to interim reforms short of full universal suffrage between now and 2017 and 2020. My government hopes the people of Hong Kong will progress rapidly on the path of political reform. Hong Kong's competitiveness and prosperity, and thus its contribution to China, will be enhanced by political leadership strengthened by elections within an increasingly democratic framework that meets international standards. My country, like other friends of Hong Kong and China, will follow developments with interest, and will hope to see a process, and results, that we can support.

The very engagement of foreigners in Hong Kong has always been one of the defining elements of this special part of China. The international component in Asia's world city is a huge strength, and it keeps growing. While welcoming foreigners, Hong Kong people are justifiably proud of their Chinese heritage, and see no contradiction between love of their country and the pursuit of Hong Kong's economic and political development. Being a patriot and being pro-democracy are not incompatible.

I am optimistic about Hong Kong's prospects, but do not take them for granted. The prescription seems pretty clear. Do what it takes to remain competitive and entrepreneurial. Don't take the future for granted. Stick to the fundamental values that have produced success. Respect "one country, two systems." Secure the political reform that most people in Hong Kong believe is both right, and necessary. Continue to anticipate the future, and to plan for change. Strengthen Hong Kong's role as an international financial center, with focus on its human capital.

Easier said than done, I know. But as a friend of Hong Kong and China, I hope to see a Hong Kong that continues to contribute to a prosperous, stable, and confident China, and which contributes to its country and the world by continuing to be a leading light in economic freedoms, civil liberties and respect for human rights. A Hong Kong that continues to adapt and respond to change, a Hong Kong whose government has found the legitimacy that comes from popular elections. And a Hong Kong that draws strength from its Western heritage as well as its Chinese heritage, a Hong Kong that is a positive, dynamic force in China's development on all fronts.

If Hong Kong continues down that path, it will have a unique role to play in promoting the broader aims in Asia that many Asians, and the United States, are striving for in this century of great opportunity for Asia. We will be following the next decade of Hong Kong's development with interest and high expectations.

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