Speeches and Articles by Former Consul General Richard A. Boucher

Remarks by U.S. Consul General Richard A. Boucher
on U.S. - Hong Kong Relations
to Far Eastern Economic Review Conference on
Weathering the Storm: Hong Kong and
the Asian Financial Crisis
Session on Hong Kong and the World
June 10, 1998

Thank you very much. I'm glad to be here today to talk about the United States and Hong Kong's present situation, and how this great city can play a constructive role in the region and the world.

First, let's look at the current state of affairs. This city has had quite a year. We have swung from the much anticipated - that is, the handover of sovereignty - to the completely unexpected - in the form of scourges of God, man and beast, the Asian financial crisis, the downturn in tourism, the bird flu, red-tides, and the downstream effects of the Asian crisis such as layoffs in the retail industry and low turnover in the stock market. Still, Hong Kong has weathered the storm better than other Asian economies, thus proving the resilience of the foundation on which it has been built, the foundation of a free society operating a free market. Crucial building blocks of that foundation include the rule of law, open access to information, and transparency of government actions. Equally important is Hong Kong's clean, efficient government which keeps its interference in commercial and financial affairs to a minimum, and the fact that Hong Kong has continued to rely on markets even when those markets were plummeting. When we look around the region at the immense problems facing other societies, we see clearly that these formulas have been reaffirmed, and that Hong Kong's economic management team has handled the crisis well.

There is always room for improvement, of course, but this is not a time to alter the fundamentals. Now is the time to build on these important basics. Supervision of markets and vigilance against corruption need to be maintained and strengthened. Following the spectacular turnout for the Legislative Council elections, the timetable for the expansion of democracy here should be reviewed with an eye to proceeding at the pace which Hong Kong people desire. And full respect for the rule of law should be strictly maintained. In surveys of American companies over the last few years, U.S. business people have always indicated that the rule of law was the bedrock for their high level of confidence in Hong Kong. We have been troubled by the Provisional Legislative Council's passage of the Adaptation of Laws Ordinance and by several recent, highly publicized court cases which have created uncertainty about whether the law is being equally applied, irrespective of the organizations involved. We hope these instances do not indicate a pattern. We will also be paying close attention to the laws on treason and sedition to be drawn up in compliance with Article 23 of the Basic Law. We share the concern expressed by Hong Kong journalists and others that the new law should not limit freedom of expression. As Hong Kong addresses these issues, authorities will want to reassure their own people and outside business people that Hong Kong's direction is firm and that Hong Kong is moving forward, not backwards.

Even with these caveats, it remains the case that Hong Kong has demonstrated great resilience in the midst of the present turmoil, and that this resilience is not a coincidence. It reflects sound fundamentals, and on the basis of having gotten those fundamentals right, Hong Kong is in a position to play a role as an example and as an engine for reform, both in China and in the region as a whole.

As I have said in the past, Hong Kong and China are linked like binary stars: one small and intense, the other large and just finding its glow. Hong Kong's prosperity contributes to China's, and vice versa. Since the handover, Hong Kong has only deepened its involvement in the Chinese economy, where reform is opening up new opportunities in the domestic market. Hong Kong's intimate economic relationship with the mainland has been crucial in the reform of China's systems and China's opening up to the wider world. This is because Hong Kong brings together traders and investors who are plunging into the China market, providing capital for China's reforming enterprises, and acting as a cross- cultural bridge for Chinese business people who are reaching out to world markets. On the other hand, being China's window on the world has been crucial for Hong Kong's development as a prosperous, cosmopolitan city.

When we pull back our focus and look at the region as a whole, we see that Hong Kong can act as a model of sound policy, a capital market to recapitalize regional firms, and a source of direct investment for those companies that are in the process of recovery. The dynamism Hong Kong provides is that of a packager of business deals - putting together the marketing opportunity, the technology, the manufacturing center, the finance and the coordination to make deals work even under difficult market conditions. Other economies will not be able to mimic exactly what Hong Kong does, nor should they try to, but every economy can look at the underlying principles of Hong Kong's success to see how they might better manage aspects of their commercial and financial systems which have caused them difficulty. As Hong Kong expands its roles in Chinese reform and Asian recovery, you will find Americans working with you. Our interests also lead us to strong involvement in Asian prosperity and our government and firms will continue to assist in recovery.

I don't want to minimize the difficulties that Hong Kong people have been facing in the last few months. 1998 is going to be a tough year. We know that the economic numbers haven't been looking good, and people are concerned about a number of livelihood issues. A regional financial crisis has real effects on the lives of those who live in a regional center. But the seeds of recovery are already here. They are here in the flexibility and entrepreneurship of Hong Kong people, and even in phenomena like the drop of property prices, which afford new opportunities for enhancing Hong Kong's competitiveness as an international business center. Addressing livelihood issues like housing, education, and a superior information infrastructure will enhance Hong Kong's position as a good place to do business in Asia.

Let me finish up by making a few remarks about the relationship between Hong Kong and the United States. We have an excellent overall relationship. Our commercial ties, our excellent law enforcement cooperation with the Hong Kong authorities, our cooperation internationally, all these have never been better. We also look to enhance our bilateral cooperation in several ways:

• We want to continue to work with Hong Kong to promote free trade and open the international economy. Hong Kong has been an active player in fora like the World Trade Organization and the Asia-Pacific Economic Cooperation forum, where it advocates tariff reductions, less red tape, and better access to markets.
• We want to expand our law enforcement cooperation with a view to better preventing money laundering as Hong Kong expands its role as an international financial center.
• We want to fight against illegal textile transshipments and violations of intellectual property rights. We welcome the efforts Hong Kong has been making, particularly in combating piracy, but we are still looking for the day when it will actually be difficult to walk down the street and find pirated goods here. That day has not yet arrived.
• We seek to cooperate with Hong Kong in exploring new opportunities to open telecommunications, broadcasting and air services markets. Hong Kong is moving in the right direction by reviewing these areas, all of which optimize Hong Kong's connectedness to the rest of the world, a true necessity for a city whose economy depends so much on foreign trade and investment. Tourism in particular would benefit from more open air services at the new airport.
• And we want to continue our bilateral cooperation on international monetary affairs, an area in which Hong Kong has proved its expertise and decisiveness so well over the past year.

Our shared values and our interests, as well as the abundant opportunities that exist here, continue to draw Americans to Hong Kong, as many others are drawn as well. I'm sometimes asked whether the handover sparked any decrease in U.S. involvement in Hong Kong, and I have to say I haven't been able to detect any. The American Chamber of Commerce surveys continue to show a high level of confidence on the part of our business community. New companies are starting up, and school enrollments of American children - probably one of the most reliable indicators - have remained steady.

Last week we announced the exciting news that President Clinton will visit Hong Kong during his trip to China in late June and early July. This is going to give us an unparalleled opportunity to reaffirm the importance of the Hong Kong- U.S. relationship and of Hong Kong's role as a special part of China and its growing role in the region as a whole. Despite the storms and turmoil, there is a broad and exciting agenda which brings us to Hong Kong, a partner in tough times.