Speeches and Articles by Consul General Richard W. Mueller

United States, Hong Kong, and China: Reflections on Changing Relationships

Remarks by Consul General Richard W. Mueller to the American Chamber of Commerce in Hong Kong
June 14, 1996

(As Prepared for Delivery)

Many of us, particularly diplomats, become accustomed to having our lives divided up into discrete periods of time -- into tours of duty. We look back at a career composed of a year of Vietnamese language training, a two-year tour in Saigon, a multi-year tour in Washington, two years of Chinese language training, two years in Beijing, a three-year tour of duty in Hong Kong, and so forth. You get the idea. Each assignment involves different living conditions, new friends, a different set of professional challenges. So the end of each assignment provides a natural vantage point for looking back over what we have accomplished and how the world has changed during our all-too-brief tenure. Today I stand here at the end of yet another tour, at the end of a second wonderful three-year assignment in Hong Kong. It seems natural for me to reminisce a bit, to look back at events and trends in Hong Kong and China and to talk about the future and of what I hope it holds. I do so not for reasons of nostalgia but rather a desire to help us look at longer-term trends and not just the heated events of today. If anyone has the impression I might have talked about these things before, you would be right because in June 1986 the American Chamber invited me to speak at the conclusion of my last tour of duty here.

Let me highlight some of the themes I want to weave through my remarks. They include: the enduring nature of U.S. interests in Asia and the importance we attach to solid, constructive ties with China and Hong Kong; the remarkable progress China has made in unleashing the creativity and productivity of its people; the adaptability and energy of Hong Kong and its people; the strong civil and political institutions in Hong Kong; the importance of open societies whether in the area of trade, investment, or information; and the necessity of evaluating and judging events in a longer timeframe than we usually do.

I'd like to go back 20 years to June 1976 when Claire and I arrived in Beijing, via Hong Kong of course, for our first assignment in China. I was fresh from two years of Mandarin studies in Taiwan, and I thought I knew a lot. In fact, little did I know.

We were assigned to the United States Liaison Office. George Bush had departed not long before and Thomas Gates, a former Secretary of Defense, had taken over as Director of what we called USLO. U.S.-China relations had entered a downturn because progress toward normalization was stalled, but the relationship was anchored in the Shanghai Communique and in the high level exchanges between China and the United States, symbolized by President Nixon's historic visit to China in 1972.

In 1976 I was privileged in many ways to be present at the beginning of several trends which are in full flood today: China's commitment to joining the world community; Hong Kong's key role in that process; and a rapprochement between the United States and China that has drawn heavily on Hong Kong's mediation.

I wonder whether you remember what the year 1976 was like. It was truly a pivotal year for China. In January Premier Zhou Enlai died; in April, on Qing Ming, Tiananmen Square demonstrations commemorating Premier Zhou's death led to political purges, including that of Deng Xiaoping; in June Marshall Zhu De died; in July the great Tang Shan earthquake wreaked its devastation. All these events, in retrospect of course, foreshadowed the passing of Mao Zedong on September 9. I will never forget how the huge city of Beijing seemed to go entirely quiet, black armbands appeared everywhere and vast numbers of people marched to Tiananmen Square. Nor will I ever forget how an entire nation stopped at 3:00 p.m. on September 18th to observe three minutes of silence in memory of a man who took China to the heights of triumph as the People's Republic was founded and then to the depths of despair during the days of the Great Leap Forward and the Cultural Revolution.

But the tumultuous events of 1976 were not over. I remember sitting in a restaurant in Guangzhou in early October and suddenly hearing the sound of gongs and music and demonstrations in the street. These were the first public sounds of what became known as the overthrow of the Gang of Four. They were outwitted by, among others, a toughminded, bridge-playing veteran of the Long March named Deng Xiaoping. Since then Deng Xiaoping has remained the leading architect of China's turning outward and finding its rightful place on the world stage.

I dwell on the events of 1976 because I believe it is entirely possible that history books will record that year as the true watershed in China's modern day transformation. Those who took power then had a very different vision of China's future than did the Gang of Four. China's leaders realized that ideology, as it had been practised for 25 years, no longer motivated China's citizens. New policies were needed to stimulate economic development, to connect China to the world community and to set China on a real course of modernization. The promulgation of these policies at the third Plenum in December 1978 was made possible by the events of 1976.

The events of the 1970's in China had a profound significance for Hong Kong, which was just beginning to hit its stride as an important manufacturing center, recovering from the years when its role as an entrepot had been stifled by the trade embargo on China. Textiles, garments, toys, and electronic products were just a few of the items Hong Kong exported to American and other consumer markets. Easy access to the U.S. market over many years has been one of the keys to Hong Kong's strong and steady growth. This transformation from entrepot to manufacturing center is a vivid example of the adaptability of Hong Kong's people and economy.

In the 1970's the nascent nature of the U.S.-China relationship meant that Hong Kong played a vital role in helping Americans understand China. Hong Kong was like a giant switchboard where messages from an emerging China that we still knew very little about were received, interpreted and analyzed. The observations and judgments of Hong Kong-based businesspeople, academics, journalists and others provided essential input in trying to comprehend what was really happening in China. For its part, China also found Hong Kong an important source of information about trade, investment and other developments. Despite the rapid expansion of China's relationships with the rest of the world, Hong Kong to this day remains a crucial bridge of understanding between China and the rest of the globe.

The 1980's were a dramatic decade for Hong Kong. Chinese economic reforms began to open an enormous market, and Hong Kongers needed no encouragement to take full advantage of the many possibilities. Hong Kong media, as well as academic and commercial interests continued to focus on what was happening in China, reporting, analyzing and making decisions based on China's rapid progress. American companies moved to Hong Kong in record numbers. And, of course, the 1980's saw the twin developments of the re-emergence of Hong Kong as a vital entrepot, based on high-value added services, and the rapid movement by Hong Kong companies of their manufacturing operations into China. I remember the conventional wisdom seemed to be that as China opened up, Hong Kong would become much less important as a place from which to do business with China and to understand China. In fact, I would argue that just the opposite has happened: Hong Kong is as important as it used to be, if not more so, as Hong Kong's links with China and the world diversify and multiply.

Politically, the 1980's marked a crucial turning point for Hong Kong with the negotiation and signing of the Sino-British Joint Declaration. The 1984 declaration, strongly supported by the United States, combined with China's Basic Law passed in 1990, provides a solid basis for Hong Kong's continued growth and vibrancy. However, the Joint Declaration came to fruition only after considerable anxieties early in the decade, in particular, the panic of September 1983 when it appeared that China and Britain were making no progress in their negotiations. I remember clearly Black Saturday. The Hong Kong dollar plummeted below HK$9 to US$1, the stock market had fallen dramatically, and panic buying left store shelves bare. Many wondered whether they had missed their last chance to leave before Hong Kong's inevitable decline set in.

Hong Kong was not on its way down. In addition to its economic resurgence, the 1980's were marked by significant progress in other areas. Of particular importance to making Hong Kong a distinctive and civil society was the rapid growth of a large, educated middle class, the development and localization of the professional Civil Service of the Hong Kong Government, the strengthening of the legal system featuring an independent and respected judiciary, and the gradual progress toward a more open governmental and political system which allowed and encouraged greater participation by all citizens in matters affecting them.

The decade closed with the watershed year of 1989 and the events of June 4th. We should not underestimate the impact of those events on the perceptions of many in Hong Kong. Perhaps a million people demonstrated against the actions of the PLA in Tiananmen. People who had looked toward the 1997 transition with equanimity or even anticipation found themselves questioning anew what their future held for them. It was a time of disillusion and uncertainty.

Since then, few issues in Hong Kong have not been affected by transition considerations. Britain, China and Hong Kong have devoted extraordinary efforts to working out the specifics of China's one country--two systems concept as embodied in China's constitution, in the Joint Declaration, and in the Basic Law. Many areas of successful cooperation are laying the groundwork for the future. I would point in particular to financial, monetary and law enforcement cooperation. It is unfortunate there has been no agreement on some of the key elements of the transition, including the future shape of the Legislative Council and the adaptation of Hong Kong's laws. Sensitive handling of these issues is essential to ensuring continuity, predictability and continued vitality.

Despite the uncertainties and potential difficulties, I remain, as many of you know, fundamentally positive about Hong Kong's prospects over the coming years. Hong Kong will continue to benefit from China's economic growth and increasing participation in world affairs. Its strengths, developed in recent decades, have prepared Hong Kong well.

One of the most important lessons of Hong Kong's history is the unfailing ingenuity and adaptability of its people. They have repeatedly confronted extraordinary crises and challenges and always have found ways to overcome the difficulties of the moment and to emerge even stronger and more vibrant than before. For example, how many people wrote Hong Kong off in 1967 as the Cultural Revolution appeared on the verge of engulfing the city? How many people could have predicted Hong Kong's successful structural transition as it transferred much of its industry to China in recent years and created in its place the higher value-added services industries of today?

I believe that China's constitutional one country--two systems concept can be made to work. Hong Kong after 1997 can be every bit as hospitable a place for American commercial and other interests as it is today. Granted, there is nothing automatic about the process or the outcome.

Risk analysts can find reasons to be pessimistic. But with hard work, goodwill and cooperation, and the support of the international community, Hong Kong, China and Britain can and must make this unique concept a successful one. There is a great deal at stake.

What are some of the essential elements which will contribute to this success? First, I hope Hong Kong's residents will maintain their active role in public life. I'm referring not just to the sphere of political party activity which captures the headlines, but also to the broad range of participation in civic affairs which has become more and more a feature of this educated and well-informed society. People are sometimes too fond, I think, of harking back to earlier colonial times when Hong Kong people really had little or no voice in political or other public activity. That may have worked in the past, but I think it is unworkable in today's world. If you look at the general trend in Hong Kong over the past 20 years of increasing citizen participation in government and civic activities, Governor Patten's 1992 proposals to flesh out the Joint Declaration and Basic Law were only one step, albeit an important one, in that direction. There has been a slow but steady growth in overall openness, representativeness, and accountability in government. After all, this educated citizenry increasingly wants to participate in important public decisions that affect it -- whether those decisions involve how tax money is spent; whether the air we breathe is clean; or how civil liberties are to be protected. I hope Hong Kong people, working with China, will strive to maintain this healthy development of recent decades.

Secondly, continued openness to trade, financial flows and particularly to information is vital. Freedom of the press gives citizens the information they need to make informed choices. In addition, a free press and free access to information is essential to conducting commerce in this electronic age when many events, economic and political, move markets. This crucial information is not limited to such things as stock market quotations. Hong Kongers and others here do business all over the world, and they need the full range of global information to manage their investments properly . Nothing would be more damaging to Hong Kong's position as an international entrepot and financial center than a perception that the media and other information services were altering or manipulating their reporting to serve a particular economic or political goal.

Thirdly, as I have said on other occasions, full implementation of Hong Kong's promised high degree of autonomy will help to assure Hong Kong's continued way of life. Hong Kong and China must work together closely in the coming years, but Hong Kong people also must be the ones to make the decisions in those non-defense and non-foreign affairs areas reserved to Hong Kong. This will require that Hong Kong officials be willing to fully exercise their guaranteed authorities and will require forbearance by others.

Why do I continue to stress these points? The international community is deeply interested in the continuing success of this city and in its future as a part of China. U.S. Secretary of State Warren Christopher said last month in New York: "Beijing's commitment to maintain Hong Kong's open economy, democratic government, distinct legal system, and civil liberties is critical to Hong Kong's future prosperity -- and to China's." The United States is pledged, by our law, to treat Hong Kong differently from China after 1997. For example, we will support Hong Kong as a separate member of WTO and APEC. We will maintain separate textile quotas, a separate export control regime and separate aviation relations. But we can do so only as long as Hong Kong remains a genuinely separate entity, distinct from the rest of China. I make these statements in order to state clearly and unambiguously the conditions under which we can continue to provide differential treatment to Hong Kong, as both China and Britain have asked us to do. I have the twin goals of encouraging Hong Kong officials and others genuinely to exercise their high degree of autonomy as well as to give good reason to a broad range of officials and businessmen to exercise appropriate restraint in those areas reserved to Hong Kong. This will require a delicate balance and a great deal of flexibility and goodwill all-around as Hong Kong and China cooperate to make the HKSAR a reality.

I have had a continuing series of exchanges with Chinese officials on a broad range of transition issues and on United States' interests in Hong Kong. I have conveyed clearly our support for a successful transition that leads to close cooperation between Hong Kong and China and that preserves what we see as fundamental ingredients in Hong Kong's continued success. These include the preservation of the legal system and an independent judiciary; protection of civil liberties, including freedom of expression and of the press; continued openness to trade and investment; and continued progress toward more open, accountable and democratic government. I have said there is great value to Hong Kong in freely and fairly elected bodies and that the United States hopes post-1997 institutions will fully reflect the broad spectrum of views in Hong Kong. I have also described why implementation of a high degree of autonomy is of such importance.

I am not the only foreign representative who has made these points. I believe that senior Chinese officials understand that the international community in general -- and the United States in particular -- holds important interests in and genuine hopes for a smooth and successful transition. They have provided assurances that the commitments of the Joint Declaration will be fully implemented. Indeed, China's own interests -- beyond those of any other nation -- are best served by a prosperous and open Hong Kong. I hope and expect that Chinese leaders will continue to welcome views of the international community on transition questions as this next year unfolds.

Once the dramatic moment of transition has passed and the questions we all have about the evolving nature of Hong Kong's polity are being answered, Hong Kong will need to devote attention to other important and longer-run issues, such as:

• How can Hong Kong go about consolidating its service-based economy?
• How can Hong Kong attract high-technology manufacturing firms?
• What role and what positions will Hong Kong assume as a member of the Asia-Pacific Economic Cooperation forum, the World Trade Organization, and other international bodies?
• How can Hong Kong best go about preserving the natural blessings of its parks and its waters? How can the environmental damage that has too often accompanied economic development be lessened and controlled?
• What goals do Hong Kong people wish to set for themselves with regard to housing, health care and the education of their children?

In short, Hong Kong and those who wish Hong Kong well should look at the coming changes as a challenge and an opportunity. There will be changes, many of them significant. There are uncertainties and even dangers. Sensitivity, restraint and goodwill are vital. Hong Kong people must engage on issues of importance, whether it is the definition of freedom of expression or their desires for the future shape of their governmental institutions. Such discussion and debate is necessary and healthy in order to illuminate differences and identify solutions. Hong Kong cannot be preserved in amber now any more than it could have been in 1984 or at any other time. Look at how different Hong Kong is today from 20, 30 or 40 years ago. Hong Kong has repeatedly demonstrated a remarkable ability to adjust to changing circumstances.

I challenge Hong Kong's citizens to continue to show the same courage, resourcefulness, and entrepreneurial drive in mastering these challenges and in working out their new status in cooperation with China, as they have so many other times in their history. I can assure you that the United States takes a great interest in Hong Kong's future and will continue to do everything it can to support Hong Kong, China, and Britain in ensuring a successful transition. Secretary Christopher in his May 7 speech made clear that the United States supports the Joint Declaration and its one country, two systems framework and that "the United States has an important interest in ensuring a smooth and succcessful transition of Hong Kong on July 1, 1997."

It is my great good fortune, as it will be for many of you here today, to be in Hong Kong through the transition period and into the months beyond. As many of you know, I will take a leave of absence from the State Department and join you in the private sector, as Director of Asia Society's Hong Kong Center. This is a rare opportunity for a career diplomat. I look forward to witnessing the setting up of a new, post-transition agenda by and for the people of Hong Kong.

Who knows? When the year 2006 rolls around, perhaps AmCham will once again ask me for my reminiscences -- this time of the ten years that encompassed the transition of sovereignty and the consolidation of Hong Kong's position as the premiere East Asian center for trade, finance, the media, and cultural exchange.

I await your invitation.