Hong Kong's Roles in Supporting the Economic Development of China

Abstract

If China was the startup economy star of the late 20th century, Hong Kong was its main angel investor. But Hong Kong’s roles in supporting the economic development of China go well beyond investment. During the Cold War, Hong Kong helped China through the pressures of allied embargo and today Hong Kong facilitates the controlled liberalization of the Chinese currency and capital markets. When Chinese markets were vastly underdeveloped, Hong Kong served as the international funding portal for Chinese enterprises. Merchants in Hong Kong were some of the first to build sophisticated commercial networks in mainland China following 1978, and Hong Kong has provided commercial and legal expertise as mainland China gradually built its legal and regulatory institutions during recent decades. Now, as Hong Kong links ever more closely with mainland China, its institutions and law are influencing the neighboring city of Shenzhen while the capital markets of the two cities are being physically linked. The most recent stage of this relationship has brought significant social stress to Hong Kong, as mainland Chinese buyers drove up property prices, large numbers of mainland entrants filled Hong Kong jobs, and mainland visitors flooded the community with contrasting ethical and civic behavior. The resulting tensions have been dangerously simplified by some into a struggle of Hong Kong “freedom fighters” repelling “authoritarian” China, and one aim of this paper is to reinstate an acceptable level of factual detail to the matter. Rather a neo-cold war battle, the tension in Hong Kong’s relationship to mainland China should be understood as a difficult juncture among long-standing partners. Public sentiment evidences the discomfort of Hong Kong’ tidy rule-of-law culture as increasingly immersed within a mainland China still lurching through a tumultuous period of internal development. If freed from the cold war caricature, Hong Kong’s vocal discontent can be understood as its most recent contribution to China’s development toward rule of law.