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Hong Kong and Macau’s return to China – blessing or curse?

By Julia Marie Ewert

10 June 2013

It is a generation since Hong Kong and Macau were returned to China. How has the situation developed since 1999 in the two Special Administrative Regions (SAR) – and how do locals feel about their relationship with mainland China? Recent tensions between Hong Kong citizens and mainland Chinese have made headlines in Western media. Issues such as rich mainlanders buying up expensive apartments, birth tourism and milk powder shortages have led to a debate about ‘civilized behaviour’. But this is Hong Kong. Attitudes towards mainland China in Macau are more positive as I discovered during a recent trip to the region.

Hong Kong

Hong Kong is one of the richest cities in the world. Its port is one of the busiest on the globe and the Hong Kong dollar is the eighth most traded currency. In particular before the return to China, Hong Kong served as an important gateway for China to the West. Until 2001, around 50% of FDI in China came from Hong Kong and Hong Kong served as a motor for development. After 2001, increased western FDI into China diminished Hong Kong’s role as investor in China. The consequences of the 2003 SARS crisis weakened Hong Kong’s economy and led to a subsequent loosening of visa restrictions on mainland Chinese.  

Locals in Hong Kong mainly see the negative impact of the return to China and the development of China’s economy. They are concerned about money laundering by rich mainlanders who buy up property and cause rising property prices. Newspaper articles about rude and ‘uncivilized’ mainlanders are among the most read in Hong Kong. Last year, 34 million Chinese tourists came to Hong Kong. Luxury brands catering to tourists open more and more stores in Hong Kong, driving up rents and forcing small shop owners to relocate or close their shops.

The feeling that Chinese initial admiration for Hong Kong and its economic success has changed into condescendence since China’s rise is widespread and concerns about the Chinese political system prevail. In May, the Chinese Communist Party’s (CCP) issued a ‘Report on the Current Situation of the Ideological Front’ naming seven topics the media and universities should not write about, causing indignation in Hong Kong.

People in Hong Kong, however, are very outspoken in defending their distinctiveness and political rights. Last year’s strong protests against the planned Chinese national education lessons in state-run primary schools in Hong Kong led to their suspension. The annual 1 July march drew the largest number of protesters in 2003 in opposition to the Hong Kong Basic Law Article 23, leading to its shelving.

Widely discussed is the concept of aiguo, aigang 愛國愛港 (love China, love Hong Kong). According to Deng Xiaoping in 1984, aiguo aigang should be understood for Hong Kong people as loving the people of China, their Chinese heritage, and Hong Kong, regardless of politics. He thus distinguished between China and the current Chinese political system. This distinction, however, has been increasingly blurred since the handover. Many in Hong Kong criticize that the Communist Party equates China with the People’s Republic of China (PRC) and thus interprets ‘loving the country’ as loving the CCP and the PRC.

This concept also plays a role in the promised universal suffrage at the chief executive’s election in 2017. Beijing stated that chief executive candidates had to love both the country and Hong Kong and not oppose the central government. While being sceptical if Beijing will keep its promise of universal suffrage, people in Hong Kong also fear the election to be controlled by the CCP and by pro-China politicians. Candidates are chosen by a nomination committee and the election winner must be confirmed by the CCP. Even though the pan-democracy camp received around 60% of votes in the last legislative elections, it only constitutes a minority in the Legislative Council due to electoral regulations.

These issues are criticized by the proposed ‘Occupy Central 2014’ movement under Hong Kong University associate professor Benny Tai Yiu-ting. He sees it as a means to pressure Beijing to grant Hong Kong universal suffrage rights if plans have not been firmed until then.

Yet, hostility between holders of different viewpoints in Hong Kong is growing. While many in Hong Kong had hoped that Hong Kong might help reform the Chinese political system after its return, they have been disappointed. Instead, Hong Kong feels increasingly shaped by mainland China (daluhua大陸化). Despite or because of that, in a 2011 survey by Hong Kong University only 16.6% of residents identified themselves first as Chinese citizens and only 37% of residents were proud to be PRC citizens. These were the lowest figures since 2001. The protests around the 15th anniversary of Hong Kong’s return to China in 2012 were the biggest in the last 8 years. However, the feeling is not completely one-sided. Mainland Chinese have drawn attention to their difficulties to integrate into an increasingly mainland-sceptic society in Hong Kong.

Foreign observers see China’s rise as a mixed blessing for Hong Kong. While Hong Kong’s economy has benefited from China’s economic development, fears of losing their identity and way of life prevail.

 

Macau

Prior to its return to China in 1999, Macau had experienced a number of problems. Gaming and tourism decreased in 1993, followed by the collapse of Macau’s property market in 1994 and the Asian economic crisis in 1997. Deteriorating public order, rising crime rates and widespread corruption during the last years of the Portuguese-Macau government led to most locals welcoming the handover. After 1999, triad violence declined significantly and public security improved. After the introduction of the Individual Visit Scheme in 2003 tourism increased and boosted Macau’s economic development.

The main reason for Macau’s booming prosperity is gambling. After the termination of the previous monopoly system on concessions for gambling licenses in 2002, Macau is now four times bigger than Las Vegas and makes more than five times its gambling profits. Direct taxes from gaming are expected to account for more than 80% of the city’s total revenue this year. The gaming revenue is growing at an annual rate of around 11.5%, boosted by the influx of mainland Chinese over the Lunar New Year.

The attitude towards mainland Chinese is generally positive as they have been largely responsible for fuelling its growth. There are, however, some negative aspects. Minimum restrictions on the purchase of properties have led to increasing numbers of rich mainlanders buying luxurious flats in order to become Macau residents but without any intentions of living there. This has driven up housing prices in Macau. The gap between rich and poor has widened, leading to bitterness of those at the bottom of the heap. While Macau’s tourists are responsible for high gambling revenue, they also lead to logistic problems in the small city with around 580,000 inhabitants. Last year, 28 million people visited Macau, more than 60% of which were from the mainland.

Following a growing number of cases of suspected money laundering, Macau has recently tightened its anti-money laundering laws. The current spokesperson of the Hong Kong Liaison office, Li Gang, who has a track record of successfully dealing with tough issues, has been promoted to become the top official in Macau this year.

Speaking about Macanese identity proves difficult, considering that in 2011 almost 60% of Macau’s population were born outside Macau, 46% of which were born on the mainland. Locals say that Macau’s ‘sinicization’ has occurred quickly after or even before its return to China. This and the improved living conditions after the handover might be the main reasons why Macau seems to be struggling less with the return to China than Hong Kong.

 

What role for the EU?

Locals both in Macau and Hong Kong view the EU’s role as rather insignificant. European observers, however, believe that the EU should be more outspoken regarding Hong Kong’s political situation and has been acting too cautiously in the past. Looking at both Hong Kong and Macau, the EU states the smooth implementation of the ‘one country, two systems’ principle as its main policy focus.

Yet, the EU as a political actor is facing problems similar to those in other regions: it is hardly perceived as a serious political actor. Additionally, the EU is currently in a weak position due to the financial crisis and it is hardly a role model of sound financial governance.

The EU sees Hong Kong as a strong partner and as a “platform for deepening relations with mainland China”. Economic and trade relations are sound and both are important partners for each other. The EU is Hong Kong’s second largest trading partner after China and its third largest source of FDI. Hong Kong is among the EU’s top ten trading partners in commercial services and an important entrepot for EU-China trade.

The EU has expanded its public diplomacy in Hong Kong and Macau. It is questionable, however, whether a more outspoken EU in Hong Kong would be desirable for EU-China relations and whether the EU would be willing to take that risk. Relations with Macau are founded on European heritage, culture, and common values and interests are seen as satisfactory by the EU.

The future of relations with the mainland seems much more complex for Hong Kong than for Macau. While Macau has experienced numerous improvements after its return, people in Hong Kong have developed a sense of crisis. As one professor in Hong Kong put it eloquently: Hong Kong has returned to China, the hearts of the people have not.