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One Country, Two Systems and Hong

Kong-China National Integration: A
Crisis-Transformation Perspective
a
Alvin Y. So
a
Division of Social Science , Hong Kong University of Science and
Technology , Kowloon, Hong Kong
Published online: 14 Dec 2010.

To cite this article: Alvin Y. So (2011) One Country, Two Systems and Hong Kong-China National
Integration: A Crisis-Transformation Perspective, Journal of Contemporary Asia, 41:1, 99-116, DOI:
10.1080/00472336.2011.530039

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 Journal of Contemporary Asia
Vol. 41, No. 1, February 2011, pp. 99116

One Country, Two Systems and

Hong Kong-China National Integration:
A Crisis-Transformation Perspective
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ALVIN Y. SO
Division of Social Science, Hong Kong University of Science and Technology, Kowloon, Hong Kong

ABSTRACT This paper examines the historical process of Hong Kong-China national unication
through a crisis-transformation framework. This paper argues that the Chinese unication pro-
cess between Hong Kong and mainland China is not a smooth process. Instead, it has gone
through at least four crises during the 1980s and the 1990s. The institution framework for uni-
cation the so-called One Country, Two Systems policy emerged out of the rst crisis of
negotiation in the early 1980s, and this policy has been hotly contested and transformed during
the various crises over the past three decades. Previous studies on Hong Kong-China unication
tends to focus solely on the political and legal aspects. However, this paper shows that unication
needs to be symmetrical on all aspects (legal, political, economic and socio-cultural) in order to
make it work.

KEY WORDS: National unication, social and economic integration, cross-border linkages,
Hong Kong, China

In 1997, Britain returned Hong Kong to China after having governed it as a colony
for one and a half centuries. China promised the former British colony a policy of
One Country, Two Systems, guaranteeing that Hong Kong would be governed as
a Special Administrative Region (SAR), with Hong Kong people ruling Hong Kong
while enjoying a high degree of autonomy with no change for 50 years. During the
rst decade of Hong Kongs SAR history, the Beijing government did uphold the
One Country, Two Systems policy and adopted a hands-o policy of not
interfering in Hong Kong aairs; Beijing even told its own people in Beijing and
Hong Kong not to interfere (Ching, 2009).
However, in 2008 Cao Erbao, director of the research section of Beijings Central
Liaison Oce in Hong Kong, had written an article in which he said that Hong
Kong has, in fact, two governing teams: one is the establishment team of the Hong
Kong SAR government; the second consists of Chinese government authorities
responsible for Hong Kong issues on the mainland (Cao, 2008). For Hong Kong

Correspondence Address: Alvin Y. So, Division of Social Science, Hong Kong University of Science and
Technology, Clear Water Bay, Kowloon, Hong Kong. Email: [email protected]

ISSN 0047-2336 Print/1752-7554 Online/11/010099-18 2011 Journal of Contemporary Asia

DOI: 10.1080/00472336.2011.530039
 100 A. Y. So

citizens, Caos article indicated a new Beijing policy, interpreted as tightening its grip
and increasing interference in Hong Kongs aairs. In this respect, Beijing has
violated its promise embodied in the One Country, Two Systems policy.
What role has the One Country, Two Systems policy played in Hong Kongs
national reunication with China? When did this policy emerge and how did this
policy transform? What explains Beijings shifting of the One Country, Two
Systems policy from 1997 to 2008? Finally, what is the future of this One Country,
Two Systems policy?
The aim of this paper is to examine the historical process of Hong Kong-China
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national reunication from a crisis-transformation perspective. Even though China

now exercises sovereignty over Hong Kong, this paper argues that the national
unication process between Hong Kong and mainland China has not been a smooth
process. Instead, the process has gone through at least four crises over the past three
decades. The institutional framework for unication the One Country, Two
Systems policy emerged out of the rst crisis of negotiation between London and
Beijing over the future of Hong Kong in the early 1980s. Since then, the One
Country, Two Systems policy has been hotly contested during the various crises
over the past three decades.
In addition, this paper distinguishes the term unication from integration.
Unication refers to the political dimension; Hong Kong is said to have achieved
national unication when China resumed sovereignty over Hong Kong. The
literature on Hong Kongs future is mostly unication studies, which focus mostly
on the political and legal aspects. However, from a longer historical perspective, this
paper argues we have to examine not only the political and legal aspects of the
unication process, but also the broader integration process. Integration refers to
the economic, social and cultural aspects of the process of bringing Hong Kong back
to the mainland. Examining integration allows a comprehensive understanding of
whether the political unication process is working. After all, colonial Hong Kong
was not only politically separated from mainland China, but it was also
economically, socially and culturally separated from the mainland as well. The
two territories did not only have two divided states, but also had two divided
economies, two divided societies and two divided cultures and identities.
What is a crisis-transformation perspective? Researchers on Hong Kongs
unication are mostly legal scholars and they tend to examine the One Country,
Two Systems policy from a legal viewpoint (Fu and Cullen, 2006; Geping Rao,
2006); they treat this policy as something rmly ingrained in the Basic Law and
emphasise the permanence of the policy. However, using a crisis-transformation
framework, this paper starts with a dierent basic assumption. Instead of
emphasising the constitutional basis of the policy, this paper takes a dynamic view
of the policy and assumes that the policy is constantly evolving and subject to change.
In addition, this crisis-transformation framework helps to locate the major turning
points of the One Country, Two Systems policy. It is when Hong Kong
experiences a crisis which threatens the national unication process that new sets of
organising principles will emerge to redene the nature of the One Country, Two
Systems policy. Consequently, this framework shows that the most fruitful way to
examine the One Country, Two Systems policy is to examine it in a crisis situation
and trace how it changes.
 Hong Kong-China National Integration 101

To begin our discussion, let us briey review the historical process of how Hong
Kong was separated from China.

Hong Kong under Colonial Rule

From Partial Separation to Total Separation
Looking back in history, Hong Kong was separated from China through two stages.
In the rst stage (1840s-1940s), Hong Kong was ceded to Great Britain in 1842 after
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China lost the Opium War. Britain turned Hong Kong into a British colony and
used Hong Kong as an outpost to promote trade and investment in China.
Subsequently, Hong Kong became a ourishing entrepot and built up a strong
shipbuilding and ship repairing industry.
During this stage, even after it became a British colony, Hong Kong was still
closely integrated to China socially and economically. Most of the Hong Kong
population were migrants from South China. Since there was no formal border
separating Hong Kong from the mainland, mainland Chinese could come and go
freely across the border. They were attracted either by the opportunities for trade
and employment in the colony or by Hong Kongs role as a refuge of political
stability during wars and rebellions on the mainland. As a result of immigration,
Hong Kongs population grew from 5000 in the 1840s to around 1.6 million just
before the Japanese invaded Hong Kong in 1941 (Siu, 1996). However, the migrants
tended to return to the mainland when the situation improved or they had amassed
enough capital to retire or buy a business. Thus, the migrants identied themselves as
Chinese and Hong Kong was only a place of transit and few felt that it was their
home (Chan, 1995).
However, after the Chinese Communist Revolution in 1949, the nature of Hong
Kong-China integration changed. On the one hand, over a million Chinese entered
Hong Kong after the Communist Revolution, and these refugees, unlike the
earlier migrants, could not go back to China (Hambro, 1955). To stop the coming of
these refugees, the colonial state quickly erected fences along the Hong Kong-
mainland China border. Formal documentation was required for border crossing
and direct train services were suspended. On the other hand, the communist
government wanted to seal o South China from the imperialistic-bourgeois evil
inuence of colonial Hong Kong through barbed wire and strict border controls.
Afraid of capitalist contamination, the Chinese communist state closed itself o from
Hong Kong, making it dicult for Hong Kong Chinese to return to their native
villages through vigorous border controls and interrogations (Chan, 1995).
Aside from strengthening the Hong Kong-mainland China border, the colonial
government of Hong Kong also implemented two de-nationalisation policies in
order to consolidate its control. First, there was a de-linking from the Chinese
economy. Hong Kongs economy was changed from entrepot trade orientated
towards China to export-led industrialisation orientated toward the global market.
This outward shift of orientation was necessary because the Korean War had dealt a
decisive blow to Hong Kongs ourishing entrepot trade. In June 1951, the war
prompted the United Nations to impose an embargo on Chinese trade, which
crippled the Hong Kong economy since China was the colonys largest trading
 102 A. Y. So

partner. As Hong Kongs trading houses and shipping companies were decimated,
thousands of workers were displaced from employment. Fortunately, the arrival of a
large number of refugee capitalists from Shanghai and refugee labourers from
south China provided the colony with an excellent opportunity to pursue a new
model of export-led industrialisation (Youngson, 1982).
Second, despite having a liberal political label, the colonial state was quite active in
suppressing communist inltration in Hong Kong. It banned the operation of the
Chinese Communist Party in Hong Kong. On the education front, English was
maintained as the prestigious language of instruction, while Chinese was downgraded.
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The colonial University of Hong Kong was the only one that was seen as legitimate,
while various universities set up by mainland refugee or missionary professors were
seen as illegitimate and received neither funding nor recognition from the colonial
state. In the post-World War II era, a new generation of Hong Kongers emerged in
Hong Kong. This generation, which grew up in the Cold War environment and the
colonial education system, identied themselves with Hong Kong and were quite
critical of the communist government in China (Ku and Pun, 2006).
In sum, Hong Kongs separation from mainland China was deepened after the
Chinese Communist Revolution in 1949. Not only was Hong Kong politically
separated, it was economically, socially and culturally separated from the mainland
as well. Hong Kongs economy became totally delinked from the Chinese economy
and Hong Kongs society began to develop a separate identity, lifestyle and culture
from the mainland from the 1950s. Given that the two territories polity, economy
and society were so completely divided, how could the national unication process
ever get started?

Negotiation Crisis and the One Country, Two Systems Policy

Although the island of Hong Kong was permanently ceded to Great Britain, a large
part of its hinterland the so-called the New Territories and the outer islands of
Hong Kong were only leased to Britain for 99 years. Since this lease would expire in
1997, capitalists were reluctant to make long-term investments in the New Territories
and the outer islands (Scott, 1989). The London government was, therefore, under
pressure in the early 1980s to enter into negotiations with the Beijing government to
renew the lease so as to boost business condence in the colony. During these
negotiations, London was shocked to nd that Beijing not only would not renew the
lease for the New Territories but also wanted to take back the entire Hong Kong
territory (Scott, 1989).
Since Beijing had re-entered the capitalist world-economy in the late 1970s, it felt
little need to maintain Hong Kongs colonial status. Moreover, for the aging
communist party leaders, national unication was taken as the top priority of the
Chinese government; they would take it as a calling for them to see the Chinese
nation unied in their lifetime.
With London and Beijing repeatedly assuring Hong Kong of continued economic
prosperity and political stability, no matter what the outcome of the negotiations,
and although 1997 was still 15 years away before the New Territories lease expired,
the very fact that the negotiation process over the future of Hong Kong started in
1982 had already triggered a crisis of condence in Hong Kong (So, 1993).
 Hong Kong-China National Integration 103

In the economy, for example, there were sudden irrational uctuations in the
nancial market and massive emigration of nancial and human capital in the early
1980s. The booming property market turned sour and dropped more than half of its
value and many construction projects were cancelled without notice. Several giant
real estate companies reported unprecedented losses amounting to billions of Hong
Kong dollars. Ination began to rise sharply because every month in 1983 saw an
increase in the cost of at least one major public or private service electricity,
telephone, water, postage, gas, public hospital services, trains, buses (South China
Morning Post, 13 January 1984). There were signs that nancial capital was moving
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out of Hong Kong during this period. Asian Business (January 1983, p. 57) reported
that 1982 marked the beginning of an outow of an estimated US$20 billion of
investment capital believed to be in the hands of Hong Kong investors. There were
currency and banking crises too. The Hong Kong dollar fell sharply from HK$6 to
US$1 in 1982 to HK$9.6 in 1983. The colonial government had to revoke the licence
of 21 Deposit Taking Companies and took over the Hang Lung Bank. The nancial
crisis made Hong Kongs Hang Seng Index dropped from 1800 in 1981 to 600 in
1983 (Far Eastern Economic Review Yearbook 1984, p. 166).
Economic volatility quickly led to political instability. In September 1983, there
was a protest at Victoria Park against high ination and against the colonial
governments seeming indierence toward the worsening of the living standard of the
Hong Kong people. In January 1984, there was a violent riot in the city involving
looting, burning and looting of a police station. This riot was followed by a taxi
drivers strike and a metro rail workers strike in early 1984 (South China Morning
Post, 14 January 1984).
At the beginning of negotiations in 1982, Hong Kong society was highly optimistic
about the British position (Cheng, 1984). It was felt that the lease of the New
Territories would be renewed because China had just started the Four Modernisa-
tion reforms and it would not want to alienate the London government and risk the
substantial Hong Kong investment in China and the economic usefulness of Hong
Kong for a China with limited trade and investment links to the rest of the world.
Consequently, many in Hong Kong were shocked to discover that Beijing had
adopted a hard-liner position: no lease renewal and no continuation of British rule.
Instead China declared that it would resume sovereignty over Hong Kong in 1997.
Since the British and the Chinese positions were so far apart, the negotiation process
ran into a deadlock and a shouting match developed between Beijing and London.
London condemned Beijing for not recognising the international treaty the Qing
government signed in the nineteenth century, while Beijing accused London of
wanting to enforce an outmoded colonialism over the Chinese territory (Scott, 1989).
During this 1982-84 period of heated negotiation and conict between London
and Beijing, public opinion in Hong Kong was overwhelmingly for the renewal of
the lease (Cheng, 1984). The mass media was conservative, pro-capitalist and pro-
British, while the pro-Beijing left-wing newspapers did not have large circulations.
The pro-British media generally presented two arguments in favour of the British
position to renew the lease: the Economic Card argument that Hong Kongs
economic prosperity and business condence depended on a continuing British
presence; and the Public Opinion card argument that Hong Kong people wanted
the status quo and did not want communist rule.
 104 A. Y. So

It was under this historical context of an acute condence crisis and the need to
win over the public opinion of Hong Kong during 1982-84 that Beijing articulated a
new policy to calm the fear. Aside from its previous position of Sovereignty
Resumption, Beijing now presented a new policy, the so-called One Country, Two
Systems. Beijing spelled out the new policy in detail to clarify how Beijing would
rule Hong Kong after it resumed sovereignty of the territory. In a nutshell, the policy
of One Country, Two Systems has the following key ingredients (Wong, 2004):

. Hong Kong would keep its capitalist economic system with a separation from
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Chinas communist system; thus the policy was called One Country, Two Systems.
. Hong Kong would have a high degree of autonomy in running its economic,
political and cultural aairs and maintain its own police and armed forces,
currency, its capitalist social habits (such as horse racing) and institutions,
including its own laws and courts. Mainland laws and regulations would not be
applied in Hong Kong. Beijing and local governments on the mainland would not
interfere in Hong Kong aairs except those concerning foreign aairs.
. Hong Kong people would rule Hong Kong (gangren zhigang). The government
of Hong Kong would be elected by Hong Kong people, and Beijing would not
send any ocials to run the Hong Kong government.
. The One Country, Two Systems would be unchanged for a period of 50 years
after 1997.

In order to show its sincerity to the One Country, Two Systems policy, Beijing
quickly inserted a new Article 31 into the Chinese constitution, providing the legal
basis to establish Special Administrative Regions in Hong Kong, Macao and Taiwan.
This One Country, Two Systems policy was well received in Hong Kong. It
helped to sway public opinion from the pro-British position of lease renewal to the
pro-Beijing position of sovereignty resumption. Sensing the wide support of the
Chinese position after Beijing promulgated the One Country, Two Systems policy,
London quickly backed down on its position of lease extension on the grounds that
developing a long-term relationship with China had higher priority (Scott, 1989).
In 1984, Britain signed the Joint Declaration with China, agreeing to return
sovereignty over Hong Kong by 1 July 1997. On that date, Hong Kong would
become a Special Administrative Region of China, with its social and economic
system, its way of life, its status as a free port and its currency remain unchanged.
The Joint Declaration further specied that Hong Kong would draft its own Basic
Law (a mini-constitution) to protect its autonomy from Beijing.
With the guarantees of One Country, Two Systems formally written into the
Joint Declaration, the panic in Hong Kong society quickly stopped, emigration
waves gradually died down and irrational currency uctuations swiftly disappeared.
Since 1984, Hong Kong had started a new wave of economic expansion by seizing
the opportunities provided by integration with the mainland.

Rapid Economic Integration, the Tiananmen Crisis and Revising the Basic Law
With the uncertainty of the future of Hong Kong settled (China would resume the
sovereignty of Hong Kong in 1997), Hong Kong people turned their energy from
 Hong Kong-China National Integration 105

politics to economics; they found that enhanced economic integration with the
mainland provided an excellent opportunity for solving the limitations of export-led
industrialisation that had emerged.
By the 1970s, rapid industrialisation had led to labour shortages, rising real wages,
escalating land prices, the emergence of urban movements (such as students
movements, the public housing movements, the nationalist movements) and the
tightening of government regulations over the abuses of labour practices and the
worsening environment. All these factors served to push up the costs of production,
making Hong Kong industries less competitive in the global market. In order to
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survive, Hong Kong capitalists needed to nd a new way to secure an abundant

supply of cheap labour force, a large supply of land and to escape from their
governments regulations. These factors help to explain the industrial relocation of
Hong Kongs labour-intensive industries across the border in the 1980s.
Geographical proximity was highly attractive and China had an almost unlimited
supply of cheap labour force and land. The mainlands local governments were also
eager to attract Hong Kongs investment because they were permitted to keep part of
the foreign exchange earnings created through exports for their local economies (So
et al., 2001).
Therefore, soon after the Joint Declaration was signed in 1984, economic
integration between Hong Kong and the mainland began to increase. This rst wave
of Hong Kong-China integration had the following characteristics (see Ho and So,
1997). With respect to agency, it was Hong Kong small businesses that took the lead.
Hong Kongs manufacturing rms were predominantly small and used local capital.
Being small-scale and having limited resources, these small rms did not have the
capacity to carry out research and development to upgrade their production
technology. They also did not have the capacity to engage in long-distance oshore
production in other countries. Therefore, in order to reduce costs and to remain
competitive in the world market, these Hong Kong small rms found it attractive to
set up their plants across the border in Guangdong Province, where labour costs
were estimated to be only one-third of those in Hong Kong at comparable skill and
productivity levels (Chiu and Lui, 1993).
The small businesses used a strategy which can called informal, societal
integration. Instead of going through the formal central bureaucracy, Hong Kongs
small businesspeople invoked guanxi or the use of social relations, such as
cultivating kinship and community ties, making donations to local schools and sports
arena, giving gifts to local government ocials in order to bypass the complicated
bureaucratic rules and procedures to facilitate their economic transactions. In this
respect, Hong Kong businesses had an edge over the other transnational
corporations. Not only could they speak the local Cantonese dialect and were
familiar with local customs, they could also invoke their ethnicity in economic
transactions. For example, they heavily invested in their native communities,
upgraded their ancestral halls and reconstructed their village genealogy. They stressed
that even though they were born and lived in Hong Kong for most of their lives, they
were also kin to their Chinese business partners and works as they had the same
surname and shared a common ancestor (Smart and Smart, 1991).
These practices of ethnic mobilisation and social integration were happily
endorsed by local government ocials in the mainland, because they too could
 106 A. Y. So

use ethnicity to justify their special treatment of the Hong Kong investors. For
example, local village or county ocials tended to approve Hong Kong investment
much faster and they had been exible in enforcing labour practices, industrial safety
standards, and taxation policies toward their Hong Kong kin. This extra dose of
ethnic justication was necessary to overcome the complicated bureaucracy of the
communist state and its lingering hostility to capitalist production because China in
the late 1970s was still very much inuenced by revolutionary Maoism in the
aftermath of the Cultural Revolution (Smart and Smart, 1991). However, once this
anti-capitalist ideological hurdle was overcome, local village and county govern-
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ments quickly took the initiative to develop power supplies, highways and other
infrastructure to ensure a hospitable environment for Hong Kong investors.
This kind of informal, social integration worked very well in the rst phase of Hong
Kong-China integration in the 1980s. By June 1991, Maruya (1992) estimated that
20,000 Hong Kong garments, plastics, textiles and electronic factories had already
relocated across the border to Guangdong province. These factories employed more
than two million workers in Guangdong, which was about three times more workers
than they employed in the colony. During this period, it was observed that many
mainland people also migrated to Hong Kong for family reunion.
However, it must be pointed out that the rst phase of integration between Hong
Kong and mainland China was not entirely smooth. There were many forms of
conict between Hong Kong and the mainland. For example, Guangdong residents
suered from a high ination rate (over 30%) in mid1993. This sharp increase in
prices was not only a result of Beijings removal of price controls on food, rent and
service fees in the early 1990s, but was also a result of massive Hong Kong
investment (which led to an overheated economy and caused a rapid increase in price
in raw materials, food and real estate industry in Guangdong).
In Hong Kong, this rst phase of informal, social integration had resulted in a vast
increase in smuggling, armed robbery, stolen cars and gang activities committed by
recent mainland immigrants to Hong Kong, leading to a new cultural conict in
which Hong Kong people blamed their cross-border cousins, declaring them
uneducated, not willing to obey laws and regulations and responsible for armed
robberies (Mathews et al., 2008).
During this period, since the colonial government was scheduled to end its rule in
1997, it considered itself as a lame-duck government and took a hands-o attitude
toward Hong Kongs integration with the mainland. It did not oppose the
integration process, but it also failed to promote the integration process enthu-
siastically like the governments across the border.
However, although economic integration between Hong Kong-China took place
rapidly during the 1980s, political integration had received a setback. In 1989, there
was the Tiananmen Incident in China. Thousands of students protested in
Tiananmen Square for a democratic government in China. Even though the protests
were peaceful, the Communist Party declared them illegal and subversive and sent
armies and tanks to suppress the student protests, resulting in bloodshed and
casualties.
Although the student protests took place in Beijing, they sent shock waves
through Hong Kong society. Thanks to high-tech communication, the suppression
of the protests could be watched live on Hong Kong television. The Tiananmen
 Hong Kong-China National Integration 107

Incident made Hong Kong people worry again about the return of sovereignty to
China and triggered another crisis of condence. Hong Kong people gured that if
the Communist Party could send tanks to suppress the peaceful protests of students,
they could do the same in Hong Kong. If the Communist Party showed no respect
for laws and citizens protests, the written statement in the Joint Declaration and in
the Basic Law were worthless and could not be used to protect Hong Kong. The
Tiananmen Incident quickly shattered any trust that Hong Kong people had in
Beijings One Country, Two Systems policy.
In retrospect, the Tiananmen Incident produced three impacts in Hong Kong (So,
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1997). First, it led to a series of large-scale protests in Hong Kong against the
Communist Partys suppression of the student protests in Beijing. In May 1989, on
two occasions, more than one million people ooded into the streets to show their
support for the students and to protest against the declaration of martial law in
Beijing. After the bloody suppression on 4 June, more than 300,000 people
assembled in Hong Kongs Happy Valley to mourn the victims suppressed by the
Peoples Liberation Army (PLA). Hundreds of pro-democracy activists from the
mainland escaped to the West through the support of underground Hong Kong
organizations (Wong, 2006).
Second, the Tiananmen Incident triggered a tidal wave of emigration in Hong
Kong. Hong Kong people were seen lining up at various embassies to apply for
visas to leave Hong Kong. The most popular destinations were the USA, Canada
and Australia. Studies reported that professionals, such as teachers, social
workers, lawyers, were over-represented among the foreign passport applicants.
It was estimated that an average of 50,000 people per year had emigrated out of
Hong Kong annually during the early 1990s before the handover (see Skeldon,
1994).
Third, for those who could not aord to emigrate or those who preferred to stay,
they put up a resistance movement in Hong Kong. Thus, the Hong Kongs
democracy movement was revitalised following the Tiananmen Incident. Whereas
Hong Kongs democracy movement could draw only a few hundred or, at most, a
few thousand people to protest before 1989, crowds in the range of 50,000-100,000
began to show up in after the Tiananmen Incident (So, 1999a). In the post-
Tiananmen era, democracy became a hot topic in Hong Kong society. Many books
on pro-democracy activities appeared; the mass media devoted their front pages to
reporting democratic events in Hong Kong, mainland China and overseas. The
Hong Kong legislature held many lengthy debates on speeding up democratisation in
the territory. It was during this fervent climate that a new Democratic Party was
born. The Democratic Party was highly popular in the 1990s; it won landslide
elections in Hong Kong because it adopted an anti-Beijing line and put forward a
slogan that only democracy could save Hong Kong from Beijing imposing
authoritarian rule in the territory. With the last governor Chris Patten standing
on the side of democracy, democratisation in Hong Kong had become a highly
contested event between the small pro-Beijing factions and the popular democrats in
Hong Kong (So, 1997).
Facing large-scale protests and a new wave of anti-Beijing democratisation in the
aftermath of the Tiananmen Incident, Beijing came to perceive Hong Kong as a base
of subversion against the Chinese government. Beijing responded by tightening the
 108 A. Y. So

Basic Law and inserted a new clause Article 23 at the last minute before the Basic
Law was passed in the NPC (National Peoples Congress) in 1990. Article 23 says:

The Hong Kong Special Administration Region (HKSAR) shall enact laws on
its own to prohibit any act of treason, secession, sedition, subversion against the
Central Peoples Government, or theft of state secrets, to prohibit foreign
political organizations or bodies from conducting political activities in the
Region, and to prohibit organizations or bodies of the Region from establishing
ties with foreign political organizations or bodies (Hong Kong Government,
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1997).

However, in the midst of strong anti-Beijing sentiment in 1989, Beijing was willing to
compromise with the leaders of the democracy movement on Article 23, to allow
Hong Kong to enact laws on its own in an unspecied period in the future. By
making the laws in Hong Kong conform to the laws in China, Article 23 serves to
undermine the spirit of the One Country, Two Systems policy, thus sowing the
seeds for further political crisis in Hong Kong.
Observing the wave of emigration and the large democracy protests in the
aftermath of the Tiananmen Incident, foreign media tended to report a very
pessimistic picture with regard to Hong Kong-China national reunication. For
instance, Fortune magazine proclaimed The Death of Hong Kong after 1997 in a
headline (Kraar, 1995).

The 1997 Transition and the Tilt to Two Systems

During the transition period to 1997, Hong Kong was lled with all sorts of
politically pessimism, economic optimism predictions (Chan and Lin, 2008). There
was politically pessimism because there were indeed deep worries about the
imposition of communist rule on Hong Kong; people were so worried that they
wanted to get out of Hong Kong before the communists arrived in 1997. The robust
resistance movement in the form of democratisation protests continued. On the
other hand, there was economic optimism because the Hong Kong economy was
doing very well during the transition period (1984-97), due to industrial relocation
across the border that served to strengthen the economy. An abundant supply of
cheap labour and the huge and expanding mainland market had greatly increased
the competitiveness and protability of Hong Kong industries.
However, it turns out that both the politically pessimistic and the economically
optimistic predictions about Hong Kongs 1997 transition were wrong. Politically,
it seems 1997 was little more than a false alarm regarding authoritarian rule.
Although there were several disputes in regard to what extent mainland laws could
be applied to Hong Kong citizens, and whether the mainlands National Peoples
Congress (NPC) should reinterpret the Basic Law when the NPC does not agree with
a ruling of Hong Kongs nal court of appeal (Wong, 2004), Beijing did largely keep
its promise of One Country, Two Systems, adopted a position of non-interference
towards Hong Kong aairs and allowed a high degree of autonomy. While the
democrats in Hong Kong were afraid they would be put into prison when
the communists took over after 1997, there was no arrest of democrats. In fact, the
 Hong Kong-China National Integration 109

democrats were allowed to voice their views freely (including condemnation of the
Communist Partys bloody suppression at Tiananmen Square). In the new SAR
government of Hong Kong, anti-communist protests (like those organised by Falun
Gong) were allowed, the mass media remained free (Ma Ngok, 2007), and there was
a continuation of democratic elections after 1997 (So, 1999b).
The optimistic economic prediction was wrong too. Although pundits predicted
that economic growth would continue after 1997, Hong Kongs economy was in a
terrible shape right after the 1997 handover. The downturn of Hong Kongs
economy, however, was mostly a result of the Asian nancial crisis rather than of the
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1997 transition. At the height of the Asian crisis in 1998, Hong Kongs gross
domestic product (GDP) contracted by about 5% (compared to a 5.2% real growth
in 1997), property prices dropped by a staggering 50% and stock market prices
dropped considerably. Unemployment hovered at a record high of 6%, wages fell,
many businesses closed down and consumer demand was weak (Lui, 2002).
During this period of economic downturn (1997-2003), the SAR government was
reluctant to push forward on more economic integration with mainland China
because the Democratic Party, which was very popular in the late 1990s, wanted the
SAR government to minimise the integrative process in order to preserve the
distinctiveness of Hong Kong. The Democratic Party assumed that more
integration would turn Hong Kong into just another Chinese city, like Canton
and Shanghai. It argued that Hong Kong must keep its distinctiveness, especially
democratic elections, a free civil society, independence of judiciary and related
freedoms, so as to preserve its global city status (Loh, 2006).
Since Beijing adopted a position of non-interference and allowed Hong Kong to
have autonomy and independence, it seems the One Country, Two Systems policy
was working smoothly in Hong Kong when the pendulum began to shift from One
Country to Two Systems.

2003 Mass Protest: Back to One Country

Hong Kong faced another crisis at the turn of the twenty-rst century. The Severe
Acute Respiratory Syndrome (SARS) epidemic in 2003 caused the United Nations to
issue an international travel warning to tourists travelling to Hong Kong, making it a
dead port and its tourist industry came to a sudden halt. Because the government
did not have any eective policy to get Hong Kong out of the Asian nancial crisis,
the Hong Kong economy hit rock bottom in 2003, during the SARS epidemic.
What made the matter worse is that the Hong Kong government made the wrong
strategic move in seeking to also enact Article 23 (the anti-subversion law) in 2003.
According to Wong Yiu Chung (2006), the Hong Kong government took that move
because of pressure from Beijing, whose tolerance of the various anti-communist
activists in Hong Kong, such as Falun Gong protests and the anniversary gathering
to commemorate the victims of Tiananmen Incident on 4 June in Victoria Park,
began to wear out.
Since Article 23 covers seven areas of oences, including treason, secession,
sedition, subversion, theft of state secrets, foreign organisations and police
investigative powers, it has wide-ranging implications for professionals (teachers,
journalists, lawyers and librarians) and for civil liberties in Hong Kong (Ma, 2005).
 110 A. Y. So

On 1 July 2003, an estimated 500,000 people came out to protest on the street against
Article 23 fearing it would threaten freedom of association, threaten the freedom of
information and the free press, and endanger the freedom of speech and religion. An
estimated 500,000 people protested, making it the largest protest in Hong Kong since
the 1997 handover to China (So, 2008). The protest marked a signicant new phase
in Hong Kong-China integration.
Signicantly, Beijing decided to take the lead in solving the economic and political
crisis in Hong Kong, seeing the Hong Kong SAR government as incapable. Soon
after the half-a-million people protest, Beijing started a new formal, state-led
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integration process to speed up Hong Kongs integration with the mainland. This
state-led process involved the following formal agreements signed between the
Beijing government and the Hong Kong SAR government.
In the so-called Individual Travellers Scheme, residents in nine Chinese
provinces can visit Hong Kong and Macao on a personal basis. Previously, mainland
tourists had to visit Hong Kong and Macao on ocial tours and go through a
complicated application process, which sometimes took months. The individual
travellers scheme is aimed at boosting the tourist industry of Hong Kong, which
suered a severe downturn during the SARS epidemics in 2003.
Hong Kong and Guangdong governments also signed the Closer Economic
Participation Arrangement (CEPA). The rst CEPA in 2003 provided 1087 Hong
Kong-made products with tari-free entry into the mainland market, accounting for
67% of manufactured goods exported to the mainland (Kynge and McGregor,
2003). CEPA aimed to open the huge mainland market for the manufacturing
industry of Hong Kong. Two years later, CEPA II in 2005 allowed not only Hong
Kong-manufactured products, but also allowed services to enter the mainland
market, including law, accountancy, medical, banking, insurance, transportation,
tourism, education and social welfare (Anon., 2005; Black, 2007). In educational
services, for example, Hong Kong began to have more integration with the mainland
after CEPA II. Many Hong Kong universities are setting up branch campuses on the
mainland, joint programmes and exchange programmes with mainland universities
in order to capture the mainland education market. In return, more and more
mainland students are coming to Hong Kong to pursue their undergraduate and
graduate studies. In fact, the majority of the research graduate students in the
authors department at the Hong University of Science and Technology are
mainland students.
All these activities showed that Beijing started to assert its inuence in earnest,
signalled another shift of the One Country, Two Systems policy from the direction
of Two Systems back to the direction of One Country. Indeed, less than two
years after the 1 June 2003 protests, Chief Executive Tung Chee Hwa was eased out
(Ching, 2009). This followed the dispatch of dozens of mainland ocials to Hong
Kong to discover what had gone wrong in the SAR. They met with all sectors of
society, including advocates of democracy, and sent reports back to Beijing leaders.

Towards More Symmetrical Integration

The setting up of formal institutional arrangements between the Hong Kong SAR
government and the Beijing government served to raise Hong Kong-China
 Hong Kong-China National Integration 111

connections to a new phase of a Symmetrical Integration. This new integration

process had three characteristics. First, it was a two-way interaction. Previously, it
was mostly one-way trac, with Hong Kong small business going into China. In the
2000s, more tourists, students, professionals and businesspeople were coming from
the mainland to Hong Kong to tour, study, work and invest. Second, it was a more
comprehensive interaction, as the interaction has gone beyond the connes of the
manufacturing sector to include services, real estate (Hong Kong rms build
apartment complexes and shopping malls in China) and the retail sector, as Hong
Kong rms set up branch stores in China (SinoCast China Business Daily News,
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2005). Third, the benets of integration are more widely spread from the capitalists
to other social classes. In the 1980s, only Hong Kong businesspeople could benet
from integration with the mainland. In the 2000s, the benets have spread to middle-
class professionals: students can go the mainland to pursue higher education and
professional training; university graduates and professionals can work and develop
their careers on the mainland, professional rms can set up a branch company or
form partnership with a professional rm on the mainland; consumer industries also
reap benets from the large number of tourists from the mainland. Since the signing
of the CEPA in 2003, the middle-class Democrat Party has considerably scaled down
its criticism of the Beijing government.
However, for Hong Kongs unskilled workers, it is increasingly dicult to get a
job in the labour-intensive manufacturing sector because Hong Kong rms either
have relocated across the border or have upgraded their production to a higher
technological content. It has been pointed out that a recent rise in radical politics and
social activism in Hong Kong in the rst decade of the twenty-rst century has its
structural roots in these dislocated workers and marginalised youths (Tang, 2009).
As such, it is important for the SAR government to provide more resources to
retrain these workers so they can upgrade their skills (Harney, 2004).
The most recent development is constructing a better infrastructure framework to
link Hong Kong with the mainland. The two governments hope that when the
transportation network between Hong Kong and the mainland is more direct and
more ecient, there will be a larger ow of human trac and products across the
border. Thus, there is a plan to construct a new US$10 billion Hong Kong-Macao-
Zhuhai bridge, linking Hong Kong to Macao and to the West Pearl Delta by road.
This plan was approved in 2008, although no date has been agreed for construction
to begin and little had been achieved by late 2010. Also, there are plans to build a
high-speed train and many new freeways connecting Hong Kong to the small cities in
the Pearl River Delta and to other big cities in northern China. Currently, 150,000
people cross the Hong Kong-Shenzhen border daily, with all but one checkpoint
open 17 hours a day. These large infrastructures and the proposed 24-hour border
crossing at all borders are a means to increase the ow of people and products
between Hong Kong and China (Li, 2007).
Each of these infrastructure projects will strengthen Hong Kongs position as a
key logistics centre for south China, providing job opportunities in the transporta-
tion, export and insurance sectors, as well as more jobs to the construction workers,
the cross-border truck drivers and the other workers in these sectors.
Aside from the above economic integration activities, there are also social and
cultural integration activities as well. For instance, cross-border marriage is on the
 112 A. Y. So

rise and it extends from the working class to the professionals and the capitalists
(including the second wives). Many mainland wives of Hong Kong residents
especially make a trip to Hong Kong hospitals to give birth (Fowler and Qin, 2007).
Hong Kong identity is changing too. Due to the patriotic campaigns of the pro-
Beijing groups in Hong Kong, the closer socio-economic integration and the growing
power and prestige of Beijing in the world, more people in Hong Kong identify
themselves as Chinese rather than as Hong Kongers or as Hong Kong
Chinese (Mathews et al., 2008). It seems that the media has changed too. It is
presenting a much more favourable image of the mainland in Hong Kong; it tones
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down its criticisms of Beijing and the communists. Even movie actor Jackie Chan has
publicly voiced his support for a more authoritarian government by criticising Hong
Kong and Taiwan for having too much freedom and insucient discipline
(cited in E. Ma, 2007).

Conclusion
This paper has examined the national unication process between Hong Kong and
mainland China from a crisis-transformation perspective. Rather than seeing One
Country, Two Systems from a legalistic viewpoint, this paper has taken a dynamic
view of the policy and assumes that the policy is constantly evolving.
Tracing the various crises in Hong Kong over the past three decades, this
paper has shown that the One Country, Two Systems policy has transformed
in two ways: either moving toward the direction of One Country or moving
toward the direction of Two Systems. Over the past three decades, Hong Kong
leaders and democrats were seen constantly negotiating and bargaining with
Beijing to push the policy towards the direction of Two Systems, while Beijing
leaders were seen constantly adjusting their position towards the direction of
One Country. The various crises reported above can be seen as the socio-
political dynamics that swing the pendulum back and forth between the two poles
of the One Country, Two Systems policy. In the crises, actors struggle with
each other to restore the delicate balance in the policy; none of them, however,
wants to completely reject the framework of the One Country, Two Systems
policy.
Up to the turn of the twenty-rst century, Hong Kong can be said to have
experienced a reluctant integration. Before 1997, the colonial government took a
hands-o position; the integration process took place at the informal, social level,
mostly through ethnic and kinship mobilisation of Hong Kong small businesspeople.
But even after Hong Kong returned to Chinese sovereignty in 1997, the rst SAR
government was still reluctant to promote more integration with the mainland
because the Hong Kong democrats were afraid that more integration would lead to
the pruning of Hong Kongs distinctiveness.
So it had to wait until the economic crisis and the political crisis in 2003 before
there was a deepening of the integration between Hong Kong and the mainland.
Since 2003, Beijing took the lead and raised the integration process from an
informal, societal level to a state-led formal, institutional level. Formal
agreements, such as CEPA, were signed between the Hong Kong SAR government
and Beijing and the provincial governments on the mainland. CEPA has started a
 Hong Kong-China National Integration 113

new process of Symmetrical Integration because it has transformed Hong

Kong-China integration from a one-way ow to two-way processes, because it
makes integration more comprehensive by getting other sectors involved, because
it has spread the benets of integration beyond the capitalists to other classes,
and because it has greatly intensied social integration. Since 2003, there seems to
be a change in cultural integration as well, as Hong Kong people increasingly
identify themselves as Chinese rather than as Hong Kongers or Hong Kong
Chinese.
This paper shows that unication needs to be understood as symmetrical in all
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legal, political, economic and social aspects if it is to work. It may take a long time
before symmetrical integration can be restored in Hong Kong because the two
territories were completely torn apart until the late 1970s. The earlier phases of Hong
Kong-China unication were indeed testing, as Hong Kong went through many
crises. However, as integration was institutionalised from the 1980s onwards, the
crises have been weathered.
What, then, is the future of Hong Kongs national unication with China? After
going through so many crises, it seems the One Country position is gaining
momentum as Hong Kong is moving closer to a symmetrical integration. Of course,
there will still be crises ahead, but it seems the social, economic and political
foundations are now so rmly laid down that it is unlikely to reverse the trend of
symmetrical integration. The One Country position is so rmly institutionalised
that a Beijing ocial like Cao Erbao can boldly declare that Hong Kong is governed
not only by the SAR government but also by a team of cadres of Central and
Mainland Authorities carrying out Hong Kong work (Cao, 2008) and a mainland
professor like Jie Cheng is authorised to announce that a new paradigm in the
Beijing-Hong Kong relationship has taken place . . . and Beijing has nal control
(Cheng, 2009).
How has it reached this point? It is necessary to spell out the reasons why national
unication works despite so many crises over the past three decades. First, the
unication process took place during a long period of political stability and
economic prosperity in China. Since China is stable and resourceful, it allows Beijing
more condence in dealing with crises. For example, increased condence allowed
Beijing to drive a hard bargain with the British during the negotiation process to take
back Hong Kong. Since Beijing leaders are not under any internal threat, they could
be more exible in handling anti-Beijing sentiment in Hong Kong (like tolerating
their existence) without being seen as weak. Since China had close to 10% economic
growth during the 1990s, Beijing could aord to make concessions (like CEPA) and
oer more resources and favourable policies to Hong Kong to boost the SAR
economy.
Moreover, Hong Kong-China unication has beneted from good timing. It
started unexpectedly in 1982 (when London asked for the lease renewal of the New
Territories) and before Taiwan-China integration was considered. The success of
Hong Kong-China unication is critical because the One Country, Two Systems
policy can then be used as a model to attract Taiwan to come to the negotiation
table. Subsequently, more hostility across the Taiwan Strait and the stronger the pro-
independence movement in Taiwan, the more bargaining chips there were for Hong
Kongers to push towards the direction of Two Systems.
 114 A. Y. So

In addition, Hong Kongs proximity to the mainland means it cannot survive by

being completely cut o from the mainland (for example, Hong Kong depends on
the mainland to supply drinking water to the territory). This has considerably
simplied the unication issue because, unlike Taiwan, there is no independence
movement in Hong Kong. Despite the Democratic Partys anti-Beijing position, it
also supports national unication and does not advocate political independence. In
passing, this article wants to mention that it was also this survival need that made
London decide to return sovereignty of Hong Kong to China.
Finally, the framework One Country, Two Systems has provided a rm
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institutional foundation for the unication process. So far, there is no leader or

political group (in Hong Kong or on mainland) who wants to challenge or to
demolish the One Country, Two Systems model. Controversy arose concerning
only whether Hong Kong should move closer to the pole of One Country or to the
pole of Two Systems. So as long as the general framework of the One Country,
Two Systems policy is accepted by all the actors of national unication, their
dierences and conict can be worked out.

Acknowledgement
An earlier version of this article was presented to a seminar on National Unication in Germany and
Hong Kong, organised by the Institute of Peace and Unication Studies on 29 April 2009, Seoul National
University, Seoul.

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