Capitalism here to stay

Updated: 2013-02-05 06:32

By Li Kui-wai(HK Edition)

  Print Mail Large Medium  Small 分享按钮 0

It was timely and appropriate for Hao Tiechuan, director of publicity, culture and sports affairs at the Liaison Office of the Central People's Government in the HKSAR, to reassure Hong Kong people that Beijing will not change the city's capitalist system, which is supposed to help the nation's reform and opening up. Hao's reiteration actually echoed the spirit of late leader Deng Xiaoping's idea of "One China, Two Systems" running the post-1997 HKSAR.

The core interest of "One Country, Two Systems" is to "safeguard the country's sovereignty, security and development". Hao pointed out that "the differences between the 'Two Systems' have not only been respected, but have been put into good use". Hao noted that "Hong Kong has been a role model for the mainland during its reform and opening up process". Put in simple words, "One Country, Two Systems" implies the acceptance of the "One Country" principle, as Hong Kong's sovereignty reverted to China in 1997, but when it comes to differences in the "Two Systems", it is the Hong Kong system that should appropriately be respected and upheld.

These original comments are crucially important in the contemporary special administrative region, as there exist variations in interpretation of the "One Country, Two Systems" framework. Several ideas come to mind. First, the various features of Hong Kong's system of capitalism have been specified in the Basic Law; it is the "system" that Hong Kong should keep, uphold and deepen, not the individual favors or special interests of different personalities. As Hong Kong is counting on its system, it is equally important for people in Hong Kong to understand how the system works domestically and contributes to reform on the mainland.

After decades of economic openness and capitalist practices, development in Hong Kong is mainly market driven, as the government does not engage too much in business nor own any productive resources. For example, the government does not normally negotiate with foreigners on the amount of investments; it would be up to the foreigners to decide by judging on the economic performance in Hong Kong. Leaders in Hong Kong should see the importance of capitalism in Hong Kong. Personality does not have a role. It is individual initiative, innovation and personal drive that are socially cherished. The government can only "assist" in ensuring macroeconomic stability. Massive economic intervention would be suicidal, and welfare provision is only a means to help the needy, not a blanket policy that kills initiatives and incentives.

Beginning from 1978, Hong Kong's capitalism has been aiding mainland economic reform. In the early stages, for example, the amount of Hong Kong investment injected to southern and other open regions on the mainland was unprecedented, as many of these investments were not profit oriented, but they served as "patriotic" capital that eventually helped to build up the foundation of economic reform. A large amount of inward investment to the mainland helped to establish a large number of industries that permitted local employment and raised economic growth. By the turn of the century, Hong Kong's financial market enabled mainland enterprises to raise capital for their development. By today, a number of mainland enterprises and financial institutions have achieved top world rankings in their areas.

Hong Kong is not expecting any "payback" for aiding the development on the mainland economy. Indeed, Hong Kong people should be pleased to see the reduction of poverty on the mainland, and it would only be continuous and further growth on the mainland that would make the country stronger and more open. Hong Kong has been providing references and preferences to development on the mainland. It is common and popular for development on the mainland to seek lessons from Hong Kong's experiences and possibilities. While Hong Kong is complementing the economic reform on the mainland, one should not be surprised to see growing economic maturity there. In other words, after years of development, one would expect the mainland to catch-up and even compete with Hong Kong in some areas.

There have been talks on the "marginalization" of the Hong Kong economy, because of growing competition from Shanghai, Shenzhen or even Qianhai, which is still in its planning stage. One has to take these comments and ideas carefully. From an economic development point of view, it would be great to see more metropolises in the mainland, as that indicates further growth and development. But it is not a zero-sum game that the rise of one leads to the fall of another. The mainland economy has "absolute advantage" over Hong Kong in terms of resources of land, labor and capital. On the contrary, Hong Kong has "comparative advantage" over the mainland as it excels in a number of economic aspects. In any case, both economies are moving forward and one cannot replace another. The long ago rise of New York as a global financial center did not mean London would fall into obscurity. There were simply more financial centers. Similarly, the rise of Shanghai means more metropolitan cities on the mainland, but it would be a wrong assumption to believe that Hong Kong's stature would then fall as a result. China today is the second largest world economy, yet HKSAR is still helping her development in various ways.

The author is an associate professor of economics at City University of Hong Kong.

(HK Edition 02/05/2013 page1)