Hong Kong and China

HL Deb 09 December 1992 vol 541 cc188-95

3.8 p.m.

Lord Geddes rose to call attention to the situation in Hong Kong and China; and to move for Papers.

The noble Lord said: My Lords, in moving my Motion I am sure that we are all delighted that the noble Lord, Lord Wilson of Tillyorn, has chosen today's debate to open his account in your Lordships' House. As the most immediate past Governor of Hong Kong he will be listened to with great attention, as will his predecessor but one, the noble Lord, Lord MacLehose of Beoch.

We are also grateful to the noble Baroness, Lady Dunn, for finding time to speak in today's debate. It is indeed sad that the other two Hong Kong resident Members of your Lordships' House—the noble Lord, Lord Kadoorie, and my noble friend Lord Cromer —are unable to be with us. The noble Lord, Lord Kadoorie, is unable to be here on medical grounds and my noble friend Lord Cromer has last-minute business reasons.

As many of your Lordships will be aware, I have one overriding objective in the debate; it is to do what is right and best for the people of Hong Kong both before and after 30th June 1997. The present unhappy relations between Hong Kong and Beijing give considerable cause for concern, but I suggest that it would be a mistake to concentrate only on that present situation.

It was entirely deliberate to include China as well as Hong Kong in the title of today's debate. It is no longer realistic or even possible to consider one without the other. Hong Kong and China, particularly southern China, are now interdependent to such a degree that economically they should already be viewed as one entity.

Much has been made in recent days about the volatility in the Hang Seng Index. I am sure that those who know Hong Kong, particularly its stock market, will agree that it is probably the most emotive market in the world. For the record, the Hang Seng dropped 18 per cent. in the past four weeks, but that was from an all-time high on 12th November. It is still 423 per cent. higher than in September 1984 when the Joint Declaration was signed; 98 per cent. higher than the day before the Tiananmen Square incident; 153 per cent. higher than the day after Tiananmen Square and 27 per cent. higher than a year ago. As in every society or political system the economy is the heart of the matter, the fulcrum, the driving force. The Asia-Pacific area is undoubtedly the fastest growing in the world and Hong Kong is still very much at its centre.

In 1991 nearly one-third of all Hong Kong's trade was with China. Around 85 per cent. of Hong Kong's re-exports either originate from or are destined for China. In the first nine months of this year, Hong Kong's domestic exports to China rose by 16 per cent. In Guangdong, the province nearest to Hong Kong and where there are three special economic zones, some 3 million people are employed by Hong Kong businesses in 25,000 enterprises. Directly or indirectly, Hong Kong is said to be responsible for up to 90 per cent. of the investment in Guangdong, which itself has a population of 80 million. Nor is it all one-way traffic. Hong Kong and China are now each other's largest trading partners. China invests heavily in Hong Kong's manufacturing industry. Mainland Chinese interests already own around 5 per cent. of all the real estate in Hong Kong and 70 per cent. of all purchase and sales agreements filed with the Hong Kong Land Office this year have been with China. Without even allowing for acceleration of that trend, China will own 20 per cent. of Hong Kong by June 1997.

The businessmen of Hong Kong have not waited for 1997. With the ingenuity and economic astuteness for which they are justly famous they have looked into the future and acted accordingly. To them, 1997 represents opportunity as well as a step into the unknown. They have not been slow to seize the former in an attempt to mitigate the latter. It must not be forgotten that 98 per cent. of the population of Hong Kong is Chinese—a people with a strong sense of cultural unity and desire to preserve their ancient civilisation. Even in Taiwan, the 1991 elections demonstrated the electorate's overwhelming rejection of the concept of total independence and divorce from mainland China.

Above all, the Chinese are prepared to be endlessly flexible and utterly pragmatic in their approach to achieve their objectives. The concept of "one country, two systems" is, if nothing else, ingenious! The way in which China's economic structure has advanced during the past 13 years, when the modernisation programme started, is further proof of the Chinese versatility and willingness to adapt circumstances to their needs.

Two months ago I had the real pleasure and privilege of accompanying the noble Lord, Lord MacLehose of Beoch, on a visit to China—a follow-up to the one he and I made in April of this year to Fujien and Guangdong Provinces. Our most recent visit was to Wuhan in Hubei Province, 1,000 kilometres north of Hong Kong and to Shanghai. Both in their different ways were equally fascinating and impressive. Wuhan stands at the crossroads of the Yangtze River flowing west to east and the north-south railway, and as such could become a huge inland container entrepot for goods destined to and from Kowloon via the new double track north-south railway presently under construction.

We received most interesting general briefings from the Hubei planning authorities, together with a visit to the Wuhan Iron and Steel Company, itself occupying a site of 10 square kilometres, and a specific briefing with regard to the planned Three Gorges Dam. That dam is truly mind boggling in its conception. If built, it will take 18 years to complete; it will require 20 million tonnes of cement and will eventually produce 84 gigawatts of electricity per annum.

To me, Wuhan was also interesting in that it is in the same state and position as Guangzhou was 15 years ago; that is, ready, able and extremely willing to embark on a period of major expansion. Shanghai was, in a different way, equally fascinating. The historical city is sprouting high rise buildings at an incredible rate. But the biggest and most impressive expansion is in the area of Pudong, south of the Wangpo River, where the authorities have embarked on a 30-year programme to develop 350 square kilometres of land to be turned into, "the financial and economic centre in the Asia area". That development, including construction of a second international airport and a sea port, will be divided into four zones specifically designed for free trade, export processing, finance and high technology. As with, but different from, the projects in Wuhan and Hubei Province, the Pudong development is a truly gigantic one, and again the Chinese seem to have got it right in insisting on years of concentration on infrastructure before opening up the development to investors. In both Wuhan and Shanghai, the majority of foreign investment which is "pouring" in comes from Hong Kong.

Deng Xiaoping defined China's economic policy as "socialism with Chinese characteristics", which amounts to free market capitalism with a highly centralised political system: to the western way of thinking, those are concepts which are mutually exclusive. However, Mr. Deng continues to urge on a programme of deregulation and a free market. It is not without interest that economic reformers dominated the appointments to the Communist party's Politburo and Standing Committee at the 14th Party Congress in October.

China's economy has doubled in size since economic liberalisation began in 1978 and could well double again by the year 2000. Despite chronic losses in the state-owned sector, China's GNP for the first three quarters of 1992 was up by 10.6 per cent. over the same period last year and projections for China's economic growth during this year were revised upwards from 6 per cent. to 10 per cent. by the Beijing Government in July. Over the past 13 years China has averaged an annual growth of 9 per cent., which is something they intend to maintain at least until the end of the decade. In 1990 official stock markets were established in Shanghai and Shenzhen. Although there is a risk of the economy overheating and inflation, few can argue that China's economic achievements are little short of miraculous.

China's pragmatism extends to the loosening of controls in order to achieve her aims; the system allows just so much liberty and personal prosperity as is necessary, although Tiananmen Square was more than a sharp reminder of how the state can flex its military muscles and exercise political control if provoked. It is tempting to compare China with the former Soviet Union and to forecast that political liberalisation will be the inevitable result of the economic progress. However, I suggest that the Chinese have learned well from their neighbours and that economic reform must come a very long way first.

So, where does that leave Hong Kong? The trite answer of course is on the front page of virtually every newspaper every day; not necessarily an ideal position or situation, particularly for Hong Kong which basically just wants to be left alone to get on with what it knows best, and that is to make money. The present bout of decibel diplomacy is deafening, dangerous and potentially destructive. It is doing no one any good at all; not Beijing, not London and certainly not Hong Kong. At the end of the day, what is that decibel diplomacy all about? Apparently, it is about democracy with an important sideline as to whether Westminster intends to abscond with Hong Kong's silver—perhaps I should say jade—before the handover.

I have not a shadow of doubt that the latter is neither true nor a practical possibility. As to the former, democracy, I wonder whether that is not more a symptom than a cause. The real reason seems to be that of trust. The background for what became the 1984 Joint Declaration and the 1990 Basic Law was lack of assurance that Beijing would stick to its word and allow Hong Kong to continue with its previous way of life for at least 50 years after 1997. I suggest that the Governor's present proposals—and they are only proposals, which can be amended or, indeed, overturned by the Hong Kong Legislative Council —are a natural extension of that unease and therefore an endeavour to strengthen the democratic safety net. Beijing, in turn, is increasingly distrustful of the motives behind such constitutional reform and indeed its possible implications for the rest of China. In my view, it is a classic situation of each side becoming more and more convinced that only its view is right.

I suggest that were it not for the fear that Beijing might not honour its agreements of 1984 and 1990, the vast majority of the people of Hong Kong would be happy to get on with their business provided—this is a most important proviso—they were absolutely certain that the status quo of an independent judiciary, free speech, free assembly, a free press and freedom to travel, would remain. Given such absolute certainty, the pressure for democracy (itself an occidental concept) would surely be greatly reduced. To achieve that will require a positive rather than a negative move from Beijing and an immediate—I stress, immediate—corresponding positive reaction from Hong Kong.

I most genuinely congratulate Mr. Christopher Patten, the present Governor of Hong Kong, on his sincerity. I have no doubt that he totally believes that the proposals outlined in his remarkable speech of 7th October are entirely within the strict written terms of the Basic Law. His coolness under fire in recent weeks does him enormous credit and I greatly honour such courage. However, what he has done is to bring very much an occidental mind and a Westminster approach to what is an almost entirely oriental situation where "face" and "principle" assume proportions which, if not unknown at Westminster, are of far less consequence there in the hurly-burly of daily political life.

I am reminded of a simple story told many years ago by an eminent Member of your Lordships' House regarding different interpretations of identical words. The story, as I recall it, was of two bachelor girls, one living in New York and one in London, who said, simultaneously, "I'm just wild about my flat". Of course, we know that the New Yorker was singularly unamused at having had a puncture in her car whereas her opposite number in London was ecstatic about her new home.

I do not believe that the present "difficulties" in Hong Kong, which amount to different interpretations of the same words, are as great as is being made out. As the Sunday Times said three days ago: Patten's proposals for an extension of Hong Kong's limited democracy in the proposed elections for 1995 may have been modest: it was the manner in which they were announced as much as the content that infuriated Peking and prompted a wave of hostility that frayed the fragile nerves of Hong Kong's investors".

The 18th century philosopher, Kant, said that, the mode of government is incomparably more important for a nation than the form of state". The framework for a mode of government which will serve Hong Kong and its people well beyond 1997 is there in writing in the 1984 Joint Declaration (an internationally recognised agreement) and the 1990 Basic Law. What is absolutely vital is that both sides should lay down their loud hailers and start listening to each other again in the tried and tested forum of quiet discussion. In that context, this week's meeting of the Joint Liaison Group is encouraging. The route of quiet discussion may well not suit the media but its co-operation is, if not vital, then certainly an important ingredient.

I most earnestly urge both Governments to build on the solid foundations laid down in the Joint Declaration and the Basic Law. And I also encourage them—London, Beijing and Hong Kong—to take to heart the words of the late Mr. Chou En-lai that we should, set aside differences and concentrate on points we have in common".

In the interests of the future lives and prosperity of the people of Hong Kong well beyond 1997, I do most earnestly advocate that sentiment. If it needs an honest broker to bring the parties together, I am sure that there are many who, believing and caring for Hong Kong's future, could and would, jointly or severally, fulfil that role. My Lords, I beg to move for Papers.

3.28 p.m.

Baroness Chalker of Wallasey

My Lords, we are all indebted to my noble friend Lord Geddes for initiating this debate on one of the most important foreign policy issues facing this country. We look forward very much to the maiden speech of the noble Lord, Lord Wilson of Tillyorn; and we are delighted to see the noble Baroness, Lady Dunn, with us today. I thank her for making the effort to be here; I know that it was not easy. My noble and learned friend Lord Howe of Aberavon returned from China just yesterday. He very much wanted to be here, but he has asked me to say how sorry he is that he cannot be here. The reason—as I am sure noble Lords would wish to know—is that he is being granted the Freedom of the Borough of Port Talbot this afternoon.

China is by any measure a significant country, as my noble friend Lord Geddes has said. Its significance is increasing. In the 200 years since Lord Macartney's mission, successive British governments have consistently recognised the importance of establishing good relations with successive governments in Peking.

Since the founding of the People's Republic of China in 1949 some periods have been marked more by mutual suspicion than by constructive dialogue. However, the Chinese leadership's decision in 1978, under the inspiration of Mr. Deng Xiaoping, to concentrate on economic reform and opening to the outside world introduced a long period when Sino-British relations flowered to an unprecedented degree. There are many reasons why Britain and China must maintain and develop a constructive and broadly based relationship. China is by far the world's most populous country. It is a member of the Permanent Five in the United Nations. It is a nuclear power. It is a major exporter of military equipment. As my noble friend has just told us, its economic growth rates in recent years, based on the "reform and opening" policies of Deng Xiaoping, have been among the fastest in the world. Southern China in particular is now regarded as the fifth "Tiger" of the Asia-Pacific rim. In short, China must be taken very seriously. This Government have done so consistently.

If your Lordships wish, I shall deal with other aspects of our relations with China, such as the important matter of human rights, at the conclusion of this debate. But it is over Hong Kong where Britain and China have the clearest interest in co-operation. I should now like to concentrate on that co-operation.

Hong Kong is making its own significant contribution to China's economic growth. Hong Kong firms employ some 3 million people in Guangdong Province alone. Hong Kong is a major source of investment, of foreign exchange, of marketing skills and of technical know-how for China. Hong Kong also benefits greatly from its economic links to southern China. This has helped to protect Hong Kong from the recession elsewhere in the world. Hong Kong's growth rate is expected to be some 5 per cent. each year until 1997.

This enviable economic success owes much to the political certainty provided by the Joint Declaration in 1984. It shows what can be achieved through Sino-British co-operation. Like other noble Lords, I have seen some suggestions in recent days from Chinese spokesmen which seem to call into question the value of the Joint Declaration. Let me be absolutely clear: the British Government remain 100 per cent. committed to the full implementation of the Joint Declaration. We want to work closely with the Chinese Government to ensure a smooth transition in Hong Kong. There has been no change whatever in that policy.

The Governor's proposals for a modest extension of democracy fit squarely into the pattern of gradual evolution laid down in the Joint Declaration under which the Legislative Council will evolve from the all-appointed body of 1984 to one "constituted by elections" by 1997. Britain has the responsibility for administering the next cycle of elections in Hong Kong in 1994 and 1995. We would like to see as much continuity as possible through 1997. But we also need to respond to the clear wish of Hong Kong people to have a greater say in the running of their affairs.

We still believe that the simplest way of responding to this wish would be to agree with the Chinese Government an amendment to the Basic Law to allow an increase in the number of directly elected members of the Legislative Council beyond the 20 now envisaged. But the Chinese Government have made plain that they will not change the Basic Law. Taking account of that position, the Governor has put forward a parallel approach which would enhance democracy within the terms of the Joint Declaration and the Basic Law.

The Governor's proposals were worked out in close co-ordination with the British Government. They enjoy the Government's full support. They pose no threat to anyone. Hong Kong is a mature and sophisticated society. Meeting the wishes of its people for a small step forward in democratic participation could not conceivably put at risk Hong Kong's prosperity and stability.

It is not the Governor's proposals which have unsettled the markets in recent weeks and alarmed people in Hong Kong. It is China's increasingly strident propaganda attacks that have done that. The sooner the megaphones are put away, the better—how right my noble friend was. It is very much in Hong Kong's interest that Britain and China should resume calm discussion of these issues and the British Government are ready to do so at any time.

Let me emphasise that this is not an argument of our making. The Basic Law does not lay down the detailed electoral arrangements for the Legislative Council which will make the transition in 1997. So the Governor had to make proposals. But they are just that—proposals. Since the Chinese evidently disagree with them, the most constructive course would be for them to come forward with alternatives of their own. The Governor has also emphasised that he is ready to consider alternative proposals from individuals or groups in Hong Kong. He—and we—are totally sincere in this. Our only condition is that elections held under British rule should be open, fair and command the support of the people of Hong Kong.

A number of alternative proposals have already been suggested. More may come forward in the next few weeks. But the time for discussion is limited. For practical reasons, it will be necessary to put draft legislation to the Legislative Council in the early part of next year. Otherwise, arrangements may not be in place in time for the district board elections in 1994.

It is entirely right that the Legislative Council should have the final say on the electoral arrangements, having weighed up all the factors. I do not think that your Lordships would want the Governor or this Government to press the Legislative Council to go further than they judge right in the interests of Hong Kong. On the other hand, it would clearly be wrong for us to say that we would not be prepared to go as far as the Legislative Council would wish.

There really is no contradiction between a more representative system of government and continuing economic success. Indeed Hong Kong's way of life, including its open society underpinned by the rule of law, has been crucial to that success. Building up strong and self-confident local institutions before 1997 should therefore help to create the conditions in which business can continue to flourish in Hong Kong. Her Majesty's Government remain firmly committed to ensuring the stability and prosperity of Hong Kong.

Britain and China have come a long way together in the implementation of the Joint Declaration's promise of "one country two systems". As 1997 draws nearer there is a need for even closer co-operation. All concerned will benefit from that: Britain, China and most of all the people of Hong Kong. We seek renewed dialogue with China, with the aim of narrowing differences and restoring a co-operative relationship. That is the best basis for Hong Kong's prosperity and stability.