- The Washington Times - Thursday, November 13, 2003

Three days ago, the Shanghai and Hong Kong Office for Professionals’ Exchange and Cooperation Service (SHKOPECS) opened a branch in Shanghai. The mission of that bureaucratic mouthful is to recruit professionals from Hong Kong to help in the rapid development of Shanghai. Hong Kongers should be wary.

Since Britain handed the colony over to Beijing in 1997, the main protection for political freedoms in Hong Kong has been the reality that too much Chinese intervention would disrupt the city’s massive economy. Further integrating Hong Kong’s economy into that of the mainland threatens the remnants of the region’s independence. That, however, is the direction Hong Kong’s Beijing-anointed leaders are heading. The opening of the SHKOPECS recruitment office is a lead up to the Close Economic Partnership Arrangement (CEPA) that goes into effect on Jan. 1. The goal of CEPA is to establish a free-trade zone between Hong Kong and mainland China, which for six years have operated as two separate political-economic systems under one flag.

For a vision of what these ties will bring, Hong Kongers need only look northeast to Taiwan, where increased economic integration has decreased the island’s practical independence. Currently, more than a quarter of all Taiwanese exports go to the People’s Republic. At least 75 percent of Taiwan’s 2,000 largest firms have investments in China. In becoming increasingly dependent on the mainland economy, Taiwan’s business class has become ever-more complacent in defending the autonomous security of the island because confrontation is bad for the bottom line. This contrasts with Beijing’s consistently tough refusal to rule out a military invasion of Taiwan.

There is no clear evidence that building more economic links to the mainland will have a positive long-term effect in Hong Kong. Taiwan’s reaching out to its belligerent big brother was made in a state of desperation after the bottom fell out of its high-tech market during the Asian financial crisis. Hong Kong seems to be doing the same thing, though preemptively. Last year, Hong Kong’s economic growth was a lowly 2.3 percent and unemployment was 7.3 percent — numbers that worsened when SARS hit. In 2001, growth was only 0.6 percent. Hong Kong economists worry that these trends are a sign of the future as businesses decide that it is more convenient to have regional headquarters serving mainland China located in mainland China. Hong Kong hopes open trade links will let the city hold onto a share of the market a little longer.

For more than a century, Hong Kong’s wealth was derived from the fact that it was the gateway to the Middle Kingdom, which for the most part was closed to the world. Now that Beijing is working to make the country into an economic power, several mainland Chinese cities are vying to take away Hong Kong’s business. These developing trade centers are cheaper and offer more deals to lure new investment. What Hong Kong has that these cities don’t are political freedoms. Gambling these away is a losing bet — and will give businesses one more reason to move away.

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