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7 Cross-border urban governance in Hong Kong1
Introduction Globalization has been advancing in the world in two main ways. First, various initiatives for institutional changes have been proposed and introduced in many regions to abolish various barriers and border controls to form “borderless region states,” conforming to a general shift toward a “borderless world economy” as advocated by Ohmae (1995). Second, the transnational corporations (TNCs) have engaged actively in the organization of new international or regional division of labor to make the best use of worldwide resources under a flexible mode of production.
Because of changing scalar relations in the era of globalization, it is now popu- lar to assume that the role of state is on the decline (Dunning 1995). An extreme version of globalization advocates the “end of nation states” and the “end of geog- raphy” in a “borderless world” (Pun and Lee 2002). Among various critics of the neoliberal “end-state” view of globalization, Yeung (1998) emphasized the role of the (capitalist) state in enabling and facilitating capital accumulation and glo- balization. He described globalization as a dialectical process of homogenization and differentiation.
Whether and how the state acts tactically to resist or facilitate regional integra- tion and globalization is an important issue. This chapter looks at Hong Kong for a detailed case study of changing cross-border urban governance, especially the role of the state in resisting and participating in the cross-border regional integra- tion in the Hong Kong–PRD region (Figure 7.1). The region has been deeply involved in the processes of globalization and regionalization since the late 1970s (Kwok and So 1995; Sit 1995; Lin 1997; Chan 1998; Li 1998; Tsui-Auch 1999; Hu and Chan 2002; Shen 2002; Shen, Wong and Feng 2002).
Hong Kong has long been a well-known (quasi) city-state. Figure 7.2 shows Hong Kong’s main regions and new towns. Hong Kong was a British colony before 1997 and has been a special administrative region (SAR) of China since 1997. It has enjoyed a high degree of autonomy because it was regarded as a city-state both before and after 1997. As a free port for many years, Hong Kong was ranked the freest economy in the world by the Heritage Foundation over the period of 1995–2001 and by the Fraser Institute for the period of 1970–2000
134 Cross-border urban governance in Hong Kong
(O’Driscoll, Holmes, and O’Grady 2002; Gwartney et al. 2002). But its cross- border relation with the PRD region has been subject to serious criticisms in recent years (Ng 2002).
It is claimed that the Hong Kong SAR (HKSAR) government adopted a so- called Fortress Hong Kong policy toward regional integration of the Hong Kong– PRD region in stark contrast to its famous liberal and positive nonintervention policy toward global capital and globalization (Sung 2002). This issue calls for a reconsideration of the role of the Hong Kong government and laissez-faire capital- ism. It has been widely accepted that the Hong Kong government’s laissez-faire (or positive nonintervention) policy was the cornerstone of Hong Kong’s success in the postwar period (Cheng 1995). However, Yeung (2000) argues that commercial and financial interests have dominated Hong Kong’s Executive and Legislative councils, and have had much influence in political affairs and government policy. The role of the Hong Kong government can best be interpreted as “a passive, reac- tive and status quo “intervention” without intervention”(original emphasis, Yeung 2000: 138), possibly in conflict with the notion of neoliberalism.
In the case of cross-border development and governance, the government anx- iously and actively attempted to resist close regional integration across the Hong
Figure 7.1 Location of Hong Kong, PRD region and Guangdong Note: PRD region is part of Guangdong province
Cross-border urban governance in Hong Kong 135
Kong–Shenzhen border, especially in the period of 1997–2000, even after the return of Hong Kong to China. This chapter explores the role of the state – the Hong Kong government – in cross-border urban governance under the challenges of the accelerated process of globalization and regional integration, and argues that multiple TSEs rather than a single and structurally cohesive geoeconomic TSE are in place in the Hong Kong–PRD region. A tension-free model of regional integration has never existed because of complexities in the governance network and the interaction between geoeconomic and geopolitical TSEs.
Conceptualizing cross-border urban governance in Hong Kong In the process of globalization, a new regionalism is on the rise, based on some dense nodes of regional social formations called global city-regions (Scott et al. 2001). Cross-border city-regions such as the Hong Kong–PRD region and the Indonesia-Malaysia-Singapore growth triangle spill over national or political
Figure 7.2 Regions and new towns in Hong Kong Notes: HKI &I: Hong Kong Island and Islands K: Kowloon NTN: North New Territories NTE: East New Territories NTW: West New Territories
136 Cross-border urban governance in Hong Kong
boundaries (Chen and Ho 1994; Grundy-Warr, Peachey, and Perry 1999; Shen 2003).
Governance has been a popular term in social sciences to describe the role of a network involving both state and nonstate sectors (Rhodes 1997). One important area of urban governance is related to cross-border matters such as cross-border infrastructure and border crossing controls. The rearticulation of Hong Kong’s cross-border urban governance is the focus of this chapter. This is a subset of wider cross-border regional governance in the Hong Kong–PRD region or South China. Two conceptual approaches have been adopted in the study of governance in this dynamic region – multilevel governance (MLG) and TSEs (Sasuga 2001; Sum 2001a).
The “MLG paradigm” has been applied to the case of European Union govern- ance, but a comprehensive theory of MLG still does not exist. Generally, MLG involves a shift from a hierarchical/vertical to a nonhierarchical/horizontal system of political negotiation, or “networked polity” (Christiansen 1996). According to Sasuga (2001), the existing cross-border business network in southern China, geared toward spatial and technical divisions of labor, is backed up by “Local Corporatism” and dense “Multiple Local Networks.” The MLG involves a com- bination of strong social networks and supportive governance arrangements in the cross-border region of southern China, Hong Kong and Taiwan.
The TSE concept was applied to cross-border regions by Sum (2001b). A TSE is a nexi of social and political relations that projects a coherent identity to a space. According to Sum (2001b: 33), one key property of a TSE is its “structured coherence” over space and time, depending on the “stretching out” and “compres- sion” of key social and political relations. A TSE is considered to be a meaning system that is produced through an articulation of personal, public and metanarra- tives. A TSE is also a dynamic concept, postulating that actors and networks may attempt to establish TSEs favorable to their own interests. The possible outcome varies from a dominant TSE to no stable/dominant TSE and a dominant TSE linked to a complementary TSE. There are at least four kinds of TSEs, includ- ing geoeconomic TSEs, geopolitical TSEs, nationalist TSEs and gendered TSEs. The analysis of the emergence, existence and contestation of different TSEs can contribute to a better understanding of cross-border governance (Sum 2001b: 38).
Sum (2001a, 2001b: 30) argued that the geoeconomic and nationalist TSEs dominated the cross-border region of “Greater China” and were connected and coordinated through the strategic networks of actors. Most previous studies have focused on how the regional production networks and the regional division of labor have been consolidated by linguistic affinities, kinship ties and “guanxi” networks, in addition to complementary factors of production and geographical proximity (Smart and Smart 1991; Leung 1993; Sit 1995).
The cooperative nature between local government in mainland China and busi- ness investors from Hong Kong and Taiwan has been widely noticed. Thus a struc- turally cohesive geoeconomic TSE is considered to be in place in southern China, resulting in closer and closer regional integration. Although there is a network of public, quasi-public and private institutions, such a network is often loosely
Cross-border urban governance in Hong Kong 137
connected since it is motivated by business interests (Sit 1995: 183; Sum 2001a: 94). A tension-free model of regional integration has never existed in southern China because of complexities of the governance network and the interaction between geoeconomic and geopolitical TSEs.
Indeed, the role of governments in Hong Kong and Taiwan has not been con- sidered adequately. For example, the government in Taiwan has attempted to limit cross-strait investment and trade, as epitomized by Lee Teng-hui’s slogan, “No haste and patience (jieji yongren)”(Cabestan 2000: 112; Sum 2001b: 88; Wang 2001). Similar, but less explicit, resistance to regional integration has also existed in Hong Kong. The opposition forces against close regional integration can be influential when these actors hold substantial power. Previous studies also paid little attention to other voices such as the ordinary workers in Hong Kong who were against close economic linkages. The transfer of manufacturing from Hong Kong to the PRD region once caused serious unemployment problems in the city- state (Chan 1995: 52).
The economic and political interests of these actors have to be taken seriously into account in the study of cross-border regional governance, especially from the perspective of Hong Kong. The cross-border governance strategy in Hong Kong has been changing because of the rearticulation of its economic and political rela- tions with the mainland and the world at large. This chapter will use a multiple TSE approach in analyzing the dynamics and interaction of multiple geoeconomic TSEs and geopolitical TSEs in Hong Kong. Despite the risk of oversimplicity, the chapter proposes that there are two competing geoeconomic TSEs and two competing geopolitical TSEs in Hong Kong that have different economic interests and political agendas.
The two geoeconomic TSEs are the pro-economic-integration TSE and anti- economic-integration TSE. The two geopolitical TSEs are the nationalist TSE and the politically distancing TSE. The interaction, confrontation and dynamics of these TSEs determine Hong Kong’s path in its cross-border relationship with the PRD region and mainland China in general. The 1997 Asian Financial Crisis (AFC) intensified the tensions between the two economic TSEs, while the 1997 handover intensified the struggle between the two political TSEs.
This chapter will focus on the key actors in Hong Kong in its cross-border governance. To put the analysis in the proper context, it may be useful to out- line the major actors on both sides of the Hong Kong–Shenzhen border. On the mainland side, government actors include the central government of China, the government of Guangdong province and the governments of cities in the PRD region, especially that of Shenzhen, which shares a land border with Hong Kong. In the governance network, the Guangdong provincial government is in a peculiar position, with limited power in co-coordinating the 19 cities and 1 county in the PRD region. Shenzhen has been most active in seeking cross-border development jointly with Hong Kong. On the mainland side, governments dominate society and are assumed to represent its overall interests.
On the Hong Kong side, business interests, grassroots residents and nongov- ernmental organizations have also openly voiced their views both in words and by
138 Cross-border urban governance in Hong Kong
practice and have been highly influential in cross-border matters. Nevertheless, the government in Hong Kong has played an important role in mediating cross- border relations both before and after 1997. After all, cross-border relations in the Hong Kong–PRD region are highly asymmetrical. Hong Kong businessmen and residents are free to travel and do business in the PRD region, while businessmen and residents from the PRD are restricted from entering Hong Kong. Thus the key issue of cross-border governance has often focused on how to facilitate the free flow of capital, goods and people in Hong Kong to and from the PRD. The role of the state (the Hong Kong government) in such a complicated governance network is crucial in shaping and reshaping the cross-border relationship.
Cross-border urban governance in Hong Kong: from separation to tolerance before 1997 Hong Kong’s cross-border urban governance since 1841 can be divided into five periods: 1841–1949, 1949–1978, 1978–1997, 1997–2000 and after 2001. Because of changing dominance of various TSEs, there have been significant changes in cross-border relations (Table 7.1). The colonial periods before 1997 had substan- tial effect on cross-border relations after 1997. Thus it is useful to examine briefly cross-border relations before 1997 here.
As a British colony until 1997, a colonial geopolitical TSE dominated Hong Kong, although a nationalist TSE always existed there, exemplified by some pro- China activists. The key interest of the colonial geopolitical TSE was to secure Hong Kong as a free port for trading under British rule, and its participants included the colonial government as well as businessmen from Britain and else- where. Politically, Hong Kong government and politicians were accountable to the British government, and it was natural to keep some distance from the Chinese government. On the other hand, participants in the nationalist TSE were Chinese people in Hong Kong who believed that Hong Kong was part of China.
The cross-border relationship in the first period of 1841–1949 can be character- ized as no government control of the border. Hong Kong’s immigration law prior to 1940 allowed Chinese to enter and leave Hong Kong freely. A colonial geo- economic TSE dominated Hong Kong’s economy and facilitated entrepot trade with mainland China up to 1950s. This pro-trade, geoeconomic TSE was based on close economic linkages between Hong Kong and mainland China. The cross- border relationship in this period can be characterized as close and permeable.
After 1949, an anti-economic-integration TSE emerged to sever economic links with the mainland and to serve the geopolitical TSE following the United Nations’ embargo on China. This embargo virtually stopped Hong Kong’s entrepot trading with the mainland. A pro-separation, political TSE and anti-economic-integration TSE dominated Hong Kong. The Hong Kong–Shenzhen border separated Hong Kong from the mainland politically, economically, and spatially. This example shows how the geoeconomic TSE was shaped by a powerful geopolitical TSE. In this period, there was very limited trading between Hong Kong and the mainland. Hong Kong embarked on industrialization from the 1950s through the 1970s and
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140 Cross-border urban governance in Hong Kong
became one of the four newly industrialized dragons in East Asia. The share of the labor force employed in manufacturing in Hong Kong increased to 47% in 1971 (Suen and Chan 1997).
The cross-border urban governance of Hong Kong in the second period can be characterized as separation. The political, economic and social distances between Chinese in Hong Kong and mainland were increased significantly. Spatially, a closed-border area, 20km long and 0.5–2km wide, was created on the Hong Kong side for security concerns. Cold War politics and governments on both sides of the border were decisive in suppressing cross-border exchanges and trading.
The emergence of the cross-border Hong Kong–PRD city-region has been a phenomenon only since 1978 with the consolidation of geoeconomic TSEs, both for and against economic integration. The opening of mainland China in 1978 marked the beginning of the third period, 1978–1997, in cross-border relations. Mainland China implemented a series of open door policies, such as the designa- tion of the Shenzhen special economic zone in 1980, which produced a strong pulling effect on capital and industries in Hong Kong. A pro-integration TSE emerged in Hong Kong, with the active participation of its business sector and residents, especially those with a close connection to mainland China, respond- ing to immense cross-border opportunities, initially for investment and later for leisure, shopping and housing. A pro-China nationalist TSE was also strengthened as investing on the mainland by Chinese in Hong Kong was encouraged and rec- ognized as supporting the modernization of the motherland.
In the new framework of cross-border development, governments of PRD cities and businessmen and residents in Hong Kong were the key players (Weng 1998; Shen 2002). Governments in PRD cities actively engaged in promoting cross- border social and economic activities by improving infrastructure and offering tax concessions for foreign investors. Hong Kong residents of Chinese origin were issued home visit permits for freely traveling to the mainland. These measures effectively knocked down the institutional barrier preventing Hong Kong’s inves- tors and residents from entering the mainland. Driven by private investors, Hong Kong transferred the majority of its manufacturing to the PRD in the period of 1978–1997. A strong economic relationship was soon established as a result of scale and spatial expansion of the production system from Hong Kong (Sit 1995: 183). Large-scale outward processing, practiced under the model of “front shop, back factory,” in Hong Kong and the PRD (Lo 1989; Sit 1995; Shen 2002, 2003) was successful and lifted the level of development in both Hong Kong and the PRD to a higher level. By 1997, Hong Kong had become a well-established world city. Its real GDP per capita was US$24,540, ranked fourth in the world in 1997 (World Bank 1998).
Nevertheless, an anti-economic-integration TSE also emerged since the trans- fer of the manufacturing from Hong Kong to the PRD region has caused a seri- ous unemployment problem among Hong Kong’s blue-collar population (Chan 1995: 52). But the anti-economic-integration TSE was less influential than the pro-integration TSE. The latter had a wide base of businessmen and middle class,
Cross-border urban governance in Hong Kong 141
and the government took a neutral stand. Recognizing the huge economic benefit of cross-border investment, the dominant colonial geopolitical TSE did not inter- vene in cross-border investment from Hong Kong. But the role of Hong Kong’s colonial government was very limited, playing a passive role at most.
There was no synergy between the pro-economic-integration TSE and the colonial geopolitical TSE because political indifference persisted between the governments on both sides of the border. Ideologically, socialism and the government- driven economy on the mainland were considered not an ideal partnership for cooperation at the Hong Kong government level. As a result, the Hong Kong government did not ever consider the interest of the Hong Kong–PRD as a whole city-region. No serious effort was made by the government to consolidate the cross-border infrastructure. This was a serious lapse that became clear after 1997 (Yeung 2002).
Under the umbrella of “positive nonintervention policy,” the then-colonial Hong Kong government neither supported nor restricted the increasing cross- border economic links initiated mainly by local businessmen. The role of the Hong Kong government in cross-border development can be described generally as tolerant or disregarding, rather than promotional. With regard to migration and tourists from mainland, the Hong Kong government implemented a strict policy using a quota system (Lam and Liu 1998). Hong Kong’s door was closed to pro- fessionals on the mainland while quite open to professionals from other countries. A Fortress Hong Kong mentality was already laid down in the colonial period.
The Hong Kong government rarely listened to calls for better and coordinated cross-border infrastructure development. For example, the government of Shen- zhen city proposed to build a Hong Kong/Shenzhen western corridor jointly with Hong Kong in 1993. This proposal did not materialize before 1997. The passive response of the Hong Kong government paralleled concerns over the expected return of Hong Kong to China in 1997. These concerns were instrumental in the formation of the Fortress Hong Kong mentality. When the Sino-British joint dec- laration on the future of Hong Kong was released in 1984, many Hong Kong businessmen and residents in Hong Kong were worried about the future, although the aim of the agreement was to provide a secure future for the city-state (Walden 1989: 46).
Despite these concerns, social ties, along with cross-border investment activi- ties, between Hong Kong and the PRD region continued to expand dramatically. This is best illustrated by the rapid growth of passengers going through the border crossing at Lowu. The annual number of exits increased from 12.79 million to 22.95 million in the period of 1990–1996. It was clear that private businessmen and residents from Hong Kong played a leading role in cross-border develop- ment, while the contribution of the Hong Kong government was negligible. The pro-economic-integration TSE coexisted with the colonial, political TSE and the Fortress Hong Kong mentality. There was little open conflict between the pro- economic-integration TSE and the anti-economic-integration TSE because the public’s concerns were dominated by the 1997 handover (Chung 2001).
142 Cross-border urban governance in Hong Kong
Cross-border urban governance in Hong Kong: from protectionism to free trade zone after 1997 The return of Hong Kong to China in 1997 was expected to be a catalyst for developing a close economic relationship between the Hong Kong and mainland China, especially at the governmental level. The return of Hong Kong to China strengthened Hong Kong’s nationalist TSE, which had been overshadowed by the colonial geopolitical TSE before 1997. With the closure of Hong Kong’s colonial history and the departure of its colonial government, the nationalist TSE gained great legitimacy. The nationalist TSE and the pro-economic-integration TSE were expected to reinforce each other to accelerate cross-border economic integration in the Hong Kong–PRD region. This is clear in various policy addresses, which is the most important strategic and policy documents of HKSAR, delivered by the first chief executive, Tung Chee-hwa, since 1997. In his first policy address in 1997, Tung (1997) said,
In recent decades, Hong Kong and the mainland have established broader and closer relationships in many areas. Whereas previously they had mainly been confined to the non-governmental level, with reunification and with govern- ment support, the relationship between Hong Kong and the Mainland should flourish comprehensively in all fields such as the economy, finance, trade, transport, culture, education, science and technology, tourism and sports.
A high-level framework, “Hong Kong-Guangdong Cooperation Joint Confer- ence,” was established in March 1998, and it was planned to be held half-yearly. His 1997 policy address clearly indicated Tung’s wish to develop close economic relations with the mainland. But the outbreak of the AFC had a negative impact on this development.
After two years of the AFC, in his 1999 policy address (Tung 1999), Tung seems to have settled on the destiny for Hong Kong: developing Hong Kong as a world city based on the advice of the Commission on Strategic Development formed in early 1998. In the process of becoming a world-class city, strengthening ties with the mainland and joint development of the PRD region were again con- sidered important. Hong Kong’s economy recovered in 2000, when its GDP grew by 10.2%. The 2000 policy address focused on internal matters of the HKSAR, especially education, poverty and governance. Tung believed that China’s immi- nent accession to the WTO would stimulate joint development of the regional economy by both Hong Kong and Guangdong.
In 2001, Hong Kong’s economy went down again following the bursting of the dot.com bubble, the slowing down of the American economy and the 9/11 terrorist attack in New York. In his 2001 policy address, Tung (2001) admitted, “We are facing the most acute economic problems for many years.” Consider- ing the gloomy world economy and continuing stable economic growth on the mainland, Tung was optimistic about Hong Kong: “We are in the right place at the right time to benefit most from the economic development of our Motherland.”
Cross-border urban governance in Hong Kong 143
The mainland, he said, would not only provide many opportunities but also bring new challenges to Hong Kong, especially to maintain its competitiveness. Tung recognized the necessity of economic restructuring in Hong Kong. He also under- stood that the support of the central government was important since the policies of mainland China would affect economic cooperation between Hong Kong and the PRD. Nevertheless, there was little progress in cross-border cooperation until 2001. Significant progress only took place after late 2001, with important changes in the government’s vision of its role in the Hong Kong–PRD region.
The nationalist TSE and the pro-economic-integration TSE, exemplified by Tung’s policy addresses, clashed with the politically distancing TSE that was cou- pled with the anti-economic-integration TSE in the initial period after 1997. The nationalist TSE and the politically distancing TSE had a quite different approach toward the central government and Hong Kong–PRD integration. Participants in the politically distancing TSE were keen to safeguard the autonomy of Hong Kong. Many of them, especially pro-democracy politicians, also participated in the anti-economic-integration TSE since they worried that economic integration would eventually undermine political autonomy. Indeed, the return of Hong Kong to China in 1997 marked the beginning of a period of cross-border protection- ism. Generally, despite Tung’s goodwill, the HKSAR government was skeptical of most suggestions from the Shenzhen side. It did not actively move toward cooper- ation, but showed resistance toward closer, cross-border integration. There are two explanations for this cross-border protectionism: one political, the other economic.
The first explanation lies in the emergence of the politically distancing TSE in post-handover Hong Kong. It has been recognized that local and international confidence in the future of Hong Kong was fragile after 1997 (Yeung 2002). For many Hong Kong residents, the return to China in 1997 was a reluctant one. Impressed by Hong Kong’s great postwar success in the colonial era, some senior officials and the middle class were most worried about potential interference in Hong Kong’s internal affairs by the Chinese government. They advocated politi- cal separation between Hong Kong and the mainland, strengthening the politically distancing TSE.
The politically distancing TSE had its origins before 1997. To minimize the possibility of the imminent rule of pro-China leaders after 1997 and to advance its own political interest, the colonial government, led by Chris Patten, deliberately, but subtly, manipulated the anti-Communist sentiments of the people of Hong Kong to keep their distance politically from the Chinese government and the new HKSAR government (Lau 2002: 4). Democratic reforms and human rights legislation were introduced soon after the 1984 Sino-British joint declaration to nurture a kind of people-based political power to fill the gap left by the departing regime. Thus, alongside a number of organizations and people who participated in the nationalist TSE in anticipating the 1997 handover, a group of politicians, officials and organizations, exemplified by the Democratic Party, actively partici- pated in the politically distancing TSE. After 1997, this group focused on promot- ing a “Hong Kong first” mentality for its legitimacy. Society in Hong Kong was polarized politically into pro-Beijing and anti-Beijing camps after 1997.
144 Cross-border urban governance in Hong Kong
The HKSAR government was established on 1 July 1997. Most previous civil servants stayed on in the new government, including the chief secretary for admin- istration, Ms. Chan. She shared similar views with participants in the politically distancing TSE, and her standing was critical in making the TSE influential after 1997. The disagreements and sometimes open clashes between the chief exec- utive and chief secretary for administration crippled policy making and policy implementation of the HKSAR government in the period of 1997–2000.
Ms. Chan pointed out in one speech that too many Hong Kong people “have looked towards the mainland at the expense of our traditional links with the rest of the world” and that they “seem to forget that our strength lies in the separation which is fundamental to the success of One Country, Two Systems” (Chan 2001). She did not agree that Hong Kong should “in any way ignore or stand out against the national interest,” but said her priority was to “speak up for Hong Kong” with “Hong Kong’s conscience.” Such views produced competitive perspectives con- cerning Hong Kong’s interest versus national interest rather than both interests complementing and reinforcing each other.
Similar to the concerns of the Taiwan government, some HKSAR officials were clearly concerned that close economic integration could undermine the political autonomy of HKSAR. Some higher civil servants argued, “We need to avoid the contamination of Guangdong” and “the border protects us” (Rohlen 2000). Thus the politically distancing TSE reinforced the anti-economic-integration TSE.
The second explanation for the conservative policy of the HKSAR government toward cross-border development was the potentially negative economic impact on Hong Kong. For example, property prices and retailing in the new territories of Hong Kong would be affected if many residents from Hong Kong bought prop- erty or went shopping in the PRD region. The participants in the anti-economic- integration TSE included some real estate developers, homeowners and retailers in Hong Kong. With the presence of a politically distancing TSE, their complaints were well noted by government officials.
The 1997 AFC made the government even more conservative about cross- border integration. The price index of private housing dropped by 46.8%, and the rental index of private housing dropped by 27.1% in the period of 1997–2000 (CSD 2001). The Hang Seng Index dropped from over 16,000 in 1997 to the bottom of 6,600 in August 1998. Hong Kong’s domestic export dropped from HK$211.4 billion in 1997 to HK$170.6 billion in 1999. Hong Kong registered a negative GDP growth rate of –5.3% in 1998 and –3.0% in 1999 (Table 7.2).
In 2000, Hong Kong’s economy seemed to be on its way to recovery with a positive GDP growth rate of 10.2% (CSD 2001). However, the economy wors- ened again after the 9/11 event in New York. In December 2001, the value of total exports of goods decreased by 10.4% over a year earlier. The value of re-exports dropped by 10.6%, while the value of domestic exports fell by 8.5% (CSD 2002a). The GDP growth rate was only 0.6% in the year 2001 (CSD 2002b). The season- ally adjusted unemployment rate rose to 7.8% in May–July 2002 (CSD 2002c).
Economic slowdown has had significant implications on the balance of Hong Kong’s government budget. Its revenue dropped from HK$281.2 billion in
Cross-border urban governance in Hong Kong 145
1997/1998 to HK$225.1 billion in 2000/2001 with significant loss in the earn- ings and income tax, stamp duty and capital revenue. Land premium dropped from the peak of HK$63.6 billion in 1997/1998 to HK$29.5 billion in 2000/2001 and estimated HK$8.5 billion in 2001/2002 (CSD 2001; Finance Bureau 2002). As a result, the HKSAR government incurred a deficit of HK$23.3 billion in 1998/1999, HK$7.8 billion in 2000/2001 and as much as HK$63.3 billion in 2001/2002 (Treasury Branch 2002; Leung 2002).
Because of AFC, the new HKSAR government had to struggle with the eco- nomic downturn. As mentioned before, a full regional integration of Hong Kong with the PRD region was not considered to be of benefit to Hong Kong’s economy. The anti-economic-integration TSE and Fortress Hong Kong mentality were fur- ther strengthened. As a result, the HKSAR government was hesitant to improve cross-boundary arrangements before 2001. Many policy suggestions from busi- nessmen and the public were stalled even before a serious policy study took place. Only limited progress was achieved at the government level during the period 1997–2000. For example, after mid-October 1998, the opening time of two main border crossings, Lowu and Lok Ma Chau, for passengers had been extended by one hour.
Generally, Hong Kong did not play a leading role in strengthening coop- eration in the Hong Kong–PRD region because of the prevailing politically distancing TSE and anti-economic-integration TSE. The nationalist TSE and the pro- economic-integration TSE were not able to advance much more in the period of 1997–2000 than what had been achieved before 1997.
The influence of the politically distancing TSE declined dramatically after the resignation of the former chief secretary for administration in April 2002. The open disagreement among the top government officials on the relationship with the mainland subsided (Lau 2002: 12). Thus it was much easier for Tung to lead the HKSAR government with an active approach to the cross-border cooperation between Hong Kong and PRD. Clearly, the stance of key officials has significant influence on cross-border governance. They are in control of the policy-making
Table 7.2 GDP growth rate, GDP per capita and social security schemes expenditure in Hong Kong 1991–2000
Year GDP growth rate (%) GDP per capita (HK$1,000)
Social security schemes expenditure (HK$billion)
1991 5.1 116 3.7 1994 5.4 167 6.6 1996 4.5 185 11.2 1997 5.0 204 13.9 1998 −5.3 192 17.8 1999 −3.0 186 18.5 2000 10.2 190 18.7
Data source: CSD (2001)
146 Cross-border urban governance in Hong Kong
process and have ample room to initiate new policies. More importantly, the argument that Hong Kong will suffer from close economic integration has been outweighed by the argument that close economic integration will benefit the city- state. According to resident surveys in May 2001 and November 2002, the per- centage of residents with interest in buying housing property on the mainland declined from 9.7% to 4.8% (Yeung 2003: 40).
According to the ranking of growth competitiveness by the World Economic Forum (2002), Hong Kong’s rank fell from 2nd in 1997 to 13th in 2001. Hong Kong’s rank in GDP per capita fell from 4th in 1997 to 17th in 2000 in the world (World Bank 2002). On the other side of the border, the mainland and PRD were rising rapidly. The entry of China into the WTO on 11 December 2001 brought both opportunities and challenges. Rohlen (2000) argued, “A policy of maintain- ing the status quo carries a significant price tag in the lost opportunities.” The actors in the pro-economic-integration TSE stress that Hong Kong must act now to secure its future in the age of accelerated globalization.
Another important challenge to Hong Kong is the sustainability of low-cost production in the PRD. While Hong Kong still has many problems in integrating closely with the PRD, the economy in the YRD, led by Shanghai with substantial R&D facilities, is advancing rapidly. The PRD is losing out in terms of economic growth and foreign investment. In the year 2000, contracted foreign investment was US$15.8 billion in Guangdong, less than the total of US$26.2 billion in Shanghai, Jiangsu and Zhejiang (Mingpao Daily 2002a).
Shenzhen also brings a major challenge to the future of Hong Kong. Shenzhen’s port facilities have expanded: in 2001, the entire Shenzhen port handled a total of 5.07 million TEUs and became the eighth-busiest container port in the world (Marine Department of the Hong Kong SAR 2018). Guangdong and Shenzhen have become more aggressive in their development strategies. Their enthusiasm for close cross-border cooperation is waning, as their previous suggestions have received little response from the HKSAR government, and Shenzhen is success- fully developing its own high-tech industry without much cooperation from the HKSAR government. These cities now demand a more balanced horizontal divi- sion of labor instead of the existing vertical model of “front shop, back factory.”
It is clear that the external environment in China and the world has substantial influence on the geopolitical and geoeconomic TSEs in Hong Kong. Hong Kong people are beginning to abandon the old mind-set of “Great Hongkongism,” real- izing that integration with the mainland is the only way to move forward. Enhanc- ing Hong Kong’s integration with the PRD is regarded by many businessmen and scholars in Hong Kong as a critical measure for moving Hong Kong out of reces- sion and into another period of prosperity (Mingpao Daily 2002b).
The involvement of the HKSAR government in the process of integration has also been considered important. Some scholars urged government officials to change their old colonial attitude of distancing Hong Kong from the mainland and to increase their knowledge about mainland China (Mingpao Daily 2002c). The year 2001 was indicative of a fundamental shift of the HKSAR government’s position toward cooperation and development in the Hong Kong–PRD region,
Cross-border urban governance in Hong Kong 147
greatly strengthening the pro-economic-integration TSE. This was exemplified by the government’s proposal to establish a free trade zone (closer economic partner- ship agreement) between the HKSAR and the mainland on 20 December 2001 (Mingpao Daily 2001; Shen 2004; Shen and Yeung 2004).
At the request of the Hong Kong side, the central government has also been more active in facilitating negotiation and arrangement for cross-border development since late 2001. Since 1997, the central government has taken the position that it will not intervene in Hong Kong–PRD cooperation unless it is asked for coordina- tion and assistance by Hong Kong. These developments mark the beginning of a new period of cross-border governance. The nature of the cross-border governance network is transformed so that now the HKSAR government, backed by a strong pro-economic-integration TSE and nationalist TSE in Hong Kong, assumes a lead- ing role in cross-border development, while the central government acts as facilita- tor and coordinator. The following examples illustrate the fast track of cross-border cooperation and development under the new cross-border governance.
• The issue of extending opening hours for border crossings received the atten- tion of the State Council in July 2001. The key issue was that the central government needed to increase funding for the cross-border operation on the Shenzhen side. Hong Kong also had to spend over HK$8 million a year for extended border crossing operation. With the involvement of central gov- ernment, the issue was resolved more quickly than the HKSAR government expected.
• The case of Hong Kong-Zhuhai/Macao Bridge (Lingdingyang Bridge previ- ously) was reopened in 2002. Senior Hong Kong officials now support the idea that the bridge needs to be built well before 2016.
• The quota on the number of tourists from mainland to Hong Kong, 2000 tour- ists a day, was abolished on 1 January 2002.
Conclusion Accelerating globalization worldwide has resulted in the restructuring of the political, economic, social, and culture orders in the world. Such global restruc- turing often involves dense and complicated governance processes at the inter- national, national, regional and local levels. The changing role of the state has been most controversial in contrast to the clear and catalyzing role of TNCs in the globalization process (Dunning 1995; Pun and Lee 2002). Whether and how the state acts tactically to resist or facilitate regional integration and globalization is an important issue.
The Hong Kong–PRD region has experienced rapid globalization and regional integration in recent decades. This has involved the PRD region on the mainland that has implemented a reform and open door policy since 1978 and, more impor- tantly, Hong Kong that is a well-known free port for many years.
The framework of TSEs has been adopted for a study of cross-border governance in Hong Kong, especially the role of the state in cross-border urban governance.
148 Cross-border urban governance in Hong Kong
Previous studies have argued that a structurally cohesive geoeconomic TSE is in place in southern China, resulting in closer and closer regional integration. This chapter argues that such a tension-free model of regional integration has never existed in southern China because of complexities of the governance network and the interaction between geoeconomic and geopolitical TSEs. The chapter also finds that the shift from cross-border protectionism to cross-border free trade zone in Hong Kong’s cross-border urban governance since 2001 was a result of the rearticulation of the state cutting through the geoeconomic and geopolitical TSEs. Facing the challenge of economic recession and increasing pressure of the business sector, the Hong Kong government eventually became more active in promoting cross-border development in 2001. It even took the initiative to ask the central government to act as facilitator and coordinator to reach agreements with the PRD cities and Guangdong.
The divergent interests and visions of a cross-border relationship between Hong Kong and the PRD region have been the focus of debate both before and after 1997. In the case of cross-border city-regions, governments on both sides of the border may adopt active or passive strategies toward regional integration and globalization. An active strategy for regional integration means that one actively designs and implements incentive policies to facilitate cross-border flows and actively seeks cooperation and partnership with the other side of the border. A passive strategy toward regional integration means that one does not respond to the increasing needs and pressure on cross-border social-economic linkages, including transport infrastructure, for good planning. Only very limited measures are taken, and cross-border issues are generally ignored. The Hong Kong govern- ment before 2000 could be considered an example of using such a strategy.
The return of Hong Kong to China in 1997 was expected to be a catalyst for developing close economic relationships between the two, especially at the gov- ernmental level. The nationalist TSE and the pro-economic-integration TSE were expected to reinforce each other. Close economic cooperation between Hong Kong and the PRD region was high on the agenda of the first chief executive of the HKSAR. Nevertheless, there was little progress in cross-border cooperation in the period of 1997–2000. Indeed, July 1997 marked the beginning of a period of cross-border protectionism because of the emergence of the politically distancing TSE in post-handover Hong Kong and the potentially negative economic impact of cross-border development on Hong Kong.
Hong Kong’s economy entered another round of stagnancy after the 9/11 event in New York in 2001. In the meantime, the economy on the mainland continued to grow despite a worldwide economic slowdown. China’s entry into the WTO in 2001 was expected to further boost its economy, upgrade its service sector and increase competition in the mainland market. Hong Kong is facing competition from cities in the PRD, such as Shenzhen, while the Hong Kong–PRD region is facing competition from the YRD region. Without a close economic tie with the hinterland in the PRD and Guangdong, Hong Kong’s economy will suffer, since goods-and-service trade with the PRD has been an important driving force of its economy (Shen 2003). On the other hand, as a leading world city in Asia,
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Hong Kong can play an indispensable role in providing financial and professional service to the PRD region (Enright et al. 1997; Meyer 2000). After China’s entry into the WTO in 2001, the argument that Hong Kong would suffer from closer economic-integration has been outweighed by the argument that closer economic integration will benefit Hong Kong. With the departure of the former chief secre- tary for administration, the influence of politically distancing TSE has subsided. Thus the HKSAR government is moving toward a close economic relation with the PRD. It has been argued that the HKSAR government should facilitate easy movement of people and goods between Hong Kong and the PRD while helping Hong Kong’s enterprises to consolidate their competitive edge on the mainland and in world markets in terms of human resources, R&D, logistics and producer services.
It is clear that the HKSAR government plays an indispensable role in mediating the cross-border integration between Hong Kong and the PRD according to its own political and economic considerations. This is in stark contrast to the notions of the laissez-faire policy of Hong Kong. It is clear that its government has always responded selectively to cross-border issues, according to prevailing political and economic interests. The case of cross-border governance of Hong Kong vividly shows the role of the state as a gatekeeper in the globalizing process even for the freest economy in the world. Yet its strategy changes according to changing social-economic circumstances in the pursuit of its interests.
Note 1 This Chapter 7 is reprinted from Shen, J. 2004. Cross-border urban governance in Hong
Kong: The role of state in a globalizing city-region. The Professional Geographer: Forum and Journal of the Association of American Geographers, 56(4): 530–543, with permission from the American Association of Geographers, www.aag.org.
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