Hong Kong politics Market outlook
Christine Loh Civic Exchange, Hong Kong cloh@civic-exchange.org (852) 9802 8888
Amar Gill CLSA Head of Hong Kong Research amar.gill@clsa.com (852) 2600 8593
July 2003
Hong Kong Politics
Uncharted territory A demonstration of 500,000 people, a high-profile resignation from cabinet and a deferred national security bill are all testing Hong Kong’s political system as severely as the Asian crisis did its financial system. This time, however, Hong Kong’s fate depends on decisions made in Beijing. Former legislator, Christine Loh, shared her views on two conference calls with CLSA. Beijing shocked by the massive rally Beijing has been fairly quiet in response to the 1 July demonstration. There are some red faces among those who advised on the situation and the events clearly caught the national leadership by surprise. Hong Kong’s leadership is now at the forefront and Beijing is gathering information before deciding on how to proceed. It is unclear how long it will take to decide and when it will affect any change. Governability of Hong Kong under CH Tung now in question If Chief Executive Tung stays on, he may try to reshuffle the cabinet to deflect some of the criticism. But individuals might be reluctant to join core leadership if they perceive that the chief executive’s tenure is uncertain. Provision in the Basic Law for the chief executive to resign Article 52 provides that the chief executive must resign if he is unable to discharge his duties as a result of serious illness or “other reasons”. If he vacates his office, the chief secretary is the first in line constitutionally to take over as acting chief executive. A new selection process then has to take place for the 800-member election committee to choose the next chief executive. Candidates for the next chief executive Donald Tsang might get the reins on day-to-day running of Hong Kong if CH Tung is moved up to take on a face-saving ceremonial role. Other possible replacement candidates include CY Leung, Henry Tang, Peter Woo and Victor Fung. Security law will be enacted but probably later in the year The legislature will soon go into summer recess. Formal sessions to pass legislation will not resume until October. Thus, the revised draft will not be formally debated and passed until later in the year. Downside risk – Indecision and uncertainty If Beijing takes too long to decide on the leadership in Hong Kong, protracted uncertainty will increase risk of destabilisation. The worst outcome would be if Beijing decided to quash the nascent call for participatory democracy in Hong Kong in a heavy handed manner. The odds of this however appear low. Low market risk despite political heat (by Amar Gill) Until the political situation clears, expect the market to move in a similar direction as the region, though attracting lesser inflow when markets rally. But the odds that the uncertainties will be resolved positively in the coming months should mean positioning into Hong Kong domestic cyclicals.
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Hong Kong politics
Contents 1. Executive summary....................................................................... 3
2. Monday â&#x20AC;&#x201C; Credibility gap............................................................... 4
3. Wednesday â&#x20AC;&#x201C; Where to now, Mr Tung?.........................................13
Christine Loh Christine Loh is CEO of Civic Exchange, an independent, non-profit, publicpolicy think tank established in Hong Kong with a mission to: 1. Promote civic education, public awareness and participation in governance by strengthening civic participation in public life; 2. Undertake research and development in economic, social and political policies and practices to help shape the breadth and depth of public-policy debate and so to advance policies that are sustainable, resilient, non-violent, economically efficient, just, participatory, locally appropriate and spiritually rewarding; and "Thinking gets better when we think often. Thinking is fun because it creates new possibilities in the way we live our lives. Research helps to drive thinking. Thinking in groups helps leverage our collective intelligence and can lead to breakthroughs.â&#x20AC;?
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3. Integrate skills and experience across various disciplines including academia, business, politics, finance, technology and the non-profit-making sectors. Ms Loh consults occasionally with CLSA and its clients on matters of current interest for investors in Hong Kong. For more details please contact your CLSA representative, or email cloh@civic-exchange.org.
cloh@civic-exchange.org
July 2003
Executive summary
Hong Kong politics
Low market risk despite political heat Hong Kong’s leadership has been ineffective
Hong Kong since 1997 has had an ineffective leadership. Now it has an incapacitated leader. While this lasts, no major decisions can be made – but previously very few were and most were subsequently reversed or put back for further public consultation. The vacuum in leadership has become more apparent – but really is not new.
Change of guard?
What has changed is the likelihood that the chief executive of Hong Kong may need to step down after the 1 July rally where 500,000 people protested. No one anticipated this possibility arising. When CH Tung was confirmed to serve a second term as the chief executive, he was expected to stay till 30 June 2007 when his five years in office comes to a natural close.
Appointment of a new CE seems likely in the next 12 months
Those odds are now substantially reduced. Christine Loh, in the transcript that follows, puts the odds of CH Tung remaining in power at 50:50. But with polls in Hong Kong reflecting 70% of the people wanting him to step down, and with Beijing wondering whether accident-prone Tung is really worth keeping, the appointment of a new chief executive in the next 12 months seems likely.
More positive sentiment on expectations that the CE will step down
Most people in Hong Kong seem to think the chief executive will step down. And the mood, with that expectation, has gotten more positive. Following the massive 1 July demonstration, weekend property sales in the primary market registered 1,100 units, 3.8x the year-to-date average.
Beijing is assessing the situation
Beijing, shocked by the size of the rally, is reassessing the situation and its options. The final outcome depends on decisions miles outside of Hong Kong – and this means political uncertainty. But what are the real risks?
Political stakes are high
The first risk is indecision by Beijing, or their deciding to stick it out with their current man. Even if there is a new cabinet, and the national security law gets introduced with significant concessions, it does not appear that the locals will be happy with such an outcome. Further demonstrations cannot be ruled out, which if not handled carefully, may force Beijing to stick to their man thereby ensuring a stalemate that could sour relations between Hong Kong people and Beijing.
Who will be the next leader?
More than likely is that a change in leadership in Hong Kong comes about in the next six to 12 months. Who the next leader might be is currently the main topic of conversation.
Something good should come out of this
Although uncertainty in Hong Kong is greater today than two weeks ago, the risk of a negative outcome is low. More probable is an outcome that boosts the sentiment of locals and generates interest in Hong Kong assets.
Market risk is low
What are the investment implications? In the short-term, until the political situation clears, expect Hong Kong to move in a similar direction as the region, though possibly attracting lesser inflow when markets rally. However, investors taking the bet that the uncertainties here will be resolved in the coming months and would be positive should, in the dips, position into Hong Kong domestic cyclicals – mainly the medium-sized banks and developers.
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Section 1: Credibility gap
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Credibility gap Conference call on Monday, 7 July 2003 AMAR GILL:
Good afternoon to all those who are calling in from our time zone. Lots of interesting developments overnight and I think everybody’s wondering what will be the next steps going forward. To shed some light on that, we have Christine Loh, who for most people won’t need much of an introduction - but just very quickly, she was a member of Legco and now she heads the thinktank, Civic Exchange, which does a fair amount of work in collaboration with CLSA. So we’re very fortunate. I think Christine has a wealth of knowledge and information that she can share with us and what we’ll do is ask Christine what she thinks has led up to these developments overnight and then we’ll open it up to questions and answers. Christine.
CHRISTINE LOH:
What is urgent is if people feel – and this is the talk all over town right now – that Mr Tung has lost so much credibility, that he really has lost legitimacy to govern, then the question really is: what do you do? Whether we like it or not, Beijing has a role to play here. Hong Kong is not a sovereign entity. If the chief executive has incapacitated himself, then Beijing has some involvement in the process. If we look at the Basic Law, which is our constitution, Article 52 says that the chief executive must resign under a number of circumstances, and the one that is relevant for us right now is, and I’m quoting: “… when he or she loses the ability to discharge his or her duties as a result of serious illness or other reasons. It was never clear what “other reasons” meant and I think it will make constitutional history if Mr Tung indeed has to resign. So obviously the stakes are very, very high.
QUESTION:
Is Beijing’s position united on this?
CHRISTINE LOH:
Beijing? As far as I can assess, they’re doing their homework and they know they have to do it relatively quickly.
QUESTION:
But someone must have told James Tien something and someone must have told CH Tung something from Beijing and they’ve come to different conclusions. Does that mean there’s actually a split in the functional ranks in China that mediate between Hong Kong and Beijing?
CHRISTINE LOH:
My own assessment is that it was a mistake for whomever up in China to invite James Tien to Beijing. The reason is that they seem to have missed the point that he is a member of the ruling coalition, that if one was looking at what he might do when he came back to Hong Kong and how he played this issue, how the issue proceeded would be critical. Secondly, when he did come back to Hong Kong, he publicly said that the legislation should be delayed. This then created the impression in Hong Kong that the Central People’s Government was willing to be flexible on time. I cannot say whether that was indeed the view of the Central People’s Government, but that was the impression that was created in Hong Kong. That impression had a very negative impact on the chief executive because he then decided to only give a concession on the content of the national security bill and not on timing. That then precipitated the Liberal Party to say that Tung’s position was fundamentally different from what they would have
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wished, and then for Tien to resign. So politically, whoever invited James Tien to Beijing made a mistake in not having thought through the risk of such an action. QUESTION:
Clearly that’s what happened in the event. But what I think is really bizarre, to say the least, is how you can have these two views coming out of basically the same fountain. What worries me more than anything else is the split up there. Is that possible?
CHRISTINE LOH:
There have always been different views in terms of how to deal with Hong Kong issues. Again, this is no secret in terms of people who watch China. The Central People’s Government is of course always much harder to read and also there is the new leadership. But in terms of the influence of the Chinese officials who are stationed in Hong Kong and who have responsibility for – not supervising Hong Kong because there’s supposedly One Country, Two Systems – reporting and observing affairs in Hong Kong, then their reading of the situation in Hong Kong has not been as accurate as it could have been. So I think part of the fallout that we would want to see further down the road, is what happens to some of these mainland institutions stationed in Hong Kong that played that role. Because, as I said earlier on, I am sure there are a lot of very, very red faces among them.
QUESTION:
Now that the Cabinet has broken up, there must be a flood of information around. What is some of the intrigue? Have you spoken to people this morning who can give you blow by blow? What’s the colour behind the scenes? What was actually going on last night?
CHRISTINE LOH:
One of the interesting aspects to watch is the dramatically different views and therefore advice presumably given to the chief executive from the chairmen of the two parties. One is James Tien, whom we’ve just spoken about; the other is Tsang Yok-sing who’s the chairman of the Democratic Alliance for the Betterment of Hong Kong, commonly called the DAB. DAB had, I think, advised against delaying the legislation, so one can assume that there was a bit of a punch-up in the cabinet. Secondly, the other ministers have kept very quiet. But again, I’m sure that this was one of those issues that were hotly debated. As to what happened yesterday, everything happened very late. Mr James Tien decided that he would write a letter to the chief executive to resign and I believe this did not become known until after dinnertime. The media didn’t get hold of it until quite late in the day. Mr Tien told us this morning that he decided not to first speak to or meet the chief executive before he handed in his resignation because he has a longstanding friendship with Mr Tung and he didn’t think he was necessarily strong enough as a character that if Mr Tung were to persuade him to stay, he might have agreed. He said that his party disagreed with the executive council’s position and so the only option was for him to resign and so he handed in his resignation right away. Initially, when the media called up the chief executive’s office last night, the comment was “no comment”. But he called a snap cabinet meeting, I think at around 11.30pm, which went to around 1am, and at 1.57am the chief executive came out and said that he would delay the process. I think then
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that everybody tried to reach everybody to find out what happened, and this morning, Mr Tien finally gave a public explanation of why he did what he did. So the speculation on the ground is on what will happen in the executive council. Will there be other resignations? I won’t rule anything out at the moment. Will it mean that certain officers like the secretary for security, who has the policy brief to take the legislation through, will resign or would have to go? The secretary of justice, who is in charge of drafting the legislation, has always said that once this is over she would leave, that she would step down this summer. Now that this piece of legislation is not over, would she stay or leave? If she leaves, we’d have to have a new appointment. All these issues are sensitive. In terms of who might replace them, the chief executive obviously has to have a role, as these were his appointments and that’s why who he wants to appoint to fill any vacancies is directly linked to his own position. Another speculation is if he were to bring other people to fill vacant seats, how people would say “yes” when Mr Tung’s own position appears to be insecure, plus whether people would want to work for a chief executive who has shown a very difficult style in terms of governing Hong Kong. QUESTION:
Do you really think that CH Tung is going to go over this? I know you want to wait and see, but unfortunately investors are impatient and need to act quickly. Do you really think that he’s going to leave and if he does that will create a measure of instability in government that might affect the execution of policy, public order and economic activity?
CHRISTINE LOH:
I would not rule out the option. One thing that I’m not able to give a firm view on is how long that process might take because that would have an impact as well. Can something happen in a matter of weeks? I’m not sure. Can something happen by the autumn? Maybe. But it will depend on how fast Beijing is doing its homework. Because if that requires a regrouping of the cabinet, even if Mr Tung is going to stay for another period of time, the fact is we might have a new cabinet. What really is the issue is that he’s lost the confidence of the people of Hong Kong and he’s lost the confidence of the people of Hong Kong because of a series of actions and omissions. Will he consider when he changes his cabinet, past action, for instance the financial secretary over “Lexus-gate” and things like that, because those are some of the issues that had a negative impact on how people saw his style of government? Obviously, from an investor’s point of view, you might say these are all signs of instability. Therefore, I think we do have to consider changing the government. Not having a government-in-waiting as you would have in other political systems makes things more difficult. It actually present a big challenge for the Central People’s Government. That’s why I’m not sure you can change the system very quickly. There’s no mechanism. And I think that’s an important point – it shows that the Hong Kong political system lacks an adjusting mechanism when there is a crisis. Say in a parliamentary system, the party could actually say: “We’ve lost confidence in the prime minister and he will now step down. We nominate another leader”. But in Hong Kong, that is just not possible.
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Article 52 of the Basic Law, which allows for the resignation of the chief executive when he is unable to discharge his duties because of illness or “other [unspecified] reasons”. For him to resign, that is to create a new constitutional precedent altogether. The last thing I want to say on this point is that investors, like all of us, have to make a decision about how long Hong Kong can go on autopilot. QUESTION:
As a politician, is James Tien being the “unking maker”, the decider and two, would he be the leading candidate if there was a replacement of Tung and three, what has that done to the Liberal Party, which has been sagging in public opinion for quite some time?
CHRISTINE LOH:
Obviously, the focus is all on James Tien now, but I’m very unsure whether than means that he’s now the frontrunner to replace the chief executive. I think knowing something about mainland politics, the answer has got to be “no”. We’re unclear about how what he did is perceived in Beijing. If what he has done is not well received in Beijing, then it may be that his political career is in fact finished. He might have a surge of popularity in Hong Kong in the meantime, because it is his action that has precipitated what people want. But in terms of the role of chief executive, which I think in the near future Beijing still has a huge influence on who gets the job, I would put a huge question mark next to Tien’s name. Of course, James has the option to run for direct election if that’s what he wants. If he thinks that by this route it would be a better route for him to get into the legislature – he currently represents the Hong Kong General Chamber of Commerce in the legislature under that functional constituency. The election is more than a year away, and as we’ve seen over the last few days, one day is a long time in politics. So again I’d put a question mark on how he wants to develop his own political career.
QUESTION:
If not him, who? There must be some person they’re going to try to build upon. Who would that be?
CHRISTINE LOH:
I assume that what the Central People’s Government is doing as part of their homework is to consider how Article 52 can be played out in Hong Kong. Secondly, as to who might be the sort of candidate – obviously there are other people in the cabinet who are possible successors. The other thing that is interesting is that if Mr Tung was to step down, it would take a period of time before the selection process under the constitution could be put in place. Again, under Article 53 of the Basic Law, in the event that the office of the chief executive becomes vacant, a new chief executive shall be selected within six months in accordance of the provisions of the Basic Law. And again I’m reading from the Basic Law now. So within six months, there has to be a new selection process … would someone like Donald Tsang, who would automatically become acting chief executive upon the resignation or stepping down of the current chief executive, be a candidate for chief executive? I think that’s one candidate who people had written off previously that may actually be back in the running. And of course there are longstanding candidates: CY Leung, who has always been touted as one of the favourites. There are businessmen like Peter Woo, who seems to be making a play again recently to throw his hat into the ring.
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People have always talked about Victor Fung as a likely candidate. But one of the things I think Beijing may wish to consider, if you take your typical businessperson, Mr Tung, James Tien, Peter Woo, even Victor Fung, is it sufficient for somebody who governs to only have experience in the business sector? A political leader needs to have quite wide experience. What would also be interesting is whether the Central People’s Government is ready to cast its net a little wider. The second issue to bear in mind is it will no longer be just the chief executive, because the chief executive is going to also need a cabinet, and having politicised the cabinet with the ministerial system a year ago, he can’t just say “well of course the civil servants will stay and here they are”. No, the new chief executive will have to choose people to serve as ministers. QUESTION:
What is the selection process for a new chief executive? Is it another rigged event like last time or is it something more robust?
CHRISTINE LOH:
Well this is a very interesting question because the system that is in place right now is a committee of 800 people who would select the chief executive.
QUESTION: CHRISTINE LOH:
QUESTION: CHRISTINE LOH:
The same as last time? Well, actually the last time was in 1996, when only 400 people selected CH Tung. Because there was no challenge in 2002 for his second term, he was automatically selected. Therefore those 800 people who are now standing around, actually never selected him. The committee was put in place to select six legislators in the last election in 2000. So the committee is there ready to swing into action for the next election, unless a new committee first has to be selected to select the next chief executive. Who is the chairperson of that committee? There is no chairperson. There is a very complicated election process. The question really is, after the experience of the 1 July, will Hong Kong people accept that these 800 people, including some of the great and the good in the business community – not all of them are popular with the people of Hong Kong – that these are the people who make the selection. 1 July could have changed the underlying sense of how people behave politically. We won’t know until events present themselves as to what is acceptable and what is not acceptable, and therefore it’s a challenge to Beijing to calculate all of these issues. If Beijing were to decide that Hong Kong were to go on a faster pace of at least discussing political reform, this could be very exciting for Hong Kong and this could also have an impact on China. We mustn’t ignore developments in China completely. We have an indication that the new government is going through initial thinking themselves of what they would do with bureaucratic and political reform on the mainland. Having 1 July in Hong Kong precipitating the fall of the Tung administration forces the hand of the Beijing leadership to now look at what to do in Hong Kong. It may actually present a situation that will have some impact on the mainland. Now we may only be able to look back on 1 July several years later to see if it has a more enduring impact, but I won’t rule this out either.
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QUESTION:
What is the downside risk if Beijing takes a reactionary position? If they’re concerned that whatever happens in Hong Kong may have ramifications for their own position, do you think that they might force change in Hong Kong that the Hong Kong people are unhappy about?
CHRISTINE LOH:
If Beijing acts without due caution, it will be a problem. If they take far too long to deal with the problem, that might again present problems. If Beijing is not able to handle this very carefully, it will also give the impression that One Country, Two Systems is over. Although my own sense is, Hong Kong not being a sovereign entity, the national government of course will have a role to play, but they have to play it very carefully so that Hong Kong and the rest of the world sees that they played their role in a “hands off” enough manner for people to believe in One Country, Two Systems. So the stakes are incredibly high.
QUESTION:
If the Legco or the Hong Kong government is unable to come up with the legislation or not for a prolonged period, is there anything that Beijing can do? Because this is written in the Basic law that we have to do our own legislation. Secondly, knowing that most of the members of the Liberal Party have close business ties with China, what do you think they have in mind in opposing Article 23? Do you think they have some knowledge or they are not worried about moves from China? Do you think progress on CEPA will be slowed down by China?
CHRISTINE LOH:
We already have a range of existing laws that are currently being amended, that cover most of the requirement of Article 23. What we have seen with the government’s concession is that if they are able and willing to give way on the proscription mechanism, then it probably means that we can pass a piece of legislation at some stage that can cover the requirement of Article 23. Of course, how loose or how tight that piece of legislation will be, we need to wait and see, but I don’t see that we won’t be able to pass any legislation. This is where we need a capable secretary for security and secretary for justice, and we don’t know whether we’re going to keep the current appointees or whether we’re going to have some new people. But I’m not so worried about that right now because we have a window of time. Your second question in terms of analysing the Liberal Party and impact on CEPA - CEPA was signed by the Premier Wen Jiabao when he can to Hong Kong, so from China’s point of view they couldn’t have given it a higher profile. So I think this will go ahead. It is also a sign for China to show it is business as usual, because China’s interest is to show stability in Hong Kong. So they wouldn’t think of doing anything that would give the impression that they’re not going to push ahead with CEPA. I would not link CEPA with the Liberal Party. CEPA is a national policy whereas the Liberal Party is the Liberal Party. In terms of assessing why the Liberal Party did what they did, did they know something? I guess your question makes an assumption that the Liberal Party could only do this if it was going to be in their longer-term favour from a business context. I’m not going to comment on that point. From a political perspective, I’ve answered the question in that it’s too early to tell whether what James Tien did will enhance his political future or not, which of course, is also tied to that of the Liberal Party. I’m not so optimistic myself because
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we don’t know really how China looks at it. I’m not prepared to believe right now that that’s going to end being positive for him with regard to China. QUESTION:
Clearly both the government and the chief executive have not stated when the bill would be resubmitted. You’ve talked about the fluidity of events right now, also the standpoint that it could be back on the table with respect to abandoning the summer recess for Legco. But it seems to me that the government plainly did not want this corrosive issue to drag into next year when it could give a major boost to pro-democracy candidates running in the legislative-council elections. Do you think that’s a valid comment?
CHRISTINE LOH:
We never thought a week ago that we would be where we are today. In fact … the HKSAR government didn’t want to delay the bill to give any advantage to the Democratic Party and other parties that oppose the bill in terms of electoral brownie points. But what has just happened has changed those dynamics altogether. Even more than that, what we saw on 1 July is that we have a by-in-large well-educated, middle-class people who were not unemployed and who don’t have to worry about where the next bowl of rice is coming from coming out to demonstrate. So the dynamics in Hong Kong, in terms of how people perceive their role as citizens may have changed quite dramatically and that will obviously impact on future election results. My own sense is that the vote for the pro-China parties, such as the DAB, are fairly solid, maybe give or take a few per cent, but the reason other people didn’t do better was that there weren’t enough people who went out to vote. But with what happened on 1 July, it may be that the pro-China parties will not do as well because more people will go out to vote to make sure that they don’t do well - not that their traditional supporters will have turned away from them.
QUESTION:
As of now, no legislator has introduced a vote of no confidence in the chief executive, but my understanding is that the motion can be put at very short notice. What is that short notice and do you believe that someone might actually push that button?
CHRISTINE LOH:
Two things. As I’m speaking to you now, my think-tank, Civic Exchange, is giving another press conference to release survey results that we commissioned a few days ago. One of the questions we asked was whether there should be a change of government. Of course that is only a snapshot of public views, but I believe the issue of how Hong Kong people feel about the current administration will be one of those issues that will come back again and again. You’re right, on Wednesday legislators can put forward a motion of no confidence. It will be up to the president whether to allow it or not and it will be interesting to see how Mrs Rita Fan reacts to something like this.
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QUESTION:
Why is the government in such a hurry to push through Article 23? And why is China so uncharacteristically quiet on this issue?
CHRISTINE LOH:
We never could figure out why the government wanted to be in such a hurry the government has not come out to say exactly why. Mr Tung has made numerous indications that have left an impression that it was Beijing’s view, because he keeps repeating that it was our constitutional duty, our national duty to protect the motherland and words to that effect. It may well be that at some stage the Central People’s Government thought that this was
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something that was viable. But what has happened in recent days is that this can now no longer happen, so that’s why I think in Beijing there’s a lot of discussion on what really happened, who gave what advice to whom. Secondly I think Beijing is so quiet because they have suddenly realised that this issue has really blown out of all proportion. They really didn’t expect what happened especially in the last 24 hours, so best to say nothing when you’re not quite sure. It isn’t just some underlings in parts of the Chinese bureaucracy now charting Hong Kong’s past. It’s gone right up to the very top. QUESTION:
I find it a little inconceivable that these guys in Hong Kong suddenly decide there’s a big rush when we’ve gone for five years with no amendments. There’s no visible trap. Even the Falun Gong has gone quiet. So the only plausible explanation for the hurry is that someone’s pushing them. Do you agree with that?
CHRISTINE LOH:
Yes I do. It may very well be that at some stage in the past this was the point that somebody put their finger on and said: “Okay, let’s do it by then”, so this became an immovable object and it may have had it’s reasons then, elections and so on. But it also shows that those who are directly in charge took their eye off the ball. In politics the last thing you want to do is say “these are immovable objects” when there is evidence that you may need to be more flexible. So in the end you are forced into a position of being more flexible.
QUESTION:
The source is really important to me to determine what the outcome might be. Cause and effect is one thing, but if it really is a hot potato for someone across the border, then it’s going to be red-hot today. And if there’s disagreement there about how it should be resolved, the execution will find its way down here in a way that’s quite dangerous. Factions start forming here, representing factions up there.
CHRISTINE LOH:
I would also caution taking any final view on that. The reason is what has happened is so extraordinary that the factions have got to now look at this, otherwise they will be trapped in the same problem. And one of the things that they will be required to do is look at the coherence of this piece of legislation. The Basic Law says that Hong Kong has to, on its own, pass this legislation. Of course, it is a piece of legislation of national security and we’ve maintained this fiction that Beijing should have nothing to do with it. It’s probably better that someone in Beijing now has a look at it to see where Hong Kong’s concerns really are. One of the questions I’ve always had was did they truly understand what Hong Kong people were against? The impression here is that Beijing wanted the proscription mechanism which has now been taken away and the chief executive has promised that it won’t be reintroduced. So if something like that could be taken away, surely this is an opportunity to revisit the whole bill. And I would imagine that for people in Beijing, one of the options that they should be looking at is: “Okay there’s been a monumental screw-up in Hong Kong” – then they need to come out of this well. And since the national interest is stability, for them to come out of it well, the opportunities are still there but it requires them to look at it afresh. By the way, we’re not talking about anti-terrorism laws. We’re talking about national security. Antiterrorism legislation is already in place.
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QUESTION:
Whatever the outcome from now, I am increasingly concerned that Hong Kong could become unmanageable, with people just taking to the street over various issues. I believe the solution is a full-fleshed democracy, but do you see a way that Beijing could accept a fully elected administration?
CHRISTINE LOH:
This is one of those very difficult issues where China will look at the evolution of the Hong Kong system as part of the entire system, the pace of development in China as a whole. That is not necessarily to say that before China becomes more democratic that Hong Kong could not be more democratic because we already are. Hong Kong’s mission in the modernisation of China in a way is to be a testing ground. Now we already see that in China they are willing to test political and bureaucratic reform across the border in Shenzhen. The Hong Kong model is one step ahead of the Shenzhen model. It may very well be that if the new leadership were to think that they can manage allowing Hong Kong to evolve several steps ahead of the mainland, then they would be more open to allow a discussion to start taking place in Hong Kong on political development. I don’t think we can go from one night to the next night and have a fully democratic system in place. The reason is we have yet to come up with an alternative design to what we have. Whomever you go to in Hong Kong, whether in the academic sector or in the political sector, I think you’d find no one really has thought through a new model. This is a challenge for Hong Kong. Can we collectively start discussing what the issues are, what options are there? This is going to take a number of years. You are entering a time for Hong Kong to start some kind of constitutional convention-type of discussion. It’s better when people aren’t just talking in civil society. It’s better when the government is part of this process. And again, does 1 July mean this process can be expedited? And is it going to be unmanageable? Not necessarily. I accept that what you’re saying is we don’t know how things will go, but at this stage I wouldn’t make any rash decision. I would watch this space at least for the next two or three weeks.
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Section 2: Where to now, Mr Tung?
Hong Kong politics
Where to now, Mr Tung? Conference call on Wednesday, 9 July 2003 AMAR GILL:
As we speak, there is yet another demonstration in Hong Kong outside Legco. Many thousands of people are again out on the streets expressing their dissatisfaction, not just with the national security law, the bill that has been delayed probably until later in the year, but also the lack of leadership in Hong Kong. To shed some light on the events that have led to this, some of the background and behind-the-scenes events, and how these events might unfold, we have Christine Loh on the line with us. Christine was a Legco member and now heads Civic Exchange, one of the leading think-tanks in Hong Kong, with which CLSA is involved through various collaborative efforts.
CHRISTINE LOH:
If I could just talk about the last week, I think this has been both the longest and the shortest week for Hong Kong. It’s the shortest because so many Hong Kong people appear to be so excited about what has happened. On 1 July, 7% of Kong Kong’s population - 500,000 people - went out on a peaceful protest against the national security legislation, but many of them also called for chief executive Tung Chee-hwa to step down. The massive showing of discontent precipitated the government to move into crisis mode. Then a member of the executive council, James Tien, who is the head of the Liberal Party, made a trip to Beijing at Beijing’s invitation. He saw some reasonably senior officials and when he returned to Hong Kong, he gave the impression that Beijing was flexible on the timing for passage of the Bill. After Tien made his statement on Friday, everybody in Hong Kong was expecting that a delay was possible. On Saturday, the chief executive announced three concessions, but said that he would push ahead with the legislation for passage on Wednesday 9 July. Tien handed in his resignation and on Sunday night and very early on Monday morning, the chief executive, was forced to withdraw the bill for another time when he realised he would no longer have the votes in LegCo to get it passed. Everybody waited to see what would happen with bated breath. For the major figures, this must have been the longest week in their political lives. This included the chief executive, his cabinet, and mainland officials responsible for Hong Kong. Beijing realised that Mr Tung had lost even more credibility and so his position as chief executive became very shaky. We now know from statements from Mr Tien in the last day, that Mr Tien misread Beijing. Whatever conversations he had with the officials, he misunderstood them and they misunderstood him, because the message should have been “We’re not giving way on the 9th”. That misunderstanding precipitated possibly the fall of the Tung Chee-hwa administration. Today, Mr Tung gave a press conference saying he believed he could do the job, that he had the support of his cabinet and that they could ride out this crisis. We also know that Beijing has a large team of people here trying to assess the situation and considering its options. This is an entirely new experience for the people of Hong Kong, the government in Hong Kong and Beijing. Of course, throughout our colonial history we’ve never had the experience that a governor had to go because of incompetence. The civil servants, the bureaucracy, had not anticipated this
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Section 2: Where to now, Mr Tung?
Hong Kong politics
kind of situation and neither had Beijing. Under the constitution, called the Basic Law, people just assumed that the chief executive would serve out his five-year term. And if there were a change then it would be something that was thought out with Beijing’s participation, rather than something that came as a surprise. One positive aspect is that Hong Kong is incredibly calm. A group of people is currently protesting outside the legislature, but the level of protest is winding down because withdrawing the national security legislation has defused the immediate crisis. There’s one more rally being organised by the democratic camp on Sunday and then I’m told they’re all going on holiday, so we’ll have a relatively demonstration-free summer unless we have a fresh round of crises. With Hong Kong people being calm, with the financial institutions strong, with public services functioning, Hong Kong is on autopilot. So we can expect a fairly long period of relief enabling Beijing and Mr Tung to sort out whatever it is they’re going to do. QUESTION:
If Beijing remains indecisive, say for one year, and if Hong Kong people are dissatisfied and really want change, can such a change be initiated from Hong Kong without Beijing’s agreement?
CHRISTINE LOH:
What we’ve seen with the new government in Beijing is that it has the capacity to act quite decisively once it recognises there is a crisis. We saw this with Sars. Of course, the Chinese government really didn’t focus on Sars until the early days of April, but once they had that Politburo meeting on 17 April, they moved very quickly. So in Hong Kong, I’m not sure they will take a very long time, but this is anybody’s guess. In terms of what Hong Kong people can do, on our own we cannot change the constitution. What was interesting about 1 July was that people knew many people would turn up, maybe 100,000+, but nobody knew half a million people would show up. But when that many people did show up, it was still very peaceful and orderly. If you’d asked any of the rally organisers if they thought they could organise that size rally, they would have said no. It was the people coming out of their own volition because they felt very strongly about it. So we now know we have that capacity as a people.
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QUESTION:
Some people might consider that James Tien’s decision and the opinion of the leader of the DAB, who a day ago said he might consider stepping down from the cabinet then saying he’d continue in the cabinet – people might think that this reflects different factions within Beijing - and that Beijing is quite split about what should happen in Hong Kong. Who do you think will decide? Is this a matter that the current president and premier can decide or ultimately do you think this will go back to Jiang?
CHRISTINE LOH:
The Standing Committee of the Politburo is the main body that will decide. In terms of Jiang and his faction, they are of course in the Politburo. The two views would be: the reformer might say, “Okay, let’s have a clean slate.” The others might say, “Let’s stick with what we know.” But sticking with what we know is not risk-free because Mr Tung has shown himself to be extremely prone to crisis. Every six months or so we’ve had some kind of political crisis in Hong Kong and that has a lot to do with his personal style of decision-
cloh@civic-exchange.org
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Section 2: Where to now, Mr Tung?
Hong Kong politics
making. Secondly, there’d have to be a number of cabinet changes if Mr Tung were to tough it out. Choosing those people would require quite a lot of care. The position of secretary for security is a highly sensitive position and you really need someone who knows what he/she is doing. You can’t just bring someone from the private sector and say “get on with it”. Beijing expects the Hong Kong government to bring the national security legislation back at some stage so again you need a skilled secretary for justice. Some of the ministers have proved to be less than good, for example, some in the financial and economic sector, so again you need to find the right replacements. There is going to be some sort of cabinet reshuffle and there’s going to be a difference between ministers with portfolio and those without. One of the things that some say reflected very badly on Mr Tung is that some of the ministers he appointed were not ready for ministerial positions. If the DAB’s Tsang Yuk-sing is going to go, it is a sign that it is time to jump ship now because Beijing would want their most friendly party to have a chance to salvage its political future. If the DAB were to stay for the time being, it does not mean that Beijing has made the decision that Mr Tung should stay. They may be looking at other options, such as Mr Tung being more of a ceremonial head and getting the second-in-command to take on the day-to-day business of government. The next in command is Donald Tsang and I think Hong Kong people would think that is quite a good thing. QUESTION:
What is your gut feeling about CH Tung’s chances of survival? Is there any olive branch that could be put forward at the same time the national security legislation comes back in October to ease public angst or improve CH Tung’s lot. And three, what would you like any new administration in Hong Kong to proactively do to improve Hong Kong’s economy?
CHRISTINE LOH:
I’d still put a 50:50 bet on Mr Tung’s survival. I don’t know whether it’s higher than 50, but there’s a reasonable chance that he will have to go. If this represents the unsettled tussle between two factions in Beijing, that may be the case. It could be that Beijing hasn’t had enough time to think things through. And changing him means changing the entire cabinet. Now about Article 23, there are olive branches that the government could give out. First of all, there’s a lot of pressure coming from the legal community in Hong Kong that has led to the debate on the details of the bill. One of the things that the Hong Kong people feel uncomfortable about is that the draft law is a dog’s dinner still. It’s not just the content, but also the drafting, so now that there’s a period of time for more amendments. I think we’re going to see people pushing for more change beyond the three concessions. I think there is some chance of further concessions. In addition, I think we’re going to see lawyers and NGOs asking for a Freedom of Information Ordinance in Hong Kong. We already have the Access to Information Code. That could easily be legislated to balance out the stronger laws on state secrets. So there are things that the government can do. In terms of the timetable, Legco is now going into recess [the latest information is that Legco has called a meeting on 23 July to discuss the bill].
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It will start having committee meetings again in September, but there will be no formal sitting to pass laws till October at the earliest. So I suspect the timetable of passing the bill would be beyond October. But I think we’re going to see a strong move on the part of lawyers and others in Hong Kong to extend that period. QUESTION:
If there is a new chief executive or a new cabinet in Hong Kong, what would the people like to see from this new leadership?
CHRISTINE LOH:
What we have learnt is that just because someone is well known and has a reasonable successful background in business, it doesn’t mean he knows anything about governing. Mr Tung’s greatest asset was that Beijing trusted him, but he had no idea about running a community. Secondly there is a discomfort among Hong Kong people to just accepting a well-known business person again. Among successful business people we can include Peter Woo, Victor Fung and so on. They haven’t really spent any time in politics or public administration. They can sing a good song when it comes to some limited aspect of trade or the economy, or the integration of the Pearl River Delta, but if you ask them about anything else, they really don’t seem to know. And if you continue to assume that politics is all about the economy, that’s a bit simplistic. Hong Kong people are saying you cannot divorce economic decisions from political decisions. People are already upset with Mr Tung because he gave them the impression that he was more in favour of tycoons and business interests. This has not only upset the grassroots, it has gone down badly with the professionals as well as other business interests. So we need someone who is credible, who can stand up and speak to the people and give them a sense that he will listen and has the capacity to learn.
QUESTION:
What is the potential for the demonstrations to get less than peaceful? If they could get 500,000 protesters and were successful, what is the potential the movement might pick up some steam and be less than peaceful next time?
CHRISTINE LOH:
I think there is always a risk when you’ve got a large group of people out there. But there’s no reason to assume for now that Hong Kong’s demonstration is going to be anything but relatively peaceful. The other situation that could precipitate violence and aggression would be if you had two warring camps. On 1 July, there was essentially one camp. As for Article 23, it doesn’t take away people’s right of public assembly or free expression. And let me clarify, the national security law is not about antiterrorism; we already have laws to deal with that. The kind of issues that Article 23 cover include treason, subversion, sedition, giving out state secrets, and secession [advocating independence for Taiwan and Tibet].
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QUESTION:
So they will probably work to clarify the true meaning of that and calm the people down?
CHRISTINE LOH:
Well people think the draft law is not clear enough. For example, the notion of state secrets is rather frightening to the people of Hong Kong because they associate it with the mainland version of state secrets, which essentially means we don’t know ahead of time what secrets we’re taking about. And mainland academics and reporters have been arrested and detained for a substantial period of time over information that you and I would never consider to be state secrets. In the past it has related to the research of
cloh@civic-exchange.org
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Section 2: Where to now, Mr Tung?
Hong Kong politics
academics, historical records, the price of gold, management issues, population and so on. So this area is incredibly murky. QUESTION:
A lot of the Western media have linked the recent protest to calls for more public participation in Hong Kong, but many businessmen in Hong Kong and political groups in China have explained that what we’re seeing is a population discontented because of the economic downturn and a middle class hurt by negative equity – that when the economy recovers, people will feel a lot happier and what they need to focus on is getting the economy back on track. Could you clarify for us what the people of Hong Kong are actually asking for right now? And why haven’t we seen greater unity among the political opposition in Hong Kong, an effort to share resources – more like a shadow cabinet that you see in other countries?
CHRISTINE LOH:
It’s always a mistake to assume that people are unhappy because the economy is bad. Of course that’s obviously a factor, but, in fact, one of the universities conducted a survey on 1 July during the demonstration because they wanted to find out what sort of people were there. The results are on the Hong Kong University website [http://hkupop.hku.hk]. The interesting thing is that this was a group of 500,000 highly educated people. This was not your grassroots crowd who are looking at job losses or who have lost their jobs. Some were highly paid professionals and some were people who don’t have to worry about their financial circumstances. They might be called the silent majority who understood why they were there. This is a new force in Hong Kong. So I think media reports and also the government’s explanation that people are out there because they are unhappy means they have refused to look at the evidence that is available. Secondly, in terms of Hong Kong’s opposition, Hong Kong people are going through a very interesting transition from subjects to citizens. Prior to 1997, we were subjects of a colonial system and we disassociated ourselves from being political. But as citizens, this is something new and we’re trying to understand what it means. When we talk about a political force, we’re talking about people who are interested in politics, who are prepared to think through what their political ideologies really are and it has to extend beyond just calling for a more democratic electoral system. You have to think about your political ideology in terms of left, right, centre, new age, green or whatever. On that more philosophical basis, Hong Kong has yet to succeed in clearly defining where people stand on these issues. Therefore, you see all the political parties going all over the place in terms of what they stand for and how their policies relate to a fundamental set of values. But I see this as a process of political maturity. Another reason why the opposition appears to be less united is that we have a proportional representational electoral system, where if they all piled into one party, they would win fewer seats. So once people split up into different parties, they develop a life of their own, although in the last elections there was a little bit more cooperation to try to get allies elected through being smart with how you placed candidates, rather than everybody lumping themselves into one party.
QUESTION:
July 2003
This new silent majority, what do they actually want and will the removal of Mr Tung placate them and satisfy their desires?
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Section 2: Where to now, Mr Tung?
CHRISTINE LOH:
QUESTION:
18
Hong Kong politics
The survey showed that well over 70% of the people would like to see Mr Tung step down. Ostensibly they were out there protesting about the national security legislation, but another dominant theme was that they want to see Mr Tung leave office. And that would satisfy them?
CHRISTINE LOH:
Political rallies are a momentary show of discontent. Nowhere do you expect rallies to come up with clear policies because that’s not what rallies are about - but it clearly offers an opportunity for the opposition to see if they can turn that energy into something more coherent. And for that we have to wait and see.
QUESTION:
What level of pressure is coming from Beijing to pass these anti-subversion laws and ultimately, do you regard the passage as inevitable or is this something that is still up in the air?
CHRISTINE LOH:
Article 23 is about national security. Hong Kong already has a range of national security legislation. The bill under discussion seeks to amend them. In some areas they’re being relaxed and in some areas they’re being tightened. Because it’s not a fresh piece of legislation, but a series of amendments, it became very hard to understand and a messy exercise. Secondly, if we are going to pass revised national security legislation, people want to know the content. There are some of the areas that are very sensitive, for example, the police could enter private property without a court warrant. That is one of the concessions that the government gave in on in the end, but Hong Kong people have been screaming for this for several months and the government chose to ignore them until the very last minute. In Hong Kong, we find it rather hard to fathom what Beijing specifically wanted in the draft bill. Why did the secretary for security push so hard for things that the government was willing to give way on in the end when she should have known that some provisions were clearly unacceptable to people? In terms of what will be the final laws that will be passed it is too early to say, because now we have this period, it opens up the opportunity for lawyers and others to propose further amendments than the three concessions that have been given.
QUESTION:
Politically, is there some tie to Beijing? Is there pressure to tighten down on some freedoms in Hong Kong?
CHRISTINE LOH:
There are certain things that are never explicit, that nobody wants to talk about and therefore it makes our assessment very difficult. For example, in Hong Kong a lot of people assume that these laws are being put in place to ban the Falun Gong and other groups China banned. My understanding is that China is very concerned about Hong Kong being used for spying activities. Presumably these are the sorts of things that every national government has to deal with. But does that require the police to enter private property without a court warrant?
QUESTION:
We see in the press today that Chen Shui-bian of Taiwan says the events have shown that “One country, two systems” doesn’t work. Do you think this has all been a very bad example for Taiwan. If so, does Beijing have little to lose in being more reactionary and taking a tougher stance on Hong Kong?
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July 2003
Section 2: Where to now, Mr Tung?
Hong Kong politics
CHRISTINE LOH:
What Chen Shui-bian said is frankly not a surprise. I just cannot see under almost any circumstance, the Taiwanese saying Hong Kong’s “One country, two systems” is going well because they don’t have an interest in that - they don’t want the same formula for reunification. Secondly, they’ve said many times before that what we have here is a lesser system than what they have, so I think that kind of repetition will continue.
AMAR GILL:
I think time is running out, but it has been very useful for those on the line. We know some of the issues, some of the concerns that Hong Kong people have, but ultimately it seems that the solution here will be a Beijing solution and we’ll have to wait and see when Beijing is ready to decide. In the meantime, as soon as I get the website on the Hong Kong University study, I will be able to send that out to anyone who is interested, so please send that out to either me or your CLSA contact person. Thank you very much for participating Christine, and ladies and gentlemen good afternoon and goodnight to you.
July 2003
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