Go to the first chapter of "The Hong Kong Advantage"

MADE BY HONG KONG
Edited by Suzanne Berger and Richard K. Lester
Oxford University Press. 376 pp. $29.95

Go to the first chapter of "Made by Hong Kong"

Go to Chapter One

Fate Of a Colony

In these two books keyed to Hong Kong's handover to China on July 1, Western experts conclude that even under Beijing's rule the city is well-placed to continue to hustle and boom and beat out its economic competitors.

Hong Kong has come far since the sweatshop days when it was known for producing wigs, transistor radios and plastic flowers. It is developing an economy that manages information flows -- to its customers, across manufacturing networks, and between local and foreign operations of overseas firms. "If, as the business gurus tell us, these are the keys to success in the future, then Hong Kong is well-positioned," say the authors of The Hong Kong Advantage, who base their conclusions on hundreds of interviews with business people, government officials and industry experts. Hong Kong's best bet, they say, is to keep on doing what it does incomparably well as the world's busiest container port, a driver of the mainland Chinese economy, and the capital of the powerful overseas Chinese business network.

The authors of Made in Hong Kong, however, say that the city of 6 million will need to do much more to keep up the pace.. After a year-long study, these researchers from the Massachusetts Institute of Technology say that to succeed in the 21st century, Hong Kong must sharply upgrade its technological and human capabilities, partly by encouraging more spending on research and development.

Several advisers to Hong Kong's new boss, the city's chief executive-designate Tung Chee-hwa, agree that the city should boost R&D spending. They also propose building industrial parks and providing risk-capital funds for high-tech startup companies. The other little dragons of Asia -- Singapore, Taiwan, and South Korea -- have already gone this route. But such a policy is heresy to many business people in Hong Kong, which has traditionally prided itself on a lack of government intervention in most sectors of the economy. Tung is an avowed admirer of Singapore.

The authors of Made in Hong Kong caution that there is no need for the Hong Kong government to become directly involved in financing technology start-ups. Like many corporate executives, they argue against trying to pick winners among Hong Kong high-tech firms. The MIT experts propose instead that the Hong Kong government stimulate the flow of funds to the emerging technology sectors, particularly the software industry, and help to establish a new stock exchange in the city that would specialize in technology stocks. Hong Kong's digital telecommunications network is first-rate, they say, but the city needs to capitalize on such assets and expand and improve them lest it be overtaken by competitors such as Singapore and Taiwan.

The authors of both books describe Hong Kong's economic strengths and weaknesses in painstaking detail. What they fail to do is probe deeply for subsurface trends that could eventually diminish Hong Kong's economic success. These worrisome trends include the self-censorship increasingly practiced by Hong Kong journalists, who are afraid to offend mainland Chinese authorities. One of their fears is that journalists deemed hostile to Beijing could be accused of violating "national security" laws.

A number of Hong Kong media bosses who place their business interests on the mainland ahead of journalistic ideals have worsened matters by reining in independent-minded commentators, reporters and editorial writers. According to Hong Kong columnist Frank Ching, writing in a recent edition of Foreign Affairs, "It is known that China keeps dossiers on reporters and editors, and many are fearful of reprisals."

If the journalists' fear spills over into financial reporting, then not only journalists but also Hong Kong businesses will have something to worry about: One of the city's main strengths is the free flow of information. Even now, a number of stock market analysts based in the city are believed to be hesitating to criticize the performances of mainland Chinese companies. Some of the largest of these companies are secretive about their operations, financing, and accounting practices. And, although many Hong Kong residents profess optimism about the future, many also express concern that corruption that could damage the economy will grow under Chinese rule. As the authors of The Hong Kong Advantage acknowledge, "Many Hong Kong-based executives worry that the rule of law will be replaced by the rule of officials and that the Hong Kong judiciary will cease to be independent and even-handed, particularly when Mainland companies or individuals are involved."

But the authors contend that Western journalists and other commentators tend to treat Hong Kong's handover almost entirely as a political story while ignoring the territory's strong economic fundamentals. This is a fair point, but The Hong Kong Advantage is written in an academic style ill-suited to remedy the situation. Crammed with statistics and technical jargon, this is a book for financial specialists and business people, not for the average reader. Unfortunately, Made In Hong Kong falls into the same category.n

Daniel Southerland, a former correspondent in China and Hong Kong, is vice president and executive editor of Radio Free Asia.