China struggles with Hong Kong dilemma

When China commemorates the 20th anniversary of the return of the former British colony to Chinese rule on July 1, Beijing will undoubtedly declare that, contrary to dire predictions, Hong Kong has thrived, and that the "one country, two systems" model designed by Deng Xiaoping, China's late paramount leader, has been a resounding success.

But the Chinese government and its hand-picked leaders in Hong Kong will have a hard time convincing the people of Hong Kong that they have delivered on their promises of protecting the territory's autonomy and respecting its people's desire for more democracy. To be sure, the extreme disaster scenarios have never materialized. Hong Kong remains a prosperous commercial hub, with its independent courts and financial system. Its population has grown by 800,000 to 7.3 million while its per capita income, unadjusted for inflation, has risen from $27,000 to about $42,500.

Hong Kong's economic prosperity, however, barely conceals the social and political tensions that have been brewing for the last two decades. Hong Kong's super-wealthy have done very well under Chinese rule as Beijing showers them with favors, but the same cannot be said of the average resident. Its income inequality, already among the highest in the world, has risen, although slightly (from 0.52 in 1996 to 0.53 today on the Gini coefficient index). The sky-high property prices, driven in part by a huge influx of hot money from the mainland, have raised the costs of living for most people in the city.

Those defending Beijing's post-1997 record habitually cite socioeconomic factors such as income inequality and unaffordable housing as sources of Hong Kong's rising tensions. While their arguments cannot be dismissed out of hand, it is also clear that politics, specifically Beijing's policy toward Hong Kong, has alienated a significant segment, if not the majority, of the people of Hong Kong.

Evidence that political factors are responsible for the deteriorating conditions in Hong Kong is hard to miss. All street demonstrations, a rarity in pre-1997 Hong Kong, have explicit political demands, such as the direct election of the city's chief executive and reform of the electoral system that picks the city's legislative council. Of the most critical events in the last two decades that contributed to Hong Kong people's loss of trust in Beijing, all are political in nature. For instance, the severe acute respiratory syndrome, or SARS, epidemic that hit Hong Kong in 2003 originated in Guangdong, and Hong Kong became a victim of the cover-up by Chinese authorities of the rampaging viral epidemic. The largest anti-Beijing rally, with about half a million demonstrators, took place on July 1, 2003 in protest of the city administration's heavy-handed attempt to ram through a national security law that would threaten Hong Kong's civil liberties.