Anxiety and Confidence in Hong Kong

Consul General Kurt W. Tong

Remarks by U.S. Consul General Kurt W. Tong
to the Foreign Correspondent’s Club, Hong Kong
January 10, 2017

(As prepared for delivery)

Good afternoon, everyone.

First of all, let me express my heartfelt thanks to the Foreign Correspondent’s Club for hosting me here today.

This institution is one of the most storied press clubs in the world. It has a rich tradition as a meeting point — and a watering hole. For seven decades, journalists have gathered here to share ideas and reflect on the profound changes that have shaped and reshaped Asia, again and again.

Your mission, to promote press freedom and credible, high-standard journalism, has never been more important. So I salute you for what you do every day, to provide people with the facts they need to shape their world.

In fact, it requires real imagination to consider Hong Kong back in 1943, when this club was founded, amid the turmoil and dissolution of the Second World War — and then try to grasp the full tapestry of the history that has brought us to today’s moment. Today’s Hong Kong is an international financial center par excellence and China is a re-emergent global power of surpassing wealth and military strength. I doubt many would have foreseen all those changes seven decades ago.

The scope of this history informs the topic of my talk today: Anxiety and Confidence in Hong Kong.

I will try not to be the classic diplomat, who thinks twice before he says nothing.

When I arrived here as U.S. Consul General roughly five months ago, I was new to Hong Kong. Like all Asia Hands, I had visited in the city before. But I had never worked or lived here for an extended time. So during my time here I have tried hard to meet, and listen to, and learn from, as many Hong Kongers as I can. Fortunately, this is a friendly place, and I have found that people are very ready to tell you what they really think about the issues of our times.

When I spoke to the American Chamber of Commerce back in September, I outlined certain working assumptions:

  • First, that Hong Kong is and continues to be a success story;
  • Second, that the “One Country, Two Systems” framework — and the autonomy that goes with it — are fundamental elements of that success; and
  • Third, that the United States has an important role to play as a partner in Hong Kong’s continued success.

My staff at the U.S. Consulate often despairs that I think too much like an economist. I assume you have heard that old story where a fellow falls into a deep ditch and lands next to an economist. He cries in despair, “How are we ever going to get out?” And the economist replies cheerfully, “Easy!  First, just assume that there is a ladder…”

But actually, I am happy to report that in this case, my working assumptions about Hong Kong have proven correct. In my brief time here, I have spoken with taxi drivers and tycoons, teachers and tailors, students and solicitors and civil servants. I’ve had the chance to hike the hills and duck into dim sum restaurants and zip around town on a much better public transit system than we have in Washington.

Sure enough, I found that:

  • Hong Kong is a success story;
  • “One Country, Two Systems” enables that success; and
  • The United States is an important partner.

So, obviously, since you paid to come to this lunch, let me expand on this a bit.

You all know the litany of statistics that document Hong Kong’s achievements. With a three hundred billion dollar economy and only seven million people, give or take, Hong Kong is an economic marvel by any conventional metric.

And of course, it only takes a few conversations to realize that Hong Kong’s greatest asset is its people. Hong Kongers are some of the smartest and most worldly people you will meet anywhere. Young and old alike, Hong Kongers are highly skilled and motivated, and, collectively they comprise a deep pool of talented professionals and skilled labor that naturally attracts international business and investment.

I’ve been deeply impressed with the creativity and entrepreneurial spirit I see in Hong Kong. Just the other day I found myself at a small, elegantly appointed teahouse in Fo Tan. Remarkably enough, recycling an old industrial space, a young woman named Catherine Yung has created a wonderful business. But even more impressive than her reimagining of the physical space was her vision for the tea itself. Her family has been in the tea business for years, but she has taken and adapted those traditions and expertise to create a young, vibrant vibe suited to today’s Hong Kong. Completely Chinese, but also fully modern.

Another set of entrepreneurs I met recently reminded me of another of Hong Kong’s key characteristics — its openness to international participation. David Hanson and his team of American and Chinese robot makers at the Hong Kong Science Park are doing truly cutting edge work, making robots that hold conversations and use facial expressions as human as many of the rest of us on a good day. Now putting aside how scary that is — after recalling what Alicia Vikander did to the smart guy in the movie “Ex Machina” — what is noteworthy is that Hanson’s team is working in Hong Kong. Not California. They chose Hong Kong because it is a great place to live, has good technologists, is close to manufacturers in Shenzhen, and actually protects intellectual property.

These people are really impressive. However, I think we all recognize that for even the most energetic and hardworking people to succeed, especially in the highly competitive world of the 21st Century, they need to exist in a place that supports their aspirations.

Hong Kong’s commitment to the rule of law, transparency, and openness create the basis for business and trade to succeed. And its dedication to freedom of expression helps foster the creativity that is the key to success in a post-industrial society.

Under the “One Country, Two Systems” construct, as set forth in the Basic Law, Hong Kong’s courts are independent, and the Special Administrative Region has a unique representational political system that operates with a high degree of autonomy.

These advantages have enabled Hong Kong to become an international financial center, with top-notch regulatory standards. Hong Kong is regularly ranked among the freest economies in the world, noted for ease of doing business and superior logistical capacity. Not to mention Hong Kong’s commitment to clean water and clear air, and other environmental considerations.

It is these traits, in fact, that also make the United States a natural partner for Hong Kong. It helps that we have many shared values.

These values include an abiding respect for fundamental freedoms: freedom of expression; of the press; and of assembly.

At the same time, of course, as a part of China, Hong Kong benefits from a rich cultural heritage, and from its unique historical experiences and capabilities acting as a gateway between China and the United States, and the rest of the world.

Hong Kong has always been especially good for China in this sense. For many years, Hong Kong was the primary conduit for investment flows into the Mainland. Now, it serves as a premier platform for assisting Mainland firms investing abroad. It is also a vanguard of ongoing efforts at internationalization of the Renminbi.

Anxiety

So why, then, you are asking, did Tong include the word “Anxiety” in the title of this speech?

Despite Hong Kong’s many strengths, I would be remiss if I did not also report that I have detected a palpable and persistent note of anxiety, expressed by Hong Kongers, in many of my discussions here over the past half year.

Some of this anxiety, I think, can be ascribed to the relentless self-critique that comes naturally to people in a fast-paced global city. Hong Kongers are concerned about maintaining a comparative advantage in finance, trade and innovation, in a fiercely competitive global market.

Hong Kongers also express anxiety about issues that are not all that dissimilar to concerns back at home, in the United States. Income inequality statistics for Hong Kong show one of the widest divides in the developed world. There are structural issues in the economy here that must be addressed going forward, which are even more noticeable given slow growth trends around the world, such as how much Hong Kong can continue to rely on tourism, real estate development or its ports to drive new growth in the years ahead. And certainly everyone is aware of the housing crunch here, and the high numbers of people living in or queued up for government housing assistance.

I believe that some of Hong Kong’s anxiety can also be attributed to awareness of its limitations. Hong Kong has a high degree of autonomy within China, but by design, that autonomy does come with some limitations, such as in the conduct of foreign policy and national defense. Hong Kong has unrealized potential as a regional leader in science, technology, medicine, and education — but this is another way of saying that it has not developed in these areas fast enough to maintain a clear lead. And Hong Kong is in some ways beholden to the vicissitudes of the larger economies upon which it depends. Hong Kong can do little, for example, to affect the Mainland’s capital controls or U.S. interest rate changes, but these policy decisions can directly impact its economy.  And then there is always the broader dynamic of U.S.-China relations, which can both help or harm Hong Kong, depending on how things play out.

Amid these economic realities, I have also heard from many people here about their concerns that polarization in the Legislative Council will make it more difficult for the government, or for the Council itself, to identify and outlay funding for solutions to key problems.

Also, over the past year or so, the unwarranted disappearance of the booksellers, as well as the unfortunate, preemptive interpretation of the Basic Law by the National People’s Congress with respect to official oath-taking, have contributed to a sense among many in Hong Kong that Beijing may be losing sight of the importance of respecting Hong Kong’s autonomy.

And these incidents have tended to feed Hong Kongers’ endless, unhealthy speculation about what Beijing wants, or does not want.

Obviously, the Central Government’s opinions matter. But I remain hopeful that the Central Government really does understand that the “two systems” part of “one country, two systems” is critical to Hong Kong’s success — as well as to Hong Kong’s value to the rest of China.

In fact, I have had useful conversations with PRC officials in both Beijing and Hong Kong that reflect an understanding of the importance of maintaining the health of the proverbial “goose that lays the golden eggs.” If anything, I think it is clear that recent trends in global affairs have made Hong Kong even more valuable to the rest of China.

So if I were to be granted one New Year’s wish, it would be that Hong Kongers would spend less time worrying about what Beijing thinks, and just go ahead and tackle the various issues of the day with their typical “can do spirit.”

Confidence

At any rate, here we are: anxious about Hong Kong’s state of anxiety. The risk, as you can see clearly, is that anxiety breeds anxiety. And that can become a vicious cycle.

But of course, the opposite is also true. Confidence breeds confidence. Confidence can create and reinforce a virtuous cycle.

Without minimizing any of the concerns I just laid out, let me just tell you clearly:  I am extraordinarily confident about Hong Kong’s future.

I represent the American people and American interests here in Hong Kong, and our mission here is to partner, not preach. But in the spirit of partnership, please allow me to offer my view on why we can approach the coming months and years with confidence about Hong Kong.

First and foremost, “One Country, Two Systems” still presents Hong Kong with incredible opportunities for creative and innovative and sustainable growth.

There are natural tensions inherent in the design of “One Country, Two Systems,” but Hong Kong has found a way to make work, for the benefit of its people, for twenty years. And I will say it again: a successful, prosperous Hong Kong is good for China and all its partners.

China can play its part by respecting the high degree of autonomy laid out in the Basic Law. But the key for Hong Kong itself, I believe, is this: the “One Country, Two Systems” formula works best when applied actively, imaginatively, and affirmatively. In a word: confidently.

What do I mean by this?

I share the fault of so many of Americans that I never miss the chance to use a sports analogy. I will spare you baseball — that’s too complicated — but I think I can safely assume that many of you have watched a soccer match or two. (Our Consulate team, by the way, was victorious on the field again this weekend. Please let me know if anyone wants a match.) At any rate, I assume you know what I mean when I talk about offense and defense on the “football pitch.” There are attacking styles, like Brazil’s, and famous counterattacks, like Italy’s, but what they all share in common is that at some point, teams that win go on offense. You cannot play an entire match on defense and win. You have to work the ball up the field and eventually find the back of the net.

To finish the analogy, then, how best can Hong Kong play offense?

Over these past five months I have heard myriad ways in which Hong Kong can do just that — move the ball up the field – within the constructs of the Basic Law, “One Country, Two Systems” and its high degree of autonomy.

Simply put, through “One Country, Two Systems,” Hong Kong has the opportunity to achieve nearly any goal its sets for itself.

Hong Kongers know they benefit from the free flow of information and freedom of exchange with other countries, in ways that are beyond the reach of many in the Mainland. Embracing and celebrating these core advantages — and reaffirming them wherever possible — will help Hong Kong maintain its “specialness” – the secret sauce that fuels its vibrant culture and dynamic economy.

Here are some ideas I have heard from Hong Kongers themselves:

  • Hong Kong can grab the opportunity to make itself a finance and design center for the Belt and Road initiative.
  • Hong Kong can expand its regional and global competitiveness through free trade agreements or bilateral investment treaties with regional partners on both sides of the Pacific.
  • It might even seek to join the Trans-Pacific Partnership, if that most excellent initiative is constituted in some form.
  • Hong Kong can work through APEC or with other partners to ensure that it is a regional leader in such areas as cross-border data privacy issues, which is another way of saying it can keep information flowing freely, and securely, over the Internet.
  • It could even volunteer to host APEC, to help steer regional priorities.
  • Hong Kong can make itself into a regional and global leader in arbitration, and education, and medicine.
  • Given the creativity and drive I have seen everywhere here, Hong Kong can make itself into a technology and design hub, whether for financial technology or any other not-yet-seen value proposition.

Imagine the confidence that will flow from the vigorous pursuit and eventual realization of these goals. Work in these areas will reinforce the confidence that is already born out of Hong Kong’s continued prosperity.

From a United States perspective, there are opportunities to partner on each of these potential initiatives. For example, we are willing to share our experiences on cutting-edge trade agreements.  Likewise, U.S. firms have expressed keen interest in working through Hong Kong to access Belt and Road projects.

We look forward to working with the Hong Kong private sector, and its government, in any or all of these areas. I hope that the next Chief Executive will see the United States as a key partner, and I hope that he or she will be an early and frequent visitor to the United States, as well as other global centers of commerce and creativity.

Conclusion

Look, we all know that we live in an era of disruptive technological change, which is reshaping business, labor and livelihoods the world over. Governments and cities everywhere are grappling with how to navigate the changes.

I think that is why 2017 is shaping up to be a consequential year for the United States, Hong Kong and China.

In less than a fortnight, the United States will have a new President. Just two months after that, the Election Committee here will select a new Chief Executive. This July will mark twenty years since the establishment of the Hong Kong Special Administrative Region. In late fall, the Communist Party of China will cement its leadership structure for the next five years through the 19th Party Congress.

Transitions like these naturally produce anxiety. They introduce additional uncertainty in an already uncertain world.

But the “One Country, Two Systems” construct provides Hong Kong the flexibility to navigate disruptions and to continue to create a bright future.

And let’s also remember this: Hong Kong, very much like the United States, has a remarkable capacity for reinvention.

Hong Kongers have always seized the opportunities, and overcome the challenges, brought to them as a result of geography, culture and political developments. They have transformed their city over time from a fishing village to a trading post to a light manufacturing center to a logistics hub to a global financial center. Every time conditions shift, Hong Kongers adapt proactively and find creative solutions to move forward and prosper.

I think we have every reason to be confident that this very special city will be able to craft the next chapter toward inclusive growth and prosperity. The United States is here to support and participate as an enthusiastic partner.

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