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Letter from London|The second Great Leap Forward

Frank Wilson

There is much hand-wringing going on in the West currently about how to deal with an emergent, powerful China. Our government here in London, for example, condemns China’s treatment of the Uighurs, its suppression of freedoms in Hong Kong and its belligerent foreign policy. But it’s all words and no action. Our Brexit government is at the same time desperate for trade and business links with China, to justify its vapid “Global Britain” alternative to membership of the EU, and its loosening of close trading ties with our democratic next-door neighbors.

It’s such a contrast to the cautious optimism which prevailed immediately after the handover of Hong Kong and the turn of the millennium. It seemed reasonable to assume at that time that the spectacular economic strides made by China as a result of more liberal policies, would lead to social change and the inevitable introduction of some measures of political reform. China would fully join the international community and accept its norms. Hong Kong, it was believed, would be “safe” under a Chinese government within the terms of the treaties signed.

Why were people hopeful at the turn of the century? Mainly because the economic change had been so swift and profound that it seemed an irreversible process was underway. After all, the period between 1978, when Deng Xiaoping announced the new “Open Door” policy, and established the new “Special Economic Zones”, and 1997, witnessed an economic renaissance unparalleled in history. Over this time, China’s annual GDP growth was close to ten percent. Per capita GDP, the significant measure for a huge country like China, rose from U$155 in 1978 to over US$781 in 1997. At the same time, it grew from being a minor exporter into one of the world’s top ten, achieving an annual growth rate in export volume of some 15 percent.

Wily old Deng had recognised that if China was to develop its industries and exports it had to compromise a little with capitalism and secure needed foreign investment. To gain that, the Special Economic Zones, with their attractive tax regimes and more liberal regulations, were set up as bait. The plan worked, for by 1995 China had lured in over US$100 billion of investment, money which went a long way to financing the building of industry.

Nowhere was the impact more fruitful than in Shenzhen, the SEZ set up adjacent to Hong Kong. Growth rates there exceeded 40 percent per annum in the decade of the 1980s. Hong Kong entrepreneurs and manufacturers eagerly seized upon the opportunities offered just across the border, where labor rates alone were one fifteenth of Hong Kong’s. Thus, Hong Kong’s own dramatic boom time was built on the back of China’s second Great Leap Forward.

This was the era when Hong Kong evolved from manufacturer of basic consumer goods into a design and marketing centre, leading global entrepot, and financial competitor to New York and London. “Made in Hong Kong” became “Designed in Hong Kong” and the vast majority of that critical foreign investment made its way into China through Hong Kong.

For Hongkongers and those of us expats lucky enough to have been living there through those years, it meant a time of unbounded business optimism, of career opportunity and financial gain. For me personally, the story behind the statistics quoted above was one of progress and business success. For someone working in the communications and publicity field, it meant many more potential Hong Kong, Chinese and incoming overseas companies needing our skills.

This tremendous economic transformation — the overnight industrialization of China — resulted in rapid urbanization, major changes in transport and communications, and coincided with the onset of the internet age. Chinese people had access to more education, travel and news. A middle class was being created. It was quite reasonable to think these social developments would lead to a desire for a more open, liberal type of government. This would, after all, be a traditional Marxist view — that political change follows economic change. Why didn’t it happen?

The suppression of the democratic movement culminating in the tragic events of Tiananmen Square certainly squashed hopes of reform. But even then, there was a belief that change must come. The reasons are of course complex, but one major factor in the failure of any further reform initiatives must be the impact of the financial crisis of 2008. It shook the Chinese leadership’s belief in the market economy and strengthened the view that tighter state control was the way forward. Since then, the country has become more centralized and authoritarian under the personal rule of President Xi.

Today China is the second largest economy in the world and the leading contributor to global economic growth. Soon it will overtake the USA to become the largest economy. It is beyond the scope and ability of this article to predict what will happen now, but it remains unthinkable, to this writer at least, that the existing governmental structure can survive without evolving.

One thing is certain, there can surely be no return to the type of ideological naivete that led to the first, failed and fatal Great Leap Forward, which cost the lives of tens of millions.

(The writer lived in Hong Kong for more than twenty years, arriving soon after the death of Mao and leaving after the handover of the territory to China. He experienced the seismic transformation of Hong Kong on its journey from plastic flowers and T-shirts to global front runner in trade and high finance.)

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