‘Death of Hong Kong’ predictions were wrong in 1997 and are still off the mark today

Western media eager to call time on Hong Kong in 1997 focused solely on the city’s political prospects and ignored its economic strength
Although Hong Kong has retained its edge over the past 25 years, a doomsday narrative persists, one that the incoming administration must work hard to quell

David Dodwell

Published: 4:30pm, 24 Jun, 2022

Why you can trust SCMP

I have always believed that Michael Enright, Edith Scott and I were both politically and economically courageous – and perhaps foolhardy – to publish The Hong Kong Advantage just a couple of months before the 1997 return to Chinese sovereignty.

As we walked through the hallowed corridors of Government House a quarter of a century ago to introduce the book to outgoing governor Chris Patten, our narrative was seriously at odds with the international media and academic consensus at the time that the death of Hong Kong was upon us. We received a polite, interested, but sceptical reception; time would soon tell whether we were right or not – and either way, this was not going to be Patten’s problem.

Our core thesis was that “the Hong Kong we read about in the Western press often bore limited resemblance to the Hong Kong that we have come to know … widely discussed but not widely understood”, that the Western narrative was obsessively focused on the politics of the transition, and that any analysis that failed to take economic factors into account was doomed to misinterpret Hong Kong’s future prospects. As we noted, “ignoring the economic story is to miss the political story as well”.

Our economic analysis revealed a “Hong Kong advantage” – a unique combination of economic strengths that made Hong Kong immensely more resilient than most commentators appreciated. While the transition was unprecedented and intrinsically challenging, “Hong Kong’s economy and its industries are likely to be able to ride out even relatively substantial storms”.

People cross a street in Hong Kong’s Central district on May 12. Photo: EPA-EFE

We saw a unique location that was performing an indispensable role both for China and for businesses around the world that wanted to build links with it. We saw a unique balance between government and business, local and overseas enterprises, and managerial and entrepreneurial strengths.

We examined an array of fiercely competitive industries specialising in light manufacturing, transport and logistics, tourism, infrastructure and real estate, business and financial services, and communications and media. We traced an array of unique roles: a capital base for tens of millions of overseas Chinese; a magnet for mainland investment; and a developer of dispersed manufacturing practices that were both driving, and benefiting from, globalisation.

We concluded that Hong Kong’s “complex web of advantages” would be difficult, if not impossible, to duplicate, and that it would equip the Hong Kong community to manage the 1997 transition much more robustly than pundits recognised.

Now 25 years later, I believe we were more right than wrong. Yet it is fascinating to see that the doom-monger narrative remains alive and well – and energetically championed by the likes of Patten.

02:16

Why other Chinese cities are not yet ready to ‘surpass’ Hong Kong

That generation of prophets of doom in 1997 were clearly wrong: China’s army did not frogmarch in, grab the reins of power, and subvert Hong Kong to the will of the Communist Party. Beijing leaders were painstakingly respectful of Hong Kong’s “high degree of autonomy”, and left Hong Kong people free to rule Hong Kong even in the face of their repeatedly disappointing performance.

While Hong Kong has been humbled by numerous setbacks since 1997, few were anticipated, and few can be blamed on Beijing. The Asian financial crash, avian flu and the dot-com crash: none of these challenges were of Beijing’s making.

From Sars in 2003 to the global financial crisis in 2007, Hong Kong has struggled to regain its stride despite China’s steady growth and opening up. While asset prices – in particular for housing – have soared, most households have seen family incomes stagnate for the better part of two decades, widening Hong Kong’s already-wide wealth gap, and laying foundations for the politically catastrophic stresses that culminated in our 2019 street riots.

Persistent indecisiveness and procrastination have hobbled successive administrations, culminating in the quixotic and inept management of the Covid-19 pandemic over the past two years.

So, revisiting the conclusions of our Hong Kong Advantage book, were we wrong after all? Have Hong Kong’s “complex web of advantages” been unravelled by weak leadership and deep political division, an erosion of local self-confidence, rising self-assurance among mainland businesses which today dominate our financial and equity markets, perceptions of clumsy intervention from Beijing, and an exodus of international businesses?

Whatever our modern-day doom-mongers may claim, I believe such negative conclusions are premature. As we wrote back in 1997, “in the absence of near-complete political meltdown or dramatic mishandling, Hong Kong should continue to prosper”. Ironically, and almost tragically, we did indeed experience that “near-complete political meltdown” in 2019.

It can also be argued that we have seen “dramatic mishandling” of our economy, most seriously in allowing a mistaken “zero-Covid” strategy to make a hermit kingdom out of a city that for most of my lifetime has counted as one of the best-connected economies in the world.

A combination of ill-fortune and political ineptitude has tested this most-resilient of economies to its very limits. As the new administration of John Lee Ka-chiu prepares to take up the reins of power, it must recognise the very real and imminent danger we face. Lee has said he will bring “result-oriented” decisiveness, and this needs to begin with urgent steps to reopen our unique economy.

Already back in 1997, our economy was deeply intertwined with that of the mainland, and this interdependence has continued to grow, particularly in the Greater Bay Area. Our role as the metropolitan heart of an increasingly prosperous 80-million-strong economic region needs to be developed as a high priority.

Back in 1997, we wrote: “Those who have bet against Hong Kong in the past have lost”. My bet today is that they will still lose, but a sorry story of inept leadership over the past 25 years has kept alive a doom-mongers narrative that was wrong in 1997 and ought still to be wrong today. It is Lee’s job from July 1 to prove it so.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view