Aaron Seals – Hong Kong, a tiny island smaller than Rhode Island, has an unusual history. Britain claimed parts of Hong Kong in the mid-nineteenth century and in 1892 legally leased the island from China for a term of 99 years. Although the negotiator of the lease believed the 99-year term actually granted Britain the island for forever, China wanted the island back upon its conclusion. After all, Hong Kong was already an economic powerhouse in the late twentieth century. So, after 156 years of British rule, China and Britain agreed to a turnover of the island beginning in 1997; however, Britain only agreed so long as China respected Hong Kong’s capitalist system for 50 years. Following the handover of the island, the Cantonese population of Hong Kong found themselves being ruled by yet another outside group; what would their future hold?
The fifty-year period expires in 2047, and concerns about what will become of Hong Kong’s dominant free market are abound. Hong Kong notoriously places first on earth in the Free Market Index, an index which compares the economic freedom granted to persons across states. China, even with its grand expansion of cities and invitation of foreign investment, ranks 110. Citizens of Bhutan and Cambodia have greater economic freedom than Chinese citizens according to the index. Fortunately for Hong Kong’s entrepreneurs, China has largely respected the fifty-year agreement they made with Britain. There are clear economic reasons for this.
In 2000, just three years after Hong Kong was handed over to China, Hong Kong’s GDP was about $160 billion. China’s GDP in the same year was just over $1 trillion. China had little incentive to violate its agreement with Britain and bust into Hong Kong and insert its anti-free market laws; Hong Kong’s free market accounted for around 15% of China’s total GDP. Today, however, the situation is much different. Hong Kong only supplies 4% of China’s GDP. With the rapid development of China’s cities, its reliance on Hong Kong has slumped. Therefore, China’s incentive to honor its agreement with Britain may also falter. Interesting legal questions are presented whether or not China interferes with the presently autonomous Hong Kong before 2047.
Britain and China’s agreement to slowly reintroduce Hong Kong to China is a binding international agreement according to Britain. In 2017, however, China stated that the agreement had no legal meaning any longer. If China breaches a duty they agreed to, how would Britain respond? Would Hong Kong, a state with only seven million residents, fight back against China? Aside from the obvious interest the Hong Kong residents have in this problem, colossal western companies have much at stake. A host of American financial institutions, including JP Morgan Chase, have their Asian headquarters in Hong Kong. Many international companies have large financial stakes in Hong Kong remaining economically free.
Regardless of whether China encroaches upon Hong Kong before 2047, it undoubtedly will be able to do so upon the expiration of its agreement with Britain. Whenever China fully reclaims Hong Kong, there is no doubt that the residents of Hong Kong itself will have something to say. Only 3% of young Hongkongers identify as Chinese. That group of people will be running Hong Kong in 2047. Whether the island, after centuries of being overseen by outsiders, willingly turns over ownership, will be an extraordinary moment in the not-so-distant future.
