Hong Kong as a Nonsovereign International Actor

Author(s): James C. Hsiung

Source: Asian Affairs: An American Review , Winter, 1998, Vol. 24, No. 4, Symposium
on Hong Kong (Winter, 1998), pp. 237-244
Published by: Taylor & Francis, Ltd.

Stable URL: https://www.jstor.org/stable/30172730

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 Hong Kong as a Nonsovereign
International Actor

JAMES C. HSIUNG

earing Hong Kong described as an international actor, most people proba-

H bly think of the territory's role as a world-class trader, a financial center, the
world's largest container shipping center, and so forth-in short, in terms of its
links with the global economy. Although all those descriptions are appropriate,
in that they are indispensable parts of Hong Kong's international profile, my
attention in this article is directed elsewhere, to the political and legal realms.
Indeed, a full range of concerns could encompass (a) the capacity of the Hong
Kong Special Administrative Region (HKSAR) to assert claims or espouse causes,
both in its own right and on behalf of its residents, and to protect the interests of
aliens within its jurisdiction; (b) the extent of the SAR's autonomy to take inter-
national action vis-a-vis its Chinese sovereign; (c) Hong Kong's role as a
"reversible window," that is, as China's window on the world and, conversely, the
world's window on China; (d) the potential for Hong Kong to be a catalyst in
bringing together Taiwan, the mainland, Macau, and itself into a "Greater China";
and (e) Hong Kong's role in China's foreign relations, such as in the Sino-U.S.
tangle. Given the constraint of space, however, we can only briefly address some
of those questions.
Initially, let me offer two general comments. First, the SAR's international legal
status and capacity to act derives from a number of sources: (1) the 1984 UK-PRC
Joint Declaration, which is the devolution agreement from the standpoint of inter-
national law that makes the SARa successor to the former Hong Kong under
British rule, with all its rights accruing from existing treaties and its membership
in international organizations; (2) the Basic Law, Hong Kong's mini-constitution,
which grants the SAR "a high degree of autonomy," separate and distinct from

237

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 238 Asian Affairs

China, with its own capac

al international law, inclu
previously mentioned 19
state practice, repeated ov
and conviction as to conv
My second general remar
has only increased after i
the SAR's hosting of the
the International Moneta
from 180 member states a
That was followed by the
from October 6 through 9
countries, including Ch
William Daley.

HKSAR's Discretion to Act

In less than two months following its reversion to China, the HKSAR has had
occasion to act on its own, as in the decision to contribute U.S.$1 billion to the
IMF-orchestrated U.S.$16 billion package to bail out the Thai baht. (Beijing's
decision to follow suit came one week later.) On the other hand, the SAR seemed
to be bowing to Beijing's wishes when its semi-official Hong Kong Productivity
Organization withdrew from the Asian Productivity Organization (APO), the rea-
son being that Hong Kong's being in an international organization of which Tai-
wan was also a member would violate the "one China" principle.3 In 1963, while
under British rule, Hong Kong joined the Tokyo-based APO, which was found-
ed that year. Under the name "Republic of China," Taiwan was also among the
founding members. Hong Kong's withdrawal from the APO shortly after (but not
before) the territory's reversion to China seemed to convey a distinct political
message.
True to expectations and to the letter and spirit of the Basic Law, Hong Kong
continues to be a party to certain international treaties, such as the two 1966
human rights covenants, and it still participates in international organizations
(IOs) as before. An official tally shows Hong Kong taking part as a "full mem-
ber" in seven IOs, including the Asian Development Bank (ADB) and the World
Trade Organization (WTO), and as an "associate member" in six others, includ-
ing the International Maritime Organization. In addition, Hong Kong sits as a part
of the People's Republic of China's (PRC) delegation in nineteen other interna-
tional organizations, ranging from Asia-Pacific Postal Union to World Intellectu-
al Property Organization.4
Hong Kong's joint membership (with the PRC) in IOs, as such, is only one
indication that the SAR's international capacity to act is not in itself incompati-

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Hong Kong as a Nonsovereign International Actor 239

ble with that of the Chinese sovereign. The Basic Law in fact guarantees t
patible capacity of the HKSAR in its participation in international affair
152). Consistent with the same provision in the Basic Law, Hong Kong
ly took part in the 23-25 September 1997 annual meeting of the World
the IMF as part of the Chinese delegation. By contrast, Taiwan, which
member of either organization, was excluded from the meeting.
Another example is the role played by China through its embassy in
during the 15 August 1997 Manila Bay boat accident. Literally on the s
PRC embassy issued temporary travel documents to the eleven survivi
Kong tourists whose passports were lost during the accident.5 In the c
stances, the embassy seemed to be offering a service to those unfortuna
Kong citizens on behalf of the HKSAR which, according to Article 154
Basic Law, has the power to issue passports to its residents abroad.

Hong Kong as a "Reversible Window"

The term "reversible window" is shorthand for Hong Kong's function

China's window on the world and the world's window on China. For illus
the discussion here will concern Hong Kong's role as a bridge between
side world and China in the domain of investment and capital flow. Overa
nal investment in Hong Kong is derived from three sources: foreign firm
land Chinese firms, and investors from Taiwan.
First, I will discuss foreign capital in Hong Kong. Total assets of three
nations alone-Britain, the United States, and Japan-amounted to
U.S.$70 billion in 1996.6 Close to two hundred foreign banks, including
five of the world's one hundred largest banks, have branches in Hong
About five thousand foreign companies are represented there. Over eight
multinational companies have their regional offices in Hong Kong, repre
the largest group of foreign investors in the entire Asian Pacific region.
joined by over one hundred thousand additional foreign trading compan
all over the world.7 The important thing is that this foreign investment co
tion has remained unchanged since the end of British rule.
Second, let us turn to PRC investments in Hong Kong. The generic hua
nese capital) in itself came from three sources: the Chinese mainland (
Southeast Asia, and overseas Chinese from other parts of the world. By
of 1996, the total pool of huazi from this wide range of sources accoun
U.S.$40 billion, or about the same level as total British investment in Hon
An overwhelming part of that capital has been invested in real estate, m
turing, and shipping; the rest, in financial, trading, public utilities, and
sectors. In fact, huazi is represented, generally speaking, by the most en
tic supporters of Hong Kong's return to Chinese sovereignty. Within t
pool, PRC investments (known as Zhongzi) are becoming more prominen

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 240 Asian Affairs

from the PRC account fo

its total shipping volume,
cent of Hong Kong's tou
Third, direct investmen
in Hong Kong registere
that another U.S.$30 bil
various parts of the Chi
The data may be far fr
cations of the SAR's "reversible window" effect. Much of the information
shows only Hong Kong's function as the world's window on China; however,
one example of the reverse traffic is the PRC's access to international organi-
zations (for instance, the WTO) in which Hong Kong has membership and the
PRC does not. The awareness that the PRC may have indirect access to an orga-
nization such as the WTO through Hong Kong (as a special region of China)
nevertheless would probably weigh heavily in the deliberations of foreign deci-
sion makers who are yet undecided whether to support the PRC's admission
into the organization.

Hong Kong As a Catalyst for Mainland-Taiwan Unification

Although the question of mainland-Taiwan unification is not an internation-

al issue, its realization will obviously raise concerns for many foreign powers
at both the global and regional levels. Hong Kong's ability to play a catalyst's
role will be solid evidence for the extent of its capabilities as an international
actor. Hence, the question falls within the scope of this article, whose concern
is with the HKSAR as an actor on the international scene, despite its lack of
sovereignty.
Most discussions of the impact of Hong Kong's reversion to China or the main-
land's relations with Taiwan capitalize on the prospects of enhanced ties between
the two sides, assuming they will continue to trade through Hong Kong, now as
before. Some even provide statistics from the recent past to show how beneficial
it has been for Taiwan to trade with the mainland through Hong Kong. One
account gave Taiwan's favorable trade balance with and through Hong Kong as
U.S.$1.04 billion, out of Taiwan's total 1996 trade surplus of U.S.$14.7 billion.1i
Although all that is important, none of the commentators has offered a convinc-
ing argument as to why those links, which have existed since before reversion,
are going to sway Taiwan toward a more agreeable view of unification with the
Chinese mainland. The answer, I submit, lies elsewhere.
In short, Hong Kong may play a catalyst's role in bringing Taiwan and the
mainland closer to unification by demonstrating that the "one country, two sys-
tems" model can work successfully in Hong Kong. A few words of explanation
are in order.

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Hong Kong as a Nonsovereign International Actor 241

Taiwan's official position is that "one country, two systems," under wh

HKSAR has been conceived, will not work in Hong Kong, and on that b
wan rejects the model as a possible solution to the division between Tai
the mainland. Paradoxically, in the logic of Taiwan's official doomsday
about the "one country, two systems" model in Hong Kong lies the key
future of Chinese unification. The Taiwan doomsday theory can be bes
stood in the following way: (a) the Dengist "one country, two systems" m
ultimately directed at Taiwan, as a solution to the split across the Taiwan
(b) its applicability will have to pass a preliminary test in Hong Kong, an
failure in Hong Kong will foredoom its chance of ever being acceptable
wan. Out of fear of becoming a second Hong Kong itself, Taiwan is by t
impelled to condemn the model as doomed to failure.
Whether the "one country, two systems" model will work in Hong Kon
ever, is not a question of conviction but rather an empirical one. What
model, contrary to Taiwan's wishful thinking, should prove to be worka
even highly successful in Hong Kong? Then, according to its own logic,
rejection of the model would be unconvincing, and worse, Taiwan would
credibility in the eyes of its international supporters, including the Unite
Let us examine the empirical side of the question.
Now that Hong Kong's reversion has taken place, the combined resou
the SAR and China proper are so formidable that they exert an invisible
on Taiwan. For instance, their combined GNP (U.S.$140 billion + U.S.$74
lion = U.S.$885 billion) is approximately four times that of Taiwan (U.S
billion). Their combined foreign trade (U.S.$652.3 billion), which admit
includes their bilateral trade, is three times that of Taiwan's U.S.$215 bil
terms of foreign exchange reserves, something on which Taiwan has alwa
ed itself, Hong Kong and China proper have a combined total of U.S.$2
lion (as of September 1997), or two-and-a-half times Taiwan's U.S.$90 b
If, on top of all of that, Hong Kong continues to prosper, or even do bett
before, Taiwan would be caught in a dilemma between getting on the mu
alded "Greater China" bandwagon, on the one hand, and missing the hi
boat, on the other. "Missing the historical boat," in this context, would
among other things that Taiwan would be relegated to a future deprived
anteed access to a richly endowed hinterland, something that the HKSAR
to its advantage.
Needless to say, whether Taiwan can expect to avert the dilemma or e
itself from it depends on whether Hong Kong continues to prosper under
sovereignty. It is therefore necessary to examine briefly the objective
accounting for Hong Kong's phenomenal economic success, with a view t
taining whether they are in any way adversely affected by the transfer o
eignty. The following are usually the factors singled out as accounting f
Success:

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 242 Asian Affairs

1. Hong Kong's strategi

is the Asia Pacific, whe
(in the World Bank's lan
2. an extensive transpor
3. a wholesome infrastructure

4. the facility and attraction of a free port

5. the enterprising spirit and managerial professionalism of Hong Kong's busi-
ness elites

6. Hong Kong's renowned competitiveness (ranking as number three in the

world, as compared with Taiwan's number twenty-four ranking)
7. the supportive role of Chinese enterprises investing in the territory from the
mainland."1

That none of the above attributes will disappear after the changeover is appar-
ent. Furthermore, to this list is to be added a post-reversion advantage: the sure-
ty with which Hong Kong can now draw upon the support of China proper as its
hinterland, something that had existed on a de facto and ad hoc basis before, but
became institutionalized following the handover. The advantage of a hinterland
offers Hong Kong easy and guaranteed access to an abundant and inexpensive
supply of land, labor, and natural resources. The value of that advantage becomes
more apparent when comparing Hong Kong's situation with that of Singapore.
The Singaporeans have no comparable hinterland backup and have, therefore, to
live with much higher costs for land, labor, and natural resources. The Singa-
poreans have invested lavishly in the Chinese mainland (e.g., in the Suzhou area)
partly to offset that deficiency.

The Hong Kongers seem to be fully aware of all of that; the polls showed an
increase in their confidence in the future of Hong Kong, from 70 percent in May
1997 to 85 percent in September 1997, two months after reversion. Nearly 70 per-
cent of the respondents indicated confidence in the viability of the "one country,
two systems" model as currently practiced.12
In connection with Taiwan's doomsday theory of the future of Hong Kong, I
suggested earlier that the chickens may come home to roost for Taiwan if the "one
country, two systems" model proves successful in Hong Kong. If Taiwan then
opts to jump on the "Greater China" bandwagon-joining Taiwan with the main-
land, Hong Kong, and Macau (which is to return to Chinese sovereignty in
1999)-it might be the first step toward ultimate Chinese reunification. If Taiwan
then should continue to reject the "one country, two systems" model, it would
most likely find its international support diminishing. This scenario brings into
relief the complications of Sino-U.S. relations and United States policy toward
the divided China across the Taiwan Strait. It also turns the focus on post-rever-
sion Hong Kong as a factor in China's relations with foreign powers.

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Hong Kong as a Nonsovereign International Actor 243

A Factor in Sino-U.S. Relations

The United States has both high stakes and high hopes in Hong Kong's return
to Chinese sovereignty. The high stakes include its U.S.$12 billion investment,
the over twelve hundred U.S. firms, and the thirty thousand U.S. citizens in the
territory. Its official concerns stemming from these high stakes are attested by the
United States Hong Kong Policy Act, passed by Congress in 1992. U.S. hopes in
regard to Hong Kong, although not explicitly stated, can be deduced from exist-
ing policy goals and couched in three points: (a) that it is in the interest of the
United States to see the "one country, two systems" model prove workable in
post-reversion Hong Kong; (b) that consistent with U.S. policy that the solution
to the Taiwan-mainland division should come through peaceful means from Chi-
nese on both sides of the Taiwan Strait, Washington sees in the "one country, two
systems" model a reasonable, peaceful solution, which could be duplicated in set-
tling the Taiwan question, should it truly prove workable in Hong Kong; and (c)
that should Taiwan reject the model in the circumstances (i.e., after it has been
proven workable in Hong Kong), the rejection would cast doubt on Taiwan's true
intentions, and in that light it will be in Washington's interest that its policy of
supporting Taiwan's current status not be interpreted as encouragement for the
island's separatism.
Those three points are a restatement---obviously phrased to suit the context of
our discussion-of U.S. policy toward the Chinese unification issue. The Hong
Kong angle is the potential attractiveness of its "one country, two systems" model,
as a solution to the transition from British rule. If proven, its success would rec-
ommend the model as a sensible solution to end Taiwan's isolation from the Chi-
nese mainland, which has long plagued Sino-U.S. relations. The Taiwan-main-
land division, if left unresolved, would stoke the worst fears of United States
decision makers about the tenuous stability in the critical post-Cold War hot-spot
in the Asia Pacific that is also the most crucial to U.S. commercial interests. The
Hong Kong model seems to provide a way out of the Taiwan-mainland tangle.
If it is a catalyst in making the Greater China scenario come true, the HKSAR
will have proven that despite its lack of sovereignty, it can exert influence on the
outcome of events of tremendous proportions. For that reason, the HKSAR
deserves to be kept under long-term study as an additional example of a growing
array of nonsovereign actors in international relations-ranging from the so-
called noncentral regimes (e.g., Quebec) to certain international organizations
(such as the International Civil Aviation Organization and the International Mari-
time Organization) that have regulatory jurisdiction over certain activities of sov-
ereign states.13 Because of their increasing activities and effects on the conduct
of international relations, these and other nonsovereign actors (for example,
multinational corporations, many of them out of the jurisdictional reach of sov-
ereign states in which they operate) require an overhaul of our traditional West-

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 244 Asian Affairs

phalian paradigm. A late

lenge more compelling.

NOTES

1. Cf. Roda Mushkat, chap. 1 in One Country, Two International Personalities: The Case ofHong
Kong (Hong Kong: Hong Kong University Press, 1997).
2. Xianggangjingji ribao (Hong Kong Economic Daily), 23 September 1997, special supplement
on the World Bank-IMF Meeting, p. 1.
3. South China Morning Post (hereinafter SCMP), 3 August 1997, p. 6.
4. The list was provided by the Trade and Industry Bureau, Government Secretariat, HKSAR, at
the request of Professor Yue Ren of Lingnan College, Tuen Mun, Hong Kong.
5. SCMP, 17 August 1997, p. 1.
6. Bank of China, Hong Kong Branch, Selected Translations in Economic Data, no. 1473, 18
October 1996. Cited in Li Jiaquan, "Hongkong as a Conduit for the Mainland and Taiwan," Haixia
pinglun, no. 81, September 1997, p. 39.
7. Cited in Li, Ibid.
8. Cf. Ai Li's report in Commonweal magazine (Taipei), June 1996.
9. Li Jiaquan, Haixia pinglun, p. 40.
10. Ibid.
11. The first five items are on the list of Frank Ching's article in Foreign Affairs, May 1997, and I
added the last two, the second one taken from a report for 1997 of the Laussant Institute of Manage-
ment, Switzerland.
12. Ming Bao, 1 October 1997, p. 1.
13. See Brian Hocking, "Regional Governments and International Affairs: Foreign Policy or
Deviant Behavior?" International Journal 41 (1986): 477-506 for a discussion of "non-central
regimes." On the role of certain international organizations with the capacity to regulate activities of
sovereign states in certain functional domains, consult James C. Hsiung, chap. 5 in Anarchy and
Order: The Interplay of Law and Politics in International Relations (Boulder, CO: Lynne Rienner,
1997), which calls the phenomenon "jurisdiction with sovereignty."

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