Monday, July 22, 2013

The Hong Kong Model: What would "One Country Two Systems" look like if it were applied to Taiwan?

If the Chinese government expects the Hong Kong Model to eventually be acceptable to the people of Taiwan, it will be sorely disappointed. 

Two American Secretaries of State, one from the past (Henry Kissinger) and one currently serving (John Kerry), have at different times in recent history stated their support for a "One China Two Systems" model that would in their view solve the long standing sovereignty dispute between Taiwan and China, which would allow for the primary impediment of improved relations between the United States and China to at long last be washed away.  If believing in this point of view, both Mr. Kissinger and Mr. Kerry would also have to accept the premise that the people of Taiwan would be accepting of such a grand bargain.  Both could be forgiven for failing to understand the complexities of  contemporary Taiwanese society: where it is currently, and the road in which it has traveled to arrive at its current point. For arguments sake, however, this article will attempt to take a speculative look at a scenario in which Taiwan were to enter into a "One China Two Systems" system that is similar to the system currently in place in Hong Kong; while taking the results of the  past 16 years of Hong Kong's experience under the system as a guide, as well as current trends in Taiwanese society.


Since the 1997 handover, Hong Kong has experienced seismic shifts both in its economic importance to Mainland China, as well as a number of troubling economic trends that have troubling signs for Hong Kong society.  In 1997, Hong Kong's contribution to the combined GDP of China plus Hong Kong stood at nearly fifteen percent, a figure that dropped to nearly three percent in 2012.  As China gets richer, Hong Kong will likely continue its downward slide of economic importance to China proper. As China's economy has been growing at well over 7.0% annually, Taiwan's GDP infusion would have an estimated  smaller impact mathematically in 2013 than that of Hong Kong in 1997, at 5.35%.

   It is not a well kept secret  that some of the strongest advocates of increasing Taiwan's relationship with China to even the point of  eventual unification are Taiwanese high level business executives who see China proper as a massive market with nearly limitless potential to turn profit, as well as having considerable political clout under such a system.  It is also likely that the stated executives wield substantially more power within Taiwanese society today than they would under a OCTS framework.  Taiwanese executives would be wise to look to the similar scenario that took place in Hong Kong in 1997--and where the  level of executive-political influence presently lies in Hong Kong.

Be careful what you wish for Terry Guo...

In 1997, officials in Beijing depended heavily on the tycoons of Hong Kong to lead the way in ensuring a stable transition from British colonial rule to Chinese control.  These business leaders did their part in placating fears among the citizenry of Hong Kong (and international investors), that an economic status-quo would be in place, and it would be business as usual within the city.  As time has passed, however, Beijing has had ample time to maneuver  its preferred leaders into prominent political and economic positions  (more on this aspect later).  Combining this fact with Hong Kong's decline in economic relevance, the tycoons who were once vital to Hong Kong's transition are now viewed by Beijing as actors who provide diminishing returns to their objectives within  the city.  In a Taiwan scenario, these tycoon types who currently hold a great deal of sway both politically and economically in Taiwan, would likely be counted on to have a similar role as their Hong Kong counterparts did.  However, these officials would quickly see their influence diminished as a result of being just a few fish within a much larger pond, and seeing their political relevance likely diminish with each year that passes by.

Socially, the economic ramifications of a One Country Two Systems (OCTS) approach would leave no aspect of Taiwanese society untouched.  With trade and investment barriers being removed on a wide scale following the handover, consider the following:

*In 2011, investors from Mainland China accounted for 25% percent of Hong Kong prime property purchases, which has resulted in pushing home prices out of reach for many aspiring middle class citizens

*Hong Kong's wealth gap, long being the highest in Asia, has reached its highest level in decades

It is more likely than not that Taiwan would experience similar results within a OCTS model.  With the housing market within Taipei already experiencing what many economists perceive as a housing bubble waiting to burst, a large influx of Chinese capital into the housing market would likely send the median home price in the city through the roof, causing even more discontent with aspiring homeowners than what currently exists.  Other major cities in Taiwan, such as Kaohsiung, Taichung, Tainan, and Hsinchu would likely see a considerable spike in real estate prices as well.

In the agricultural sector, Taiwanese farmers  would also face a bleak future, as China's agricultural industry attempts to emulate the quality of Taiwanese products, larger Chinese firms would likely have the ability to eventually produce similar products at a lower cost without the current trade barriers as a restriction to Taiwan's domestic market, forcing many producers in Taiwan to leave the industry.

In the tourism sector, Taiwan would also likely experience many of the similar effects that have been felt by Hong Kong since Mainlanders were permitted to enter the city on individual visas, rather than on the group visa program.  As Hong Kong based companies shifted much of their manufacturing base to China proper, tourism has grown as a vital economic aspect of the cities economy.  As a result, retail rental properties have skyrocketed in the city, rising as much as 32% in some prime locations, erasing the traditional landscape of some areas, such as Causeway Bay in the process.  In 2011, the retail chain Forever 21 opened its first store in Hong Kong in 2011, paying $1.4 million dollars in rent per month--the highest in the world in both total terms and square feet.
Forever 21 in Hong Kong

  While many areas in Taiwan would likely follow suit in developing areas that would cater to the influx of Chinese tourists, some would likely be in areas that are considered mainstays of Taiwanese society, such as night market areas.  It is likely that many areas within Taiwanese cities would become unrecognizable as they currently stand.


The cultural impact within Taiwan as a result of a OCTS implementation would be massive, and the results of which are far too large to be explored in depth here, but a brief (albeit simplistic) overview is needed. Ironically, studies and polls have shown that since the 1997 handover,  residents of Hong Kong have latched on tighter to the notion of being a citizen of Hong Kong that has an identity separate from Mainland Chinese, instead of forming an identity that is one of simply being "Chinese".  In 2011, a University of Hong Kong poll asked residents to rate how strongly they felt as being a "Hong Kong citizen", with the average rating being 8.23, the highest result in 10 years.  The same participants in the poll rated their feelings about being a "Chinese citizen" at an average of 7.01--a 12-year low.  With many residents increasing their  daily contact with the population from China proper, there was likely a feeling that while ethnically bonds are indeed shared, culturally wide differences have developed over time, resulting in some level of a nationality difference.

In the case of a similar poll taking place in Taiwan 15 years after a hypothetical unification scenario, the numbers would likely be much further apart in those identifying themselves proudly as "Taiwanese" and at the same time "Chinese citizens".  For over a half-century, the citizens of Taiwan have combined (often times with considerable friction) aspects of Chinese culture from a large influx of Chinese immigrants--refugees that occurred in the mid to late 1940s with an existing Taiwanese culture that was already firmly developed prior to their arrival, sprinkled with aspects of Japanese colonial rule that lasted sixty years--without the interference of the guiding hand of the People's Republic of China.  The result could in fact be compared to the formation of a separate American cultural identity that occurred prior to the American revolution, as distance between England and its colonies allowed for such a development to occur.  For many colonists, the bloodlines did not change, but their mindset and self-identity evolved. One example in which China shows its inability to understand the complexities of the evolution of Taiwanese self-identity is the way in which it classifies the aboriginal population of Taiwan.  While Taiwan recognizes 14 distinct and separate native Taiwanese aboriginal groups within its borders-- the PRC sees one.

They're all "Gaoshan" in the eyes of Beijing

 From the perspective of Beijing, this aspect of a OCTS approach  with Taiwan would be perhaps its most daunting challenge in making such an arrangement a success.  Thus far, China's appeals to Chinese brotherhood and bloodlines (which could have been more effective in centuries past) has only appealed to a small fraction of Taiwan's population.  China would have to take a long term approach in its attempt to successfully integrate Taiwan's population into a greater China model, a task that would almost certainly fail due to Taiwan's strongly entrenched sense of self-identity that grows stronger with each day it is not under the flag of the PRC.

Political Structure and Social Freedoms --The Firewall to Annexation 

Despite the bleak economic and cultural scenarios that have been proposed in this article, the political and social freedom aspect is one that is perhaps the strongest barrier to China's objective to implement the OCTS approach with Taiwan.  If proponents of the OCTS approach towards Taiwan hope to look to Hong Kong for a viable model--upon closer inspection their hopes would likely be dashed. The following is the reality of the OCTS approach that has taken place in Hong Kong presented in bullet point form:

* Prior to the 1997 handover, the 1984 Basic Law was devised for the governance of Hong Kong. Within the framework it stated that universal suffrage was the "ultimate aim" for Hong Kong--an objective that has not yet been met.  Most observers do not believe expect the universal suffrage to occur before 2017 ( the targeted year stated by Beijing), as the provision was not included in the 2010 electoral reforms.  The Law also restricts law making powers, prohibits legislators from introducing bills that would affect Hong Kong public spending, government operations, or political structure.

* The selection of the Hong Kong's chief executive is done by a system in which special interests controlled by a small circle of wealth tycoons select the person who will take the position.  In 2012 the committee chose Leung Chun-ying, a member of the Mainland government advisory body--and the preferred candidate of Beijing.  Officials from China's Liaison Office reportedly lobbied members of the election committee to vote for Leung, and castigated media officials from critical coverage of him (source 2013 Freedom House Report on Hong Kong)

*   In 2002 Pro-Beijing lawmakers in the city attempted to pass Hong Kong Basic Law Article 23, which included the following:

  • Any branch of an organization that is part of an organization banned by the central government of the PRC under state security reasons can be banned in Hong Kong at any time, and the Hong Kong government does not have to conduct any independent investigation.
  • The concepts of government and country are confused and exchangeable in the proposed document. In a democratic country, citizens are empowered with the right to monitor and check the government. The proposed enactment of Article 23 makes opposing the government the same as opposing the country.
  • In the proposed enactment, police are allowed to enter residential buildings and arrest people at any time without court warrants or evidence.
  • Any speech deemed as instigative can be regarded as illegal, including oral, written and electronic forms; it is a crime both to express, and to hear such speech and fail to report it.
  • Permanent residents of Hong Kong are under the power of this law, no matter where they reside. People who are in Hong Kong are also under the power of Article 23, regardless of nationality, including people who visit or transit through Hong Kong. Violations of Article 23 can result in a life term in prison. 

-Mass protests by the citizens of Hong Kong forced the legislature to suspend the vote and implementation of Article 23
-However in 2009, the territory of Macau (which was transferred from Portugal to China in 1999 ) passed the Macau Basic Law, which has exactly the same wording as Article 23 of the Hong Kong Basic Law.

Media Suppression  in Hong Kong since 1997 

Exerpts taken from the 2013 Freedom House Report

"A 2012 poll conducted by the Hong Kong Journalists Association (HKJA) found that for the first time, journalists’ concerns about tighter government control over access to information surpassed self-censorship as the most commonly cited threat to media freedom. Over the past two years, officials have increasingly used off-the-record briefings to announce policies and released official footage for news events rather than opening them to the press, while the police and fire departments have released less detailed and timely information about newsworthy incidents."

"In January, Wang Xiangwei, a mainlander who had once worked for the state-run China Daily, became the editor in chief of the popular local English-language paper South China Morning Post. He was accused of censoring the Post’s coverage of the suspicious death of Chinese dissident Li Wangyang in June, and of refusing to renew a contract with an award-winning reporter known for his articles about Beijing’s poor human rights record."

" Hong Kong journalists aiming to report from the mainland must obtain press cards from Beijing’s Liaison Office, though even with accreditation, they are often subject to surveillance, threats, beatings, and occasional detention by mainland authorities."

"At least three mainlanders were beaten or sentenced to labor camps after returning home from the July 1 protest in Hong Kong, the first such known cases of mainlanders punished for attending Hong Kong demonstrations."

As frustrated as Hong Kong residents are with their current political situation, it is vastly different from a potential Taiwan OCTS scenario for one primary reason.  The people of Taiwan have spilled considerable blood in their quest to establish a democratic form of representative government, and for this reason the vast majority of its citizens would be unequivocally opposed to any change that could effect their current democratic abilities.  While China has promised to maintain Taiwan's current governmental structure (with the exception of managing foreign policy), it would be impossible for it to do so.  The people of Taiwan would have the ability to elect representatives who could not only push back Chinese interests within Taiwan, the potential for speaking of Taiwanese independence would certainly be a possibility, something that Beijing does not have to deal with regarding the mindset of any large group in Hong Kong (....yet).  Such a scenario would force Beijing to allocate large resources towards maintaining public order inside Taiwan, and confronting millions of people who have become well-versed in the tactics of self-expression and have had prior exposure to living in a free and democratic society-- a potentially potent combination that could give Beijing headaches for years...or decades.  

In conclusion, there is no objective observer who could state that Taiwan and the majority of her population would beneficially gain from any sort of OCTS approach that is currently in place between Mainland China and Hong Kong.  Economic gains would be reaped by the top of Taiwanese society, while the rest of the population would likely see the gradual, if not subtle erosion of basic liberties that have become pillars of a modern Taiwanese society.  The government in Beijing likely sees a similar picture, as it continues to espouse an annexation of Taiwan by speaking of vague ancient territorial claims and a shared bloodline. Yet the people of Taiwan do not live in the past or seem willing to trade their hard-earned freedoms for something as tribal  as a shared ethnicity.  All the while citizens of Hong Kong look enviously across the Taiwan Strait to see what it is that they themselves desire most.  A society that still has the option to make a choice about its own future. 

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