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Hong Kong's New Boss

International Business: POLITICS


Will C.H. Tung really stand up for the territory--or just be a figurehead?

When Simon Murray, Deutsche Bank Group's executive chairman for Asia, had a family problem, he turned to his old buddy, shipping magnate C.H. Tung. Murray's son wanted to marry a Chinese woman from Taiwan, but her family objected to an East-West marriage. The personable Tung "handled the situation in a very statesmanlike manner," smoothing the way for the 1993 wedding, says Murray. "I regard him as a very well-balanced guy, which is just what [Hong Kong] needs at this point."

And that's just what Hong Kong is going to get. On Dec. 11, in a cavernous hall at the Hong Kong Exhibition Center, a 400-person committee backed by Beijing overwhelmingly elected Tung, 59, as the first chief executive to run Hong Kong when it reverts to Chinese control on July 1, 1997. At that time, he will face the matchmaking challenge of a lifetime: maintaining Hong Kong's Western freedoms as it becomes part of the People's Republic of China. In an interview with BUSINESS WEEK, Tung says he aims to emphasize "good traditional Chinese values" as well as preserve Hong Kong's Western-style system. "The best of the East and West will make our society stronger," he says.

FINE LINE. Hong Kong's special marriage of East and West won't be easy to keep intact. China, of course, is eager to prove it can manage Hong Kong as well as the British have. But Beijing's leaders will undermine confidence if they erode the civil liberties and rule of law that let Hong Kong thrive. Beijing is particularly worried that Hong Kong's freedom may "pollute" the rest of China.

Tung will have to walk a fine line, trying to maintain freedom while keeping Beijing happy. He hopes to use quiet persuasion and his reputation as an honest broker to head off clashes between pro-democracy forces and hardliners. He also aims to convince average residents that they will be better off in 1997 because the new government will be more attentive than the British to issues such as housing, education, and attracting new industry. "Our community is too politicized," Tung says. "We're not dealing with the issues that need to be dealt with."

But it's also possible Tung is misjudging popular sentiment. In legislative elections and opinion polls, the public has overwhelmingly backed the Democratic Party, which is sharply critical of China. Every June since 1989, thousands have protested China's Tiananmen Square bloodbath. And as a member of Hong Kong's superrich who are used to operating behind closed doors, Tung may underestimate the intense public scrutiny his actions will receive.

Activists are sure to test the limits of free expression soon after the handover. So far, Tung has been evasive about where the lines will be drawn. He insists that all of Hong Kong's liberties will remain intact. But he also concedes that some protests--such as those involving Tibet and Taiwan--won't be tolerated. Mainland officials use even broader definitions of "subversion." The contradiction was underscored just as Tung was being elected, when 400 police broke up a small protest of the meeting. Among those arrested were some of Hong Kong's most popular legislators.

To many Hong Kong watchers, the key question is whether Tung will be a strong leader who will stand up for Hong Kong--or merely a well-intentioned caretaker. Critics say he is too close to Beijing. As he struggled in the 1980s to save his shipping company, Orient Overseas (International) Ltd., fellow tycoon Henry Fok raised a crucial $120 million loan. Much of it came from mainland Chinese companies. "He owes them," says London School of Economics China-watcher Michael Yahuda.

But Tung also has proved that his low-key style can yield results. After his father nearly bankrupted the company, he went on to build Orient into a $1.7 billion shipping giant. He often bounces ideas off employees before making big decisions. In the early 1990s, when 21 employees died after a tanker crashed, he insisted that the families get more compensation than they technically were owed--and offered to pay out of his own pocket. "He is a man of principle," says one Hong Kong tycoon.

WIDE WEB. That's one reason associates believe Tung is sincere when he says he is determined to safeguard the territory's rule of law. Asked what he would tell mainland companies if they looked for special favors in Hong Kong, Tung says emphatically: "No, no, no."

Tung will need every asset he has in handling the challenges. Born in Shanghai, brought up in Hong Kong, educated at Liverpool University, and a former employee of General Electric Co. in the U.S., he has wide contacts. His key teammate in Hong Kong's first Chinese administration will be Anson Chan, head of the civil service. Chan will provide continuity and will seek to limit Beijing's interference in the bureaucracy.

Tung intends to focus on the economy. He wants to increase spending and appoint an education minister to shore up faltering schools. Another concern is housing. Because government-subsidized rentals are scarce, many residents live in squalid conditions. Few can afford to buy their own flats because of sky-high prices. Tung wants to make more low-cost housing available. He also aims to "revitalize" Hong Kong's industrial base, which has largely shifted to China to take advantage of cheap labor.

But Tung is no fan of Big Government. While he wants to provide for the elderly poor, for example, he does not believe in a lavish welfare system. Tung is tight with money in his private life as well. For decades he has had his hair cropped in the crew-cut style by the same barber. His children drive second-hand cars. "He doesn't go for the extravagant," says his sister Alice King, an art dealer.

Despite Tung's distaste for controversy and politics, he is likely to get plenty of both. The Democratic Party is already denouncing Tung for supporting Beijing's decision to disband the legislature and replace it with a hand-picked "provisional" lawmaking body as soon as the British depart. Tung plans to hold elections as early as possible

in 1998.

Tung also will have to adjust to being in the public eye. Since few in Hong Kong will want to criticize China openly, the chief executive will be the main target. He will be leaned on by every Hong Kong interest group and by Beijing. Tung has proved that one can succeed in business without alienating anyone. Soon he will find out how well this experience has prepared him for one of the world's toughest political jobs.By Joyce Barnathan, with David Lindorff, in Hong KongReturn to top

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