Jittery Dragon

China's leaders, while eager to gain from the takeover, see Hong Kong's destabilizing potential

Hong Kong, Hong Kong, what's it all about?

...Take me to that wonderful world,

Give a passport to this girl...

Come on 1997! So I can make it to Hong Kong.

So go the lyrics from the popular song on the mainland, My 1997, by pop star Ai Jing. The sentiment is part of the Hong Kong mania gripping the mother country as millions of Chinese wonder what Hong Kong will offer them. In Beijing's power corridors, meanwhile, officialdom is wrestling with the problem of how to manage Hong Kong and the many expectations raised by the British colony's imminent return.

It's a real quandary. Beijing is eager to seize on the return of Hong Kong, lost 155 humiliating years ago, and to stoke a growing nationalism useful in uniting this fast-changing and fractured country. But the leadership is also keenly aware that Hong Kong's strong influence has great potential to transform or even destabilize China.

Indeed, much of China sees Hong Kong as a beacon to a better future. Millions of migrant workers are hoping to slip across the border to make a Hong Kong buck. Provincial and municipal governments are rushing to set up Hong Kong offices for international businesses, and get rich. Meanwhile, Hong Kong money is starting to flow to new destinations, cementing the fortunes of China's hinterlands. Mainland Big Business, lodged in Hong Kong's unforgiving markets, is learning to shed its socialist ways. And the growing popularity of Hong Kong's movies, television, and music will challenge Beijing's desire to control and mold its citizens.

China's rulers know that Hong Kong could be a political time bomb. As China prepares for the crucial 15th Party Congress in October, top politicians are jockeying to ensure that their factions come out on top. Any missteps in Hong Kong--such as a heavy-handed crackdown on those commemorating the anniversary of the Tiananmen Square massacre--would be disastrous for China's leadership. President Jiang Zemin, eager to prove he can step into Deng Xiaoping's shoes, and Foreign Minister Qian Qichen, hoping to improve China's image, have staked their fortunes on a successful Hong Kong.

To that end, China's leaders are using Hong Kong's return to whip up nationalist fervor. Primary schools in Beijing are organizing "love the motherland" activities. The state has sponsored the historical epic movie The Opium Wars, slated for June release, while star-studded TV variety shows celebrate the handover.

WILY PROVINCIALS. The dilemma for Chinese rulers is how to tap that nationalism without raising undue expectations. Many Chinese mistakenly assume that the return means an end to restrictions on travel to Hong Kong. But as it becomes clear that most Chinese will never even see Hong Kong's greener pastures, a backlash of resentment could develop against Hong Kong's special, "one country, two systems" rights. Anger will mount if those allowed to settle in Hong Kong turn out to be the well-connected.

Another ticklish problem is Chinese provincial leaders who would like to run their fiefdoms along Hong Kong lines. High on their wish list will be more freedom to make money: lower taxes, less bureaucratic interference, and easier access to global investors. But eventually, these economic demands may lead to calls for greater freedom of expression and religion, and improved rights for workers. "Beijing has to worry about a lot of unruly provincial and local governments...[that] will want to know why we continue to get such special treatment," warns a high-ranking civil servant in Hong Kong.

What about the hard-charging provincial business people who want to move their operations southward? Provincial, county, and city governments run companies that form the backbone of China's regional economies. These entrepreneurial officials expect an open ticket to set up shop in Hong Kong. Following the model of China's "red chips," these officials would like to transfer assets to Hong Kong shell or holding companies and make a killing on the stock market. Planners in Beijing are concerned that billions of dollars in state assets will be stripped away by wily provincials. A major question plaguing Beijing, says University of Michigan professor Kenneth Lieberthal, is "How do you prevent the provinces from feeding at the trough" of Hong Kong?

Hong Kong already is tilting China's regional balance of power. Until now, most of the billions in Hong Kong investment has gone to Cantonese-speaking Guangdong and its thousands of clothing and light-manufacturing plants. But the new money is pouring into Shanghai, Jiangsu province, and hinterlands up the Yangtze River. Hong Kong property giant, New World, is spending $485 million on building stores, hotels, and highways in far-off Wuhan. Even Hong Kong's archrival, Shanghai, is benefiting from Hong Kong's largesse, as the Shanghainese elite plow billions into shipping, housing projects, and shopping malls.

At the same time, thousands of Chinese managers are getting a crash global-capitalism course in Hong Kong. More than 1,700 mainland enterprises already have set up shop. They are learning Hong Kong's rules of fairer financial play and how to please finicky investors. Many Chinese companies regularly rotate staff through their Hong Kong subsidiaries to improve their management skills.

CROONING ANDY. Perhaps more importantly, Hong Kong is already shaping China's masses through its alluring pop culture and glamour images. That's one reason why China's communist ideals have faded so fast. Hong Kong's growing power in movies, music, and TV programming means that Chinese from icy Manchuria to tropical Yunnan are growing up crooning Andy Lau's love songs and marveling at the gunplay of movie star Chow Yun-fat. And with Hong Kong-produced TV shows glorifying Hong Kong chic, China's youth are channel surfing right past state-produced fare.

Chinese companies, smelling money, are rushing into joint ventures with Hong Kong media outfits to learn how to create popular mainland music and movies in the Hong Kong entertainment style. "Most of the music business and film makers are trying to learn from the Hong Kong culture business," says Gene Lau managing director of Zoom Music, a Hong Kong record and promotion company.

So as the handover looms, Chinese officials are bracing for the inevitable aftershocks. There's little doubt that Hong Kong's thrall over the Chinese will strengthen. It's just that the mainland may be getting a great deal more than it bargained for in this deal.

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