Stock market integration in Hong Kong and China

The Hong Kong Stock Exchange currently ranks sixth in terms of trading volumes in the world while China's fledgling securities industry at Shanghai and Shenzhen Stock Exchanges combined is barely more than 7 years old. With 1997 handover of Hong Kong to China, the securities industries of the two sides ought to integrate into one market. However, the Basic Law governing Hong Kong maintains unchanged British Common Law system as well as the life style of Hong Kong capitalist society, at least for the next 50 years. To understand how the stock exchanges operate under such a situation and how they cooperate in the future is the theme throughout this paper. This paper first describes the market backgrounds separately in Hong Kong and China. It intends to answer how, what and why China needs Hong Kong market and how, what and why Hong Kong, at a different level, needs China's. Then it deals with the interactions or cooperation in the primary market operations. The paper also deals with broader issues such as the RMB convertibility with respect to the integration of the stock exchanges and tries to forecast the future trend in the regional as well as international perspectives. It concludes that as part of the ‘one country, two systems’, the SEHK will be stronger as it has an added value to China's financial window to the world.     

The Hong Kong economy: Opportunities out of the crisis?

The Hong Kong economy has been heavily influenced by the ‘China factor’ and an imbalance in the property sector. Down the path of ‘Manhattanization’, a lopsided economic structure emerged in the pre‐1997 era, which would be inconsistent with the framework of ‘one country, two systems‘. While transition politics resulted in a lack of effective responses by the last colonial government, after the take‐over the SAR Chief Executive Tung Chee Hwa unveiled a partial reform package with long‐term targets. His attempt met with the unanticipated consequences of the bursting of the local economic bubble and the East Asian financial crisis. The prospect of a structural reform for the Hong Kong economy is hanging in the balance. This paper looks at the factors that have been shaping the Hong Kong economy and speculates about the direction in which it may be heading in a time of global turbulence.     

The Hong Kong Policy of the People's Republic of China, 1949-1997

China's policy toward Hong Kong in the period 1949-1997 was primarily driven by utilitarian calculations of national interests and the interests of the Chinese Communist Party. The Hong Kong policy of China, as an integral part of its foreign policy, was distinctive in that ideological fervor and nationalist passions had limited influence. The goals to be achieved by the Hong Kong policy remained unchanged throughout the period; the strategies adopted, however, changed in accordance with the changing international situation and the national interests as defined by the Chinese leaders. The primary goals of the Hong Kong policy were to secure a less threatening external political environment for China and to make calculated use of Hong Kong for China's economic development. By tolerating Hong Kong as a British colony, China also depended on Britain to control the potentially threatening anti-Communist Chinese population there. The 'over-dependence' on the British to control the Chinese people in Hong Kong on the eve of Hong Kong's reversion to China, however, alienated the Hong Kong people as well as impeded the formation of local political leaders in the territory. As a result, the acquisition of Hong Kong by China in 1997 has not been accompanied by political rapport between the Chinese government and the Hong Kong people, thus sowing seeds for lingering friction between them.     

Identity,Sovereignty, and Economic Penetration: Beijing's responses to offshore Chinese democracies

Investigating how the PRC responds to democratization in Taiwan and Hong Kong, this paper argues that the Chinese Communist leadership has mainly developed three strategies in managing the complicated crises, including Beijing's own legitimacy crisis and the integration crisis of the Chinese nation, caused by the rise of offshore Chinese democracies. These strategies are: identity politics, sovereignty politics, and economic penetration. With ‘identity politics’, Beijing identifies ‘identification with the Communist leadership’ as the sole Chinese national identification, and utilizes the nationalistic passions of mainland and even overseas Chinese people against democrats in Taiwan and Hong Kong, by labeling the latter as ‘separatists’ or ‘national traitors’. Further, Beijing defines ‘sovereignty’ in a way in which the ‘central’ government monopolizes all possessions of the nation, and excludes ‘people's sovereignty’ from the politics of national reunification or the ‘one country, two systems’ model actualization. While appealing to both ‘soft power’ based in ‘patriotic nationalism’ and ‘hard power’ embedded in national sovereignty, however, the Chinese regime also mobilizes business resources and opportunities provided by China's growing economic power and China's dominance in Greater Chian economic integration for its political purposes of curbing offshore Chinese democracies.     

Hong Kong redux

There are surprises ahead for both Hong Kong and the China of which it will become a part. This article focuses on how the reversion of Hong Kong will affect the future of politics in both societies. Even though rule by Beijing will change Hong Kong's commercial and political life, China will also be changed by having to deal with the emerging elite of Hong Kong and those persons from the mainland who have been educated in the West. This will not produce democracy in either Hong Kong or China but it will reduce the likelihood that China will become a hegemonic power in East Asia.     

Hong Kong's policy possibilities and directions toward the mainland‐Taiwan conflict

On 1 July 1997, Hong Kong was returned from British colonial rule to Chinese rule under the sovereignty of the People's Republic of China (PRC). The change in political status of Hong Kong has great impacts on the triangular relationship between Hong Kong, the mainland and Taiwan, in which the mainland and Taiwan are still in a state of intense political conflict and competition. This paper examines the policy possibilities and directions for Hong Kong as a Special Administrative Region of the PRC in handling its relations with Taiwan. It argues that both Beijing and Taipei want to preserve the existing Hong Kong‐Taiwan relations for political and practical purposes but at the same time will try to avoid being forced into a suspected political trap—for Beijing the recognition of Taiwan as an independent political entity and for Taipei the subordination of Taiwan to PRC sovereignty. Between these two baselines, the paper points out that Hong Kong should pursues its own Taiwan policy built upon the interests of Hong Kong and depoliticization of Hong Kong‐Taiwan relations.     

Business as usual: The dynamics of government‐business relations in the Hong Kong special administrative region

This is an attempt to evaluate the implications of Hong Kong's political transition to post‐colonial rule for economic governance in the SAR beyond the ‘Beijing versus Hong Kong’ perspective. The article examines the changing government‐business dynamics in Hong Kong after the reversion by focusing on three inter‐related dimensions: economic ideology; institutional and policy framework; and the new political environment in post‐colonial Hong Kong. By challenging the assertion that Hong Kong is returning to the pre‐Patten colonial order under Chinese management, it argues that economic governance in Hong Kong has always been more complex than has been characterized in the literature. A conceptual framework incorporating the dynamic interplay of domestic and international factors is needed to comprehend the changing nature of government‐business relationships in the SAR.     

‘Three Chinas’ and international organizations after 1997

This article analyzes the effects of the transfer of Hong Kong's sovereignty to China in 1997 on the participation of Hong Kong and Taiwan in international organizations. It identifies the conditions under which China tolerates co‐existence with Taiwan as members of eleven intergovernmental organizations as of 1996. It concludes with two observations: one, international organizations are not monolithic entities; two, although China has overwhelming influence over Hong Kong's participation in these organizations, it depends also on how the Hong Kong Special Administrative Region government is going to manage its relations with China.     

China's Future Economic Regionalization

This paper investigates China's economic growth potentials and limitation up to 2020 and recommends a trend of economic regionalization. A sustainable growing economy is a necessity for China's future stability. The growth sustainability of the Chinese economy depends essentially on its continued commitments to institutional reform and economic deregulation. China's relaxation of government intervention in economic activities has led and will be leading China to decentralize its central governmental authority over economic planning and control. This will consequently stimulate the emergence of regional economies in Mainland China. In the next two decades, there will likely be 10 regional economies with relatively independent industrial structures emerging in Greater China (or the Chinese Economic Area of Hong Kong, Macao, Taiwan and the Mainland) as a result of economic liberalization and decentralization.     

WHERE DOES CHINA'S SECURITIES MARKET GO FROM NOW?

On December 19,2010,China’s securities market turns 20.The past two decades have witnessed the market start from scratch and grow steadily,withstanding the near-cataclysmic 1997 Asian financial crisis and the 2008 global financial crisis.Now,it is opening up to the outside world and merging into the international financial environment.Its role in propelling the Chinese economy is undeniable,but as the securities market continues to expand and adapts to the changing world environment,one question arises:What is the next step on its path of development?     

Hong Kong joins the National People's Congress: A first test for one country with two political systems

Before its reversion to Chinese sovereignty in July 1997, Hong Kong was preoccupied with safeguarding its autonomy while China insisted on keeping separate the two political systems of Hong Kong and the mainland. Toward these ends, everyone focused on Hong Kong's own governing councils and ignored its future status within China's congress system. Not until the December 1997 deadline approached for naming Hong Kong's delegation to the March 1998 meeting of China's new Ninth National People's Congress, did the full implications of this oversight become apparent. Hence, the institutional channels whereby the two systems must interact are actually rooted in the reforming structure of China's congress system. Delegate selection in Hong Kong revealed a new ‘bridging’ function whereby the two legislative systems are linked through the old organization tactic of concurrent membership. The bridging function also illuminates previously unheralded features of Hong Kong's new post‐1997 government, as a replica and appendage of China's people's congress network.     

Hong Kong's ‘One Country,Two Systems’ Experience under the Basic Law: two perspectives from Chinese legal scholars

Hong Kong is an administrative and economic entity under Chinese sovereignty. Essentially, the local political system that Hong Kong has adopted is that of a non-sovereign state as well as a non-political entity. It is neither entirely occidental nor completely oriental, but an executive-led system which has developed according to Hong Kong's characteristics and has proved to be an effective one. 1997 was not the end of the ‘One Country, Two Systems’ policy, but its beginning. To guarantee the policy's success is in the overall interest of both Hong Kong and China. As such, China has no greater interests in Hong Kong than to maintain its stability and prosperity. The Chinese Central Authorities will continue to abide by the ‘One Country, Two Systems’ policy and the Basic Law whenever problems regarding Hong Kong arise.     

One Formula,Two Experiences: political divergence of Hong Kong and Macao since retrocession

Since the return of Hong Kong's sovereignty to the People's Republic of China, the territory's political development has diverged from that of Macao. The poverty of leadership, state–society confrontations, deinstitutionalization and Beijing's explicit intervention have marked Hong Kong's political development from 1997 to 2004. Since April 2004, the Hong Kong governing style has converged with that of Macao in terms of its pragmatism. Although Macao's political development is characterized by leadership finesse, state–society partnership and institutionalization, its relatively weak civil society and lack of democratic reforms are by no means an attractive ‘one country, two systems’ model to Taiwan; nor does Hong Kong's ‘one country, two systems’ appeal to the Republic of China. Yet, the political corruption and chaos that punctuate Taiwan's democracy have failed to have any positive demonstration effect on Hong Kong and Macao. While the models of Hong Kong and Macao are bound to diverge from that of Taiwan, political development in the two Chinese Special Administrative Regions is gradually converging.     

Hong Kong in United States‐China relations: The international politics of Hong Kong's reversion to Chinese sovereignty

This article examines the implications of the political transition of Hong Kong on US‐China relations in strategic, political and economic dimensions. It evaluates the impact of Hong Kong's changing status in the context of the engagement‐containment debate on China policy in the US. It suggests that US concerns over questions such as democracy and human rights and China's rejection of foreign interference’ in Hong Kong would turn the territory into a source of political conflict between the US and China. Finally it points out that any major trade confrontation between the two countries would have serious implications for the territory. The article concludes by arguing that if Hong Kong could continue to be a prosperous and free society with a global outlook, it would facilitate China's integration with the global community, but if a reversion to authoritarian rule occurred in Hong Kong, US‐China relations will be aversely affected.     

MARKET WATCH

Cooling the Rush China has pushed all the buttons to tame the red-hot property market where price surges are bringing worries of a bubble burst to a boiling point.     

Outshining the Competition

China has vied for a remarkable share of international trade over the past three decades, drawing on its low labor and manufacturing costs and resources. With the outbreak of the global financial crisis, its export-oriented economy has delivered a heavy blow to its economic performance. Will China be able to use the crisis as a golden opportunity to outshine its opponents in international trade? Mei Xinyu, an associate researcher at the Chinese Academy of International Trade and Economic Cooperation under t...     

Why Is China Supposed to Be Responsible for the World?

People's Daily: The point of "China's responsibilities" is to describe China as the original cause of world economic imbalances, blaming China's inaction in stimulating global economic recovery.What do you think about it?     

China and Major Power Relations in East Asia

Tremendous changes have taken place in East Asia in the post-Cold War era, which have a great impact on Chinese foreign policy and its relations with major powers in East Asia. This new power configuration is related to as 'two ups' and 'two downs', which have become apparent since the early 1990s. The 'two ups' concern the rise of the United States and China. The United States' rise to sole superpower status has given Washington a dominant role in all four dimensions of world affairs: political, strategic, economic, and technological/cultural. Meanwhile, China has achieved a spectacular economic performance for the past two decades, sustaining high growth rates, and escaping, so far, the Asian economic crisis of 1997‐98. This expansion has greatly increased China's influence in regional and global affairs. The 'two downs' refer to the downturns of Russia and Japan. This article provides a detailed analysis of China's international environment in the context of the changing dynamics of major-power relations in East Asia. Special attention is paid to the crucial Beijing‐Tokyo‐Washington triangle. The examination focuses upon political, economic, and strategic dimensions.     

Economic prosperity or democracy: Dilemma of development in Hong Kong and China

After Hong Kong is integrated with mainland China in July 1997, the economic and political environments of the two places will inevitably link up with each other. Economic modernization significantly not only improves the living conditions of the Chinese, but also alters their social structure and political values. As such, economic prosperity and democracy become the two conflicting values in Hong Kong and China during the transition to 2000. The people of Hong Kong and China are presented a choice over two mutually exclusive targets: economic prosperity vs. democracy. On the one hand, the choice for economic prosperity will imply no democracy because a conservative political system will be maintained to preserve the political status quo. On the other hand, the choice for democracy will imply no economic prosperity, because democratization will be suppressed and hence the economy will suffer as a result of political instability. However, neither of these two choices could offer the people of Hong Kong and China a genuine prosperity and stability. Therefore a congruent relationship between the economy and the political system must be established and maintained. As prosperity is contributed by both economic growth and political stability, neglection of either of these two elements will not result in a long‐lasting prosperity. Thus, economic development and democratization are two complementary rather than contradicting forces on the road to development in China.     

Constitutionalism and Hong Kong's future

This paper considers the transition and handover processes in Hong Kong in terms of constitutional development. It is argued that the Sino‐British Joint Declaration effectively promises Hong Kong a liberal constitutional system and that this system has been implemented in part and eroded in part. It considers the health of Hong Kong's constitutional system in the first year‐and‐a‐half of the handover. The paper then identifies the three central threats to Hong Kong's continued constitutional health: a Chinese and SAR policy vision that favors economic over political liberalism; the threat of mainland intrusion upon Hong Kong's autonomy; and any mainland failure to respect Hong Kong's viable international status to the extent guaranteed in the Joint Declaration. The history of Chinese policy calls into question its appreciation of these threats.