A YEAR OF UNCERTAINTY

By Robert Keatley, Editor, January 2006

As 2006 began, Hong Kong faced a contradictory year that seemed to combine economic prosperity with political uncertainty, perhaps bringing consequences that no one could forecast with confidence. What overall conditions will be like when 2007 rolls around remained an open question impossible to answer with much conviction.

This clouded outlook exists despite much good news on the economic side. Last year saw the territory finally recovering well after a prolonged slowdown stemming from the 1997 Asian financial crisis and other causes. Shops were busy, hotels were full and goods were once again streaming through the world’s leading container port in vast quantities. The third quarter of 2004 saw the economy grow by a spectacular 8.2%, causing the official forecast for all of 2004 to be revised upward sharply to 7% from an earlier prediction of approximately 5%.

Even though higher interest rates and energy costs will take hold and slow things down somewhat in 2006, Financial Secretary Henry Tang predicted a healthy 6.2% expansion rate for the current year.

But the political situation was another matter. As the year ended, the Legislative Council refused to approve (by the required two-thirds majority) a modest electoral reform bill advanced by Chief Executive Donald Tsang, with Beijing’s approval, because pro-democracy members claimed it did not go far enough. Specifically, they wanted a plan for introducing universal suffrage for Legco and the Chief Executive’s position by a fixed date, such as the 2012 scheduled elections.

This intensified the division between Communist Party officials in Beijing, always suspicious of groups they do not control, and Hong Kong democrats, who demand political transparency not allowed anywhere on the mainland. It also left Tsang in the middle; he supports the democrats long range goals but cannot move more decisively than Beijing will permit.

New street demonstrations in favor of democratic rule seem likely. Whether Beijing’s leaders—who show little sign of permitting such reforms at home—will respond with confrontation or conciliation remains unknown. Hong Kong has little recent history of political violence, but if there is turmoil it could put the rosy economic forecasts for 2006 in jeopardy. At the extreme, political agitation could bring harsh responses that could undermine Hong Kong’s prosperity and damage China’s global relations in costly ways.