Hong Kong

INTRODUCTION:

Hong Kong is located in the southeast of China. It was colonized by the British from 1842 to 1997 and includes various other islands and a mainland peninsula (Kowloon). It covers 1,062 km² and has a population of 6.7 million inhabitants, making it one of the most densely populated areas in the world. With a per capita income of $16,455, Hong Kong occupies a strategic position in the South China Sea, serving as a passageway to Australia, India, the Arab world, and the West. It is a major commercial artery connecting Japan and North Korea to the Indo-Chinese Peninsula, the Philippine and Indonesian Archipelagos, and Taiwan to the south.

Since the Sino-British Declaration of 1984, which organized Hong Kong's return to China, the territory has been governed under the status of a Special Administrative Region (SAR) starting from that date. Officially called "Hong Kong-China," it enjoys a high degree of autonomy in economic, legislative, and judicial matters for a period of 50 years.

What are the secrets behind Hong Kong's sustained economic development?

Hong Kong, one of the four Asian Tigers in the 1970s, exports between 75% and 97% of its industrial production, contributes 2.4% of global trade, and attracts 6 million tourists per year. It is the world's leading container port along with Singapore and has Asia’s largest airport. Hong Kong ranks as the third-largest financial center globally.

There are already five major British business groups, and investments from the People's Republic of China are estimated at $12 billion (including 24% ownership of the airline). This represents significant economic support. Hong Kong exemplifies economic liberalism: it is a free port, respects private property, maintains monetary autonomy, and allows the free transfer of capital.

Hong Kong has been one of the key places for the explosive meeting between the modern industrial West and the oldest continental empire on Earth, which considered itself the center of civilization.

To illustrate this thesis, we will start with a general overview of Hong Kong, followed by a detailed account of the period from colonial rule to retrocession, and finally, we will revisit the territory's economy.

I. General Overview of Hong Kong

1. Geographic Location
The Hong Kong Special Administrative Region (SAR) is located on the southeastern side of the People's Republic of China. It covers an area of 1,062 km² and is divided into three main parts:

• The island of Hong Kong (80 km²)
• The Kowloon Peninsula (47 km²)
• The New Territories, comprising a peninsula and around 235 islets (962 km²).

Hong Kong is very mountainous, but the elevations are relatively low. Its climate is hot and humid, with average temperatures of 16°C in January and 29°C in July.

2. History
The British East India Company, established in Macau since 1681, began trade with Canton, the only Chinese port open to foreigners in the 18th century. During the Opium War (1839-1842), the British sought refuge on Hong Kong Island, where 5,800 men (fishermen, farmers, and pirates) lived at the time. They acquired Hong Kong in 1842 through the Treaty of Nanking. In 1860, through the First Convention of Beijing, the southern tip of the Kowloon Peninsula, including the small fortified town of Kaolin, was also ceded to Great Britain. In 1898, the vast majority of the peninsula and 75 islands, including Lantau Island, were leased to the British Crown for 99 years.

From 1842 to 1941, Hong Kong served as a warehouse and naval base for the Royal Navy. By 1930, the colony became an important center for the cotton industry. Almost three years after Canton, Hong Kong was taken by the Japanese on December 25, 1941. The territory had 1.5 million inhabitants, of which nearly one-third were refugees. By the end of the war, only 500,000 remained. After 1949, a continuous influx of refugees, mainly from Guangdong Province, contributed to the current predominance of the Cantonese dialect.

According to the Sino-British Joint Declaration of December 1984, Hong Kong was to retain the same economic and social systems for 50 years following its retrocession to China on July 1, 1997. The economic transition proceeded smoothly, aided by the creation in 1985 of a joint Sino-British Liaison Group (dissolved on June 30, 1997). The principle of "one country, two systems" was applied. The return of Macau to China in 1999 raised questions about the future of Taiwan.

3. Population
Hong Kong has a total population of approximately 6.7 million people, of which around 1.4 million live on Hong Kong Island, 2.5 million in Kowloon, and the rest in the New Territories. The population density in Hong Kong is extremely high (about 5,740 inhabitants per km²), with some areas reaching a density of 21,000 people per km².

More than 95% of the population consists of emigrants of Chinese origin, with others coming from the Commonwealth, the United States, and other Asian countries. Among the non-Chinese foreign populations, Filipinos account for 150,000 people, followed by Americans (41,000), Indonesians (35,000), and Canadians (34,000). The British population numbered only 30,000 in 1998, followed by economically significant Japanese and Indian populations (25,000), Australians (23,000), and Malaysians (15,000).

Among the issues arising from the high population density is housing, which has become a major concern. In Victoria and Kowloon, new construction is almost only possible by leveling mountains or reclaiming land from the sea.

The main transportation challenge involves the Victoria-Kowloon connection. In addition to passenger ferries, a road tunnel and a metro line have been constructed. In terms of supply, agro-industrial companies complement imports, particularly from China (pork, ducks, vegetables, and rice).
Victoria's water reservoirs have long been insufficient. Some have been reclaimed from the sea in the New Territories.

II- HONG KONG FROM COLONY TO RETROCESSION:

According to Beijing, the retrocession of Hong Kong to China is seen as a highly symbolic event. It marks the end of Western colonial rule over the territory and the beginning of a new community, equal to the world's major industrial nations. The event on July 1, 1997, mobilized national consciousness around this transition, following rules established by the Chinese regime while disregarding democratization.

21. Hong Kong as a Colony

Hong Kong Island had long been home to a small community of fishermen. The location was notable for offering shelter to pirates in the South China Sea and protecting ships from frequent storms and typhoons. In 1842, after the First Opium War, China ceded the island to Britain under the Treaty of Nanjing. In 1860, Britain gained control of the mainland area of Kowloon, as well as 240 islands within the Hong Kong archipelago.

In 1898, China granted a 99-year lease to Britain over Hong Kong. During World War II, the Japanese easily captured Hong Kong, but the British regained control of the archipelago in 1945. At the edge of Communist China, Hong Kong quickly became an attractive destination for many Chinese, who sought to emigrate in hopes of more freedom and better living conditions.

By the 1960s, Hong Kong experienced rapid economic growth, with industries producing consumer goods (clothing, electronics, toys, etc.). Its port became a major transit hub between China and Europe, helping Hong Kong become one of the "Four Asian Tigers." In 1984, the United Kingdom agreed to return Hong Kong to China in 1997, with China committing to respect Hong Kong's political and economic freedoms under the principle of "One Country, Two Systems."

22. Hong Kong at the Time of Retrocession

The retrocession of Hong Kong to China was carried out based on the Sino-British Agreement of 1984, which granted the territory a special status as a "Special Administrative Region" (SAR).

Will Beijing uphold its promises for 50 years, as Deng Xiaoping had promised under the "One Country, Two Systems" principle? While there seems to be a real intent to maintain a favorable business climate, there were early signs of political restrictions. The announcement of limits on newly acquired political rights, such as the right to protest, raised concerns. Additionally, the reintroduction of outdated colonial laws further cast doubt on the future of freedom in Hong Kong. Whether the Chinese government will be able to appease the population’s concerns by invoking nationalism remains to be seen.

23. Hong Kong Moving Towards a Singaporean Model

Some analysts believe that Chinese authorities may have misunderstood the factors behind Hong Kong’s success, such as economic liberalism, the rule of law, judicial independence, and civic freedoms. Earlier predictions up to 1996 foresaw destabilization due to brain drain and a potential real estate market recession. However, the opposite occurred.

Recent projections show the population growing from 6.7 million to 8.1 million by 2011, with 150,000 immigrants arriving each year—three times more than initially anticipated. Around 4,000 construction projects are underway to build 800,000 apartments. The demand for housing has pushed real estate prices up by 30% in 1996, with a 50m² apartment in the city selling for around 3.5 million francs, and monthly rent between 15,000 and 20,000 francs.

The influx of foreign investment, regionalization, and globalization tripled China's exports, and Western diplomacy, driven by economic considerations, shifted its priorities away from human rights advocacy. Singapore serves as a model of how a free port and financial center with Western-style infrastructure and legal systems can operate under an authoritarian regime. Beijing's gamble is to bolster Hong Kong’s economic integration with China while tolerating a degree of democratic erosion. The stakes are high, as Hong Kong competes with Singapore for the title of the world's top container port and leading regional financial center.

Until 1993, Hong Kong's economy was dominated by five major British corporations with diverse operations. These companies had strong ties to China, investing heavily in infrastructure and urban development. The Chinese government adopted British tradition by inviting business leaders to sit on the Preparatory Committee and the provisional legislature for the new SAR, just as they had served in the British governor's Executive Council.

III- HONG KONG'S ECONOMY

Hong Kong’s economy has seen remarkable growth in port services and industries, evolving from an assembly hub to a major manufacturing center. Today, Hong Kong is one of the economies most impacted by China’s accession to the World Trade Organization (WTO). However, rather than being direct competitors, Hong Kong and China maintain complementary economic relationships that continue to evolve with uncertain consequences.

31. Hong Kong’s Role as a Bridge Between China and the World

As a crucial intermediary between China and the global market, Hong Kong once enjoyed a near-monopoly due to its geographical and strategic position. This advantage enabled the territory to maintain high commercial margins on Chinese products passing through its ports.

However, the reduction in costs for direct transactions between China and the world, along with the rise of China’s special economic zones and improved infrastructure, has intensified competition in business services. Guangdong’s ports now offer viable alternatives to Hong Kong, and Shanghai is emerging as a rival for foreign companies seeking to establish themselves in China.

Despite these challenges, Hong Kong remains one of the world's most powerful ports. In 1997, its traffic reached 87 million tons, with 19 million passengers. Hong Kong benefits from the extensive network of Chinese merchants from Guangdong and Fujian, who dominate the economy of this region, often working in tandem with or in competition with Singapore.

32. Industrial Challenges and Economic Resilience

Hong Kong’s industrial sector took off in 1949 when engineers, technicians, and capital from Shanghai fled the Communist victory in China. The influx of cheap labor spurred rapid industrial growth, with American and Japanese investment following in the 1960s, and later Chinese investment in the 1990s. By 1993, the manufacturing sector employed 18% of the workforce, with textiles—particularly cotton and synthetic fabrics—playing a dominant role.

Hong Kong became a world leader in ready-to-wear clothing, and it is also a major exporter of toys and consumer electronics. The city's shipbuilding industry, though small, employs around 7,000 workers. The cultural industry is also significant, with a thriving printing industry and a major cinema scene.

As a popular tourist destination, Hong Kong offers more than 23,000 hotel rooms. The territory is also a cultural hub, with British and Chinese universities contributing to its educational influence across Asia.

33- Resources and Means of Economic Development:

Hong Kong's economic activity is characterized by the significance of re-exports, which accounted for two-thirds of its exports in 1990. Its powerful financial foundation was nevertheless weakened by the crisis that occurred in Southeast Asia and Japan in 1997.

In addition to the major British banks, such as the Hong Kong and Shanghai Banking Corporation (HSBC), 140 Chinese companies have been added, along with major international banks, and particularly the Bank of China and its 13 subsidiaries.

The KAI-TAK airport (which handled 25.2 million passengers per year), whose runway was extended into the sea, had become saturated. Today, it has been replaced by the new CHEK LAP KOK airport, which is the largest airport in the world, handling 87 million passengers annually. It is connected to Kowloon by a suspension bridge, and its terminal (with a 4.4 km perimeter across eight levels) was designed by British architect Norman Foster. The range of services provided extends to two renowned airline companies, including Cathay Pacific, and a deep-sea fleet under a British flag of convenience.

CONCLUSION :

The future of Hong Kong will largely depend on the more or less protectionist attitudes of its main trading partners, as well as political developments in Mainland China.

Indeed, Hong Kong’s competitiveness increasingly relies on its complementarity with the economies of neighboring provinces. Nevertheless, Hong Kong has become the largest investor in Mainland China, playing a key role in re-exporting Chinese goods and serving as a logistical hub, supported by the new CHEK LAP KOK airport.

Thanks to these resources and activities, Hong Kong continues to be one of the main commercial and tourist gateways to China, although its future remains uncertain due to the emergence of the SARS epidemic.