Hong Kong Gong

By Global Tax Weekly

In a week when international attention was focused, apart from the unavoidable World Cup, on the 25th anniversary of the Tiananmen Square massacre, commemorated this year as every year with a candlelight vigil in Hong Kong, it was praiseworthy of China to issue a “White Paper” lauding Hong Kong’s economic and financial achievements over the 17 years since it returned to Chinese rule. Of course, having Hong Kong on its doorstep is a massive advantage for China, which can use it as a free-market laboratory, as its own private “offshore” center, and as a source of investment funds via Hong Kong stock exchange listings. A slightly more cavalier commentator might wonder about the extent to which Chinese officials and quasi-state business operators might use Hong Kong as a laundry-basket for their wealth: without Hong Kong, they would find it far more difficult to stash their dollars or renminbis in a safe place, however gotten. Whatever the motivation of Chinese leaders, it is clear that they are going to continue to allow Hong Kong to maintain its independent financial regime. What is not so clear is whether and how they are going to honor their rash promise to allow a form of democracy in Hong Kong by 2017. The place is notably undemocratic at present, although in a completely different way from China. In 1997, 2017 must have seemed a long way off; now, there is not much time left. This week’s Beijing pronouncements, alongside the eulogies for the SAR, included a more menacing reminder that Hong Kong is subject to China’s political will, which won’t have done much for the hopes of the ex-colony’s democrats.

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