the hksar governance, ambiguous patron-client relationships embedded in the “one country, two...

Raphaëlle ROFFO – Sciences Po, Master Governing the Large Metropolis – Fall semester 2012

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Government & Governance of the Large Metropolis

Patrick Le Galès

HONG KONG - CHINA

The HKSAR governance, ambiguous patron-client relationships embedded in the

“One Country, two systems” framework

Raphaëlle ROFFO

Governing the Large Metropolis

Fall Semester 2012


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“One country, two systems”. Initially proposed by Deng Xiaoping as a model for the

forthcoming reunification and handover of the former British colony to mainland China, the

principle became an actual system in 1997 with the establishment of the HKSAR (Hong Kong

Special Administrative Region). Detailed under the Basic Law, Hong Kong’s own mini-

constitution, this framework proposes a strong autonomy with clearly-defined boundaries

for Hong Kong: “The HKSAR has a high degree of autonomy and enjoys executive, legislative

and independent judicial power, including that of final adjudication” (Article 2). Hong Kong is

thus, in theory, responsible for most of its governance matters, except foreign affairs and

national defence.

However and as a matter of fact, the reality of the relationships between both sides

is far more subtle, evolving over time and torn by opposite pressures for emphasizing either

the “one country” or “two systems” aspect of the system. A study of the HKSAR and its

unique mode of governance therefore requires to take into account those complex trends,

with competing and intertwining influences of local political and economic elites, and power

relations at a larger scale. There is indeed a dynamic interplay of international

considerations and domestic strategies (including the thorny question of Taiwan) in which

the PRC, in order to strengthen its leadership, is determined to promote the Hong Kong

experience of “One country, two systems” as a success and prosperous model.

This paper is an attempt to explain how the multi-faceted role of Chinese central

government is mediated by economic interests and clientelist relations, as we argue that

the ambiguous “One country two systems” framework has, at the turn of the century,

accelerated a deeper penetration of mainland China’s politico-economic influence in the

HKSAR.

The analysis of this reconfiguration of interactions, including in the regional

integration context of the Pearl River Delta, will enable us to better understand Beijing

central government’s role over Hong Kong governance. Therefore, we need to explain and

develop the key mechanisms and patterns of interaction between mainland and the HKSAR.

Starting with an overview of the increasing interdependency between the two economies, in

what we can call a convergence pattern, we will in a second part pay attention to the way

Beijing exerts its influence over Hong Kong political institutions. patron-client politics of the


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HKSAR. We will then foster our argument that patron-clientelism is a defining feature of the

relations between the PRC and Hong Kong, and go more into details on the role of business

and political elites in the process of balancing the two poles of the “One country two

systems” model. We will then finally be able to use and extend those previously developed

tools to interpret the wide range of roles played by the central government in planning,

infrastructures development and coordination between Hong Kong and the neighbouring

provinces of the Pearl River Delta.

I. An increased economic interdependency

First of all, we argue that a conceptual framework of Hong Kong governance must not

only focus on institutional and policy framework, but also pay close attention to the

economic environment characterized by trends of convergence between the two economies

and the evolutions of government-business relationships they generate. Indeed, it happened

that the most challenging issue for Hong Kong after 1997 handover was much more

economic than political, with the unexpected outbreak of the Asian financial crisis that

plunged the HKSAR into deep financial turbulences and an economic recession.

Initially, the agreements and political negotiations around the retrocession had

ensured the protection and continuation of Hong Kong’s mode of economic governance,

supported by the business community and the administration. In 1997, the “Chinese miracle”

was already emerging, with an economy based on export and cheap labour. However, it was

cruelly lacking an efficient financial market to reorient households’ savings towards

industrial investments. In the retrocession of Hong Kong, China inherited from a

sophisticated financial place, with 437 credit banks, the 7th exchange market and the highest

concentration of fund management companies in Asia. In short, it represented a fantastic

leverage for the PRC to finance its economy, to experiment and withdraw from Hong Kong’s

experience lessons on regulation norms and risk management, as well as, since 2004, to test

at a reduced scale the external convertibility of its currency, the Chinese Renminbi.


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Beijing does not levy taxes from the HKSAR. However, it does extract resources

through capitalistic mechanisms: an increasing phenomenon since 2003 is that of mainland

companies floating shares and bonds on Hong Kong financial place to accumulate capital.

This of course also benefits Hong Kong-based stock buyers, as a means to increase their

assets. Interdependency is obviously becoming the main characteristics of both economies,

but one side tends to be more dependent than the other, in an asymmetric relationship, as

the HKSAR economy increasingly relies on mainland’s support and the lucrative market

opportunities this emerging market has to offer. Besides, China obviously has become a

crucial actor in Hong Kong’s tourism industry, which precisely is one of the pillars of the city’s

economic strategy, and an important source of revenues and cash injection. A striking

example is the opening in 2005 of Hong Kong Disneyland, whose visitors are mostly

mainlander Chinese (45% in 2012).

This deepening economic and financial interpenetration of the HKSAR and its

motherland was stronger enacted by the highly symbolic CEPA and the ensuing free

individual visits scheme. After a period of adaptation following the retrocession, the financial

sector became a powerful engine of integration. In 2003, the CEPA (Close Economic

Partnership Agreements) were a significant signal of Hong Kong’s preferential status, with

three types of measures: a zero tariff preference for 273 categories of goods exported by

Hong Kong to the PRC, a preferential opening to Hong Kong providers in 18 service sectors1,

and a series of measures facilitating bilateral mobility of goods, capitals and individuals. If

the impact of those measures needs to be relativized as such, some annex or complimentary

dispositions actually had strong consequences on the HKSAR economy. In particular, the free

individual visits scheme generated a boom in its tourism industry (+40% visitors from 2003

to 2004).

Still, interdependency embeds a high degree of ambiguity in the relationship. It is

obviously in Beijing’s interests to prop up and support the HKSAR economy, as it represents

a safety valve for the risks of an overheating mainland economy, and ties down Hong Kong

to PRC’s destiny by flowing it with mainland capital. Nonetheless, it appears that Hong Kong

nowadays is even the more vulnerable to Chinese market fluctuations that it has to face

heightened competition from Shanghai, Shenzhen and other international financial centres.

1 See Annex – figure 3


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Following its adhesion to the WTO in 2001, China had committed to open its bank sector

from December 11th 2006 onwards. Even if limited, these dispositions de facto restricted

Hong Kong banks’ competitive advantage on the Chinese market, even within the CEPA

framework. This situation is of course pushing the HKSAR to adapt its market and structures

so to position itself as the key player in Chinese financial sector reform, and to reinforce its

institutional links with Beijing authorities by means of “complementary, cooperative and

interactive”2 relations, as we shall examine in the following section.

II. Beijing’s voice over the HKSAR political institutions

The central argument raised by this paper is that Hong Kong’s urban governance, in

many ways, is characterized by strong “patron-clientelist relations”3 (Loh, 2008) with Beijing,

whose penetration in the politics of the HKSAR also reflects the interests of Hong Kong-

based political and business elites.

Hong Kong political institutions are characterized by a high degree of centralization.

Led by a Chief Executive assisted by an Executive Council, and a directly-elected Legislative

Council, the system highly relies on the 156,000 civil servants (12 policy bureaux and 61

departments and agencies) in charge of carrying out the main administrative and executive

functions of government4. Bureaucracy being the main political arena under the Basic Law,

all the reforms to the system of governance needed to be implemented before July 1st 1997,

when the Basic Law would literally freeze structures of governance until 2047. But the

structures of local government in Hong Kong have in fact been modified since. From 2000

onwards, the former Urban Council and Regional Council were replaced by four District

Councils, democratically elected but with an extremely limited role: mainly, promoting

community activities or improvements of the environment, and advisors on issues affecting

the 18 districts to the government. De facto, this dismantling weakened the democrats both

financially and politically.

2 1-3-5 blueprint, Hong Kong Monetary Authority annual report, 2006, p. 89

3 LOH Sonny Shiu-Hing, The Dynamics of Beijing-Hong Kong Relations, A model for Taiwan?, Hong Kong

University Press 2008 4 See Annex – Figure 1


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Furthermore, an institutional freeze, by nature, does not mean the system is to

remain unchanged; governance is much more flexible in its structures and institutional

organizations than it theoretically is. As we shall demonstrate, intense pressures are in fact

going on and actively contribute to the reshaping of power relations and even rescaling of

the main actors’ capacities and domains of influence. A quick look at the repartition of the

Legislative Council (unicameral parliament) 70 seats speaks for itself, with the dominance of

pro-Beijing parties (43 seats) over Pan-Democrats (27). This expresses the common belief

amongst business elites that a political convergence with Beijing would support their

economic interests, and that an even stronger back-up from the mainland would be

beneficial. These elites are obviously not a homogeneous group: leaders of small and

medium enterprises or established business tycoons… They nonetheless all converge in

challenging the Western-style democracy model, vision that tends to be widely shared by

the upper-middle classes. But how can we interpret and analyze this allegiance and

enhanced “patriotic fervor”? What rewards do these elites perceive in return?

III. The role of the elites and Beijing’s patronage

The interests and rewards are indeed not always evident and can take more hidden

forms than monetary benefits. Patterns of patron-clientelism relations between those

business elites and Beijing are made more complex by the pluralistic polity of Hong Kong and

the rule of law, in which no support from clients can ever be fully ensured, and the anti-

democratic front is also confronted to a sharp opposition from parts of the population and

political personnel who reject Beijing’s breach of local autonomy and cultural identity. As

developed by James Scott5 in 1972, relations between the patron and the clients are always

asymmetrical and dependent on the way the patron can induce loyalty from his clients. In

our case, Beijing favours non-material benefits, thereby rendering its patronage invisible. It

is not question of monetary corruption, which could be sanctioned by the Prevention of

Bribery Ordinance. Instead, those who support the Chief Executive are rewarded political

positions, social prestige and connexions. One should not forget here the absolutely crucial

role in Chinese patterns of social interactions of the guanxi; a dynamic process of

5 SCOTT James, “Patron-Client Politics and Political Change in Southeast Asia” in: The American Political Science

Review, Vol. 66, No. 1 (Mar., 1972), pp. 91-113


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interpersonal connections and relationships with wide cultural implications, including the

notions of face, moral obligation and mutual efforts from people of equal social status to

maintain the relationship. This mainland culture of guanxi has deeply penetrated Hong Kong

politics and is now a key explanatory variable in the analysis of power distribution at the top

of the government. The Hong Kong-based capitalist class is henceforth captive of its

economic reliance on Beijing, and seems to compensate its loss of bargaining power towards

the motherland by ultra-conservative positions and strengthened loyalty, as to protect its

interests based on China’s lucrative market. The elites adopt a realpolitik strategy and stick

to the CCP (Chinese Communist Party) line to secure positive spillovers of Chinese rapid

socioeconomic development on the HKSAR economy.

On the other hand, influence scope of the administrative personnel and the

bureaucratic politics perspective should not be underestimated; the role of mainland

agencies responsible for the HKSAR affairs is extremely relevant and conditions in large part

the formulation and implementation of centre policy towards Hong Kong. The PRC

nomenklatura also plays a key role in the control of HKSAR political personnel. Even though

it remains confidential and highly secretive, the underground branches of CCP in Hong Kong

gather an increasing membership from business elites eager to expand their network and

improve their guanxi.

Meanwhile and as a response to this obedience, the legal profession driven by the

moral duty to protect Hong Kong’s judicial autonomy and civil liberties strongly oppose the

“mainlandization” trend and attempts to the pluralistic polity. This polarization of elites and

society in general also creates distortions and politicization of legal issues, with difficulties

and contention over the development of bilateral conventions, or the coexistence of the

Basic Law and Chinese own Constitution. For instance, dissensions arose at the occasion of

the three interpretations of the Basic Law by Chinese SCNPC (Standing Committee of the

National People’s Congress) on the right of abode (1999), universal suffrage (2003) and term

of the new Chief Executive after the former resigned (2004).

Such pressures and tensions were also exemplified by the 2008 controversy raised by

an article from the Beijing’s Central Liaison Office in Hong Kong research director Cao Erbao,


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in which he advocated the establishment of a parallel government for the HKSAR, led by the

CCP:

“The governing powers must be of two teams. One of the governing teams embodies

the ‘one country’ principle, exercise the constitutional power of the Central

Authorities to govern Hong Kong but without interfering with the affairs within the

SAR’s autonomy, and that team is the team of cadres of the Central and Mainland

Authorities carrying out Hong Kong work.” (Cao, 2008)6

As we see, the “One Country two systems” framework hence simultaneously

generates a pull of politico-economic convergence and a push of socio-legal divergence,

making the concept highly ambiguous and conflict-ridden, and emphasizing the polarization

of society. We may now explore the way these patron-clientelist relations encroached in a

very unique governance system are expressed in the regional integration process of the

Pearl River Delta.

IV. Planning and coordination: governance in the subnational cross-boundary

region

Beijing central government is actually far from limiting its implication in Hong Kong

governance to a politico-personnel control in the SAR only. One major aspect of recent

economic developments of the HKSAR is indeed its integration in the Pearl River Delta

regional integration and close collaboration with neighbouring regions for the planning and

coordination of infrastructures. In the subnational PRD cross-border region, some scholars

argue that a multilevel governance pattern is emerging7 with a spreading of competencies in

the decision-making process across central, provincial, SAR, municipal, city and county levels

6 CAO Erbao, “Governing Hong Kong under the Conditions of ‘One Country, two Systems’”, translation by

Margaret Ng of CAO Erbao (曹二寶), 《一國兩制」條件下香港的管治力量》in Study Times (學習時報), No422, January 2008 7 CHUN Yang, “Multilevel governance in the cross-boundary region of Hong Kong - Pearl River Delta, China”, in

Environment and Planning A 2005, vol 37, pp2147-2168


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of government. In such a complex layout, PRC central government has undertaken the role

of coordinator but also referee in the disputes opposing Hong Kong and neighbouring

provinces. From economic coordinator to political controller, Beijing plays a multi-faceted

role and supervises the development of the Pearl River Delta Economic Zone and the cross-

border integration mechanism.

Indeed, the PRD has been the hinterland of Hong Kong for more than a century and

increasingly in the last twenty years, by the means of family, business ties and migration

dynamics. Thus, it concentrates a large part of the interactions between the HKSAR and

mainland China and reflects their relative power and capacities. Interestingly, the integration

of the HKSAR in the regionalization dynamic is, like most of economic integration patterns in

East Asia, market-driven. No real supranational institution is in charge of the integration and

governance of the cross-boundary region, and therefore tremendous efforts of cooperative

management are required, amidst intense rivalry between the various actors. The following

figure illustrates the architecture of governance structures in the HK-PRD cross-border

region in 2003 (source: Yang, 2004 8 ).

8 CHUN Yang, “From Market-Led to Institution-Based Economic Integration: The Case of the Pearl River Delta

and Hong Kong” in Issues & Studies 40, no. 2 (June 2004): 79-118.


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Besides, the Chinese central government defends Hong Kong’s status of autonomy in

the management of cross-border issues, in order to preserve and promote the “One country

two systems” model. The State-led Hong Kong and Macao Affairs Office (HKMAO) plays a

role of gate-keeper and ensures mainland authorities respect the Article 22 of the Basic Law,

according to which “no department of the central government and no province, autonomous

region, or municipality may interfere in the affairs which the HKSAR administers on its own”.

Still, a severe lack of communication and coordination between various levels of government

result in rivalries, rather than emulation, and a messy planning with duplication of

infrastructures, source of tensions and disputes among the partners. Each actor promotes

developments that obviously involve economic benefits for them without taking into

account the already built infrastructures and facilities, so that five international airports and

five deep-water ports compete, within a radius of 100km. Beijing selectively intervenes as a

referee in disputes between provinces. It did not intervene in the airport issue, but did for

the finalization of the Shenzhen Bay Bridge and Port in 2007. Initially hostile to the extension

of a Bridge into Shenzhen, National People’s Congress members feared such a project would

allow anti-CCP slogans and protests from Hong Kong on the bridge. Chinese central

government played here a crucial role by influencing the vote and political game to unlock

the situation and provide Shenzhen authorities with guarantees. In the case of Hong Kong –

Zhuhai – Macao Bridge, Beijing took this time the role of an impartial referee and tried to

reach a consensus by coming with a bridge proposal that could satisfy all actors involved.

Finally, even though this goes slightly beyond the scope of this paper, the PRC of course

supports all initiatives of closer cooperation developed recently on immigration matters,

crime control and border security between local governments and the HKSAR, certainly

reinforced by the CEPA.

Conclusion

The 1997 handover enacted a deep transformation of Hong Kong’s relations with

mainland China, and the HKSAR integration seems to have evolved at a much more rapid

path than initially expected. Economic interests are central in understanding the way Hong


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Kong slowly allowed a stronger hold of Beijing on its economy and deeper penetration into

its political system. We emphasized the role of business elites in the building of these

relations, but the tacit agreement of most of the population for the sake of Hong Kong’s

economic health is also a main factor allowing for enhanced integration of the HKSAR. The

development of sub-national cross-border cooperation is part of this trend and in a global

context where regional integration and organizations play an ever more structuring role in

shaping economic dynamics, the trend towards a “mainlandization” of Hong Kong seems

ineluctable. How will in this context evolve the Hong Kong identity? What will be the

dynamics of cultural resistance that can already be observed in resistance to this integration

trend?

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translation by Margaret Ng of CAO Erbao (曹二寶), 《一國兩制」條件下香港的管治力量》

in Study Times (學習時報), No422, January 2008

CHUN Yang, “From Market-Led to Institution-Based Economic Integration: The Case of the

Pearl River Delta and Hong Kong” in Issues & Studies 40, no. 2 (June 2004): 79-118.

CHUN Yang, “Multilevel governance in the cross-boundary region of Hong Kong - Pearl River

Delta, China”, in Environment and Planning A 2005, vol 37, pp2147-2168

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Hong Kong University Press 2008

SCOTT James, “Patron-Client Politics and Political Change in Southeast Asia” in: The

American Political Science Review, Vol. 66, No. 1, March 1972, pp. 91-113

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Annexes

Figure 1 - Organization Chart of the government of the HKSAR


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Figure 3 - Market Access Liberalisation for Hong Kong Services under CEPA

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