Hong Kongís Margaret Fong Takes on Trade Issues by Larry Luxner The personalized District of Columbia license plate on Margaret Fongís BMW reads ìHKSARîóa tribute to Hong Kongís unique, often misunderstood status as a Special Administrative Region of China. Because Hong Kong is not a country (and never has been), it obviously cannot have an embassy. Yet the former British colony boasts a population of 6.8 million and a gross domestic product exceeding $160 billion. That translates into a per-capita income of $23,800, nearly 25 times that of mainland China. Likewise, Hong Kongís four-story Economic and Trade Office just off Dupont Circle is far bigger than many bona fide embassies. Fong, who was appointed in August to run that office after having previously served there from 1997 to 1999, said her job is ìto ensure that weíre talking to everybody we need to talk toóCongress, think tanks and other D.C. opinion makersóto make sure they know the Hong Kong story.î And what a story it is. Situated at the southeastern tip of China, this wealthy 1,102-square-kilometer enclave of capitalism comprises Hong Kong Island, the adjacent K owloon Peninsula and the New Territories with its 235 outlying islands. In 1997, Great Britainís 99-year lease on Hong Kong expired, leaving London no choice but to turn over its richest and most important colony to Beijing. Hong Kongís inhabitantsówith memories of the 1989 Tiananmen Square massacre still fresh on their mindsótrembled at the thought of communist China brutally suppressing their societyís democratic institutions and freewheeling economy. ìIt was obvious that when we started to discuss the transition, there would be a lot of concern about Hong Kongís future. Everybody thought there could suddenly be an upheaval,î said Fong, whose first tour of duty here began just after the handover. ìWe had lived under the British system for 150 years, and we were used to a way of life we were comfortable with and hoped to maintain.î Fortunately, she said, their worst fears never materialized. ìEverything went smoothly, and the Chinese government today fully recognizes the capitalist system which has been working for so long, and therefore devised this formula of one country, two systems,î Fong told The Washington Diplomat. ìWe enjoy all the freedoms that we previously hadófreedom of religion, freedom of the press and freedom of assembly.î On the other hand, Asiaís financial crisis of 1997-98 hit just as China assumed sovereignty over Hong Kong, seriously threatening its prosperity. It took a while to recover, but the economy finally turned the corner and is now stronger than ever. In the first quarter of 2004, Hong Kongís economy expanded by 7 percent. In the second quarter, its gross domestic product jumped by 12.1 percent. Overall, according to Fong, Hong Kong expects to end this year with GDP growth of 7.5 percent, compared to 9 percent growth for China as a whole. ìWe now have a closer economic partnership agreement with mainland China, sort of like a free trade agreement. The fact that we actually have such an agreement is a demonstration of our two systems,î she said. Hong Kong also has its own currency, the Hong Kong dollar, which currently trades at 7.8 to the U.S. dollar. In fact, Fong said, ìWe are in charge of all daily issues other than foreign policy and defense. That is set out in our Basic Law of 1997.î As director of the Washington office, Fong oversees a staff of 20, including six diplomats. She reports to Commissioner Jacqueline Ann Willis, who is Hong Kongís highest-ranking bureaucrat in the United States and who supervises not only the Washington office but also similar offices in San Francisco and New York. ìWe have had a very good relationship with the United States for many years and have been working very closely on all fronts, including textiles, high-tech goodsómainly computersóand intellectual property issues,î she said. On another issue, the bird flu epidemic, Fong said thereís nothing to worry about when it comes to Hong Kong. ìAfter the unfortunate incidents of 2001, we have had no incidence of bird flu in Hong Kong,î she said. ìThere has been bird flu in the rest of the region, but Hong Kong has taken very special precautions, and most of our live poultry comes from mainland China. Whenever thereís a hint of a problem, we stop the importation of poultry immediately.î Fong, 40, was born in Hong Kong. She studied English literature at the University of Hong Kong and then spent a year at Oxford. Her last job before coming to Washington in 1997 was as assistant private secretary to Lord David Wilson, the former governor of Hong Kong. ìWe still had telegrams then, and we started every day by reading telegrams,î she recalled. ìFrom 1993 to 1997, I was working in the constitutional affairs branch. That experience was particularly worthwhile because I saw the whole process of ensuring how we would preserve everything we had under British rule.î After that, Fong joined the finance branch to supervise the funding of Hong Kongís massive public works program. In 1997, upon coming to Washington as deputy director of the Hong Kong Economic and Trade Office, she was put in charge of export control, intellectual property rights and congressional relations. ìIt was a very interesting time. Everybody wanted to talk to me,î she said of her first stint in Washington. ìI love this city, but now itís changed. Overall, people are much more concerned these days about homeland security.î Fong returned to Hong Kong in 1999 and joined the transport branch as deputy secretary. In that capacity, her portfolio covered a wide range of responsibilities from road safety and traffic management issues to build-operate-transfer infrastructure projects. She was also in charge of planning for new road and rail networks both within Hong Kong and linking with the Pearl River Delta in mainland China. ìThereís a clear border, both a physical border and an immigration border, between Hong Kong and the rest of China,î she explained. ìYou need a permit of some sort to get from one side to the other. For a long time, Hong Kong people have been going to China for tourism and business.î These days, tourism is flowing in the opposite direction as well. In July 2003, mainland China began allowing its citizens to visit Hong Kong on an individual basis. Previously, Chinese citizens could visit the enclave only as part of organized tour groups. This new scheme alone has brought 3.5 million additional tourists to Hong Kong during the first nine months of 2004. Tourism now accounts for 5 percent of Hong Kongís GDP, with more than 20 million visitors expected this year. Of that total, about 5 million will be American citizens. One project sure to attract even more visitors is Hong Kong Disneyland, which will be connected to the city center by a 30-minute express train. The theme park will generate 18,000 new jobs when it opens in late 2005 or early 2006, and is expected to draw 5.6 million visitors in its first year of operation, rising to 10 million after 15 years. Yet Hong Kongís most important industry is banking. One of the worldís undisputed financial centers, Hong Kong at the end of 2002 had 133 licensed banks, of which 10 were U.S. banks. Seven of the top 10 U.S. banks maintain branches in Hong Kong; in addition, Hong Kong has nine restricted-license banks and three deposit-taking companies owned by U.S. interests. Most of these institutions are engaged in money-market operations, foreign exchange and securities. Several are also active in domestic banking, including mortgage lending and trade financing. The total assets of U.S. financial institutions in Hong Kong stands at $63.3 billion, representing 8.2 percent of Hong Kongís total banking sector. Customer deposits at those institutions is around $28 billion, or 6.6 percent of Hong Kongís total. More impressive statistics: 3,609 overseas companies had regional operations in Hong Kong as of June 1. This includes 256 regional headquarters of U.S. firms involved mainly in wholesale, retail and import-export trade. Other major lines of business include transportation and related services, finance, banking and manufacturing. Some 50,000 U.S. citizens reside in Hong Kong, making Americans one of Hong Kongís largest expatriate communities. Among Hong Kongís traditional advantages: a simple and low tax structure, the absence of foreign-exchange controls, a corruption-free government and the free flow of information. ìHong Kong people are mature and pragmatic,î said Fong. ìThey know they have the right to express their views, and they do it in a ver y peaceful manner. The fact that tens of thousands of people took to the street in a recent demonstration and there was no incident or disorderónot even anyone pushing over a trash canósays a lot about how responsible we are.î Perhaps that explains why the United States today accounts for nearly $25 billion worth of inward direct investment in Hong Kong. In 2002, Hong Kong imported $1,409 in U.S. goods per inhabitant, substantially higher than per-capita U.S. imports from Mexico, Taiwan, Australia, South Korea and Japan. Hong Kongís per-capita income, although not as high as Japan or Australia, exceeds that of Singapore, New Zealand and Taiwan. And Hong Kong already accounts for 70 percent of all direct investment in Chinaís Guangdong province, a center of export-based manufacturing. Fong said it is important for Hong Kong to have a say in China's futureónot just for economic reasons but also to ensure that the former colonyís democratic traditions remain intact. ìWe want constructive dialogue, and we are engaging not just the community but also all 60 legislators, both Democrats and pro-business groups,î Fong said. ìItís especially encouraging to see even the Democrats saying that they want an active dialogue with the mainland government. We believe this will be a major step forward.î Perhaps no one is looking as closely at Beijingís ìone country, two systemsî policy toward Hong Kong than Taiwan. With 23 million people, Taiwan also has a booming, export-based economy. Many of its inhabitants, and some of its politicians, would like to see Taiwan become an independent nation, although Chinaówhich views the island as a renegade provinceóhas threatened a military invasion if Taiwan gets too vocal in its demands for independence. Asked if the Hong Kong experience has any relevance to Taiwan, Fong demurred as any good diplomat would. ìWhether by our successful example Taiwan would then feel itís a formula that could also apply to them, is very much for the Taiwanese to decide for themselves,î she said. Larry Luxner is a contributing writer for The Washington