The Taiwan Banker
In the recent anti-extradition protests in Hong Kong, a large proportion of the city’s residents took to the streets to express their deep misgivings about mainland control. Moreover, multiple outbreaks of violence have aroused the sympathy of Taiwan, situated next door. What does the future hold for this city which was once considered the Pearl of the Orient? And can the financial industry, the backbone of Hong Kong’s economy, emerge unscathed from these disruptions?
For a long time, rule of law was regarded as the most important of the many reasons for Hong Kong’s success as a financial center. In this tradition, inherited from the British constitutional system, law is the highest form of social order; everyone is subject to the same restrictions and endowed the same rights under its authority. Only in such a society can the contractual relationship of trust required for financial development be completely protected. A century of experience with this system has given Hong Kong an internationally competitive financial environment.
Because of the importance of this legal foundation, the Sino-British Joint Declaration explicitly mentioned that “The Hong Kong Special Administrative Region will be vested with executive, legislative and independent judicial power, including that of final adjudication. The laws currently in force in Hong Kong will remain basically unchanged.” The UK and China agreed to leave Hong Kong’s system intact for 50 years.
This confidence that Hong Kong can maintain a society under rule of law has however been gradually shaken, one National People’s Congress interpretation at a time. After all, under the separation of powers of the original common law system, the Basic Law assigned the power of final interpretation to the Standing Committee of the National People’s Congress following reunification. In other words, under One Country, Two Systems, it is representatives of Beijing, not Hong Kong, who are authorized to interpret all Hong Kong laws. When Hong Kong’s interests contradict Beijing's, how can one expect the rights of the former to be preserved?
In the Chinese legal system, a conflict exists between rule of man (in this case, the Chinese Communist Party) and rule of law. Even though President Xi Jinping said that the Chinese Communist Party's leadership must evolve in a law-based direction, he also rejected the Western path towards “constitutional government,” “separation of powers,” and “judicial independence.” In a “democratic dictatorship” led by the Party, a legal basis for administrative action is already a small step forward. In the end, though, China has a system of "rule by law" rather than the universal concept of "rule of law." The Chinese judicial system is still far from independent and is ultimately subservient to Party interests.
Thus, the continued viability of compromise between “rule of law” and “rule by law” will be key to whether Hong Kong, weighed down by the “Chinese dream,” can maintain its status as a financial center. At stake is no less than the concept of property rights. Should they be protected by explicit law, or must they rely upon good governance by individual leaders? This is the question Hong Kong now ponders.
Hong Kong's hard-won legal foundations developed gradually over 150 years under the framework of the Colonial Charter, following the seizure of Hong Kong by Queen Victoria of England. By a quirk of history, perhaps, it is relations with the motherland today, following reunification, that pose the greatest challenge to the city's future development. The lights of Victoria Harbor still shine at night, but the question posed by the “Chinese Dream” is whether One Country, Two Systems can support the legal foundation under which Hong Kong matured. Taiwan should carefully consider the fate of its neighbor.