China and Hong Kong. The new Hong Kong approach

This new approach divided Hong Kong politically to an extent that had not occurred since the first years of the Cultural Revolution in the 1960s. It made him an international media star, featured on the cover of Newsweek. Hong Kong politics became completely central on Patten. (The gain would be the same if China sent gunboats to Washington and demanded that much of the US Senate be elected on the same purely populist basis as the House of Representatives). It would be most unusual for the new executive of a joint venture not to express an interest in fruitful co-operation. When Patten gave his speech, any mention of vital high priority Hong Kong-China infrastructure project was omitted. Patten addressed the Chinese with scornful sarcasm. Shortly after the speech, the British armed forces planned an exercise, Operation Winged Dragon, to practice defense of Hong Kong against a Chinese invasion. This was a curious exercise because Hong Kong is indefensible. A Chinese attacker would not use military force, but would merely turn off the water tap and have total victory in a few days. Martin Dinham, Patten aid, phoned the South China Morning Post and, after insisting on anonymity, told a reporter that large numbers of Chinese were writing to support the Governor and suggested that the newspaper look into it. Th Post conducted a survey in Guangdong and reported in front-page headlines that the people of China wanted patten style democracy. Patten sought to mobilize Hong Kong public opinion and international opinion against China. On November 1992, China announced that no British government contracts would be honored after 1997. The effort to draw foreign countries into the quarrel was seen by Beijing as a major threat to China's sovereignty, and was put by Beijing in the context of George Bush's decision to reverse a decade of American policy and sell F-16 fighter aircraft to Taiwan.

As the quarrel became more intense, both sides backed off.

Patten changed the psychology of Hong Kong. When he did so, the stock market immediately dropped 8.1% and Patten support in the public opinion pools simply collapsed.

The Hong Kong public was repudiating Patten's decision. Li Ping called a press conference for the expected angry denunciation of Patten. The stock market prepared for another drop. Angry Chinese denunciations had, always, caused a drop. Except this time. While Li Ping was speaking, the market rose about 200 points. His speech was very angry, but the Hong Kong Chinese sensed immediately that China had decided to denounce Britain but abjure any action that could damage Hong Kong. The market began a march to a series of new record highs.

(Deng Xiaoping, like Park, is a crusty genius with a firm sense of priorities that does not put diplomacy very high on the list.)

(While the negotiations proceeded, China announced that the hand over in 1997 would include a major military parade from China into Hong Kong and that 10,000 Chinese troops, rather than the previously announced 5,000, would subsequently be stationed in Hong Kong).

By the early 1960s japan was once more on the verge of industrial power. By 1970 the riots which had prevented Eisenhower from visiting Tokyo in 1960 were unimaginable and the Soviet goals of dividing or subverting Japan were unattainable.

In 1959-60 South Korea had been on the verge of chaos and defeat, and even Lee Kwan Yew still regarded the Communist Party as Singapore's strongest political force. Indonesia, home of the world's third largest Communist Party, was closer to the communist power than to the West. In the 1950s, Malaysia and the Philippines were nearly overwhelmed by communist insurgencies. Through the 1970s, Thailand fought a communist insurgency, so serious that much of world opinion held that it would fall like a domino after the collapse of VietNam, Laos and Cambodia. By the 1980s, nothing of the kind had occurred. Rather, economic development  had consolidated the politics of all these non-communist state and made Thailand pre-eminent in its region, while lack of development had humbled the Vietnamese empire to Thailand's east, and backward, isolationist Burma to Thailand's west.

In the late 1970s North American transpacific trade for the first time exceeded transatlantic trade. In that decade Deng Xiaoping declared China an honorary member of NATO.

Expenditures on the Vietnam War generously financed and accelerated the takeoff, just as the Korean War had earlier financed and accelerated the takeoff of Japan.

Relations with Indonesia had been strained since the country's revolution in 1965-6, which Jakarta believed to have been triggered by a Beijing-supported abortive communist coup.

In 1990-2 Beijing cooperated increasingly with Western diplomatic efforts to resolve the warfare in Cambodia; it curtailed weapons to the Khmer Rouge from 1990 onwards. In 1990 China restored diplomatic relations with Vietnam.

The Chinese abandoned support of the North Korean confrontation with South Korea; on several occasion they actively intervened to prevent North Korean actions from threatening war in the peninsula. Most importantly, China intervened to dissuade North Korea from invading South Korea in the wake of the 1975 US defeat in Vietnam. Recently, China refused to help North Korea with its nuclear programmes.

Formerly, China has held that it would not recognize South Korea until the US recognized North Korea. Now North Korea was isolated, and China abandoned it further. Now China is establishing normal diplomatic ties between US and North Korea.

China also recognized Israel, signaling its abandonment of attempts to profit from extreme positions on Middle East political disputes. When the question arouse in the UN Security Council of whether to permit US operations against Iraq, China abstained, despite strong PRC traditions

opposing any kind of Western intervention in a third-world country. Reward for this cooperation with the US was that the congress continued to press for economic sanctions on China.

Perhaps most dramatically, China has reached rapprochement with Taiwan, which harbors Beijing's greatest opponents. From 1949 through to the 1970s, leaders on opposing sides regarded each other as war criminals. In 1958, China sought nuclear backing from the Soviet Union for an attack on Kuomintang offshore forces, and some of Eisenhower's advisers proffered nuclear options for defense of the islands. Before reform began in 1979, trade and travel between the two territories was banned and huge concentrations of armed forces faced off across the Taiwan Strait. Into the 1970s, mainland forces regularly shelled the islands.

The fortification of Quemoy needed to be seen to be believed. In 1974, I travelled with a group of American scholars from Taipei to Quemoy on Madame Chiang Kai-Shek's private DC-3. We flew 50 feet above the water so that our plane would be difficult to detect. and 14 jet fighters flew above us for protection. On landing at Quemoy, the airstrip ran directly inside a mountain. Once inside, there was no need to go back out; the entire interior of the island had been carved into a livable habitat.

At the beginning of reform, as we have seen, China offered Taiwan a "One country two systems" deal of the kind subsequently promised to Hong Kong. Taiwan could keep its freer social system, capitalist economic system, government and army so long as it accepted the PRC flag. Taiwan refused this and continued its polic of no contacts with the mainland. Technically, illegal trade between Taiwan and the PRC through Hong Kong increased, firs gradually, then spectacularly.

Taiwan's low-tech industries migrated en masse across the Taiwan Strait. By the 1992 Taiwan's shoe and toy industries, which are among the world's largest and most successful, were primarily manufacturing and exporting from bases on the mainland. Both government were scrambling to create legal channels for this trade and investment, despite their continued pro-forma political antagonism. Relax political tension, to reduce military competition and to promote considerable economic integration.

The collapse of NIEO and the diffusion of trade tensions.

The early 1980s saw the destruction of the Third World Movement. The sponsors of the New International Economic Order (NIEO) represented a majority of the world's countries and an overwhelming majority of the world's population. They believed that the world economy was unfairly organized by the rich countries in a way that condemned the poor countries to permanent dependence on the rich countries and therefore to insurmountable poverty. The only way to break out of this poverty was a programme that rejected multinational corporations, repudiated international banks, insisted upon national self-reliance rather than increasing interdependence, replaced the market for raw materials with a system of cartels, and reshaped world politics by building on the movement for such a new economic order.

The real core of this programme was the system of cartels. Each major commodity was to be controlled by a third world cartel which would raise prices above market levels. This political coalition, the institutions of the New International Economic Order and the associated ideology of dependency theory were shattered by the rise of the smaller Asian economies and the subsequent success of China in following their lead. By 1980 the combined trade of the smaller Asian economies exceeded Japan's, and their trade has subsequently expanded far more rapidly than that of Japan. Taiwan, South Korea, Thailand and Singapore broke all the shibboleths of the New International Economic Order. They exploited international markets rather than defying them. They tamed multinational corporations rather than banning them. They focused on education and competitive organization - that is, on human resources - rather than natural resource cartels as the keys to development. They emphasized serving Western markets rather than self sufficiency as the key to national revival.

This economic success split the third world politically, defeated Latin America and Africa economically, and left the Third World movement intellectually bankrupt. Thus, the Third World movement lost its hold on the West, which was willing to feel responsible for underdevelopment if third world countries were structurally trapped, but not if their poverty flowed from stubbornly wrong policies.Thus China's seduction by the Pacifica Asian miracle has created a turning point in world politics and economics. It has transformed the regional successes of a limited number of small countries into a decisive defeat for communist insurgencies, for disruptive regional irredentism, and for the global economic radicalism of the NIEO.

Sea Boundaries

All of China's land borders are peaceful, but trouble remains over its territorial waters claims. China claims major island chains far from its mainland borders, together with territorial waters stretching virtually to the beaches of Malaysia and the Philippines.

The Chinese government passed a law on  25 February 1992 specifically reinforcing its claim to vast territorial waters and demanding that ships passing through them obey PRC regulations. According to these, all submarines must surface. Aircraft must avoid the area overhead except as provided by agreements with the PRC. These claims conflict with those of Japan, Vietnam and most ASEAN countries.

Even under Cory Aquino, the Philippines had difficulty resisting the temptation to claim Guam, thousands of miles from the Philippines and the strategic headquarters of America's island empire.The Philippines also claims Sabah, which constitutes a large proportion of Malaysia's total land area.

Declining military expenditures

Many Asian states rode to prosperity in the 1980s in part by limiting military expenditures and focusing budgetary priorities on economic development. Japan kept military budgets below 1% of the GNP through the late 1980s. In South Korea, Park Chung Hee, despite his background as an army general, cut military spending to 4% of GNP, although his country was at that time the most threatened country in the world. He raised it to 6% after USA withdrew a division from his country. (The USA was spending 9% of the GNP on defense.) China followed. Military expenditures as a share of GNP declined from 16% of the GNP in the 1960s to 10.4% at the beginning of Deng's reform in 1979 and to 3.7% in 1989.

In 1963 North Korea's GNP was $2.3 billion and South Korea's was $3.8 billion. North Korea spent 12.2% of the GNP on its military, while South Korea spent only 4.2%. However, by 1991 North Korea's GNP was a mere $20.5 billion while the South's had grown to $ 283 billion. South Korea was therefore very comfortably able to spend $10.8 billion on its military while the North's expenditure of half that much was crippling burden

The same thing has happened to China. Over the past generation China has cut tremendously the burden of the military on the economy and has reduced systematically other forms of geopolitical entanglement, so that the country can focus its resources and its leaders' attention on economic development. The result has been economic growth so fast that, even if military expenditure just grows proportionately with the economy, it can create a formidable power within a generation. China is a major nuclear power, with moderately sophisticated nuclear warheads and fairly long-range delivery systems. Its military, although shrinking in size, will soon have the ability to project limited force overseas. It has long-range aircraft with a new refueling capability, and its navy is being modernized. So short-term restraint is leading to long-term power. If economic growth continues, China will be a major power by any standard.

A crucial consequence of China's economic success has been to integrate its economy with the economies of Hong Kong and Taiwan and to begin a process of political healing.

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