Deng Xiaoping’s legacy in Hong Kong: the unfinished business of one nation, two systems.
In late 1991, Hong Kong businessman Frederick Ma Si-hang desperately wanted to sell his company’s stake in a luxury hotel in Beijing for some much-needed cash.
But Jin Guang New World Hotel in Beijing charged only US$20 per room a night amid a sluggish economy and stiff competition. No buyer wanted to touch it.
“There was no way we could make money,” recounted Ma, 72, then managing director of one of Hong Kong’s largest construction companies, Kumagai Gumi, that built the hotel.
Unbeknown to him, a pint-sized dynamo of a leader was about to embark on an epic journey that would unleash China’s economic potential for decades beyond.
Deng Xiaoping went on his fabled tour of the southern provinces of China in early 1992 as he put the country on a path of reform and opening up to the world.
Shenzhen became a special economic zone, becoming one of the country’s first manufacturing hubs and Hong Kong sealed its reputation as a financial centre channelling investments to mainland China and connecting it to the world.
“It was a dramatic change of fortunes,” said Ma, who served as commerce and economic development minister in 2007. “After Deng’s trip, we suddenly were charging US$120 per room per night.
“The tour triggered a boom in business investment in China.”
Ma’s is one of countless stories from Hong Kong business leaders on the wave of transformation they found themselves swept up in as Deng’s vision for modernisation was rolled out.
Ascending to power in 1978, Deng set about grafting a market economy onto China’s socialist system, launching reforms to eradicate the debilitating poverty that more than a decade of the cultural revolution had inflicted on the country.
And Hong Kong’s businesses were among the first that responded to the mainland’s call for investments and joint ventures.
Less often acknowledged is Deng’s political wisdom. He was the first to articulate the novel “one country, two systems” model of government as his answer to Hong Kong’s future in imagining how it could be returned to the motherland after 150 years of British colonial rule.
Set in motion more than 40 years ago, these twin contributions of Deng will continue to shape Hong Kong’s core, analysts said as they reflected on his legacy on his 120th birthday on August 22 this week.
Formula for economic lift-off
To Deng, a prosperous Hong Kong would not only prove the success of the one country, two systems and be a model for Taiwan for reunification, but would also be vital to China’s reform and opening up.
One of his most famous sayings on grafting a market economy onto a socialist system was: “It doesn’t matter whether a cat is black or white, as long as it catches mice.”
Early in the 1980s, he emphasised Beijing’s intention to maintain Hong Kong’s status as a free port and an international financial centre.
“Opening up some cities to allow the influx of foreign capital would serve as a supplement to the socialist economy,” he told a Hong Kong business delegation in 1984.
In the nine years since 1985, Hong Kong provided 47 per cent of foreign direct investments for the mainland market. By 2022, the proportion was 73 per cent.
“At that time, all the things we did in Hong Kong were very new to them, especially the way we run our economy,” she said.
Hong Kong’s economy has expanded considerably since the leadership in Beijing settled on the one country, two systems approach for the city.
Annie Wu Suk-ching, daughter of the founder of restaurant chain Maxim, was among those who helped China in the early days.
Wu, now 75, and her father James Tak Wu sealed the first joint venture with China for in-flight catering – but only after Deng had asked if they knew how to make croissants, a pastry he grew to like when he was a student in France in the 1920s.
Even if China no longer needed help with bread rolls, she said the city’s strengths, including its deep capital market, a sound legal system and strong financial services, remained unbeatable.
Dr Victor Fung Kwok-king, group chairman of the Fung Group, a Hong Kong-based multinational company specialising in trading, logistics and retailing, said decades of market-driven interaction between Hong Kong and the Pearl River Delta (PRD) had generated prosperity for both sides of the boundary.
“The PRD has become a global manufacturing hub and a centre of technological innovation. Meanwhile, Hong Kong has transformed into a supply chain orchestrator, a services platform and an international financial centre,” he said.
“Going forward, I believe the [bay area] will play a more important role in promoting China’s next round of deepening reform and connectivity with the world at a time of unprecedented change in the global economy.”
Amid new challenges such as the geopolitical headwinds caused by US-China tensions and new directives for national development, the city must adapt, observers have said.
It needed to figure out how to stay relevant, said former minister Anthony Cheung Bing-leung, now an adviser with the Education University of Hong Kong’s Asian and policy studies department.
The former lawmaker and ex-transport minister said he believed that when Beijing proposed the “historical compromise” of one country, two systems, Deng had expected the city to maintain a more liberal society and a well-connected free market to serve as the mainland’s window to the West.
Poisoned chalice and two systems
Much more contentious has been the problem of defining the political contours of one country, two systems – where democratic freedoms end and the imperatives of a communist state and leadership begin.
Many have argued that while it served Hong Kong well in the early days after the handover, the expectations heaped on what “two systems” ought to mean have politically burdened the city for the longest time.
At conception, the idea was an act of political genius.
A year after Deng came into power, Hong Kong governor Murray MacLehose went to Beijing to raise the issue of the city’s sovereignty in a historic dialogue that set the path for handover.
It was revealed later Deng had told MacLehose that China “might” take over Hong Kong by 1997 but it would respect the city’s “special status” – a hint of the one country, two systems model he had been thinking about ahead of the Sino-British negotiations.
In his discussions with British Prime Minister Margaret Thatcher in September 1982, Deng made it clear that Hong Kong’s capitalist system, including its political and economic structures, would not change after the handover.
His memoir recorded a key meeting in June in 1984 in Beijing between Deng and several Hong Kong representatives, in which Chung told the leader about Hongkongers’ fears.
They were worried by the possibility of Beijing officials ruling Hong Kong, low-level mainland cadres interfering in the city and future leaders potentially denying the one country, two systems principle.
According to the memoir, Deng responded: “The central government is not willing to take a copper penny from Hong Kong. What it has been doing is good for Hong Kong. Their worries are unnecessary.”
A few months later, Deng brokered an agreement with the British government to return Hong Kong to Chinese sovereignty in 1997, the year Britain’s 99-year lease on much of the territory was set to expire.
Veteran political scientist Lau Siu-kai, a consultant with the Chinese Association of Hong Kong and Macau Studies, a semi-official think tank, said that the reforms and opening up and one country, two systems were policies made possible in an era conducive to cooperation between China and the West.
“Had one country, two systems not been conceived, the British might have resisted, our society might have lost confidence, and Hongkongers would have definitely wanted to run away,” he said.
But it was clear from the outset that Deng was wary of electoral freedoms. At a meeting with members of the Basic Law Drafting Committee in April 1987, he said: “Would it be good for Hong Kong to hold general elections? I don’t think so.”
With prescience, he opined: “Hong Kong would not be democratised in a Western sense. … The central government would intervene if Hong Kong turned into turmoil or an anti-mainland base.”
Countermoves by the central government to engineer a friendly Legco gave its supporters the upper hand but it mattered little. An opposition at loggerheads with the local administration became the order of the day.
By 2014, Beijing decided to issue a white paper to assert a “comprehensive jurisdiction” over Hong Kong as the opposition camp vowed to hold a civil disobedience movement demanding greater democracy.
With the reset, analysts said Hong Kong was marking its “second return” to China under “one country, two systems 2.0”.
Veteran China watcher Johnny Lau Yui-siu maintains the one country, two systems approach of today is “poles apart” from what Deng had envisioned.
“From 1997 to 2003, Beijing avoided interfering with local governance and tried to prevent the appearance of a shadow government. They deliberately avoided appearing at the same events as the local administration,” Lau said.
Back then, he said, even Taiwan’s independence-leaning Democratic Progressive Party viewed Hong Kong as a safe meeting place with Beijing officials.
Former Democratic Party chairwoman Emily Lau Wai-hing said she believed the freedoms that Beijing once promised were now gone, marking a “deformity” of one country, two systems.
“Hong Kong was once called a city of protest, thanks to the freedom given to its residents to express their views. Now can you see any protests?” she asked.
“I don’t think that is what Deng created in the first place.”
Former minister Cheung also argued that Hong Kong’s opposition camp had failed to uphold the delicate balance between the nation’s socialist political order and the city’s liberal social life.
“By turning the campaign for universal suffrage into an ill-conceived fight for unrestrained autonomy, they presented Beijing with no choice but to suppress the Hong Kong ‘rebellion’ through high-handed measures,” he said.
Whither Deng’s vision
The Basic Law guarantees that Hong Kong will retain one country, two systems, including its rule of law, currency, basic human rights and freedoms for 50 years. State leaders have expressed confidence that the model will remain fit for the purpose beyond the half-century.
In a speech delivered in 2022 to mark the 25th anniversary of Hong Kong’s return to Chinese rule, Xi made it clear that one country, two systems must be adhered to in the long run, saying that there was no reason to “change such a good policy”.
Xi also stressed that Beijing fully supported Hong Kong in maintaining the common law system, keeping its business environment free, open and regulated, as well as improving its international presence.
For now, the fulfilment of Deng’s vision is still a work in progress, analysts have said.
Instead of merely aligning with Beijing’s policies as a “follower”, Lui Tai-lok of the Education University of Hong Kong said the city should focus on what mainland cities were unable to do.
The adjunct research chair professor said he believed such boldness of foresight was tied to the tolerance of free expression, and local officials might need to feel more empowered to act.
Political scientist Lau Siu-kai said he felt Hong Kong’s officials could sometimes be “overly cautious” in navigating the city’s relationship with Beijing.
The city’s ruling class was still in a “learning and adaptation process” in the new era of “patriots-only” politics, he said.
Despite its stumbles over the decades, Lau said he believed Hong Kong had kept faith in Deng’s vision of being unique.
“Hong Kong still has its unique advantages to Beijing and it won’t be happy about any attempt to turn Hong Kong into a mainland city. What’s the point of keeping it then?” he said.
As Deng himself once said about one country, two systems: “The core issue, the decisive factor, is whether this policy is right … If we are on the right path and the people approve of it, it cannot be changed.”
