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Interview with Dr. Larry Wortzel - 2002-07-04


In China, this week marks the fifth anniversary of Britain’s handover of Hong Kong to Chinese rule, but the celebrations were dampened by Hong Kong’s economic downturn.

To understand Hong Kong’s economic situation, VOA-TV’s David Borgida interviewed Dr. Larry Wortzel. Dr. Wortzel is the director of the Asian Studies Center at the Heritage Foundation. He is an analyst of Asian affairs, and has focused on security, defense, political, and economic issues. Dr. Wortzel was our guest on the program, “NewsLine.”

MR. BORGIDA:
Joining us now to discuss Hong Kong and China, Larry Wortzel, of Washington's Heritage Foundation. Thank you so much, Mr. Wortzel, for joining us. It's a very hot day in Washington; we're glad you could be with us.

Tell us about how Hong Kong has adapted to Chinese rule in the last five years.

DR. WORTZEL:
I think it has surprised some of us that it has done as well as it has. I was one who thought that there would be a very heavy Chinese hand in there. Hong Kong still has, at least rated by the Wall Street Journal and the Heritage Foundation, the freest economy in the world. It is the world's 10th largest trading entity. It has a solid legal system and rule of law and it has a solid banking system.

But the press is increasingly less free. Some of it is self-censorship. I think some of it is just imposed from above.

I think the tragedy that certainly I think about, and that a lot of Americans think about, is it has never been a democracy. It went from being a British Crown Colony, with relatively free legal institutions, to being part, a special entity, of the People's Republic of China, a Marxist-Leninist state.

MR. BORGIDA:
Let's focus in a little more sharply on this economic downturn, which is the subject of a report earlier. What are the reasons for it?

DR. WORTZEL:
Part of the reason, of course, is that increasingly manufacturing and shipping links go direct to China. So its value as a trading post is slightly lower. Hong Kong's comparative advantage is an educated population, a good legal system, where you don't have to bribe people to get things done, and very well-automated ports and airports. But China is improving that way. And labor costs are lower in China. Hong Kong now has a 7.4 percent unemployment rate. That is very high for them.

MR. BORGIDA:
Would you, for example, if we can look ahead to the next five years of Chinese rule over Hong Kong, would you expect that this would improve or stay roughly the same?

DR. WORTZEL:
I think that if Hong Kong holds the course on keeping its economy free and not interfering or intervening in the economy, it won't do too badly. But as the World Trade Organization, WTO, implementation comes about in China, if China really implements and comes up with the legal reforms, increasingly that is going to cut Hong Kong's economic lead, and it will really then have a number of comparative advantages. But I think it is going to be a tough economic fight.

MR. BORGIDA:
In about 30 seconds or so, you mentioned the WTO, but can foreign and Western capital put increasing pressure on Beijing to improve the economic situation in Hong Kong?

DR. WORTZEL:
I think that foreign capital is going to go where the best market opportunities are. And if the market opportunities are better in China because the Chinese Government improves conditions there, that's what's going to happen.

MR. BORGIDA:
Thanks so much. The views of Larry Wortzel, of Washington's Heritage Foundation. Thanks so much for joining us today. We appreciate it.

DR. WORTZEL:
I'm happy to be here.

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