What Beijing needs to learn from Hong Kong

September 26, 2003 • Commentary
This article originally appeared in South China Morning Post on September 26, 2003.

Long before the Scottish Enlightenment, the great Chinese philosopher Lao Tzu taught that when the ruler engages “in no activity, the people, of themselves, become prosperous”. Commenting on the principle of non‐​intervention, or wu wei, a young Chinese liberal recently wrote: “If our government had understood the importance of non‐​interference, it would be good news for both the Chinese economy and the world.”

The Communist Party’s decision to fire upon innocent students during the Tiananmen Square demonstrations in 1989 was a huge step backwards. But today, as a result of further economic liberalisation, China is much freer than it was during the pre‐​reform era when Mao Zedong ruled with an iron fist.

Housing is being rapidly privatised, long‐​term land leases have been instituted, the non‐​state sector accounts for more than 70 per cent of industrial‐​output value, real per capita incomes have more than quadrupled, capitalists can join the party, the constitution recognises the importance of the private sector, internet use is rapidly spreading, and China is a member of the World Trade Organisation.

Those positive developments have created a new middle class and revitalised civil society. But they have not been sufficient to end the party’s monopoly on political power, which continues to corrupt and politicise everyday life. Most important, there is still no rule of law to protect property rights. When the state owns the presses, controls the media, requires internal passports and limits all political speech, individuals lose their autonomy.

China’s leaders have placed great emphasis on achieving robust economic growth. Yet, as Justin Yifu Lin, a prominent economist at Peking University, has noted: “It is essential for the continuous growth of the Chinese economy to establish a transparent legal system that protects property rights.” The dilemma, of course, is that the stronger the protection of property rights, the weaker the power of the party.

The party, however, is not monolithic. Like any political body, there are factions. The challenge is for the reform wing to out‐​manoeuvre the hardliners and push ahead with liberalisation. Most of that effort will be towards creating a market economy, but economic liberalisation normally generates the demand for political reform, as witnessed in Taiwan and South Korea.

Moreover, Hong Kong’s demand for limiting the reach of the Chinese government, as witnessed by the mass demonstrations against the proposed anti‐​subversion law, is a sign that Hong Kong’s quest for political freedom may spread to the mainland. As the Wall Street Journal said: “Having been forced to give ground on civil liberties, Beijing is learning in Hong Kong that economic freedom has political consequences.”

Although China’s march towards market liberalism has been slow, it has been steady. Mindsets are changing as more people become exposed to western culture and commerce. The private sector is gaining ground and with it the demand for political reform and less state intervention. In a recent article in the China Business Weekly, Jia Hepeng cited economist Friedrich Hayek and wrote: “Deeper involvement of the government could destroy the spontaneous order of the market.”

In June, one of China’s leading advocates of constitutional reform, Cao Siyuan, held a major forum entitled, the Chinese Constitution: Protecting Private Property and Constitutional Amendment. Like other liberals, he understands that private property and freedom of contract (free‐​trade) are human rights that should be protected by law. The recent ban on constitutional debate following Mr Cao’s forum, though troublesome, is not expected to prevent the National People’s Congress from amending the constitution this year to give stronger protection to the private sector.

Hong Kong has taught us that economic liberalism is a catalyst for peace and prosperity. We must continue to advocate it, but also remember that economic reform is not enough. Ultimately, the Chinese people must embark on political reform. By deepening relations with China’s liberals, the US can help them advance the cause of freedom.

Li Shenzhi, one of China’s leading liberals, wrote: “The revival of the liberalist tradition … will bring a free China into a globalising world and will be beneficial and glorious for the entire world.” Although Li died in April, his words will remain to inspire the younger generation of liberals who are struggling to transform China into a normal civil society in which both economic and personal freedoms are protected by a constitution of liberty.

About the Author
James A. Dorn

Vice President for Monetary Studies, Senior Fellow, and Editor of Cato Journal