By Michael Dobbs

The Washington Post, December 10 1996

HONG KONG Since the fall of the Berlin Wall in 1989, more than 400 million people have been liberated from Communist rule, from Nicaragua to Outer Mongolia. On July 1 next year, the tide of recent political history will be reversed for the 6 million people of Hong Kong.

With the Clinton administration seemingly intent on improving relations with China after a long period of tension, the fate of Hong Kong has emerged as a major wild card that still has the ability to wreck the entire strategy. How the Communist leaders in Beijing manage the coming transfer of power in Hong Kong, officials both here and Washington agree, will have implications far beyond this economically dynamic and politically boisterous enclave on China's southern coast.

A successful transition that preserves Hong Kong as a bastion of free markets and free speech could serve as a model for China's own post-Communist transformation. A crackdown would seriously undermine China's hopes of recovering Taiwan and jeopardize its own standing in Asia and around the world.

"The way Beijing handles Hong Kong goes right to the heart of the sort of issues that are going to determine what China will be like in the next generation," said Chris Patten, the last British governor of Hong Kong, who will sail away from the island on the royal yacht Britannia at the stroke of midnight on June 30. "Pretty well every problem that China faces will be easier to deal with if it gets Hong Kong right and more difficult if it gets Hong Kong wrong."

The future of Hong Kong is likely to be one of the first foreign policy challenges facing the Clinton administration's new foreign policy team, led by Secretary of State-designate Madeleine K. Albright. U.S. officials say that large-scale political repression in Hong Kong after July 1997 would make it very difficult for Clinton to proceed with a planned exchange of state visits with Chinese President Jiang Zemin.

During their Asia trips last month, both Clinton and outgoing Secretary of State Warren Christopher went out of their way to tell Chinese leaders that the "world will be watching Hong Kong very carefully" over the coming months. But the State Department has stopped short of criticizing Chinese plans to dissolve the enclave's present legislature.

China has agreed to respect Hong Kong's capitalist way of life for at least 50 years under transitional arrangements worked out with Britain and has pledged to implement a formula of "one country, two systems." Hong Kong will become a special administrative region of China after the transfer of sovereignty, with its own political system, currency, laws and independent judiciary.

Such assurances have been generally well received by the Hong Kong business community, but democracy activists have expressed alarm over a series of political steps China has taken regarding Hong Kong including an announcement that it will replace the present, partially elected Legislative Council with an appointed body.

The leader of the largest group in the legislature, Martin Lee, says that the United States has failed to react explicitly enough to the warning signals from China. He cites an instance during Christopher's recent visit to Beijing in which the Foreign Ministry spokesman announced that, as of next July, anything that happens in Hong Kong will be China's "internal affair."

"If we are treated as an internal affair of China, we will go down the drain like Tibet," said Lee, who will not be a member of the new legislature. "By failing to speak out, the United States is sending a very negative message to the Hong Kong people."

Lee and other democracy leaders in Hong Kong say the Clinton administration is so intent on improving relations with Beijing that it is prepared to overlook all but the most glaring acts of political repression by China. They argue that human rights is now taking a back seat to trade and geopolitics in U.S. foreign policy, as evidenced by Clinton's new eagerness to do business as normal with the Chinese leaders who ordered the massacre of hundreds who demonstrated for democracy in Beijing's Tiananmen square in 1989.

"When Clinton ran for office the first time, he accused [President] Bush of coddling Chinese dictators," said Emily Lau, who won a landslide victory in Hong Kong's first partially free legislative election in 1995. "But look at what he is doing now; he is embracing them himself."

Patten, by contrast, said he is "extremely pleased" with the position adopted by both the White House and Congress toward Hong Kong. He added that the 1992 U.S.-Hong Kong Policy Act, which obliges the U.S. administration to treat Hong Kong as a "non-sovereign entity distinct from China and report annually to Congress on how the transfer of sovereignty is going, provides for a "continuing channel for American political interest" in the enclave.

"The Chinese leadership knows perfectly well that the world is going to regard the way Hong Kong is treated as a litmus test for how China is going to behave on the international stage," said Patten, who incurred Beijing's wrath by introducing democracy to Hong Kong in the waning months of Britain's 155-year rule.

U.S. officials said yesterday that they had reached agreement with China on continuing visits to Hong Kong by U.S. Navy vessels, an important source of local revenue. As the world's eighth-largest trading entity, Hong Kong conducts $25 billion worth of business with the United States annually. Nearly three-quarters of a million U.S. citizens travel to Hong Kong each year, and 40,000 U.S. citizens are permanent residents.

According to Taiwanese officials, Taiwan alone channels about $15 billion in investment funds to the mainland via Hong Kong banks. "If Hong Kong becomes a mess and loses its glamour, if its economy plunges into turmoil, this would affect us as well," said Chi Su, director general of the Taiwanese government information office.

The Clinton administration has taken a generally upbeat view of Hong Kong's prospects after next July. Most U.S. China experts believe Beijing will want to avoid any heavy-handed show of repression, given the enormous political and economic dividends that would flow from a smooth transition.

"I am cautiously optimistic," said Jim Sasser, the U.S. ambassador to Beijing, who shocked advocates of democracy in Hong Kong at his confirmation hearings last year by saying that Beijing would be within its rights in dissolving the Legislative Council set up by the British. "There is likely to be a learning process on both sides."

Sasser predicted that the Chinese will honor their promises to preserve Hong Kong's free business environment. At the same time, however, he conceded that it is an open question how Beijing will deal with the issue of civil liberties in Hong Kong, including annual demonstrations protesting the 1989 Tiananmen massacre.

"I would be surprised if the Chinese screw up massively," said a State Department expert on China. "I doubt that they will handle Hong Kong with the kind of restraint and deftness that we would like, but on the other hand they are unlikely to go to the other extreme and use the army to crush demonstrations. There will probably be some heavy-handedness."

Any large-scale repression in Hong Kong, such as the arrest or expulsion of democracy activists such as Martin Lee, would almost certainly provoke a sharp reaction from Congress. Leading Democrats and Republicans are already bombarding the administration with letters expressing concern about the future of the enclave.

"Hong Kong is special," said Rep. Nancy Pelosi (D-Calif.), one of the most outspoken human rights activists in the House. "This is a place where democratic freedoms already exist. If we as a country are in any way responsible for the diminution of freedom in Hong Kong, that will be a huge black mark."