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Who Will Lead Hong Kong? (Int'l Edition)


International -- Cover Story

WHO WILL LEAD HONG KONG? (int'l edition)

A handful of Hong Kong's elite are up for the toughest new job in Asia

Help Wanted: One ethnic Chinese, Hong Kong citizen to serve as Chief Executive of Hong Kong after British departure. Must be pro-democracy and pro-Communist. Respect for rule of law essential, but ability to bend with the wind required. Must administer capitalist society under rules of bankrupt socialist bureaucracy. Language fluency: English, Cantonese, and Mandarin. Miracle workers given preference.

It's perhaps the most difficult job in Asia. It may even be impossible to run Hong Kong after the British leave.

The Chief Executive must lead one of the world's richest cities, with per capita income of more than $22,000 per year, home to the world's eighth-largest stock market and the second-largest in Asia. It's a place populated by more than 6 million people who have the Chinese flair for entrepreneurship but also a deep-rooted reverence for Western rule of law, free flow of information, judicial independence, and a modern civil service. It's home to thousands of foreigners. "Hong Kong has a system that works," says Mark Michelson, chairman of the American Chamber of Commerce. "That's the reason a lot of us are here."

This vibrant economy and society reverts to China on July 1, 1997, and it will enter an era of unknowns. The Chinese have developed their own brand of frontier capitalism but cling to many of the old Stalinist ways. The Beijing leadership has pledged to let the territory operate under its own laws after it rejoins China as a Special Administrative Region (SAR) in July. Yet at the same time, senior Chinese leaders are signaling that Hong Kong may not enjoy all the freedoms it does now. They intend, for example, to replace the Legislative Council (Legco), reconfigured by Hong Kong Governor Chris Patten to expand democracy.

The task of managing this transition falls to the Chief Executive, the first official of non-British origin to run Hong Kong. The selection will not be democratic. Candidates have until Oct. 28 to submit applications. Then Beijing's handpicked Preparatory Committee--composed of Hong Kong and Chinese members--will choose a 400-person Selection Committee in early November. This group will name the Chief Executive by yearend. It will also pick the members of a controversial provisional legislature, which is due to replace the existing Legco on July 1.

The city's elite of executives and professionals will be represented on these committees. They want someone who can persuade Beijing to uphold, not erode, Hong Kong's way of life. "We don't need a brownnoser or an idiot," says Ronnie Chan, chairman of the $5.1 billion Hang Lung Group. "A brownnoser says everything China says is right. Idiots say everything China says is wrong."

Cynical observers might point out that Hong Kong's ruler will be a Chinese puppet. But the feeling in Hong Kong is that the situation is far more fluid. An estimated one out of every four Hong Kong citizens has someone in the family who can provide a legitimate way out of the territory--and many could bolt if the going gets rough. Beijing knows it would be disastrous to prompt such an exodus. Instead, most of China's leaders want to use Hong Kong as a showcase, proof that China is sophisticated enough to improve Hong Kong's prosperity and not destroy it.

Hong Kong officials also figure that in the coming years the Chinese have no option but to rely on a Chief Executive to maintain confidence in the city. So part of Beijing's strategy is to include Hong Kong's elite in the process of choosing a Chief Executive and to pick a candidate who will have popular appeal and strong rapport with China's leadership.

Much could still go wrong. A big fear is the spread of corruption from China into Hong Kong. If Hong Kong's outspoken Democratic Party launches too many protests against China, the Chinese could overreact. Or they might tamper with the monetary system and threaten the stability of the Hong Kong dollar, which is linked to the U.S. greenback. A raid by currency traders on the Hong Kong dollar could destabilize global markets.

Hong Kong's new chief also will need diplomatic skills to deal with a Beijing leadership enmeshed in its own power struggles, which might still give the upper hand to hard-liners who are suspicious of Hong Kong. Last September, for example, Beijing extended an olive branch to members of Hong Kong's Democratic Party. But more recently, China has indicated that it won't tolerate demonstrations marking the 1989 massacre at Tiananmen Square or allow "rumors" in the media attacking Chinese leaders.

Given the difficulties any Chief Executive would face, it's a wonder anyone wants this job. But candidates are stepping forward. They include a shipping magnate who is steeped in Confucian values. There's a thoroughly Westernized business leader-turned-public servant who can articulate a vision and implement it--with something of an iron fist. Add the top man in Hong Kong's judiciary, who lacks administrative skills but has a clean image. Another judge, one with pro-China leanings, has just entered the race. Meanwhile, the popular favorite remains a woman who has worked her way to the top of Hong Kong's civil service. By coincidence, all but one hail from Shanghai at a time when a Shanghai faction is in power in Beijing.

THE CONFUCIAN. Of all the top contenders, shipping magnate C.H. Tung is the front-runner. Tung, 59, is the quintessential Confucian patriarch and Chinese patriot (his given name, Chee Hwa, means "build China"). A reluctant candidate cast into the spotlight when President Jiang Zemin singled him out for a handshake last January, Tung finally geared up his campaign on Oct. 18. He has managed his Orient Overseas (Int'l) Ltd. by promoting consensus among his loyal staff. Tung prefers to mull over each decision, bouncing ideas off many people. "He's overcautious," says one colleague. "But he'll never take a short-term gain over a long-term loss."

Tung's more flamboyant father, C.Y. Tung, founder of shipping giant Orient Overseas Container Line Ltd. (OOCL), taught his eldest son financial discipline by making him account for every cent, says Alice King, Tung's sister. Tung got a degree in marine engineering from the University of Liverpool, then worked near Boston for General Electric Co. before returning to Hong Kong to help with the family business. Among his close American friends are former Federal Reserve Chairman Paul A. Volcker, ex-President George Bush and his wife, and trade negotiator Mickey Kantor.

Tung can manage a crisis. His father had seriously overextended the company and, after his death, Tung was left holding the bag. At the time, the restructuring of OOCL was one of the most complicated ever, with some 200 creditors. "It was done more like a restructuring of a small country," says Jeffrey E. Garten, then managing director of the Asia group of Shearson Lehman Brothers and now dean of Yale University's School of Organization & Management. "He was under enormous strain, but he never showed it," says Garten. When Henry Fok, a Hong Kong tycoon with close ties to Beijing, invested $120 million, creditors were relieved. Most assumed the funds represented a vote of confidence by China in OOCL, and some think the rescue left Tung in China's debt.

Indeed, Tung has excellent connections in China. He first met Jiang Zemin about nine years ago, when Jiang was Shanghai's mayor. A Chinese patriot, Tung turned down the chance to receive the British title of Justice of the Peace for his good deeds because "he's Chinese and doesn't like taking a title from a foreign country," his sister says. His inclination is to work with China to find solutions. "We have to cooperate," his sister says. "There are bound to be changes."

THE EXECUTIVE. By contrast, Peter Woo, 50, is more like a U.S. business executive running a political campaign. The dapper Woo appeals to the younger set. He gives press conferences and has made pitches to various interest groups in Hong Kong. And he has put together a lengthy platform that calls for increased education spending. No one expected a potential Chief Executive to act like such a campaigner. He has, however, circumvented questions on whether Hong Kong residents should be permitted to criticize Beijing after 1997, or whether it will still be legal to shelter dissidents fleeing China.

Woo went to the University of Cincinnati, where he was senior-class president. He earned an MBA at Columbia University business school in one year and took a job at Chase Manhattan Corp. in New York. In 1973, he married the daughter of shipping magnate Sir Y.K. Pao, one of the first Hong Kong Chinese to put money in the mainland. Woo became head of Wharf (Holdings) Ltd. and Wheelock & Co., companies with $13 billion in assets. After Pao died in 1991, Woo became more aggressive about revamping the business, which has interests ranging from real estate to cable TV.

Focusing first on the most lucrative parts of the empire, he streamlined the staff and brought in professional management. Still, some of his competitors among Hong Kong's tycoons grouse that Woo is too Western and talks a better game than he plays. They point out that his elaborate plan to turn the central Chinese city of Wuhan into a key trade and transportation center for the People's Republic has gone nowhere.

Indeed, Woo's tough and direct approach doesn't endear him to everyone. Employees accustomed to a Chinese family business got a rude awakening when Woo took over. "He didn't make many friends, but he shook things up," says one source. But that toughness could come in handy in a face-off with China. "Maybe that's the kind of person you need to deal with China," says one Woo supporter among the Hong Kong elite. "You need a tough cookie." Several years ago, Woo left the private sector to head Hong Kong's Hospital Authority, where he has improved efficiency.

THE CHIEF JUSTICE. Sir Ti Liang Yang, the first ethnic Chinese to become Chief Justice of Hong Kong, is also the first to admit that administrative skills aren't his strength. A judge for more than 40 years, Sir Ti Liang, 67, says his strong point is his lack of business or political affiliations. Concerns about conflicts of interest or uncomfortably close commercial ties with Beijing don't extend to Sir Ti Liang. Others in the judicial system find his understanding of China to be "naive," says one barrister. While Sir Ti Liang admits his contacts with China have been "remote and infrequent," he feels this also gives him a degree of neutrality.

His idea of managing the transition is for Hong Kong to play it cool. Bold initiatives, he believes, are not the order of the day: "Any big innovative measures would only serve to confuse, rather than help."

THE CIVIL SERVANT. Chief Secretary Anson Chan, 56, is the one person crucial to Hong Kong's future. Whether or not she decides to compete for Chief Executive, she is interested at the very least in staying on as No.2 in the post-Britain rule. If she were a candidate, she would be by far the most popular. In opinion polls, she routinely grabs 60% of the vote. Both Sir Ti Liang and C.H. Tung say they want Chan to remain Chief Secretary if either wins. "She's the glue that keeps it all together," says one colleague.

Chan came to Hong Kong from Shanghai in 1948 and got a degree in English literature at the University of Hong Kong. Over the past 35 years, she has climbed the ranks of the civil service, in 1993 becoming the first ethnic Chinese to hold the job of Chief Secretary, second-in-command behind the Governor. It's a system based on merit, with checks and balances to ensure fairness. Whoever runs Hong Kong will need the backing of the civil service to succeed. "We are not corruptible," says Sandra Lee, deputy secretary for the civil service.

As Chief Secretary, Chan has boldly stood up to Beijing on many issues, including her disapproval of the creation of the provisional legislature. Given her outspoken ways and strong ties to Britain, Beijing leaders are unlikely to trust her in the top slot. But as an administrator, she is tops. The first time she sat in for Governor Patten at an Executive Council meeting, attendees were astounded. Meetings usually lasted two to three hours; Chan accomplished everything in 35 minutes. "She expects everyone to do their homework and doesn't have too much patience for those who don't," says a British civil servant.

Chan wants to prevent cronyism and under-the-table deals from creeping into Hong Kong because she believes they will ultimately erode confidence in the system. If she and other senior civil servants get disenchanted with the new Chief Executive, Hong Kong will be in for a rough time indeed. Some citizens have an even more fundamental worry: that when the British depart, Hong Kong's ability to cultivate good administrators will start to erode. "The British are trained to be good administrators with a good sense of justice," says Payson Cha, managing director of HKR International Ltd., a $356 million property company. "We are educated to become independent businessmen--and no one likes to be an administrator."

More candidates are bound to declare themselves before the deadline. One late entry is Simon Li, 74. Li comes from an old-line Hong Kong family, which dominates the local Bank of East Asia. A judge, Li fought discrimination in the colonial government and helped promote homegrown judges and lawyers.

Li believes an independent judiciary and the rule of law are more important than a democratic system for Hong Kong. He also has close ties to Beijing. He's a vice chairman of the Preparatory Committee and a Hong Kong advisor to China. By contrast, his daughter Gladys, a lawyer, strongly believes the provisional legislature has no legal basis. The judge could take votes from Sir Ti Liang, but his pro-China leanings could also hurt Tung.

The Chief Executive won't have to wait until July, 1997, for dicey times. Once selected, he or she will have to work closely with the Governor and civil service without undermining them. At the same time, Beijing will be conveying ideas on how best to handle any number of situations in Hong Kong.

An even tenser situation may arise after the provisional legislature is named. A majority will surely vote according to Beijing's wishes. By contrast, the Democrats are now the most popular party in the Legco, led by such critics of Beijing as lawyer Martin Lee. By early 1997 the provisional legislature is expected to meet in China. Although the group has no formal power, some suspect it will prepare to repeal statutes Beijing doesn't like. "This is a bomb waiting to go off," warns Michael Yahuda, professor of international relations at the London School of Economics.

In the end, the future of Hong Kong rests largely with the Chief Executive, who will run the Special Administrative Region for five years. There's no doubt that Beijing will have the final say on who this person will be. That said, the new chief "must make it quite clear that he is Hong Kong's spokesman in Beijing and not Beijing's spokesman in Hong Kong," says one British civil servant. The first Chief Executive will have a historic opportunity to shape the destiny of Hong Kong. But if the new boss lacks integrity or vision, cosmopolitan Hong Kong could easily turn into just another Chinese port city. If that happens, Hong Kong and China will both be losers--as will the world at large.By Joyce Barnathan in Hong KongReturn to top


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