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United States-Hong Kong Policy Act Report, as of March 31, 1997
As required by section 301 of the United States-Hong Kong Policy Act of 1992, 22 U.S.C. 5731, as amended
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State, April 14, 1997
(Link to all years available.)

Blue Bar rule

[Note: For quick links to sections of the report and appendices, click here.]

PREFACE

After over 150 years of British colonial rule, Hong Kong will become a Special Administrative Region of the People's Republic of China on July 1, 1997. Hong Kong 's status after its reversion to Chinese sovereignty is defined in two documents: the 1984 Sino-British Joint Declaration and the 1990 Basic Law promulgated by the People's Republic of China.

The Joint Declaration was signed by the United Kingdom (U.K.) and the People's Republic of China on December 19, 1984. It provides that the post-reversion Hong Kong Special Administrative Region (HKSAR) will be directly under the authority of the central government of China. Unlike any other region or city of China, however, China has promised to grant Hong Kong a high degree of autonomy. According to the Joint Declaration, no mainland officials will be assigned to the HKSAR Government, and the Hong Kong Chief Executive, legislature and civil service will have responsibility for all matters except those relating to foreign affairs and defense. The Joint Declaration established the concept of "one country, two systems" for Hong Kong, and guaranteed that Hong Kong 's social and economic system, lifestyle, and rights and freedoms enjoyed by the Hong Kong people will remain unchanged for at least 50 years. The Joint Declaration is an international agreement registered with the United Nations Secretariat.

The Basic Law of the Hong Kong Special Administrative Region was adopted on April 4, 1990 by the Seventh National People's Congress of the PRC. In effect a mini-constitution, it provides the fundamental legal framework for implementing the "one country, two systems" principle in Hong Kong. The Basic Law reiterates the Sino-British agreement to allow Hong Kong to exercise a high degree of autonomy and to exercise separate executive, legislative, and judicial power. The Basic Law also stipulates that the growth of more representative and democratic government institutions -- a process initiated in the 1980's -- will continue after the end of British rule. According to the Basic Law, the ultimate aim of a "gradual and orderly" process of change is the election of the Chief Executive and all members of the legislature by universal suffrage.

The Basic Law and the Joint Declaration also guarantee continued protection for human rights and civil liberties in Hong Kong after July 1, 1997. In addition to guarantees that the people of Hong Kong will have freedom of speech, freedom of the press and publication, and freedom of association and assembly, the documents promise that the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights will remain in force after reversion. The Joint Declaration and the Basic Law also stipulate that the Common Law -- including legal precedents -- will continue to apply to Hong Kong after 1997.

The United States has substantial interests in Hong Kong and supports the Joint Declaration concept of "one country two systems" for Hong Kong 's return to Chinese sovereignty. If the commitments in the Joint Declaration and the Basic Law are adhered to, our interests and Hong Kong's way of life will be preserved. With the expectation that Hong Kong will have a high degree of autonomy except in the areas of foreign affairs and defense, the United States will continue to accord to Hong Kong a special status distinct from the rest of China after reversion. The United States continues to lend support to Hong Kong 's promised autonomy by strengthening bilateral ties: concluding bilateral agreements; promoting trade and investment; arranging high-level visits; broadening law enforcement cooperation; and bolstering educational, academic, and cultural links. This report covers significant developments during the past 12 months that affect U.S. interests in Hong Kong and its prospects for a smooth transition. A chronology of significant events in Hong Kong over the past year is attached at Appendix A.

I. SIGNIFICANT DEVELOPMENTS IN UNITED STATES RELATIONS WITH HONG KONG, INCLUDING A DESCRIPTION OF AGREEMENTS THAT HAVE ENTERED INTO FORCE BETWEEN THE UNITED STATES AND HONG KONG

A. ECONOMIC AND COMMERCIAL

Hong Kong is an active member of the World Trade Organization and the Asia Pacific Economic Cooperation Forum. In these organizations, Hong Kong's policymakers represent one of the world's most open economies and are among the most articulate and effective champions of free markets, reduction of trade barriers, and universal most-favored-nation treatment. The Hong Kong Government has placed special emphasis on participation in multilateral economic institutions, believing they offer the best way to protect Hong Kong 's long-term economic and commercial rights and interests.

Hong Kong is the eleventh largest U.S. export market and the fifteenth largest exporter to the U.S. market. In 1996, two-way merchandise trade totaled nearly US $24 billion. United States exports to Hong Kong reached almost US $14 billion, while U.S. imports of Hong Kong-produced goods totaled US $9.9 billion; this amount excludes Hong Kong re-exports of PRC-made goods, which provide substantial indirect income to the territory as well. Principal Hong Kong imports from the United States include computers, telecommunications equipment, and foodstuffs. Major Hong Kong exports to the United States include clothing and apparel, office machines and electrical machinery, photographic apparatus, watches and clocks.

Hong Kong has one of the most liberal trade and investment regimes in the world. There are no import tariffs. Hong Kong levies taxes on alcohol, autos, fuel and some luxury goods, but otherwise does not tax consumption. U.S. and foreign firms are free to invest and establish businesses with minimal government interference. In 1996, U.S. direct investment in Hong Kong on a historical cost basis was US $13.8 billion, primarily in wholesale trade, banking and finance, and manufacturing, and Hong Kong invested US $1.4 billion in the United States, mostly in manufacturing and in wholesale trade.

Hong Kong maintains no non-tariff barriers, and has reduced restrictions on foreign participation in professional service sectors (e.g., medicine and law) and in certification services. It has liberalized the telecommunications sector, though Hong Kong Telecom continues to enjoy a monopoly on international voice services. Hong Kong justifiably prides itself on supporting competition, but the absence of antitrust laws has led to domination of some sectors by major local companies, creating barriers to entry in those sectors. There were also provisions within proposed copyright legislation to broaden parallel imports and permit decompilation of software.

Also on the trade front, pirated movie, audio, and software compact discs continued to be widely sold in Hong Kong throughout 1996. This situation aroused concern among American software and entertainment firms, and led the U.S. Trade Representative to put Hong Kong on the Special 301 "Other Observations" list. Hong Kong officials have reiterated their intention to combat piracy, and have proposed legal provisions to facilitate law enforcement efforts. Hong Kong officials have also pledged to expand cooperation with PRC officials in the joint effort to combat piracy of intellectual property.

Hong Kong is the principal commercial gateway to China. Almost 45 percent of all trade with the PRC and approximately 60 percent of foreign direct investment funds destined for the PRC pass through Hong Kong. Over 2,000 foreign companies maintain regional headquarters or offices in Hong Kong, registering a net increase of 287 foreign firms in 1996. There are over 1,100 U.S. businesses represented in Hong Kong , including 457 regional offices. The American Chamber of Commerce in Hong Kong has over 1,100 members, the largest business organization of its kind outside the United States. Many factors attract U.S. firms to Hong Kong: its excellent telecommunications and port infrastructure; the sanctity of contracts and respect for the rule of law; a high quality of life; transparency of government regulations; the use of English in commerce and government; a non-interventionist economic policy; and unsurpassed expertise of Hong Kong entrepreneurs in accessing the mainland market.

U.S. companies have a favorable view of Hong Kong's business environment. The American Chamber of Commerce's annual business confidence survey, conducted in mid-1996, reported that 95 percent of U.S. firms responding consider the business environment in Hong Kong as "very favorable" or "favorable" for the next five years. Most of the 633 respondents plan to either maintain or expand their investments or operations. Only nine percent indicated a plan for gradual reduction of Hong Kong activities. Despite the generally high level of confidence, some firms expressed concern over continuation of the rule of law and free flow of information, and the possibility of increased corruption.

American companies have had limited success in winning contracts for the design and construction of Hong Kong's US $21 billion Chek Lap Kok Airport and its associated projects. U.S. strengths in the service sector and high technology have made U.S. bidders more competitive as construction proceeds and more contracts for equipment and franchises are awarded. U.S. companies have won nearly every contract for air traffic control equipment, including US $48 million in sales for Raytheon and additional sales by Unisys, Cardion, and Wilcox.

Following formation of the airport authority in 1995, several franchise agreements have been signed with United States companies or consortia including U.S. firms. Fedex is part of a consortium that won an air cargo franchise. United Airlines is part of a consortium approved for line services and aircraft maintenance, and Mobil is a member of a franchise for fuel services. U.S. companies are competing for design and engineering services contracts with the mass transit and Kowloon-Canton railways, both of which plan multi-billion dollar expansions.

B. HIGH-LEVEL VISITS

The United States encourages high-level visits to Hong Kong as evidence of our close bilateral ties and the importance of Hong Kong to United States interests. Senior U.S. Government officials from the executive, legislative, and judicial branches regularly visit Hong Kong. Reflecting the importance of U.S. interests and the intense concern over Hong Kong's transition, over forty U.S. Government delegations, five State delegations, and close to 100 members of Congress visited Hong Kong during the past year. A list of visitors to Hong Kong during the past year is attached at Appendix B.

C. LAW ENFORCEMENT COOPERATION

United States law enforcement agencies enjoy excellent cooperation with their Hong Kong counterparts. The U.S. Government is broadening its cooperative liaison and operational relationship with Hong Kong Government agencies, particularly to combat international drug trafficking, counterfeiting, credit card fraud, money laundering, illegal textile transshipment, Asian organized crime, violations of intellectual property rights, and alien smuggling.

The U.S. is expanding its law enforcement presence at the Consulate General in Hong Kong. In 1996, the U.S. Secret Service opened a one-person office to work on credit card fraud and U.S. banknote counterfeiting and plans to add an additional agent in 1997. In addition, the Immigration and Naturalization Service will add one officer to its staff in 1997, and the Internal Revenue Service criminal investigations division is exploring the possibility of establishing a position to investigate money laundering and similar fraud. Other U.S. agencies with law enforcement responsibilities present in Hong Kong include the Department of State, U.S. Customs Service, Drug Enforcement Administration, and the Federal Bureau of Investigation.

The Hong Kong Government cooperates fully with U.S. agencies in combating narcotics activity. As one of Asia's most important financial centers, Hong Kong is used by regional and local drug traffickers to launder drug-related proceeds. In July, the United States and Hong Kong agreed to extend a bilateral narcotics cooperation agreement that governs mutual assistance in freezing, restraining, seizure, forfeiture, and confiscation of the proceeds and instrumentalities of drug trafficking. This agreement will expire on June 30, 1997 and is expected to be replaced by a mutual legal assistance agreement that incorporates cooperation in each of these areas.

In 1996, U.S. and Hong Kong investigators cooperated on several international narcotics investigations that resulted in arrests both in Hong Kong and the United States. Hong Kong investigators have traveled to the United States to pursue investigative leads and U.S. investigators have made several trips to Hong Kong for investigative purposes. U.S. law enforcement agencies continue to provide training to their Hong Kong Government counterparts in areas ranging from conducting financial investigations to the control of precursor chemicals. U.S. agencies continue to urge the Hong Kong Government to adopt mandatory rather than voluntary financial transaction reporting requirements and to explore options for discouraging the use of non-bank remittance centers by money launderers.

The U.S. Secret Service cooperates closely with Hong Kong Government agencies in the detection and suppression of counterfeit currency and other obligations of the United States. The Secret Service is also engaged in the enforcement of U.S. laws pertaining to access device fraud, including credit card and cellular telephone fraud. In the past year, Hong Kong law enforcement agencies have cooperated with the Secret Service in several investigations that have resulted in the closure of a number of counterfeit credit card factories and the seizure of several thousand dollars in counterfeit U.S. currency. A number of arrests and prosecutions have resulted.

Hong Kong 's accessibility and favorable flight connections have made it a major transit point for alien smuggling in the region. The U.S. Immigration and Naturalization Service (INS) works closely with the Hong Kong Immigration Department, Hong Kong's Independent Commission Against Corruption (ICAC), and the Hong Kong Police in identifying smuggling syndicates and individuals involved in alien smuggling and related illegal activities. This cooperation, along with the training INS officers have provided to Hong Kong Government officials and local airline representatives in fraudulent document detection, resulted the detection of more than 2,000 persons attempting to depart Hong Kong on falsified documents. The Hong Kong Government also followed up and successfully prosecuted sixteen alien smuggling cases referred to it by INS in 1996.

D. BILATERAL AGREEMENTS

There are nearly a dozen U.S. bilateral agreements that currently apply to Hong Kong. Most of these are agreements with the U.K. that extend to the territory. Others have been concluded directly with Hong Kong under "entrustment" from the United Kingdom. Under international law, the U.S.-U.K. agreements will lapse with respect to Hong Kong upon reversion unless special arrangements are made with Hong Kong and/or China as circumstances warrant for their continuation in force. Most U.S.-Hong Kong agreements will continue in force, including several new agreements which have been concluded to replace those U.S.-U.K. agreements of interest to both sides.

In July 1994, the U.S. and Hong Kong initialed a new extradition agreement to apply to the Hong Kong Special Administrative Region post-reversion; it was approved by the Sino-British Joint Liaison Group (JLG) in September 1996, signed in Hong Kong on December 20, 1996, and was submitted to the U.S. Senate for advice and consent to ratification on March 5, 1997. In June 1996, the United States and Hong Kong concluded a new mutual legal assistance agreement; it was approved by the JLG in March 1997 and is expected to be signed shortly. It will then be submitted to the Senate for its advice and consent to ratification. A bilateral Prisoner Transfer Agreement was initialed in October 1996 and is awaiting JLG approval.

In September 1995, the United States and Hong Kong concluded a stand-alone Air Services Agreement to govern air relations and traffic rights between our two economies; it was approved by the Joint Liaison Group in March 1997 and is expected to be signed shortly. Meanwhile, the expanded traffic rights are already in effect pursuant to an adjunct memorandum, and the United States and Hong Kong have awarded to airlines new service opportunities obtained in conjunction with the new agreement.

Considerable progress was made in 1996 on a U.S.-Hong Kong bilateral investment agreement. Following several rounds of negotiations, some difficult problems remain but both sides have expressed a desire to conclude an agreement before July 1, 1997. We expect that the agreement will then be submitted to the Joint Liaison Group for approval.

In addition, there are several dozen U.S.-PRC agreements that currently do not apply to Hong Kong but that could be applied to Hong Kong after reversion if appropriate and upon agreement by the U.S., China, and the HKSAR Government. The United States and China have reached a preliminary consensus that almost all of these agreements should not be extended to Hong Kong. In other areas, such as the official U.S. Government presence in Hong Kong and U.S. Navy port calls to Hong Kong, direct agreement between the United States and China is necessary to continue current practices and procedures.

On March 7, 1997, the United States and China concluded negotiations and initialed the text of an agreement on the maintenance of the U.S. Consulate General in Hong Kong beyond June 30, 1997. The agreement contains no limitations on the size or existing operations of the Consulate General and guarantees a broad range of privileges and immunities for U.S. officials and specific protections for U.S. nationals arrested or otherwise detained by Hong Kong authorities. The agreement was signed in Beijing on March 25 during Vice President Gore's visit and will enter into force on July 1, 1997.

Routine and frequent port calls to Hong Kong by U.S. Navy ships provide an important and welcome rest and recuperation opportunity for U.S. Navy personnel and provide over US $50 million a year in business for Hong Kong while contributing to Hong Kong's status as an open, international port. In December 1996, China announced that U.S. Navy ships would continue to visit Hong Kong after reversion. Since then, discussions between China and the United States have begun regarding the technical procedures used to facilitate port calls, and agreement is expected to be reached before July 1.

II. OTHER MATTERS, INCLUDING DEVELOPMENTS RELATED TO THE CHANGE IN THE EXERCISE OF SOVEREIGNTY OVER HONG KONG AFFECTING UNITED STATES INTERESTS IN HONG KONG OR UNITED STATES RELATIONS WITH HONG KONG

A. UNITED STATES INTERESTS IN HONG KONG

United States interests in Hong Kong are substantial. U.S. trade, investment, and business with Hong Kong flourish in a virtually barrier-free environment. Last year's exports to Hong Kong, many of which are re-exported to China, totaled US $14 billion. In 1996, U.S. direct investment in Hong Kong amounted to US $13.8 billion. Over 1,100 resident American firms employ 250,000 Hong Kong workers (10% of the workforce), and Hong Kong's open society and attractive living environment are home to an estimated 35,000 American citizens. Cooperation between the Hong Kong Government and the FBI, DEA, INS, Customs, and the U.S. Navy is broad, effective, and mutually beneficial. The United States also enjoys strong educational and cultural relations with the people of Hong Kong, including a very large flow of tourists and students in both directions. Thus, we have significant interests in promoting economic and business relationships; preserving civil liberties, the rule of law, and the free flow of information; maintaining a cooperative law enforcement relationship; and continuing access to Hong Kong as a routine port of call for Navy ships.

Protection of these interests would be enhanced by Hong Kong's continued stability and prosperity; the continued operation of a full-service Consulate General; the steady development of open, accountable, and democratic institutions; the protection of civil liberties; and the preservation of Hong Kong's legal system. The United States works closely with and communicates our views to the present sovereign (the U.K.), the future sovereign (the PRC), and the people of Hong Kong. The United States also lends official support to private efforts and programs designed to achieve our goals.

B. DEVELOPMENTS AFFECTING U.S. INTERESTS IN AND RELATIONS WITH HONG KONG

Hong Kong continues to be a dynamic, prosperous, and stable territory. It welcomes interaction with foreigners and is friendly to American and international business interests. Its economy continues to grow at over five percent a year. Due to its highly educated and skilled work force, efficient services, and predictable legal climate, Hong Kong has remained an attractive place for Americans to live, work, and visit. And Hong Kong people remain confident overall about the transition -- particularly about the economic outlook. Over the past year, however, developments in Hong Kong have sent mixed signals about some aspects of the change in sovereignty. While there have been significant positive developments since March 1996 -- in particular the decision to keep Chief Secretary Anson Chan and other senior civil servants in place after the reversion, China's actions regarding the future of the legislature and the laws governing human rights and civil liberties in Hong Kong have been disturbing and have caused concern in both Hong Kong and the international community.

The Preparatory Committee

In December 1995, Beijing announced the formation of the Preparatory Committee, a group of 150 representatives -- 57 from China and 93 from Hong Kong. The Preparatory Committee was directed to "prescribe the specific method for forming . . . the first Legislative Council" and to prepare for "the establishment of the Selection Committee for the First Government of the [HKSAR]." All Preparatory Committee members were chosen by Beijing without open deliberations or formal consultations in Hong Kong. China did not include any members of the Democratic Party on the Preparatory Committee, although it represents the largest political party in the legislature and has demonstrated broad popular support.

Since its formation, the Preparatory Committee has taken action in several areas important to Hong Kong's future: It has devised methods for the selection of the first Chief Executive and a provisional legislature; selected the members of a 400-person Selection Committee, which in turn chose both the first Chief Executive and the members of the provisional legislature; begun to devise election rules for the first post-reversion Legislative Council elections; recommended to the National People's Congress that certain Hong Kong laws -- including parts of the Bill of Rights Ordinance and laws on public order and societies -- be repealed. Further review of the Preparatory Committee's actions in these and other areas is included in Section VII.

The Electoral System

The Sino-British controversy over Hong Kong's system of representative institutions has continued, especially with respect to the Legislative Council (Legco) -- the legislative branch of the Hong Kong Government. The conflict has persisted since 1992 when Hong Kong Governor Patten proposed reform of the electoral procedures for Legco and the lower level District Boards and Municipal Councils. After a series of unsuccessful negotiations with Beijing, and in the wake of legislative action supporting the Patten proposals, the Hong Kong Government in 1994 enacted the Governor's electoral reforms without China's agreement.

The PRC National People's Congress (NPC) thereafter decided that the Legislative Council, the District Boards, and the Municipal Councils would terminate as of July 1, 1997. In March 1996, the Preparatory Committee announced that a provisional legislature would be formed to "examine and approve" laws and other measures that take effect on July 1, 1997. According to the Preparatory Committee, the provisional legislature will serve until the first HKSAR legislature is elected no more than one year after reversion. Shortly after it chose the first Chief Executive in December 1996, the Selection Committee chose a provisional legislature to take office as of July 1, 1997; 33 of the 34 members of the current Legislative Council who sought inclusion were chosen for the 60-seat body. Members of the Democratic Party and most pro-democracy independents chose not to seek seats on the provisional legislature, calling it an illegitimate body not sanctioned by either the Basic Law or the Joint Declaration. Further review of Hong Kong's electoral system is included in Section VII(B).

The Selection Of The First Chief Executive

In December 1996, Hong Kong businessman C.H. Tung was chosen by an overwhelming majority of the Selection Committee to be the first Chief Executive for the Hong Kong Special Administrative Region. The selection of Tung, who was educated in Britain and spent almost ten years in the United States, was welcomed by the local community and the international business community. His emphasis on the importance of collective values over the rights of individuals has drawn some negative comment in Hong Kong. Nevertheless, his approval ratings in local polls have remained strong, in large part due to his popular decisions to retain Chief Secretary Anson Chan and virtually all senior Hong Kong civil servants. Additional discussion of the Chief Executive is included in Section VII(C).

Amendment Or Repeal Of Hong Kong Laws

In March 1997, acting on a recommendation from the Preparatory Committee, the Standing Committee of the National People's Congress voted to amend or repeal 25 Hong Kong laws it determined were in violation of the Basic Law and the Joint Declaration guarantee that the "laws currently in force" for Hong Kong would remain unchanged. Over half of the changes made needed adjustments to colonial laws that would become archaic or obsolete in view of the change in sovereignty and were not controversial. The decision to amend a portion of the Bill of Rights Ordinance and scrap liberalizing amendments made since 1992 to laws on societies and public order, however, met with widespread opposition in Hong Kong.

The Law Society, senior civil servants, and even some members of the provisional legislature criticized China, arguing that there were no contradictions between the Basic Law and the Bill of Rights Ordinance or the societies and public order legislation. Noting that Beijing had specifically decided not to adopt replacement legislation to restore the status quo ante, Chief Executive-designate Tung has promised public consultations on any legislation to replace the public order and societies laws. Tung also argues that human rights and civil liberties are well protected under the Basic Law's guarantees that the UN human rights covenants and the Common Law will continue to apply to Hong Kong. Further review of the amendments to the Bill of Rights Ordinance is included in Section VII(F).

The Civil Service

Hong Kong's professional and efficient civil service will be a key force in ensuring its smooth transition and stability beyond July 1. Public confidence in the "one country two-systems" formula and in Chief Executive-designate Tung was greatly enhanced by his announcements in late 1996 and in February 1997, respectively, that he intended to retain Chief Secretary Anson Chan and 21 of the 23 current policy secretaries after reversion (only the Hong Kong Attorney General, who as a British national cannot serve in the HKSAR Government, and the head of the Independent Commission Against Corruption, who is retiring, will not remain). Tung's decision to emphasize continuity and avoid significant changes in the executive branch allayed concerns that civil servants who had supported or had been closely identified with Governor Patten and British policies opposed in Beijing would be omitted from the HKSAR Government. These announcements were welcomed in Hong Kong and bolstered confidence in the international community.

The modalities of sharing civil service records and information with Beijing continues to be discussed in JLG channels. The Hong Kong Government is providing files on civil servants to Chief Executive-designate Tung and his staff to aid in the transition. The Hong Kong Government has also begun to assign senior civil servants to work in the Chief Executive-designate's transition office.

HKSAR Passport and Visa Regime

The HKSAR passport will be issued only to Chinese nationals holding Hong Kong permanent identity cards, as provided in the Joint Declaration and the Basic Law (essentially, those who are presently eligible to hold British travel documents or Hong Kong Certificates of Identity). Details of its design, production, control, and issuance have been finalized. The HKSAR passport incorporates security features that are close to state-of-the-art, and production and distribution is expected to be subject to strict safeguards. Only the Hong Kong Immigration Department will have authority for issuance; it expects it will be ready to issue 2,500 HKSAR passports per day as of July 1, with the capability of issuing up to 4,000 per day if necessary. The Immigration Department also expects it will take from three to five years to issue new HKSAR passports to all 5.5 million Hong Kong residents it estimates will be eligible to acquire them.

China has confirmed that the British National Overseas (BNO) passport will continue to be honored after reversion. In keeping with its position on dual nationality, however, China will recognize the BNO passport as a travel document only, and not as dispositive evidence of the bearer's citizenship. Accordingly, Hong Kong residents will be entitled to hold both BNO passports and HKSAR passports concurrently.

Hong Kong's current "stateless" travel documents, the Certificate of Identity and the Document of Identity, will also continue to be valid travel documents after reversion. The Hong Kong Immigration Department will cease issuing Certificates of Identity after June 30, but existing Certificates will remain valid for ten years from the date of issuance. Bearers of Certificates of Identity will be eligible to replace them with HKSAR passports. Documents of Identity, held by immigrants with less than seven year's residence in Hong Kong, will continue to be issued after reversion.

The Hong Kong Government continues to seek official recognition of the HKSAR passport, and also seeks visa-free access for the HKSAR passport to countries currently enjoying visa-free access to Hong Kong. So far, however, only the United Kingdom, Canada, and a few other nations have agreed to grant visa-free entry to bearers of the new passport. The United States is currently considering its response. At present, U.S. citizens visiting Hong Kong for a temporary stay of less than 30 days may enter without a visa. The ability of the United States to reciprocate -- that is, to offer visa-free entry to the United States to holders of the HKSAR passport -- is limited and governed by section 217 of the Immigration and Nationality Act. At present, the United States issues ten-year multiple entry visas to those who obtain visitor visas; this is the maximum now available to Hong Kong residents under U.S. law.

Article 23 of the Basic Law: Treason, Subversion, And Foreign Political Organizations

According to Article 23 of the Basic Law, "the Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People's Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies." Chief Executive-designate C.H. Tung and the provisional legislature are expected to draft legislation to meet this requirement of the Basic Law after reversion, and no decisions on the content of the laws relating to Article 23 have yet been announced. There is concern, however, that broad provisions of future legislation could seriously curtail freedom of speech and rights of association in Hong Kong. Many non-governmental organizations, particularly human rights and environmentalist groups, are concerned that the HKSAR Government may enact laws barring them from Hong Kong. Journalists are also apprehensive that provisions on "theft of state secrets," if drawn as broadly as are current PRC laws, could restrict or criminalize reporting in Hong Kong on China's economy and politics.

In December 1996, the current Hong Kong Government introduced a draft amendment to the crime ordinance to define subversion and sedition. The law was carefully drafted as a piece of "ideal" legislation, which would protect freedom of speech, while allowing prosecution of acts involving incidents of violence or illegal action. The bill has not passed the Legislative Council, where it was criticized as an effort to usurp the prerogatives of the future HKSAR Government. Even if no further action takes place on the draft bill before reversion, its provisions are expected to serve as a useful benchmark against which future legislation on these issues may be compared.

Adaptation Of Laws

Progress in the Joint Liaison Group continues to be slow in several important areas. Although a recent National People's Congress decision made clear that almost all of Hong Kong Common Law will apply in the HKSAR, Britain and China have yet to agree on the modalities of adapting some current Hong Kong laws to the "constitutional" provisions of the Basic Law for the post-reversion period. Continued delays in cooperation could result in uncertainties in the legal system after reversion; this increases anxiety among some companies that rely on commercial laws, including intellectual property laws.

Agreements In The Joint Liaison Group

As of March 1997, the Joint Liaison Group (JLG) had approved the continued application of close to 200 multilateral treaties currently applied to Hong Kong, either in its own name or through the United Kingdom. It had also approved Hong Kong's continued participation in 31 international organizations. There has also been good progress in the JLG on the approval of Hong Kong's bilateral agreements with other countries (see Section I (D) for a discussion of U.S.-Hong Kong agreements). As of March 1997, the Hong Kong Government had signed 33 bilateral agreements on air services, investment protection, transfer of sentenced persons, mutual legal assistance in criminal matters, and extradition.

People's Liberation Army Hong Kong Garrison

Delegations from China and Britain have reached agreement on stationing a contingent of the People's Liberation Army (PLA) in Hong Kong after reversion, and have continued to discuss the procedures for turning over British military installations to China's incoming military garrison. During 1996, the commander of British Forces visited China to meet the incoming commander of the People's Liberation Army garrison in Hong Kong and hosted a return trip by the PLA commander to Hong Kong. The People's Liberation Army intends to station approximately 8,000 soldiers in Hong Kong, primarily as a symbolic presence to underscore Chinese sovereignty. The force is not expected to engage in public security work or augment the 37,000 police officers and staff of the Hong Kong police, or be permitted to engage in business.

Chek Lap Kok Airport

During 1995, Britain and the PRC agreed on financial terms for the amount of debt and equity for the new Chek Lap Kok Airport and connecting railway. Agreement on financing removed the last major obstacle to completion of the US $21 billion project, which is expected to open in April 1998. In May 1996, the two sides agreed to build a second runway at the airport. The additional runway will cost HK $5 billion and will expand airport capacity to 50 million passengers a year when it opens and close to 90 million passengers a year by 2040.

Container Terminal 9

Construction of Container Terminal 9 (CT-9), a much needed expansion to Hong Kong's port, was approved by Britain and China at a Joint Liaison Group meeting in September, 1996. A major U.S. company and Hong Kong terminal operator, Sea-Land, has a large stake in the project. Beginning in November 1992, China had complained that the Hong Kong Government had not awarded CT-9 contracts by open tender. Most local observers agree, however, that Beijing had opposed the participation in the Sea-Land consortium of Jardine Matheson, a British-run corporation, as much as the method of tendering the project itself. In September 1996, Britain and China reached agreement on CT-9 based on Jardine Matheson's willingness to drop out of the project in return for acquiring two existing container berths.

III. THE NATURE AND EXTENT OF UNITED STATES-HONG KONG CULTURAL, EDUCATION, SCIENTIFIC AND ACADEMIC EXCHANGES, BOTH OFFICIAL AND UNOFFICIAL

The United States, largely through programs of the U.S. Information Agency (USIA), has developed and institutionalized a wide spectrum of cultural, educational, scientific and academic exchanges in Hong Kong. Major programs and activities are summarized below.

A. HONG KONG-AMERICA CENTER

The Hong Kong-America Center has been in operation since April 1993 with support from three Hong Kong universities: Chinese University of Hong Kong, Baptist University, and Hong Kong University. A major mission of the Center is to increase mutual understanding between Hong Kong and the United States. USIA provides a Fulbright scholar each year to serve as a co-director of the Center and has provided support for its programs and activities. Its Board of Governors is comprised of prominent American and Hong Kong leaders from the business and academic communities.

B. ADVISORY SERVICES FOR STUDY IN THE UNITED STATES

An important part of the Hong Kong America Center is the Office of the Institute of International Education (IIE). The IIE provides educational advisory services to thousands of Hong Kong students wishing to pursue studies in the United States. It also organizes academic fairs and briefs American educators on opportunities in Hong Kong. IIE's operations are partially supported by an annual grant from USIA.

In addition to publishing information sheets on higher education opportunities in the U.S., IIE conducts workshops for student adviser of local schools and universities. In addition, with local corporate support, IIE published and distributed a Hong Kong employment guide for Hong Kong graduates of United States educational institutions. USIA has also worked with the Department of Commerce's Foreign Commercial Service to promote U.S. education and training. Through this joint effort, a United States pavilion was set up at Hong Kong's Education and Career Expo in late 1995.

C. THE FULBRIGHT PROGRAM

The Hong Kong Fulbright program has had separate status from the U.K. for many years; it is an important part of official American access to Hong Kong's institutes of higher education. In 1996, the program had three lecturers and five students from the United States. Also in 1996, USIA funded one Hong Kong graduate student and one scholar to study and conduct research in American Studies in the United States. The Hong Kong Government also funded a Hong Kong scholar to lecture in the United States as a distinguished Fulbright Fellow in honor of the 50th anniversary of the program.

D. ARTISTIC AND INTELLECTUAL EXCHANGES

To strengthen American links to the local cultural and artistic community, USIA sponsors visits to Hong Kong by American performing and visual artists and supports presentations by American artists and lecturers at Hong Kong cultural institutions.

E. SUPPORT FOR DEMOCRACY AND FREEDOM OF THE PRESS

To better equip local media with the tools needed to promote professional practices and to address self-censorship concerns in Hong Kong, USIA awarded two grants totaling US $173,421 to the University of South Carolina and the International Center for Community Journalism (ICCJ) in Iowa for professional journalism exchange programs. USIA, the Hong Kong Journalists Association, and the journalism faculty of Chinese University of Hong Kong and Hong Kong Baptist University, selected six Hong Kong broadcast and print reporters for its March-April 1996 program in South Carolina. The second part of the exchange brought six U.S. journalism faculty members to Hong Kong in June 1996 for a week of seminars and workshops on free press issues and professional standards. A similar exchange with ICCJ took place in the fall of 1996.

During the two weeks in November 1996 surrounding the U.S. presidential election, USIA funded a program by the National Committee on U.S.-China Relations for travel by six news executives from Hong Kong newspapers, radio and television stations to observe the U.S. election process and media coverage of the election, and to exchange views on free press and other issues with their American counterparts and U.S. Government officials. The program resulted in a series of reports in several local newspapers about U.S. politics, culture, economics and mass media. During 1996, two news editors also participated in USIA's International Visitors program. One attended the national presidential conventions; the other studied U.S. media and free press practices.

A digital video conference organized by USIA in October 1996 gave Hong Kong journalists and government information officials an opportunity to talk with three prestigious U.S. journalists, one a former Department of State spokesperson, about the relationship between U.S. Government information sources and the U.S. media. The discussion highlighted ethical and other professional standards, and helped the Hong Kong participants to better evaluate U.S. reporting and draw comparisons with local practice. In addition, as the reversion approaches and Hong Kong journalists' concerns for a continued free press grow, USIA is facilitating networking between visiting U.S. policymakers and various journalistic organizations and personnel to monitor the health of Hong Kong's free flow of information.

The U.S. private sector in Hong Kong also plays a constructive role in support of democracy and press freedom. Of particular interest is the Hong Kong office of the Freedom Forum, which conducts a program of seminars, conferences and symposia examining issues facing journalists in Hong Kong and throughout the region. The American Chamber of Commerce in Hong Kong also has an active public information program, which included a series of distinguished speakers in 1996 to address press freedom in Hong Kong. All presentations were advertised and open to the public.

USIA also maintains close liaison with the Foreign Correspondents Club and the News Executives Association, both formally and informally, to keep abreast of development in the local media climate and to look for ways in which the United States could provide further support for press freedom in Hong Kong. In addition, USIA has a constructive professional relationship with Xinhua News Agency, China's de facto representative in Hong Kong. Xinhua and other pro-China media organizations are regularly included in official U.S. press events.

USIA also cooperates regularly with Hong Kong Government information services on public affairs matters. The Hong Kong Government successfully launched two World Wide Web (WWW) sites on the Internet, one of which is devoted to freedom of information. During the development of these projects, USIA arranged a voluntary visitor program for the project officer to study U.S. Government use of the Internet and WWW home page design.

F. PROMOTING AMERICAN STUDIES IN HONG KONG

For several years, the U.S. has sought to obtain a secure place for American Studies in the curriculum of Hong Kong universities. In 1992-1993, an American Studies program was initiated at Hong Kong University (HKU). The degree-granting program is supported by USIA contributions, a Fulbright scholar each year, and a three year (1994-1997) USIA grant between HKU and the University of Kansas. HKU is developing a new Center of American Studies to enhance its research capacity in the area and to develop exchanges with other institutions in East Asia, Europe and the United States. USIA is applying on its behalf for a USIA American Studies Libraries in Foreign Countries initiative collection of around 1,000 volumes.

In the summer of 1996, USIA, the Hong Kong-America Center, and the Yale-China Association, organized a month-long American Studies seminar for 30 scholars from the East Asia region. USIA also coordinated a series of meetings with leaders of American Studies to seek ways to cooperate in the administration of American Studies.

G. INTERNATIONAL VISITOR EXCHANGES

The USIA International Visitor Program supports a wide variety of professional exchanges for mission-sponsored candidates; it sent 10 individuals to the United States in 1996. International visitors included journalists and Hong Kong Government officials from the Customs Department, Attorney General's office, and Electoral office. One group of 18 Regional Councillors and staff from the Hong Kong Regional Council also participated in the Voluntary Visitor Program. The professional programs were aimed at developing greater understanding of and appreciation for the American legal system, press freedoms, and participatory government.

H. UNOFFICIAL ACADEMIC EXCHANGES

Exchanges between Hong Kong and U.S. universities have grown over the last ten years. There are regular exchanges between Yale, Columbia, Johns Hopkins, UCLA, Princeton, the University of Alabama and many other large and small American colleges and universities. Exchanges range from short-term visits by American faculty and summer program for students to ambitious multi-year exchanges of faculty and staff. Joint degrees and collaborative research projects are also growing in number. In general, Hong Kong universities view academic linkages with the United States as profitable exercises involving a practical exchange of ideas and sharing of resources and experiences, as well as a potential deterrent against possible interference in their academic freedom after reversion.

Five to six thousand Hong Kong students go to the United States each year for graduate and undergraduate study. In 1996, the Consulate General issued 4,067 visas for study in the United States and 545 visas for exchange visitors. We estimate that 14,000 Hong Kong students now study in the U.S., and that approximately 60,000 graduates of U.S. institutions live and work in Hong Kong. The Consulate General actively supports student exchanges by supporting student counseling, arranging programs for visiting American faculty and board members, continuing liaison with alumni groups in Hong Kong, supporting educational fairs, and advising on U.S. visa requirements.

I. UNOFFICIAL EXCHANGES -- TOURISM AND BUSINESS TRAVEL

In 1996, the U.S. Consulate General issued over 183,000 nonimmigrant visas to residents of Hong Kong. An average of almost 2,000 Americans enter Hong Kong for business or pleasure every day, contributing to an annual tourist influx from the U.S. of well over 700,000 people. Although accurate statistics are unavailable, we estimate that close to 500,000 Hong Kong residents visited the United States in 1995 and 1996.

J. LIBRARY

USIA's American research service in the U.S. Consulate General continues to be the primary source of information about the United States in Hong Kong. Budget cuts have forced it to transform itself from a traditional walk-in library open to the general public to an electronic information hub which relies heavily on on-line databases and CD-ROM resources. It has had to cut back on number of clients it serves; it now focuses on Hong Kong decision-makers in Government, media, and academia.

USIA's American Research Service also maintains the Consulate General web page, which provides Internet access to a wealth of information about U.S. policy consular services, other Consulate General agencies, and U.S. Government regulations, society, economy, and politics. A special page on matters related to the July 1, 1997 handover has been added.

IV. THE LAWS OF THE UNITED STATES WITH RESPECT TO WHICH THE APPLICATION OF SECTION 201 (A) HAS BEEN SUSPENDED PURSUANT TO SECTION 202 (A) OR WITH RESPECT TO WHICH SUCH A SUSPENSION HAS BEEN TERMINATED PURSUANT TO SECTION 202 (D), AND THE REASONS FOR THE SUSPENSION OR TERMINATION, AS THE CASE MAY BE

This section does not apply until on or after July 1, 1997.

V. TREATIES AND OTHER INTERNATIONAL AGREEMENTS WITH RESPECT TO WHICH THE PRESIDENT HAS MADE A DETERMINATION DESCRIBED IN THE LAST SENTENCE OF SECTION 201(B), AND THE REASONS FOR EACH SUCH DETERMINATION

This section does not apply until on or after July 1, 1997.

VI. SIGNIFICANT PROBLEMS IN COOPERATION BETWEEN HONG KONG AND THE UNITED STATES IN THE AREA OF EXPORT CONTROLS

There are no significant problems between Hong Kong and the United States in export control cooperation. Hong Kong and U.S. Government officials continue to exchange information, ranging from routine licensing information to in-depth exchanges on specific export control issues such as diversions. In May 1996, the U.S., Hong Kong, and U.K. Governments held tripartite consultations on the status of Hong Kong's export control regime. At the invitation of the United States, four Hong Kong export control experts participated in a Missile Technology Control Regime (MTCR) seminar in July that focused on transshipment issues; the Hong Kong delegation made a presentation to other non-MTCR members on balancing nonproliferation and commercial and economic interests. In August, the Departments of Commerce, State, and Energy arranged a week-long program with Hong Kong Government licensing, telecommunications, and chemical control specialists engaged in export control work. In September, a team of U.S. export control experts representing seven different agencies provided targeted briefings to Hong Kong Government counterparts on recent changes to the various export control regimes, U.S. legislation governing strategic trade control, and case studies of specific export control violations and trends. Since November, a strategic industries licensing official from the Department of Commerce has been detailed to Hong Kong Government export control agencies; he provides advice and technical assistance on matters related to Hong Kong's strategic export control and strategic commodity classification.

Hong Kong has a long history of effective strategic trade controls; it first began licensing trade in sensitive goods in 1950. In view of its effective export control regime, Hong Kong has benefited since 1992 from the license-free import of most controlled high technology dual-use items under section 5(k) of the U.S. Export Control Act. The legal basis of Hong Kong's export control regime is the 1955 Import and Export (Strategic Commodities) Ordinance, which governs imports or exports of weapons or military-related equipment, nuclear, chemical, or dual-use items. Thus, while not a signatory itself because it is not a state, Hong Kong controls strategic commodities according to the various non-proliferation regimes: the Nuclear Nonproliferation Treaty, the Missile Technology Control Regime, the Australia Group, the Nuclear Suppliers' Group, and the control lists of the former COCOM. The Hong Kong Import and Export Ordinance is regularly reviewed and amended as necessary to incorporate the most up-to-date provisions agreed by the different regimes.

Hong Kong's export licensing procedures are two-phased. In the first phase, a technical assessment of the product is made by Hong Kong Government engineers to determine if the item is controlled and to evaluate its technical capabilities. This technical assessment is followed by a risk assessment that, in the case of particularly sensitive goods or items going to sensitive markets, requires detailed end-user inquiries. These end-user statements are then evaluated in light of the technical capabilities of the goods. A computerized Hong Kong "watch list" is also employed to guard against exports to countries or individuals of special proliferation concern.

Hong Kong's Customs and Excise Department carries out preventative controls that include routine checks at entry/exit points and searches of vehicles and vessels to ensure that all strategic trade shipments have been approved by the Hong Kong Government. Both random and targeted searches are conducted, during which cargo manifests are scrutinized. Hong Kong officials also conduct pre- and post-shipment checks at various locations to certify that strategic goods are actually delivered to the proper destinations and used for the purposes described.

Under provisions of the Joint Declaration and the Basic Law, Hong Kong will remain a separate customs territory after 1997. Hong Kong expects and is actively planning its export control regime with the understanding that this autonomy will extend to trade in strategic goods.

VII. THE DEVELOPMENT OF DEMOCRATIC INSTITUTIONS IN HONG KONG, INCLUDING DETAILED INFORMATION ON THE STATUS OF, AND OTHER DEVELOPMENTS AFFECTING, IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION ON THE QUESTION OF HONG KONG

Hong Kong is a free society with most individual freedoms and rights protected by law and custom. Hong Kong's constitutional arrangements are defined by the Letters Patent and Royal Instructions issued by the United Kingdom. Although basic oversight responsibilities rest with the British Parliament, Hong Kong largely controls its own internal affairs in practice and enjoys broad autonomy in its international relations. As subjects of a British Crown colony, however, Hong Kong people do not have the right to choose the Governor. The Governor is appointed by and serves at the pleasure of the British Crown; he is advised on policy by an Executive Council, which he appoints. The Governor has ultimate control of the administration of Hong Kong but, by convention, rarely exercises his full powers. The number of District Board, Municipal and Legislative Council seats open to direct election has been expanded since the first elected members entered the Legislative Council in 1985.

A. THE BASIC LAW AND ITS CONSISTENCY WITH THE JOINT DECLARATION

The Joint Declaration is a bilateral agreement between two sovereign nations, the United Kingdom and the People's Republic of China. The United States is not a party. Generally, the United States does not offer technical legal interpretations of agreements to which it is not a party. Although some critics in Hong Kong contend that certain elements of the Basic Law violate the Joint Declaration, neither party to the agreement has done so. In such cases, it is inappropriate and premature for the United States to attempt definitive legal pronouncements as to the meaning of disputed provisions of the Joint Declaration, or whether one of the parties may have breached its obligations. Such speculative or premature pronouncements by the United States could be inconsistent with the interpretations and understandings shared by the contracting parties themselves. Accordingly, any U.S. judgment regarding consistency of the Joint Declaration and Basic Law should await implementation of the Basic Law and the statements and actions of the parties themselves.

B. THE OPENNESS AND FAIRNESS OF ELECTIONS TO THE LEGISLATURE

Prior to 1985, all seats in the Legislative Council (Legco) were appointed by the Governor rather than elected. Elections in 1985 and 1991 expanded the numbers of legislators returned by voters. In 1992, Governor Patten proposed measures toward a more accountable and democratic political system. In June 1994, following seventeen rounds of unsuccessful talks between Britain and China, and over Beijing's strong objections, the Hong Kong Legislative Council approved proposals to: lower the voting age from 21 to 18; open all District Board and Municipal Council seats to direct election, and significantly increase the number of voters selecting legislature seats through indirect elections. In addition, the Hong Kong Government implemented legislation abolishing all appointed legislative seats for the 1995 election.

The 1994 and 1995 elections for District Board, Municipal Council, and Legislative Council seats were conducted on the basis of Governor Patten's reform package. The September 1995 Legislative Council elections were fair, open, and resulted in the most representative and democratic legislative body in Hong Kong's history. Even pro-Beijing politicians disputed early charges in the local Beijing-controlled press that the elections had been unfair. Legislative Council members were chosen in three groups in the September elections:

-- 20 seats from geographic constituencies -- 920,000 of the 2.57 million registered voters cast ballots, a 36 percent turnout. Reflecting the popularity of the Democratic Party, 12 Democratic Party members were elected from the geographic constituencies. Although pro-Beijing candidates won only two seats, they received close to 16 percent of the votes cast.

-- 30 seats from "functional" constituencies -- 460,694 of the 1.15 million registered voters cast ballots, a 40 percent turnout. The functional constituencies are filled by representatives chosen by large sectors of the Hong Kong populace divided by occupation or industry.

-- 10 seats from the electoral college -- a group composed of 283 elected District Board and Municipal Council members.

The present Legislative Council consists of 60 total seats and includes 19 lawmakers from the Democratic Party; 6 "pro-Beijing" members from the Democratic Alliance for the Betterment of Hong Kong (DAB); 1 member from the Federation of Trade Unions; 10 members from the "pro-business" Liberal Party; 4 members from the Association for Democracy and People's Livelihood, and 20 independents. In races for the geographic constituencies, the category that most closely reflects the overall popularity of political parties in Hong Kong, the Democratic Party and its independent allies won about 60 percent of the vote and 80 percent of the seats.

Although the Patten reforms did not envision a fully representative, democratically elected government, recent elections reflect a representative government through universal franchise at the local District Board and Municipal Council levels. Since the Basic Law (Article 68) stipulates that the "ultimate aim" of gradual and orderly political change in Hong Kong is the election of all members of the Legislative Council by universal suffrage, it may become a more democratically representative legislative body some years after reversion than it is today.

China has, however, continued its strong opposition to Governor Patten's election reforms and the bodies they produced. China insists the crux of its disagreement is not the pace of democratization, but the failure of the British to reach a mutually acceptable position on Hong Kong's election system changes before unilaterally making the reform package public. Beijing accuses Governor Patten of violating the Joint Declaration and past agreements and understandings on the question of elections in Hong Kong. It points to the Joint Declaration's assurance that "the laws currently in force in Hong Kong will remain basically unchanged" and to confidential exchanges between London and Beijing in 1991. In these exchanges, according to China's interpretation, then Foreign Secretary Hurd agreed to adopt electoral procedures for the 1995 Legislative Council elections that were acceptable to China, but more modest than the proposals Governor Patten and the Hong Kong Government later enacted.

Due to its disagreements with Governor Patten's reforms, Beijing repeatedly stated that the legislature elected in 1995 and the district and municipal bodies chosen in 1994 did not have a mandate to serve beyond June 30, 1997. In August 1994, the Standing Committee of China's National People's Congress passed a unanimous resolution declaring that the Legislative Council, Urban Council, Regional Council and District Boards would end on June 30, 1997. In March 1996, the Preparatory Committee announced that a provisional legislature would be formed after the selection of the first Chief Executive. In December 1996, the 400-member Selection Committee, a body chosen by the Preparatory Committee from among the 5,800 Hong Kong residents who submitted self-nominations, voted for the members of the 60-seat provisional legislature. Those selected included 33 of the 34 current legislative councillors who sought inclusion. In addition, ten candidates who had been defeated in the September 1995 Legco elections were chosen. All Democratic Party members, with the exception of one who was later expelled from the party, and most pro-democracy independents refused to participate in the process and chose not to seek seats on the provisional body.

Both British and Hong Kong Government officials have criticized China's decision to disband the current Legislative Council as unnecessary and as a potential threat to Hong Kong's future autonomy and continued democratic development. They have challenged Beijing to describe how a provisional legislature is consistent with the Joint Declaration requirement of an elected legislature in Hong Kong, and have invited China to allow the International Court of Justice to adjudicate the issue. For its part, Beijing points out that 33 of the 34 current Legislative Council members who sought inclusion won seats on the provisional body and constitutes a majority of the existing Legco. China has promised that the provisional legislature would serve for no more than a year, and has committed to hold Legislative Council elections prior to July 1, 1998 based on a new election law to be adopted by the provisional legislature. It has also said that a broad spectrum of candidates and parties will be allowed to participate in the 1998 elections, including members of the Democratic Party.

The United States has expressed regret, both publicly and privately, that Britain and China were unable to reach agreement on arrangements for the transition between the current Legislative Council and the first legislature for the Hong Kong Special Administrative Region. Because of our support for the development of open, accountable, and democratic institutions, and for the sake of continuity and stability in Hong Kong, the United States often stated its belief that the current Legco members should have been allowed to serve through the transition.

China's decision instead to create a provisional legislature raises serious concerns. The process for choosing a provisional legislature was not based upon an open and fair election and did not produce a legislature that reflects the broad representative will of the Hong Kong people. Although the United States has not endorsed any particular electoral law or set of proposals, we believe that Hong Kong's electoral reforms were a worthy step toward a fully-elected legislative body -- an objective stated in China's own Basic Law. We have thus made clear our belief that China's decision to replace the current elected Legislative Council was unjustified and unnecessary. Moreover, since the provisional legislature fails to fulfill the pledge in the Joint Declaration that Hong Kong's legislature will be constituted by elections, the United States has urged that the provisional legislature be replaced as soon as possible by a body elected on the basis of open and fair elections, and that its mandate be limited until such elections are held.

C. THE OPENNESS AND FAIRNESS OF THE ELECTION OF THE CHIEF EXECUTIVE AND THE EXECUTIVE'S ACCOUNTABILITY TO THE LEGISLATURE

On December 11, 1996, Hong Kong businessman C.H. Tung was elected by the 400-member Selection Committee to be Hong Kong's first Chief Executive. Tung received 320 votes in the final balloting, significantly more than his two principal opponents -- former Hong Kong Chief Justice Sir T.L. Yang, who received 42 votes, and Hong Kong businessman Peter Woo, who received 36 votes. In the campaign for Chief Executive, all candidates made efforts to be accessible and explain their views to the public and the members of the Selection Committee. Public opinion polls between December 1996 and March 1997 indicated that Tung enjoyed broad popular support in Hong Kong, initially receiving higher approval ratings than Governor Patten

Like the present Governor of Hong Kong, the HKSAR Chief Executive's mandate to rule derives from appointment by the sovereign rather than by general election. Unlike colonial Governors, however, the Basic Law provides that the Chief Executive must be a resident of Hong Kong and must be appointed by Beijing from candidates nominated by selected Hong Kong people. C.H. Tung's selection as the first HKSAR Chief Executive marked the first time in Hong Kong's history that a Hong Kong resident was chosen to administer Hong Kong. His selection was thus more responsive to the will of the people of Hong Kong than the selection of colonial Governors had been. The Basic Law states that "the ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by the broadly representative nominating committee in accordance with democratic procedures." Future elections of Hong Kong Chief Executives may thus be more open and representative of public opinion in Hong Kong.

The nomination process for Chief Executive was structured to avoid presenting Beijing with a candidate it could not accept. China's 150-person Preparatory Committee was responsible for establishing the Selection Committee which, in turn, chose the Chief Executive. Mainland China representatives controlled over one third of the votes on the Preparatory Committee, and business leaders and pro-Beijing political figures predominated even among the 93 Hong Kong members. Democratic Party members and most critics of Beijing were excluded from the Preparatory Committee and thus had no voice in choosing the Selection Committee, which was composed of 400 representatives from Hong Kong professional, social, and business groups.

Since the HKSAR will be an executive-led rather than a parliamentary system, the Chief Executive will not be fully accountable to the legislature. The Basic Law does, however, give the legislature power to pass bills opposed by the Chief Executive. If the Chief Executive dissolves the legislature (which may be done only once during a five-year term of office), calls new elections, and loses a vote on the original bill by a two-thirds majority, the Basic Law requires the Chief Executive to resign. The Basic Law also allows the legislature to impeach the Chief Executive for "serious breach of law or dereliction of duty."

D. THE TREATMENT OF POLITICAL PARTIES

The Hong Kong Government's decision in 1991 to allow direct elections for local District Board and some Legislative Council seats was a major impetus for the growth of political parties, which had been forbidden by the colonial government until the late 1980's. Three major parties -- the Democratic Party, the Democratic Alliance for the Betterment of Hong Kong (DAB), and the Liberal Party -- and one smaller group, the Association for Democracy and People's Livelihood, have actively participated in the election process. Overall, Hong Kong's political parties are very small and are only beginning the process of building local party organizations. The Democratic Party, for example, despite its widespread popular support in Hong Kong, had only 600 party members at the beginning of 1997. Even the DAB, which receives support from labor unions and organizations, has only slightly more than 1,000 members.

There are no limitations in the Joint Declaration or the Basic Law on political parties, although the establishment of ties with overseas political organizations is prohibited under the Basic Law. All of Hong Kong's existing parties intend to remain active, contest elections, and continue to play a role in expanding representative institutions in Hong Kong after 1997. Some in Hong Kong have expressed concern that China may use a broad definition of "subversive" activities or some sort of loyalty oath to bar certain parties or individuals critical of Beijing from participating in elections. During 1996, however, Beijing took no action to confirm these fears.

The United States continues to encourage leaders of Hong Kong political parties to meet with visiting Members of Congress, participate in the International Visitors Program, and maintain contacts with non-governmental organizations to provide international recognition of and support for local party development. The Consulate General in Hong Kong maintains good contacts with the full spectrum of public and political opinion in Hong Kong.

E. THE INDEPENDENCE OF THE JUDICIARY AND ITS ABILITY TO EXERCISE THE POWER OF FINAL JUDGMENT OVER HONG KONG LAW

Hong Kong's independent judiciary operates according to the precepts of the Common Law, with certain variations. In general, Hong Kong's statutory laws and common law traditions provide substantial and effective legal protection against arbitrary arrest or detention and respect the right to a fair public trail. The Joint Declaration and Basic Law specify that the current judicial system will continue after reversion.

In 1991, China and Britain agreed in principle to establish a Court of Final Appeal (CFA) before reversion to replace the British Privy Council as the highest final arbiter of cases brought in Hong Kong courts. In June 1995, following lengthy and difficult negotiations, China and Britain agreed on the details of the Court's establishment. After heated Legislative Council debate in July 1995, in which some accused Britain and China of violating the Joint Declaration in their agreement on the CFA, the Court of Final Appeal Ordinance was passed. In accordance with the Basic Law and the CFA Ordinance, the Court will be established on July 1, 1997.

The Court of Final Appeal will have power of final judgment over Hong Kong law. According to the Basic Law and the Sino-British agreement establishing the CFA, however, Hong Kong courts will have "no jurisdiction over acts of State such as defence and foreign affairs." Moreover, the Basic Law requires Hong Kong judges to seek interpretations by the National People's Congress in Beijing with regard to matters which are the "responsibility of the Central People's Government" or concern "the relationship between the Central authorities and the [HKSAR]." Some in Hong Kong are concerned that, if broadly applied and loosely interpreted, these exceptions to the Court of Final Appeal's power of final jurisdiction could be used to limit the autonomy of Hong Kong's judiciary after reversion.

Increased use of Cantonese and less use of English in the courts is expected to lead to changes on the bench. At present, 60% of Hong Kong's judges are expatriates, few of whom can conduct legal proceedings in Chinese. It is estimated that, within several years, 80% of criminal cases will be conducted completely in Cantonese. Some observers predict that the Common Law tradition of English-language precedent could weaken as bilingual Cantonese-speaking judges replace those who speak only English.

The continuation of Hong Kong laws and legal system beyond reversion is a key factor in Hong Kong's ability to maintain its promised high degree of autonomy. Hong Kong's transparent legal system and predictable regulatory climate have been important factors in attracting the local and international businesses that have fueled Hong Kong's success and prosperity. The United States believes the establishment of the CFA and the continuation of Hong Kong's independent judiciary are essential in maintaining broad local and international confidence in Hong Kong.

F. THE BILL OF RIGHTS

The Hong Kong Bill of Rights Ordinance was enacted in June 1991 to codify the rights elaborated in the International Covenant on Civil and Political rights (ICCPR) and the International covenant on Economic, Social, and Cultural Rights (ICESAR). These treaties were promulgated by the United Nations in 1966 to obligate signatories to adopt the general principles in the Universal Declaration of Human Rights. The United States believes the Bill of Rights Ordinance institutionalizes internationally recognized human rights standards and that its continued application will contribute to the protection of civil rights, the continued rule of law, the stability of Hong Kong, and the preservation of its way of life.

Before the enactment of the Bill of Rights Ordinance, the ICCPR and the ICESAR were implemented in Hong Kong, as in the United Kingdom, through a combination of Common Law, legislation, and administrative measures (Britain had, however, reserved the right not to apply certain provisions of the Covenants to Hong Kong). But, the 1989 military assault on Tiananmen Square had a profound effect on many Hong Kong residents -- a million of whom marched to protest the killings in Beijing. It provided the impetus to institutionalize Hong Kong's body of human rights law in a comprehensive statute that would unambiguously establish the primacy of basic human rights guarantees. The Bill of Rights Ordinance was the result of this effort.

The Joint Declaration provides that the ICCPR and the ICESAR as applied to Hong Kong will remain in force. Although the PRC is not a signatory to either covenant, the Basic Law reiterated this assurance with the condition that the covenants would be implemented through the laws of the HKSAR. China has not agreed to submit the reports required by the ICCPR and ICESAR on the human rights situation in Hong Kong. In its view, while the covenants will apply in Hong Kong after reversion, the PRC is not obliged to file the required reports as it is not a signatory to the covenants themselves. Beijing's refusal to commit itself to reporting to the United Nations on human rights in Hong Kong has caused concern in Hong Kong.

The UN Human Rights Committee reported on the continued application of the ICCPR at its session in October 1995; it declared in respect to Hong Kong that "human rights treaties devolve with territory, and States continue to be bound by the obligations under the Covenant entered by the predecessor State . . . . Once the people living in a territory find themselves under the protection of the ICCPR, such protection cannot be denied to them by virtue of . . . that territory . . . coming within the jurisdiction of another State." The Human Rights Committee's position has been interpreted as signaling it would accept reports on human rights in Hong Kong under the Covenant even though China, as a non-signatory to the Covenant, would not have the competency to report to the Human Rights Commission under the usual practice.

China has also expressed concern about certain portions of the Bill of Rights Ordinance, in particular its provisions requiring repeal of all Hong Kong laws which contravene it or are inconsistent with it. Beijing argues that the Basic Law is the supreme law for the HKSAR and cannot be made subordinate to the Bill of Rights Ordinance or any other Hong Kong law. It also has maintained that the Basic Law adequately protects human rights, thereby making the broad pronouncements of the Bill of Rights Ordinance unnecessary. China also criticized Britain for making a unilateral change to Hong Kong law in violation of the Joint Declaration commitment that the "laws currently in force" for Hong Kong would remain "basically unchanged." China argues that "basic" changes to the laws are acceptable only if China's prior assent is obtained.

In October 1995, the Preliminary Working Committee (an advisory group appointed by Beijing to work on transition issues before the Preparatory Committee was named) proposed a selective repeal of portions of the Bill of Rights Ordinance. This proposal generated a strong negative reaction in Hong Kong outside the Beijing-controlled press. On February 1, 1977, the Preparatory Committee seconded the PWC's recommendation, calling for China to amend the Bill of Rights Ordinance to remove those sections giving it overriding power over all other laws. On February 23, 1997, the Standing Committee of the National People's Congress approved the recommendation of the Preparatory Committee. In the end, although it had originally entertained proposals to scrap the entire Bill of Rights Ordinance after reversion, China focused only on two sections: the provisions giving the Bill of Rights Ordinance overriding power over all other legislation and requiring repeal of all laws which contravene or are inconsistent with it.

The United States has made clear its views that the protection of civil liberties is an important element of the Joint Declaration and the Basic Law. We believe that civil liberties and basic freedoms are critical components of Hong Kong's way of life and are vital to continuing confidence in Hong Kong. China's actions regarding the Bill of Rights Ordinance and related laws do not help foster confidence and stability in Hong Kong and send the wrong message to the people of Hong Kong and the international community. Thus, we have expressed concern, both publicly and privately, over attempts to weaken civil liberties and basic freedoms in Hong Kong and have called on Beijing to allow the post-reversion Hong Kong Government and courts to debate and decide the amendment and implementation of Hong Kong laws.

G. FREEDOM OF EXPRESSION

Hong Kong has a tradition of free speech and a free press. Political debate is dynamic and raucous, and a wide range of political opinion and commentary is well represented in the media. Numerous views and opinions, including those independent or critical of the U.K., Hong Kong, or PRC Governments, are aired in the mass media, in public fora, and by political groups. Diverse viewpoints were freely expressed, for example, during the "campaign" for the first Chief Executive during the fall of 1996. Various candidates views on the issues were widely reported, analyzed, compared and evaluated. The strengths and weaknesses of candidates were openly discussed. Talk radio programs and publications like "Mad Dog Daily" appeared to operate without limitation in making criticisms of local leaders and China's policies toward Hong Kong.

Hong Kong people continue to speak freely to the press, and there are no taboo subjects in the media. Self-censorship is widely perceived to exist, but it remains difficult to find specific instances in which self-censorship killed a story or suppressed an editorial. The pressure appears to remain more subtle, coming not as a direct order to refrain from writing, but as a subjective exercise of special care toward topics of particular sensitivity such as PRC leadership dynamics, Taiwan, Tibet, or military activity. Chinese language journalists in` Hong Kong report a pervasive if tacit understanding that editors expect those reporting on mainland China to be particularly sure of their facts and careful in their wording. Analysts have also noted that many Chinese-language papers that originally criticized the provisional legislature changed their position after the body became a reality, and now support it. This may represent a form of self-censorship, or it may reflect a pragmatic approach toward unfolding events.

Comments made in 1996 by China's Hong Kong and Macau Affairs Director Lu Ping and China's Foreign Minister (and Preparatory Committee Chairman) Qian Qichen reinforced the concern about restrictions on press freedoms in Hong Kong after reversion. Lu and Qian have each emphasized that the Basic Law guarantees press freedom in Hong Kong after the change of sovereignty. But they have also stressed that this freedom has to be regulated by law, and that certain topics are not to be "advocated" after July 1, 1997. Qian's comments in an October interview in the Asian Wall Street Journal were particularly noteworthy: he said that media coverage which advocated the independence of Hong Kong, Taiwan or Tibet, or which contained "rumors or lies," would not be permitted. The comments drew immediate, negative reaction in Hong Kong. In February, the editor of a local communist paper said publicly that Lu and Qian had been "mistaken," and only language which "incited" opposition on issues where a "clear and present danger" existed would be restricted. No legislation has been proposed to regulate the media in Hong Kong after reversion; thus, whatever ultimate restrictions, if any, will be imposed remains to be seen.

Hong Kong press coverage of the PRC continues to be extensive and is frequently critical. Some stories which are sensitive for China, such as the bombing in Xinjiang in early 1997, broke first in the Hong Kong papers. Although there has been neither a sharp increase nor decrease of critical coverage over the past year, Hong Kong journalists based in or traveling to China face certain risks. Beijing requires journalists to apply for permission to do any reporting in China. Those who bypass official channels -- which many feel they must do to get the stories they want -- run a risk of violating regulations. At least one Hong Kong publication, "Apple Daily" (whose owner, Jimmy Lai offended Beijing's leadership several years ago with an unflattering reference to Premier Li Peng) has never been able to obtain official permission to cover events in mainland China. Indeed, many in Hong Kong believe that Lai is the target of PRC retaliation against his other business interests; he has been unable, for example, to locate a broker to take his publishing empire to an initial public offering on the Hong Kong stock market.

VIII. THE NATURE AND EXTENT OF HONG KONG'S PARTICIPATION IN MULTILATERAL FORUMS

A. INTERNATIONAL ORGANIZATIONS IN WHICH HONG KONG'S CONTINUED PARTICIPATION HAS BEEN AGREED IN THE JLG

Asian Development Bank (ADB)
Asian And Pacific Development Center (APDC)
Asia-Pacific Postal Union (APPU)
Asia-Pacific Telecommunity (APT)
Customs Cooperation Council (CCC)
Economic And Social Commission For Asia And The Pacific (ESCAP)
Food And Agriculture Organization (FAO)
General Agreement On Tariffs And Trade (GATT)
Intergovernmental Typhoon Committee (ITC)
International Atomic Energy Agency (IAEA)
International Bank For Reconstruction And Development (IBRD)
International Civil Aviation Organization (ICAO)
International Criminal Police Organization (INTERPOL)
International Development Associations (IDA)
International Finance Corporation (IFC)
International Hydrographic Organization (IHO)
International Labor Organization (ILO)
International Maritime Organization (IMO)
International Mobile Satellite Organization (INMARSAT)
International Monetary Fund (IMF)
International Telecommunications Satellite Organization (INTELSAT)
International Telecommunication Union (ITU)
International Textiles And Clothing Bureau (ITCB)
Network Of Aquaculture Centers In Asia And The Pacific (NACA)
Statistical Institute For Asia And The Pacific (SIAP)
United Nations Commission On Narcotic Drugs (UNCND)
United Nations Conference On Trade And Development (UNCTAD)
Universal Postal Union (UPU)
World Health Organization (WHO)
World Intellectual Property Organization (WIPO)
World Meteorological Organization (WMO)
World Trade Organization (WTO)

B. INTERNATIONAL ORGANIZATIONS IN WHICH HONG KONG CURRENTLY PARTICIPATES, BUT JLG APPROVAL FOR POST-1997 PARTICIPATION REMAINS PENDING

Asian Productivity Organization (APO)
United Nations Development Program (UNDP)

C. OTHER ORGANIZATIONS IN WHICH HONG KONG CURRENTLY PARTICIPATES, AND WHICH JLG AGREEMENT IS NOT REQUIRED FOR HONG KONG'S CONTINUED PARTICIPATION

Asia Pacific Economic Cooperation (APEC)
Australian Council Of Auditors-General And The International Consortium On Government Financial Management
Commonwealth Association Of Tax Administrators
East Asian Regional Branch Of International Council Of Archives (EASTICA)
Eastern Regional Organization For Planning And Housing (EAROPH)
Financial Action Task Force (Established following the G-7 Summit in July 1989)
Index Foundation
International Association Of Assessing Officers
International Association Of Insurance Fraud Agencies (IAIFA)
International Association Of Insurance Supervisors (IAIS)
International Association Of Lighthouse Authorities
International Association Of Ports And Harbors
International Consortium On Government Financial Management
International Council On Archives (ICA)
International Function Point Users Group
International Government Printers' Association
International Ombudsman Institute
International Organization For Standardization
International Structured Systems Analysis And Design Method Users Group
National Conference Of Standards Laboratories
Organization For Economic Cooperation And Development (OECD)
-- OECD Committee On Financial Markets
-- OECD Trade Committee
Permanent International Association Of Road Congress (PIARC)
Quality Assurance Institute
Transport Research Board
United Nations Environmental Program (UNEP)
-- The Global Environment Information Exchange Network
-- The Network For Environmental Training At Tertiary Level In Asia And The Pacific
Fund Of The United Nations International Drug Control Program

D. ORGANIZATIONS IN WHICH THE HKSAR WILL BE A FULL MEMBER

Asian Development Bank (ADB)
Customs Cooperation Council (CCC)
General Agreement On Tariffs And Trade (GATT)/World Trade Organization (WTO)
International Textiles And Clothing Bureau (ITCB)
Network Of Aquaculture Centers In Asia And The Pacific (NACA)
World Meteorological Organization (WMO)

E. ORGANIZATIONS IN WHICH THE HKSAR WILL PARTICIPATE AS PART OF THE PRC DELEGATION

Asia-Pacific Postal Union (APPU)
Food And Agriculture Organization (FAO)
International Atomic Energy Agency (IAEA)
International Bank For Reconstruction And Development (IBRD)
International Civil Aviation Organization (ICAO)
International Criminal Police Organization (INTERPOL)
International Development Association (IDA)
International Finance Corporation (IFC)
International Hydrographic Organization (IHO)
International Labor Organization (ILO)
International Mobile Satellite Organization (INMARSAT)
International Monetary Fund (IMF)
International Telecommunications Satellite Organization (INTELSAT)
International Telecommunication Union (ITU)
United Nations Commission On Narcotic Drugs (UNCND)
United Nations Conference On Trade And Development (UNCTAD)
Universal Postal Union (UPU)
World Intellectual Property Organization (WIPO)

F. ORGANIZATIONS IN WHICH THE HKSAR WILL BE AN ASSOCIATE MEMBER

Asian And Pacific Development Center (APDC)
Asia-Pacific Telecommunity (APT)
Economic And Social Commission For Asia And The Pacific (ESCAP)
Intergovernmental Typhoon Committee (ITC)
International Maritime Organization (IMO)
Statistical Institute For Asia And The Pacific (SIAP)
World Health Organization (WHO)

NOTE: IT HAS NOT YET BEEN DETERMINED IN WHAT CAPACITY HONG KONG WILL PARTICIPATE IN ORGANIZATIONS LISTED IN SECTIONS B OR C.

Appendices

1. A Chronology Of Significant Events In Hong Kong: April 1, 1996 - March 31, 1997.
2. Official Visitors To Hong Kong: April 1, 1996 - March 31, 1997.

APPENDIX A: Chronology of Major Events in Hong Kong since March 1996

March 1996

24 -- The Preparatory Committee votes, with one dissenting vote and one absentee, to establish a 60-seat provisional legislature in place of the current Legislative Council on July 1, 1997. Governor Patten calls it a "black day for democracy".

April

11-19 -- Director of Hong Kong and Macau Affairs Office Lu Ping visits the territory to hold a series of consultative exercises on the formation of a 400-member Selection Committee. Members of the Democratic Party are barred from attending the consultations.

13 -- Lu Ping holds a breakfast meeting with consular corps at Xinhua's villa at Stanley. Former Consul General Richard Mueller attends the meeting and holds talks with Lu Ping.

18 -- Chief Secretary Anson Chan meets Lu Ping at a reception hosted by the Director of the local Xinhua office Zhou Nan

25 -- Chief Secretary Anson Chan visits Beijing to discuss with Lu Ping the continuity of civil service and cooperation between Hong Kong government and the Preparatory Committee.

May

15 -- China's National People's Congress Standing Committee approves a six-point explanatory note on the enforcement of PRC nationality law in Hong Kong after July 1. It states that Hong Kong residents of Chinese descent who were born in HK or China will be considered Chinese nationals, and that holders of BDTC or BNO or British Nationality Scheme passports are not entitled to British consular protection after the handover.

24-25 -- The third plenary session of the Preparatory Committee approves the general principle for establishing a 400-strong Selection Committee, which is tasked with selecting the first Chief Executive and a 60-member provisional legislature.

June

3 -- Shipping magnate C. H. Tung resigns from the Executive Council, clearing his way to stand for the post of Hong Kong's first Chief Executive.

4 -- Tens of thousands of Hong Kong people attend a candlelight vigil in Victoria Park to commemorate those who died in the June 4 military crackdown in Tiananmen Square seven years ago. At the vigil, organizers erect a replica of the 'Goddess of Democracy' statue built by Chinese students at Tiananmen square.

5-7 -- The 36th plenary session of the Sino-UK JLG meet in London. The two sides approve air service agreements between Hong Kong-Taiwan and Hong Kong-Italy. Differences remain on several key issues, including the transfer of government archives, the handover ceremony, provisional legislature, and container terminal 9.

July

1 -- The start of the last year of British rule is marked by eight pro-democracy protesters being detained by armed Chinese guards and questioned when they arrive in Beijing to deliver a petition with 60,000 signatures attacking the establishment of the provisional legislature.

5 -- Immigration Department Director Laurence Leung resigns suddenly. A subsequent legislative inquiry into his departure reveals he was forced to resign.

August

9-10 -- The Preparatory Committee holds its fourth plenary session in Beijing and spells out details on the implementation of Article 24 of the Basic Law concerning the definition of permanent residents of the Special Administrative Region. Vice Premier Qian Qichen delivers a closing speech stating that Hong Kong people holding different views on the pace of democratization can sit down and talk. Qian's speech is widely interpreted as a China's offer for dialogue with Hong Kong pro-democracy figures.

26 -- Five pro-democracy legislators, including independents Emily Lau and Elizabeth Wong and union leaders Lau Chin-shek and Lee Cheuk-yan, formally set up a political group called "The Frontier" to defend human rights and democracy in the territory.

September

3 -- Chief Justice Sir T. L. Yang announces he is stepping down in order to run for the Chief Executive post.

17-19 -- The Sino-UK JLG holds its 37th plenary session in Beijing and the two sides reach agreements on CT9, surrender of fugitive offenders between Hong Kong and the United States, and air services between HK-Burma and HK-Thailand.

19 -- C H. Tung expresses an interest in running for the Chief Executive post, but stops short of announcing his candidacy.

26 -- British Foreign Secretary Malcolm Rifkind and his Chinese counterpart Qian Qichen meet in New York. The two reach an accord on the establishment of a British Consulate General in Hong Kong and on the relevant documents relating to the handover ceremony.

30 -- Hong Kong businessman Peter Woo declares his bid for the first Chief Executive slot.

October

2 -- Governor Patten, in his annual policy address to the Legislative Council, challenges China to show the world its handover promises will be honored.

4 -5 -- The Preparatory Committee holds its fifth plenary session in Beijing to approve the rules and procedures for the selection of the first SAR Chief Executive.

18 -- C. H. Tung ends months of speculation by confirming his candidacy for the first Chief Executive position.

26 -- Chief Secretary Anson Chan declares she will not run for Chief Executive.

November

2 -- The sixth plenary session of the Preparatory Committee names prominent Hong Kongers to serve on the Selection Committee which will select the first Chief Executive and a 60-seat provisional legislature. The Selection Committee's membership is dominated by pro-China interest.

15 -- Chinese Vice Premier Qian Qichen presides over the first meeting of the Selection Committee in Hong Kong. The first round of voting by the committee members for the Chief Executive gives C. H. Tung a commanding lead with 206 votes. Of the remaining votes cast, T. L. Yang captures 82, Peter Woo receives 54, and Preparatory Committee Vice Chairman Simon Li 43.

29 -- The Crimes (Amendment) (No. 2) Bill 1996, which deals with the concepts of treason, sedition, secession and subversion, is published in the government gazette. Beijing and local Xinhua spokespersons react negatively to the move, saying that the bill is "usurping the responsibility of the SAR government".

December

4-6 -- At the 38th plenary session of the Sino-UK JLG held in Hong Kong, the two sides reach agreements on the localization of the Official Secrets Act, franchises for the new airport, and the new Lantau motor bus line.

11 -- Chinese Vice Premier Qian Qichen comes to Hong Kong to preside over the third plenary session of the 400-member Selection Committee. C. H. Tung is chosen Hong Kong's first Chief Executive with 320 votes. T. L. Yang and Peter Woo received 42 and 36 votes respectively.

12 -- The Preparatory Committee holds its seventh plenary session in Shenzhen and announces a list of 130 eligible candidates vying for a 60-seat provisional legislature. The committee also decides to repeal the subversion law after the handover claiming that it is inconsistent with the Basic Law.

17 -- In Beijing, Chinese Premier Li Peng formally appoints C. H. Tung as the first Chief Executive of the Special Administrative Region.

21 -- The Selection Committee holds its fourth plenary session in Shenzhen and selects a 60-seat provisional legislature, 51 of whom are members of the Selection Committee. Among the 60 winners, 33 are serving legislators. Leading pro-democracy politicians Martin Lee and Emily Lau strongly denounced the "undemocratic" selection process of creating an "illegal" legislature in the territory.

January 1997

24 -- The future Chief Executive C. H. Tung names his post-reversion Executive Council. In addition to creating the new post of special adviser to Exco for pro-Beijing businessman Paul Yip, Tung appoints former senior Executive Councillor Sir S. Y. Chung to be the convenor of the new Exco. Also named are C.Y. Leung, Anthony Leung, Tam Yiu-chung, Henry Tang, T.L. Yang, Rosanna Wong, Nellie Fong, Charles Lee, Chung Shui-ming and Raymond Chien.

25 -- The provisional legislature holds its first meeting in Shenzhen and elects Rita Fan as its president. The interim body agrees to set up two working sub-groups on administrative affairs and on procedural matters

February

1 -- At its eighth plenum held in Beijing from 1/31 to 2/1, the Preparatory Committee recommends that out of Hong Kong's more than 600 existing ordinances 14 be repealed in their entirety and 10 others amended after July 1, that the Chief Executive and the provisional legislature can start work before June 30, and that provisional district organizations be set up to replace the current ones in July 1997.

13 -- C. H. Tung openly criticizes leading members of the Democratic Party for "bad-mouthing" Hong Kong overseas.

18 -- The post-1997 Executive Council holds its first meeting at future Chief Executive C.H. Tung's new offices in Central. Tung decides to follow the current Exco's convention of Tuesday meetings.

20 -- In a sign of post-reversion continuity, Chief Executive-designate C. H. Tung announces that 21 of Hong Kong's most senior civil servants will remain in their posts following the July transition. The only two new faces in the senior line up are pro-Beijing solicitor Elsie Leung, who will be the first local Secretary for Justice, replacing Attorney General Jeremy Mathews, and the new Commissioner of the Independent Commission Against Corruption (ICAC) Lily Yam, who replaces Michael Leung who is retiring.

22 -- The provisional legislature holds its second session in Shenzhen and elects convenors of the two working sub-groups on administrative affairs and procedural matters. President Rita Fan says meetings will be held every two weeks in April and every week in May and June.

23 -- China's National People's Congress Standing Committee passes a resolution at its 24th session held in Beijing, endorsing the February 1 recommendation made by the Preparatory Committee to repeal or amend 24 Hong Kong laws that are considered to be inconsistent with the Basic Law.

March

21 -- Chief Executive-designate C. H. Tung sets up three task forces headed by his Executive Council appointees to help formulate policies on housing, education, and care for the elderly. C. Y. Leung will take on housing, Anthony Leung education, and Tam Yiu-chung services for the elderly.

22 -- The provisional legislature holds its third session in Shenzhen but fails to reach an agreement on the rules of procedure.

23 -- China's chief representative in Hong Kong, Xinhua Director Zhou Nan, marks the 100-day countdown to Chinese sovereignty with a call for unity. Zhou urges local residents to support their future government, saying that Beijing places great trust in the SAR government that will be led by C. H. Tung.

27-29 -- Chief Executive-designate C. H. Tung and Chief Secretary Anson Chan meet Chinese leaders in Beijing. It is Mrs. Chan's first visit to China after being appointed by Tung last December to serve as his future Administrative Secretary.

APPENDIX B: Official U.S. Visitors to Hong Kong April 1, 1996 - March 31, 1997

Assistant Secretary of State for East Asian and Pacific Affairs
Deputy Secretary of Treasury
Deputy Administrator of U.S. Department of Agriculture
Senior Adviser to the President for Policy Development
Governor of the Federal Reserve
U.S. Securities and Exchange Commission Chairman
Director of the Federal Communications Commission
Department of Commerce Deputy Assistant Secretary
U.S. Navy Commander of the 7th Fleet
U.S. Navy Commander-in-Chief, U.S. Pacific Commander
U.S. Small Business Administrator
FBI Senior Adviser to the Director
U.S. Army Deputy Commander of the Pacific

U.S. Consulate, Hong Kong also hosted visits from the following groups and organizations:

National Institute of Health
Centers for Disease Control
Foreign Agricultural Service
Department of Commerce
U.S. Customs
U.S. Secret Service
U.S. Coordinator for APEC
World Customs Organization
U.S. Mint and Office of the Comptroller of Currency
Eximbank
Library of Congress
U.S. Securities and Exchange Commission
NOAA
White House Fellows (twice)
White House Commission on Aviation Safety and Security
U.S. Trade Representative
Assistant U.S. Trade Representative
National Transportation Safety Board
International College of the Armed Forces
Department of Energy
Department of Justice
State/Commerce/Defense -- Export Control Group
Drug Enforcement Agency
White House Conference on Small Business Trade Mission
National War College
Former President of the U.S. George Bush (twice)
Federal Air Marshals
Government Accounting Office
Department of Treasury Delegation to the Asian Development Fund Donors' Meeting
State of Oklahoma Governor and delegation
State of Nevada Lt. Governor and delegation
State of California Governor and delegation
State of California State Treasurer
State of California Secretary of Agriculture
Lawrence Livermore Laboratories
Presidential Commission on U.S.-Pacific Trade and Investment Policy
New York Federal Reserve Bank
State Department Deputy Legal Adviser and Delegation
Federal Reserve

The Consulate General in Hong Kong also provided assistance and support to numerous members of Congress and Congressional staff.

Congressional visitors to Hong Kong, April 1996-March 1997:

April 1996

Senate:

Sen. Ernest Hollings, (D-SC)
Sen. William Cohen, (R-ME)
Sen. Bennett Johnston (D-LA)

House of Representatives:

Rep. Jack Fields, (R-TX)

July 1996

Senate:

Sen. Thad Cochran (R-MS)

November 1996

Senate:

Sen. Fred Thompson (R-TN)
Sen. Tom Daschle (D-SD)
Sen. John Glenn (D-OH)
Sen. Diane Feinstein (D-CA)
Sen. Patrick Leahy (D-VT)
Sen. Byron Dorgan (D-ND)
Sen. Dirk Kempthorne (R-ID)
Sen. John McCain (R-AZ)

House of Representatives:

Rep. Jon Christensen (R-NE)

December 1996

Senate:

Sen. Charles Grassley (R-IA)
Sen. Frank Murkowski (R-AK)
Sen. Daniel Akaka (D-HI)

House of Representatives:

Rep. Philip Crane (R-IL)
Rep. Jim Kolbe (R-AZ)
Rep. Jennifer Dunn (R-WA)
Rep. Mac Collins (R-GA)
Rep. Michael McNulty (D-NY)
Rep. Karne Thruman (D-FL)
Rep. Jay Kim (R-CA)

January 1997

Senate:

Sen. William Roth, Jr. (R-DE)

House of Representatives:

Rep. Jim Kolbe (R-AZ)
Rep. John LaFalce (D-NY)
Rep. Barbara Kennelly (R-CT)
Rep. Sander Levin (D-MI)
Rep. Louise Slaughter (D-NY)
Rep. Cliff Stearns (R-FL)
Rep. Collin Peterson (D-MN)
Rep. Xavier Becerra (D-CA)
Rep. Sanford Bishop (D-GA)
Rep. Pat Danner (D-MO)
Rep. Nathan Deal (R-GA)
Rep. Tim Holden (D-PA)
Rep. Paul McHale (D-PA)
Rep. Ron Lewis (R-KY)
Rep. Thomas Davis (R-VA)
Rep. Robert Ehrlich (R-MD)
Rep. Mark Foley (R-FL)
Rep. Sue Kelly (R-NY)
Rep. Robert Ney (R-OH)
Rep. James Greenwood (R-PA)
Rep. Alcee Hastings (D-FL)
Rep. Doug Bereuter (R-NE)
Rep. John Porter (D-IL)
Rep. Jay Dickey (R-AR)
Rep. Jerry Costello (D-IL)
Rep. Eliot Engel (R-NY)
Rep. William Lipinski (D-IL)
Rep. Dan Miller (R-FL)
Rep, Connie Morella (R-MD)
Rep. Nancy Pelosi (D-CA)
Rep. Roger Wicker (R-MS)
Rep. Frank Wolf (R-VA)
Rep. Lindsey Graham (R-SC)
Rep. Curt Weldon (R-PA)
Rep. Solomon Ortiz (D-TX)
Rep. Bud Cramer (D-AL)
Rep Jon Fox (R-PA)
Rep. John McHugh (R-NY)
Rep. Matt Salman (R-AZ)
Rep. Gary Ackerman (D-NY)

March 1997

Senate:

Sen. Patty Murray (D WA)
Sen. Connie Mack (R-FL)
Sen. Joseph Lieberman (D-CT)

House of Representatives:

Rep. Newt Gingrich (R-GA)
Rep. Doug Bereuter (R-NE)
Rep. Bob Livingston (R-LA)
Rep. John Boehner (R-OH)
Rep. Chris Cox (R-CA)
Rep. Ed Royce (R-CA)
Rep. Jennifer Dunn (R-WA)
Rep. Jay Kim (R-CA)
Rep. Mark Foley (R-FL)
Rep, John Dingell (D-MI)
Rep. Alcee Hastings (D-FL)
Rep. William Jefferson (D-LA)

[end of document]


Quick Links to the March 31, 1997 U.S.-Hong Kong Policy Act Report and Appendices

PREFACE

I. SIGNIFICANT DEVELOPMENTS IN UNITED STATES RELATIONS WITH HONG KONG, INCLUDING A DESCRIPTION OF AGREEMENTS THAT HAVE ENTERED INTO FORCE BETWEEN THE UNITED STATES AND HONG KONG

A. ECONOMIC AND COMMERCIAL

B. HIGH-LEVEL VISITS

C. LAW ENFORCEMENT COOPERATION

D. BILATERAL AGREEMENTS

II. OTHER MATTERS, INCLUDING DEVELOPMENTS RELATED TO THE CHANGE IN THE EXERCISE OF SOVEREIGNTY OVER HONG KONG AFFECTING UNITED STATES INTERESTS IN HONG KONG OR UNITED STATES RELATIONS WITH HONG KONG

A. UNITED STATES INTERESTS IN HONG KONG

B. DEVELOPMENTS AFFECTING U.S. INTERESTS IN AND RELATIONS WITH HONG KONG

III. THE NATURE AND EXTENT OF UNITED STATES-HONG KONG CULTURAL, EDUCATION, SCIENTIFIC AND ACADEMIC EXCHANGES, BOTH OFFICIAL AND UNOFFICIAL

A. HONG KONG-AMERICA CENTER

B. ADVISORY SERVICES FOR STUDY IN THE UNITED STATES

C. THE FULBRIGHT PROGRAM

D. ARTISTIC AND INTELLECTUAL EXCHANGES

E. SUPPORT FOR DEMOCRACY AND FREEDOM OF THE PRESS

F. PROMOTING AMERICAN STUDIES IN HONG KONG

G. INTERNATIONAL VISITOR EXCHANGES

H. UNOFFICIAL ACADEMIC EXCHANGES

I. UNOFFICIAL EXCHANGES -- TOURISM AND BUSINESS TRAVEL

J. LIBRARY

IV. THE LAWS OF THE UNITED STATES WITH RESPECT TO WHICH THE APPLICATION OF SECTION 201 (A) HAS BEEN SUSPENDED PURSUANT TO SECTION 202 (A) OR WITH RESPECT TO WHICH SUCH A SUSPENSION HAS BEEN TERMINATED PURSUANT TO SECTION 202 (D), AND THE REASONS FOR THE SUSPENSION OR TERMINATION, AS THE CASE MAY BE

V. TREATIES AND OTHER INTERNATIONAL AGREEMENTS WITH RESPECT TO WHICH THE PRESIDENT HAS MADE A DETERMINATION DESCRIBED IN THE LAST SENTENCE OF SECTION 201(B), AND THE REASONS FOR EACH SUCH DETERMINATION

VI. SIGNIFICANT PROBLEMS IN COOPERATION BETWEEN HONG KONG AND THE UNITED STATES IN THE AREA OF EXPORT CONTROLS

VII. THE DEVELOPMENT OF DEMOCRATIC INSTITUTIONS IN HONG KONG, INCLUDING DETAILED INFORMATION ON THE STATUS OF, AND OTHER DEVELOPMENTS AFFECTING, IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION ON THE QUESTION OF HONG KONG

A. THE BASIC LAW AND ITS CONSISTENCY WITH THE JOINT DECLARATION

B. THE OPENNESS AND FAIRNESS OF ELECTIONS TO THE LEGISLATURE

C. THE OPENNESS AND FAIRNESS OF THE ELECTION OF THE CHIEF EXECUTIVE AND THE EXECUTIVE'S ACCOUNTABILITY TO THE LEGISLATURE

D. THE TREATMENT OF POLITICAL PARTIES

E. THE INDEPENDENCE OF THE JUDICIARY AND ITS ABILITY TO EXERCISE THE POWER OF FINAL JUDGMENT OVER HONG KONG LAW

F. THE BILL OF RIGHTS

G. FREEDOM OF EXPRESSION

VIII. THE NATURE AND EXTENT OF HONG KONG'S PARTICIPATION IN MULTILATERAL FORUMS

A. INTERNATIONAL ORGANIZATIONS IN WHICH HONG KONG'S CONTINUED PARTICIPATION HAS BEEN AGREED IN THE JLG

B. INTERNATIONAL ORGANIZATIONS IN WHICH HONG KONG CURRENTLY PARTICIPATES, BUT JLG APPROVAL FOR POST-1997 PARTICIPATION REMAINS PENDING

C. OTHER ORGANIZATIONS IN WHICH HONG KONG CURRENTLY PARTICIPATES, AND WHICH JLG AGREEMENT IS NOT REQUIRED FOR HONG KONG'S CONTINUED PARTICIPATION

D. ORGANIZATIONS IN WHICH THE HKSAR WILL BE A FULL MEMBER

E. ORGANIZATIONS IN WHICH THE HKSAR WILL PARTICIPATE AS PART OF THE PRC DELEGATION

F. ORGANIZATIONS IN WHICH THE HKSAR WILL BE AN ASSOCIATE MEMBER

APPENDIX A: Chronology of Major Events in Hong Kong since March 1996

APPENDIX B: Official U.S. Visitors to Hong Kong April 1, 1996 - March 31, 1997

[end of document]

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