U.S. Department of State
Other State Department Archive SitesU.S. Department of State
U.S. Department of State
U.S. Department of State
U.S. Department of State
U.S. Department of State
The State Department web site below is a permanent electronic archive of information released online from January 1, 1997 to January 20, 2001. Please see www.state.gov for current material from the Department of State. Or visit http://2001-2009.state.gov for information from that period. Archive sites are not updated, so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.
U.S. Department of State

Great Seal logo

United States Hong Kong Policy Act Report, as of April 1, 1998
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 2, 1998
(Link to all years available.)

Blue Bar rule

TABLE OF CONTENTS

PREFACE

I. SIGNIFICANT DEVELOPMENTS IN US-HONG KONG RELATIONS

A. Economic-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 AFFECTING U.S. INTERESTS IN HONG KONG

A. United States Interests in Hong Kong
B. Developments affecting U.S. Interests:
-- the Preparatory Committee, The Electoral System, the Chief Executive, Amendment and Repeal of Laws, The Civil Service, HKSAR Passport and Visa Regime, Article 23 of the Basic Law, Continuity of Laws and Adaptation of Laws, Suspension of labor Laws, PLA Garrison, Chek Lap Kok Airport, Non-Prosecution of Two Sensitive Cases

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

IV. SECTION 201(A) -- (NO SUSPENSIONS)

V. SECTION 201 (B) DETERMINATIONS -- (NO SUCH DETERMINATIONS)

VI. SIGNIFICANT PROBLEMS IN THE AREA OF EXPORT CONTROLS

VII. DEVELOPMENT OF DEMOCRATIC INSTITUTIONS -- INCLUDING DETAILED INFORMATION ON THE IMPLEMENTATION OF THE JOINT DECLARATION

A. The Basic law and its consistency with the Joint Declaration
B. Elections to the Legislature
C. Selection of the Chief Executive
D. The Treatment of Political Parties
E. The Independence of the Judiciary
F. The Bill of Rights
G. Freedom of Expression

VIII. THE NATURE AND EXTENT OF HONG KONG'S PARTICIPATION IN INTERNATIONAL ORGANIZATIONS (LISTS)

APPENDICES

A. High Level visitors and delegations
B. Chronology of events -- March 1997 - March 1998


UNITED STATES HONG KONG POLICY ACT REPORT
as of April 1, 1998

As required by Section 301 of the United-States-Hong Kong Policy Act
of 1992, 22 U.S.C. 5731 as amended

PREFACE

After 156 years of British colonial rule, Hong Kong became a Special Administrative Region of the People's Republic of China on July 1, 1997. In the first nine months after reversion, there have been problems, but the overall transition to Chinese sovereignty has gone smoothly.

There is no evidence of interference from the Chinese central government in local affairs. Hong Kong's civil service remains independent, and senior officers, including those who have been critical of the PRC, have been retained. Hong Kong continues to play an important role as a regional finance center, actively participating in efforts to address the Asian financial crisis. The Hong Kong press remains free and continues to comment critically on the PRC and its leaders, though some self-censorship has been reported. Demonstrations -- often critical of the PRC --continue to be held. Mainland Chinese companies are subject to the same laws and prudential supervision as everyone else, and the rule of law and the independent judiciary remain in place as guarantees of Hong Kong's free and open civil society.

We continue to watch closely the dissolution of the elected pre-handover legislature and the installation of an unelected provisional body in its place; the repeal of legislation that had given the Bill of Rights Law overriding status in jurisprudence; the passage of a new election law that will lead to a legislature that is less representative than the 1995-97 Legislative Council; and apprehension that the future adoption of laws on sedition, subversion, and secession might undermine fundamental human rights.

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 Hong Kong Special Administrative Region (HKSAR) is directly under the authority of the central government of China. However, in an arrangement unlike those for other regions or cities in China, the Chinese central government has granted Hong Kong a high degree of autonomy. As stipulated in the Basic Law and Joint Declaration, Hong Kong officials run Hong Kong rather than personnel assigned by the central government. The Hong Kong Chief Executive, legislature and civil service 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 limits the powers of the Hong Kong legislature and, in the first ten year period after reversion, stipulates the size and composition of the legislature. But 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 sometime after 2007.

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

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. In recognition of Hong Kong's high degree of autonomy, the United States continues to accord to Hong Kong a special status distinct from the rest of China. The United States continues to lend support to Hong Kong's autonomy by strengthening bilateral ties (e.g., by 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 . 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 SIGNIFICANT AGREEMENTS 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 and dynamic economies. Hong Kong is the world's seventh largest trading entity, fifth largest banking center, and has a per capita GDP larger than Great Britain's. Both before and after July 1, 1997 Hong Kong officials and business leaders have been among the world's 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.

Since July 1, 1997, Hong Kong has enjoyed a high degree of autonomy as a separate customs territory. Customs borders remain in place, and Hong Kong authorities continue to develop, implement, and enforce their own trade laws and regulations. At all levels, Hong Kong trade and custom officials remain in place, with no personnel changes beyond ordinary job rotations. In the WTO, APEC and other fora, Hong Kong has continued to press for further trade and investment liberalization, strongly supporting efforts to promote financial services liberalization in APEC. Hong Kong is acting autonomously in economic fora.

Since mid-1997, the Hong Kong government has moved actively to help address the Asian financial crisis. It was one of the first governments to make funds available to help Thailand deal with its fiscal crisis, contributing one billion U.S. dollars to the International Monetary Fund's assistance package for Thailand. According to Hong Kong officials, the decision to contribute was made independently, without permission from, or consultations with, the central government in Beijing. The Hong Kong government has also aggressively defended the Hong Kong dollar peg to the U.S. dollar against speculative attacks.

Noting that "Hong Kong is the nerve center of Asian finance," Deputy Secretary of the Treasury Lawrence Summers announced in January 1998 that the Department of the Treasury will establish a financial attaché's office in the U.S. Consulate General. The Treasury representative, who will follow regional financial matters, is scheduled to arrive by mid-1998.

Our most serious trade problem with Hong Kong is the continued wide availability of pirated movie, audio, and software compact discs and pirated trademark goods. This situation aroused serious concerns among American software and entertainment firms, and led the U.S. Trade Representative to put Hong Kong on the Special 301 watchlist in April 1997. Hong Kong officials have reiterated their intention to combat piracy, and have passed a new copyright law, stepped up Custom's raids on retail outlets, and started to put legislation in place giving enforcement officials the ability to control illicit production.

Hong Kong ranks with Japan and European Union nations as a significant source of foreign investment capital. Outward investment totals about US $25 billion annually. Hong Kong has invested US $1.4 billion in the United States, mostly in manufacturing and in wholesale trade. Hong Kong is also the largest outside investor in mainland China, with over US $100 billion in direct investment.

Hong Kong maintains few non-tariff barriers, and has moved steadily to reduce or remove what few restrictions exist. Most recently, Hong Kong announced a deal to open the international voice telecommunications sector to competition beginning in 1999, and eliminate the foreign ownership cap on broadcast uplink 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.

U.S. companies have a favorable view of Hong Kong's business environment. The American Chamber of Commerce's annual business confidence survey of its members, conducted in mid- 1997, reported that 96 percent of firms responding consider the business environment in Hong Kong as "very favorable" or "favorable" for the next five years. Most of the respondents plan to either maintain or expand their investments or operations. Only six percent indicated their companies planned to reduce Hong Kong operations.

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 our interests here and the intense concern over Hong Kong's transition. The Secretary of State, the Secretary of the Treasury, the Secretary of Commerce, 40 U.S. government delegations and teams, and over 40 Senators and Congressmen visited Hong Kong in the past year. A list of visitors is attached at Appendix B.

C. LAW ENFORCEMENT COOPERATION

United States law enforcement agencies enjoy excellent cooperation with their Hong Kong counterparts. Following reversion to China, there has been no change in the level or quality of law enforcement cooperation between the United States and Hong Kong. The U.S. Government continues to broaden 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. The U.S. Secret Service, which opened an office to work on credit card fraud and U.S. banknote counterfeiting in 1996, added an additional agent in 1997. The Immigration and Naturalization Service also added one officer to its staff in 1997, and the Internal Revenue Service criminal investigations division assigned an officer to Hong Kong in March 1998 to investigate money laundering and similar fraud. Other U.S. agencies with law enforcement responsibilities present in Hong Kong include the Department of State, US. Customs Service, Drug Enforcement Administration, and the Federal Bureau of Investigation.

The Hong Kong Government cooperates fully with U.S. agencies in combating narcotics trafficking. 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 1996, 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 expired on June 30, 1997 and is expected to be replaced by a mutual legal assistance agreement, which has been signed by both sides but has not been approved for ratification by the US Senate as of March 1998.

In 1997-98, 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. 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. Hong Kong enacted the 1997 Drug Trafficking Order, which allows for the enforcement of confiscation orders made in countries that are signatories to the 1988 UN Drug Convention and is designed to enhance Hong Kong's ability to recover the proceeds of drug trafficking.

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.

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 in FY 1997 and 239 persons in FY 1998.

The US Customs Service and State Department and Commerce Department staff have close law enforcement liaison relationships with the Hong Kong government. Hong Kong trade and customs officials continue to enforce laws against illegal textile transshipment, to exchange information with U.S. officials, and to look for ways to improve their enforcement regime. Improved inspection and enforcement systems led to numerous seizures, arrests, prosecutions, and fines for illegal transshipment.

D. BILATERAL AGREEMENTS

There are nearly a dozen U.S.-Hong Kong bilateral agreements currently in force. Before July 1, 1997, most of these were agreements with the United Kingdom that were extended to the territory. Others had been concluded directly with Hong Kong under "entrustment" from the United Kingdom. Under international law, the U.S.-UK agreements would have lapsed with respect to Hong Kong upon reversion if special arrangements had not been made with Hong Kong and/or China for continuation in force. Most U.S.-Hong Kong agreements continued in force after reversion. Also, several new agreements were 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, and was signed in Hong Kong on December 20, 1996. The extradition agreement was approved by the U.S. Senate and ratified, and came into effect on January 21,1998. In addition, a bilateral Prisoner Transfer Agreement was signed on April 15, 1997 and is awaiting final action by the U.S. Senate as of March 1998.

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 was signed in April 1997.

Progress was made in 1997 on a U.S.-Hong Kong bilateral investment agreement, but it has not yet been possible to reach agreement. Some difficult problems remain to be resolved, but both sides have expressed a desire to conclude an agreement.

In addition, there are several dozen U.S.-PRC agreements that did not apply to Hong Kong before reversion but which could have been applied to Hong Kong after July 1, 1997 if appropriate and upon agreement by the U.S., China, and the HKSAR Government. The United States and China agreed that none of these should be extended to Hong Kong at the present time.

In certain areas involving foreign affairs or defense matters--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 was required. 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 entered into force on July 1, 1997.

During discussions held in Washington, D.C., in April 1997, U.S. and Chinese negotiators agreed on the modalities for continued U.S. Navy port calls to Hong Kong after establishment of the Special Administration Region.

U.S. Consulate General operations and US Navy port calls have continued since July 1, 1997. In the Consulate General, the Defense Liaison Office closed and was replaced by the Office of Liaison Administration, which works with the Chinese Ministry of Foreign Affairs and the local government to receive permission for and arrange for port calls and visits of U.S. military aircraft to Hong Kong.

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 $15.1 billion. Through 1997, U.S. direct investment in Hong Kong on a historical cost basis amounted to US $16 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 50,000 American citizens. ( Included in this total are a number of dual nationals, who are not counted by Hong Kong authorities as resident Americans.)

Cooperation between the Hong Kong Government and the U.S. Consulate General is broad, effective, and mutually beneficial. The United States enjoys strong cultural and educational relations with the people of Hong Kong, including a very large flow of tourists and students in both directions. The United States has 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.

The United States also has strong interests in the protection of human rights, the promotion of democratic institutions, the freedom of people to worship the religion of their choice, and the development of civil societies where the rule of law prevails and individual freedoms are guaranteed. Hong Kongers share many values and interests with Americans and have worked to make Hong Kong a model of what can be achieved in a society that values freedom. Hong Kong is a tolerant and open society, in which both local and foreign non-governmental organizations continue to operate freely and representatives of the international media work with few restrictions.

Protection of American interests is enhanced by Hong Kong's continued stability and prosperity after reversion to Chinese sovereignty; the operation of a full-service Consulate General; the protection of civil liberties; and the preservation of Hong Kong's legal system. The United States works closely with and communicates our views on Hong Kong to the Hong Kong Special Administrative Region government, the central government authorities in Beijing, and the people of Hong Kong. The United States also lends official support to private efforts and programs designed to further our goals. There is concern in the United States, however, that legislature elected in May 1998 will be less representative of the Hong Kong people than the 1995-97 legislature.

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

As it was before reversion, Hong Kong -- now a Special Administrative Region (SAR) of China rather than a dependent territory of the United Kingdom -- remains dynamic, prosperous, and stable. Hong Kong continues to welcome interaction with foreigners and is friendly to American and international business interests.

Although 1997-1998 has been turbulent for Asian economies, Hong Kong's economy continues to grow, albeit at a slower rate. With massive reserves, no public debt, a strong legal system, a strong external position, a rigorously enforced anti-corruption regime, and a budget in surplus, Hong Kong is better prepared than most regional economies to weather the current economic uncertainties. Nonetheless, the drops in Hong Kong's stock and real estate markets since mid-1997, the speculative attacks on the Hong Kong currency, and longer-term task of managing Hong Kong's continuing evolution as an advanced, high-cost, service-based economy pose difficult challenges for the SAR's new administration.

Hong Kong people remain confident overall about the transition and well over half continue to indicate in public opinion polls that they are satisfied so far with China's hands-off approach to Hong Kong and with the overall performance of the Special Administrative Region government. The most significant development of the year from April 1, 1997 has been the restraint showed by the central government in Beijing -- which has avoided involving itself or giving the appearance of involvement in local affairs. The record of the nine months since reversion has bolstered confidence in both the local and international community that China's leaders intend to keep their commitment to allow Hong Kong to remain autonomous and "let Hong Kongers rule Hong Kong."

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 the Democrats represented the largest political party in the 1995 legislature and had demonstrated broad popular support.

Marking the end of active involvement of Mainland officials in Hong Kong affairs, the Preparatory Committee was disbanded on July 11, 1997. Between April 1997 and July the Preparatory Committee devised election rules for the first post-reversion Legislative Council elections, and 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. Details of the Preparatory Committee's actions in these and other areas are included in Section VII.

The Electoral System

Controversy over Hong Kong's system of representative institutions has continued, especially with respect to the Legislative Council. (See the Hong Kong Policy Act Reports for 1995, 1996 and 1997 for full descriptions of Sino-British disputes over the formation of Hong Kong's legislature, the 1995 legislative elections, and the creation of an unelected "Provisional" Legislature.)

Following a period of public consultations in March 1997, the Preparatory Committee drew up proposals for legislative elections in 1998 for the "first" elected legislature under the SAR government, which was to replace the Provisional Legislature. The Preparatory Committee's election proposals -- based on the Basic Law formula of 20 geographic seats, 30 seats from "functional" constituencies representing the professions, business sectors, and labor, and 10 seats from an electoral college or committee -- changed several significant elements of the election rules used in 1995 to chose the last legislature of the colonial period. Most observers agreed that the Preparatory Committee's proposed electoral law changes, which included introducing proportional representation, multi-member geographic constituencies, and elimination of "mass-membership" functional constituencies, in favor of narrowly defined, limited membership "functional" constituencies marked a rollback of reforms made in the last years of colonial rule that had made the legislature more democratic and representative of Hong Kong people as a whole. Specifically, it is expected that these changes will limit the popular Democratic Party and like-minded pro-democracy independents to a smaller proportion of legislative seats than they had won in the September 1995 elections.

The Hong Kong SAR Electoral Law, which tracked closely with the outline proposed by the Preparatory Committee, was announced by the SAR government and passed by the Provisional Legislature on July 8, 1997. (A description of the method for choosing Hong Kong's first post-reversion legislature is in section VII, Development of Democratic Institutions in Hong Kong.)

The Selection Of The First Chief Executive

On July 1, 1997 Hong Kong businessman C.H. Tung was sworn in to be the first Chief Executive of the Hong Kong Special Administrative Region. Although the selection process which put him into office was controversial, his selection was nevertheless welcomed by many in the local community and the international business community. Tung's emphasis on the importance of collective values over the rights of individuals has drawn some negative comment in Hong Kong. Nevertheless, Tung's approval ratings in local polls have been strong, albeit weaker in the early months of 1998 in the wake of the Asian financial crisis than they were in his first half year in office. Local people appear to give him credit for maintaining Hong Kong's way of life and managing a smooth transition.

Amendment Or Repeal Of Hong Kong Laws/Public Order And Societies Ordinances

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. While more than half of the changes made needed adjustments to colonial laws that would become archaic or obsolete in view of the change in sovereignty, others were significant and controversial. In particular, 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 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 Ordinances. Chief Executive-designate Tung published proposed legislation on Public Order and Societies laws and held public consultations on the draft legislation in the spring of 1997.

As a result of public submissions, the proposals to amend the Public Order and the Societies Ordinances were scaled back somewhat; loosening the requirements for demonstrations, narrowly defining national security as "the safeguarding of the territorial independence of the People's Republic of China" and stipulating that if the government invoked "national security" as grounds for action, it must be "consistent with what is necessary in a democratic society." In a move which reassured foreign NGOs, particularly those concerned with human rights, "political organizations" were explicitly defined to refer to organizations "the principal functions of which are to promote and prepare candidates for elections." The final revisions to the laws included provisions requiring societies to register with the police and for police permission to hold demonstrations. Critics charged the laws were a step backwards from existing arrangements. C.H. Tung argued that human rights and civil liberties were well protected under the Basic Law's guarantees that the UN human rights covenants and the Common Law would continue to apply to Hong Kong.

Although many feared that the government might use the Public Order Ordinance to curtail the freedom of assembly, demonstrations have continued to take place regularly after July 1. By February 28, 1998, the Hong Kong government reported that there had been over 1,000 public demonstrations in Hong Kong since the handover. There was some scuffling with police and five demonstrators were arrested during World Bank meetings on September 22. Some Hong Kong activists note that police personnel sometimes outnumber demonstrators at a demonstration. However, residents continue to exercise their right of assembly.

Many persons also feared that the government would use the Societies Ordinance to restrict political activity by forcing parties to sever ties with political groups abroad or curtailing activities of nongovernmental organizations (NGO's). In turn, Chief Executive Tung expressed concern lest Hong Kong be used by foreign groups as a base of subversion against China. Since the handover, however, the government has taken no action to restrict the operations of parties, other political organizations, or NGO's. Freedom of association continues.

Democratic Party officials, independent politicians, and human rights advocates continued to be concerned that restrictions in the revised statutes, could be used to curtail freedom of assembly and association, particularly in dealing with critics of the government of China.

(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 has played a key role in ensuring a smooth transition and stability since 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 serving policy secretaries after reversion (only the Hong Kong Attorney General, who as a British national could not serve in the HKSAR Government, and the head of the Independent Commission Against Corruption, who was retiring, did 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.

Since July 1, 1997, the civil service has remained independent. Senior civil servants credibly assert that they make decisions on their own without receiving instructions from or holding consultations with the central government. For example, on the advice of Financial Secretary Donald Tsang, the SAR government committed one billion US dollars to the IMF-arranged aid package for Thailand, without reference to Chinese authorities. In a similar demonstration of independence in March 1998, Chief Secretary Anson Chan, underscoring Hong Kong's autonomy and special status within China, publicly criticized a Hong Kong businessman who called for the government-funded broadcaster, Radio Television Hong Kong, to cease or tone down criticism of the PRC and the local SAR government. Chan defended the editorial independence of RTHK.

The modalities of sharing civil service records and information with Beijing were satisfactorily resolved in the final days before the transition, allaying fears that confidential personnel files of officials in the colonial administration would be turned over to mainland authorities. The Hong Kong Government provided files on civil servants directly to Chief Executive-designate Tung and his staff to aid in the transition. The Hong Kong Government also assigned senior civil servants to work in the Chief Executive-designate's transition office in the run-up to the handover.

HKSAR Passport and Visa Regime

The HKSAR passport is issued only to Chinese nationals holding Hong Kong permanent identity cards, as provided in the Joint Declaration and the Basic Law. The HKSAR passport incorporates security features that are close to state-of-the-art, and production and distribution is subject to strict safeguards. Only the Hong Kong Immigration Department has authority for issuance; it has issued close to 500,000 since July 1, 1997. The Immigration Department estimates it will take several years to issue new HKSAR passports to all 5.5 million Hong Kong residents it estimates will be eligible to acquire them.

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

Hong Kong's pre-reversion "stateless" travel documents, the Certificate of Identity and the Document of Identity, are still valid travel documents . The Hong Kong Immigration Department ceased 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, a choice most are reported to opt for given the visa-free or liberal visa issuance arrangements afforded HKSAR passport holders by many countries. Documents of Identity, held by immigrants with less than seven years' 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, the United Kingdom, Canada, and 43 other nations have agreed to grant visa-free entry to bearers of the new passport.

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, 8 U.S.C. Section 1187. 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."

As reported in the Hong Kong Policy Act Report of 1997, in December of 1996, the Hong Kong government introduced a draft bill redefining the crimes of sedition and subversion which, under the colonial law, had provided for severe punishment. Governor Patten's administration characterized the bill as having been carefully drafted to protect freedom of association and expression while allowing prosecution of acts involving violence or criminal acts. The bill failed to pass in the Legislative Council, where it was criticized as an effort by the outgoing colonial administration to usurp the prerogatives of the future HKSAR government.

Chief Executive C.H. Tung has delayed submitting legislation to meet the Basic Law requirement for laws on treason, sedition , and subversion until after the election of the first legislature in May 1998. No proposed draft legislation or decisions on the content of the laws relating to Article 23 have yet been announced. There has been widespread concern that broadly drawn legislation on sedition and subversion could threaten fundamental freedoms and civil liberties in Hong Kong, but these concerns have been allayed somewhat by the government's decision to delay submitting Article 23 legislation for almost year after the handover.

Many non-governmental organizations, particularly human rights and environmentalist groups, were concerned in the months before reversion that the HKSAR government would enact laws barring them from Hong Kong. Journalists were 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. On the basis of the first nine months of the HKSAR, it appears Hong Kong's policy on foreign NGOs and journalists -- which must be tacitly accepted by the Beijing central authorities -- is to maintain the pre-reversion status quo. Thus far, there is no evidence that NGOs or journalists are being restricted or excluded from Hong Kong.

Adaptation Of Laws and Continuity of Laws

Progress in the Joint Liaison Group was slow in several important areas in the year before the handover in preparing for the adaptation of laws and in ensuring that no required laws or regulations lapsed after reversion. However, arrangements made by the incoming administration have allayed fears that Hong Kong would face a "legal vacuum" after July 1.

In the landmark case of HKSAR v. Ma Wai-Kwan et.al , Chief Judge of the High Court Patrick Chan and two other High Court judges ruled on July 29, 1997 in an appeal from a criminal court that the Common Law and laws previously in force in Hong Kong before reversion continued in force after July 1, 1997. Ma, under indictment for a criminal offense, had argued that the Basic Law's provision that laws in force before the reversion would continue was ineffective. According to Ma's legal counsel, without explicit enabling legislation passed by either the National People's Congress or a Hong Kong legislature elected under provisions of the Basic Law, all Hong Kong laws lapsed on July 1, 1997. Ma's lawyers submitted that that since the NPC had not acted and the unelected Provisional Legislature was in violation of the Basic Law's provision that the legislature be "constituted by elections" and thus lacked legal authority to pass a "Reunification Bill" ensuring the continuity of laws, Ma should go free.

Chief Justice Chan rejected Ma's arguments and found the Basic Law's explicit provision for continuity of laws was sufficient to guarantee the continuity of the legal system in Hong Kong and the adaptation of the pre-handover legal codes to the Special Administrative region without any additional enabling legislation by the NPC or the Hong Kong Legislature.

Suspension of Labor Laws

On July 2, 1997, Chief Executive Tung, supported by Chief Secretary for Administration Anson Chan and senior HKSAR civil servants, announced the government would submit a proposal to the Provisional Legislature to suspend three bills relating to labor rights passed by the previous legislature in the month before reversion. The government stated that the bills had been rushed through the legislature without consultation, would force "radical" changes in management-labor relations in Hong Kong, and would hurt Hong Kong's competitiveness. The bills' proponents, however, maintain that the proposals were under consideration and debate, supported by detailed studies of past practice, for more than a year before enactment. After the Provisional Legislature voted to suspend three of the new labor laws on July 16, the Hong Kong Confederation of Trade Unions, supported by the International Confederation of Free Trade Unions, presented a formal complaint to the International Labor Organization (ILO). The complaint alleges that the suspension of the three laws is inconsistent with Article 39 of the Basic Law, which states that "international labor conventions as applied to Hong Kong shall remain in force and shall be implemented through the laws of the HKSAR." The complaint asserts that the three laws contain provisions implementing articles of ILO Convention 87 on freedom of association and ILO Convention 98 on the right to organize and bargain collectively. As of March 1998, the HKSAR government had not responded to the ILO's request for comment on the complaint.

People's Liberation Army Hong Kong Garrison

China and Britain agreed that a contingent of the People's Liberation Army (PLA) could be stationed in Hong Kong after reversion, and negotiated procedures for the orderly transfer of British military installations to China's incoming military garrison.

The PLA announced in 1997 that it intended to station approximately 8,000 soldiers in Hong Kong, primarily as a symbolic presence to underscore Chinese sovereignty. Following a small contingent of PLA sent on June 30 to prepare military sites for occupancy, the main force of 4,800 Chinese soldiers entered Hong Kong in truck convoys in the early morning hours of July 1. Avoiding any displays and passing up the opportunity to stage a military parade or demonstrations symbolizing the "retaking" of Hong Kong after a century and a half of colonial rule, the PLA garrison troops moved quietly into their barracks and assumed a low profile. PLA soldiers have remained out of sight and confined to barracks since July. In an apparent effort to stay out of the public eye as much as possible, PLA soldiers generally wear civilian clothing when off-base and avoid social contacts in Hong Kong.

According to the Basic Law, the HKSAR government may, "when necessary", ask the central government to allow the PLA Hong Kong garrison to assist in maintaining public order or assist in disaster relief. Otherwise, the sole mission for the garrison is national defense, not internal security. The Hong Kong garrison does not to engage in public security work, does not augment the 37,000 police officers and staff of the Hong Kong police, and does not engage in any business activities.

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. The airport was expected to open in April 1998; however, delays in completing rail links to the new facility have pushed the estimated opening date to July 1998. In May 1996, a second runway at the airport was approved. 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.

Non-Prosecution of Two Sensitive Cases

Secretary for Justice Elsie Leung decided on February 27 not to prosecute the local branch of China's Xinhua News Agency for violating the Personal Data (Privacy) Ordinance, although the Privacy Commissioner indicated Xinhua had not given politician Emily Lau access to her personal file within the 40-day legal deadline set by the ordinance. Lau had asked to see her file late in 1996, after passage of the ordinance; ten months later, following a complaint to the Privacy Commissioner, Lau had received a brief reply from Xinhua saying that it had no file on her. Operating on the assumption that Xinhua must certainly have had a file on Lau, critics contended that the decision placed Xinhua above the law because of its mainland connection. However, the Government stressed that key principles -- determining if evidence was sufficient and if prosecution served the public interest -- had been scrupulously observed, and that no special treatment was given. In a separate development, in late March 1998, the government introduced before the Provisional Legislature an "Adaptation of Laws (Interpretative Provisions) Bill" that raised additional concerns that Chinese central government entities such as Xinhua might, under certain circumstances, be exempt from the application of certain Hong Kong laws.

Secretary Leung on March 17 made a second decision: not to prosecute Sally Aw, Chairman of Sing Tao Holdings and publisher of the "Hong Kong Standard," for fraud. The Independent Commissioner Against Corruption said three "Standard" executives had conspired with Aw from 1993-97 to defraud advertising clients by inflating the paper's circulation figures; but only the three subordinates were charged. Critics contended that Aw had been shielded by political connections with Beijing and family ties to Chief Executive C.H. Tung. Again, the Justice Department stressed that neither the status of any suspect nor political factors influenced its decision, and Secretary Leung urged patience and reliance on the open and fair judicial system. Some commentators, including members of the Bar often critical of the government noted that Leung had in effect put her integrity on the line, and expressed willingness to suspend judgment pending the outcome of the trial of the subordinates.

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. The City University of Hong Kong joined the Center in 1997. 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 co-director of the Center and has provided support for its programs and activities. The Center's Board of Governors is made up of prominent American and Hong Kong leaders from the business and academic communities.

The Center's second international conference on intellectual property rights took place March 15-19, 1997, and provided a forum for discussion of IPR issues among U.S. panelists and delegates from most of the countries of East Asia. A special day focusing on local IPR issues co-sponsored by the American Chamber of Commerce and other local chambers of commerce attracted many representatives of business corporations. The Center co-sponsored an international conference on Chinese education in the 21st century August 13-19, 1997, in cooperation with Hong Kong, Chinese, and U.S. universities. The Center is currently organizing an international symposium on the outlook for Sino-U.S. relations, planned for May 28-29, 1998, which is expected to draw a number of high-level participants from U.S. and Chinese government and academia.

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). IIE provides educational advisory services to thousands of Hong Kong students who wish to pursue studies in the United States. It also organizes academic fairs and briefs American educators on opportunities in Hong Kong. IIE's 1997 U.S. University Fair featured 132 universities from all over the U.S. and attracted 3,800 local students and parents. IIE also organized the first U.S. Boarding Schools Fair in November 1997, in which 34 American boarding schools were represented. A total of 275 visitors attended the fair. IIE's operations are partially funded 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 advisers at local schools and universities. With the support of the American Chamber of Commerce in Hong Kong, IIE also publishes and distributes a Hong Kong employment guide entitled Returning to Hong Kong for graduates of U.S. educational institutions. The eighth edition was published in 1997. USIA has also worked with the Department of Commerce U.S. and Foreign Commercial Service to promote U.S. education and training: USIS assisted in publicizing the FCS booth at the Hong Kong Education and Careers Expo in February, 1998.

C. THE FULBRIGHT PROGRAM

The Hong Kong Fulbright program operates independently from that in China. The program supports three U.S. lecturers and five to six U.S. students in Hong Kong each year, and is an important element in maintaining official American access to Hong Kong's institutions of higher learning. The Hong Kong Special Administrative Region Government plans to send an internationally renowned Hong Kong scholar to lecture in the U.S. as a Distinguished Fulbright Lecturer in the fall of 1998.

D. ARTISTIC AND INTELLECTUAL EXCHANGES

Budget cuts have forced USIA to curtail sponsorship of visits to Hong Kong by American performing and visual artists and presentations by American artists and lecturers at Hong Kong cultural institutions. In order to maintain some contact with the local cultural and artistic community, USIS occasionally uses post resources for small grants to assist American participation in selected artistic programs and conferences.

E. SUPPORT FOR DEMOCRACY AND FREEDOM OF THE PRESS

During 1997-98, USIA continued to sponsor programs designed to better equip local media with the tools needed to promote professional practices and to address Hong Kong journalists' concerns. Programming also aimed at informing reporters and other persons of influence in Hong Kong about U.S. foreign policy positions that affect the bilateral relationship.

Programs directed toward journalists included sponsoring the participation of a Yazhou Zhoukan (Chinese-language weekly magazine) reporter on military affairs in the Defense Writers Program in September, 1997. This program provided a wide variety of briefings on U.S. defense and security issues for candidates selected from a number of East Asian countries. USIA also sponsored one radio reporter and two print editors on International Visitors Programs. When Chief Executive C. H. Tung paid an official visit to the U.S. in September, 1997, USIA worked with the White House and State Department to assist Hong Kong-based reporters in obtaining credentials and provided facilitative assistance in Washington.

USIA also provided media support for visiting Congressional delegations, for ships of the Seventh Fleet calling in Hong Kong, and for U.S. Cabinet and sub-Cabinet members and other administration officials coming to Hong Kong to assess various aspects of the political, economic and social situation here. Of special note are the periodic visits by the Task Force on Hong Kong led by Representative Douglas Bereuter, for whom USIA convenes media interlocutors who can brief the Task Force on the status of press freedom and other information issues.

Through Worldnet and speakers' programs, USIA continues to inform Hong Kong's academic, media, and business communities about U.S. policy in a number of areas. Programs in 1997-98 addressed topics including China's defense modernization, Hong Kong's role in the future of Sino-U.S. relations, and U.S. security strategy in East Asia.

Prior to the handover of sovereignty, dozens of U.S. and international media outlets set up or enlarged bureaus in Hong Kong in order to cover this major story. Much of USIA's media activities during 1997-98 were designed to brief the incoming press on U.S. government policy vis-a-vis Hong Kong, assist them in identifying sources and respond to their enquiries with a view to helping the media provide accurate and balanced coverage of the handover events. During the week of the handover itself, USIS assisted in Secretary of State Albright's press events in Hong Kong.

USIA has continued to maintain close liaison with the Foreign Correspondents Club and the News Executives Association, both formally and informally, to keep abreast of developments 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. Since the handover, USIA has initiated contact with the newly arrived official Chinese information outlets: the Press Office of the Ministry of Foreign Affairs, Xinhua's Propaganda Department, and the press liaison office of the People's Liberation Army. USIA currently enjoys constructive professional relationships with all of these offices. Pro-China media organizations continue to be regularly included in official U.S. press events.

F. PROMOTING AMERICAN STUDIES

USIA continues to support the degree-granting program of the American Studies Program established at Hong Kong University in 1992. A Fulbright scholar is assigned to the Program every year. The University is in the process of developing a new Center of American Studies to enhance its research capacity.

G. INTERNATIONAL VISITOR EXCHANGES

The USIA International Visitor Program supports a wide variety of professional exchanges for candidates sponsored by the Consulate General. In 1997, nine individuals traveled to the U.S. on these study programs. The 1997 visitors included three journalists, one grassroots environmentalist, two arts administrators, two immigration officials, and one customs (anti-narcotics) official. One legislator concerned with the rule of law and independent judiciary took part in the Voluntary Visitor Program in 1997; this program facilitates professional contacts for those who are traveling to the U.S. under non-U.S. government auspices.

H. UNOFFICIAL ACADEMIC EXCHANGES

There are six major universities in Hong Kong, plus a handful of other well-established educational institutions catering to specialized studies such as performing arts, liberal arts, teacher training, and distance learning. Exchanges between Hong Kong and U.S. universities have grown over the last decade, ranging from short-term visits by American faculty and summer programs for students to ambitious multi-year exchanges of faculty and staff. In 1997, the Hong Kong University of Science and Technology formed a partnership with the J. L. Kellogg Graduate School of Management at Northwestern University to offer a new Executive Master of Business Administration program, with EMBA degree awarded by the two schools. Apart from joint degrees, collaborative research projects are also growing in number. In general, Hong Kong educational institutions 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 to possible interference in academic freedom.

Five to six thousand Hong Kong students go to the United States each year for graduate and undergraduate study. In 1997, the Consulate General issued 3,808 visas for study in the United States and over 480 visas for exchange visitors. We estimate that 14,000 Hong Kong students now are studying in the U.S. at any given time, 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, participating in educational fairs, and advising on U.S. visa requirements.

I. UNOFFICIAL EXCHANGES -- TOURISM AND BUSINESS TRAVEL

In 1997, the U.S. Consulate General issued over 135,000 non-immigrant 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 over 700,000 people.

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.

There were no such suspensions or terminations during the period from April 1, 1997 to March 31, 1998.

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.

There were no such determinations for the period April 1, 1997 to March 31, 1998.

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. As called for in the Sino-UK Joint Declaration and the Basic Law, Hong Kong has remained a separate customs territory and has enjoyed a high degree of autonomy in the export controls area. We have seen no evidence of Chinese central government involvement or interference in Hong Kong export control decisions. Chinese central government officials have made clear on several occasions that they consider export controls a trade -- not foreign policy -- issue, and thus within Hong Kong's sphere of autonomy.

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. 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. 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 nonproliferation regimes.

Hong Kong has both an import and an export license procedure. This allows it to track controlled commodities coming into the SAR, as well as those that leave its customs territory. 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-use inquiries. These end-use 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 in the SAR to ensure that strategic goods are actually delivered to the proper destinations and used for the purposes described.

Hong Kong and U.S. Government officials continue to exchange information, including in-depth exchanges on specific export control issues such as proliferation concerns and diversions. In October 1997, Secretary for Commerce William Daley and Hong Kong Secretary for Trade and Industry Denise Yue signed an "agreed minute" on ways to enhance cooperation, including semi-annual inter-agency meetings to exchange information and provide updates. The first such meeting took place in Hong Kong in mid-January 1998. Representatives from five U.S. agencies briefed Hong Kong on latest trends and issues in control policy and on relevant U.S. legislation. Hong Kong officials reviewed their control system, made specific suggestions for training/technical expertise, and reiterated their commitment to maintaining the strongest possible control system.

Although Hong Kong is not a member of the various international control regimes, it has committed to maintaining the standards of those regimes via its own laws, both before and after July 1, 1997. To support this commitment, the U.S., Great Britain, Japan, and Australia have agreed to keep Hong Kong authorities informed on changes in the regimes. The U.S. agreed specifically to brief Hong Kong regularly on the Missile Technology Control Regime (MTCR), and has provided two such briefings already.

From November 1996 to May 1997, a U.S. Department of Commerce Bureau of Export Administration technical expert was seconded to the Hong Kong Trade Department, providing technical assistance and serving as a liaison. An Australian official is now performing a similar function, and Hong Kong hopes to continue to receive secondees from the U.S. and other countries.

In August 1997, a Department of Commerce Bureau of Export Administration enforcement specialist spent a month in Hong Kong carrying out 35 intensified post-license verification checks. During the specialist's visit, the Hong Kong government provided an overview of its export control system, and the specialist briefed Hong Kong officials on his findings.

A significant development in 1997 was Hong Kong's adoption of a brokerage law, which allows the government to prosecute Hong Kong-based individuals who support efforts outside of Hong Kong to divert or acquire weapons of mass destruction. Hong Kong is one of the few jurisdictions to have adopted such legislation.

One significant way in which the Hong Kong government's approach to export controls continues to be different from that of China is its policy regarding U.S. officials' preventive enforcement activities. Department of Commerce representatives in Hong Kong regularly carry out pre-license checks and post-shipment verifications on companies in Hong Kong as part of the dual-use licensing vetting and post-issuance process. Likewise, Department of State and U.S. Customs officers carry out Blue Lantern checks on munitions items. In both cases, Hong Kong officials are neither informed of such checks nor involved in making them. The importance of these checks was underscored by the 1997 General Accounting Office (GAO) report which stated that such checks were a key factor in determining whether Hong Kong continued to maintain an effective export control system.

Three specific cases in the last year provide examples of Hong Kong's efforts to sustain rigorous enforcement of export controls. The first involved Rex International Development, a local Hong Kong company. In June 1997, the Hong Kong Government ordered the closure of Rex and one other company suspected of selling chemical weapons-making equipment to Iran. In the second, Hong Kong SAR Customs officers seized a Chinese armored personnel carrier being shipped, without the required license, from Thailand back to China via Hong Kong. The APC was confiscated and the carrier fined for failing to declare the arms shipment. The Chinese owner of the APC has petitioned in Hong Kong courts to have it returned, but the case is still pending as of March 1998. The third involved the U.S. high performance computer allegedly re-exported from Hong Kong to the Changsha Institute on the mainland. It demonstrated Hong Kong enforcement authorities' ability and willingness to enforce its own export control laws even when the mainland was involved. This case is still pending as of March 1998.

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. Until June 30, 1997, Hong Kong's constitutional arrangements were defined by the Letters Patent and Royal Instructions issued by the United Kingdom; thereafter, Hong Kong became a special Administrative Region of the People's Republic of China as prescribed by the 1985 Sino-British Joint Declaration and the Basic Law, a "mini-constitution" approved in 1990 by China's National People's Congress.

Executive powers until June 30 were vested in a Governor, who was appointed by and served at the pleasure of the British Crown. The colonial Governors had ultimate control of the administration of Hong Kong, but, by convention, in recent decades rarely exercised their full powers. After June 30, 1997, executive powers were vested in a Chief Executive selected by a 400-person Selection Committee of Hong Kong residents, who were, in turn, chosen by a 150-person Preparatory Committee, composed of Hong Kong and mainland representatives appointed by the Chinese central government. There is no mechanism for the Chinese Central Government to remove the Chief Executive, but he or she can be forced to resign under certain circumstances outlined in the Basic Law (see Art. 52).

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

The Joint Declaration is an agreement between two sovereign nations, the United Kingdom and the People's Republic of China, that is registered internationally with the United Nations. 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 January 1998, British Foreign Secretary Robin Cook reported to Parliament in the second "Six-monthly Report on Hong Kong, July-December 1997" that, "For its part, the Chinese government has so far been careful to uphold the Joint Declaration." Commenting on China's decision to apply two international covenants on human rights to Hong Kong and to submit reports on human rights in Hong Kong to UN treaty monitoring bodies, Secretary Cook noted the PRC announcement "resolves one of the principal uncertainties remaining at the handover about the implementation of the Joint Declaration."

Despite its overall judgment that China has complied with the Joint Declaration, the United Kingdom has also stated that there was "no stipulation in the Joint Declaration for the establishment of the Provisional Legislature," a body of "dubious legality," to replace the legislature elected in September 1995. (See Six-monthly Report on Hong Kong, January-June 1997, Cm 3719.) Annex 1, article 49 of the Joint Declaration provides that "The legislature of the Hong Kong Special Administrative Region shall be constituted by elections," a requirement the provisional legislature did not meet.

Although Britain did not declare China's move to replace the elected legislature with an appointed provisional body a breach of the Joint Declaration, Prime Minister Blair and Foreign Secretary Robin Cook refused to attend the swearing-in ceremony for the Provisional Legislature at the Inaugural Ceremony of the HKSAR in the early morning hours of July 1. Secretary of State Albright and members of the U.S. Congressional Delegation to the Inaugural Ceremony also declined to attend the Provisional Legislature swearing-in. The United States announced that the provisional body was unnecessary, expressed disappointment that an elected legislature was being replaced by an unelected body, and called for the provisional body to be quickly replaced by a legislature constituted by elections.

B. THE OPENNESS AND FAIRNESS OF ELECTIONS TO THE LEGISLATURE

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 Legislative Council elected in September 1995 and the first legislature of 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 Legco members elected to four year terms in 1995 should have been allowed to serve out their terms through the transition.

China's decision to create a Provisional Legislature and the replacement of the elected legislature with an unelected body on July 1, 1997 raised serious concerns. As stated in the Hong Kong Policy Act report for 1996-1997, 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. During the Secretary of State's visit to Hong Kong for the handover, during President Clinton's meeting with Chief Executive C.H. Tung on September 12 in the White House, and at many other times, the United States has made clear our belief that China's decision to replace an elected Legislative Council with an appointed body 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 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.

The United States welcomed the announcement that elections would be held in May 1998 and appreciated the Hong Kong government's decision to limit the scope of the provisional body's activities. Because of the importance of free and fair elections to the creation of a truly autonomous Hong Special Administrative Region, the Policy Act Report for 1998 includes an expanded description of arrangements made for legislative elections in May, the background for those elections, and the outlook for the development of an increasingly democratic and representative legislature in Hong Kong.

Summary and Key Findings

Hong Kong's first post-colonial legislative elections are expected to be fairly and cleanly run. Elections to the Legislature are a key indicator of Hong Kong's progress towards democratic and representative government. The May elections are also an important step in implementing the Joint Declaration commitments to local rule and democratic institutions.

The rules for the May 1998 legislative elections mark a narrowing of the electorate for some of the functional constituencies, as established in the last years of colonial rule, and will result in a legislature that is thus less representative than the 1995 legislature. It is important to note, however, that no major political parties are boycotting the elections on the basis of the existing electoral arrangements.

Beijing central government leaders and Chinese government representatives in Hong Kong have been scrupulous in avoiding any involvement with election matters, apparently leaving questions on arrangements up to the SAR government. Nonetheless, as it was under British colonial rule, the complex and cumbersome system of picking the 60-member body will not be fully representative (only 20 seats will be directly elected) and thus will not produce a legislature which necessarily reflects the views of the majority of Hong Kong people. Based on recent polls, the Democratic Party and other politicians who support a fully representative system have the support of about half of the population, but will probably be limited to less than 20 seats in the legislature by an electoral scheme that earmarks 30 of the legislature's 60 seats for representatives of business, professional, and labor groups, and 10 remaining seats for an 800-person Election Committee.

Local attitudes toward the elections are mixed. Many Hong Kongers -- including some leaders of pro-PRC parties -- want a more representative legislature than the current law allows, but seem willing to go along with the government's plans for May's elections, after which the push for a faster pace of democratization may become stronger.

Reflecting a mix of public apathy, distrust of elections in general, and cynicism on the part of some of the population, government efforts to increase voter registration -- including a door-to-door registration campaign by 30,000 voter registration workers -- failed to pull in many new voters. Over a million Hong Kongers, roughly thirty percent of the voting age population, declined to register. It is unlikely that many more Hong Kongers will vote in the May 1998 elections than did in the last legislative elections in 1995, meaning only about one in three of people of voting age will cast a ballot.

Electoral procedures

The Tung administration has made strong efforts to demonstrate that the May 24, 1998 legislative elections will be run fairly and professionally. In one of his first moves, C.H. Tung appointed retired Justice Woo Kwok-Hing to head the Electoral Affairs Commission, the body charged with running the elections. Justice Woo had the same job during the 1995 legislative elections and has a reputation for efficiency and absolute honesty. Foreign observers, from a delegation of European Parliamentarians to analysts from the National Democratic Institute have visited Hong Kong since the handover and subsequently reported there is little chance of election fixing or corrupt practices tainting the results of May's balloting.

The Hong Kong government has made no move to restrict any Hong Kongers, including Beijing's vehement critics, from voting, operating a political party, demonstrating, holding public meetings, or standing for office. However, in early 1998, the government announced that political party signs and billboards had to be removed, explaining the ban was to ensure no party would have an unfair advantage in the May polls. In a decision later overturned, a low-level municipal committee decided to drop a film featuring a short clip produced by political party head Christine Loh from a government-sponsored arts festival. Although the film was not political, the committee -- whose logic was rejected by the Urban Council which allowed the film to be shown-- argued that the screening and attendant publicity might give Ms. Loh an unfair advantage in the legislative elections.

Central Government Involvement

Before reversion, there were worries -- based in part on statements by Beijing officials in the early 1990's-- that opposition legislators might be thrown out of office after reversion for failing to pass a Beijing-administered "loyalty check." Governor Patten, when explaining why no compromise was possible with Beijing on post-handover arrangements for Legco, frequently and bitterly criticized China for wanting to pick and choose which Hong Kong legislators would be allowed to ride the "through train" and serve after June 30,1997.

Since reversion, China has been scrupulous in avoiding pronouncements on Hong Kong or becoming involved in Hong Kong affairs. Chinese officials have been silent on election arrangements in Hong Kong and have refrained from singling out any political figure in Hong Kong as being unacceptable to serve in the legislature. For example, Szeto Wah -- Democratic party leader, ex-legislator, and leader of "The Alliance for the Support of the Patriotic Democratic Movement in China," a group that supports democracy and human rights reform in China -- reportedly worried he would be singled out by Beijing after the reversion and barred from public office. Still a vocal Beijing critic and organizer of demonstrations calling for the release of Chinese dissidents and democratic reform in China, Szeto Wah is now a candidate for the legislature in Kowloon's East District, where most predict he will win decisively.

Political Parties

The Democratic Party, headed by lawyer Martin Lee, is the best known political party in Hong Kong. No other group can rival its name recognition and pool of experienced and hard-working potential legislative candidates. Until a recent ban on public advertising, Democratic Party billboards with the party's distinctive green and white colors and white dove logo blanketed Hong Kong, particularly in densely populated areas of Kowloon and the New Territories. While continuing to push for more representative democracy in Hong Kong, the Democrats' political advertising emphasizes social and economic issues, e.g., lower public housing rents, affordable private housing, education, social services, and labor rights.

The pro-Beijing Alliance for the Betterment of Hong Kong (DAB), the second largest party after the Democrats, has announced plans to run a full slate of candidates in the geographic constituencies. However, the DAB president openly acknowledges his party's candidates are relatively unknown and that the DAB has years of work ahead if it is to displace the Democrats as the most popular political party in Hong Kong.

Other parties are running very small lists of candidates for the geographic, directly-elected seats. The Frontier group has announced six candidates so far, the pro-business Liberals four, but that number may drop as factions within the party drop out over disagreements over nominating party candidates for the legislature. Christine Loh's new Citizens Party has announced three candidates, Frederick Fung's Association for Democracy and People's Livelihood three, and the pro-Beijing Hong Kong Progressive Alliance three.

Fairness of Elections

While there are widespread expectations that the election will be run in a clean and fair manner, the nature of the system and decisions about voting will distort the process so that parties will not be represented in the legislature in the same proportion as they are represented in the voting population.

Following Chinese opposition to the Patten electoral reforms and a National People's Congress directive voiding the colonial electoral law, the Hong Kong Special Administrative Region government passed an election law in July 1997 which rolled back some of the reforms introduced by Governor Patten in the last years of colonial rule. In the September 1995 election, the Democratic Party and its allies got 29 seats in the legislature, an achievement that often translated into being able to muster a majority when they were able to enlist several independents to side with them. Under the Tung administration's current electoral rules, the Democrats and their allies are unlikely to get more than 20 seats and will have little or no chance of putting together ad-hoc majorities with like-minded independents.

Under the new electoral law, the number of geographic constituency seats in the May 1998 poll remains at twenty -- the same level as September 1995 -- but the new law introduced multi-member districts and proportional representation to replace single-member districts. Democrats and their allies have 40 to 60 percent support in most geographic constituencies, more than enough to win almost all 20 geographic constituency seats in "winner-take-all, first-past-the-post" contests. However, multi-member districts and proportional representation will allow smaller pro-Beijing parties and politicians with 10 to 25 percent support levels to pick up seats in the geographic constituencies.

While the effect of the changes to the method of picking representatives from geographic constituencies reduces the democratic camp's chances of winning, it is difficult to argue that the proportional representation method itself is unfair. The effect is to insure a party with a bare majority does not pick up 80 to 90 percent of the legislative seats up for election. Proportional representation also is an electoral method that has been employed by Germany, Italy, Norway, Switzerland, and various other democratic nations.

The second significant change to the election arrangements that will cut back pro-democracy and pro-labor forces' legislative seats is the new electoral law's reduction of the number of voters in functional constituency electorates from well over two million to about 200,000. In 1995, many voters had, in effect, two votes, one in the area where they lived and a second as a member of a functional constituency. Gov. Patten's reforms established broader constituencies that tipped the balance in the pre-handover legislature in favor of pro-democracy and labor union representatives who won easily in industrial constituencies like textiles, retail trade, and transport. All of these had been "safe seats" for business and "tycoon" interests until 1995 and will again be "safe seats" for business interests in the May 1998 elections.

Foreign election monitoring

Hong Kong government officials, from C.H. Tung to close confidants of Governor Patten who have stayed on in government, are unanimous in saying they will not welcome or allow "election monitoring," although "private observers" would be permitted. Despite the lack of anything to hide, it appears the prospect of having foreign election monitors hits a raw nerve with Hong Kong officials, who view monitoring as interference in Hong Kong's affairs and as an implicit criticism of Hong Kongers' ability to police themselves. Hong Kong officials also cite election rules which prohibit non-voters from entering polling places as grounds for banning "foreign monitors." C.H. Tung himself delivered a strong message to a visiting group of European Parliament members in late 1997 that a monitoring group would not be welcome, but that "private observers" would be allowed to follow the legislative elections. In a practical sense this distinction may bar visitors from polling places, where activity will be monitored by the government and political party representatives.

Voter participation

The Hong Kong electorate has expanded markedly since 1985, when fewer than 50,000 voters chose 12 legislators representing functional constituencies. In the 1991 and 1995 elections, all Hong Kong residents were able to register and to vote for a legislator representing a geographic district. In 1995, most Hong Kongers with jobs also had a second vote for a functional constituency seat. The pool of eligible voters is roughly 4 million. (All adults over 18 with right of abode in Hong Kong.) However, only 2,572,124 voters registered for the 1995 elections and of those only 920,567 cast ballots in the geographic constituencies.

In the most recent registration drive, the government spent sixty million Hong Kong dollars (about 7.75 Million US dollars), flooded Hong Kong with advertising urging voters to register, and mobilized 30,000 college-age students to go door-to-door in an attempt to give every potential voter a chance to register. The registration blitz only signed up 290,000 new voters, which increased the number of registered voters to 2.79 million, roughly 70 percent of the voting age population.

Although democratic camp politicians said disenchantment with the Tung electoral package was widespread and the reason for the poor response to the registration drive, many student registration workers reported they received few politically motivated refusals to register. While there is a good deal of dissatisfaction with the election rules, particularly regarding the narrow-based functional constituencies, it seems that most non-registrants were not "sending a message" on specific political issues. Instead, it appears the "refusers" were in many cases unfamiliar with voting, unconvinced it could do anything for them, or expressing acceptance of the current political arrangements as either good for them or the best that can be expected.

Registration of voters in the functional constituencies was more disappointing than in the geographic seats. Of an estimated 230,000 potential voters, only 138,984 completed registration procedures. In some "new functional" groupings created to replace the nine, mass membership constituencies created by the Patten reforms and won by pro-democracy legislators in 1995, registration numbers were particularly poor. For example in the textiles and garment group only 2,739 electors out of a pool of 21,781 registered; in wholesale and retail only 2,216 out of 10,588, in import and export 1,182 out of 6,971. Commenting in the Hong Kong media, Tsang Yok-Sing, head of the pro-PRC DAB party wrote it was clear that the functional constituencies had little public support. Tsang suggested that it might be necessary to amend the Basic Law to eliminate functional constituencies and move more quickly to a system of direct election for all legislators.

Campaign funding limits

Campaign funding has been increased from 200,000 Hong Kong dollars per candidate in the 1995 elections to 500,000 (64,000 US dollars) per candidate for the May poll. Democrats and others have criticized the increase, warning that the higher level will hurt poorly funded candidates and lead to money politics taking root in Hong Kong. While the new limit may create problems for independents wanting to mount a campaign, it is still not a large amount to spend on election campaigns in districts with over a million inhabitants. Some political analysts note that without the higher spending limits it would be impossible for unknown candidates to "build name recognition and get a message out." Others have warned that higher limits will bring problems of vote-buying.

Hong Kong Legislatures: Background

A summary of Hong Kong's short but complex history of legislative elections is appended below.

From 1841 to 1985, Britain did not allow Hong Kong residents to vote for members of the legislature. The Legislative Council was composed of appointees of the colonial governor and high-ranking civil servants. Instead of functioning as a separate and autonomous branch of government, the Hong Kong legislature was an advisory body for the Governor and had no power to pass legislation on its own or overturn acts of the executive.

Starting in 1985 (after the signing of the Joint Declaration), the first legislators were chosen by elections rather than appointment by the Governor of Hong Kong, and Hong Kong's colonial legislatures became progressively more representative and democratic. While the legislature remained very much a junior partner in the government, it did begin to hold the executive accountable and function as an overseer of the civil service and the government.

In 1985, "functional constituencies" representing, among others, the legal and medical professions and business groups were first allowed to return a small number of legislators by election within each group; direct election of legislators from geographic constituencies was introduced in 1988 and expanded to 20 seats in 1995. The last remaining legislative seats appointed by the governor and legislative seats reserved for senior government civil servants were eliminated in September 1995 when a completely elected legislative council was returned.

Despite the changes in legislative personnel and function since 1985, the Hong Kong Legislature remains much less powerful than the executive. Moreover, looking to the future, there is no provision in the Basic Law for putting the legislature on an equal footing with the Chief Executive as a law-making branch of government. Article 74 of the Basic Law stipulates that legislators cannot introduce bills that relate "to public expenditure or political structure or the operation of the government;" and that "the written consent of the Chief Executive" is required before bills relating to government policies are introduced.

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 was sworn in as Chief Executive on July 1, 1997. 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 colonial Governors 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 following selection and recommendation in Hong Kong in accordance with procedures in the Basic Law. 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. 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 ensure that Beijing was not presented 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 held 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 legislature will not be fully equal in power to the Chief Executive. 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 by a two-thirds majority 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 Boards 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. In 1997-1998 three new political parties have formed, The Frontier, The Citizen's Party and the Hong Kong Progressive Alliance. 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 less than 1000 party members at the beginning of 1998. Even the DAB, which receives significant support from left-wing labor unions and pro-China organizations, has under 1,000 members.

There are no limitations in the Joint Declaration or the Basic Law on political parties, although Article 23 of the Basic Law provides that the HKSAR Government shall pass laws which prohibit political parties of the region from establishing ties with overseas political organizations. All of Hong Kong's parties have remained active, and are actively planning to contest legislative elections in May 1998.

Before the handover many in Hong Kong expressed concern that the central government might 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. Thus far no actions have been taken by the HKSAR or the central government to confirm these fears.

Democrat Party members who ran for Hong Kong's delegation to the National People's Congress failed to get more than two or three Selection Committee members to put their names in nomination -- ten nominations were required in order to be placed on the final ballot for NPC members. The closed nature of the NPC selection process highlighted the continuing problems Democrats and others critical of Beijing continue to experience when trying to participate in politics in China.

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 nongovernmental 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. The Basic Law (article 80) guarantees that the courts of Hong Kong shall be the judiciary of the Special Administrative Region and "exercise the judicial power of the region." The Basic Law (article 8) also stipulates that the laws in force in Hong Kong before reversion, except for any which contravene the Basic Law, will remain in force. Since July 1, Hong Kong's independent judiciary, statutory laws and Common Law traditions have continued to provide substantial and effective legal protection against arbitrary arrest or detention and respect for the right to a fair public trial.

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 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 -- which was strongly supported by Governor Patten and the government -- was passed. The Court was established on July 1, 1997.

The CFA inherited, in large part, the power of final judgment in appeals cases formerly held by the Privy Council in London. Judges are nominated by an independent commission, members of which are appointed by the Chief Executive subject to endorsement by the legislature. By late July, a respected jurist, Andrew Li, had been named as Chief Justice, and three other permanent Justices and several nonpermanent judges from Hong Kong and other commonwealth jurisdictions were appointed. The list of 15 non-permanent Justices on the CFA includes four prominent Commonwealth jurists: Lord Cooke, Sir Edward Somers (both of whom serve on the Privy Council), Lord Hoffmann, and Lord Nicholls. The presence of foreign jurists is a further safeguard of the CFA's independence and fairness.

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 defense 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 CFA's power of final jurisdiction could be used to limit the autonomy of Hong Kong's judiciary.

In a July 29 ruling on the continuity of laws, the CFA offered a controversial interpretation of the power of Hong Kong courts to review acts of the Chinese central government. Ruling on the HKSAR government's submission that his court was "a regional court and it is out of its jurisdiction to inquire into the legality of laws enacted by the sovereign power," Chief Judge Chan ruled that it was a "self-evident proposition" that as "the National People's Congress is the highest organ of state power (Article 57 of the Constitution) and with its Standing Committee is entrusted to exercise the legislative power of the State (article 59) ... the legality or validity of these laws made by these bodies is not open to challenge in Hong Kong courts." (emphasis added) Critics in Hong Kong's legal community, while noting this portion of the court's decision was "obiter dicta" -- neither dispositive of the case under consideration nor legally binding -- charged Justice Chan had damaged judicial independence and the basis of the rule of law in Hong Kong. In particular, critics pointed out that according to the Basic Law, the "mini-constitution" for Hong Kong, courts have jurisdiction to interpret the Basic Law (article 158) and the National People's Congress has the power to amend the Basic Law (article 159). Justice Chan's dicta raised the possibility that "unchallengeable acts of the sovereign," i.e., the central government in Beijing, were a second and new source of law for Hong Kong in addition to the Basic Law. A respected member of the Hong Kong Bar wrote in her column in the South China Morning Post that one interpretation of Justice Chan's decision was that ".... the NPC reserves an unlimited power to legislate for Hong Kong, which it can exercise in anyway and at anytime it sees fit, without regard to anything provided in the Basic Law... ".

Judges have ruled several times against the new HKSAR government. Overturning a government decision to deny an illegitimate child right of abode in Hong Kong, a court ruled that the Hong Kong law denying right of abode to illegitimate children of Hong Kong resident fathers (but not mothers) violated Article 24 of the Basic Law, which grants right of abode without reference to legitimacy or the sex of either parent. The Court of Appeal rejected government arguments for continued detention of 278 Vietnamese in Hong Kong's closed refugee camps pending outcome of their appeal, stating that "if a person's detention is unlawful, even one minute is too much." There were several additional cases in which judges overturned government decisions and policies.

As reported in the Policy Act Report for 1997, increased use of Cantonese and less use of English in the courts is leading to changes on the bench. At present, about half 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's laws and legal system 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 continuation of Hong Kong's independent judiciary is essential in maintaining 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). This treaty was 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 was 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 Covenant 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 ICCPR and the International Covenant on Economic, Social, and Cultural Rights (ICESCR) as applied to Hong Kong will remain in force. Although at the time the PRC was 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. In November 1997, China announced that it would submit reports to the United Nations on the application of the ICCPR and ICESCR covenants to Hong Kong. The Hong Kong government and the HKSAR Home Affairs Bureau are preparing draft reports, which will be transmitted to Beijing and submitted by the Chinese Foreign Ministry to the appropriate United Nations organizations. China has indicated informally that it does not plan to make any changes to the reports prepared by the Hong Kong government. China's decision to reporting to the United Nations on human rights in Hong Kong was welcome and has strengthened confidence in the continued protection of individual freedoms in Hong Kong. (Note: China signed the ICESCR in November 1997; on March 11, 1998, Foreign Minister Qian Qichen announced China's intention to sign the ICCPR at some future date. End note)

Before reversion, the PRC government 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. The central government authorities in Beijing argued 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. They maintained that the Basic Law adequately protects human rights, thereby making the broad pronouncements of the supremacy of the Bill of Rights Ordinance unnecessary.

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, 1997, 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.

Since reversion there have been two changes to the Bill of Rights Ordinance. The first, as called for by the National People's Congress was to remove the article of the law giving it over-riding status over all other legislation. Lawyers and legal scholars point out that this change may not have any immediate significant practical effect. They note that as subsequent legislation, the Bill of Rights Ordinance, according to Common Law practices of legal interpretation, takes precedence over previous laws in any case. In addition, both the Basic Law and the laws of Hong Kong stipulate that all future legislation must not conflict with the UN covenants on human rights, from which the human rights protection measures in the Bill of Rights Ordinance were directly taken.

The second change to the Bill of Rights was to suspend and begin the process of repealing a bill passed in June 1997 which applied Bill of Rights to all legislation, including legislation involving cases between private persons. As originally passed in 1991, the Bill of Rights Ordinance affected only the government, all public authorities, and any person acting on the behalf of the government or public authority. However, in a court case (Tam Hing-yee v. Wu Tai-wai,1992) a district court judge ruled that an ordinance used to prevent a debtor subject to a judgment from leaving Hong Kong was inconsistent with the Bill of Rights Ordinance, which guaranteed the freedom of travel and the right to leave Hong Kong. On appeal, the district court was overruled, the Court of Appeals holding that the Bill of Rights Ordinance, as passed by the Legislature in 1991, had no application to disputes between individuals.

To clear up the ambiguity of what the Legislature had meant in 1991 when passing the Bill of Rights Ordinance, Democrat Party legislator Lau Chin-shek introduced a private member's bill, which Legco passed right before the handover. The Provisional Legislature enacted a measure to void Lau's amendment on February 25, 1998, with HKSAR government backing. HKSAR government legal authorities, most of whom served in the Patten administration, argue that the Lau amendment to the Bill of Rights Ordinance creates ambiguity and confusion. The HKSAR Government prefers to take a step-by-step approach to applying the Bill of Rights Ordinance to disputes between private individuals. They explain that they have been making progress in safeguarding individual rights in matters that do not involve the government: first, by making efforts to bring all Hong Kong statutes into conformity with the ICCPR and; second, by enacting anti-discrimination laws in the areas of marriage, family status, sex, and disability laws. HKSAR government legal authorities warn that Lau's amendment could have unanticipated consequences if allowed to stand.

Supporters of the amendment, who include prominent barristers, point out that the intent of Lau's bill is simply to apply the Bill of Rights Ordinance to all legislation, whether affecting government-private party relations or private party-private party relations. To do otherwise they insist would create a system in which the Bill of Rights Ordinance could only be invoked when there is direct government involvement. This controversy received wide coverage in the press on the grounds that the amendment represented a "roll-back" of human rights guarantees.

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.

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 United Kingdom, Hong Kong, or PRC governments, were aired in the mass media, in public fora, and by political groups throughout the year from April 1, 1997. For example, the medical parole and departure of Chinese dissident Wei Jingsheng hit the front pages of Hong Kong newspapers, and was applauded editorially by most local media despite the Chinese central government's position on the matter. During the bird flu crisis of November 1997-January 1998, the media were scathing in their criticism of how the Special Administrative Region government handled various aspects of the crisis.

Radio Television Hong Kong (RTHK), the government-operated broadcaster, continues to carry material critical of the government of the Special Administrative Region -- some observers would say it has been more critical of the SAR than it has been of the previous administration. Talk radio programs and publications like "Mad Dog Daily" appear to operate without limitation both before and after reversion in criticizing local leaders and China's policies toward Hong Kong. Political cartoonists continue to satirize, if not savage, prominent political figures in Beijing and Hong Kong in ways unimaginable in the rest of China's media and the papers of many of Hong Kong's more tightly controlled Asian neighbors.

Hong Kong people continue to speak freely to the press, and there are no taboo subjects in the media. However, self-censorship is widely perceived to exist. A February 1998 survey conducted by the Social Science Research Center of the University of Hong Kong showed that about 70 percent of those interviewed thought the media had scruples about criticizing the Chinese central government. Another 43 percent said they believed the media practiced self-censorship (down from 50.3 percent in a December 1997 by the same organization), and 54 percent praised the media for fully exercising freedom of speech (slightly down from 57.5 percent two months earlier).

In the past, it has been difficult to find specific instances in which self-censorship killed a story or suppressed an editorial. The pressure appears to be more subtle, coming not as a direct order to refrain from writing, but as subjective exercises of special care toward topics of particular sensitivity, such as PRC leadership dynamics, Taiwan, Tibet, or military activity. One indication that self-censorship may become a problem came to light during a December 1997 presentation at the Freedom Forum Newseum in Rosslyn, Virginia, where Hong Kong Economic Times op-ed editor Liu Kin-ming told the audience that he had "taken lots of heat" for printing a Chinese translation of an article written by the Dalai Lama's representative in Washington. After the article appeared, Mr. Liu received a note from his publisher saying that he should not give so much space or attention to the issue of Tibet because the paper's readers were not interested.

The Hong Kong Journalists Association, the largest professional organization for local journalists and a staunch advocate of freedom of the press, issued a statement last October which took issue with Chief Executive C. H. Tung's statement that there was no self-censorship in Hong Kong. Nor did the Journalists Association hesitate to complain about the press arrangements put in place when Mr, Tung visited one of the People's Liberation Army installations in Hong Kong. On that occasion, only Chinese Central Television was invited to cover the event. Since the Journalists Association's complaint, the Chief Executive's Office instituted strict procedures to ensure fuller notice to all sectors of the media and opportunities for coverage of all his public events.

In February 1998, the Hong Kong Journalists Association launched a "Campaign for Open Government" calling on the Special Administrative Region Government to start work on a Freedom of Information Ordinance. It did this after conducting a test in November 1997 by requesting 81 documents from the government under the existing Code on Access to Information. According to the Journalists Association, only 35 documents were available in full. The Journalists Association had earlier criticized the Department of Home Affairs for circulating a memorandum encouraging government officials to comply as well as possible with the requests for documents. It objected particularly to the memo's statement that, "In the nature of things, good news is no news and we can kill the story -- or at least reduce its impact -- if we all do well."

Following the transfer of sovereignty, Ma Yuzhen, the Commissioner of the Chinese Ministry of Foreign Affairs Hong Kong Office, stressed on a number of occasions that China would not interfere with media operations in Hong Kong. There have been no reports of interference with the press by Chinese officials based in Hong Kong. Foreign correspondents resident in Hong Kong, who do have to deal with the Ministry when they travel to China, have generally praised the treatment they receive from the MFA Press Office.

Since the handover, new mainland media outlets have begun to appear in Hong Kong. China's official English-language newspaper, China Daily, launched its Hong Kong edition in July 1997. It takes its editorial line from Beijing. China Central Television expanded its Hong Kong bureau significantly. A monthly magazine, China Review (Zhongguo Pinglun) began publication in January 1998. Both its publisher and editor-in-chief were formerly directors of China's domestic news service, the China News Agency.

Hong Kong press coverage of the PRC continues to be extensive and is frequently critical. Hong Kong continues to be a hotbed of speculation over changes in leadership and policy in Beijing, and all the different theories are freely aired in the press. 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 leaders several years ago by referring to Premier Li Peng in an editorial with a common Chinese obscenity) has never been able to obtain official permission to cover events in mainland China. In October 1997, when Chinese President Jiang Zemin made his state visit to the U.S., Apple Daily was turned down by the Hong Kong office of the Ministry of Foreign Affairs when it applied for accreditation to cover the story. The Ministry indicated that Apple had submitted its application after the deadline. Nor did the Ministry invite Apple to the year-end party it hosted for the local media.

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

A. FULL MEMBERSHIP

B. ORGANIZATIONS IN WHICH THE HKSAR PARTICIPATES AS PART OF THE PRC DELEGATION

C. ASSOCIATE MEMBERSHIP

D. OTHER ORGANIZATIONS IN WHICH HONG KONG PARTICIPATES, AND WHICH JLG AGREEMENT WAS NOT REQUIRED FOR HONG KONG'S CONTINUED PARTICIPATION

(Note: The following list includes only some of the over 300 international organizations and conferences in which the HKSAR government and officials of the HKSAR participate.)

E. INTERNATIONAL ORGANIZATIONS IN WHICH HONG KONG NO LONGER PARTICIPATES


Blue Bar rule


APPENDICES

A. Official Visitors to Hong Kong: April 1, 1997 - March 31, 1998
B. A Chronology of Significant Events in Hong Kong: April 1, 1997 - March 31, 1998

 
Appendix A: Official U.S. Visitors to Hong Kong: April 1, 1997 - March 31, 1998

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

Congressional Visitors to Hong Kong, March 1997 to March 1998

March 1997:

Senate:

House of Representatives:

May 1997:

Senate:

House of Representatives:

June/July 1997:

Senate:

House of Representatives:

August 1997:

Senate:

House of Representatives:

September 1997:

October 1997:

Senate:

November 1997:

Senate:

December 1997:

Senate:

House of Representatives:

January 1998:

Senate:

House of Representatives:

 
Appendix B: Chronology of Significant Events in Hong Kong since March 1997

March 1997

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 handle 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 the future government. Zhou says the Chinese government has confidence in C. H. Tung and the future HKSAR government.

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

31 -- After a one-month consultation period, the Preparatory Committee Secretariat receives about 1,000 proposals on the elections of the first SAR legislature. Multi-seat, single-vote system appears to be the favored option for the direct legislative elections in 1998. All the proposals will be sent to Beijing and a final decision will be made by the Preparatory Committee at its ninth plenum in May.

April

9 -- Chief Executive-designate C. H. Tung's office releases a consultation document on "Civil Liberties and Social Order." Included in the document are proposals to bar local political parties from receiving overseas donations and allowing police to ban demonstrations on "national security" grounds. The proposed changes draw negative responses.

11 -- The future Chief Executive C. H. Tung appoints two Preparatory Committee members, Edgar Cheng and Chan Wing-kee to the Judicial Officers' Recommendation Commission that will recommend judicial appointments after the handover. They replace two independents, Sir Joseph Hotung and Eleanor Ling. Those being offeredre-appointment are Court of Appeal Justice Gerald Nazareth, High Court Judge Patrick Chan, former Bar Association Chairman Gladys Li, former Law Society President Roderick Woo, and Trade Development Council Chairman Victor Fung. The future Chief Justice of the Court of Final Appeal will be the ex-officio chairman of the commission. The Secretary for Justice-designate Elsie Leung will be an ex-officio member.

12 -- At its fourth plenum held in Shenzhen, the Provisional Legislature is presented its first bill, the Holidays (1997 and 1998) Bill. The interim body also reaches an agreementon rules of procedure that includes a controversial option for crucial bills to go through three readings before the handover. Dr. Leong Che-hung is elected House Committee Chairman with Ip Kwok-him of the DAB as deputy, Ronald Arculli of the Liberal Party as Finance Committee Chairman and Henry Wu as Vice Chairman.

18 -- President Clinton drops in during a meeting held between Vice President Gore and Democratic Party Chairman Martin Lee.

28 -- Secretary of State Madeleine Albright meets visiting Chinese Foreign Minister Qian Qichen. While hailing positive momentum in improving bilateral ties, she reaffirms the need for Beijing to take "concrete and meaningful steps" to preserve basic freedoms in Hong Kong after July 1. The talks reach an agreement on navy port calls to Hong Kong.

May

3 -- The Provisional Legislature holds its fifth session in Shenzhen. Two Bills on National and Regional Flags and Emblems are presented for their first and second readings. A motion urging provisional legislators to support the transitional budget is also moved at the session.

4 -- Independent legislator Christine Loh sets up the "Citizens Party." The party is described as being "competitive, but not adversarial" and will field candidates to run for the 1998 legislative elections. Despite Loh's invitations, officials from local Xinhua and C. H. Tung's office do not attend the inauguration ceremony.

7 -- Speaking on his return to Hong Kong after meeting Vice Premier Qian Qichen in Beijing, the future Chief Executive C. H. Tung says they have discussed the arrangements for post-handover foreign consulates, timing of dissolving the Preparatory Committee, and formation methods of the first SAR legislature. He urges Beijing to be more flexible on the electoral rules and arrangements of the first SAR legislature. "Personally, I tend to support a more flexible arrangement so that the Chief Executive's office, the Provisional Legislature and Hong Kong people can make the final decision," Tung says.

15 -- The future Chief Executive's office announces a number of changes to the original proposals to amend the Societies and Public Order Ordinances. Some original recommendations remain, notably restrictions relating to "national security" and a requirement for the registration of societies.

17 -- The Provisional Legislature holds its seventh session in Shenzhen. Five bills, two on civil liberties and three on setting up provisional municipal and district organizations, are presented for their first and second readings. During the meeting, four pro-democracy provisional legislators walk out of the session in protest of a move to stop a debate on public assistance for the elderly.

20 -- The future Chief Executive C. H. Tung formally names Executive Councillor and barrister Andrew Li as the territory's first post-1997 Chief Justice. The announcement is warmly welcomed by the local community. Governor Patten describes the appointment as "very good news" for the rule of law in Hong Kong. Legco's legal representative Margaret Ng, the Law Society and the Bar Association welcome the announcement and express confidence that the appointment supports the independence of the judiciary.

22 -- At its ninth plenum held in Beijing from 5/22 to 5/23, the Preparatory Committee puts forward two options for the first elections to the SAR Legislature: proportional representation and a "multiple-seat, single-vote" system for geographical direct elections. Old functional constituencies will remain unchanged, but 15 sectors are proposed as possible replacements to replace the nine new mass-membership functional sectors formed under Governor Patten's electoral reform. An 800-member Election Committee will be set up to choose ten legislators in the 1998 legislative elections.

28-30 -- The Sino-British Joint Liaison Group (JLG) holds its last plenary session before the handover. The two sides differ over the future role of the body: the British side proposes to "monitor" the implementation of the Joint Declaration after the handover; China maintains that the JLG will remain a "liaison" body. Agreement on details of handover ceremonies and arrangements is reached.

June

1 -- Over 4,000 Hong Kong people take part in a peaceful procession to mark the eighth anniversary of the June 4 crackdown on pro-democracy activists in Beijing. The is turnout slightly larger than last year's 3,000.

2 -- In an interview with Newsweek, Chief Secretary Anson Chan hints that she may step down if asked to implement policies that go against her principles and conscience.

2 -- The future Chief Executive C. H. Tung says in an interview with local electronic media that Hong Kong people should look for ways to achieve a smooth transition and put the past behind them by dropping the "baggage of June 4."

4 -- A "Pillar of Shame" sculpture is erected in the Victoria Park, where 55,000 peopletake part in a candlelight vigil to mark the eighth anniversary of the Tiananmen Square Incident. The gathering is peaceful.

4 -- The Legislative Council endorses the Official Secrets Bill without amendments being made to the clauses on espionage and unlawful disclosure of information, which have been criticized for restricting freedom of information. The bill, which seeks to localize the 1911 British Official Secrets Act and to legislate against "theft of state secrets" as required by the Basic Law, has been approved by the JLG.

5 -- Ma Yuzhen, 63, is named head of the Foreign Ministry Office in the HKSAR to deal with the territory's post-handover foreign affairs. The announcement draws positive reaction from the local community. Ma is a career diplomat and a former Chinese Ambassador in London with extensive experience in Sino-US and Sino-British relations.

7 -- Three bills re-introducing appointed seats to the post-handover municipal councils and district boards are given their third readings by the Provisional Legislature. The Immigration Bill is tabled to the interim body for its first and second readings.

9 -- In an interview with an ITN reporter, C. H. Tung describes himself as a man of principle, who would resign as Chief Executive if his beliefs were compromised after the handover.

11 -- China announces that Chinese President Jiang Zemin will lead a delegation of high-ranking central government officials to the territory for the handover ceremony and the inauguration of the SAR government.

12 -- The Democrats' legal challenge to the legislative functions of the Provisional Legislature is halted by High Court Judge Justice Raymond Sears. Judge Sears comments that the suit is "doomed to failure" and is politically motivated.

14 -- The Provisional Legislature passes the Public Order and Societies Amendment Bills and rejects amendments proposed by two pro-democracy members on the registration of societies and on the national security provision.

16 -- The future Chief Executive's office announces a through-train arrangement for all incumbent Urban Councillors, Regional Councillors and District Board members to serve in the provisional bodies until December 1999. At the same time, each body will be expanded 25 percent by adding appointed members. Among the new 116 appointees, a number had been defeated in the previous polls for public office.

19 -- Director of Hong Kong and Macau Affairs Office Lu Ping pays a surprise visit to the territory to discuss the handover ceremony.

24 -- Legco passes an amended treason law by a vote of 23-20. The legislation states thatonly violence, not vocal dissent, should constitute a punishable offence. Legco members vote down the provisions on subversion and sedition, arguing that they are vague and open to abuses. C. H. Tung's office rejects the law, saying that moves to enact Article 23 of the Basic Law regarding treason, secession, sedition and subversion are unacceptable.

24 -- In an interview with CNN, Chief Secretary Anson Chan denies that she has threatened to resign. "I did not, and I repeat, I did not threaten to resign," Chan says on CNN, adding that she intends to stay on until she reaches retirement age in three years.

25 -- Washington announces that Consul General Richard Boucher will attend the swearing-in of the Provisional Legislature held at 1:30 AM July 1.

28 -- The Chinese Central Government announces the appointment of six prominent Hong Kongers to the Basic Law Committee, which is responsible for studying questions arising from the implementation of the Basic Law. The six members are Hong Kong Airport Authority Chairman Wong Po-yan, who is named Vice Chairman of the Committee; Preparatory Committee member Raymond Wu; barrister and Preparatory Committee member Maria Tam; local NPC deputy Ng Hong-mun; head of the Law Faculty of the University of Hong Kong Professor Albert Chan; barrister and the Securities and Future Commission Chairman Anthony Francis Neoh.

30 -- As Hong Kong counts down the hours to the mid-night handover, future Chief Executive sets a May 1998 timetable for elections. Chinese President Jiang Zemin pledges to uphold Hong Kong's human rights and freedoms.

30 -- At 11:30 PM, Britain's Prince Charles and Chinese President Jiang Zemin officiate at a 35-minute handover ceremony at the Hong Kong Convention and Exhibition Center.

July

1 -- Speaking at the inaugural ceremony of the HKSAR, President Jiang Zemin pledges that

the Central Government resolutely supports the HKSAR government in exercising a high degree of autonomy provided in the Basic Law. "The Hong Kong Basic Law protects, in full, rights and freedoms of the Hong Kong residents," Jiang says.

1 -- The HKSAR government is formally established. Chief Executive C. H. Tung pledges that post-reversion Hong Kong will remain the "freest and the most vibrant economy in the world."

8 -- The SAR government announces the 1998 electoral arrangements, saying that the new polling methods are to have an open and fair election, to achieve a balanced participation of all groups and individuals, and to constitute a credible legislature. The Democrats and others criticize the government proposal.

9 -- The Provisional Legislature passes an immigration bill through all three readings in a single session. The bill allows deportation of illegal immigrant children claiming right of abode in the HKSAR.

9 -- Former director of the Foreign Ministry's Hong Kong and Macau Affairs Office Wang Guisheng is named senior representative of the Chinese team to the JLG, succeeding Zhao Jihua, who is named to be Deputy Commissioner of the Foreign Ministry Office in the HKSAR.

11 -- The Preparatory Committee holds its last plenum in Beijing to mark the disbandment of the 150-member body set up in January, 1996 to oversee Hong Kong's transition. Top Chinese leaders, including President Jiang Zemin, Premier Li Peng and NPC Chairman Qiao Shi, meet members after the session.

16 -- Provisional Legislative Council passes a bill suspending labor laws giving workers increased bargaining powers, allowing unions to fund political activities, and preventing anti-union discrimination by a vote of 40-9.

18 -- The HKSAR government issues administrative guidelines on national security which empower the Police Commissioner to ban protests or public processions if needed in order to "safeguard the territorial integrity and the independence of the People's Republic of China."

23 -- The HKSAR government issues a consultation document on the formation of the nine new functional constituencies for next year's elections. A 10-day consultation exercise is also announced.

25 -- The Central Government announces the appointment of former Vice Foreign Minister Jiang Enzhu to replace the retiring Zhou Nan as head of the New China News Agency's Hong Kong Branch.

29 -- In a landmark challenge to the legality of the Provisional Legislature, Chief Judge Patrick Chan of the Court of Appeal rules that the interim body was validly and properly constituted; that National People's Congress is the highest law-making body in China and local courts have no jurisdiction over its decisions; and that the laws adopted by the Provisional Legislature on July 1 continue in force under the HKSAR.

August

4 -- An opinion poll conducted after one month of Hong Kong's reversion to Chinese rule indicates that 78 per cent of Hong Kong people have confidence in Chief Executive C. H. Tung, whose approval rating was 57 per cent in June.

14 -- Director of Overseas Chinese Affairs Office Liao Hui is named head of the State Council's Hong Kong and Macau Affairs Office to replace the retiring Director Lu Ping. Born in Hong Kong in May 1942, Liao is a grandson of KMT revolutionary martyr Liao Zhongkai and the eldest son of the founder of the Hong Kong and Macau Affairs Office Liao Chengzhi.

15 -- A draft bill on the first legislative elections is gazetted. It proposes that the first SAR Legislative Council, with a two-year term starting from July 1, 1998, will have 20 geographically elected seats, 30 functional constituency seats and 10 seats chosen by a 800-member Election Committee.

20 -- Hong Kong stock suffers their worst drop since March 1996 as worries intensify of an attack on the local currency. The benchmark Hang Seng index drops 619.62 points, or 3.85 %, to 15,477.26.

28 -- Local stocks suffer another drop as major Southeast Asian stocks plummet. The Hang Seng index is down 657.85 points, or 4.23 %, to 14,876.

30 -- The first official meeting between Chief Executive C. H. Tung and the new Director of Hong Kong and Macau Affairs Office Liao Hui takes place in Shenzhen. Speaking in fluent Cantonese, Liao pledges that he will steer clear of Hong Kong's domestic affairs.

September

2 -- Hong Kong shares experience one of the most dramatic trading days in years. Share prices drop from 13,425.65 to 12,899.81 before rebounding to close at 13,735.33. Chief Executive C. H. Tung reiterates that the SAR government will not interfere with the stock market despite the sharp recent downward trend, but warns small investors to be cautious.

3 -- The Central Government announces that Hong Kong suspended its membership in the Asian Productivity Organization (APO) on July 1, 1997 because of Central Government objection to Taiwan's participation in the organization under the name "Republic of China."

3 -- Local stocks stage record one-day gain. Driven by a surge on Wall Street and a strong rebound in China-related shares, the Hang Seng index gains 978.66 points, or 7.12%, to close at 14,713.99.

3-5 -- Chief Executive C. H. Tung pays his first overseas visit to Malaysia and Singapore to spread word of a smooth-running Hong Kong after the reversion and to foster

bilateral relationship with host countries.

5 -- In his first press meeting, Chief Justice Andrew Li assures Hong Kong people of an independent judiciary. "Competence, integrity and independence are, and will continue to be, its hallmarks," Li says, adding that the Court of Final Appeal will deal with the question of the Provisional Legislature's legality impartially.

8-11 -- Chief Executive C. H. Tung pays his first official visit to the United States.

9 -- The Chief Executive meets with Secretary of State Madeleine Albright. Tung is told that the US expects next year's legislative elections to adopt rules that are "free, fair and fully representative." C.H. Tung maintains Hong Kong must do what is best for the people in the long run.

12 -- Chief Executive C. H. Tung meets with President Clinton. Tung reaffirms Hong Kong's commitment to democracy during the 40-minute White House meeting, stressing that Hong Kong's political direction and the timetable for changes to the electoral system have been laid down in the Basic Law. A White House spokesman says: "The President expressed disappointment with the decision to reverse Hong Kong's electoral reforms. He was encouraged that basic freedoms -- freedom of speech, of the press and the right to demonstrate -- were being effectively protected."

15 -- Chief Secretary for Administration Anson Chan delivers her first post-reversion speech to AmCham, saying that the 1998 electoral arrangements are designed not to freeze out the Democrats but to function as a stepping stone to universal suffrage.

20 -- Premier Li Peng pays a four-day visit to Hong Kong, his second visit since the reversion to officiate at the opening of the World Bank/IMF Conference.

21 -- Scuffles take place when a group of protesters attempt to get as close as possible to the Convention and Exhibition Center, the venue of the IMF conferences. They clash with the police when five activists break through police lines. Police later say that the two men and three women arrested have been released.

27 -- The Provisional Legislature passes the Legislative Council Bill, which establishes the rules for the first SAR elections, by a vote of 29-9 with 11 abstentions. Provisional legislators, after an 18-hour marathon session, endorse several major amendments to enlarge the electorate of five functional constituencies: Social Welfare; Textiles and Garment; Tourism; Information Technology; Sports, Performing Arts, Culture and Publications. Democrats criticize the new law as "undemocratic and unfair," charging it disenfranches about two million voters who are no longer eligible to vote in the 1998 functional constituency elections.

29 -- The HKSAR government announces the formal establishment of the Electoral Affairs Commission (EAC), an independent three-member body responsible for overseeing arrangements for the 1998 first SAR legislative elections. Justice Woo Kwok-hing isnamed Chairman of the EAC. The other two members are Norman Leung and Elizabeth Shing. The Chief Executive's appointment of two incumbent members of the former Boundary and Election Commission is symbolically important as it reflects both continuity and appreciation of the Commission's past performance in ensuring the openness and fairness of elections.

October

1 -- Marking Hong Kong's first national day celebrations since reversion, Chief Executive C. H. Tung joins in the singing of the national anthem as he officiates at a flag-raising ceremony outside the Convention Center. Democratic Party members are for the first time invited to attend the national day reception.

8 -- Delivering his debut policy address to the Provisional Legislature, Chief Executive C. H. Tung lays out his road map for Hong Kong. He expresses full confidence that his blueprint can turn the HKSAR into a "fair, democratic, affluent and vibrant" society in the next century. His agenda focuses primarily on livelihood issues: housing, education, elderly welfare and competitiveness. Local reaction to the policy address is positive.

9 -- In a landmark judgment on the fate of 66,000 mainland children claiming right of abode in Hong Kong, Justice Brian Keith of the Court of First Instance backs the HKSAR government's bid to impose restrictive changes to the Immigration Ordinance. Passed by the Provisional Legislature on July 10, the Ordinance requires mainland children to prove their right of abode claim with a certificate of entitlement" to be issued by mainland authorities. The ruling is strongly criticized.

10 -- Double Ten celebrations (the Chinese National Day before 1949 revolution, which is still observed in Taiwan) are held, but are low-key and low-profile. At a reception hosted by Taiwan Chief Representative Cheng An-kuo, no pictures of Chiang Kai-shek and his son Chiang Ching-kuo are displayed. The festival's name is changed to celebrate the "Double Ten and the Hsin Hai Revolution." Police remove Nationalist Chinese flags from roads and overpasses.

15 -- Local shares drop. Hang Seng index ends 452.32 points lower at 13,384.24. Losses in mainland stocks are much steeper, with the H-share index down 8.2 per cent and the red-chip index down 8.59 per cent.

16 -- In his third overseas trip since reversion, Chief Executive C. H. Tung tells Japanese Prime Minister Ryutaro Hashimoto and Tokyo's business leaders that Chinese markets will be a major area of cooperation for Japan and Hong Kong.

19 -- During his first official visit to Europe, Chief Executive C. H. Tung visits Brussels before travelling to London to meet Prime Minister Tony Blair and other senior ministers for trade and investment talks.

21 -- The Hang Seng Index plunges 567.78 points, or 4.37%, to end at a six-month low of 12,403.1.

22 -- The crisis in local financial markets deepens as stock prices fall for a third consecutive day amid rising concerns about the stability of the Hong Kong dollar peg. The Hang Seng Index drops 765.33 points, or 6.17%, to end at a 13-month low of 11,637.77.


28 -- The Provisional Legislature approves the revocation of two labor laws, which gave workers increased bargaining power. A third labor law allowing trade unions to fund political activities and join foreign organizations without prior consent of the Chief Executive is amended. Chief Secretary Anson Chan supports the move, criticizing the pre-handover legislature for acting too quickly and without consultations in passing radical changes in Hong Kong labor laws.

29 -- The local stock market posts its biggest one-day gain in history. The Hang Seng Index closes 1,705.41 points higher at 10,765.30, up 18.82 per cent. Hong Kong's rebound follows a record leap of 337 points on Wall Street.

31 -- Electoral Affairs Commission Chairman Justice Woo submits the final recommendations for geographical constituency boundaries for the May 1998 legislative elections. He promises that the commission will never bow to political pressure when making its decisions.

November

1 -- Beijing announces the membership of a 424-member Selection Panel that will elect 36 local NPC deputies in December. The DAB and Hong Kong Progressive Alliance become the two largest parties in the committee with 56 and 43 seats, respectively.

11 -- The Executive Council approves final recommendations on the constituency boundaries for the 1998 legislative elections. There are four directly elected seats for Hong Kong island; three seats each for Kowloon East and West constituencies; and five seats each for New Territories East and West constituencies.

22 -- Beijing announces its decision to submit reports to the United Nations on human rights in the HKSAR. Dismissing claims that China has bowed to foreign pressure, a Foreign Ministry spokesman maintains the arrangements will enable the international community to have a better understanding of developments in the HKSAR.

23 -- Chief Executive C. H. Tung assures world economic leaders at APEC summit held in Vancouver that Hong Kong will be the first to bounce back among East Asian communities hit by financial turmoil.

December

2-3 -- The JLG holds its first post-reversion meeting -- the 41st plenary session -- in Beijing. Despite the cordial atmosphere and an unprecedented joint press conference after the session, the two sides appear at odds on resolving the issues of Vietnamese boat people.

8 -- The Director of the local Xinhua office, Jiang Enzhu, is the top vote getter among the 36 Hong Kong deputies to China's National People's Congress (NPC) with 397 out of 424 votes. The winners include Provisional Legislature President Rita Fan, Basic Law Committee members Maria Tam and Raymond Wu, Liberal Party Chairman Allen Lee and 14 incumbent NPC deputies. Democratic Party members who run for NPC seats fail to get the required ten nominations to have their names placed on the final list.

9-11 -- Chief Executive C. H. Tung pays his first official working visit to Beijing. He is repeatedly praised by Premier Li Peng and President Jiang Zemin for ensuring the smooth operation of the SAR government since reversion.

22 -- The head of the Foreign Ministry Office in Hong Kong, Commissioner Ma Yuzhen, tells the press that local Hong Kong officials are responsible for drafting HKSAR human rights reports submitted to the United Nations by Beijing and for explaining them to the international community on behalf of China. Ma notes that his office and the HKSAR government have been working closely in the past six months.

23 -- Leading a Central Military Commission working group, PLA General Staff Department General Fu Quanyou arrives in Hong Kong. He meets and holds talks with Chief Executive C. H. Tung during his one-week visit. General Fu is the second senior PLA leader to visit Hong Kong since reversion. Central Military Commission Vice Chairman General Zhang Wannian came to Hong Kong in late June to attend the handover ceremony on July 1.

28 -- Hong Kong government decides to slaughter 1.2 million local chickens to prevent the spread of the deadly H5N1 virus which killed five people in Hong Kong by the end of December and triggered a worldwide alert.

January 1998

1 -- The Hong Kong Alliance in Support of the Patriotic Democratic Movement in China organizes a New Year's Day pro-democracy protest during which several among the 300 participants display the Nationalist flag and deface Chinese and SAR flags. The procession is peaceful and no one is arrested, although individuals who defaced flags are later charged.

1 -- Amid gloomy forecasts for the year ahead, Financial Secretary Donald Tsang strikes an upbeat note in his New Year's message and stresses the underlying strength of the local economy.

2 -- Vice Premier Qian Qichen and a delegation from the Ministry of Foreign Affairs and the Ministry of Foreign Trade and Economic Co-operation arrive in Hong Kong. Qian praises Tung and the SAR government for coping well with Asian financial turmoil, asserting that Hong Kong's resilience relects its good economic foundation, solid financial management, and sound banking system.

5-7 -- Chief Secretary for Administration Anson Chan visits Beijing and holds talks with Vice Premier Qian Qichen and Director of Hong Kong and Macau Affairs Office Liao Hui during her first official visit to China since reversion. She reaches agreementon setting up a hotline between Director Liao Hui and the HKSAR government, setting up a communication channel with the NPC Standing Committee, and forging closer ties with the Public Security Bureau to combat cross-border crimes.

7 -- Local stocks slump 5.89 per cent as Asian markets continue to drop. Hang Seng Index drops 596.9 points to 9,538.61, its biggest slump since October last year.

9 -- The HKSAR government announces its decision to end Hong Kong's "port of first asylum" policy for refugees. Vietnamese will thereafter be treated in the same way as other illegal immigrants and will be repatriated, says Secretary for Security Peter Lai. The remaining 1,200 Hong Kong-resident Vietnamese refugees who are not eligible for repatriation to Vietnam or third country resettlement will be encouraged to become self-reliant and lead a normal life in the SAR, Lai states.

13 -- The government announces that the opening of the new airport will be delayed from April until July 6 in order to complete a railway link and air-cargo terminal.

14 -- US Deputy Secretary of Treasury Lawrence Summers visits Hong Kong. Describing Hong Kong as the "nerve center of Asian finance," he notes that HKSAR's continued prosperity is crucial to the stability of the region. Stressing the US commitment to Hong Kong, Summers announces that a Treasury representative will soon be assigned to U. S. Consulate General Hong Kong.

15 -- In a question-and-answer session with provisional legislators, Chief Executive C. H. Tung reiterates the government's determination to maintain the pegged exchange rate. He urges the public to unite and predicts that 1998 will be a difficult year for Hong Kong people, who may face higher interest rates, stock and currency market uncertainties, a decline in tourism, falling property prices, growing unemployment and an economic slowdown. "However, with a sound economic background, Hong Kong will be the first to recover," Tung predicts.

16 -- Chief Executive C. H. Tung creates a Commission on Strategic Development. Under the chairmanship of the Chief Executive, the 14-member commission comprises top officials, prominent businessmen and leading academics who will be charged with developing strategies to enhance Hong Kong's competitiveness.

19 -- Defending the $60 million voter registration campaign which closed on January 16, Electoral Affairs Commission Chairman Justice Woo says about 25,000 new voters have been added to the electoral rolls in the functional constituencies, bringing a total of 147, 680 FC voters and 2.79 million voters in geographical constituencies.

20 -- In an interview with independent Ming Pao and pro-Beijing Hong Kong Economic Times, Chief Executive C. H. Tung assures the local community that it is "unnecessary" to establish a ministerial system in Hong Kong, adding that the present structure of the Executive Council will be kept intact.

23 -- 145 Hong Kong people are named deputies to the Ninth Chinese People's Political Consultative Conference. The appointees include Commissioner Ma Yuzhen as well as business leaders Peter Woo, Nina Kung, Vincent Lo, William Fung and Victor Li.

26 -- Justice Brian Keith rules that 81 mainland-born children will have the right of abode in Hong Kong despite the fact that their parents were not yet SAR permanent residents when they were born. The HKSAR government had been prepared to repatriate the children to China. It is understood that Justice Keith's ruling will affect as many as 300,000 children still on the mainland whose Hong Kong parents are waiting to acquire SAR resident status. The government announces it will lodge an appeal.

February

2 -- Opening for the first time after the Lunar New Year break, the Hong Kong stock market gains 14.3 per cent, closing at 10,578.60. It is the biggest one-day gain since October 1997 and the third-biggest percentage rise on record.

9 -- At a Xinhua spring reception, Chief Executive C. H. Tung and Director of local Xinhua Office Jiang Enzhu jointly express confidence in a brighter future for Hong Kong.

10-14 -- National People's Congress Chairman Qiao Shi and his wife Yu Wen arrive in Hong Kong. In a meeting with Hong Kong-based mainland officials held on 2/10, Qiao urges them to steer clear of local affairs. PRC officials stationed in the HKSAR should strictly abide by the Basic Law and fully implement the "one country two systems" policy, Qiao says. Speaking highly of Tung's leadership, Qiao says Beijing is satisfied with the performance of the HKSAR government since reversion. Hong Kong's sound economic operations and fiscal management have been firmly upheld and political and social difficulties have been duly dealt with. Demonstrators picket Qiao and call for a reversal of China's policy on the Tiananmen Incident of 1989.

13 -- Secretary for the Treasury K. C. Kwong is named to head the new Information Technology Bureau, which will be in charge of information technology development. Kwong is replaced by Secretary for Trade and Industry Denise Yue. Secretary for Broadcasting, Recreation and Culture Brian Chau will succeed Yue as Secretary for Trade and Industry. The three appointments will be effective in April,1998.

17 -- The government decides to postpone its proposed labor importation scheme in the construction industry for three months. The move comes after strong objections from the labor unions and labor leaders.

18 -- Financial Secretary Donald Tsang announces the first SAR budget. In a bid to "provide comfort, bolster confidence and boost competitiveness," the government unveils a record package of $13.6 billion in tax concessions that includes mortgage tax relief, rate reductions and a cut in the airport departure tax. Local parties and the media respond positively to the budget, hoping that it can help "ride out the storm."

23-25 -- Financial Secretary Donald Tsang pays his first official visit to Beijing where he meets several central government officials, including Vice Premier Qian Qichen and Director of Hong Kong and Macau Affairs Office Liao Hui. Qian expresses confidence that Hong Kong can handle the regional financial problems effectively and stresses that theRenminbi will not be devalued.

25 -- Hong Kong moves a step closer to setting up a retirement scheme for three million workers with the passage of the Mandatory Provident Fund Amendment Bill. The bill is passed unanimously by the Provisional Legislature.

March

2 -- Electoral Affairs Commission Chairman Justice Woo says foreign "monitoring" of the first SAR legislative elections is not welcome as it will undermine the independence of the commission.

4 -- At a small group discussion at the Ninth Chinese People's Political Consultative Conference held in Beijing, Hong Kong's CPPCC Standing Committee member Xu Simin openly urges Chief Executive C. H. Tung to keep a tight rein on RTHK, the government-funded station in Hong Kong. Xu accuses RTHK of adopting a "confrontational" stance towards the HKSAR government and of failing to promotegovernment policies under the pretext of "editorial independence."

4 -- In response to Xu's remarks, the Chief Executive says freedom of speech and a positive presentation of government policies are of equal importance. Chief Secretary Anson Chan expresses "deep regrets" over Xu's remarks, which she describes as "improper."

9 -- President Jiang Zemin meets with Hong Kong NPC and CPPCC delegates in the Great Hall of the People. With press and television camera present, Jiang tells Hong Kong's representatives, "Deputies from Hong Kong will only take part in the management of national affairs on behalf of the Hong Kong comrades." "There should not be any interference with the affairs of the SAR."

[end of document]

Blue Bar rule

|| China | East Asian and Pacific Affairs |
U.S. Department of State | Disclaimers ||