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United States Hong Kong Policy Act Report, as of April 1, 1999
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, 1999
(Link to all years available.)

Blue Bar rule




A. Economic-Commercial
B. High-Level Visits
C. Law Enforcement Cooperation
D. Bilateral Agreements


A. United States Interests in Hong Kong
B. Developments affecting U.S. Interests:

-- The Electoral System
-- Update on Civil Liberties Ordinances, Adaptation of Laws
-- Article 23 of the Basic Law: Treason and Related Crimes
-- ILO Comments on Repeal of Labor Laws
-- The Civil Service
-- HKSAR Passport and Visa Regime
-- People's Liberation Army Hong Kong Garrison






A. The Basic Law and its Consistency with the Joint Declaration
B. The Openness and Fairness of Elections to the Legislature
C. The Debate on Democratization
D. The Treatment of Political Parties
E. Judicial and Legal Developments
F. International Human Rights Conventions
G. Freedom of Expression


APPENDIX: High Level Visitors and Delegations

as of April 1, 1999

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


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. Hong Kong's status since reverting to China is defined in two documents: the Joint Declaration signed by Britain and China in 1984, and the Basic Law promulgated by China in 1990. These documents established the concept of "one country, two systems" under which Hong Kong is guaranteed a high degree of autonomy except in foreign affairs and defense. The Joint Declaration and Basic Law state 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. 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. In the year from April 1, 1998 to March 31, 1999, problems have arisen on the economic front, while overall political development under Chinese sovereignty has gone relatively smoothly.

There has been no evidence of interference from the Chinese central government in local affairs, with one possible exception, noted below. Hong Kong's civil service remains independent, and senior officers, including those who have been critical of the PRC, remain in key posts. Hong Kong continues to play an important role as a regional finance center, actively participating in international efforts to address the Asian regional recession while struggling with a sharpening downturn in its own economy. The Hong Kong press remains free and continues to comment critically on the PRC and its leaders. Demonstrations -- often critical of the PRC -- continue to be held. Mainland Chinese companies are subject to the same laws and prudential supervision as all other enterprises. The rule of law and an independent, world-class judiciary remain in place as guarantees of Hong Kong's free and open society. However, a recent controversy over a ruling by Hong Kong's top court resulted in a clarification by the court of its ruling that it had the power of judicial review over acts by China's parliament affecting Hong Kong. This case has raised uncertainty about how judicial independence will fare over the longer term, although for the present Hong Kong's judicial system appears to have weathered intact the first major test of its independence.

Hong Kong's political system continues to evolve. The legislature and free press have used their public fora to increase government transparency and accountability. There is vigorous public debate on the pace of democratizing elections for the legislature and chief executive. Likewise, there was controversy regarding the Government's proposal to abolish democratically elected municipal councils and to add appointed members on local district councils. Public debate on issues of democracy and law has been active and vigorous and has served to reconfirm the distinction of Hong Kong as a free society with free markets.

The United States has substantial interests in Hong Kong and supports the Joint Declaration concept of "one country, two systems" for Hong Kong under Chinese sovereignty. In recognition of Hong Kong's high degree of autonomy, the United States continues to accord Hong Kong a special status distinct from the rest of China. The United States continues to lend support to Hong Kong's autonomy 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.



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 higher 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. Hong Kong is acting autonomously in economic fora.

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 customs officials remain in place, with no personnel changes beyond ordinary rotations. In the WTO, APEC and other fora, Hong Kong has continued to press for further trade and investment liberalization, strongly supporting promotion of APEC's Early Voluntary Sectoral Liberalization initiative and pushing hard for a comprehensive new round of trade liberalization in the WTO. In May 1998, Hong Kong joined the U.S. in ratifying the World Trade Organization's Financial Services Agreement.

Since the onset of the regional financial crisis in mid-1997, the Hong Kong Government has been pro-active and was, for example, one of the first to make funds available to help Thailand deal with its fiscal crisis. The Hong Kong Government's response to the economic downturn included a series of modest accommodations in its February 1998 and March 1999 budgets and a temporary abatement in Government land sales from June 1998 through March 1999 in order to stabilize declining property prices. In August 1998, the Government intervened in the currency, futures, and stock markets (spending about U.S. $15 billion) to defend itself from market "manipulators," arguing the move was a "one-time" divergence from Hong Kong's usual adherence to non-interventionist, market-oriented policies. All of these decisions were made, according to Hong Kong officials, on their own and without permission from or consultations with China's Central Government.

During his July 2-3, 1998 visit to Hong Kong, President Clinton reiterated the importance of Hong Kong as a regional trade and finance center. To underscore this point, the Department of the Treasury's representative in the U.S. Consulate General arrived in June to begin following regional financial matters.

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 responded by introducing effective new legislation to control illicit production and by significantly increasing raids, seizures and prosecutions at all levels, leading the U.S. Trade Representative to take Hong Kong off of the Watchlist in February 1999. Despite the increased effort, piracy remains a serious problem of great concern to the U.S., and further measures are under consideration by Hong Kong officials to combat piracy.

Hong Kong ranks with Japan and European Union nations as a significant source of foreign investment capital. Outward investment totals about U.S. $25 billion annually, though this figure has dropped slightly due to the regional economic downturn. Hong Kong has invested U.S. $1.7 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 U.S. $100 billion in direct investment.

Hong Kong maintains few non-tariff barriers, and has moved steadily to reduce or remove what few restrictions exist. For example, in 1998, Hong Kong announced measures to open the broadcast and telecommunications markets to greater competition. Some of these telecom and broadcast initiatives have been implemented, while others have occasioned vigorous debate within the business community. Hong Kong justifiably prides itself on supporting competition, though the absence of antitrust laws has led to domination of some service sectors by major local companies.

U.S. companies have a favorable view of elements of Hong Kong's business environment, including its autonomous, impartial legal system and the free flow of information, low taxation, and well-developed infrastructure. The American Chamber of Commerce's annual business confidence survey of its members, conducted in mid-1998, reflects the impact of the downturn on expectations. Among survey respondents, only 54% indicated they believe the outlook in 1999 would be "good" or "satisfactory," although these figures rise to 87% and 98% respectively with regard to the outlook for 2000 and 2001. Most of the respondents plan to either maintain or expand their investments or operations while those planning to gradually reduce their presence or leave Hong Kong stood at 10% and 1% respectively.


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 President, the First Lady, the Secretary of State, the Secretary of Commerce, the U.S. Trade Representative, the Chairman of the Federal Reserve Board, a Supreme Court Justice, and 50 U.S. government delegations and teams visited Hong Kong in the past year. Twenty-two Senators and Congressmen, and over 30 congressional staff members, also visited. A list of visitors is attached at Appendix A.


United States law enforcement agencies enjoy excellent cooperation with their Hong Kong counterparts. Since reversion to China in July 1997, law enforcement cooperation between the United States and Hong Kong has continued to improve. The U.S. Government has sought successfully to broaden its cooperative liaison and operational relationship with Hong Kong Government agencies. We pay particular attention to combating international drug trafficking, money-laundering, counterfeiting of currency and travel documents, credit card fraud, illegal textile transshipment, Asian organized crime, violations of intellectual property rights, illegal high technology transfer, and alien smuggling. The U.S. and Hong Kong also cooperate to facilitate the extradition of fugitives.

U.S. agencies with law enforcement responsibilities present in Hong Kong include the U.S. Secret Service, the Immigration and Naturalization Service, the Internal Revenue Service -- Criminal Investigations Division, the U.S. Customs Service, the Drug Enforcement Administration, the Federal Bureau of Investigation, and the Department of State.

In 1998, the President of the United States certified Hong Kong as fully cooperating with the United States in the international fight against narcotics, and the Department of State cited the "exemplary partnership" between U.S. and Hong Kong law enforcement agencies. On January 21, 1998, after both parties had complied with their respective requirements, a bilateral Extradition Agreement signed in December 1996 came into force. A Mutual Legal Assistance Agreement and a Prisoner Transfer Agreement were signed in April 1997, were approved by the U.S. Senate in November 1998, and were ratified by the President in December 1998. Both agreements await the completion of legal formalities in Hong Kong to incorporate them into Hong Kong law before coming into force.

In 1998, the Narcotics Division of the Hong Kong Bureau of Security agreed in principle with a U.S. Government proposal to move the cocaine chemical precursor potassium permanganate from Schedule 3 to Schedule 2 on the Hong Kong Precursor Chemical Control Schedule. This will require licensing and authorization for the manufacture, import, and export of potassium permanganate in Hong Kong, greatly increasing the control of shipments from the People's Republic of China through Hong Kong to the international market. The necessary regulatory processes are now underway. Hong Kong is also supporting a U.S. initiative and helping to organize a worldwide task force to track multi-ton shipments of potassium permanganate throughout the world.

To combat money laundering, U.S. agencies continue to urge the Hong Kong Government to adopt mandatory rather than voluntary financial transaction and foreign exchange reporting requirements and to explore options for discouraging the illicit use of non-bank remittance centers. In early 1999, the Hong Kong Government began the legislative process to bring these centers under regulation, with mandatory reporting requirements. In addition, U.S. agencies continue to urge the establishment of mandatory minimum value currency entry-exit reporting requirements and penalties for cross-border currency movements and other bank deposits.

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 sponsored training in Washington, D.C. for officers from the Hong Kong Police Commercial Crime Bureau to enhance their investigative skills in combating counterfeiting. The Secret Service is engaged in the enforcement of U.S. laws pertaining to access device fraud, including credit card and cellular telephone fraud. The Secret Service is also responsible for the protection of certain senior U.S. Government officials who travel to Hong Kong, including President Clinton during his visit in July 1998 and former President George Bush.

The Office of the Senior Customs Representative works closely with the Hong Kong law enforcement agencies, especially the Customs and Excise Department, in combating money laundering, stolen vehicle smuggling, illegal textile transshipment, licensable commodity/high technology transfer, intellectual property rights violations, and fraud. U.S. Customs has close ties with the Hong Kong Police Force in investigating international auto theft cases, pursuing extradition of fugitives, and enforcing of child pornography laws.

The Federal Bureau of Investigation's Legal Liaison Office works with Hong Kong law enforcement agencies on a variety of criminal violations which affect the U.S. A majority of cases involving the Legal Liaison Office fall into four categories: white color crime, including bank fraud, embezzlement, mail fraud, and fraud against the U.S. Government; Asian organized crime, including Triad-related and other Asian criminal activities; the Violent Crime and fugitive Apprehension Program; and international terrorism. In 1998, the Legal Liaison Office, through the assistance of the Hong Kong Police, arrested three fugitives in Hong Kong and successfully extradited two fugitives to the U.S.

Hong Kong's accessibility and favorable flight connections have made it a major transit point for alien smuggling in the region, a situation exemplified by the opening of Hong Kong's new international airport at Chek Lap Kok on July 6, 1998. The U.S. Immigration and Naturalization Service has provided training to airline staff and local immigration officers in the detection of altered and counterfeited documents. The Immigration and Naturalization Service also cooperates with Immigration Control Officers from Hong Kong, Australia, Canada, New Zealand, and local airline staff in detecting mala fide passengers attempting to travel from and/or through Chek Lap Kok using altered or counterfeit travel documents. These combined efforts resulted in the detection of 2,348 persons attempting to board flights in Hong Kong with falsified documents during 1998.

The Immigration Office also works closely with the Hong Kong Immigration Department, the Hong Kong Police Force, and the Independent Commission Against Corruption to identify and disrupt smuggling syndicates, and to prosecute individuals involved in alien smuggling and related activities.


There are more than a dozen U.S.-Hong Kong bilateral agreements currently in force, including a stand-alone Air Services Agreement and an Extradition Agreement which entered into force on January 21, 1998. A bilateral Prisoner Transfer Agreement was ratified by the United States in December 1998 and should be enacted by the Hong Kong Government before April 1999. The United States ratified the bilateral Mutual Legal Assistance Agreement in December 1998. For its part, Hong Kong must pass subordinate legislation, which is currently pending before the Legislative Council, before the treaty can enter into force.

U.S. Consulate General operations and U.S. Navy port calls have continued virtually without change since July 1, 1997. In the Consulate General, the Office of Liaison Administration, which replaced the Defense Liaison Office, works with the Chinese Ministry of Foreign Affairs and the Hong Kong Government to receive permission for and arrange port calls and visits of U.S. military aircraft to Hong Kong.

Little progress has been made since 1997 on a U.S.-Hong Kong Bilateral Investment Agreement and it has not yet been possible to reach closure. Some difficult problems remain to be resolved, but both sides have expressed a desire to conclude an agreement.



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, U.S. exports to Hong Kong, many of which are re-exported to China, totaled U.S. $12.9 billion. Through March 1999, U.S. direct investment in Hong Kong on a historical cost basis amounted to U.S. $17 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; maintaining a cooperative law enforcement relationship; and continuing access to Hong Kong as a routine port of call for Navy ships. No U.S. vessel, and only one aircraft, has been denied diplomatic clearance into Hong Kong and Hong Kong remains a premier port call destination for U.S. forces in the Pacific.

The United States also has strong interests in the protection of human rights, the promotion of democratic institutions, the free flow of information, the freedom of people to practice the religion of their choice, the development and protection of the rule of law, and the protection of individual liberties. Hong Kong residents 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 an open and tolerant society, in which both local and foreign non-governmental organizations continue to operate freely and representatives of the 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 the pace of democratization may not be consistent with the aspirations of the Hong Kong people and that recent pressures on the Court of Final Appeal may erode Hong Kong's judicial independence. There is also concern that the Government's stock market intervention in August 1998 may have affected Hong Kong's reputation for adherence to free-market mechanisms.


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.

Along with others in the region, Hong Kong's economy has suffered, registering a decline of around 5.1% in gross domestic product in 1998 and expectations of flat growth for 1999. The Government registered a modest fiscal deficit for 1998 of U.S. $4.2 billion and projects a similar deficit for 1999. Nonetheless, Hong Kong enjoys a number of positive factors, including accumulated personal wealth from several years of unprecedented growth, massive fiscal and foreign exchange reserves, virtually no public debt, a strong legal system, and a strong and rigorously enforced anti-corruption regime. The lengthening of the recovery period and the need for restructuring, as Hong Kong's advanced, high-cost, service-based economy continues to evolve, pose difficult challenges and choices for Hong Kong's Government.

Hong Kongers have generally been up-beat about the political transition, particularly China's hands-off approach since reversion. Officials tell visitors there are no phone calls from Beijing telling them what to do; the August market intervention was done without consulting (but merely informing) central authorities. Until recently, confidence in the local and international community was very high that China's leaders intend to keep their commitment to allow Hong Kong to remain autonomous. However, the January 29, 1999 decision by the Court of Final Appeal asserting the power of judicial review over actions of China's National People's Congress (NPC) affecting Hong Kong drew a sharp response from Beijing, including threats to overrule the Court. The Court's March 5 clarification of the ruling defused the crisis, but concerns remain about the longer term relationship between the Hong Kong judiciary and China's central government.

The Electoral System

Controversy over Hong Kong's system of representative institutions continues. The terms of debate have broadened from earlier focus on electing the Legislative Council to include the chief executive, the grassroots-level Municipal Councils and the local District Councils.

The legislative elections of May 1998 were based on the Basic Law formula -- also used in the 1995 elections -- of 20 geographic (universal-suffrage) seats, 30 "functional" constituency seats (representing the professions, business, and labor), and 10 seats from an electoral college. In one sense, they were a triumph for democracy; 53% of registered voters -- the highest percentage ever -- braved torrential rains to defy predictions of a flat turnout, and pro-democracy forces garnered 65% of the vote in the 20 universal-suffrage geographic districts. Many highly respected political leaders who had opted not to seek membership in the "Provisional Legislature" appointed in 1997 now returned to office, as that unelected body disbanded and the first elected post-reversion legislature convened in July 1998.

However, the 1998 election system -- modified by the now-defunct, China-appointed "Preparatory Committee" in 1997 and enacted that year by the Provisional Legislature -- also reversed reforms that had broadened participation in the 1995 election. Most importantly, the new system eliminated "mass-membership" functional constituencies in favor of narrowly defined constituencies, thus rolling back reforms in the last years of colonial rule that had made the legislature more democratic and representative of the people as a whole. The changes limited prodemocracy parties to a smaller portion of legislative seats than they had won in 1995.

Debate on democratization continues. Democracy advocates want to amend the Basic Law to allow direct election by universal suffrage for all seats in the legislature in 2000 and for the chief executive in 2002. Conservatives want to proceed slowly; some are loathe to eliminate functional constituencies even after 2007, when permitted by the Basic Law. The Government opposes immediate democratization and says consultations on the issue will begin after the 2000 elections.

Debate has also arisen on the Government's decision to abolish two grassroots Municipal Councils when their terms expire at the end of 2000. Although most agree the Councils have done poorly in meeting challenges in such areas as health and food hygiene, many urged that the two bodies be merged, rather than eliminating a level of democratically elected government. Democracy advocates have also strongly attacked the Government's decision to increase the proportion of appointed seats to the local District Boards as a backward step.

(Details on the 1998 elections, the democratization debate, and the fate of municipal and district bodies are in Section VII, Development of Democratic Institutions in Hong Kong.)

Update on the Public Order and Societies Ordinances and the Adaptation of Laws (Interpretative Provisions) Ordinance

A revised Public Order Ordinance, passed by the now-defunct Provisional Legislature with effect on July 1, 1997, reintroduced licensing for demonstrations and empowered the police to raise objections on national security grounds. From April 1, 1998 -- March 31, 1999, the police denied only one application for a permit to demonstrate (involving a fleet of garbage trucks blocking rush-hour traffic). There are an average of four demonstrations per day, a rate slightly higher than the pre-handover rate. Police authorities say they try to place minimum constraints on demonstrations, consistent with the need to maintain public order. However, this results in complaints by some demonstrators, particularly labor activists, who complain that demonstrations are often limited to "designated areas" where they will receive little public attention and that police sometimes outnumber demonstrators at demonstrations.

A police order issued in September 1998, while underlining that it is police "policy to facilitate, as far as possible, all peaceful public order events," also stipulates that certain "Internationally Protected Persons" are in addition to security entitled to "protection of their dignity." Human rights activists are concerned that the order will lead to the use of police tactics such as those employed during the September 1997 visit of Chinese Prime Minister Li Peng, when the police played classical music over loudspeakers to drown out the shouts of demonstrators. The Independent Police Complaints Council ruled in March 1998 that those tactics were inappropriate, and police officials say they have no intention of using them again.

In the first nine months after the handover, 626 societies were registered and no applications for registration denied. Nevertheless, human rights groups are concerned that the Societies Ordinance passed by the Provisional Legislature could be used to restrict political activity. The Societies Ordinance requires that new societies must apply for registration within one month of establishment, and stipulates a number of grounds on which registration could be denied. There are no reports, however, of any limits being applied or proposed.

The Provisional Legislature passed the Adaptation of Laws (Interpretative Provisions) Ordinance in April 1998. The Ordinance replaced the word "Crown" with the word "State" in hundreds of existing Hong Kong laws. Government officials have stated that the change is a technical fix, necessary for the continued implementation of pre-handover laws, that does not offer a wholesale exemption from laws. However, critics are concerned that the change may place Chinese government organs, particularly the New China News Agency, above some laws, since laws which previously did not apply to the Crown now do not apply to the (Chinese) State. The Hong Kong Government reviewed seventeen laws passed since the handover and determined that the State should be subject to sixteen of them. However, it has not yet made a determination on the applicability of the most important, the Privacy Ordinance.

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

Article 23 of The Basic Law provides that Hong Kong shall enact laws on its own to prohibit subversion, secession, treason, and sedition against the Chinese Government. The process of developing this legislation continues at a very deliberate pace, with no indication of when such laws will be enacted, and the Government has undertaken to conduct wide public consultations on draft legislation. Amendments to the Crime Ordinance, passed by the Legislative Council in June 1997, narrowed the definition of treason and sedition to include a "proven intention of causing violence or creating public disorder or a public disturbance." However, the amendments stipulate that the Government must name the date when the change is to take effect, and the Government has chosen not to enact the amendments until comprehensive legislation dealing with all the "Article 23 crimes" is developed. In the meantime, pre-existing provisions in the Crime Ordinance dealing with treason and sedition continue to apply.

ILO Comments on Repeal of Labor Laws

In October 1997, the Provisional Legislature repealed two labor laws passed in June 1997 and amended a third, removing the new legislation's statutory protection against summary dismissal for union activity. The Government argued that existing law already offered adequate protection against unfair dismissal arising from antiunion discrimination. Also in October 1997, the Provisional Legislature published the Employment and Labor Relations (Miscellaneous Amendments) Bill. This bill permits the cross-industry affiliation of labor union federations and confederations and allows free association with overseas trade unions (although notification of the Labor Department within one month of affiliation is required). But it removes the legal stipulation of trade unions' right to engage employers in collective bargaining. The bill also bans the use of union funds for political purposes; requires the Chief Executive's approval before unions can contribute funds to any trade union outside of Hong Kong; and restricts the appointment of persons from outside the enterprise or sector to union executive committees. In November 1998, the International Labor Organization's Committee on Freedom of Association concluded that the new labor ordinance breached ILO conventions 87 and 98 and recommended that the Government take legislative action to remedy the situation. The Government has not commented.

The Civil Service

Hong Kong's professional and efficient civil service has continued to play a key role in ensuring a smooth transition under Chinese sovereignty, as it did in the initial months after the handover. More than a year after retaining Chief Secretary Anson Chan and 21 of the 23 serving policy secretaries following reversion, Chief Executive C.H. Tung made his first major reshuffle in October 1998, moving several key officials to new slots. Many others, such as Financial Secretary Donald Tsang, remained in place. Local and international confidence in the "one country, two systems" formula has been enhanced by this continuity.

The civil service remains independent. Senior civil servants credibly assert that they make decisions on their own without receiving instructions from or holding consultations with the Central Government. When Hong Kong made its unparalleled and controversial financial market intervention in August 1998, Beijing was informed, not consulted. One instance of consultation was the crisis after the January 1999 Right-of-Abode decision by the Court of Final Appeal. Following sharp reactions from China, the Secretary for Justice visited Beijing to explain the ruling to mainland officials and carry back their concerns.

Long accustomed to public accolades, the civil service has been stung by recent criticism, much of it stemming from a plunging economy. Government mishandling of the "bird flu" crisis in January 1998 was followed shortly by an overly optimistic budget, a "red tide" fish scare in April, a chaotic airport opening in July, and rising unemployment through the second half of the year. Many portrayed the civil service as privileged, uncaring, and incompetent, although in truth, many of the problems were not of its making, and few were amenable to quick solution. When the Government decided in March 1999 to freeze civil service pay, many Hong Kongers expressed grim satisfaction that the public's economic pain was being shared. The Government also announced plans for a major overhaul to make the civil service more efficient and flexible, including a gradual shift of two-thirds of civil service positions to contract terms, linkage of pay rises to performance, and competition of civil servants with non-civil servants for promotion.

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 785,000 in the 21 months 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, 1997, but existing certificates will remain valid for ten years from the date of issuance. Bearers of Certificates of Identity are 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, have continued to be issued since 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. As of March 1999, the United Kingdom, Canada, and 55 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 90 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. The United States currently 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.

People's Liberation Army Hong Kong Garrison

The PLA Hong Kong Garrison continues to be a largely unseen and symbolic presence in Hong Kong. Since arriving and occupying former British military facilities, the Garrison has been out of the public eye. Garrison officials repeatedly note that its primary role is national defense. The Garrison may assist the Hong Kong Government in maintaining public order and disaster relief, but only if requested by Hong Kong's Chief Executive and approved by the Central Military Commission, as provided for in the Basic Law. Most recently, the PLA Garrison was invited by the Hong Kong Government, and received permission from the Central Government, to participate in Hong Kong's annual Search and Rescue Exercise. The United States also participated in that exercise.

PLA soldiers, sailors, and airmen remain within their barracks, and seldom venture out into the Hong Kong community. When they do so, they normally travel in civilian clothes and as part of a PLA organized activity. The PLA Hong Kong Garrison does not engage in public security work, has minimal interaction with the Hong Kong disciplined services, and does not engage in any business activities.



The Hong Kong-America Center has been in operation since 1993 with support from all four local universities: the Chinese University of Hong Kong, Baptist University, the University of Hong Kong, and City University. A major mission of the Center is to increase mutual understanding between Hong Kong and the United States. USIA provides a Fulbright Scholar each year to serve as 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. A highlight of 1998 was a prominent international conference, "Outlook for U.S.-China Relations Following the 1997-98 Summits: Chinese and U.S. Perspectives," which was held before the President's June 1998 visit to China. A scholarly book with the same title, consisting of selected conference papers, was published by the Chinese University Press in 1999.


An important part of the Hong Kong-America Center is the Office of the Institute of International Education (IIE). IIE provides educational advisory services and conducts outreach programs for schools and 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 1998 U.S. University Fair featured 93 universities from all over the U.S. and attracted 3,500 local students and parents. IIE also organized a U.S. Boarding Schools Fair in October 1998, in which 33 American boarding schools were represented. A total of 450 visitors attended the fair. IIE's operations are partially funded by an annual grant from USIA.


The Hong Kong Fulbright program operates independently from that in China. The program supports three U.S. lecturers and four to five 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 sent an internationally renowned Hong Kong scholar to lecture at prominent U.S. universities as a Distinguished Fulbright Lecturer in the fall of 1998.


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. However, a Mid-America Arts Alliance grant (partially funded by USIA) provided the opportunity for a promising Hong Kong visual artist to participate in a residency program at California State University in the fall of 1998.


During 1998-99, 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 is also aimed at informing reporters and other persons of influence in Hong Kong about U.S. foreign policy positions that affect the bilateral relationship. For example, USIA sponsored a television producer, a print editor and a reporter on International Visitors Programs in 1999.

USIA also provided media support for visiting ships of the Seventh Fleet, and for Congressional delegations, 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. Of special note are the periodic visits by the Task Force on Hong Kong led by Representative Douglas Bereuter, for whom USIA convenes media representatives who can brief the Task Force on the status of press freedom and other information issues. During the Presidential visit to Hong Kong in July 1998, USIA assisted in all the press events and the successful operation of the Press Filing Center.

Through Worldnet interactive programs, Digital Video Conferences and speaker programs, USIA continues to inform Hong Kong's media, the business community, the public sector, academic and non-governmental organizations about U.S. policies. Programs in 1998-99 focused on topics including the rule of law, judicial independence, the Asian financial crisis, U.S.-China-Hong Kong relations, democracy and press freedom, Y2K, intellectual property rights, the Asian Longhorn Beetle, environmental protection, and congressional parliamentary procedures. One highlight of the past year was a two-day visit in February 1999 by Associate Justice Anthony Kennedy of the U.S. Supreme Court, to speak about the importance of judicial independence and rule of law. Justice Kennedy addressed the entire Hong Kong judiciary in a major speech and interacted with legal scholars, law professionals and civic leaders at several other events.

USIA continues to maintain close liaison with the Foreign Correspondents Club, the News Executives Association, the Hong Kong Journalists' Association, and the Freedom Forum Asia Center, both formally and informally, to keep abreast of developments in the local media climate and to look for ways in which the United States can provide further support for press freedom in Hong Kong. During the 21 months since the handover, USIA has maintained contact with the official Chinese information outlets, including the Press Office of the Ministry of Foreign Affairs Commission Office and the New China (Xinhua) News Agency's Propaganda Department.

The National Democratic Institute for International Affairs (NDI), a nonprofit organization funded by the National Endowment for Democracy, has continued its activities monitoring the status of autonomy and the prospects for democratization in Hong Kong in light of international standards and benchmarks outlined in the Basic Law. On May 15, 1998, NDI published its fourth status report on democratization in Hong Kong, previewing the May 24 legislative elections. From May 20-26, a visiting NDI team met with a broad range of political and governmental officials and observed the elections. On July 30, NDI published a post-election report, terming the elections a positive step in bringing a measure of democracy to Hong Kong, but also noting that the election framework in place severely restricted democratic processes.


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 developing a new Center of American Studies to enhance its research capacity. The University received a Hong Kong Government grant of over U.S. $360,000 to purchase library materials which include more than 50,000 U.S. Senate and Congressional committee hearings over 200 years, making their collection the only complete collection of such materials in Asia.


The USIA International Visitor Program supports a wide variety of professional exchanges for candidates sponsored by the Consulate General. In 1998, eleven individuals traveled to the U.S. on these study programs. The 1998 visitors included two journalists, one visual artist, one legislator, one economist, one immigration official, one customs (anti-narcotics) official, and four other officials.


There are seven universities in Hong Kong, plus a handful of other well-established educational institutions catering to specialized studies such as performing arts, teacher training, and open 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. 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.

About four thousand Hong Kong students go to the United States each year for graduate and undergraduate study. In 1998, the Consulate General issued 3,430 visas for study in the United States and 538 visas for exchange visitors. We estimate that 10,000 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.


In 1998, the U.S. Consulate General issued over 108,000 non-immigrant visas to residents of Hong Kong. An average of around 2,000 Americans enter Hong Kong for business or pleasure every day, contributing to an annual tourist total from the U.S. of some 700,000 people. The number declined somewhat in 1998.


There were no such suspensions or terminations during the period from April 1, 1998 to March 31, 1999.


There were no such determinations for the period April 1, 1998 to March 31, 1999.


There are no significant problems between Hong Kong and the United States in export control cooperation. As called for in the Sino-U.K. Joint Declaration and the Basic Law, Hong Kong has remained a separate customs territory, has enjoyed a high degree of autonomy in the export controls area, and has maintained what is widely considered to be a world-class trade control regime. We have seen no evidence of Chinese central government involvement or interference in Hong Kong export control decisions. Chinese central government officials have treated export controls as a trade -- not a 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 control regime, Hong Kong has benefited since 1992 from the import of most controlled high technology dual-use items under U.S. license exceptions. 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 upon by the major international control regimes. Hong Kong also is one of the few governments to have a brokerage law, which allows the authorities to prosecute Hong Kong-based individuals who support efforts outside of Hong Kong to divert or acquire weapons of mass destruction. To date, Hong Kong has obtained no evidence sufficient to warrant a prosecution under this law.

Hong Kong's trade control regime has several unique features, including an import license requirement (as well as the more common export license requirement), control over certain sensitive goods in transit, and carrier responsibility to ensure sensitive commodities are properly licensed. Particularly important is the import license requirement, which allows Hong Kong authorities to track controlled commodities coming into the SAR, as well as those that leave its customs territory. Hong Kong's 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. Another unique aspect of Hong Kong's system is that it will not issue re-export licenses for products unless it is sure that the original exporting country -- including the U.S. -- would export the product to the relevant end-user.

Hong Kong's Customs and Excise Department enforces preventive 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. A dedicated team of Hong Kong Customs officers also conducts 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. One potential issue of concern is the examination of People's Liberation Army (PLA) vehicles when they cross the Hong Kong/Mainland border on "garrison business." While this is a potential problem, neither the Consulate nor Washington agencies have seen any indicator that the PLA is using this process to divert U.S. technology to the mainland.

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 of 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 interagency meetings to exchange information and provide updates. Three such meetings have taken place, including one in Hong Kong in February 1999. In those meetings, 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 and 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. To support this commitment, the U.S., Great Britain, Japan, and Australia have agreed to keep Honor 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 several 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 subsequently performed a similar function, and Hong Kong is now working to arrange for a Japanese secondment.

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 Honor Kong continued to maintain an effective export control system. These efforts are supplemented by regular visits by Department of Commerce enforcement agents who visit Hong Kong twice a year to conduct pre-shipment and post-shipment verification checks.

Two cases in 1998 demonstrated the strength of Hong Kong's export control system, as well as the ability and willingness of Hong Kong authorities to enforce their regime, even when such action harmed mainland interests. First, Chief Executive C.H. Tung rejected a petition from an influential mainland company to return a Chinese armored personnel carrier Hong Kong Customs had seized in 1997. On its own initiative, Hong Kong Customs had seized the vehicle in transit from Thailand, where it had been featured in an exhibition, back to China, because the shipper had not obtained the required license. The Hong Kong Government fined the shipper and confiscated the armored personnel carrier.

The second case involved a U.S. high performance computer re-exported from Hong Kong to the Changsha Institute on the mainland. Commerce enforcement agents, working through U.S. Customs liaison, notified Hong Kong Customs, which opened its own investigation. Hong Kong Customs uncovered a total of eleven shipments by the same Hong Kong company that appeared to violate Hong Kong, if not U.S., export control laws. U.S. and Hong Kong enforcement agencies have been working closely on the case. Hong Kong Customs advised a U.S. interagency export control delegation in February 1999 that it intended to prosecute the case on four counts of violating export control laws. U.S. export control agencies will continue to monitor closely Hong Kong's export control system both in Hong Kong and in Washington. To assist this, Commerce's enforcement arm is proposing to assign an export control attache in the Commercial Section of the Hong Kong Consulate General.


Hong Kong is a free society with most individual freedoms and rights protected by law and custom dating from British colonial rule which ended on July 1, 1997. Since that date, Hong Kong has been 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 are 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 Article 52 of the Basic Law.


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 continue to contend that certain elements of the Basic Law violate the Joint Declaration, neither party to the agreement has done so.

In July 1998, British Foreign Secretary Robin Cook reported to Parliament in the third "Six-monthly Report on Hong Kong, January-June 1998" that "Hong Kong is performing well (as compared to) the expectations of international opinion generally, and (as compared to) the provisions of the Joint Declaration specifically." Cook cited Hong Kong's respect for basic rights and freedoms, its clean civil service, and its full use of its autonomy. The Report also noted that the Chinese Government had "continued its policy of non-interference in Hong Kong's affairs and respect for the HKSAR's high degree of autonomy, as provided for in the Joint Declaration." In his fourth "Six-monthly Report" evaluating Hong Kong for July-December 1998, Cook reaffirmed in February 1999 his judgment that "one country, two systems" was "working well, and that the Joint Declaration is being properly upheld."

The United Kingdom also welcomed the May 1998 legislative elections. It termed them "a step forward" in replacing "the appointed provisional legislature" that had operated since July 1997, marking "the end of an unfortunate and unnecessary interlude in Hong Kong's democratic development," and resuming progress "towards a legislature elected entirely through universal suffrage and towards full democracy in Hong Kong." At the same time, London remained concerned about the framework for the elections, especially the "sharp reduction in the franchise for the functional constituencies" representing business, professional, and labor sectors.


Following the failure of Britain and China to reach agreement on arrangements for Hong Kong's legislature during the transition to Chinese sovereignty, China's decision to create a "Provisional Legislature" and the replacement of the elected legislature with this unelected body on July 1, 1997 raised serious concerns. After almost a year during which the Provisional Legislature performed legislative functions with dubious legitimacy, the United States welcomed the May 1998 election of a new legislature as an important step in implementing the Joint Declaration commitments to local rule and democratic institutions. By the same token, it was unfortunate that the electoral framework ensured that the number of pro-democracy legislators would be restricted to a minority despite the popularity of their cause.

Under the new election law, proposed by the pre-reversion China-appointed Preparatory Committee and enacted by the Provisional Legislature, the number of geographic constituency seats elected by universal suffrage remained at 20 (of a total of 60) -- as in the last colonial-era elections of 1995. But the new law introduced multi-member geographic districts and proportional representation to replace single-member districts. This system made it harder for the most popular parties (Democrats and their allies, but also one large pro-Beijing party) to win seats in keeping with their electoral support, while improving odds for smaller pro-Beijing parties and politicians. The new law also retained the 1995 numbers of seats from functional (occupational) constituencies (30) and from an Electoral College (Election Committee) (10). However, it reduced the number of voters in functional constituency elecorates from well over two million to about 200,000. Thus, many functional constituencies which had elected pro-labor and pro-democracy candidates in 1995 (textiles, retail trade, transport) produced business-interest victories in 1998.

Many advocates of open, representative elections believed that the combination of limiting universal-suffrage seats to 20, using proportional voting for those seats, and cutting back the franchise in many functional races effectively stacked the deck against prodemocracy forces. However, although democracy advocates strongly criticized the limitations placed on them, it is important to note that no major political parties boycotted the elections on the basis of the existing electoral arrangements.

The Government made strong and credible efforts to demonstrate that the actual conduct of the elections within the electoral framework would be clean and fair. C.H. Tung appointed Woo Kwok-Hing, a highly respected jurist, to head the Electoral Affairs Commission, a job he had also held (with great integrity and efficiency) during the 1995 elections. The Government made no moves to restrict any Hong Kongers, including Beijing's vehement critics, from voting, operating a political party, demonstrating, holding public meetings, or standing for office. There were no substantial complaints of polling place irregularities.

On May 24, 1998, contradicting all polls and the conventional wisdom that fewer than a million votes would be cast, close to 1.5 million Hong Kongers -- 577,000 more people than voted in the 1995 elections -- braved torrential rains to cast ballots for Hong Kong's first post-reversion elected legislature. Pro-democracy candidates won in a landslide, taking over 65% of the vote and a total of 15 geographic seats plus 5 functional seats. The Democratic Party won 43% of the vote (about two-thirds of the "pro-democracy camp" tally), winding up with 9 geographic seats and 4 functional seats. The Democratic Alliance for the Betterment of Hong Kong, the major populist pro-Beijing party, garnered 25% of the vote, winning five geographic and five functional seats. The ten legislators elected by the 800-member Election Committee were all from conservative, pro-Beijing, pro-business groups.

The election confounded widespread predictions that apathy would limit participation to some 30% of registered voters. C.H. Tung announced that this demonstrated public confidence in "one country, two systems." Democratic Party Chairman Martin Lee termed it a repudiation of the Government's policies and an endorsement of the faster pace of democratization advocated by the pro-democracy candidates. Others pointed to a widely shared belief that the act of voting itself in the first post-colonial election, regardless of candidates or issues supported, was important -- a civic duty in a new Special Administrative Region of China to redeem the promise of "Hong Kongers running Hong Kong."

Yet the election framework deprived the most popular candidates of the full fruits of their victory. Amassing almost two-thirds of the popular vote, pro-democracy parties and like-minded independents garnered 13 of 20 geographic seats, and 5 of 30 functional seats -- a solid bloc of 18 in all, but far from the 29 they held in the 1995 legislature, and far short of a majority in the 60-seat chamber. Proponents of democracy were both exhilarated by their popular vindication and frustrated that this would not be reflected in the workings of the new Legislative Council.


Hong Kong's democratic aspirations are rising within a shifting political system. Under the Basic Law, the 2000 legislative elections will see four additional geographic, universal-suffrage seats (totaling 24), and the number will rise to 30 in the 2004 race, as the Election Committee disbands. Meanwhile, the Election Committee for choosing the chief executive in 2002 and 2007 will rise to 800 from the 400 who voted in 1996. In 2008, the Basic Law allows the possibility of scrapping the 30 functional constituencies and adopting universal suffrage elections for both legislature and chief executive, but there is no guarantee this will occur.

Groups such as Martin Lee's Democratic Party and Emily Lau's Frontier movement, heartened by the strong pro-democracy showing in 1998, continue to urge immediate amendment of the Basic Law to provide for fully universal-suffrage balloting for the next legislative (2000) and chief executive (2002) elections. One Democrat raised such a motion in the Legislative Council in July 1998 but the motion was defeated. Opposed to the idea are not only the pro-China and conservative, pro-business parties but C.H. Tung and the Hong Kong Government. Parties oriented toward the mainland worry that Beijing may not tolerate a legislature and a chief executive elected fully democratically; those business representatives whose political power rests in functional constituencies are reluctant to give up their base any sooner than necessary. The Government has not clarified its position on the pace and eventual outcome of democratization, but says it will begin public consultations on the issue after the 2000 legislative elections.

Another aspect of democratization under debate is the power of the Legislative Council vis-à-vis the Administration. With an "Executive-led" tradition, Hong Kong has never had a strong legislative branch, but reformers argue that as residents of an Special Administrative Region of China rather than a British colony, the Hong Kong people now deserve a legislature with real power to protect their interests. Such reformers -- mostly pro-democracy parties and like-minded independents -- are trying to augment legislators' power to introduce bills, currently restricted by the Basic Law in broad areas affecting political structure, Government operations, and public expenditure. They also want to eliminate crippling requirements for concurrent majorities of the functional members and non-functional members to pass certain kinds of legislation.

Within the legal constraints binding it, the Legislative Council has become adept at exploiting non-binding powers to influence public debate and Executive actions. It has questioned officials and conducted investigations on such controversial issues as the chaotic Chek Lap Kok Airport opening. It withheld the customary vote of thanks to C.H. Tung after his annual Policy Address in October 1998. Following the Government's request that the Court of Final Appeal clarify its landmark right-of-abode ruling, and Secretary for Justice Elsie Leung's statement that she had declined to prosecute publisher Sally Aw for fraud partly to forestall bankrupting Aw's newspapers, the legislature mounted a no-confidence motion against Leung which the Government blocked only through intense lobbying. In all these ways, the legislature has acted in conjunction with the free press and vigorous public discussion to greatly increase Government transparency and accountability. Senior civil servants feel strong pressures stemming from this use of the legislature's public debate powers; Government lobbying on the no-confidence resolution demonstrates a high level of sensitivity to the exertion of these powers.

Yet another focus of the broadening democratization debate is the fate of grassroots representative organs, the Municipal Councils. Each composed of 50 members, the two bodies -- the Urban Council and the Regional Council -- provide municipal services to urban areas (Hong Kong/Kowloon) and the New Territories, respectively. Eighty Council members were elected; 20 were appointed by C.H. Tung after the handover. Most Hong Kongers agree the Councils have been derelict in providing for environmental hygiene and pubic health, leading to unsanitary conditions and, most notoriously, the "bird flu" scare of early 1998. When the Government proposed in July 1998 to abolish both Councils upon expiry of their terms at the end of 1999 and take over their functions, however, there was a strong political reaction. As Hong Kong's key local representative institutions, both provide funds and training for fledgling politicians, and political leaders of many stripes urged that the two bodies be merged and reformed rather than eliminated. When the Government stood firm, many saw an anti-democratic step backwards.

Similar controversy has erupted regarding the 18 District Boards, comprising 468 members who coordinate provision of environmental, safety, and other services at the local district level. The government announced plans in December 1998 to raise the total membership in the boards -- to be renamed District Councils -- to 519 in 2000, but also to increase the number of appointed seats so that 102, or about one-fifth, will be appointed rather than elected. The reaction from the pro-democracy camp was a swift and angry denunciation of what it termed another retrograde action.


Hong Kong's political parties are small, young organizations, lacking the mass membership, historical traditions, and institutional foundations of American and European parties. The Democrats attracted over 600,000 votes in May 1998, but have barely 600 members. The pro-China Democratic Alliance for the Betterment of Hong Kong garnered almost 400,000 votes with a membership of 1,300 (though it is affiliated with the far larger Federation of Trade Unions). Other parties have similarly modest memberships, if not more so. Yet all are intensely active in legislative races, and most are also aggressive at the district level and in publicity efforts. Emily Lau's Frontier stands for democratization and human rights, as does Christine Loh's Citizens Party, which also stresses environmental issues. The Liberals and the Hong Kong Progressive Alliance represent business interests. Many independents in and out of the Legislative Council articulate a wide variety of economic, political, and ideological positions.

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 Government shall pass statutes prohibiting parties from establishing ties with overseas political organizations. Although many were concerned before the handover that the Central Government might use a broad definition of "subversive" activities or some kind of loyalty oath to bar certain parties or individuals critical of Beijing from participating in elections, nothing of the sort has happened. Nor has the 1997 amendment to the Societies Ordinance, which initially caused a stir by reinstituting a registration requirement on political parties, been used to ban or restrict political organizations in any way. All of Hong Kong's parties have remained active, aggressively contesting the 1998 legislative elections and planning similar operations for coming campaigns.

The United States continues to encourage leaders of Hong Kong political parties to meet with visiting Members of Congress. We also encourage them to participate in the International Visitors Program (one party leader did so in February 1999; another will do so in April), and maintain contacts with non-governmental organizations to provide international recognition of and support for local party development. The Consulate General in Hong Kong maintains good contacts with the full spectrum of public and political opinion in Hong Kong.


Common law precedents previously in force and the Basic Law (which incorporates the International Convention on Civil and Political Rights) provide substantial and effective legal protections against arbitrary arrest or detention. Articles 25 and 35 of the Basic Law stipulate that all Hong Kong residents shall be equal before the law and shall have access to the courts. Suspects must be charged within 48 hours of arrest or released. The average length of pre-conviction incarceration does not exceed 80 days. Legal aid lawyers are available to any person in Hong Kong, resident or non-resident, who meets a means test and a merits (justification for legal action) test. This Government-funded legal assistance is free or heavily subsidized. Due process is scrupulously observed in Hong Kong.

The Court of Final Appeal was created on July 1, 1997 to replace the U.K.'s Privy Council as Hong Kong's highest court. The Basic Law provides that the courts of Hong Kong shall be vested with independent judicial power with jurisdiction over all cases "except acts of state such as defense and foreign affairs" (Article 19), and exercise judicial power independently, free from any interference (Article 85). Judges enjoy security of tenure until retirement age (60 or 65 depending on date of appointment) and adequate remuneration.

Appointments to the bench are made by the Chief Executive on the recommendation of a Judicial Officers Recommendation Commission composed of the Chief Justice, the Secretary for Justice, two senior judges, a solicitor and a barrister (selected by their respective organizations), and three eminent lay persons. Any recommendation of the Commission must have the approval of seven of its members, thus giving the legal profession near veto power and effectively denying a veto to the Government representatives. The Basic Law (Article 92) provides that judges' qualification for office must be assessed on the basis of their professional competence in the law, judicial temperament, and personal conduct. Forty percent of Hong Kong judges are expatriates from other common law jurisdictions. At least one of the Court of Final Appeal's five judges may be a non-permanent judge from another common law jurisdiction.

The Hong Kong press and public play a vital role in ensuring the independence of the judiciary. Since the handover, the press, the Law Society and the Bar Association, legislators, and human rights groups have on several occasions been extremely critical of court rulings or actions taken (or not taken) by the Department of Justice (see below).

The Basic Law (Article 158) stipulates that Hong Kong courts may "intrepret . . . provisions of the (Basic) Law which are within the limits of the autonomy of the Region . . . . However, if the courts . . . need to interpret provisions of the (Basic) Law concerning affairs which are the responsibility of the Central People's Government or concern the relationship between the Central Authorities and the (Special Administrative) Region, and if such interpretation will affect a judgment, the courts of the (Special Administrative) Region shall, before making their final judgments which are not appealable seek an interpretation of the relevant provisions from the Standing Committee of the National People's Congress . . . . When the Standing Committee makes an interpretation of the provisions concerned, the courts, in applying those provisions, shall follow the interpretation of the Standing Committee." Article 158 further states that the Standing Committee shall consult the NPC's Committee for the Basic Law before giving such interpretations. The Committee for the Basic Law is composed of six mainland and six Hong Kong members. The Hong Kong members are nominated by the Chief Executive, the President of the Legislative Council and the Chief Justice.

In a controversial January 29 ruling in the "Right of Abode" case, the Court of Final Appeal asserted the authority to determine which cases should be referred to the National People's Congress for interpretation based on a classification condition (i.e. whether it affected Hong Kong-Central Government relations) and a necessity condition (i.e. after determining that it meets the classification condition, whether the court feels an interpretation is necessary).

In the same judgment, the Court of Final Appeal asserted the right of the courts to rule on acts of the National People's Congress affecting Hong Kong if they breach the Basic Law. This reinforced the High Court's assertion of the power of judicial review in the April 1998 case Cheung Lai-wah v. Director of Immigration. It also overturned the High Court's earlier, controversial assertion in the Hong Kong SAR v. David Ma case that the courts of the Special Administrative Region, being regional courts, have no jurisdiction to query the validity of any legislation or acts passed by the Sovereign (China).

Controversy erupted when four Chinese legal experts (Basic Law drafters) and a State Council official criticized the Court of Final Appeal's Right of Abode ruling, calling it a "serious challenge" to the authority of the National People's Congress and the "one country, two systems" principle. After Hong Kong's Secretary for Justice flew to Beijing for urgent consultations with the Central Government, the Hong Kong Government on February 26 requested the Court of Final Appeal to "clarify" the parts of the judgment dealing with the Court's power of judicial review.

Meanwhile, a strong reaction had developed in Hong Kong's legal and academic circles to the mainland criticism. Foreign investors, concerned about Chinese actions which could jeopardize Hong Kong's favorable investment environment, also reacted; both the American Chamber of Commerce and Standard and Poor's rating agency issued warnings against interference with the independent judiciary. Statements of support for Hong Kong's judicial autonomy were issued by several governments, including those of the U.S., the U.K., and Canada. Secretary of State Albright raised the issue with Chinese officials during a visit to Beijing in late February 1999.

The Court responded to the Government's request for clarification, issuing a statement acknowledging that the power of the Hong Kong judiciary derives from the Basic Law and that its jurisdiction to interpret the Basic Law derives from authorization by the Standing Committee of the National People's Congress. The Court did not modify its ruling, but stated that its landmark decision did not question the authority of the Standing Committee to make an interpretation or amendment of the Basic Law which must be followed by the Hong Kong courts. The Court also stuck with its right of judicial review, but stated that it could not question the authority of China's legislature or its Standing Committee to do any act "which is in accordance with the provisions of the Basic Law."

The "clarification" appears to have resolved the issue for the time being. However, legal activists in Hong Kong contend that Beijing's challenge, and the failure of the Hong Kong Government to resist it strongly, have undermined the independence and authority of Hong Kong's courts. Critics have also expressed concern that although the Government has established a task force to study the practical implementation of the judgment, six weeks after the judgment it still has not taken steps to establish procedures for mainland residents to apply for Certificates of Entitlement (to the right of abode) as stipulated in the judgment. Some legal scholars, on the other hand, assert that the clarification was necessary because the court in the original ruling claimed authority that it lacked. Further statements or actions by the Central People's Government with regard to this landmark judgment will bear close watching by all concerned, including the U.S. government.

Local lawyers, legislators and human rights activists have also expressed concern about two highly publicized cases where persons accused of crimes in Hong Kong were prosecuted in China, stating that they should have been tried in Hong Kong, where stronger legal guarantees prevail. For example, in December 1998, a Hong Kong gangster who committed crimes in both Hong Kong and the mainland was executed after a closed and speedy trial in Guangdong Province. On March 4, 1999, the trial of a mainland citizen for murders committed in Hong Kong (China's Criminal Code asserts extra-territorial jurisdiction over its nationals) began. Talks on a rendition agreement between Hong Kong and China, which may help alleviate some of these concurrent jurisdiction problems, have begun. Currently, some Hong Kong fugitives arrested in the mainland are returned to Hong Kong through an administrative arrangement. One hundred and twenty eight Hong Kong fugitives have been returned to Hong Kong from China since 1992; none have been returned to China from Hong Kong.

Some human rights groups say that the Government's February 1998 decision not to prosecute the New China (Xinhua) News Agency for alleged violations of the Privacy Ordinance and its March 1998 decision not to prosecute a prominent newspaper editor accused of fraud created the appearance that the legal system might favor those closely connected with Beijing or ruling circles in Hong Kong. The Secretary for Justice's comment in February 1999 that she decided not to prosecute the publisher on "public interest grounds" (i.e. because doing so would bankrupt her newspapers) -- coupled with concern over the Government's handling of the Court of Final Appeal's Right of Abode ruling -- resulted in a no-confidence motion in the legislature and calls from human rights organizations for her resignation. (The motion failed to win the requisite majority in either the functional constituencies or the combined geographic/election committee constituencies.)


In September 1998, the Hong Kong Government presented its first report under the International Convention on Civil and Political Rights. The report was transmitted to the United Nations through Beijing, but was not edited by the Central Government. Hong Kong is also preparing a separate report under the International Convention on Economic, Social, and Cultural Rights, and submits a report as part of the Chinese delegation under the Convention on the Elimination of All Forms of Discrimination Against Women.


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. Hong Kong people speak freely to the press, and there are no taboo subjects in the media. Numerous views and opinions, including those independent or critical of the Hong Kong and PRC governments, were aired in the mass media, in public fora, and by political groups throughout the past years. For example, the media were scathing in their criticism of how the Special Administrative Region Government handled the opening of Hong Kong's new international airport in July 1998. Editorials were not hesitant to voice different opinions when Secretary for Justice Elsie Leung decided not to prosecute Sally Aw, owner of the "Hong Kong Standard," for inflating circulation figures. Hong Kong press coverage of the PRC is extensive and frequently critical. Hong Kong continues to be a hotbed of speculation over changes in leadership and policy in Beijing, and different theories are freely aired in the press. Hong Kong's free media also serve as a forum for the views of mainland commentators and dissidents. For example, "Apple Daily" regularly runs a column by Wang Dan, a 1989 student movement leader now living in the U.S.

Twenty-one months after the handover, Radio Television Hong Kong (RTHK), the government-operated broadcaster, continues to carry material critical of the Special Administrative Region Government; some observers say it has been more critical of the Government than it was of the previous colonial Administration. Talk radio programs appear to operate without limitation in criticizing local leaders and China's policies toward Hong Kong. Political cartoonists continue to satirize, and sometimes savage, prominent political figures in Beijing and Hong Kong in ways unimaginable in the rest of China's media or in the papers of many of Hong Kong's more tightly controlled Asian neighbors.

A September 1998 survey conducted by the Social Science Research Center of the University of Hong Kong showed that 36% of those interviewed thought the media had made progress in monitoring the HKSAR Government since the handover. The same survey showed that 51% believed the media had scruples about criticizing the Chinese central government --down from 70% in a February 1998 poll by the same organization.

The Hong Kong Journalists' Association's 1998 annual report said: "Indeed, the first year under Chinese sovereignty has not been as gloomy for media freedom as many had perhaps anticipated. There has been little or no overt interference in the operation of the media, and self-censorship may even have abated a little from its evident proliferation in the period leading up to the handover."

The same report noted, however, that the past year has been difficult for professional ethics. According to the September Hong Kong University survey, 62% of those interviewed said the biggest problem facing Hong Kong media was not a lack of press freedom, but the deterioration of journalistic ethics and standards. Two notorious examples that aroused wide public criticism involved mass circulation newspapers. "Apple Daily" allowed reporters to pay money to "manufacture" news, while the "Oriental Daily" fabricated a front-page story about a senior Chinese government official committing suicide. Such sensationalism and irresponsible journalistic practices have caused media credibility to drop sharply. Compared with the situation a year ago, the average credibility rating of the fourteen local newspapers has dropped six percent, according to the September survey.

The Hong Kong media have been seriously affected by the Asian financial crisis. Huayu TV (China Entertainment TV) will cease operations if it fails to find a new owner. ATV, one of the major television broadcast stations, is burdened by heavy debt and increasing costs. The Hong Kong-based Taiwan television network CTN moved its operations back t Taiwan, leaving 150 Hong Kong employees jobless. The Oriental Daily Group plans to launch the "Sun," a newspaper that will sell at a lower-than-average newsstand price, which could lead to a price war. Its major competitor, "Apple Daily," has sworn to fight back by slashing its price from H.K. $5.00 (U.S. $0.65) to H.K. $3.00 (under U.S. $0.40). This could result in severe financial pressure for Hong Kong's many smaller circulation newspapers.



Asian Development Bank (ADB)
Customs Cooperation Council (CCC)
International Textiles and Clothing Bureau (ITCB)
Network of Aquaculture Centers in Asia and the Pacific (NACA)
World Health Organization (WHO)
World Meteorological organization (WMO)
World Trade Organization (WTO)
World Customs Organization (WCO)


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


Asian and Pacific Development Center (APDC)
Asia-Pacific Telecommunity (APT)
Economic and Social Commission for Asia and the Pacific (ESCAP)
Intergovernmental Typhoon Committee (ITC)
International Maritime Organization (IMO)
Statistical Institute for Asia and the Pacific (SIAP)


(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.)

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


Asian Productivity Organization (APO) -- withdrew July 1997

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Official Visitors to Hong Kong: April 1, 1998 -- March 31, 1999

Official High-Level Visitors to Hong Kong:
April 1, 1998 -- March 31, 1999

Air Force Chief of Staff
Two Former Secretaries of State
Former President George Bush
U.S. Trade Representative
Inspector General, Department of State
Chairman, Federal Reserve Board
President Clinton, the First Lady, and daughter
Secretary of State
Secretary of Commerce
Deputy Assistant Secretary of Treasury
President, Exim Bank
Legal Adviser, Department of State
Supreme Court, Justice Kennedy

Official Delegations to Hong Kong:

Federal Aviation Administration
Department of Energy
Federal Reserve Bank, San Francisco/New York/Philadelphia
Office of Comptroller of the Currency Special Advisor for Global Banking
Foreign Commercial Service
Foreign Agricultural Service
Library of Congress/CRS
Defense Technology Security Administration
Federal Bureau of Investigation
U.S. Nuclear Regulatory Commission
U.S./HK Economic Cooperation Committee
National Center for APEC
Internal Revenue Service
Industrial College of the Armed Forces/National Defense University
Department of Defense
Council of Economic Advisors, White House
Department of Justice
National War College
National Democratic Institute
Securities Exchange Commission
Patent & Trademark Office
Maritime Administration/Department of Transportation
Federal Broadcast Information Service
U.S. Geological Survey
Textile Delegation
U.S. Asia Environmental Partnership Delegation
U.S. Secret Service
U.S. Intellectual Property Delegation
Interagency Export Control Delegation
National Security Study Group Delegation
U.S. Marshals Service
National Institutes of Health
National Science Foundation
USDOC Export Enforcement Safeguards Team

Various Congressional Visitors

[end of document]

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