Hong Kong: The West’s Last Colony

The beginning of July marks twenty years since Asia saw two seminal events – the beginning of the Asian financial crisis, and the British handover of Hong Kong to the People’s Republic of China.

The former soon came to be seen as far more significant. Hong Kong’s change of sovereignty was a carefully choreographed event attended by hundreds of journalists chasing very little news.

On the other hand the collapse of the Thai Baht on the following day set off a rolling series of crises which lasted for a year or more and saw the crash of currencies, banks and governments from South Korea to Thailand to Indonesia.

There was plenty of mayhem elsewhere too, including Hong Kong, which saw the bursting of one of its periodic property bubbles.

Hong Kong’s place in history

Yet, on a very much longer view the Hong Kong event may prove more of a historic marker.

Hong Kong was the last significant Western colonial possession — other than neighboring Macau, which followed a year later, finally closing 588 years of a Portuguese presence in Asia which began with the 1510 capture of Goa.

The year 1997 was also, if only by chance, a major marker in China’s rise. Soon it was to be a member of the WTO, accumulating huge trade surpluses thanks to open access to rich markets and investment to modernize its economy.

Within twenty years it was seeing itself as a world power, pitching for hegemony in East Asia and aiming eventually to surpass the United States.

The Asian crisis

That is not to understate the importance of the Asian crisis. It ushered in the transformation of Korean policies, the coming of democracy to Indonesia and, for a while, a better constitution for Thailand.

On the economic front, it brought two decades of low-risk economic policies.

Currencies were allowed to float, governments spent years cutting debt they had incurred in bank rescues during the crisis.

Every country in the region ran large external surpluses, building up immense dollar reserves.

The counterpart of this Asian conservatism was the build-up of debt in the West which culminated in the 2008 Global Financial Crisis.

Thus 1997 Asian crisis countries survived 2008 without much problem and China used the occasion to spur its own economy with massive official stimulus and claim the status of principal booster of the global economy.