#28 - Hong Kong returns to China: colonial rule goes, not the world market.

Jun 1996


By July 1st next year, the last remaining outpost of the British Empire in Asia will have disappeared. After 155 years of British domination, Hong Kong will finally be returned to China.

In a symbolic way, the handover of Hong Kong will be the last act, several decades after it actually happened, of the collapse of the British Empire. Not that the Victorian imperial lion had any strength left in its old limbs. It would have been much too arthritic to impose its continuing domination over Hong Kong after World War II, had it not been for the exceptional situation created by the Cold War blockade imposed by the American navy on China and the benevolence of the Chinese regime itself! And even then, it only maintained its presence by agreeing to act as a vehicle for the interests of other imperialist powers and acting as a Trojan horse of the world capitalist market in China.

Once this last act is completed, however, Britain's colonial territories will be reduced to one peninsula in Europe (Gibraltar) and eleven grouplets of islands scattered across the world, with a total population of less than 150,000 - the largest being the Bermudan archipelago with 60,000 inhabitants and the smallest, Pitcairn Island, in the southern Pacific ocean, with 60 inhabitants.

Of course, this does not mean that the imperialist ambitions of the British capitalists are dead - they have long ceased to depend on colonies for their profits. This does not even mean either that the British state will never again embark on colonial adventures - after all it only took a handful of "British" islanders in the Falklands (leaving aside the penguins and sheep) for Thatcher to justify the biggest British military operation since the postwar colonial expeditions! But it does mean at least that the British Empire fan club will no longer be able to deceive themselves and others over Hong Kong's so-called "success story" and the glossy images of its skyscrapers.

More importantly, the Hong Kong handover will put an end to one of the most absurd remnants left over from the colonial days - a situation whereby, by virtue of ancient treaties imposed by military force on the long-deceased Chinese imperial dynasty, the British state could still claim sovereignty over a tiny territory located right in the middle of Southern China and inhabited by six million Chinese who were expected to consider themselves as loyal "subjects of the British Crown". This situation was not merely absurd. It allowed Hong Kong to be used systematically by the imperialist powers to force their way into Chinese society. Again and again, it proved to be a significant obstacle to the attempts made by the Chinese population, and more specifically by its poorest layers, to shake off the grip of imperialism over their lives.

For this reason alone, the return of Hong Kong to China can only be seen as a positive development for the Chinese masses - both in Hong Kong and on the mainland. It should at least deprive imperialism of its last major outlet in the heart of Chinese land (the much smaller, Portuguese-controlled Macau will be last to go in 1999) while bringing down the colonial barrier which has isolated the Hong Kong proletariat from the mainland for so long.

As the deadline for the handover draws closer, the already considerable flood of literature, shedding tears over the fate of the Hong Kong population, is likely to grow even more. However, we will not join our voice to this tide of hypocrisy.

Not that we feel no sympathy for the anger of those in Hong Kong who resent being used as mere pawns in the power game between the British and Chinese governments. On the contrary.

But today's clamour against the Hong Kong handover, with the sudden concern expressed by the media for the "democratic rights" of the Hong Kong population in view of China's human rights record, is a total sham as well as a hypocritical cover for Britain's own record. Above all, this campaign is a bargaining chip in the on-going negotiations between London and Beijing. At best, it reflects the fears of that layer of Hong Kong's professional and business middle-class who would like to secure some guarantees from Beijing as to its future status after the handover. But in any case, it shows no concern whatsoever for the rights, "democratic" or otherwise, of the overwhelming majority of the Hong Kong population, and particularly of its proletariat who, anyway, never benefited from the so-called "economic miracle" so much hailed by the likes of Thatcher.

Thus, when the British-appointed governor of Hong Kong, former Tory party chairman Chris Patten, began to pose as the champion of democratic rights for Hong Kong, he conveniently forgot that until Britain's negotiations with China reached an advanced stage in the early 80s, the word "democracy" just did not exist in the colony's official vocabulary. In fact, when for the sake of improving their bargaining position, British officials suddenly added the word "democracy" to their diplomatic jargon, it was with such a restrictive content that it should have made them the laughing stock of the world. Of course, it did not. Because who, in the so-called "free world", would ever consider putting in balance the "democratic rights" of Hong Kong's six million or so inhabitants against the billion-pound profits that western multinationals hope to make out of the Chinese market thanks to the privileged position they will retain in Hong Kong after the handover?

The reality of this so-called "democracy" is that, ten years after the sudden "discovery" of the word by Hong Kong's officials, the colony is still run by an all-powerful governor appointed by London, with the Legislative Council, Legco, having still only consultative powers in most spheres. Even after ten years of so-called "democratic reforms", only 20 of Legco's 60 seats are directly elected. The seven years residence required in order to be allowed to vote means that many Chinese workers are effectively disenfranchised. Out of the colony's population of 6 million, there are only 2.45m registered voters and this number has been going down since 1991. So has the turnout in elections, with only 36% of registered voters taking part in the 1995 election. Obviously, the Hong Kong population itself is not taken in by London's fairy tales about "democracy"!

What has shaped the handover, of course, is the fact that Britain is not being booted out of Hong Kong by the Chinese masses fighting for their emancipation. On the contrary, it was the British government who initiated the negotiations, back in 1982, in its own time and for its own reasons. Indeed, it has had plenty of time to negotiate the conditions under which it would go, obtain the concessions it wanted and ensure that imperialist interests would be preserved.

The approach made by Thatcher to discuss the conditions of a handover was prompted by the changes which had already been taking place in China. Ever since the US government decided to ease the Cold War blockade of China in the early 70s, the Chinese bourgeoisie and privileged layer around the country's state machinery had been striving to re-establish their past ties with the world market in order to increase the profits they could squeeze out of the colossal labour power of the Chinese proletariat. Hong Kong had played a central role in helping them to achieve this goal, and by 1982 the Chinese ruling layers were already deep in business in Hong Kong which, in addition, was already China's main source of foreign currency.

It is therefore no wonder that the conditions of Hong Kong's handover which came out of the negotiations should be clearly designed to preserve and enhance the short-term and long-term interests of both the imperialist and Chinese bourgeoisies, at the expense, inevitably, of the Chinese poor - on the mainland as well as in Hong Kong.

In other words, while the colonial power will go, imperialism will stay, at least until it is effectively booted out, together with today's rapacious Beijing regime, by the poor masses of China. Until then, Hong Kong will remain what it used to be under Britain's domination - a trading post for the imperialist bourgeoisie - only from 1997, this will be under the cover of China's own flag.

Britain's opium den

How did this absurd British enclave in Chinese territory come to existence? The regular presence of European merchants in China goes back to the 17th century. However by the end of the 18th century, tensions were building up between the Chinese imperial regime and European merchants. Indeed the latter had discovered that, although it was banned by the Chinese regime, the quickest way for them to make a fortune, was to smuggle opium, which they brought from the British colonial estates in Bengal and sold for silver. This led a Chinese official to write a letter to Queen Victoria exhorting her to put a stop to the opium trade, in which he said among other things:

«Let us ask, where is your conscience? I have heard that the smoking of opium is strictly forbidden by your country; that is because the harm caused by opium is clearly understood. Since it is not permitted to do harm to your own country, then even less should you let it be passed on to the harm of other countries - how much less to China!»

But obviously writing letters was not likely to discipline British traders. The Chinese emperor had already retaliated by restricting foreign trade to the winter months and to only one port - Canton, or Guangzhou as it is now called - where foreigners were confined to special compounds.

The British merchants - it was the British who were chiefly implicated in the opium trade - did not particularly want the trade legalised as this would have meant new competition, taxation, and regulation. But they more and more came to the view that they needed their own British-protected permanent base-port out of which to operate, so that they were not dependent on the goodwill of the Chinese while surrounded by them in their foreigners' compounds in Canton.

This was how Hong Kong came into being. In April 1836, the Canton Register - the local newspaper of the British enclave in Canton wrote:

«If the lion's paw is to be put down on any part of the south side of China, let it be Hong Kong: let the lion declare it to be under his guarantee a free port, and in ten years it will be the most considerable mart east of the Cape. The Portuguese made a mistake: they adopted shallow water and exclusive rules. Hong Kong, deep water and a free port forever!»

The lion referred to here is of course the British Empire and the reference to the Portuguese concerns their colony on the island of Macau, opposite Hong Kong on the other side of the Pearl River estuary, where the British merchants spent their summer months waiting for the trading season to open.

Britain's plunder of China, however, was attracting fierce criticism from Chinese nationalist quarters, like this denunciation published in 1841:

«In trade relations you come to our country merely seeking to covet profit. What knowledge do you have? Your seeking profit resembles the animals greed for food. You are ignorant of our laws and institutions, ignorant of right principles... Although you have penetrated our inland rivers and enticed fellows who renounce their fathers and their ruler to become Chinese traitors, and stir up trouble among us, you are only using money to buy their services - what good points have you? ...Except for your ships being solid, your gunfire fierce, and your rockets powerful, what other abilities have you?...»

In fact it was the events surrounding the Chinese attempts to suppress the illegal opium trade which finally led to the delivery of Hong Kong into the hands of the British merchant capitalists - or rather drug barons. When the Chinese took action against foreign opium merchants by blockading them in their compounds and confiscating 1,400 tons of opium, the then British Foreign Secretary, Lord Palmerston decided to retaliate with navy gunships. He was encouraged vigorously by William Jardine, a partner in the firm Jardine Matheson & Co. who was the richest of the opium smugglers. In fact a series of brutal attacks against Chinese Ports by British naval forces, forced the Chinese to compromise. These were the "Opium Wars" of 1840-42, of which Karl Marx wrote:

«The English cannons in 1840...broke down the authority of the Emperor, and forced the Celestial Empire into contact with the terrestrial world. Complete isolation was the prime condition of the preservation of old China. That isolation having come to a violent end by the medium of England, dissolution must follow as surely as that of any mummy carefully preserved in a hermetically sealed coffin, whenever it is brought into contact with the open air.»

Indeed the prompt collapse of the Celestial Empire's resistance in front of the gunboats of the British fleet was a symptom of the decay of the old Chinese social hierarchy. And, at the so-called Peace of Nanking, in August 1842, Hong Kong was ceded to the British and lopsided treaties were agreed which also gave British traders access to five Chinese ports, including Shanghai. By that time, James Matheson had already set up a warehouse and started trading from the island.

By 1846, the Hong Kong Club was opened, and St John's Cathedral was built the following year. The population of the colony rose tenfold in the the next 15 years to 50,000, making it necessary to expand the colony to the peninsula of Kowloon, the southern tip of the Chinese mainland half a mile away across the harbour.

This goal was secured after a second "Opium War", was launched in 1856, under the pretext of a dispute over China's right to search a ship flying the British flag in a Chinese port. As Karl Marx noted with irony in the New York Daily Tribune: «The civilised nations of the world will approve this mode of invading a peaceful country, without previous declaration of war, for an alleged infringement of the fanciful code of diplomatic etiquette.»

Eventually, after a series of confrontations, including an Anglo-French expedition against Beijing in which the Emperor's Summer Palace was burned to the ground along with a whole section of the town, the British won full ownership of the Kowloon peninsula. An eight foot high bamboo fence was erected by Chinese officials marking the separation.

Throughout the rest of the nineteenth century, Britain and the other imperialist powers hacked deeper into China. Japan defeated China in a war in 1894-5, securing Taiwan. It lodged a huge indemnity claim also demanding the secession of Manchuria. However Japan's European rivals took China's side, and having done so, promptly claimed their payment in the form of new concessions. As Lenin observed at the time: «The European governments have begun to rob China as ghouls rob corpses». In the scramble for concessions, from November 1897 to May 1898, the four European powers seized harbours all along the Chinese coast.

Britain in the meantime wanted another extension of Hong Kong, to the so-called New Territories on the Chinese mainland. Eventually an agreement providing for a 99-year lease of the New Territories was signed - which was therefore due to expire in June 1997. This added 366 square miles to the 44 square miles of the Hong Kong/Kowloon area. The temporary nature of the possession and the vague terms of the agreement - it made no mention of rent and neither did it precisely delineate the territory concerned - meant that the British law officers in London and Hong Kong decided unilaterally what the nature of Britain's rights over the New Territories would be. They did not for one second consider the reality of having to hand it back in the future.

Having decided off their own bat the limits of their possession, the British authorities proceeded to draft a land law in order to be able to sell sub-leases on land in the New Territories - without having to refer to the real owner, the Chinese Emperor. By the same token, 100,000 villagers who already lived on the land thus became temporary British subjects, for 99 years, although not without mounting fierce resistance.

Heyday and decay of the British empire

Hong Kong had therefore established itself as the permanent trading station under British control which British merchants had needed in order to escape the control of the Chinese rulers. It quickly grew into a huge market place, a concentration of gigantic warehouses for goods going out of China and coming in. It had all the highly developed services needed, including the financial centres, banks, transport and communications, allowing this vast enterprise to operate smoothly as a conduit for goods manufactured in the factories located inside the British concession areas within Chinese territory.

The British made sure their superiority was pushed down the throats of the local Chinese at every opportunity of course. In 1902, 20,000 acres of Kowloon were set aside for the exclusive use of "Europeans". Apartheid operated, though unwritten, in that apparently polite way of their particular brand of colonial rule. No Chinese were admitted to the higher ranks of the civil service and neither were they allowed to become police officers right up until WW2.

Vast fortunes and business interests were built on British colonial rule, including large trading houses which still operate today in the hands of more or less the same families - like the Jardine-Matheson group. By the mid-thirties, half of China's trade was being carried by British vessels and 70% of the trade of Shanghai, China's largest port, was conducted by British companies.

Undoubtedly it was the possession of the strategic deep-water port of Hong Kong which gave Britain the edge over their rivals in China - as a wholly British-owned centre for the servicing of the network of industrial zones, shared by the other imperialist powers, located inside Chinese jurisdiction. With the addition of its colonies of India, Burma and Malaysia, the British Empire dominated trade in Asia, ahead of the USA and Japan, even after WWI when Britain had ceased to be the world's strongest industrial power.

But this was soon to change. As the Japanese occupation of China progressed from 1932 onwards, the USA used the opportunity to build up its own influence in the region. It poured money, arms and other aid into China, shoring up the corrupt Kuomingtang regime of Chiang Kai-shek, against Japan. The USA's long-term aim was to turn China into a loyal US ally, which would be strong enough to enforce the imperialist order in the Far-East while keeping rival imperialist powers at a distance.

However throughout the latter part of the thirties, the Japanese slowly advanced, occupying most of China including Hong Kong by 1941, and set up a puppet Chinese government which proceeded to abolish all unequal treaties concerning territories previously occupied by rival imperialist powers. As a symetrical gesture to Chiang Kai-shek, the USA agreed to abandon all their concessions inside China (as well as those controlled by Britain). However the British government was not prepared to go so far as to give up Hong Kong, especially in the face of an anticipated total US domination of the region, even when Roosevelt himself tried to persuade them to hand back the whole territory to China as a gesture of goodwill.

When the Japanese were finally defeated in August 1945, the British government wasted no time in hoisting the British flag in Hong Kong, before the US or the Chinese Nationalists could do anything about it. Chiang Kai-shek then agreed not to oppose this, and colonial rule was restored in 1945. This was not exactly greeted with joy by the local Chinese. They had been waging a guerilla campaign against the Japanese all the while and some of these units continued to operate, turning against the British. In fact, for fear of a Chinese uprising, the British authorities even asked the defeated Japanese troops to maintain law and order until British re-inforcements arrived. This local discontent was probably the main reason for the post-war Labour government to put forward a token liberalisation of Hong Kong's constitution. However despite its very limited nature, it was opposed by the British establishment in Hong Kong and the Labour government scrapped it

By 1945, however, the balance of power in the Far East had already changed for good. The fall of Singapore to Japan, and the Japanese occupation of Malaysia and Burma, had exposed the military weakness of the British empire, thereby boosting nationalist aspirations throughout the region. After this, everything to the east of India was potentially lost to British influence. In this context Hong Kong had a unique advantage for the British government: it was small enough for them to keep it under control (at least as long as there was no threat from China) while at the same time giving them a strategic position in terms of trade.

Cold War and hot business

By 1948, the advance of Mao's army and the anti-British hostility of the population of Guangdong were putting in question the future presence of the British in Hong Kong. In October 1949, Mao reached Guanzhou. But much to Britain's relief, Lin Piao's army stopped 25 miles short of the Hong Kong border and the the Chinese commanders notified the British that their orders were to keep the peace and prepare for the resumption of trade and the re-opening of the Kowloon-Guangzhou railway.

Yet, it would have been easy at this stage for Mao to take over Hong Kong. The British, with their 30,000 soldiers, would have been unable to mount any serious resistance, despite Macmillan's boasting to the Commons that Hong Kong, being the «Gilbraltar of the east», would be defended as such. Even the Americans, despite their military might, would not have been able to take on Mao's victorious army at a time when he was, in addition, riding to power on a wave of popular mobilisation across China.

But Mao did not want a break with imperialism. Of course, his ambitions went further than that of a second-rate player on the world scene, and he had enough support in his country to hold to his guns in front of the imperialist powers. But despite being the leader of a party which called itself communist, Mao's objectives were first and foremost those of a nationalist who wanted to build up the Chinese bourgeoisie into a fully-fledged capitalist class, enjoying full recognition on the international scene, both politically and economically. Since Hong Kong had played for such a long time the role of middleman between the Chinese economy and the world market, he wanted the colony to carry on playing this role for the benefit of the Chinese bourgeoisie. And if this meant recognising the British occupation of Hong Kong, so be it!

For the British government, however, their policy in Hong Kong had to become a more complex diplomatic game - a balancing act between the Cold War game played by the USA, who still supported Chiang kai-Shek now exiled in Taiwan, that of Mao's regime in China and the anti-British agitation which was carrying on in Hong Kong and in the surrounding region.

Thus, while Labour's Foreign Secretary Ernest Bevin, in typical Cold War demagogy, proclaimed that Britain would turn Hong Kong into the "Berlin" of Asia, Britain was in fact the first western power to offer recognition to the new regime in Beijing. For good measure they also offered recognition to Chiang kai-Shek's regime in Taiwan though in this case the exchange of ambassadors did not take place until fifty years later.

Naturally the British government was looking after the interests of the British capitalists. Just as Hong Kong had been the channel through which half China's foreign income came, China was also the source of most of the goods which the trading houses of Hong Kong relied upon to export and therefore make their profits from. So when the US declared a total trade embargo against China in 1950 using the pretext of China's support for North Korea, the new situation created a diplomatic dilemma for both Mao and the British - but it also presented British companies with a whole range of new opportunities.

Since, at the behest of the USA, there could be no official links between China and Hong Kong, an unofficial substitute was found. This was the setting up of the so-called New China News Agency (known as Xinhua) which operated from the Bank of China building in Hong Kong and was in fact the direct representative of Mao's Government, allowing Britain to maintain unofficially a permanent - and very busy - channel of communication with the Chinese government throughout the Cold War.

In most respects, the foundations of Hong Kong's future wealth were cemented in less than a decade thanks to Mao's accession to power and the US-imposed blockade of China.

First, as Mao's victory was getting closer, a flood of refugees began to come into Hong Kong. Initially they were mainly soldiers and petty functionaries who had worked for Chiang Kai-shek and were fleeing Mao's advance. Then came a flow of businessmen and wealthy families from the neighbouring Guangdong province and sometimes from as far as Shanghai. At first the rich only sent their families together with large amounts of money, gold, etc.., to what they considered as a safe place, planning to follow later themselves. But some never did, so that today some of Hong Kong's richest businessmen turn out to be based in mainland China where they have made a career in the state machinery while their wives or cousins were taking care of their wealth in Hong Kong.

It is thus estimated that while Hong Kong's population trebled to reach 2.4m in 1950, more skills and capital were injected into the colony in the period up to 1952 than into any other country in the world, including Israel. And two-thirds of this wealth came from the Guangdong province alone.

The second pillar of Hong Kong's new affluence was, paradoxically, the US-enforced blockade of China. In theory, this was a strict blockade. However, the blockade did not apply to goods maufactured in Hong Kong, nor did it apply to the trade between China and the colony. Therefore Hong Kong was able to carry on importing cheap raw materials and some manufactured goods from China. But more importantly, Chinese manufacturers, and Western companies which used to have factories in China, moved their production to Hong Kong in order to be able to carry on exporting to the rest of the world. This was the basis of the huge industrialisation of Hong Kong in the 1950s, which was completely out of proportion with the market and resources of the colony itself.

Until the late 1960s, Hong Kong's official trade figures showed a regular and considerable flow of goods between the colony and China. And yet even these figures understated considerably the real extent of the exchanges between the two countries. Not only did they ignore, for obvious reasons, the very large-scale "black market" between the two countries, but in addition it said nothing of the regular but secret sales of gold made by China which provided Mao's regime with its main source of foreign currency.

China's "open door" to Hong Kong

China's relations with Hong Kong were therefore largely pragmatic. The implicit agreement behind these relations was spelt out in 1955, when Hong Kong's governor, Alexander Grantham, met Zhou Enlai, the Chinese Prime Minister for an unofficial conversation aimed at defining the "entente cordiale" between the two countries. In return for China's implicit acceptance of the British occupation of Hong Kong, Britain agreed not to steer the colony to self-government, not to obstruct China's interests and not to allow Hong Kong to be used as a military base for foreign troops. Mao gave his own blessing to this in 1959 saying «It is better to keep Hong Kong the way it is, we are in no hurry to take it back, it is useful to us right now.» The following year, this policy was confirmed by a directive issued by the Communist Party's Central Committee, stating that the resources of HK «should be fully utilised in the interests of long-term planning» while Zhou encouraged Chinese provincial officials to co-operate economically with Hong Kong and reach an agreement to supply the colony with water.

Beijing's continuing choice to "make do" with the British presence in Hong Kong and use it as a lifeline to the world market was further demonstrated when, at the height of the Cultural Revolution, Mao ordered the army to stop over-zealous Red Guards from penetrating into the colony. Not only was the repeated threat of the Red Guards to cut Hong Kong's supply of water never implemented, but the Chinese regime even made a point of speeding up the construction of a new pipeline providing the colony with water, in the middle of the unrest.

Eventually, in 1971 the USA decided to give up its "containment" policy and abandoned its support for Taiwan, sending a Ping-Pong team to play the Chinese, before Kissinger and Nixon made their famous visits to Beijing a few months later. They called it ?ping-pong diplomacy", and it certainly was aptly named. China had no problem being admitted then to the UN. Neither did it have a problem when it insisted that China and Macau be removed from the UN list of recognised colonial territories.

Of course, Britain had never treated Hong Kong like its other colonies. The question of independence or even self-rule never arose. And in March 1972, the British Foreign Office signed a joint communique with China which increased diplomatic representation in Beijing and asserted «the principles of mutual respect for sovereignty and territorial integrity, non-interference in each other's internal affairs and equality and mutual benefit.»

After these crucial years, trade with China began to build up very actively again. And the British government even negotiated directly the sale of aircraft - both military and civil, machine tools and scientific instruments and computers. Although in this respect China remained a disappointing direct trading partner for Britain - importing in the five years to 1977, a lower value of British goods than did Korea or Pakistan. On the other hand, the role of Hong Kong as an entrepot for the Chinese market started developing fast.

By 1978, when the liberalisation of the Chinese economy was declared - in other words when private entrepreneurs were allowed to operate openly again, and state entreprises were encouraged to set up joint ventures with private capital - a new era opened for the Hong Kong economy.

New Special Economic Zones were created by Beijing, which provided foreign companies with cheap infrastructure and labour force and a special low tax regime. The first and, to date the largest of these SEZs was opened in Shenzhen, just outside Hong Kong's border. And almost immediately the movement from the mainland to Hong Kong which had led to the colony's industrialisation in the early 50s, was reversed. A large section of Hong Kong's manufacturing industries moved back into China, first to the Shenzhen SEZ and then all over the surrounding Guangdong province. Within less than four years, no less than two million workers were employed directly or indirectly by Hong Kong-based companies in Guangdong alone. In some respects, Hong Kong returned to the role it used to play before World War II, when it acted as the trading agent of the factories operating in the foreign compounds across China.

Hong Kong became, by the same token, the compulsory financial channel through which any foreign company wanting to invest in China had to go. So every one of the world's major industrial companies rushed to set up some form of representation in Hong Kong. Ironically, this was even true for Taiwanese companies which were barred from trading direcly with mainland China by their government, forcing them to set up semi-official subsidiaries in Hong Kong in order to have access to the Chinese market. Of course, all this growing activity required finances. Hong Kong was already well equipped with old banking institutions dating back to the heyday of the British empire, such as HSBC, the Hong Kong and Shanghai Banking Corporation (which has since absorbed the Midlands Bank). But none of the world's large international banks was prepared to leave the ground to the British banks, so that more skyscrapers were built to house the regional headquarters of the main banks from the USA, Japan, Germany, France, etc... At the same time floating speculative capital began to take an interest in the growing demand for short-term capital in Hong Kong. The local stock exchange, already the biggest regional market outside Japan, began to expand considerably.

The Hong Kong boom had began, at a time when the industrialised world, and in fact almost the entire the world, was slipping in the deepest recession since 1929!

From a "British colony" to a "Chinese colony"

Since the re-establishment of full diplomatic relations between Britain and China, the question of Hong Kong had been left to rest. Neither side wanted to upset a status quo which seemed to work to the benefit of both. And certainly no-one in Britain took seriously the occasional ritual reference made by Beijing to the unequal treaties and the need to correct the injustices of history.

It was the British government, then under Thatcher, who made the first move towards a negotiations in 1979. Paradoxical as it may sound, Thatcher even had some difficulty in convincing the Chinese leader, Deng Xiaoping, that it was the right time to start discussing about the future of Hong Kong! In fact it took another three years before the Chinese government declared itself ready to embark on actual discussions on the matter.

What seemed to have prompted the British government to move had nothing to do with the will to respect at last China's national right to Hong Kong. The reason was much more down-to-earth. Since all properties in the New Territories were based on a lease which ended in 1997, and had therefore only 18 years of life left, Hong Kong's very profitable property market was experiencing an unprecedented slump. Property prices were going down at an alarming speed, to the point of threatening the value of the Hong Kong dollar and, even more importantly, of threatening the wealth of some of the colony's biggest companies whose assets were mostly in real estate. It was therefore urgent to clarify the future status of land ownership in the colony.

Right from the beginning Thatcher spelt out the fact that any concession on the part of Britain, and in particular the handover itself, would have to be rewarded with privileges granted to British companies. Thus, in March 1982, in a statement in the Commons, she pointed out that British industry «now stands ready to help China's ambitious programme especially in energy, including oil and coal mining, in communications, building, etc..». A few months later, a BP-led consortium was to become the first foreign company to be awarded an oil exploration contract in China. And this was the first of a series of state contracts in which British multinationals were to take the lion's share of the cash on offer.

Finally, in September 1982, Thatcher paid a visit to Beijing to finalise the details of the negotiations. It was agreed, in particular that the content of the discussion would remain entirely secret until full agreement was reached - which said something about the worries about possible hostility from public opinion on both sides.

From then onwards, however, the negotiation process moved relatively fast. There were all kinds of officially bellicose statements on both sides, no doubt so that both could claim to have "stood their ground" in front of their respective "hardliners". That being said, no-one who followed the events closely could have been taken in by the spectacular nationalist statements issued on this occasion. Deng's reiterated reassurance addressed to the international business community that he intended to «preserve stability and prosperity in Hong Kong» left little space for any doubt.

By the time the official discussions started in April 1983, the main lines of the final settlement had probably already been agreed - otherwise it is unlikely that the British government would have taken the risk of declaring at that point that from now on the Hong Kong dollar would be convertible at a fixed rate against the US dollar. Eventually the final session took place at the end of 1984 and the famous "Joint Declaration" was officially signed in May 1985.

This declaration outlined the conditions in which the handover of the totality of Hong Kong would take place on 1st July 1997. From this date Hong Kong would become a Special Administrative Region of the People's Republic of China, placed directly under the authority of the Beijing government. The Hong Kong SAR would enjoy a large degree of autonomy except in the sphere of military and diplomatic affairs. It would have its own executive, legislative and judicial institutions (with the governor nominated by Beijing instead of being appointed by London). Its law system, civil service, economic and social systems would remain unchanged. It would retain its status as a free port and a separate customs territory. It would have its own autonomous finances and would not have to pay any taxes to Beijing. In addition, the declaration stated very explicitly that «private property, ownership of enterprises, legitimate right of inheritance and foreign investment will be protected by law», adding that «it will retain the status of an international financial centre, and its markets for foreign exchange, gold, securities and futures will continue. There will be free flow of capital. The HK dollar will continue to circulate and remain convertible.» The provisions of this declaration would remain unchanged for fifty years and, to resolve Hong Kong's urgent real estate problem, all land leases were automatically prolonged until the year 2047.

In other the Joint Declaration, as well as all subsequent more detailed documents, guaranteed that everything would remain identical in Hong Kong as far as business was concerned for the next 50 years after the handover. Ronald Li, a former chairman of the colony's stock exchange, was to put the agreement in a nutshell, a few years later, by saying: «Hong Kong is a colony. It is a dictatorship, although a benevolent one. It is and has been a British colony and it's going to be a Chinese colony, and as such it will prosper.»

Building towards the handover

Already, before the beginning of the official negotiations, Chinese state companies had been buying into Hong Kong's property market. Huge stretches of prime land were thus bought in 1980 by a group called "China Resources", acting on behalf of the state's main financial arm, Citic, and by the Bank of China. In both cases, there was no auction and the selling price was about half the going rate - which probably means that these transactions were part of the pre-conditions raised by Beijing for the negotiations to start.

Since then China has become the largest outside investor in Hong Kong, followed by the USA and Japan, with Britain now in fourth place. Among the over two thousand Chinese firms represented in Hong Kong, are a number of very large state companies like Citic (finance), Norinco (the manufacturing arm of the Chinese army), the Bank of China Group (which incorporates 13 Hong Kong banks, and shares with HSBC and Standard Chartered the role of reserve bank for Hong Kong) and Shougang Steel (one of the largest state industrial conglomerates). There are also a large number of Chinese private firms, such as for instance the new Guangshen Railway Company which was floated simultaneously on the Hong Kong and New York stock exchanges in May. Many of these private firms have been set up for the sole purpose of accrueing assets in Hong Kong, which allow Chinese capitalists to buy into foreign assets.

One thing worth noting in passing, is that all the largest Chinese firms represented in Hong Kong have something in common - their top executives as well as those of their Hong Kong subsidiary are close associates or relatives of top leaders of the Chinese regime. In particular, Deng Xiaoping's family is represented in almost everyone of the major Chinese players in Hong Kong. In other words, the very top spheres of the Chinese privileged class have chosen Hong Kong as one of the main vehicles for their own private enrichment.

On the other hand, while on the whole US and Japanese companies have now got larger investments in Hong Kong that their British counterparts, the largest companies in Hong Kong remain British - like HSBC and Standard Chartered in banking, Jardine-Matheson which has now shifted from the opium trade to real estate and textile, Swire Pacific in air transport and real estate, Hongkong Telecom which is a subsidiary of Cable & Wireless, etc... In particular, due to their special role with regards to the Hong Kong currency, the British banks hold a nearly impregnable position despite holding smaller assets than their Japanese or American rivals.

The implantation in China of Hong Kong-based capital (but it can originate from anywhere in the world) has reached the point where, according to The Banker, the British banking monthly, «it has become more and more difficult to draw a line between the financial systems of Hong Kong and China. Already more than 25% of Hong Kong's money base is circulating in Southern China». This was written in 1994, and the odds are that this figure has increased dramatically over the past two years. By the end of 1995, it was estimated that 60% of all foreign investment in China was based in Hong Kong.

What does this all mean? On the one hand, the top Chinese bourgeoisie is using the Hong Kong financial market to consolidate its position and independence in China itself, to launder illegal profits made at the expense of the state in China and to invest its wealth in more secure and profitable markets - a behaviour typical of the bourgeoisies of Third World countries. On the other hand, the world's largest financial institutions are queuing up in the colony to take their share of the projected £500bn or so which the Chinese economy (and mostly its state) will have to borrow over the next ten years for its infrastructure programmes alone. At the same time, the world's largest industrial companies are scrambling to get their share of the limited market comprising the privileged Chinese - limited, but not negligible given the overall size of the Chinese population. And in all this, the Chinese bourgeoisie and state are collaborating with the imperialist predators to allow them to plunder China more or less at will so long as they get their cut.

In many ways, but on a much larger scale, this is a situation comparable to the scramble to lend money to, and tap the markets of the third world, and particularlly the oil-producing countries, in the mid-70s. And given the result - a series of catastrophic bankruptcies in these countries are the time - there are few reasons to be optimistic as to the future of the Chinese economy.

In any case, the balance of forces in the gigantic financial operation which is developing through the Hong Kong handover, cannot be more clear - the imperialist world market will rip off most of the profits, the Chinese bourgeoisie will get some crumbs which will be kept in safety elsewhere, and the Chinese population, in Hong Kong and in China will be made to pay the bill.

A shared fear of the proletariat

The Beijing authorities have been opposing democratic reforms in the run up to the handover for exactly the same reasons as the old colonial establishment has always resisted such reforms. It is not that they feel threatened by the middle classes who are demanding these reforms so vocally. Of course, like the old establishment, they would rather be able to line their own pockets and distribute privileges to whom they want without being accountable to anyone - something that democratic reforms would make more difficult - but if necessary they could put up with some constraints in this sphere. What they are really afraid of, like the old establishment used to be, is that such reforms might lead the millions of Hong Kong proletarians to gain confidence and raise their own social banner, thereby putting in question the grandiose profits planned by the privileged - Chinese and imperialists - for the coming decades.

Because, behind Hong Kong's so-called "economic miracle", there is a large proletariat for whom the glossy GDP per head figures of the colony have never translated into any significant improvement, even though their labour is partly the source of this affluence. In some respects their standard of living may be higher than that of their brothers on the mainland. But not all that higher compared to the colony's well-off middle class, or to the really wealthy, whose affluence is arrogantly displayed to the world in the impressive line-up of the colony's skyscrapers. Huge social inequalities hit one in the face. One need just compare the tiny over-crowded single-room flats (and often mere shacks) allocated to the working people, to the precious land wasted in the golf courses, clubs and race tracks frequented by the selected few.

Again and again in the past, the Hong Kong proletariat has proved that it was not as docile and resigned as it is made out to be by the western media. On the contrary, it has a long and proud history of struggle which is enough to generate nightmares among the British and Chinese establishments - and rightly so too.

The birth of Hong Kong's proletariat

As the role of Hong Kong expanded as a trading port in the second part of the 19th century, more and more workers were required to serve in the warehouses, work as stevedores, porters, and seamen. There was also plenty of work in the construction boom which soon followed. By 1860 there were 120,000 living and working there. The expansion to the New Territories in 1898 added 100,000 peasants whose traditional agriculture was soon supplemented by commercial crop-growing, creating a new workforce of agricultural labourers.

The flow of refugees generated by the waves of repression in China provided a large labour pool. Some were recruited for local jobs while others were lured into indentured labour in other colonies like South Africa, the Carribean, New Zealand, Australia, and also the USA, where labour was needed on mines and plantations. This meant that these workers put themselves into the hands of a contractor, not knowing where they were going or what work they would be given. They were then sold on to the highest bidder and shipped out of China in British merchant vessels, often to find out later that they could not come back. This trade came to look so much like the old slave trade that Liberal MPs in the House of Commons tabled questions over this, and this trade was eventually made illegal, although Hong Kong carried on acting as a funnel for Chinese labour to the rest of the world.

The first recorded strike action by Chinese labourers (referred to by the British as "Coolies"), took place as early as 1844 and was described as a "general strike" over registration which was being introduced for residents of the colony in order to keep control over their numbers and their movements. In the event, such attempts at controlling the population failed, because whenever the colonial police resorted to repression against unregistered workers, they merely departed over the border back home to China.

The conditions of life and work for the Chinese labourers in Hong Kong were extremely poor, and most of the early population was male - the workers having left their wives and children behind in China, not considering Hong Kong a fit place to bring them. Most lived in dingy, crowded, cheap, temporary accommodation which had been erected without any plan along the waterfront. And most were concentrated not on Hong Kong Island - where even the rich Chinese were not allowed to own land - but on the Kowloon peninsula, although even there, the cooler Peak district was restricted to Europeans only. They thus had to put up with a system of unofficial apartheid, and were in fact denied any formal rights until the twenties. Even the main Chinese language was not recognised as an official language - right up until 1974!

There was quite a flow of workers in both directions in and out of Hong Kong and it had not taken long for these workers to start organising their own trade unions. By the early part of the 20th century the basis for a substantial working class existed already in Hong Kong, with its very highly developed port facility, telecommunications, tramways, electricity and gas supplies. This provided the impetus for workers' organisation to develop against the poor conditions of work and low wages they were subjected to. The engineering workers who were responsible for power production and communications had already formed a union in 1910, under the influence of the Nationalist Kuomingtang, in the run up to the first Chinese revolution of 1911. This led the the Chief Manager of the Hong Kong Shanghai Bank to help create and finance a private army to defend business interests in both Hong Kong and Guangzhou, against the nationalist forces of the KMT and their influence in the unions.

World War I marked a turning point in terms of working class organisation. A domestic industry developed in Hong Kong, due to the needs of Britain's wartime economy. More importantly, Chinese workers were drafted to Europe in order to take up vacancies in industry created by war conscription. Many returned with radical ideas, having experienced at first hand the long-established trade union and militant traditions of the European working class, who were at this point preparing themselves for a wave of revolutions. The Russian Revolution had a deep influence in China, including in the ranks of the nationalist Kuomintang to whom the Bolsheviks offered their assistance in a gesture of solidarity against the imperialist powers. And, in 1921, a Communist party was formed in China which attracted soon some of the best leaders of the young trade union movement. In Hong Kong itself the combination of social discontent and anti-colonial feeling led to a wave of strikes and boycotts against British interests, often led by communist activists.

Facing a proletarian revolution

In 1920, 9,000 mechanics and engineering workers demanded a 40% wage rise following a huge increase in the price of rice. When turned down, they decided to leave Hong Kong and go back home to China. This was a well-established tradition amongst Chinese workers which dated back to the early days of the colony. Hong Kong after all was not their home, merely an enclave of the British where they provided the labour and stayed in lodgings. Their families were mostly on mainland China and that was where they actually belonged to. So having removed themselves from their workplaces and gone home, mainly to Guangzhou, they refused to come back, unless their demand was met. This quickly brought Hong Kong to a complete standstill. Within two weeks the employers had agreed a 32.5% wage rise.

Then in 1921 the Chinese Seamen's Union followed suit, demanding a wage rise. Chinese seafarers in Hong Kong were paid only a fifth of the wages of their European counterparts. On top of this, they had to pay a high proportion of their wages to the shipmasters who found them berths and lodgings between voyages. But because they were gathered together in squalid lodgings, they were able to organise themselves quite naturally and this they proceeded to do. Each lodging elected a committee to back up their wage demand. Since the employers refused to reply, on 22 January, the seamen followed the example of the mechanics and removed themselves to Guangzhou. They were followed by increasing numbers of other workers - 120,000 in all - including the engineering workers, unskilled labourers and domestic servants. This comprised almost the whole of the Hong Kong workforce, resulting in what amounted to a spontaneous general strike, though certainly under communist influence. When the labourers' employers immediately tried to get them back by offering an increase, they refused to return until the seamen's demands were also met. The workers proceeded to blockade Hong Kong, cutting off food and other essential supplies.

The employers, the government and the traditional Chinese leaders panicked. The seamen's union was proscribed and their headquarters raided. Emergency powers were declared and the border closed. Indian troops, supporting the Hong Kong Police, fired into a large crowd trying to cross the border, killing five people. But this merely inflamed the situation further. After eight weeks, the authorities in Hong Kong were forced to back down. Arrested workers were released, the Seamen's Union was allowed to re-open, and wage increases of between 15% and 30% were agreed for the different categories of workers.

By 1925, the second Chinese revolution was underway. Unlike the 1911 revolution which had reflected the aspirations of the fledgling Chinese bourgeoisie, this time the urban working class was in the lead, and the activists of the Chinese communist party were at its head.

When 11 demonstrators were killed in the Shanghai international settlement by Chinese and Indian police under British command, strikes broke out in both Shanghai and Hong Kong. Then an even worse massacre in Guangzhou by British-led troops, which left 52 dead, inflamed anti-British feelings. In Hong Kong a general strike was declared and within one month, 250,000 strikers and their families had left for Guangzhou. There they were housed and fed by a highly organised, communist-led strike committee. In fact this strike committee grew into what amounted to an alternative government - in effect a soviet, referred to as the "Canton commune" and the first embryo of workers' power in China. 2,000 pickets mounted a blockade around Hong Kong and the island of Shameen - a foreign concession off Guangzhou, in the Pearl River. Every fifty strikers elected a delegate to a Strikers' Delegate Committee and under its direction schools and a hospital were set up for the workers and their children. Special committees were also elected to handle funds, auction confiscated goods, and a workers' court was set up to try strikebreakers and fight against anti-social crimes.

The pickets carefully policed the passage of all goods, and local peasant associations joined in, helping to control all lines of communication further along the coast. Since the strike also affected the removal of refuse, the "Fragrant Harbour" as Hong Kong was known, was renamed the "stinking harbour" and as the strike throttled the colony, it was renamed again by the strikers as the "dead harbour".

The Hong Kong strikers demanded the right to vote, freedom of expression, improvement of working conditions, prohibition of child labour, the eight-hour day, and the cancellation of rent increases due to come into force in July that year. The British authorities in Hong Kong refused to negotiate, and in the meanwhile, tried everything to break the strike. They financed an "Anti-red" opposition, murdered one of the communist strike leaders and even suggested a $3bn bribe to Beijing to force Guangzhou to end the strike. A coup was attempted but this too failed. A new British governor, Clementi was sent to Hong Kong and he threw himself into an anti-communist campaign, promoting an anti-red newspaper and initiating new conspiracies, again without much success.

Eventually, however the British were bailed out by Chiang Kai-shek, the new aspiring leader of the KMT. His arrival in Guangzhou, in March 1926, at the head of the nationalist troops, had been welcomed by the strikers. And it was an easy task for him, thanks to the accomodating policies of the communist party leadership, to take over power from the strikers' committees. But the nationalist leader was pursuing his own agenda - his first priority was to crush the the emerging proletarian power. All along, he had been negotiating the ending of the strike with the British behind the strikers' backs, which he traded with the British authorities against a $10m loan. Chiang's troops stood aside for the Royal Navy's intervention to break the strike while his police imprisoned and executed the strikers' leading activists. When the strikers returned to work, after fifteen months, not one concession was granted and the seamen's union was proscribed.

Class struggle under the Cold War

Of course the defeat of the Chinese revolution, and the resulting bloodbath, left the working class exhausted and demoralised, including in Hong Kong. But it did not uproot its traditions of organisation. This was reflected in the continuing existence of more or less clandestine trade unions.

The visible weakening of the British Empire, through the 30s and 40s, and the rising tide of resistance to the Japanese occupation of China, gave a new impetus to the working class movement. When Mao's armies gained succcess after success, the Hong Kong working class responded in a wave of strikes against their British employers.

In 1947 11,000 engineering workers, mainly in the dockyards, waged a successful strike over wages and conditions. Based on the engineers' agreement, across the board agreements on wages were made to workers in many other sections. In 1948, this strike wave led to the legalisation of today's main unions through a system of registration - 100,000 union members were recorded that year alone.

Behind this legalisation, however, the British establishment was preparing to turn the screw against the more militant communist-led unions. So, when a tramway strike broke out in 1949 and the strikers resorted to the usual practice of decamping to Guangzhou, they got a huge welcoming reception there. Only this time they were refused entry back into Hong Kong. The following year, another tramway strike, when conductors refused to collect increased fares, was met with a lockout. The strikers rioted against the police and the tramwaymen's union was derecognised. Yet the class struggle did not disappear, despite the fact that the wave of refugees from China now swelled the workforce to the point where there was certainly no scarcity of labour. For instance, rattan furniture workers staged a protracted strike in 1953 as did rubber and textile workers in 1956 against the introduction of a third shift.

The population of Hong Kong threatened to burst at the seams, with such a sudden increase in a short space of time. Squatter camps mushroomed but the Hong Kong government refused to do very much to alleviate their conditions. Denis Bray, a government official given responsibility for refugees - but few resources to help them - recalled many years afterwards: «I had to manage the screening of squatters cleared for development when all they were offered as resettlement was 4 pegs in the ground making a plot where they could build. Gradually a little government money was found to do some site formation, to provide stand pipes, to pave paths, to do a good deal, but not to provide housing.»

But given this situation, the focus of discontent shifted to the crisis in the squatter camps. There were riots and deaths - most of which were hushed up - like when a riot broke out after a squatter was killed in a protest following a fire in the Tung Tau squatter camp in 1952. The following year, another fire, this time at the Sheck Kip Mei camp on Xmas day, left 50,000 people homeless. This time the government was forced to act. But what did they do? As Denis Bray recounts, «the resettlement programme of the 50's was not a housing programme for the poor. It was a means to clear land for development. You could not apply for a resettlement flat. You were offered one if your hut was about to be pulled down. What you were offered was a concrete box allowing 24 square foot a head, in a seven story structure with no lifts, no windows but wooden shutters, no water but access to communal kitchens and bathrooms. If this sounds dreadful, it was, but such was the alternative that people fought to get into the new blocks where you had your own place legally - and it would not burn down.»

By the end of 1956, only 630 acres had been developed for resettlement, with 23,000 tenement rooms, which were not even big enough to fit in a double bed, plus 13,800 tiny cottages - and this was meant to accommodate 200,000 people! It is not therefore surprising that when the commemoration of the 45th anniversary of the 1911 nationalist revolution in China, on 10 October 1956, the refugees' feelings against the British and indeed Mao's regime, who were blamed for their plight, ran high. Nationalists besieged police stations, and attacked the shops and homes of known communist sympathisers. They invaded factories where they kidnapped and tortured workers who were known to be members of communist unions. The Swiss consul and his wife who were caught up in the fray had their car burnt and his wife later died of the burns she sustained. Communists were actually taken from their compounds into police protection during the four days that the rioting lasted. It left 59 dead - 44 killed by the police and 15 by the rioters.

In the ancient Walled City of Kowloon itself rioting took place as well but here it was led mainly by communists who were protesting against living conditions and the protection rackets run by the Triad gangs with the covert help of the police.

By 1958, the regime in Hong Kong was forced to do more, bringing in new regulations and conditions for the workforce after a visit by the Tory Secretary of State. He was quoted as saying that conditions in Hong Kong were «disgraceful, even by Asian standards.» A Labour MP added to this rather witless remark by raising his fear that textile workers in his constituency might be losing their jobs due to the unfair competition caused by the low wages and bad conditions in Hong Kong. In fact the mainly women workers in the Hong Kong mills worked a seven-day week, on 12-hour shifts and got only one-and-a-half days off per month. But that was not what this MP chose to complain about. Ironically of course, Hong Kong?s textile industry was mostly owned or co-owned by the same British consortiums operating in Lancashire and Yorkshire.

The 1966-67 "disturbances"

When the so-called "Cultural Revolution" was launched in China in 1966, this had a significant impact on Hong Kong and indeed the Portuguese colony of Macau, where the unrest started first.

This Cultural Revolution was the Chinese regime's third big reaction to the constant economic crisis which beset them, and their inability to resolve it. Facing growing discontent among the working class and urban population in general - with a wave of strikes in Shanghai, in particular - the regime resorted to a social mobilisation to crush the threat. Under the guise of a demagogic campaign against the so-called remnants of the "old" China, the notorious urban youth brigades of the Red Guard were formed to impose, alongside the military, a reign of terror against all potential opposition to Mao's regime.

The workforce in Hong Kong, superexploited, badly housed and with the experience of tremendous struggles in the past was rather open to the idea of getting rid of at least one "old" remnant - the stifling old colonial domination of the British - or at least demonstrating their contempt and their anger at their conditions. Having waited patiently all this time for some kind of indication that China was finally going to stand up against the British occupation in Hong Kong, the Hong Kong working class took Mao's demagogy at its word - they saw the events in Beijing as their chance to boot the British out.

Initially, in early 1966, a protest at the increase in first class Star Ferry fares initiated by a poor eccentric - who embarked on a hunger strike at the ferry port - sparked a general protest which spread like wildfire, especially amongst the youth and in which the CP youth organisers played a central role.

Because riots and strikes which had been taking place in Macau had put the British police on their guard, the minute the mainly children's demonstrations started growing, they aimed their rifles - shooting one protestor dead. This led to full-scale riots, looting and arson in many of the Hong Kong districts, and 1,500 suspected communist "agitators" were rounded up and imprisoned.

Official accounts of these events talk politely of "disturbances". But they all leave out completely the wave of strikes which took place while telling us how, in 1967, after the young Red Guards had burnt down the British Embassy in Beijing, young followers of Mao, armed with his Red Book, but nothing more, besieged Government House in Hong Kong. They describe how communist-owned buildings sported anti-British slogans and red flags, and mockingly tell of the Beijing-owned Bank of China broadcasting slogans through huge loudspeakers, which the British drowned out by playing "God Save the Queen" even louder.

In fact they say nothing of the real turmoil which broke out and the resonance that the CP found amongst the workforce and youth. Huge crowds did indeed beseige the whole Central district of Hong Kong for days on end, and the rioters took over the amplifiers in the Bank of China Building shouting to the police: «The British will not be here much longer, do you think they will take you with them when they leave?»

Probably some of the most militant strikes ever seen in Hong Kong took place in this period. The conflicts would normally end in riots, with communist-led workers clashing with the police. Almost every sector was eventually involved and the strikes held up the activity of much of Hong Kong's economy for over four months, between May and August 1967. The starting point, in May, seems to have been a dispute involving taxi drivers organised in the CP-led Motor Transport Workers Union. Before this was settled a strike started at the Hong Kong Artificial Flower Works. Workers stopped the flowers going out of the factory. The police intervened and this led to a confrontation and arrests. Similarly at the Green Island Cement Works, a strike over an alleged assault led to clashes with the police again with arrests and injuries and probably some deaths, though this was not officially acknowledged. Strikes then spread to public utility companies, road and harbour transport services, the government-operated waterworks, mechanical and electrical workshops and slipways. The ferry between Hong Kong and Kowloon was also stopped. Throughout this period, hundreds of demonstrators were injured or arrested, union offices were raided and ransacked by the police, and on several occasions strikers were killed.

It seems that the aim of the Hong Kong CPers leading the unions was to go all the way - taking their example from Macau, where the CP supporters had actually taken over the whole island, supported by young Red Guards, and forced the Portuguese to actually offer to hand it back to China immediately. But had they known that the Chinese regime had no intention of taking back Macau they would perhaps have thought twice. Instead the CP-led Federation of Trade Unions - by far the biggest trade union grouping in Hong Kong - went full steam ahead, calling on all its affiliated unions to set up anti-government struggle committees. In Taikoo dockyard, they called a general strike. The struggle committee, having taken the bosses hostage, put them on trial. They were forced to sign a document giving in to the workers demands in return for their release. However as soon as the bosses got away, they waited until the strikers had left the yard and locked them out. They identified the strike leaders, who were jailed, withdrew recognition from the communist unions and sacked all the strikers.

In fact no aid whatsoever came from Beijing for this tremendous effort on the part of the CP unions. Although some local people in Guangzhou seem to have tried to give some moral support to the strike movement, judging by the numerous letters received at the Hong Kong post office addressed to "Get-Out-Imperialists-City". In any case, the British authorities obviously knew that there was no real threat of a communist takeover in Hong Kong, during this so-called Cultural Revolution, because of the Macau precedent.

In desperation some activists resorted to a bombing campaign which killed 15 people, and ended up by turning public opinion against them, so that it was even easier for the police to raid their premises and get away with mass arrests of all suspected communists, many of whom were jailed on criminal charges. Many communist-led unions were derecognised after 1967. but nevertheless, the FTU, which is still CP-led, maintained a larger membership than any other union grouping throughout the next period. And strikes continued to increase, because of the wave of industrialisation of the early seventies.

What future for Hong Kong?

Who knows what will be the impact of next year's handover on Hong Kong's society? The care with which it has been prepared and engineered by both the British and Chinese governments is obviously designed to avoid any hiccups and any feeling that there may be a political vacuum waiting to be filled. Beyond the periodic wrangles, which are to be expected in a bargaining exercise on such a scale, both governments have duly co-operated over the past few years to set the stage for the post-handover Hong Kong.

This careful planning and collaboration, however, is not solely due to the delicate requirements of the Hong Kong financial machinery itself, even if, in the last resort, it all comes down to ensuring that the present flow of profit continues to be generated smoothly by Hong Kong.

All sorts of factors may upset this flow. Among these factors are the unpredictable reactions of the world's financial markets, particularly the potential risk of large masses of speculative capitals - which make up the bulk of the money currently invested in Hong Kong - being shifted around suddenly. Much of the preparation work which has been done is designed to avoid such operations and reassure current investors. Hopefully, in the governments' thinking, this preparation work will guarantee that when the time of the handover comes, there will be no massive flight of capital out of Hong Kong and no attempt by outside speculators to bet on such an event - because the consequences of such speculation could prove just as disastrous. Whether their precautions will prove sufficient is another question. After all there is no shortage of large-scale financial operations which have gone very badly wrong over the past two decades.

But there is at least one factor which is probably even more unpredictable than the hiccups of the financial markets and on which, in any case, the governments have very little weight - that is the possible social impact of the handover. On the one hand, in the short term, there is the possibility of a backlash from the Hong Kong middle class - the layer which feels probably most threatened by potential aspiring rivals coming from the mainland to take their cushy jobs. Many efforts have been made to soothe the anxiety of this milieu but who can tell whether some politician will not try to build a career for himself by whipping up their fears?

More importantly, in the longer term, there is the threat of the proletariat throwing its spanner in these glossy financial works. In China itself, this threat has been a major concern for the privileged ever since the liberalisation started. Beijing's official press is full of reiterated warnings against the risks of confrontation which could result from closing down the giant state industries too fast, depriving the workforce too brutally of their existing welfare provisions and against the growing factor of instability presented by the estimated one hundred million migrant workers fleeing the poor conditions of the countryside and who are now haunting the major industrial towns for work.

There are many different ways in which the working class could erupt onto the political scene. But the most likely trigger could well be the uncontrolled greed of the capitalists. No doubt the capitalists they will try to bring wages down in Hong Kong down to their current level in mainland China. They will try to bring in workers from the mainland in order to break all resistance in Hong Kong.

But there are many links between the Hong Kong and mainland working class - most Hong Kong workers have some family on the mainland, friends who came to work illegally in Hong Kong, etc.. There is also an even more powerful link - the fact that right on the other side of Hong Kong's border, in the Shenzhen Special Economic Zone, five million Chinese workers are slaving away on starvation wages, working directly or indirectly for Hong Kong employers. How long will these workers tolerate to be used as cheap labour in such a way? How long will it take them to feel that they have more in common with their brothers in Hong Kong than with the capitalists who exploit their class on both sides of the former border?

The mainland and Hong Kong working class have old fighting traditions in common. They may have been physically separated from each other for the past few decades, but these common traditions are not so old to have left no trace. And during all this time they have developed new traditions of organisation which could be welded into a new common fighting instrument for the future.

No, the Chinese capitalists and, behind them the bourgeoisies of the rich imperialist countries have not quite succeeded yet in forcing the Chinese and Hong Kong working classes to swallow their profit-spinning arrangements. They may find, and that is what we hope of course, that the Chinese working class, once re-united can find, once again, the road to the proletarian revolution.