The unhappiness with China among segments of Hong Kong society stems from the city’s failure to understand its privileged relationship with Beijing, prominent China expert Dr Martin Jacques said. In a wide-ranging interview with Celene Tan, the British-born author added that China has learnt from the past and will be patient in drawing Taiwan closer to the mainland. He also spoke about China’s territorial claims and President Xi Jinping’s anti-corruption campaign. Below is an excerpt of the interview, the first part of which was published yesterday.

As China takes on more global responsibilities, it is faltering in its effort to pull Hong Kong and Taiwan closer to the mainland. Why are the people in these two territories so resistant to China? How can they be swayed by Beijing?

Hong Kong had been under British rule for 155 years. The whole of Hong Kong’s modern experience was under British colonial rule, so it grew up, in a sense, deprived of its birthright, which was China, because it was cut off from China. It was brought up with a kind of adopted birthright, which was Britain, and looked West.

One-hundred-and-fifty-five years is a long time — many, many generations — so it’s left deep roots in the way in which Hongkongers see the world. They were very ignorant, by the end of British rule, about the country to their north. They were Chinese, but they knew very little about China. On the other hand, they were very knowledgeable, in many ways, about the world to their west, particularly Britain and, to a lesser extent, other countries in Europe and, of course, the United States.

Then you have the handover, and the Chinese recognised that this was going to be problematic, because they were inheriting a country that was, in many ways, very distant — the people were very distant from them and didn’t identify with them, except in certain, very few aspects. So they came up with the solution “one country, two systems”, which was a very novel solution, a very Chinese solution, a very un-Western type of solution that would enable Hong Kong to maintain some of the things that were very important to them — which was out of respect for them — while at the same time being part of China.

I wasn’t particularly surprised by the events last year in Hong Kong, because I’d say (the territory) has its growing pains. I think Hong Kongers are finding it very difficult — though not all of Hong Kong, because the opinion is very divided, but (the protesters) are more privileged because they’re students — to accept their new situation. And their new situation is more complicated than it’s been presented.

Hong Kong got lucky because when Deng Xiaoping opened up China in 1978, it didn’t allow Western and foreign companies to easily settle in China. That part happened later in the 1990s. So for 20 years, Hong Kong was the gateway to China, and it enjoyed an arbitrage advantage. Foreign companies put their Chinese headquarters in Hong Kong. That period was bound to come to an end. It was a transient period, but Hong Kong was like: “Ah, we’re very smart.” They became very arrogant, thinking: “Aren’t we clever.” No, they weren’t clever, they just got lucky for a period, and now, the truth is that Hong Kong matters much less to China than it did at the time of the handover. Its portion of the Chinese economy has gone down, from roughly — and these figures aren’t exact — just under a fifth to something like 5 or 6 per cent. So from walking tall and thinking they were extremely important and that they also had a special line of contact with Britain and the West, Hong Kong is finding itself having to accept a very different position in the world.

Now, it is still very privileged, because it has a privileged relationship with China. Where would it be if it didn’t have access to the Chinese economy? It is almost totally dependent on it.

So Hong Kong is finding it very difficult to come to terms. And I don’t have much sympathy for it, to be honest. Because it did get lucky, and now, Hongkongers are still privileged compared with Chinese mainlanders. They’ve still got much higher standards of living. I think, over time, they’ll get used to it. I think they will adjust.

The other thing to point out, which I do find irritating, is that they’re complaining about the new electoral arrangements. But the British ruled Hong Kong for 155 years and never granted the Hong Kong population universal suffrage. What a load of hypocrites! The British or whatever criticise China for doing it in the wrong way. But why did they never (grant Hong Kong universal sufferage)? Because it was a colony.

So they need to have some context to understand all this. But of course, you need patience. You can’t expect that in a period of 18 years that everything could change. These things will take decades.

And Taiwan is different. Taiwan is much closer to China than it has been at any stage since 1949, so the gravitational pull of China is very clear. The Taiwanese economy is very dependent on the Chinese economy, which is natural, because they have an affinity, because China is so huge and because the West, including America, is in such economic decline in this region. But Taiwan has also grown up in a separate context from China; they’re Chinese, but they have grown up separated from China. They are on an island, they have an idea of their own distinctive identity, so they think of themselves as Chinese.

I think China been very patient. There was a period in the 1990s when it wasn’t, but it has learnt patience and it is not going to mess it up. China will be patient.

What will happen in the long run? I think there will be some type of constitutional setting, similar to that in Hong Kong, but which grants Taiwan more autonomy, because it’s much bigger — about 20 million people — and it’s an island separate from the mainland. But I think we’re talking about a long time.

 

Where do you see Mr Xi’s anti-corruption campaign going?

I think no one expected the ferocity and scale (of the campaign). That probably tells us two things. One, the corruption problem was very serious and far too ubiquitous at all levels of the Communist Party. And secondly, it tells us that Mr Xi is determined, as far as he can, to root it out.

I don’t think he’ll succeed. The red envelope is a symbol of Chinese culture and Chinese corruption. But he has obviously made a big impression. You can see it in the fall in the consumption of luxury goods and the behaviour of the rich as the wealthiest become a lot more cautious. Sales of moutai, an extremely expensive spirit, have gone into negative territory and they are still not recovered by a long way.

So I think (the anti-corruption drive) is for real and it’s big, and I think it will carry on. Because in truth, most people — probably the great majority — who have engaged in major corruption have not been caught.

 

What do you think are other serious challenges that China faces today?

I think the first is shifting the nature of the economy, from one based on cheap production for export markets towards one based on moving up the value-added production scale, becoming more sophisticated in terms of the products it makes, being based on much more skilled labour. We know that is not an easy shift to make.

The second problem is that China is clearly going to become involved heavily in global affairs, which is, in a way, bad luck for China. Britain finished its industrial revolution before it became a major global power. America didn’t become a major player globally until after World War I, when it had finished its industrial revolution. But half of China’s population still live in the countryside, so China has not, by any means, finished its industrial revolution or economic take-off. It’s still in the midst of it, but because of its size — the reason that it’s the biggest economy in the world — it’s going to get drawn into being an international or global player before it’s ready.

China’s got to think, “What is our foreign policy?”, and so on. Because China is different, it will have a very distinctive policy. It can’t just look at America; it’s a very different culture with a very different set of values. So it is going to have to work out what its distinctive foreign policy is going to be. Managing its rise, managing its relationships with the rest of the world and with the United States, its most important relationship, are going to be very consuming.

Third, it’s about governance. The Chinese government will have to keep changing, keep performing, because if it doesn’t, it will get out of sync, out of kilter. It is going to have an asymmetrical relationship with society, and that will store up big problems. What it has done so well so far, it has to keep doing well, otherwise there would be serious political consequences — it would grow out of touch with the people.

I think the government can do it. I think Chinese governance is very impressive. It’s the oldest statecraft in the world. I think it is probably the greatest tradition of statecraft in the world, so the government is very competent. It has a lot of historical resources. But just saying that doesn’t solve the problem. The government system is going to have to be more accountable, more representative, more transparent, more institutionally innovative, less top-down — and those are big challenges.

But I am confident that China can be successful, and I think it is going to. I’m not expecting a hard landing, I’m not saying it’s impossible. I do expect it to make this economic transition we’re talking about and maintain a growth rate of about 5 to 7 per cent probably over a couple of decades. By then, it will be a very different economy.

I do think that, with China’s government tradition so strong and its achievements so powerful, it will be able to sustain this kind of dynamic of reform with very Chinese characteristics, not Western. The signs are positive, but you never know the future, you never know what’s going to happen.

Beijing has been carrying out land reclamations in the South China Sea, something with which the other countries that have rival claims to the waters are not very happy. Looking at China’s foreign policy in this aspect, is it really benign?

The other countries have carried out land reclamations too. China is not the first. Vietnam and the Philippines have also done that, and they also have airstrips on their land features.

Certainly, the other claimants, mainly Malaysia, Brunei, Vietnam and the Philippines, in varying degrees are disgruntled with what the Chinese are doing. Malaysia has maintained a good relationship with China, despite the differences over their claims on the Spratlys. I interviewed Dr Mahathir Mohamad, Malaysia’s former Prime Minister, last Wednesday, and he was very positive about China. He thinks China is a benign force as well. He says that if China is treated properly, it will be a benign force.

Now, Vietnam and the Philippines are in different situations. Vietnam is a long-standing adversary of China; it’s had to live next to China forever.

And for the past thousand years, they’ve had a problematic relationship. So, this is a piece of history that is going to be played out.

I think the Philippines is playing the American game. The Americans have decided to have a big role in the Philippines.

What’s going to happen? There’s not going to be a war, there’s not going to be any military exchanges. There will be a settlement, but it will take time and it will be in the long run and on Chinese terms, because China is so powerful.

But you see, for the Chinese, I don’t think it’s about the resources (in the South China Sea). I think it’s mainly about security and also their historical view, which is that this was a Chinese sea, or a Chinese lake.

I’m not saying that’s right or wrong. I listen to the Chinese claim, because you have to listen to where they’re coming from. And it is coming from a different history and position and point of view from other countries or the recent post-1945 maritime law. China’s going to be a big player in the world; ultimately, it will be the dominant player. All international law now is Western law. And China’s going to be more and more a shaper of global law. It is bothered about American military presence in the South China Sea. The Americans have a much bigger military presence in the South China Sea than the Chinese.

But I agree that it’s a problem for countries in this region. The Chinese and the Vietnamese could carry on arguing. It might boil over, because they’re used to getting on with each other as well as falling out with each other. The Philippines is all about the US. Malaysia will make a settlement when it has a chance and Brunei will make a settlement. And none of the other Association of South-east Asian Nations countries are claimants — of the 10, only four have claims to the waters. The majority are not. Singapore is not, so it has remained steadfastly neutral.

 

China lags behind America in innovation. How and when can we see the Chinese equivalent of Apple, Nike, IBM and so on?

What you’ve got to remember is that a catch-up society, a catch-up economy, is not an innovative economy. I mean, it’s innovative in its capacity to copy, so we shouldn’t think of it as simply sort of inert and dead. There is innovation in copying, but it’s still basically copying. They are not your own inventions, innovations, resources or research and development. All poor countries start off essentially as catch-up economies, and that’s why they can grow very quickly, because they’re closing the gap. And all the economies in this region — or most of them — have gone through that process.

Japan was the first, and it used to make copycat goods. It used to be a relatively poor society, and then Japan became a byword for lots of very impressive products. Korea has gone through the same journey, roughly the same time that Singapore went through it, and has some cracking companies like Samsung and Hyundai. China would just be following in those tracks, and I don’t think there’s any doubt at all that it’s going to develop some really formidable companies.

It’s got some formidable companies now, like Lenovo, Huawei, Xiaomi. On the Internet, Baidu is a very effective search engine, and I think the reason that Google pulled out of China is that Baidu gave it a competitive beating. And then you’ve got Alibaba and Tencent. China has some very good firms already.

In fact, it looks as if China’s been able to develop firms like these of a very high capacity and quality in cyberspace, in a way that it’s found much more difficult to with consumer products. It has, so far, not really been able to develop a successful domestic car firm. There are lots of firms, like Geely and Chery, but they’ve not made a big international impact.

Over time, the Chinese will develop in these areas. Maybe not as fast as they should be, but in the areas they have, they’ve been brilliantly successful, like with Alibaba, which had the biggest IPO offering on the New York Stock Exchange.

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