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Fri, Mar 14, 1997
Hong Kong Budget: 'continuity in a time of change'

also: NPC closes session; denial in Xinjiang; Taiwan stumbles over names for HK & Macao 'areas'; and more . . .

Please read the statement of purpose.

Hong Kong: the South China Morning Post has extensive coverage on the territory's 1997 budget. Financial Secretary Donald Tsang Yam-kuen presented the budget to the Legislative Council in a speech entitled, "Continuity In a Time of Change". Tsang underscored the need for a conservative and fiscally responsibly budget in the year marking Hong Kong's transition from a British dependent territory to a Special Administrative Region of the People's Republic of China. By 'continuity,' Tsang opted for modest tax relief in certain areas and modest increases in social welfare spending and said that now was not the time for the government to return, through spending or deeper tax cuts, the "windfall" of its budget surplus, reports the paper.

When it becomes a territory of the PRC in July, Hong Kong will have HK$330 billion in consolidated reserves, HK$15.1 billion of which will be from a 1997 surplus; the latter figure is a large increase over the estimated $1.6 billion. But Tsang cautioned that much of this revenue was derived from rather volatile sources, including the booming property market. Moreover, he said, some HK$50 billion will be spent on new rail lines, reports the paper. (See Hong Kong in the Mon, Feb 17 issue on the Recent News page for more information about this.) He cited these as some reasons for prudence and caution in this year's budget, reports the paper.

Tsang told the council: "In drawing up my proposals, I have had to balance two considerations. The first is the need for financial prudence. I have been very conscious of our obligation to ensure that the SAR government is in the strongest possible financial position on July 1. The second is the case for the people of Hong Kong to enjoy a financial dividend from the success they have created," reports the paper. He said that after this year of transition, in which caution would be prudent, the government could consider "whether to adopt tax measures to return our accumulated wealth to the community," the paper quotes him.

Despite such 'cautious' and 'conservative' budgetary measures, the budget will reduce taxes for 96 per cent of salaries taxpayers, reports the paper. A new tax structure will simplify the tax system.

The paper notes that Tsang has little political maneuvering room for devising the budget and he has had to 'dance', as the paper puts it, between concerns from Beijing over too generous tax cuts and the need to make the transition to PRC rule with brimming coffers. The paper speculates that Tsang's design to finance the railroad expansion, as noted above, might have been at Beijing's insistence. "Quite clearly a project of this size would involve close consultation with China and there was no shortage of analysts offering the view Beijing is objecting to borrowing for such a big undertaking," writes the paper.

Particularly interesting is the government's announcement that services will become an increasingly important component to Hong Kong's exports and that the economy's mainstay as a re-exporter will diminish in importance. This prediction is consistent with investment trends by Hong Kong companies in recent years. More and more of the territory's manufacturing has been moved to the mainland, especially to Guangdong Province. In turn Hong Kong has emerged as the 'front office' for many of these manufacturing firms, supplying expertise, capital and services. The paper excerpts this remark from the government report detailing these changes: "The increasing sophistication of the outward processing operations of Hong Kong companies in China, the streamlining of procedures for outward cargo by China's Customs authorities, as well as the development of China's ports, have been prompting the shift, with greater effect on re-exports of China origin."

Other stories examine increased funding for computers in public schools; lower supply of flats than expected; reactions to the budget from legislatures and other; and more.

Party politics: Premier Li Peng closed the national National People's Congress today and held what is probably the closest thing a leader of China comes to a press conference. In what Inside China characterizes as a carefully orchestrated session, Li focused on foreign relations and said China would like to forge better relations with Moscow and Washington. He denied China financed any Congressional Democrats in the last U.S. elections. Li also said Britain should mind its own business after the hand over of Hong Kong in July, reports the paper. At that time, Li said, Hong Kong will become an issue of China's internal affairs.

Li reported, President Jiang Zemin will travel to Moscow in April to sign an agreement for reducing troops positioned along the Sino-Russian frontier and along borders with Kazakhstan, Kyrgyzstan and Tajikistan, reports the paper. The paper interprets Li's announcement of the forthcoming agreements with Moscow as a way to "counteract the rapid warming in Sino-U.S. ties."

Party politics: more news on the NPC---the China Daily reports, the NPC passed two laws, eight resolutions, and three legal reforms, including raising Chongqing to 'provincial' status as China's fourth municipality, behind Beijing, Tianjin and Shanghai.

Qiao Shi, chairman of the NPC, closed the session with a speech in which he singled out democracy, law and constitutional government as fundamental to the development of socialism. Quoting maxims of the late Deng Xiaoping, Qiao said, "Without democracy, there would neither be socialism nor socialist modernization. Like modernization, democratization must be developed step by step. The more developed socialism is, the greater democracy," reports the paper. Further laws, he said, should be passed to "fundamentally ensure the democratization of the political processes of the Party and the State, of economic administration and of overall social life to guarantee an orderly progression of society," writes the paper.

The paper writes: "Qiao pointed out that the key to strengthening socialist democracy and building a legal system lies in governing the country in accordance with the Constitution and laws."

These pronouncements by Qiao should not be dismissed as empty talk, for constitutionalism has been an important aspect of China's political development since it became in 1904 a serious issue for reform of the beleaguered Qing administration. Since then every Chinese government, Nationalist and Communist alike, has written one, although these constitutions are considerably different in form and function than the one in the U.S. and elsewhere.

Ethnic problems: Wang Lequan, Communist Party boss in Xinjiang, denied reports that 'hundreds' had died in riots in Yining in early February, reports Inside China. Wang said, "Only an extremely small number of people were involved in these acts of terrorism. Most of the criminals have already been caught," reports the paper.

Speaking at a press conference held to announce a forthcoming trade fair to be held in Xinjiang, Wang stressed that the province was stable and that, the paper quotes him, "Investors should not be unduly concerned." Roads to Kazakhstan and elsewhere are open, the paper reports. "Trade overall was up 80 percent in the first two months of the year. Border trade rose 50 percent," the paper quotes Li Donghui, Xinjiang's vice governor.

Taiwan: rectifying the name---a bill now before the legislature will define Taiwan's trade, investment and cultural links with Hong Kong and Macao after the two colonies become sovereign territories of mainland China. But passage of the bill is currently hung up on how to refer to these two areas without compromising Taiwan's own position.

Party politics: Wu Zuguang, a leading Chinese playwright, has called for an investigation to clear Deng Xiaoping of involvement in ordering the 1989 crackdown in Tiananmen square. "Every time people talk about the incident, Deng Xiaoping's name is mentioned. It's unfair to Deng Xiaoping," Inside China quotes Wu. The playwright instead blames disgraced and 'exiled' ex-Beijing mayor Chen Xitong as the one responsible for ordering the shootings. A member of the Chinese People's Political Consultative Conference, Wu raised the subject at the conference and called for an investigation. Wu did not call for a reassessment of the student-led demonstrations, which also garnered support from other groups, but he defended the students, whom he said "were not rebelling," reports the paper. Indeed, the students were protesting against corruption, Wu said.

The government has declined to comment on Wu's proposal, reports the paper. The paper also notes that Chen Xitong is currently residing in northern Inner Mongolia, under house arrest.

This is an interesting story and perhaps should not be read at face value. We'll watch for more developments.

Korea: CNN reports that China is signalling an end is near in the North Korean defector case.

Taiwan: protestors in Seoul staged a demonstration against Taiwan's plans to ship barrels of radioactive waste to North Korea as part of a deal signed on January 11. A Taiwan utility will pay $1,150 per barrel for the North to accept and store the waste. The actual shipment will not occur until June, and Taiwan has said that the deal was purely a business matter and that the waste will be transported in containers meeting international safety standards for safe handling of radioactive waste.

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China Informed

a news service focused on China, Taiwan and Hong Kong
©1997 Matthew Sinclair-Day