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Hong Kong and Guangdong get together economically. Can they cooperate on the environment?

Coming Together
South China could be an economic powerhouse. But progress is slow

Anyone who stands along the border between Hong Kong and Shenzhen can see the natural affinities between the special administrative region (SAR) and its vibrant, fast-growing hinterland. By 6:30 a.m., when the customs posts open, people are already queuing by the hundreds. On one side are day laborers, working in the northern districts of Hong Kong and living across the border. On the other, long lines of truckers delivering supplies, or just shoppers headed for the new malls that have opened within yards of the frontier checkpoint.

In 1983, four years after Deng Xiaoping opened China's doors to the world, Shenzhen was just a small town. Some 8,000 vehicles a day crossed its border with Hong Kong. Now, the special economic zone (SEZ) is a modern, sprawling metropolis of 3.5 million people -- and the daily vehicle count to the SAR has hit 30,000. Crossings on foot have been expanding 17% annually. A quarter of a million people pass between Hong Kong and Shenzhen every day. These trends, authorities say, are likely to continue.

The reasons can be readily seen from a quick look at the region surrounding the Pearl River estuary, even by those ignorant of its political and cultural history. At the southeastern end is Hong Kong, the region's capital of capital. The SAR is where the area's wealth is stored and manipulated, where international corporations plan their assaults on China's burgeoning markets, where goods are loaded onto ocean freighters for distribution all over the world. It is also where much of the region's entertainment originates, beamed northward and eagerly digested in millions of households. And Hong Kong lifestyles and fashions are in vogue throughout the Pearl River delta, especially among the young.

Drive north of Shenzhen, and you quickly see the other pole sparking this remarkable synergy. The driver passes mile upon mile of factories in an almost unbroken line until reaching Guangzhou, the capital of Guangdong province at the northern end of the delta. Hong Kong has invested $17.5 billion in the region, where 3 million people work in SAR-owned factories. Such statistics underscore Guangdong's basic contribution to the growing partnership: cheap and abundant manpower and land. The province, with its expansive territory, is home to 70 million people (more than Britain or France), while the Pearl River delta alone has more than 25 million.

The region shares cultural roots and has a common language, Cantonese -- now the chief medium of school instruction in both Hong Kong and Guangdong. Even Lu Ruihua, the provincial governor, prefers to use his native tongue rather than the national language, Mandarin (which he speaks with an accent that draws giggles from mainland journalists). And with Portugal's return of Macau to China last December, the entire region is under a single national flag for the first time in centuries.

It is easy to think of the Pearl River delta in terms of a "megalopolis" -- another San Francisco Bay Area or Northeastern U.S. seaboard. Hong Kong Chief Executive Tung Chee-hwa told Asiaweek late last year: "What we are seeing is that economics are becoming more and more regional, rather than city-oriented. These are things we are looking at right now. The [Hong Kong and Guangdong] economies are very complementary."

  Hong Kong Macau Shenzhen Zhuhai
Population (millions) 6.9 0.4 3.5 1.5
GDP Growth 2.90% -0.40% 14% 11.90%
Total Exports ($ billions) 175 2.2 12.73 2.26
Change from 1998 -5.50% 2.90% 3.80% -12.80%
Foreign Trade ($ billions) 353.8 0.004 24.91 5.34
Change from 1998 -1.30% 3.70% 13.10% 7%
*All figures from 1999

On Feb. 21, the SAR government released a report outlining its vision for Hong Kong's development over the next three decades. A central theme: strengthening links with the mainland, in particular Guangzhou, Shenzhen, Macau, Zhuhai and the other key cities of the Pearl River delta. "The objective should be to successfully create an integrated city-region," says Hong Kong businessman Victor Fung who helped write the report. "The SAR's economy cannot expand indefinitely on its own."

Indeed, local business leaders constantly talk about the prospects for a "Greater Hong Kong," a single integrated market of tens of millions of consumers. Bank of East Asia chief executive David Li Kwok-po has envisaged a "Pearl City," in which a Pearl River Delta Authority administers infrastructure and overall planning. One model could be the New York Port Authority, which crosses borders from New York City into the adjacent state of New Jersey.

Even so, such grand visions and glib talk about regional synergies come up against some hard realities. Though under China's flag, Hong Kong and Macau are separate customs territories. Every resident of the SARs who travels to Guangdong must pass by a customs officer. In many other ways, Hong Kong and Macau function almost as separate countries, thanks to the "one country, two systems" arrangement. Both SARs, for example, have their own currencies, even if Hong Kong dollars are as welcome in Shenzhen as Chinese renminbi notes.

History stands in the way also. For the better part of 150 years, Hong Kong developed politically and even economically in isolation from China. Murray MacLehose, in 1979, became the first British colonial governor to visit the mainland -- and he traveled to Beijing, not Guangdong. The British went to enormous expense and trouble to build an artificial island for a new airport inside Hong Kong borders, rather than take advantage of the abundant, flat land just across the frontier, linked to the territory by an express train.

Tung Chee-hwa, Hong Kong's first Chinese leader, paid closer attention to developing ties with Guangdong. Two days before the territory's mid-1997 return to China, Tung called on Governor Lu in Guangzhou. "We discussed everything from public security and environmental protection to technology development," said Lu. Yet official intercourse remains sparse. The once-bruited semi-annual meetings between Hong Kong Chief Secretary Anson Chan and Guangdong Vice Governor Wang Qishan have not been held since September 1998.

Ma Lik, a Hong Kong delegate to the National People's Congress (NPC), says both local and Guangdong officials may be overly sensitive about "one country, two systems": "Both sides interpret 'non-interference' [in each other's affairs] as being 'no communication.' " Adds Cheng Yiu-tong, another NPC deputy from Hong Kong: "I asked [Tung adviser] Edgar Cheng about cross-border cooperation -- but he had a blank face. It's the same with most civil servants."

A "Pearl River Delta Authority" is unlikely to be formed for a long time to come. For the moment, authorities can point to few concrete, new examples of government cooperation across the border. Hong Kong is lending Guangdong money to upgrade the pipeline through which the province supplies the SAR with fresh water. And the two sides are working together to improve the water quality of the Dongjiang River. Hong Kong purchases most of its drinking water from a mainland state-owned company.

The burning issue of environmental pollution cries out for joint action. Though Hong Kong and Guangzhou set up a joint committee last year to identify problems and recommend solutions, progress has been slow. An official report is not expected until late next year. Deputy director Wang Zikui of the Guangdong Environmental Protection Bureau said recently that it would be another five to 10 years before anyone would see a marked improvement in the air quality of the Pearl River delta region.

Clearly, the first thing that must be done to foster greater economic integration is to improve transportation networks and to streamline customs. The traffic through the Hong Kong-Shenzhen gateway may seem imposing, but the George Washington Bridge linking New York City and New Jersey carries five times as many automobiles a day -- and it's just one of several bridges connecting Manhattan and its environs. Probably the only comparable project is a long-mooted 40-km link across the Pearl River estuary from Hong Kong to Zhuhai.

Another proposed bridge over Deep Bay would allow Shenzhen to direct traffic around the congested inner city, facilitating communication between Hong Kong and Guangdong. Construction of a Shenzhen Western Corridor to provide rail and road links between Yuen Long in northern Hong Kong and Shekou will reportedly get underway soon. A Hong Kong-Mainland Infrastructure Coordinating Committee is billed by SAR authorities as a "useful forum to exchange views," but it has little real authority to formulate plans.

Shenzhen officials are pushing ahead with a new border station at Huanggang (Lok Ma Chau on the Hong Kong side). It would accommodate an additional 250,000 visitors a day. The post would be served by the Kowloon-Canton Railway, which will compete its Lok Ma Chau link by 2004, and the Shenzhen Metro Corp., which plans to open a Huanggang spur in 2003 to its new subway system.

Then there is the problem of processing each individual passing through customs. Currently, the opening hours are from 6:30 a.m. to 11:30 p.m. Establishing a single, 24-hour border checkpoint has recently been under intense debate on both sides. Some influential Hong Kong property developers and retailers are said to oppose the idea because it might mean more people moving to Shenzhen, thereby lowering real-estate prices in the SAR. Even so, insiders predict that round-the-clock passage will become a reality this year. That, plus better transport links, would allow more and more people to live in Guangdong and commute to jobs in Hong Kong. Given adequate highways and reasonable traffic conditions, a person can drive from Guangzhou to Hong Kong island in 90 minutes.

Indeed, Hong Kongers have in recent years begun to eye mainland property as an investment. At Country Garden, a huge residential project in Shunde, 90% of the units have been sold to SAR residents. Prices are a mere tenth of those in Hong Kong.

Since a third of Hong Kong's people still live in public rental housing -- and must wait years to qualify for government subsidies to buy flats -- much cheaper property in Guangdong may seem a godsend. Yet most of the purchases are for second or retirement homes. Hong Kongers are famously reluctant commuters, preferring to live in crowded high-rises closer to the bustle of the city. That may prevent Guangdong from becoming Hong Kong's bedroom community (though, of course, many SAR men have long maintained second families across the border).

Yet a recent survey by the Hong Kong government's Strategic Development Research Fund found that about 18% of respondents aged 51-60, as well as those between 31 and 40, would consider retiring to Shenzhen. Moreover, 15.6% said they would consider moving there within the next ten years. That could translate into a million out of Hong Kong's population of seven million. To meet anticipated demand, the SAR government has already begun to auction land near the border.

Hong Kong has also taken the initiative to attract more talented mainlanders to work and live in the SAR, especially those with skills in the rapidly growing technology sector. Normally 150 "one-way" visas are issued a day for those wanting to settle in Hong Kong permanently. Now, mainlanders with special skills will be admitted on top of that. Says Tung: "Our immigration policy toward China has always been strict. We are adjusting an aspect of it, trying to attract the best brains and talent to join us in Hong Kong." The SAR need not look far. Fully a fifth of China's Ph.D.s work in Shenzhen.

Hong Kong has set its sights on becoming a center of technology, but so has Shenzhen. Will their strategies mesh -- or clash? The SAR may have its Cyber-port, but Shenzhen has its own "Cybercity," owned by Jiang Xiaoming, son of former NPC chairman Qiao Shi. "We may have a less desirable operating and infrastructure environment, but companies wishing to make it in China have to come here to get past policy obstacles," says Andrew Lee, executive vice president of Cybercity. "Even with the supposedly borderless Internet, you still need to be in the mainland to gain access to customers."

Cheng Cheng Wen, chief executive of the Hong Kong Science Park, notes that the average monthly income for technology workers in Shenzhen is only about $500, against Hong Kong's $3,300. "We cannot compete with Shenzhen on the same level. Instead, I look at Hong Kong competing with Silicon Valley." So Cheng sees more synergy than competition between SAR and SEZ. "What Shenzhen is to us is a manufacturing force just 40 minutes away," he says. Turning such promise into reality will thoroughly test business and government leaders on both sides of the border for years to come.

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