[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
    HONG KONG AFTER THE ELECTIONS: THE FUTURE OF ``ONE COUNTRY, TWO 
                               SYSTEMS''

=======================================================================

                                HEARING

                               before the

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 23, 2004

                               __________

 Printed for the use of the Congressional-Executive Commission on China


         Available via the World Wide Web: http://www.cecc.gov






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              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                    LEGISLATIVE BRANCH COMMISSIONERS

House

                                     Senate

JIM LEACH, Iowa, Chairman
DAVID DREIER, California
FRANK WOLF, Virginia
JOE PITTS, Pennsylvania
SANDER LEVIN, Michigan
MARCY KAPTUR, Ohio
SHERROD BROWN, Ohio
DAVID WU, Oregon

                                     CHUCK HAGEL, Nebraska, Co-Chairman
                                     CRAIG THOMAS, Wyoming
                                     SAM BROWNBACK, Kansas
                                     PAT ROBERTS, Kansas
                                     GORDON SMITH, Oregon
                                     MAX BAUCUS, Montana
                                     CARL LEVIN, Michigan
                                     DIANNE FEINSTEIN, California
                                     BYRON DORGAN, North Dakota

                     EXECUTIVE BRANCH COMMISSIONERS

                 PAULA DOBRIANSKY, Department of State
                 GRANT ALDONAS, Department of Commerce
                    JAMES KELLY, Department of State
                  STEPHEN J. LAW, Department of Labor

                      John Foarde, Staff Director

                  David Dorman, Deputy Staff Director

                                  (ii)



                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

Opening statement of Hon. James A. Leach, a U.S. Representative 
  from Iowa, Chairman, Congressional-Executive Commission on 
  China..........................................................     1
Schriver, Hon. Randall G., Deputy Assistant Secretary, Bureau of 
  East Asian and Pacific Affairs, U.S. Department of State, 
  Washington, DC.................................................     2
Davis, Michael C., Robert and Marion Short Visiting Professor, 
  Notre Dame Law School, South Bend, IN..........................     9
Overholt, William H., Asia Policy Chair, Cente for Asia and 
  Pacific Policy, RAND Corporation, Santa Monica, CA.............    12
Hung, Veron, associate, China Program, Carnegie Endowment for 
  International Peace, Washington, DC............................    14

                                APPENDIX
                          Prepared Statements

Schriver, Randall G..............................................    26
Davis, Michael C.................................................    28
Overholt, William H..............................................    33

Leach, Hon. James A..............................................    39
Hagel, Hon. Chuck................................................    39



    HONG KONG AFTER THE ELECTIONS: THE FUTURE OF ``ONE COUNTRY, TWO 
                               SYSTEMS''

                              ----------                              


                      THURSDAY, SEPTEMBER 23, 2004

                            Congressional-Executive
                                        Commission on China
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 1:03 p.m., 
in room 192, Dirksen Senate Office Building, Hon. James A. 
Leach, [Chairman of the Commission] presiding.
    Also present: Senators Chuck Hagel [Co-chairman of the 
Commission] and Max Baucus; and Representative Sander M. Levin.

      OPENING STATEMENT OF HON. JAMES A. LEACH, CHAIRMAN, 
          CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Chairman Leach. We convene the CECC today to examine the 
progress and prospects of constitutional development in Hong 
Kong. Nothing could be more timely, given the Legislative 
Council [LegCo] elections just concluded on September 12. 
Whether the 21st century is peaceful and prosperous will depend 
on whether China can live with itself and become open to the 
world in a fair and respectful manner. Hong Kong is central to 
that possibility. As such, Hong Kong's affairs and people 
deserve our greatest attention, respect, and goodwill.
    America and China both have an enormous vested interest in 
the success of the ``One Country, Two Systems'' model in Hong 
Kong. From a congressional perspective, it seems self-evident 
that advancing constitutional reform, including universal 
suffrage, would contribute to the city's political stability 
and economic prosperity.
    In that light, the September 12 elections had both good and 
bad news. While a record number of Hong Kong's voters turned 
out and voted heavily for candidates favoring continued reform, 
the bad news is that the prospect was constrained by rules 
under which the Hong Kong people could not enjoy full 
democratic autonomy.
    Hence, we continue to be concerned that, while recent 
decisions by Beijing that set limits on constitutional 
development of Hong Kong implicitly acknowledge a degree of 
autonomy for Hong Kong, they do not represent a forthright 
commitment to the high degree of autonomy that was promised by 
the central authorities in the 1982 Joint Declaration and Basic 
Law.
    Few places on the planet are better prepared for democratic 
governance than Hong Kong. In the LegCo elections earlier this 
month in which record numbers voted, the people of Hong Kong 
again made plain their aspirations for greater democratic 
autonomy, aspirations fully within the framework of the ``One 
Country, Two Systems'' formula. They previously had shown their 
keen interest in participatory democracy when they turned out 
in record numbers for the District Council elections last 
November. Yet the way forward is now rather murky. No one is 
certain what will happen after 2007. The central PRC Government 
says that it maintains a commitment to universal suffrage and 
direct election of the Chief Executive and the LegCo, as 
contemplated by the Joint Declaration and Basic Law.
    But without a timetable, the fullness of this commitment 
lacks clarity and instills uncertainty. We must all acknowledge 
that the recent election is a step forward, but democratic 
frustration continues to build because there is simply no 
credible reason to thwart the pace of democratic transformation 
in Hong Kong.
    Hong Kong is important unto itself. It is also a model for 
others. What happens there is watched particularly closely by 
Taiwan. In a globalized world where peoples everywhere are 
seeking a sense of community to serve as a buttress against 
political and economic forces beyond the control of individuals 
and their families, it is next to impossible to reconcile 
political systems based on unlike institutions and attitudes. 
Mutual respect for differences is the key to peace and 
prosperity in a world in which, history suggests, conflict has 
been a generational norm.
    To help us understand what has just transpired in the Hong 
Kong elections and how it might affect the progress of 
constitutional development, we turn to our witnesses this 
morning.
    Our first witness, Randy Schriver, joins us from the East 
Asia Bureau at the State Department to give the U.S. 
Government's perspective, and we have a distinguished panel of 
private experts who will share their expertise with us a bit 
later.
    Before beginning, let me note that there are a series of 
votes that are about to be called on the House floor, and that 
will be a little discombobulating to the hearing this morning. 
But we are going to try to proceed, if possible, through the 
votes.
    Secretary Schriver, proceed.

    STATEMENT OF HON. RANDALL G. SCHRIVER, DEPUTY ASSISTANT 
   SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Schriver. Thank you, Mr. Chairman. Thank you for the 
opportunity to address this topic today, the very important 
topic of Hong Kong's future prospects for democracy, and also 
to talk about the recently concluded election.
    As you know, Mr. Chairman, we meet shortly after the LegCo 
elections on September 12, and there are plenty of people who 
are giving thought and producing analyses on who may have won 
or lost, or what the outcomes might mean. While that unfolds, 
we can certainly say that some things are indisputable and very 
clear.
    Mr. Chairman, you already noted that perhaps the most 
significant outcome we observed is the fact that voters turned 
out in record numbers. To us, this suggests a very clear 
message to both the Government of Hong Kong and the central 
authorities in Beijing, that the people in Hong Kong want 
democracy and they value it very much, and they want it sooner 
rather than later. This has been a consistent message from the 
people of Hong Kong for some time. This was prominently 
expressed in July 2003, and also July of this year when people 
took to the streets to express their views and ask that their 
voice be heard.
    I think the voter turnout was as impressive as it was, 
perhaps, in part to respond to the regrettable decision that 
the central authorities made last April to cut short public 
debate on universal suffrage and direct election of the Chief 
Executive and the LegCo in future elections.
    Mr. Chairman, some other notable results. The Democratic 
Coalition came away with 25 seats and a very impressive 62 
percent of the vote of those seats that were up for direct 
election. I think sometimes the worst thing you can do in 
politics is fall short of expectations, and it is important 
that we be mindful of the fact that they did get a very 
significant and large majority of the vote, a very impressive 
62 percent.
    Also, some very high-profile government critics won seats 
in the LegCo, including radio personality Albert Cheng, who 
believes he may have lost his job in radio through intimidation 
and coercion from Beijing. So, this is significant that the 
people did make the choice to send him to the legislature. The 
Pro-Business Liberal Party, which we believe leans toward 
Beijing, but nonetheless came out against the national security 
legislation last year, won 10 seats, and for the first time 
also won two seats that were directly contested in direct 
elections for those seats. The Pro-Beijing Democratic Alliance 
for the Betterment of Hong Kong won 12 seats, which makes them 
the largest single bloc in the LegCo.
    The election did highlight some shortcomings, and we are 
aware of some of the allegations of technical and procedural 
problems. But we are also aware that the Electoral Affairs 
Commission will investigate these, and we wish them well in 
that endeavor.
    But more fundamentally and more troubling, there are 
persistent charges of voter intimidation and that a climate of 
fear existed in the run-up to the election. Here, too, the 
Government of Hong Kong has promised to investigate these 
issues and to defend vigorously the integrity of its elections. 
This is extremely important. It is appropriate that these 
matters be investigated, but it is also much more important 
that their deeds at this point match their words, because the 
people of Hong Kong certainly deserve no less.
    Beijing issued a statement after the election stating that 
this proves that the people of Hong Kong are masters of their 
own house. Surely a more accurate statement would note that 
Beijing will continue to wield significant influence on the 
future of Hong Kong. Nonetheless, I think even Beijing realizes 
at this point that to move their agenda and ensure that their 
vision comes to fruition, they need to find a way to mobilize 
genuine support within the LegCo and within the population of 
Hong Kong to ensure their own success.
    The Government of Hong Kong and the central authorities in 
Beijing may not have to face a democratic coalition majority, 
but they certainly have to take their views into account, and 
they will not be successful in their agenda if they do not 
undertake some effort to generate genuine popular support.
    Let me speak very briefly, also, about our goals with 
respect to Hong Kong more broadly, and then wrap up.
    Our underlying goals associated with Hong Kong are the same 
as they were before reversion, and they continued through 
reversion and up to the present day. That is, we want to see 
the people of Hong Kong succeed, we want their prosperity to 
continue, and their way of life to continue. This is not only 
the right thing for the people there, but also serves important 
U.S. interests. We believe that Members of Congress share that 
goal as well, and this is probably part of the spirit behind 
some of the recent legislation we have seen that is, I believe, 
designed to support the people of Hong Kong.
    Hong Kong, in a way, continues to be a work in progress. 
There is a foundation that has been laid with the 1984 Joint 
Declaration, the promulgation of the Basic Law, the fact that 
Hong Kong has maintained control of its day-to-day affairs for 
just over seven years now, and has laid a foundation that 
allows us to continue to treat Hong Kong as a unique and 
separate entity, and it lays a foundation for Hong Kong to 
continue its political and economic evolution. We have embraced 
this unique status, the Congress in the Hong Kong Policy Act, 
and the Administration in the implementation of that Act.
    Mr. Chairman, as you noted, we do have profound interest in 
Hong Kong. Some 45,000 Americans reside there, and over 1,000 
U.S. firms operate from Hong Kong. It is our fourteenth largest 
trading partner. We have significant foreign direct investment 
there. Hong Kong, as a major trading entity, shares a lot of 
our goals on trade liberalization worldwide, and they have been 
an important partner in the World Trade Organization [WTO] and 
the trade discussions there.
    I think the trade and the commercial relations are well-
known. Perhaps less well-known is the developing security 
relationship we have with Hong Kong and the ways that they are 
making very valued contributions to American security 
interests. As the single largest source of U.S.-bound sea 
containers, Hong Kong is vital to our ability to protect 
America from potentially dangerous inbound cargo, and thus Hong 
Kong's participation in the Container Security Initiative is a 
very significant contribution to our security.
    They have also played a leadership role in the Financial 
Action Task Force, to help address terrorist financing. Our law 
enforcement cooperation continues to be excellent. Hong Kong 
has continued to serve as a welcome port of call to many of our 
U.S. Navy vessels and Air Force aircraft.
    Finally, Hong Kong's effective export control system 
remains in place and ensures that illicit and dangerous 
commodities and equipment are not transshipped through Hong 
Kong.
    Then there is Hong Kong's comparative advantage. It remains 
one of the freest economies and places in the world, and this 
is reflected in many indexes that are well known. The Heritage 
Foundation, for example, every year ranks Hong Kong as the most 
free economy in the world. People in mainland China benefit 
from Hong Kong's openness, not only in the direct economic 
sense, but also in the fact that Hong Kong serves as an 
important model for China in so many ways.
    U.S. policy has been very clear. We want to see the people 
of Hong Kong succeed. We believe that the key to that success 
is Hong Kong continuing to move forward with democratization 
and reaching the goal of universal suffrage. The political 
future of Hong Kong should rightfully be in the hands of the 
people of Hong Kong. We in no way seek to usurp their 
decisions, nor do we in any way wish to interfere in the 
relationship between the people of Hong Kong and the central 
Chinese Government. Nonetheless, we will always stand for our 
core principles of democracy and freedom, and we will not 
shrink from making those principles known.
    Again, Mr. Chairman, as you noted, the most telling point 
of this election in Hong Kong is the fact that people turned 
out in record numbers, and through that displayed their strong 
desire for continued participation in their government. They 
certainly are a proud, smart, and capable people who deserve 
every chance for success in this century.
    While Chinese sovereignty is a reality that will heavily 
influence the success of those dedicated to democracy in Hong 
Kong, our view is that we can respect Chinese sovereignty but 
continue to make points in a very straightforward manner to our 
interlocutors in both Hong Kong and Beijing that this is 
important to us and it is important to the people of Hong Kong 
and the goals that we share.
    With that, Mr. Chairman, I welcome any questions you may 
have. Thank you.
    [The prepared statement of Mr. Schriver appears in the 
appendix.]
    Chairman Leach. Well, thank you very much for that 
testimony. Let me just stress, I think it is well articulated 
and balanced, and the stress being that both the Executive 
Branch and the U.S. Congress have no desire to upset any kind 
of relationship between Hong Kong and Beijing in the sense of a 
``One China'' policy. But we also support two systems. In that 
regard, I would only like to stress--and you pointed out--the 
United States has a significant interest in Hong Kong. But our 
principal concern is for the Hong Kong people. We think 
democracy is stabilizing, not destabilizing. I stress this 
point because there is a great concern about potential 
instability in China. I can think of nothing more stabilizing 
in Hong Kong than full democracy.
    Also, when we think of Chinese history, I think of Sun Yat-
Sen and his approach to staged democracy. Hong Kong provides a 
wonderful model for the rest of Chinese society. Maybe that is 
one of the reasons why there is reluctance to give it fuller 
autonomy at this time, or fuller democratic autonomy, but I 
think it is something that, from our point of view, we have to 
point out. In any case, I know of few subjects where the 
Executive Branch and Congress are more in lock-step. I think 
your testimony is a perfect reflection of that.
    Senator Hagel has joined us. As I announced earlier, we are 
expected to have a long series of votes on the House floor 
shortly. I apologize for that. But let me recognize the 
Senator.
    Senator Hagel. Mr. Chairman, thank you very much. I add my 
welcome and appreciation, Mr. Schriver, for your testimony. I 
apologize for getting caught late. Nonetheless, we are mindful 
of the effort that you are making, along with your colleagues, 
and again appreciate your coming forward and offering your 
testimony. Thank you.
    Mr. Chairman, thank you. I have a statement that I would 
ask be included in the record.
    Chairman Leach. Admitted without objection, of course.
    Senator Hagel. Thank you.
    [The prepared statement of Senator Hagel appears in the 
appendix.]
    Chairman Leach. If you have no questions, we will go to our 
panel of private sector witnesses.
    Senator Hagel. Mr. Chairman, I would like to ask just a 
couple of questions before the other panel comes up. I would be 
interested in knowing, how often does the U.S. Government bring 
up the issue of Hong Kong with the Chinese Government, and on 
what basis do we do that? What parameters are set, or not set? 
Thank you.
    Mr. Schriver. Yes, sir. Thank you. I would characterize it 
as quite frequent. It would be difficult to put an exact number 
or percentage of time and meetings, but it is often raised at 
the senior-most levels of our government. I would describe it 
as one of the priority issues so that it is quite frequently 
discussed.
    Sometimes we have very specific issues that we raise. At 
the time of the national security legislation, we made our 
concerns known. Sometimes it is a more general discussion on 
the future of Hong Kong. Our feeling, and I believe the 
Chairman's remarks on this are consistent with our view, is 
that we actually have some shared objectives related to Hong 
Kong. We both want Hong Kong to succeed and we both think that 
the key to that success if faithful implementation of the 
agreements that are in place.
    So, though we have some different views, we do try to 
approach this from a perspective where we actually have some 
things we share with the Chinese on this subject, and that our 
belief is that the central Chinese Government should not be 
threatened by the political evolution and democracy of Hong 
Kong, but rather should see it as a force that will ultimately 
be a stabilizing force for Hong Kong and will contribute to its 
continued success. So, that is the nature of how we frame it. 
Again, it is a priority for us, and I 
believe the Chinese as well, so it is often addressed in our 
senior dialogue.
    Senator Hagel. How often does the Taiwan issue come up in 
the framework of these discussions?
    Mr. Schriver. Sir, the Taiwan issue is almost always raised 
by our Chinese counterparts and interlocutors, again, at every 
level and certainly at the senior-most levels. Usually it is 
raised on its own and not linked to the Hong Kong question. 
When we raise issues related to Taiwan, we generally do not 
link it, either. So it tends to be a separate discussion.
    Senator Hagel. So you would not say that in any way it 
shapes our conversations with the government of the People's 
Republic of China.
    Mr. Schriver. Well, I think the Chinese themselves are 
aware that they will be judged on the success or failure of 
Hong Kong, and that there is a watchful audience in Taiwan, 
there is a watchful audience in the United States and 
elsewhere. But it is not necessarily a point of leverage or 
something that we draw their attention to. I think it is 
something that is always in the back of their minds.
    Senator Hagel. Have we gotten good cooperation from the 
Hong Kong Government regarding counter-terrorism, and other 
wider issues?
    Mr. Schriver. Yes, sir. Excellent cooperation. Again, they 
were one of the first ports to conclude the Container Security 
Initiative [CSI]. I have gone through the operation there, and 
our officials cite it as a model operation for the CSI. Also, 
in the Financial Action Task Force that addresses counter-
terrorism financing, Hong Kong was in the chair, I believe in 
2003, of the Asia-Pacific Group and played a very valuable role 
there.
    Senator Hagel. You may have noted this in your testimony, 
which, as you know, I came in the last part of it, and I 
apologize if I am covering ground you have already covered. But 
regarding your views of the September 12 elections, can you 
develop your answer further with an assessment of any positive 
signs or hopeful signs, and what are the holes? I would be 
interested also in your overall assessment for the future.
    Mr. Schriver. Yes, sir. I think I did address it. Probably 
the most significant outcome we have observed is the very high 
voter turnout. We take that as a very strong sign that the 
people of Hong Kong want and value democracy, and want it 
sooner rather than later.
    It is also very significant that the Democratic Coalition, 
although the rules and the framework that were in place did not 
make it easy for them to have large gains or gain a majority of 
the LegCo seats, but they did win 62 percent of the vote for 
those seats that were directly contested. They did have a net 
gain in the number of seats, so they control 25 of the 60 
seats.
    In addition, several prominent critics of the government 
won seats in the LegCo. So, I would put all that in the 
category of good news, in that it reflects a vibrant population 
and people who are very interested in their future and who want 
a say in that future.
    In the ``not-as-good'' category, there were some issues 
about procedural or technical glitches, which we have been told 
the Hong Kong Government will look into. Then, I think more 
troubling are the allegations--and these have been consistent 
in the lead-up to the election--that there was a climate of 
intimidation and fear among some. Human Rights Watch did a very 
important report on this question. This is something that is 
more difficult to get at, and also much more serious.
    So, again, the Government of Hong Kong has said that they 
will vigorously defend the integrity of their election system 
and they will investigate these matters, but it is critical 
that they do so in a way that their deeds match their words.
    Senator Hagel. Mr. Schriver, thank you.
    Mr. Chairman, thank you.
    Chairman Leach. Mr. Levin.
    Representative Levin. Good afternoon.
    Sir, I missed your opening statement. I am glad to join my 
distinguished colleagues. Let me just ask you a few questions, 
because I have read part of your text and heard part of your 
answers to Senator Hagel.
    You say on page 3, in the top full paragraph there, that 
``the government may not have to face a democratic majority, 
but it certainly will need to continue to find ways to win in 
LegCo and less popular support for its actions. It cannot 
govern through administrative fiat.'' Is that not more or less 
what it is doing now?
    Mr. Schriver. Thank you, Congressman. Clearly, the 
framework and the rules that are in place give the central 
authorities a very strong hand, and they have used that on 
issues that they have identified as being important. We saw 
that last April with respect to the prospects for further 
constitutional change. But we have also seen an example related 
to the national security legislation, where people took to the 
streets and expressed their point of view, where the government 
was responsive to that. They have pulled the legislation for 
consideration and were responsive to the people.
    Representative Levin. They withdrew it, not necessarily 
forever.
    Mr. Schriver. That is correct.
    Representative Levin. So when you say it cannot govern 
through administrative fiat, you mean that that is what is 
going on now unless 250,000 people take to the streets?
    Mr. Schriver. I think the fact that people have taken to 
the streets, combined with other elements like the very 
impressive voter turnout we saw in the LegCo on the 12th of 
September, the fact that the Democratic Coalition did so well, 
winning over 60 percent of the vote, all those elements, I 
believe, would make it more difficult for Beijing to govern in 
a way that was not satisfying or popular to the people of Hong 
Kong. It is an opinion and it is a view. Clearly, they sustain 
the upper hand, and they have done that by design.
    Representative Levin. So why do you not say that?
    Mr. Schriver. Well, I think I did. I commented on Beijing's 
assessment of the election, where they said this proves that 
the people of Hong Kong are ``masters of their own house.'' 
But, in fact, as I stated, a more accurate assessment would 
clearly note Beijing's continuing influence on all the 
important things related to Hong Kong's future.
    Representative Levin. You used the word ``influence.'' I 
mean, essentially they determine the key decisions. Is that not 
correct?
    Mr. Schriver. I think, to date, they certainly have, yes.
    Representative Levin. I will finish so we can go on. So why 
do you say, on the second page, ``Here, too, the Hong Kong 
Government has promised to investigate any lead, and to defend 
vigorously the integrity of its elections. That is appropriate. 
The government's deeds should match its words.'' If, 
essentially, they are now not influencing, but essentially 
directing the outcome on key things, do you have faith that 
their deeds are going to match their words?
    Mr. Schriver. Well, that remains to be seen. It is very 
important that they do, and that is why we take opportunities 
like this very public forum here, to say that this is something 
that people watch closely. As I noted, there is a very robust 
and energetic NGO community that watches these things. We had 
an important report from Human Rights Watch. So, we want to 
take all the opportunities that are afforded us to say that 
this is important to us, and we are watching.
    Representative Levin. I asked these questions thinking we 
were right to increase our engagement with China. But part of 
that approach was also to call them as we see them and to be 
very direct and frank. I must say, I think the language here is 
maybe more ``diplomatic'' than it is candid. For example, where 
you say, ``But I do firmly believe that Beijing's vision of 
Hong Kong can best be realized by moving more rapidly toward 
the goal of a genuine representative government,'' I am not 
quite sure what that really means to say.
    Mr. Schriver. I think the leaders in Beijing do want Hong 
Kong to succeed. I think they want it to be prosperous. I think 
they would take pride in a Hong Kong that continues to succeed 
economically. Our concerns are that if the pace of political 
evolution, and in particular political liberalization, does not 
meet the aspirations of the people of Hong Kong, Beijing will 
not get the outcome that they desire and instead, I think, will 
have a more unstable situation. So we try to portray this as an 
area where, in fact, we might have a common view of this. We 
both want Hong Kong to succeed. Our view is that 
democratization is one element, and a very key element to that.
    Representative Levin. All right. Quickly, how much further 
toward the goal of a genuine representative government do you 
think Hong Kong is today compared to five years ago?
    Mr. Schriver. I think this election was a step forward, but 
it is insufficient to meeting the ultimate goal, which even 
Beijing has embraced and embodied in the Basic Law, that Hong 
Kong will move to universal suffrage. But I think it is a step 
forward after the LegCo elections.
    Representative Levin. Thank you.
    Chairman Leach. Thank you, Secretary Schriver.
    We will now move to the second panel. It is composed of 
Professor Michael C. Davis. Professor Davis is currently the 
Robert and Marion Short Visiting Professor of Law at Notre Dame 
Law School. The second witness is Ms. Veron Hung. Veron Hung is 
an expert on Chinese law. She is admitted as a barrister in 
England, Wales, and Hong Kong, and is a member of the New York 
Bar and the District of Columbia Bar. Our third witness is Dr. 
William H. Overholt, who is Asia Policy Chair, Center for Asia 
and Pacific Policy of the RAND Corporation. Previously, Dr. 
Overholt was a Senior Fellow at Harvard, and before that spent 
21 years running research teams for investment banks in Asia. 
He is the author of five books, including The Rise of China. 
Welcome, Dr. Overholt. Unless there is a prearrangement, we 
will just proceed in the order in which the introductions were 
made.
    Mr. Davis.

STATEMENT OF MICHAEL C. DAVIS, ROBERT AND MARION SHORT VISITING 
        PROFESSOR, NOTRE DAME LAW SCHOOL, SOUTH BEND, IN

    Mr. Davis. Thank you. Thank you, Mr. Chairman.
    I appreciate the opportunity to testify here at this 
hearing. I think Hong Kong certainly has been a great interest 
to people in the United States in general because of our 
commitment to democracy.
    I note in that regard, this morning I was reading some 
literature telling me that during the 1990s, the number of 
democracies in the world nearly doubled. So it seems to me that 
we should bear in mind that democracy is becoming the norm, 
rather than the exception, and is something I think we all 
encourage.
    Now, I should say that, in addition to being at Notre Dame 
University, I have lived in Hong Kong for the last 20 years. I 
am a legal resident of Hong Kong. I even vote in Hong Kong and 
have been involved in public affairs there for a long time. I 
have also been involved with the Article 45 Concern Group and 
the Article 23 Concern Group, which were trying to promote 
democracy in Hong Kong during the past year, and were 
instrumental in several demonstrations that were held there.
    Now, the official from the State Department has described 
the consequence of the election. I personally would like to say 
that there is an interpretation going around about the election 
that I hear in the international media, that Hong Kong people 
voted for stability, the implication being that somehow they 
were choosing stability over democracy, and assuming that those 
things were somehow in opposition to each other. I would like 
to contest that interpretation. The State Department has 
correctly pointed out that the support for democracy in Hong 
Kong in this election was substantial. If Hong Kong's democrats 
did not win the election with 62 percent of the vote, it is 
because of serious flaws in the electoral system there.
    The United States, recall, has been asked to treat Hong 
Kong as a separate entity. So, beyond our spirit of support for 
democracy, we have a very definite interest that Hong Kong 
carry on under the Sino-British Joint Declaration.
    Now from the opening statements of the Chairman, I know you 
are familiar with the requirements that Hong Kong move toward 
universal suffrage, but this is spelled out in the basic law 
and the Sino-British Joint Declaration. So what I would 
suggest, is that the Chinese Government has taken a view that 
universal suffrage is dangerous in Hong Kong and it has 
expressed this view in no uncertain terms during the last six 
months. So we have to appreciate that this election is not just 
about counting the votes or whether the ballot boxes were open 
during certain events when they were over-stuffed and they were 
tamped down. This is a serious problem that has to be 
investigated. But I think the deficiency of an election where 
62 percent of the voters vote for one camp, and that camp loses 
the election, has to be fully appreciated. Another point that I 
would like to draw attention to, is that the election is built 
around functional constituencies, so fully half the seats in 
the election are taken by a small circle of electors, in a 
sense, just under 200,000 voters--and a good portion of them 
corporations--get to choose half the members of the Legislative 
Council.
    Another thing is that even for direct elections, they use a 
system of proportional representation. If we are investigating 
this, we should at least draw attention to these specific kinds 
of problems. The proportional representation system is one that 
favors getting more pro-Beijing candidates in, so this is 
something specific to draw attention to.
    Beyond that, I would like to highlight the history of 
intimidation before this election. The last nine months or so 
before the election had a series of attacks on Hong Kong 
democrats. The first one was the so-called ``patriot debate,'' 
where one member, a chairman of the Democratic Party, was 
actually vilified for testifying here before the U.S. Senate. 
He was accused of being unpatriotic, and a Chinese official 
attacked his father also as being unpatriotic, though 
previously no one had ever contested his father's patriotism. 
So this ``patriot debate'' was one form of intimidation.
    The second one was some argument about gradual and orderly 
progress, where Hong Kong people were told that Deng Xiaoping 
did not intend democracy to proceed very quickly, except that 
Deng Xiaoping's own words contested that viewpoint.
    The third one that came up in the last six months was an 
argument largely from the Beijing media where they started 
threatening to disband the Legislative Council after the 
election if more than 30 members of the Democratic camp were 
elected. They made statements that, ``if those who try to use 
democracy to exclude the Communist Party of China and respect 
Taiwan take the majority of seats in LegCo, Hong Kong's 
executive-led government will collapse and the central 
authority and national security will be severely challenged.'' 
A local pro-Beijing paper, the Wen Wei Bao, quoted a Beijing 
official as saying, ``I have a knife. Usually it is not used, 
but now you force me to use it.'' So, what I am suggesting to 
you is that the level of intimidation was quite high.
    After that, the next stage in this effort was to start 
talking about the spirit of the Basic Law, and accusing the 
Democrats in Hong Kong of promoting fake democracy. The next 
phase was when the National People's Congress interpreted the 
Basic Law on April 26, ruling out direct elections in 2007 and 
2008, even though the Basic Law, as interpreted by them, would 
have allowed that.
    Finally, the intimidation continued into the election 
itself, where a whole range of things were done or alleged to 
have been done to intimidate voters who were registering, to 
intimidate talk show hosts, to threaten enacting a national 
unification law that would get around the national security 
laws that they tried to enact last year.
    Trying to reach out to Democrats was one good thing. There 
were some carrots. The mainland government also had military 
parades and an Olympic medalist parade past Hong Kong people, 
trying to persuade them. And when you read the pro-Beijing 
press, you would see a very strong bias, so Beijing was taking 
a role in the election on the side of the pro-Beijing camp and 
against the pan-Democratic camp.
    So I think when Hong Kong people, in the face of all of 
this, still voted 62 percent to support the pan-Democratic 
candidates and had the highest turnout ever, it is hard to say 
that they have chosen some form of ``stability'' over 
democracy. I think this is an important thing for the 
Commission to take note of.
    Thank you.
    [The prepared statement of Mr. Davis appears in the 
appendix.]
    Senator Hagel. Dr. Davis, thank you very much.
    Dr. Overholt.

STATEMENT OF WILLIAM H. OVERHOLT, ASIA POLICY CHAIR, CENTER FOR 
  ASIA AND PACIFIC POLICY, RAND CORPORATION, SANTA MONICA, CA

    Mr. Overholt. Mr. Chairman, I am honored to be invited to 
testify before you. Like the other members of this panel, I am 
here to try to be useful rather than to represent any specific 
interest. I have submitted written testimony and I will make 
brief comments to supplement that.
    I think we need to start with the fact that this election 
did have one more step toward democratization. Before the 
Chinese demanded Hong Kong back from Britain, 100 percent of 
all Hong Kong legislators were appointed by the British 
Governor. With this election, for the first time, there are no 
appointed legislators. They are all elected in some form. 
However, the pace of movement has been slow. There is nothing 
approaching real democracy in Hong Kong, because the Chief 
Executive is hand-picked by Beijing, the system is so-called 
executive-led, and of course half of the legislature is 
functional constituencies, which are designed to be 
predominantly conservative.
    This system is gridlocked. People are unhappy with it. That 
has led to big, peaceful demonstrations, demanding what the 
Basic Law presents as an ultimate goal, namely direct elections 
by universal suffrage, although it does not firmly commit to 
any timetable in achieving that, or even to ever fully 
accomplishing it.
    China has reacted to those lawful, but large, 
demonstrations with fear of instability. You have a new 
administration in Beijing which has little experience of Hong 
Kong and has suffered, to some extent, from what I have called 
``the three confusions.'' They confuse the situation of 
democracy in Hong Kong with the independence movement in 
Taiwan; they confuse the implication of peaceful, lawful, 
traditional-type demonstrations in Hong Kong with disruptive 
demonstrations in mainland China; and they confuse the 
democratic movement, which is very broad, peaceful, deep, and 
basically loyal to Chinese sovereignty, with a few very anti-
Chinese leaders of the democratic movement.
    I would characterize the Beijing policy as divided into two 
pieces. What has been important to them is a response to these 
demonstrations and to the movement regarding universal suffrage 
in 2007. There, they have had a very broad, wide-ranging 
strategy which Mr. Davis and Mr. Schriver have highlighted. The 
core of that strategy was interpretation of the Basic Law to 
make direct universal suffrage elections in 2007 and 2008 
illegal, along with staging such events as military parades, 
fleet visits, taking measures to reinvigorate the Hong Kong 
economy, and sponsoring high-profile, positive steps like 
visits from the ``Buddha's Finger bone'' and from the Chinese 
Olympic athletes.
    All these are directed at the 2007 election, and that is 
important. The 2004 election has been a separate issue. There 
has been a series of disquieting incidents of intimidation and 
election problems, but as yet there has been no persuasive 
evidence that these were other than local political 
entrepreneurship and local business vengeance. There has been 
no serious argument by even the most partisan commentators that 
these incidents actually influenced the shape of the outcome of 
the election in Hong Kong.
    The election had very high turnout in a very calm 
atmosphere, even an atmosphere of pride, despite the things 
that had happened earlier and despite problems with the size of 
ballot boxes.
    The democrats clearly won the popular vote. Everybody 
agrees on that, 62 or 63 percent of it. The skewing of the 
system, however, meant that even a fair ballot led to the 
conservatives getting 34 out of 60 of the seats. The fact that 
the Liberal Party, a conservative group, was one of the very 
big winners and won its first two general election seats ever, 
has to do with the fact that they supported democratization. 
Their leader resigned over the proposed tough anti-subversion 
laws. So here again, even in the conservative victory, we see 
the strength of the democratic feeling behind it. There was a 
mandate in this election for democratization, but 
democratization pursued by moderate means that reassure 
Beijing.
    Mr. Chairman, the body of Hong Kong's freedoms--freedom of 
speech, freedom of press, religion, of assembly, and the rule 
of law--is basically intact. There are some dents and scratches 
this time around, and if those dents and scratches continue to 
accumulate there will be real problems, but so far we have 
dents and scratches on a sound body. There has been an 
environment this time where people felt they could get away 
with intimidations and tricks that they did not try in the 
past. As Mr. Schriver said, everybody will be looking to see 
exactly what the Hong Kong Government does to make sure that 
that permissive environment is 
reversed.
    Beijing's hard-liners believe that economic recovery, plus 
repressive actions, will contain the democratic movement. My 
forecast is that, in the end, such a strategy will be like 
sitting on the lid of a kettle of boiling water. The movement 
will boil up. It is strong and getting stronger. The political 
parties do not fully represent the strength of that movement. 
Hong Kong's political parties are very weak. Beneath the 
political party results, there is a much stronger movement. 
That movement has only one chance of 
success, and that is to push hard for democracy, while 
reassuring Beijing of their loyalty. Most of the leaders of the 
democracy movement have now coalesced around that strategy. 
There is no assurance that it will work, but it is the only one 
that has any chance.
    What does this mean for the United States? Well, we are in 
a in a frustrating situation. We have very limited positive 
leverage. We have a lot of ability to do damage. Speaking out 
very strongly, reasoning with Chinese leaders, can certainly 
help. They do talk, they do think, they do take evidence on 
board. The biggest gift we could give to the Beijing's hard-
liners would be a confrontational policy that allows them to 
portray Hong Kong democratization as a struggle between China 
and the United States, not as a struggle between them and some 
of their own people. In that regard, proposed changes in Hong 
Kong's trade status would simply harm those people of Hong Kong 
whom we say we are trying to help. The first law of doctors is 
``do no harm,'' and it is a good rule for all policies.
    Hong Kong democratic forces have coalesced around a 
strategy of demanding democratization, but reassuring Beijing. 
The electorate has clearly endorsed that strategy. We should 
not do anything to undermine it. We do provide assistance to 
democratization in Hong Kong in a variety of different ways, 
predominantly through NGOs, things like teaching fundraising. 
That is very helpful. But some of our efforts appear to single 
out one particular and particularly anti-Beijing figure, who is 
not the leader any longer of any party. That can only divide 
the democratic movement and harm its chances. So, we have to be 
very careful which things we emphasize in our consensus support 
for democratization in Hong Kong.
    I would close with the thought that there is no basis for 
despair. The recent completion of the generational transfer of 
power in China could mean less politics and more careful policy 
calculation in China. As these people gain more experience, 
that will probably be helpful. They are engaging in more and 
more dialogue with democratic forces in Hong Kong.
    The other positive thing that we must never discount, is 
Hong Kong people are enormously well-informed and good at 
thinking these things through, and we can rely heavily on their 
skills. But there are no assurances. Nobody can say for 
certain, even if we do all the right things, that this is going 
to work out well.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Overholt appears in the 
appendix.]
    Senator Hagel. Dr. Overholt, thank you very much.
    Ms. Hung, welcome.

  STATEMENT OF VERON HUNG, ASSOCIATE, CHINA PROGRAM, CARNEGIE 
       ENDOWMENT FOR INTERNATIONAL PEACE, WASHINGTON, DC

    Ms. Hung. Thank you. Today I would like to focus on one 
issue: will Hu Jintao, who finally took over China's military 
chairmanship from Jiang Zemin last Sunday, soften Beijing's 
stance on democratization in Hong Kong? Although Hu is 
generally hailed as a moderate reformer, he is unlikely to 
revoke Beijing's decision made in April that rules out 
universal suffrage in Hong Kong in 2007 and 2008.
    The decision stems largely from Chinese leaders' two fears: 
first, that a democratic Hong Kong may liberate itself from 
Beijing's control; and second, that democratization in Hong 
Kong would inspire and mobilize mainland Chinese to challenge 
the Communist Party's governance.
    Sharing such fears, Hu Jintao, whose goal is to sustain the 
party's role through reform but not to destroy it, will likely 
uphold the April decision. But the need for Hu to prove his 
governing ability may bode well for a dialogue with Hong Kong 
Democrats. The absence of such a dialogue would suggest to 
foreign nations a pessimistic future for political reform in 
China, intensifying their doubts about China's claim to seek a 
``peaceful rise'' to regional and international prominence.
    International criticism of China will likely escalate and 
overshadow Beijing's 2008 Olympics, which China sees as a 
milestone marking the country's rise. All of this criticism 
will not reflect well on Hu's leadership. Therefore, he should 
have an interest in meeting with the Democrats.
    Such interest may further increase after Hu Jintao 
considers two implications of the Legislative Council election 
results. First, the Democrats' failure to win the majority of 
seats signals that even 
direct elections would not guarantee the Democrats a landslide 
victory. Feeling less worried about direct elections, Hu may be 
more receptive to discussing democratization in Hong Kong with 
the Democrats.
    Second, the record-high turnout rate of 55.6 percent in the 
election shows that the Hong Kong people's demand for full 
democracy is still strong. If Hu does not respond to such a 
demand by meeting with Democrats, citizens in Hong Kong may, 
when their government blunders, demonstrate again on every July 
1 to demand full democracy. But even if Hu Jintao welcomes a 
dialogue with Democrats, a crucial question remains: can 
Democrats stay united to speak in one voice? Some Democrats in 
Hong Kong insist on pressuring Beijing to revoke the April 
decision. Others, such as pro-democracy barristers who just won 
in the election, appear to be more flexible. In my opinion, the 
Democrats must adopt a strategically flexible approach. In 
light of Beijing's two fears about democratization in Hong 
Kong, the harder that the Democrats push for early introduction 
of universal suffrage, the more threatened Beijing will feel 
and the more readily it will play its trump card, the Basic 
Law. This law gives Beijing the ultimate power to determine the 
city's political future and forestall the Democrats' hopes. In 
theory, of course, we may argue that Democrats could always 
trump Beijing with the threat of massive unrest, but public 
support for such a strategy is not present or foreseeable. Most 
Hong Kong citizens are pragmatic, desiring to keep intact the 
city's legal framework, prosperity, and stability.
    The Democrats should aim at dispelling Beijing's fear 
through dialogue. Knowing that Beijing cannot tolerate 
universal suffrage in 2007 and 2008, the Democrats should 
relinquish this demand, but require commensurate concessions 
from Beijing, namely, a promise that once universal suffrage is 
introduced, citizens will be allowed to exercise their right to 
vote for the Chief Executive and all legislators by direct 
elections instead of indirect elections. I must emphasize this 
point, because all Hong Kong politicians have missed it. 
Strictly speaking, ``universal suffrage'' only means that all 
citizens of voting age have the right to vote. Full democracy, 
which is the Democrats' goal, cannot be exemplified if 
universal suffrage is implemented through ``indirect 
elections,'' whereby citizens elect representatives who, in 
turn, choose the ultimate office holders.
    Recent surveys show that many Hong Kong politicians, 
including those from the pro-Beijing camp, support introduction 
of universal suffrage in 2012. Such wide support may encourage 
China's leaders to consider it to be an option. Delaying 
introduction of universal suffrage by four to five years in 
exchange for a ``universal suffrage plus direct elections'' 
package sounds acceptable.
    As every sailor knows, a boat cannot move when it is 
directly against the wind because the sail luffs. To lead Hong 
Kong toward full democracy against Beijing's resistance, 
Democrats must master the art of steerage to position the boat 
at the best angle possible under the circumstances.
    Ending the dispute with Beijing over democratization of 
Hong Kong helps build mutual trust, upon which successful 
implementation of ``One Country, Two Systems'' depends. Thank 
you.
    Senator Hagel. Dr. Hung, thank you. Each of your statements 
will be included in the record. I noted, Dr. Overholt, that you 
essentially summarized your statement. But all of the 
statements will be included for the record. Thank you very 
much.
    Let me ask a general question for the three of you. Dr. 
Hung, in your statement, you talked about the internal 
leadership situation in China and you drew some observations 
and conclusions regarding the possibilities for Hu Jintao's 
emerging and future role as president of China. How will this 
role affect Hong Kong? I would like to ask your two colleagues 
for their interpretations as well, not just of what you said, 
but also to widen it a bit, and then come back to you and see 
if you would like to add any further observations. I will begin 
with Professor Davis. Thank you.
    Mr. Davis. Thank you, Mr. Chairman.
    This question of the change of leadership is a very 
important one. There is some speculation that Hong Kong policy 
has been under the sway of very conservative elements in the 
Chinese leadership, and some question whether Hu would change 
that, and some doubts that he will, that in some ways having a 
harder hand at the rudder might be viewed as a favorable policy 
for him while he secures and consolidates his own position as 
the Chinese leader.
    This relates to the other statements of Dr. Hung, how Hong 
Kong people should react to it. I would resist the view that 
China is this static thing, monolithic thing, and Hong Kong 
Democrats are this monolithic thing on the other side, and they 
cannot push too hard or the Chinese leaders will get angry, and 
so on. I think it has been a mutually constitutive process over 
the years that I have been in Hong Kong, whether it is 
interpreting the Basic Law, whether it is pushing for 
democracy. And I am actually 1 of the 10 members of those 
barristers to whom Dr. Hung referred. To use the language of 
academia in this country, it is a mutually constitutive 
process. On both sides, we are speaking to each other. 
Sometimes we push hard. And so the Chinese leadership under 
Hu--he will not want trouble in Hong Kong. So Hong Kong 
Democrats could say, ``All right, fine, we go meet with him and 
that is it.'' But they know that he is not going to give them 
anything if they do not have a strong hand.
    So, it is a bit of both. It is a bit of pushing and 
tugging. So, the United States' role in this is generally, I 
think, to represent, I think, the views that Bill Overholt 
suggested. For example, encouraging China to talk to the 
Democrats, to encourage dialogue, because it is within the 
context of that discussion that Democrats, while pushing on the 
street, can talk to Chinese leaders and maybe the Chinese 
leaders will come to a point where they will see the Democrats 
are not so fearsome after all. Quite frankly, the Democrats in 
Hong Kong are the most moderate bunch of revolutionaries, if 
that is what they are, that I have ever seen on earth. I have 
been in the Democratic camp for nearly 20 years. I know Martin 
Lee personally. He gave away my wife at our wedding. I mean, I 
know these people all very personally. I never heard the word 
``independence'' out of a Democrat's mouth in Hong Kong. The 
only time I ever hear the word ``independence'' in Hong Kong is 
from people from China. They talk about Hong Kong, and 
sometimes they advocate that Hong Kong advocate independence. 
But Chinese officials worry that Hong Kong people have some 
idea of independence or getting away from Beijing. I never hear 
it.
    So I think the leaders need to be persuaded, to the extent 
that diplomacy persuades, that they need to talk to the people 
in Hong Kong, the people that have the majority of support in 
Hong Kong. And I think these people are very moderate. Are they 
going to always look perfectly moderate? No. Sometimes they 
have to push. If they get nowhere, they have to be louder. They 
have to ratchet up. Chinese leaders, I think, respond to that 
better than always, as the more so-called conservatives in Hong 
Kong, who always do whatever China's bidding is. I think you 
have more influence in dealing with China when you are a bit 
tough at times and conciliatory at other times. The leadership 
in Beijing needs to understand this about the Democrats as 
well. Sometimes they may insist on what they want, but other 
times be willing to listen. Up until now, they have rarely been 
willing to listen to Democrats. I have attended meetings where 
our group of barristers were invited.
    Listening to Democrats meant going to a meeting, having the 
Chinese leaders tell you the decision they had already made, 
and then flattering my colleagues in the Article 45 Concern 
Group for a bit of time, telling them that we appreciate you 
coming here, blah, blah, blah, but not consulting before the 
decision is made. So if we are talking as a country trying to 
encourage China to deal with Hong Kong in a way that is 
consistent with our values and with the Basic Law, then I think 
this kind of dialogue is something we can talk to them about. I 
think they are starting to understand it, but there is such a 
great, deep reluctance to really give away power in Beijing. 
The idea of not being in control of someone that you are 
dealing with is very hard in Chinese politics, and so this is a 
hard thing. But, then again, bearing in mind that Beijing 
itself is not monolithic. There are reform-minded leaders in 
China as well. So, we have to approach them with this 
understanding. But do not ask the Democrats to be passive. 
Sometimes they have to be tough. That is how you get what you 
want, and that is what is going on there.
    Senator Hagel. Thank you.
    Mr. Overholt.
    Mr. Overholt. Mr. Chairman, I believe your question had to 
do with the relationship between the power struggle or 
generational change in Beijing and Hong Kong policy. This has 
been a period when thinking about Hong Kong has been very 
heavily influenced by what comes close to a war fever over 
developments in Taiwan, and at a time when there was divided 
leadership.
    We do not know what happens between the leaders at the very 
top, but we can see what is going on between their followers. 
The divisions have been powerful. The issue of one side or the 
other being soft on issues of national security or stability 
has been, if anything, even more intense in that country than 
it has in ours. So I think there is reason to hope--I choose my 
words carefully--that their successful transition peacefully 
from one generation to the next will remove some of the 
political intensity that has surrounded the debate over Hong 
Kong.
    Senator Hagel. Let me ask a follow-up on that. I note in 
the summary bullet points of your written statement you say 
``deep 
division in China over proper policy toward Hong Kong.'' Do you 
want to add anything to what you just said in light of this 
point? I did not get the sense, from what you just said, that 
the intensity of disagreement is necessarily that deep.
    Mr. Overholt. I have made many, many trips to China in 
recent years and talked with dozens and dozens of people about 
Hong Kong. There are many, many experts and officials who think 
that the hard line has been counter-productive and hope that 
there will be some liberalization in the future. I do not think 
anybody can claim to have an adequate survey of Chinese experts 
or officials, and particularly not of top-ranking officials. 
But if you came to this country in 1993 when a new leader was 
saying we should cutoff our principal trade ties with China, 
removing most favored Nation status, or if you came here in 
2001 when some people were saying, treat China as an adversary, 
you would have gotten the same division between the official 
experts and the new brooms coming in at the top. My sense is 
that it is much more intense in China on this subject. That is 
why I am trying to convey.
    Senator Hagel. Thank you.
    Dr. Hung.
    Ms. Hung. Yes. Thank you. I just want to make a few points 
in response to the comments made by my colleagues here.
    The first point I want to make is that I am pleased to tell 
you that one pro-democracy barrister who won in the election 
made an announcement yesterday. He, himself, recognized that it 
may not be politically realistic to pressure Beijing to revoke 
the April decision, and he may consider just stepping back a 
little bit to pressure Beijing to consider introducing 
universal suffrage in 2012. I think that is a very good sign.
    Second, I want to emphasize one point. Pressure does help 
sometimes, but not always. Look at the April decision. I 
understand that my colleague, Professor Davis, argues that 
sometimes we cannot appear to be weak. But the proposal that I 
am making here is not a weak proposal, it is a functional, 
strategically sound proposal. In the past, the Democrats 
pressured Beijing so hard, that they forgot about the two fears 
Chinese leaders had. So that is the reason why Beijing came up 
with this April decision. My worry is that, if we continue to 
pressure Beijing to revoke the April decision, it might 
actually resort to the Basic Law again through interpretation 
or through amendment of the Basic Law to further tighten 
control over the democratic development in Hong Kong.
    Given the fact that even the pro-Beijing camp supports 
universal suffrage in 2012, if democrats also support this and 
bargain for a concession from Beijing, saying that ``We want 
you to promise that universal suffrage should be done through 
direct elections,'' I think this is actually a nice way to 
attain the final goal, that is, full democracy. Thank you.
    Senator Hagel. Thank you.
    Dr. Overholt, I do not have it exactly in your written 
statement, but I will paraphrase what I think I heard you say. 
You noted that the United States must be careful not to damage 
the overall relationship by how we handle the Hong Kong issue 
with China. In the universe of that relationship, Hong Kong is 
an important issue, but it is one of many.
    One of the things you said, I think, if I can refer back to 
my notes, is that we should be careful not to allow our 
handling of the Hong Kong issue to fuel internal leadership 
divisions in China in a way that ultimately harms Hong Kong.
    Now, if I have got that about right, would you develop it 
further for us--and I would ask the other two panelists to 
comment on this as well--that is, areas you think the United 
States should be doing more or less of in our current policy 
toward China? Thank you.
    Mr. Overholt. I think the things we do well are expressing 
our views, holding hearings that put all the arguments on 
display, for the Chinese as well as for ourselves. I think our 
human rights groups do a wonderful job when they shine the 
light on bad things that happen. We should do as much of those 
things as we can. Having very firm arguments never hurts. We 
talk in very firm ways with the Chinese about many issues, 
including Taiwan and North Korea, and the dialogue moves 
forward.
    When we start threatening sanctions, then the hardliners 
say, ``The democracy movement is just the Americans trying to 
impose their will on China.'' That obscures the real issue, 
which is, maybe Hong Kong would be stabilized by 
democratization rather than destabilized, which I think all of 
us here agree on. When we appear to take sides among the 
democrats, focusing on Martin Lee rather than some of the 
others for instance, it just divides the democrats. It gives 
Beijing another excuse for putting its thumb on them. It is 
very unhelpful.
    When we do things that directly associate democracy with 
instability, we feed the hardliners. For instance, when the 
National Endowment for Democracy [NED] gave Martin Lee an award 
that was the little Goddess of Democracy statue from Tiananmen 
Square, if there is any way we could at low cost do more damage 
to the image of what democratization would mean, I cannot 
imagine it. We have to be very careful not to gratify our own 
feelings at the expense of harming the democratization 
movement.
    I think, on the whole, American policy has been quite 
balanced and reasonable. We have made small mistakes. The 
hardliners have taken full advantage of the small mistakes we 
have made. But I would endorse everything that Mr. Schriver has 
said. I think that the core of American policy has been 
absolutely sound, and I think the Congressional resolutions 
have been helpful.
    Senator Hagel. Thank you.
    Professor Davis.
    Mr. Davis. Yes. I agree with what Bill has said, generally, 
that we need to exercise some degree of caution, and not to be 
a bull in a China store--literally a China store in this case--
when it comes to China policy. I have not seen that much of 
that from the United States, but I do find that sometimes the 
Chinese can be very selective. They have recently vilified the 
National Democratic Institute [NDI] and the NED, unrelated to 
any awards to Martin Lee, in this recent election as improperly 
interfering in Hong Kong, and it kind of becomes like America 
trying to improperly influence the election. In fact, the NED 
has funded the Republican Institute to do work in China, as 
well as the NDI in Hong Kong. I know we have actually had to 
caution the NDI. They have given as many seminars to the pro-
Beijing camp as they have the Democratic camp.
    So I think if it were known that the NDI was not really 
favoring one side, that it was actually trying to talk to 
politicians on both sides--I know the people in Hong Kong that 
do the work of the NDI, and I know that they do a good job and 
they have for long tried to be balanced about it.
    I think there are things the United States should just be 
consistent about. One, is encouraging dialogue with Democrats 
in Hong Kong, not just with Martin Lee, but all the Democrats, 
and that, as a friend of China, that we would like to see the 
Chinese have a good relationship with those people in Hong Kong 
that won the popular vote in the last election.
    So our State Department people are very good, hopefully, at 
trying to find nice ways to say that and make that message 
clear. One thing that I have also noted here that I think is 
important: I would like to see more investment in our dialogue 
with China itself on the rule of law, on issues of elections in 
China. China has elections. The NED has often been the vehicle 
through which we fund that kind of work. But a rule of law 
initiative has been batted around Washington for years, and 
sometimes it does not get too far. I would like to see more of 
that, because then it does not look like we are just singling 
out Hong Kong, but we care about China's long-term development, 
about the rule of law in China. And the rule of law is a little 
more neutral than some other terms you can come up with. I 
would like to see growth in that initiative.
    On the democratic development in Hong Kong, I think some 
encouragement for a timetable is something that we might ask 
for. If we want to ask for something definite, maybe encourage 
Beijing to indicate a timetable. As Dr. Hung has suggested, 
that timetable may well be 2012. But why not indicate that? So, 
that is something specific.
    I agree with Bill Overholt. Sanctions are something you do 
after an event like Tiananmen Square. It is not something that 
is normal policy. So, using some heavy dose of sanctions is 
something the United States really should not include in its 
China policy at the moment. It is just not the circumstances 
where that is required. So, I agree with that. We just should 
not be doing that.
    These are some other things. One can think of other things 
from time to time. I think on the Taiwan question, we really 
have to be very, very sensitive there. But that gets beyond 
Hong Kong. It is somewhat connected, but separate.
    Senator Hagel. Thank you.
    Dr. Hung.
    Ms. Hung. Yes. I think that Washington should continue 
expressing its concerns about the democratic development in 
Hong Kong through low-profile diplomacy. Given the fact that 
there is a high possibility that Beijing and the Hong Kong 
Democrats may have a dialogue, I do not think that at this 
stage the United States should react too strongly. The more 
vocally the United States opposes Beijing's policies toward 
Hong Kong, the more firmly Chinese leaders will believe the 
Democrats in Hong Kong are actually in league with the United 
States to try to overthrow it. I would also urge the United 
States not to consider changing U.S. policies toward Hong Kong 
as authorized under the U.S.-Hong Kong Policy Act. There are 
three reasons. First, is that, on this issue, Hong Kong people 
are in a passive position. They want universal suffrage as soon 
as possible, but it is Beijing that made the April decision.
    So if critics of China say that, ``Oh, because Hong Kong 
can no longer enjoy a high degree of autonomy, we should 
suspend these benefits for Hong Kong,'' then these critics are 
in effect punishing Hong Kong people for something that they 
have not done. This is not fair to the Hong Kong people.
    Second, I also believe that it is not good for United 
States' interests either, because any punishment on Hong Kong 
would develop anti-American sentiments in Hong Kong and 
mainland China.
    Third, we need to think about the possible reactions from 
China as well. For example, this April the United States 
sponsored a human rights resolution at the United Nations Human 
Rights Commission, and in response China suspended the U.S.-
China human rights dialogue. What I worry about, is if we 
change the U.S. policies toward Hong Kong, China may react so 
strongly that it might suspend the rule of law projects and 
continue suspending the U.S.-China human rights dialogue. For 
the sake of human rights developments and rule of law 
developments in Hong Kong and China, I do not think that at 
this stage the United States should change its policy toward 
Hong Kong, as authorized under the U.S.-Hong Kong Policy Act. 
Thank you.
    Senator Hagel. Dr. Hung, thank you.
    We have been joined by the former Chairman of this 
Commission, the distinguished Senator from Montana. Senator 
Baucus, welcome.
    If I might just interrupt the hearing for a moment to do a 
little business, I understand that you want to cast your vote 
at our business meeting. So if you would register your vote, 
Senator, then we can get on with whatever you have.
    Senator Baucus. I vote aye.
    Senator Hagel. Thank you, sir. You see the influence you 
have on Senator Baucus? It is amazing. [Laughter.] Senator, 
would you like to add anything, a statement, questions?
    Senator Baucus. I am fine. I have already learned by 
listening. Thank you.
    Senator Hagel. Thank you. Dr. Overholt, you had noted in 
your comments, and again I think I have written down basically 
what you said, and I think this was your term, ``basic freedoms 
are still intact in Hong Kong.'' You, I think, mentioned 
specifically freedom of speech, freedom of the press.
    In light of the concerns that this Commission has had 
regarding freedom of religion in the PRC, how is religious 
freedom--and I would ask the three of you the same question--
faring in Hong Kong? Is there any carry-over to Hong Kong on 
this issue from the mainland?
    Mr. Overholt. Hong Kong has freedom of religion. Every 
religion I know of practices in Hong Kong. Many of them 
proselytize across the border in ways that Beijing could object 
to, but has chosen not to. Falun Gong practices openly. They 
have public sessions in public places throughout Hong Kong 
where they do their exercises. They have people passing out 
leaflets in very prominent places. For instance, on either side 
of the Star Ferry, they pass out leaflets. They have not been 
inhibited in practicing their religion in Hong Kong in any way. 
There are two complaints they have that have some substance. In 
the early days, they were allowed to rent out city hall for 
Falun Gong exercises. They have not been able to do that, at 
least as much, recently. And the Hong Kong Immigration has not 
allowed in Falun Gong people from outside Hong Kong to 
participate in demonstrations. One can argue that either way, 
but with those, in the large scheme of things, minor footnotes, 
freedom of religion is alive and well in Hong Kong.
    Senator Hagel. Professor Davis.
    Mr. Davis. Yes. I agree with Bill Overholt. For the most 
part, freedom of religion is fully respected. There have been 
some issues. The Falun Gong one, I think he has mentioned. It 
has become a kind of barometer on freedom of religion in Hong 
Kong. When people see Falun Gong suppressed or harassed, then 
people start worrying. So if you want a barometer, it is one of 
them that I think comes up.
    Other developments. There have been debates about the 
Department of Education's effort to change control over 
religious schools in Hong Kong by having committees of parents. 
The bishop of Hong Kong has taken a strong stance against that. 
I do not think this is an issue that should really concern U.S. 
foreign policy. It is peculiar because Hong Kong has much less 
separation of church and state than we do in the United States, 
so a great deal of public funding goes to religion-run schools. 
So those religions that are getting the public funding have 
worried that if the government 
requires a kind of elected committee, then the bishop or other 
sponsors will lose control over the message and the way the 
school wants to conduct itself.
    The bishop of Hong Kong, Bishop Zen, the head of the 
Catholic church, has spoken out forcefully against a change in 
regulations. So this is an issue involving freedom of religion, 
but peculiar for us to complain about because our degree of 
separation of church and state means that the public funding 
would not even go to all these schools as it does in Hong Kong. 
Hong Kong has much less separation. They do provide public 
funding to church-sponsored schools. The Baptist University of 
Hong Kong is a publicly funded university. So, I do not think 
this is something of concern to U.S. foreign policy.
    On the positive side, Bishop Zen, who has been very 
outspoken in the democracy movement in Hong Kong, has actually 
been invited to Shanghai to meet with mainland church 
officials. The mainland has the so-called kind of patriotic 
religious churches. They do not allow private churches and they 
do not allow the Vatican-sponsored Catholic churches in China. 
But Bishop Zen, who has spent some of his earlier career doing 
work in China, who is now the head of the Catholic Church in 
Hong Kong, has been invited to China to meetings. So you are 
talking about dialogue with Democrats. There is also dialogue 
with this very prominent religious leader who is also very 
prominent in the democracy movement. So, it is a bit of a mixed 
bag. But I think the statement that there is religious freedom 
in Hong Kong to date is an accurate one.
    Senator Hagel. Thank you.
    Dr. Hung.
    Ms. Hung. I think that is an excellent piece of 
information. I just want to make one minor point. Religious 
freedom has never been a main concern in Hong Kong because we 
generally enjoy that freedom. The main concern right now is 
freedom of speech, press freedom. This is the case, especially 
after three famous talk show hosts resigned in May, claiming 
that they were pressured to do so. Those resignations created a 
climate of fear, which was widely reported by the Western 
media. But lately, this situation seems to have improved a 
little. According to numerous polls announced before the 
September 12 election, Hong Kong people's confidence in ``One 
Country, Two Systems'' and the Hong Kong Government and Beijing 
has increased.
    That actually shows that they feel more comfortable about 
the political environment there. That is a very good sign. But, 
of course, we just keep our fingers crossed that things will 
continue to improve.
    Senator Hagel. Thank you.
    Senator Baucus, any questions? I, unless Senator Baucus has 
anything to contribute, am going to adjourn the hearing. But 
before I do, I would ask if the three of you have any 
additional comments that you would like to add.
    Yes. Professor Davis.
    Mr. Davis. Yes. I would just say that I have submitted a 
written statement, so that is in the record, I think.
    Senator Hagel. That will be included. All the written 
statements will be included in the record.
    Senator Baucus. Mr. Chairman?
    Senator Hagel. Senator Baucus.
    Senator Baucus. I am just curious whether you can sense any 
change in China's relationship with Hong Kong with the recent, 
if you will, resignation of Jiang Zemin, that is, relinquishing 
military power, and Hu Jintao, I suppose, is basically in 
charge. Does that mean anything or not?
    Ms. Hung. Actually, I think I should answer that question. 
I addressed that issue at length in my statement.
    Senator Baucus. I am sorry I missed that.
    Ms. Hung. So, it is on record. But I want to just add one 
final remark.
    Senator Baucus. Sure. Could you just, for one or two 
sentences, summarize?
    Ms. Hung. I think although Hu Jintao is generally hailed as 
a moderate reformer, we should not expect that he can decide to 
revoke the decision made in April, to allow Hong Kong to have 
universal suffrage in 2007 and 2008. But then I believe that 
because he has to prove that he has the governing ability, he 
has to establish a dialogue with Democrats, otherwise that does 
not reflect well on his leadership.
    Mr. Davis. Just to add a brief comment. I think it has been 
true of China's team on Hong Kong for some years that they have 
been a very conservative element of the Chinese leadership. 
Some of this creeps into the Taiwan issue as well. There is a 
sense that it is kind of a ``one China'' issue, and they should 
be tougher. So I do not think Hu Jintao, who is trying to 
consolidate his position, is going to be inclined to release 
all of that and put moderates suddenly in position. But I do 
agree that even the conservatives have started to have dialogue 
with the Democrats, and I think he would be well advised to 
encourage that direction.
    Senator Baucus. Thank you. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Hagel. Senator, thank you. Thanks to each of you. 
We appreciate very much your contributions. It has been 
important.
    This Commission is adjourned.
    [Whereupon, at 2:33 p.m. the hearing was concluded.]
                            A P P E N D I X

=======================================================================


                          Prepared Statements

                              ----------                              


               Prepared Statement of Randall G. Schriver

                           september 23, 2004
    Mr. Chairman, thank you. I appreciate the opportunity to testify 
before the Committee today on a subject that engages Americans and 
America's interests directly: the prospects for democratic development 
in Hong Kong.
    We meet just 11 days after the Legislative Council elections in 
Hong Kong. I have seen a lot of analysis about who won, who lost, and 
what these scorecards portend for the future. While there may be a 
variety of views on the election, we can cite some important outcomes 
that are indisputable. Perhaps of greatest significance, is the fact 
that the people of Hong Kong turned out to vote in record numbers, a 
clear message to the governments in Hong Kong and Beijing that they 
want--and value--democracy. They want it sooner rather than later. This 
has been a consistent message for some time, including the most 
prominent expression of this desire on July 1, 2003, when a half-
million people marched in the streets of Hong Kong protesting the 
attempt by the Hong Kong government to rush through passage of national 
security legislation.
    The voter turnout was impressive and owes much, in my opinion, to 
the desire of the people in Hong Kong to exercise their rights--and I 
think perhaps to respond in a positive way to China's regrettable 
decision last April to cut short the public debate about establishing 
universal suffrage for the election of the Chief Executive in 2007 and 
the fourth Legislative Council in 2008. Over 55 percent or 1.78 million 
of those eligible to vote in the direct elections went to the polls. 
Those who voted in the 30 functional constituencies--where there are 
human voters as well as corporate ones for seats representing a variety 
of professions, from educators and accountants to industry and 
finance--similarly turned out in record numbers, though the numbers 
were much smaller, just 135,000 or about 70 percent of those eligible.
    Some notable results include:.

         The democratic coalition came away with a total of 25 
        seats, though the Democratic Party itself found its number 
        reduced from 11 to nine. The coalition won an impressive 62 
        percent of the vote in the seats that were directly elected. A 
        couple of very high profile government critics--radio 
        personality Albert Cheng, who believes that he lost his job 
        because of intimidation by Beijing, and Leung Kwok-heung, 
        nicknamed ``longhair''--both won, and they will bring 
        perspectives that likely will give the Legislative Council a 
        more colorful cast.
         The pro-business Liberal Party, which leans toward 
        Beijing, but which had opposed national security legislation in 
        2003, won ten seats, including, for the first time in Liberal 
        Party history, two that were directly contested.
         The pro-Beijing Democratic Alliance for the Betterment 
        of Hong Kong won twelve seats, becoming the largest single bloc 
        in Legco, despite some predictions that it might be tainted by 
        backing Beijing on the decision to delay the introduction of 
        direct elections and universal suffrage for the 2007 Chief 
        Executive and the 2008 Legislative Council elections.

    The election, which may move Hong Kong away from the polarization 
of the past year, did highlight some shortcomings. We are well aware of 
allegations that there were a number of technical and procedural 
problems in some locations. We understand that the Electoral Affairs 
Commission is looking into them and will review the entire operation to 
correct any irregularities in time for the next election. In fact, the 
Electoral Affairs Commission has ordered the examination of voting in 
four functional constituencies where the number of ballot papers 
counted exceeded those issued to registered voters.
    But more fundamentally, there have been consistent charges of voter 
intimidation in the run-up to the election. The campaign period was, at 
times, marred by scandal mongering and allegations of not-too-subtle 
pressure from the central authorities. Here too, the Hong Kong 
government has promised to investigate any lead and to defend 
vigorously the integrity of its elections. That is appropriate, and the 
government's deeds should match its words. Our hope is that this 
election can be the foundation for a steady reversal of some of the 
negative trends in Hong Kong over the past year. The Hong Kong people 
have earned no less.
    The elections also showed that no group can stand pat and assume 
that the people will follow their lead. The government of Hong Kong may 
not have to face a democratic majority, but it certainly will need to 
continue to find ways to win Legco--and thus popular--support for its 
actions; it cannot govern through administrative fiat.
    Although Beijing issued a statement that the elections showed that 
the people of Hong Kong were masters of their house, a more accurate 
assessment would make note of the significant influence that Beijing 
will continue to wield on important matters related to Hong Kong's 
future. Meanwhile, it is becoming increasingly clear that Beijing too 
needs to find a way to mobilize genuine popular support for its vision 
of a Hong Kong united with the mainland in a ``one-country, two 
systems'' framework, forging a prosperous future together. After all, 
more than half of the votes cast in this election were for supporters 
of the democratic coalition. I am not suggesting that some members of 
the Democratic Alliance for the Betterment of Hong Kong and the Liberal 
Party are not also interested in promoting and supporting the expansion 
of democracy in Hong Kong. But I do firmly believe that Beijing's 
vision of Hong Kong can best be realized by moving more rapidly toward 
the goal of a genuine representative government--one which would meet 
the aspirations of the vast majority of the people of Hong Kong. One 
important element of the Basic Law, Hong Kong's mini-constitution, was 
realized in 2004 with the expansion of directly elected seats from 24 
to 30. It is important that this trend be continued, if the intent of 
the Basic Law--a Hong Kong governed by Hong Kong people--is to be 
realized.
    We have a great deal of important work to do with this new 
Legislative Council in Hong Kong and with the Administration there, but 
let me note that nothing that happened in this election changes 
America's underlying policy toward Hong Kong, a policy which also 
promotes important American interests. Both before and after the 1997 
reversion, our goal remains--to the best of our ability--to help the 
people of Hong Kong preserve their prosperity and way of life. 
Elections do just that. The people's representatives will now have an 
opportunity to justify their selection, doing the sorts of things that 
legislatures normally do--enact laws, approve budgets, hold the 
government accountable for its actions, and openly debate issues that 
are in the public interest. We wish the Hong Kong government, the Hong 
Kong legislature, and the Hong Kong people well in this task and are 
prepared to assist to the best of our ability in helping them.
    I believe that the U.S. Congress has the same view of the situation 
and that this is behind the spirit of the recent Congressional 
resolutions on Hong Kong, which support the people of Hong Kong in 
freely determining the pace and the scope of constitutional 
developments.
    Let me offer some general comments about Hong Kong and about 
America's view of it. The 1984 Joint Declaration of the UK and the PRC, 
the subsequent promulgation of the Basic Law, and Hong Kong's 
sustained, autonomous management of its day-to-day affairs laid a 
foundation for Hong Kong's continued economic success, as well as its 
political development. The United States embraces and supports Hong 
Kong's uniqueness through passage and implementation of the Hong Kong 
Policy Act of 1992 which established the legal authority to treat Hong 
Kong as an entity distinct from the People's Republic of China.
    America has a profound interest in--and commitment to--the success 
of Hong Kong as a vibrant democracy. Some 45,000 Americans live and 
work there. Hong Kong hosts more than 1,100 American firms, 600 of 
which have regional operational responsibilities and employ a quarter 
of a million people. Cumulative American foreign direct investment in 
Hong Kong, a region with nearly seven million residents, totaled over 
$44 billion at the end of 2003. We also have considerable trade 
interests in Hong Kong. Total exports of goods and services to Hong 
Kong amounted to $13.5 billion in 2003, while imports of the same 
reached approximately $8.9 billion, making Hong Kong our 14th largest 
trading partner.
    With global trade in goods at $455 billion, Hong Kong has a vital 
interest in liberalizing trade internationally. We have counted Hong 
Kong among the most vocal and effective supporters of open market 
principles, and, more generally, Hong Kong has been at the forefront of 
efforts in the Doha Round to reduce barriers to trade. Hong Kong hosted 
an important APEC Telecommunications conference in May and will host 
the next WTO ministerial meeting next year.
    Beyond the trade and investment statistics, there exists the 
evolving but vital bilateral cooperation with Hong Kong authorities 
which greatly enhances America's security. Hong Kong, the single 
largest source of U.S.-bound sea containers, joined the Container 
Security Initiative in September 2002 and made its program operational 
eight months later in May 2003. In joining the CSI, the Hong Kong 
Government underscored our common interest in protecting the smooth 
functioning of the global trading system in the face of terrorist 
threats. In addition to CSI, Hong Kong, the second largest financial 
market in Asia, has worked closely with us and through the premier 
global institution for attacking money laundering, the Financial Action 
Task Force, which Hong Kong chaired in 2002, to find ways to cutoff 
terrorist access to financial sources. Law enforcement cooperation, 
across-the-board, has been excellent and targeted at protecting the 
safety and well-being of the people of Hong Kong and America alike. And 
Hong Kong has been a welcoming port-of-call for visits by American 
ships.
    I would also note that Hong Kong has an effective, autonomous, and 
transparent export control regime that is strengthened through pre-
license checks and post-shipment verification of Hong Kong companies by 
U.S. Department of Commerce representatives. Hong Kong government 
officials are working with us to strengthen our already close 
cooperation. They told Deputy Under Secretary of Commerce Mark Foulon 
earlier this month that these kinds of controls are important to ensure 
that our trade rests on a solid security foundation and that they would 
address proactively all areas of concern as soon they arose. Our 
exports of high technology commodities to Hong Kong depend on the 
integrity of Hong Kong's separateness and on the effective and vigorous 
enforcement of Hong Kong's export control rules and regulations.
    Hong Kong's openness, its international status, its welcoming 
attitude to businesspeople throughout the world, its active 
participation in economic organizations, including the World Trade 
Organization--these are elements of Hong Kong's comparative advantage. 
The Cato Institute once again recognized just how open and free Hong 
Kong's economy is by naming it--for the 8th consecutive year--the 
freest economy according to the findings in its annual report on 
Economic Freedom of the World.
    The people of mainland China benefit from Hong Kong's openness as 
well. Hong Kong has played a key role in helping alter the landscape in 
China, especially in South China, where ten million workers or more in 
at least 65,000 Hong Kong-run factories are gainfully employed and 
learning how to do business with an international focus, and according 
to free market principles. Hong Kong provides access to capital markets 
and listings on the Hong Kong stock exchange for PRC companies that are 
also becoming more international in their orientation everyday.
    Democracy is predicated on the assumption that there will be 
disagreements, and disagreements are settled in democracies by the 
ballot box. Today's disagreements in Hong Kong are over how best to 
govern and, for the most part, there is a legislature that is balanced 
with a lot of different views, but with general agreement that Hong 
Kong's future is best served by better communication between government 
and the governed. An unproductive debate on whether some in Hong Kong 
are being influenced by outsiders is the last thing that men and women 
of goodwill should engage in, What will work best is for all parties, 
across the political spectrum in Hong Kong, to forge responsible 
positions that contribute to the resolution of Hong Kong's governing 
structure and its prosperity.
    Our role is clear. We want to see the Hong Kong people succeed. 
They deserve a stable and prosperous home. The best means to that end, 
in our view, is the steady evolution of Hong Kong toward its democratic 
future. That future should rightfully be in their hands, for them to 
decide. We don't seek to usurp their decisions, nor do we intend to 
interfere with the Hong Kong people's relationship with their central 
government in Beijing. But the United States will always stand for the 
fundamental principles of democracy, and we will not shrink from 
declaring our core principles. We certainly won't agree with those who 
argue that democracy is a luxury to be offered to a people only at some 
distant point in the future when they are somehow more prepared for it. 
The most telling point that can be made about Hong Kong's legislative 
election is this: the Hong Kong people proved again that they have the 
wisdom and maturity to be trusted with universal suffrage. They are a 
proud, smart, capable, and industrious people who deserve the best 
possible chance to succeed in the 21st century.
    With that Mr. Chairman, I will be pleased to take your questions.
                                 ______
                                 

                 Prepared Statement of Michael C. Davis

                           september 23, 2004
    Mr. Chairman, let me first express my appreciation for holding this 
hearing on the Hong Kong election. The development of democratic 
governance in Hong Kong has long been a matter of great interest in the 
United States. In the recent flurry of reports over the Hong Kong 
election some international media reports highlighted that Hong Kong 
people had chosen stability over democracy. I think this misreads voter 
preferences in Hong Kong. An assessment of the complexity of and 
obstructions built into the Hong Kong electoral system may assist your 
assessment of the September 2004 Legislative Council election in Hong 
Kong. At 55.6 percent of the registered voters, the September 12th 
election had the highest voter turnout in Hong Kong history. As with 
the previous high turnout, just after the handover in 1998, this 
increased voter interest may reflect growing public concern with 
governance in Hong Kong. The election has exposed a number of problems 
in respect of Hong Kong's political development under the commitments 
of the Sino-British Joint Declaration and the Basic Law. While there 
were some concerns about the balloting process, more serious concerns 
have arisen over the basic fairness of the election.
    Respecting the former, the balloting, though generally successful, 
was occasionally marred by acts of incompetence in the maintenance and 
availability of ballots. This involved some instances where over-filled 
ballot boxes lead to delays in allowing some voters to cast their vote. 
Some members of the democratic camp in Hong Kong have worried that when 
this became public knowledge it may have deterred some voters from 
coming to the polls. As a consequence of this problem some ballot boxes 
were allegedly opened in an inadequately supervised manner in order to 
tamp down the ballots inside. There may have been some diminution of 
these difficulties and greater confidence in the voting process if 
election officials had taken greater advantage of local and 
international election monitors who were on hand to observe and offer 
advice. Other than these cases of seeming incompetence there appeared 
to be generally an acceptable level of performance in respect of the 
mechanics of the electoral process.
    More serious electoral problems arose in respect of the overall 
fairness of the election and its implications for Hong Kong's political 
development. Two key areas are of concern: (1) the fundamentally 
unequal voting system, and (2) the level of intimidation and seeming 
official bias that preceded the election. Problems in these areas 
undermine public confidence in the ``one country, two systems'' model 
and represent a serious challenge to Hong Kong political development. 
Chinese and Hong Kong officials should be encouraged to adopt a firm 
timetable to move forward on Hong Kong's political reform agenda as 
required by the Sino-British Joint Declaration and the Basic Law.
                       the unequal voting system
    The stark denial of equal voting rights in this system is most 
simply revealed in the numerical outcome of the election: overall, 
candidates from the pan-democratic camp garnered approximately 62 
percent of the vote but were allotted only about 41 percent of the 
seats in the Legislative Council. This odd numerical outcome is a 
consequence of a voting system designed to insure an electoral outcome 
favorable to the existing government and its policies. This has been 
combined historically with a deep-seated distrust of pro-democracy 
politicians. Given the relative moderation of the democratic camp in 
Hong Kong this distrust has long been unwarranted. Under the current 
system, driven by these concerns, fully half of the 60 seats in the 
Hong Kong Legislative Council are filled by legislators from functional 
constituencies representing in total just under 200,000 voters. Of the 
30 functional constituencies ten have purely human voters, while 20 
have either corporate voters alone or a mix of corporate and human 
voters. The bias of these constituencies toward the pro-government/
Beijing position is revealed in the fact that pro-democracy candidates, 
in spite of winning 50 percent of the functional constituency vote, 
were only able to take eight of the functional constituency seats, the 
highest number they have taken in this sector to date over three 
elections. Eleven functional constituency candidates even ran 
unopposed, producing for the pro-government camp without contest nearly 
two-thirds of the seats that pan-democratic candidates won in the hard 
fought geographical constituency component of the election.
    Only 30 legislators are directly elected in geographical 
constituencies by the 3.2 million registered Hong Kong voters. Even for 
the directly elected seats the government has devised a proportional 
representation system which aims to insure that minority parties--in 
Hong Kong generally meaning pro-government/Beijing parties--take 
several of the seats with only a small fraction of the vote. This 
system entails multi-seat districts with voters having only one vote 
for their favored candidate list. The purpose is allegedly to allow 
representation of minority parties and candidates. The consequence in 
Hong Kong has tended to be to gain some additional seats (in addition 
to those virtually guaranteed seats in the functional constituencies) 
for pro-government politicians. If one appreciates that the government 
itself is not directly elected then the deleterious consequence for 
democracy can be appreciated. This system allows pro-Beijing politician 
supported by a minority of voters to dominate the Legislative Council. 
The outcome in this election is that 34 or 35 (depending on whether one 
legislator is deemed an independent) seats are in the pro-government 
camp, while 25 are held by pro-democracy politicians. The pro-democracy 
camp effectively lost the election with 62 percent of the popular vote.
    This proportional representation model used for the 30 geographical 
constituency seats in Hong Kong has other flaws. Under this system the 
need for parties and politicians to agree on the number and order of 
candidates on a list breeds endless conflict in and among political 
parties from all political camps, as parties seek to devise electoral 
lists that satisfy the electoral ambitions of their core members and 
allied parties. At the same time various parties in both the pan-
democratic and the pro-government camps are put to predicting the level 
of support and devising the correct number of lists so as to maximize 
the number of seats taken in the direct election. A miscalculation in 
this regard could result in a list garnering a large number of votes 
that practically do not count toward the electoral outcome. This is in 
fact what happened in the present election for the Hong Kong Island 
constituency, resulting in an even split of the six candidates between 
the pro-democracy and pro-government camps, even though the pro-
democracy camp won the popular vote by approximately 200,000 as against 
the pro-government camp's 140,000 votes. This system not only confuses 
and angers voters but also undermines democracy by wasting many votes. 
Even within the parameters of a proportional representation system 
simply allowing voters to indicate a second choice so as not to waste 
votes would contribute to greater concurrence with voter intentions.
                 intimidation of voters and candidates
    The September 12 election was preceded by months of political 
intimidation, first over political reform and then over the election 
itself. This intimidation and the doubts that preceded it raise grave 
concern for Hong Kong's political future. The current democracy debate 
followed on the heals of the large demonstrations against national 
security legislation by over a half-million demonstrators on July 1st 
2003. The overbearing and dismissive way in which the government had 
presented this legislation had incensed Hong Kong people and signaled 
the need for political reform. The national security legislation was 
eventually withdrawn in the face of such severe opposition. In spite of 
popular outrage over the style of governance the local and Beijing 
governments have not been significantly responsive to emerging calls 
for democracy. In late 2003 and early 2004 Beijing took an increasingly 
assertive position against democratic reform. Retreating to its long-
establish hostility toward the democratic camp and democratic reform, 
Beijing launched a campaign against democracy and severely attacked the 
democratic camp. This campaign constituted the backdrop to the current 
election. Statements from Beijing officials and supporters initiated a 
level of intimidation that had not been seen in Hong Kong since the 
attacks on the British Hong Kong government in the mid 1990s. These 
attacks progressively escalated as follows:
    First, Beijing officials and their supporters launched the so-
called patriot debate. Hong Kong was told that under any democratic 
reform ``patriots must be the main body of those who govern Hong 
Kong.'' While Deng Xiaoping was cited for this requirement, Deng was 
frequently on record as indicating that patriots do not exclude people 
who criticize the communist party. Categories of democracy activist who 
were labeled unpatriotic in this campaign included those who were said 
to be subversive of mainland authorities, those who allegedly supported 
Taiwan independence, those who raised the flag of democracy but were 
accused of being running dogs for Western forces, and those who opposed 
the Article 23 national security legislation. The patriot debate 
reached its zenith when former Democratic Party Chair Martin Lee was 
attacked for testifying before a US Senate hearing on Hong Kong. He was 
vilified by a variety of leftists but the greatest attack came when Mr. 
An Min, a PRC Vice Minister of Commerce attacked even Martin Lee's 
father, General Li Yin-wo, who had been an officer in the KMT 
resistance during World War II.
    The second stage of the attack on democracy was to offer a steady 
diet of Deng Xiaoping statements arguing the meaning of ``gradual and 
orderly progress.'' This was cherry picked to suit the moment and again 
with no Basic Law support. As it became apparent that ``Deng thought'' 
could be used on either side this barrage slowed down. Ultimately, one 
suspects the best source of Deng thought is the Basic Law, which is 
better subject to current interpretation--rather than vague and 
contradictory interpretations. Such is more consistent with the rule of 
law.
    The third stage of this attack on democratic reform became even 
more aggressive when the Beijing media started publishing threats to 
dismiss the Legislative Council if democrats took more than 30 seats in 
the September elections. The China Daily warned, ``If those who try to 
use democracy to exclude the Communist Party of China and `respect 
Taiwan self-determination' take the majority of seats in Legco, Hong 
Kong's executive-led government will collapse and the central authority 
and national security will be severely challenged.'' The local pro-
Beijing paper, the Wen Wei Po, quoted an unnamed Beijing official as 
saying, ``I have a knife. Usually it is not used but now you force me 
to use it.'' These statement were understood locally to threaten 
dissolution of the Legislative Council if pro-Beijing parties lost 
control in the next election. It is true that the Basic Law has 
provisions specifying that the Chief Executive may dissolve the 
Legislative Council, after consultations, if it refuses to pass bills 
proposed by the Chief Executive. But these provisions require a new 
election of a new Legislative Council and specify that if the 
Legislative Council again refuses to pass such bill then the Chief 
Executive must resign. It must be seriously in doubt whether the 
current non-elected Chief Executive would willingly subject himself to 
what amounts to a referendum. This actually points to another argument 
for democratization, as the Basic Law constitutional design clearly 
contemplates the use of such provisions by an elected Chief Executive 
with political support. The only alternative to using these provisions 
for the purpose implied in the above comments is the declaration of a 
state of war or turmoil under Article 18, but such extraordinary 
provision only indicates the application Mainland laws, not dismissal 
of government.
    The fourth phase in the crisis was to lecture Hong Kong on the 
``spirit'' of the Basic Law and the demerits of ``fake democracy.'' 
Hong Kong was told by a mainland ``legal expert'' that the spirit, not 
words, is the key to the Basic Law. The spirit in question appeared to 
be a very mainland-regarding spirit and offered little regard to the 
long ago assurances that Hong Kong people should put their hearts at 
ease and that the rest of the world might rely on Hong Kong's autonomy. 
The pro-Beijing business elite has also weighed in on this spirit, 
asserting a Hong Kong by and for business interests and worrying about 
a welfare state. At this stage the extreme rhetoric had caused such a 
negative response in Hong Kong it seemed to be called off.
    The fifth phase in the current process was launched by the 
announcement that the NPC Standing Committee would interpret the above 
noted reform provisions in the Basic Law. The NPC Standing Committee 
made this interpretation behind closed doors with the advice of a Basic 
Law Committee made up of six mainland and six local members, the latter 
all being from the pro-Beijing camp. This interpretation essentially 
added the requirement that the Chief Executive initiate any reform 
process by issuing a report. The Chief Executive and Task Force reports 
that quickly followed effectively imposed a variety of socio-political 
conditions on reform. On April 26, 2004, a further NPC Standing 
Committee interpretation in response to the Chief Executive's report 
largely ruled out significant democratic reform. Essentially, Beijing 
has seized for itself control over not only the approval but the 
initiation of any future reform effort. Unless Beijing has a change of 
heart it is likely that it will only allow future reforms that retain 
Beijing control over critical political outcomes.
    A sixth stage in the reform debate has seen Beijing, after its 
April 26th interpretation, seek to gain a favorable electoral outcome 
in the September 2004 Legislative Council election. This has been done 
through a variety of strategies. There have been allegations of heavy-
handed tactics in registering voters and allegations of intimidation of 
popular radio talk-show hosts. More clearly visible has been support 
for pro-Beijing candidates (and opposition to democrats) in the Central 
Government controlled media and soft inducements toward patriotic 
support through military parades and visits by Olympic medalists. The 
carrot of better dialog with the democrats, aimed at reducing the size 
of democratic support in public demonstrations and elections has also 
been tried. It is not clear whether there is any hope of reversal of 
the anti-democrat stance. During the election period Beijing appeared 
to articulate support for pro-Beijing politicians in various pro-
Beijing newspapers, especially the Hong Kong edition of the China 
Daily. There have also been various accusations of Beijing meddling in 
organizing the pro-Beijing camp, in deciding who should stay in or drop 
out of the elections. During this period Mainland public security 
officials also arrested on prostitution charges and detained without 
trial for six months of reeducation a member of the Democratic Party 
who was running for the Legislative Council. The daily diet of drawing 
attention to Democratic party difficulties in pro-Beijing papers has 
generally been seen as an effort to gain local support for pro-Beijing 
candidates.
               the future of ``one country, two systems''
    The basic constitutional and electoral design in Hong Kong has long 
sought to privilege the Beijing appointed local government and its 
supporters. That elected Hong Kong politicians swear to uphold the 
central government is, of course, a legitimate Beijing concern. The 
problem for Hong Kong has been the degree of Beijing's concern over 
political loyalty and the measures taken to insure full political 
support. One would like to see a more generous posture that aimed to 
keep the fundamental democracy and human rights commitments required by 
the Sino-British Joint Declaration and international human rights law. 
The Sino-British Joint Declaration provides for a high degree of 
autonomy in Hong Kong and that democracy and basic civil liberties be 
protected in accordance with international standards. By inviting 
international support for its ``one country, two systems'' model China 
has invited international concern for these commitments.
    In respect of democracy, the Sino-British Joint Declaration 
requires that members of the Legislative Council be chosen by 
elections. The Hong Kong Basic Law, in this respect, reflects the above 
noted Beijing anxieties, by providing for a very slow pace of 
democratic development. Articles 45 and 68 and Annexes I and II of the 
Basic Law outline the method and pace of democratic development. These 
articles specify the ultimate aim as full universal suffrage both in 
respect of the Chief Executive and the Legislative Council. The annexes 
in question provide that the method for choosing the Chief Executive 
and the Legislative Council can be changed for elections subsequent to 
2007. In April of 2004 the Chinese government, in interpreting the 
Basic Law, rejected any substantial changes for the upcoming 2007/2008 
elections. Many pro-democracy politicians have run on a platform of 
trying to change this position and encourage a more firm and prompt 
timetable for democratic reform.
    An additional factor making democratic reform of great urgency is 
the political impotence of the Legislative Council. The Legislative 
Council is currently restricted from proposing bills on public policy 
and bills that require public expenditure. A split voting system 
between directly elected and functional legislators further ties the 
hands of legislators who would like to take the initiative on matters 
of public concern in Hong Kong. The Basic Law provides a way out of 
this by allowing for a change in both the method of election and the 
methods for voting on bills from 2007. These provisions on reform were 
the source of the recent tension over political reform. The democratic 
camp pushed for democratic reform and the Beijing government refused 
such reform, leaving Hong Kong largely polarized over its political 
future. This debate became the basis for the extreme intimidation over 
the past few months, which carried over into the just-completed 
election.
    In considering the future of ``one country, two systems'' in Hong 
Kong, it is obvious that the time for establishing a substantial reform 
agenda is fast approaching. Without reform it appears that the level of 
trust in government will continue to erode. This will mean a government 
with decreasing legitimacy prone to crisis management and 
indecisiveness. Rather than congratulating themselves for avoiding a 
train wreck in the current election local and central officials should 
recognize the need for political reform before confidence is eroded 
further. The costs to Hong Kong of continued dithering over political 
reform can be enormous. Hong Kong is clearly positioned quite favorably 
for full democratic development. The levels of civic engagement and 
economic development both point to a society well positioned for a 
democratic transition. Without forthright movement on reform the risk 
that Hong Kong will fall back from this favorable posture and enter a 
phase of continuing political crisis and lost public confidence is 
high.
    At this stage the only obstacle to democratic reform appears to be 
Chinese government anxiety about democracy and democrats. The cure to 
this I believe is greater Beijing engagement with the pro-democracy 
camp. China's leaders, the Hong Kong Government and pro-Beijing 
politicians should be encouraged to take a more inclusive and tolerant 
attitude toward democracy and democrats. The costs of stifling Hong 
Kong's political development have already been evident in uncertain 
governance and a series of crises that have emerged in Hong Kong since 
the handover. A government which has no popular legitimacy in a 
democratic process, supported by unpopular legislators who do its 
bidding, has clearly angered the Hong Kong public on several occasions. 
This was especially evident in the mass demonstrations over national 
security legislative proposals in 2003 and over democracy in 2004. A 
more inclusive system of democratic governance offers much greater 
promise for Hong Kong and China and would better address the human 
rights concerns of the local and international communities. A movement 
toward greater inclusiveness would appear to be the next step in Hong 
Kong's democratic transition. From such posture the Beijing government 
should work out a clear time-table for full democratic reform to be 
achieved as soon as possible.
                                 ______
                                 

              Prepared Statement of William H. Overholt\1\

                           september 23, 2004
                                summary
    The recent Hong Kong election was noteworthy for:
---------------------------------------------------------------------------
    \1\ The opinions and conclusions expressed in this testimony are 
the author's alone and should not be interpreted as representing those 
of RAND or any of the sponsors of its research. This product is part of 
the RAND Corporation testimony series. RAND testimonies record 
testimony presented by RAND associates to federal, state, or local 
legislative committees; government-appointed commissions and panels; 
and private review and oversight bodies. The RAND Corporation is a 
nonprofit research organization providing objective analysis and 
effective solutions that address the challenges facing the public and 
private sectors around the world. RAND's publications do not 
necessarily reflect the opinions of its research clients and sponsors.

         Very gradual democratization;
         Recent new restrictions on the pace of future 
        democratization that clearly frustrate a majority of Hong Kong 
        people;
         Chinese central government fear of the democracy 
        movement leading to repressive tactics that are largely legal 
        but ultimately contrary to its own interests;
         Some unsettling incidents of legal and illegal 
        intimidation prior to the election;
         A high turnout election in a calm atmosphere with an 
        outcome that was not affected by the incidents;
         A voting majority above 60 percent for pro-democracy 
        candidates;
         An electoral system that nonetheless translated the 
        pro-democracy majority vote into a majority of seats (35/60) 
        for pro-government conservatives;
         A clear mandate for a strategy of democratization and 
        moderation;
         Weak, semi-competent, scandal-ridden political parties 
        poorly representing their social bases;
         A democracy movement caught between a rising, 
        frustrated consensus on the necessity of more rapid 
        democratization and a deepening consensus against direct 
        confrontation with Beijing;
         Deep division in China over proper policy toward Hong 
        Kong;
         Considerable hope in Hong Kong for an understanding 
        that accommodates both Hong Kong's democracy aspirations and 
        China's security concerns;
         Policy proposals in the U.S. that expressed 
        understandable frustration but risked undermining the democracy 
        movement.
    gradual democratization/absence of democracy/rising frustration
    Hong Kong has been experiencing very gradual democratization. Up to 
the time when China demanded Hong Kong back from the British, 100 
percent of legislators were appointed by the British Governor. 
Effective with this election, 0 percent of legislators are appointed.
    Notwithstanding this gradual improvement, the system has not 
progressed to the point where even very popular views can effect 
structural change or ensure policy change. China's central government 
handpicks the Hong Kong Chief Executive through a carefully chosen 
small committee that has no autonomy. The central government has less 
control over the legislature, but the elitist functional constituencies 
constituting half of the legislature (30/60) heavily weight electoral 
outcomes in favor of candidates who follow the Chief Executive's 
wishes; that gives the Chief Executive effective control over most 
policy issues.
                      dirty events/clean election
    A number of intimidating incidents and violations of people's 
freedoms occurred prior to the election. Beijing efforts to contain the 
democracy movement have been directed primarily not at this 2004 
election but at staunching pressures for 
universal suffrage elections in 2007-8. Chinese officials and media 
announced in late 2003 and early 2004 that Hong Kong could only be 
ruled by patriots and put a newly restrictive interpretation on 
``patriots.'' The Politburo Standing Committee issued a quasi-
constitutional ``interpretation'' of Hong Kong's Basic Law that barred 
universal suffrage elections in 2007-8. (China has the unambiguous 
legal right to make that decision; the issue is not whether it is legal 
but whether it is sensible policy.) A Chinese fleet sailed through Hong 
Kong harbor for the first time since 1997, and the Peoples Liberation 
Army held its first-ever military parade in Hong Kong. Equally 
prominent were carrots designed to win favor from Hong Kong people, 
most notably measures that successfully reflated the Hong Kong economy, 
visits by Olympic athletes and a finger of Buddha, conciliatory albeit 
uncompromising visits from Beijing dignitaries, and gradually 
increasing willingness to consult quietly with pro-democracy figures.
    Second, and quite separately, there was also a series of human 
rights and democracy violations affecting the current election whose 
origin and intent were more obscure. There were isolated reports of 
attempts from people on the mainland side of the border to influence 
votes, including demands for cell phone photographs of their completed 
ballots. Three radio station hosts resigned after alleged intimidation. 
A Democrat Party candidate was imprisoned for soliciting a prostitute. 
Office fronts belonging to three prodemocracy figures were vandalized. 
Some commentaries lumped such incidents together as part of a concerted 
campaign by Beijing to influence the election.
    The reality behind these violations was more complex. Some were 
unambiguous violations of ambiguous origin. Some may or may not have 
been actual violations. The head of a movement opposing further 
landfills in Hong Kong's harbor was threatened, resigned his position, 
and left Hong Kong. The vandalism definitely occurred. In all 
probability there were some actual cases of people in China trying to 
impose voting choices on Hong Kong people.
    However, unlike the clear effort to repress demands for universal 
suffrage in 2007-8, the origins and intents of these violations related 
to the 2004 election remained unclear. It is difficult to imagine 
Beijing taking a serious interest in the Save the Harbour movement, 
easier to imagine action by enraged local business interests, and 
successor Christine Loh seems not to have been intimidated. Radio host 
Albert Cheng, who had been physically attacked in the past after for 
publicly denouncing triad criminals, said he resigned because of 
threats, but he then ran for election, giving his abrasive views a much 
bigger megaphone, and won. Apparently he felt intimidated about one job 
but not the other; he certainly did not moderate his views.Radio host 
and former conservative politician Allen Lee resigned following what he 
believed was an intimidating phone call that referred to his virtuous 
wife and beautiful daughter; it transpired that the phone call came 
from a retired Chinese official, Cheng Sousan, who had made such calls 
to quite a number of people, who apparently didn't feel threatened, and 
Beijing immediately identified the person in question. Was this 
intimidation, or an elderly gentleman seeking news?
    Democrat Party candidate Alex Ho was arrested for soliciting a 
prostitute. Fearful democrats could reasonably infer malice when a 
single Democrat was arrested at this particular time although numerous 
other politicians, officials and executives were vulnerable to arrest 
for the same offense over the years and few or no others have been 
arrested. On the other hand, despite the scandal, the Hong Kong 
government certified Ho as a candidate even though it might have been 
able to interpret the law restrictively. If the goal was to hurt the 
Democrats in the election, Alex Ho was a strange target, since nobody 
gave him any chance of election. Was such an arrest part of a grand 
Beijing intimidation plan or some local prosecutor trying to impress 
his boss?
    I do not know conclusively whether Beijing strategy or local 
political entrepreneurship or business vengeance was behind any of 
these cases. Anyone who claims to know must elucidate details and show 
evidence. It is difficult not to notice that Beijing's repressive 
posture regarding 2007-8 exhibited a very clear strategy, with sticks 
and carrots clearly proportionate to the (regrettable) goal it sought 
to achieve, whereas the incidents affecting the 2004 election made no 
strategic sense either individually or as a group. To put it another 
way, Beijing has so far taken a clear repressive stand on the issue of 
structural changes in the electoral system, but there is as yet no 
persuasive evidence that it is interfering with the election process 
itself.
    Third, there were occasions of election day incompetence. Long 
lines formed at some polling booths and some ballot boxes were not big 
enough to accommodate the consequences of larger turnout, larger 
ballots, and crumpled ballot sheets. There is an argument that pro-
democratic voters tend to vote later and therefore may have suffered 
more discouragement from late-day delays. Conversely, there are reports 
of more votes than eligible voters in some of the functional 
constituencies won by democratic groups.
    Through the fog of conflicting evidence on such incidents, five 
things stand out.

         The functional constituency structure is designed to 
        allocate seats disproportionately to conservative forces and 
        did so.
         No commentator of standing, including the most 
        partisan, has argued that any of these instances of 
        intimidation, rights violations or incompetence significantly 
        affected the basic shape of the election outcome. Exit polls 
        and election results tallied to the degree expected in a proper 
        election. The balloting process was basically clean and calm 
        despite the problems.
         In longer perspective the main consequence of the 
        anti-democratic incidents has probably been to broaden and 
        deepen the appeal of the democracy movement.
         There has been a permissive atmosphere in which 
        threatening incidents have become more common than in the past. 
        The Hong Kong government has an indisputable responsibility for 
        ensuring an atmosphere of rigorous observance of people's 
        rights, and it will at some point have to provide a thorough 
        account of how vigorously it protected rights, what scale of 
        investigative resources it devoted to identifying potential 
        malefactors, and most importantly whether the permissive 
        atmosphere disappears.
         The body of Hong Kong's freedoms of speech, press, 
        religion, assembly, rule of law and so forth, remains intact, 
        but has accumulated dents and scratches at a rate that raises 
        concerns.

    The real issue for Hong Kong democracy is not the detail of this 
legislative election but whether there will be substantial, early 
progress toward a system that would give Hong Kong people more direct 
leverage over the officials and decisions that affect them or whether, 
on the contrary, democratization will be indefinitely stalled.
                          the election outcome
    The election itself enjoyed a record turnout of 55.6 percent and a 
calm atmosphere. Clearly a majority of Hong Kong people felt that their 
votes mattered and that they were comfortable voting.
    Pro-democratic groups got over 60 percent of the vote but only 25 
of 60 seats. Beijing takes heart from conservatives' continued 
numerical control of the legislature, while democrats demonstrated, and 
slightly increased, their dominance of the popular vote. Among the 
conservatives, the Liberal Party gained substantially and won its first 
ever popularly elected seats. Much of its popularity was due to the 
fact that it has not been a conservative rubber stamp. Liberal Party 
leader James Tien resigned from the government last year to oppose the 
controversial anti-subversion law, and the Liberal Party platform calls 
for universal suffrage elections in 2012. Hence the Liberal Party's 
gains demonstrate simultaneous support for wider suffrage and for 
moderate strategies.
    While the results send a strong message to Beijing that Hong Kong's 
majority wants wider suffrage, they also demonstrate a continued 
embrace of moderation by a large center of gravity of the electorate. 
There have been huge controversies over the antisubversion bill of 2003 
and over suffrage for the 2007-8 elections, but and the Hong Kong 
majority is standing firm about these issues but is equally firm about 
avoiding gratuitous confrontation.
    An important caveat to the electorate's embrace of moderation comes 
from the elections of abrasive former radio commentator Albert Cheng 
and disruptive Trotskyist ``Long Hair'' Leung, which constitute a 
warning that segments of public opinion can take a different turn if 
aspirations are frustrated too long. Cheng is the Ralph Nader of Hong 
Kong and Leung is analogous to a leader of the old 1960s ``Weatherman'' 
faction of Students for a Democratic Society. Conservative groups 
associate opposition to democracy with ``stability,'' but the election 
of ``Long Hair'' indicates that rigidity and social frustration could 
cause future instability.
    Collectors of historical ironies should note that the single most 
unsettling aspect of this election for Beijing was Hong Kong's first-
ever election of a disruptive Marxist, and the most upsetting thing for 
Hong Kong's democrats was Beijing's insistence on further entrenching 
rules that give special advantages to Hong Kong's leading capitalist 
interest groups.
                        an immature party system
    It would be a mistake for either Washington or Beijing to view the 
election results as a clear image of the electorate's sentiments. Not 
only are the rules such that democratic groups' majority of the popular 
vote translates into a minority of seats, but also immature political 
parties only partially translate the breadth and intensity of 
democratic sentiment.
    Democratic political parties are split and much weaker than the 
social forces they represent. There are several distinct parties among 
the democracy advocates. The Democratic Party of Hong Kong has a total 
of 638 members (according to its website on September 15, which cites 
July 2004 figures) and negligible ability to raise funds from Hong Kong 
citizens. It is deeply divided between an elitist leadership and a 
populist base, and between older leaders who are confrontational toward 
China and younger supporters who are far less so. It lacks distinctive 
policies on the principal social and economic issues facing Hong 
Kong.\2\
---------------------------------------------------------------------------
    \2\ See for instance its website statement of education policy, a 
subject where major reform is a vital issue for Hong Kong's future: 
http://www.dphk.org/e site/index e.htm.
---------------------------------------------------------------------------
    For some years new leadership, under Yeung Sum, has run the 
Democratic Party of Hong Kong, with Martin Lee continuing to serve as a 
primary spokesman toward foreigners because of his exceptional command 
of the English language. In addition, other democratic groups have 
arisen. Audrey Eu is now the most popular figure in the democratic 
movement, running first in popularity among legislators compared to 
Martin Lee's seventh, and her Article 45 Concern Group has, according 
to HKU POP polls, slightly exceeded the Democratic Party in name 
recognition among the electorate.\3\ Political figures like Audrey Eu, 
Ronnie Tong, Alan Leong, and Margaret Ng are coalescing into what may 
become a formal political party.
---------------------------------------------------------------------------
    \3\ See the Hong Kong University Public Opinion Poll surveys of 
August 9-16, 2004, and September 14, 2004. http://hkupop.hku.hk/
english/release/release241.html
---------------------------------------------------------------------------
    The conservative DAB, which won the most seats, is better organized 
than any other party. Its links to its constituents are based on 
detailed study and emulation of the major U.S. parties. DAB events are 
well funded due to the contributions of the local subsidiaries of 
Chinese state enterprises--a large advantage in any polity. It receives 
loyal support from the trade union leadership. (Over 90 percent of the 
union functional constituency vote went to conservative groups.) But it 
has lost credibility from support of last year's government-proposed 
anti-subversion law, from abandonment of past promises to advocate 
democratization, and from some deeply ideological leadership. In the 
previous election, it was severely set back by leadership scandals, and 
its improved position this time is largely a bounce-back from those 
scandals.
    The issue of outside influence over Hong Kong campaigns continues 
to have great salience. Many in China charge that the democratic 
movement is manipulated by the United States and support their charges 
by citing Martin Lee's long reliance on an American strategy advisor, 
his vigorous solicitation of foreign support, and his pre-1997 
characterization of laws restricting foreign political party donations 
as a human rights abuse. Grants from American NGOs, his warm welcome in 
Washington in March of this year, and the National Endowment for 
Democracy's presentation to him of a democracy award modeled on the 
statue of freedom in the 1989 Tiananmen Square demonstrations have been 
emotionally gratifying for some Americans, but their main consequence 
has been to bolster the hardliners in Beijing and to fuel controversy 
inside Hong Kong's democracy movement. In recent years, Lee's foreign 
support has undoubtedly hurt his party more than it has helped. Every 
conversation I have about Hong Kong in China, even with the most 
sympathetically liberal figures, quickly homes on this issue of U.S. 
manipulation.
    Having said that, anyone who has lived in Hong Kong, as I have, 
knows that those long lines of middle class families demonstrating 
against tough anti-subversion laws and in favor of greater 
democratization come from the heart and could not imaginably be 
mobilized by foreigners. U.S. favoritism toward Lee may in fact have 
weakened the ascent of stronger leaders in his own party and also 
slowed the competitive rise of parties more likely to be able to 
consolidate the democratic movement. A lesson from the business world: 
any party that depends for long periods on foreign NGO donations is 
never going to learn to raise money itself. The rising stars of the 
democracy movement are not those with particularly strong foreign 
connections. The charge of U.S. domination of the democracy movement is 
false, but our own actions make it difficult to convince a skeptical 
observer.
    Mainland Chinese influence on the other hand is everywhere 
manifest. Mainland officials authoritatively exhort members of the 
Chief Executive Selection Committee to back Tung Chee-hwa. While the 
subsidiaries of mainland firms operating in Hong Kong are local 
entities, the extent to which they finance the DAB by funding its 
events certainly gives Beijing great leverage. DAB leaders reverse 
their policy positions, including on democratization, when Beijing 
demands it.
                   where does hong kong go from here?
    Hong Kong's future path will depend on the wisdom of leaders in 
Beijing and Hong Kong. Success, even if defined narrowly in classic 
Hong Kong terms as stability and prosperity, will require compromise on 
both sides. Instability and decline will result from rigidity or 
confrontation on either side.
    Hong Kong immediately after the election is quiescent. 
Conservatives among the leaders in China may see this as confirming 
their view that a combination of prosperity and firmness will squelch 
the democratic movement. Many Chinese as well as foreign experts 
recognize that as an illusion. There was a time when Hong Kong people 
were apolitical and obsessed with economic growth to the exclusion of 
political concerns. Two things have changed that. First, there is a 
pervasive sense among political aware groups that Beijing chose an 
ineffective leader for Hong Kong, then insisted on reselecting him, and 
that Hong Kong's future therefore depends on Hong Kong people being 
given a chance to choose their leadership. Second, the Tung 
government's handling of the Article 23 controversy of 2003 created for 
the first time very focused popular fears about their freedoms. A 
Chinese policy of trying to push back the tide will not bring 
stability, whereas a policy of gradually channeling the tide will 
benefit all parties.
    The center of gravity of Hong Kong opinion wants both moderation 
and democratization. It recognizes that confrontation with Beijing in 
the service of democratization is selfdefeating, and hence it seeks to 
reassure. The most important democratic leaders in Hong Kong, including 
Martin Lee, have for instance recently been emphasizing their consensus 
acceptance of Chinese sovereignty over Hong Kong and also Taiwan. Some 
reached out to China by re-labeling the July 1, 2004, demonstration for 
democracy as a ``celebration of civic society.'' From personal 
experience I can testify that most people in the democratic movement 
celebrate China's successes. But a clear majority also demands 
improvement of the current system and, if the policy of democratic 
reassurance fails to find partners in Beijing, political pressure will 
build up like steam in a covered kettle. When and how that steam will 
vent I cannot predict, but eventually it will.
    While the strategy of reassuring Beijing while pressing hard for 
greater democracy provides the only strategy that has any chance at all 
of success for Hong Kong's democracy movement, there is no assurance 
whatever that it will succeed. That depends on politics in Beijing, and 
I cannot predict the outcome of that process. In pure policy terms, 
there is a great divide between the top leaders' current choice of a 
hard line and the view of large numbers of officials and scholars with 
expert knowledge of Hong Kong that the hard line is self-defeating. 
Policy analysis has suffered from what I call the Three Confusions: 
confusion of Hong Kong, where there is virtually no separatist 
sentiment, with Taiwan; confusion of the meaning of traditional lawful 
demonstrations in Hong Kong with disruptive demonstrations in the 
mainland; and confusion of the anti-China tactics of a few older 
democratic leaders with the moderate loyal sentiments of the 
overwhelming majority of the democratic movement. There is reason to 
hope that, with greater experience on the part of the new leaders, such 
confusions will dissipate.
    Purely political considerations, however, dim the prospects for 
such intellectual clarity in the short run. Perceptions of Hong Kong 
have become tied to a crisis atmosphere regarding Taiwan. Moreover, any 
leaders who might wish to pursue a more generous approach to Hong Kong 
are exquisitely vulnerable to the charge that they are insufficiently 
attentive to the security of the nation. In China as in our own 
country, there is no more serious charge.
    Such overwrought charges have been magnified during a transitional 
period of 
divided leadership in 2003-2004, as they have been during own election. 
With the retirement of all the top leaders of the pre-2003 era 
transitional stresses should decline. In addition, Beijing leaders are 
exhibiting more willingness to talk with leaders of the democracy 
movement. In the past they have largely limited senior Chinese 
consultations to Hong Kong groups that have strong business interests 
to oppose democratization, but now they are broadening their contacts 
and possibly their vision. That is a good start. But the prosperity and 
stability they seek will eventually require substantial steps toward 
the democratization that is enshrined as the ultimate goal in the Basic 
Law, a document that Chinese leaders wrote themselves.
    The key strategic considerations for the democracy movement are 
two. First, democratization will never happen unless the central 
government is comfortable with it. (The Basic Law shows that in 
principle they can get comfortable with it.) Second, in an executive-
led government, the key to giving the people some influence over policy 
is to give them traction over the choice of Chief Executive. Short of 
direct universal suffrage election of the Chief Executive, which China 
banned for 2007-8, there is an infinitely divisible range of 
possibilities from the present near-zero traction up to broad popular 
election of the Selection Committee, which would then function like the 
U.S. Electoral College.
    The key strategic consideration for China should be 
straightforward. Because of recent demonstrations, the central 
government fears instability in Hong Kong. But repression of popular 
desires for wider suffrage will cause instability whereas satisfying 
them will ensure stability and continued loyalty. The argument to the 
contrary is based on what I have called the Three Confusions. The 
argument that Hong Kong can be stabilized by purely economic means is 
obsolete. The argument that democratization in Hong Kong will 
destabilize the rest of China is wrong; ever since Deng Xiaoping 
invented one country, two systems, there has been broad acknowledgment 
that the Hong Kong system is different. While the argument that the 
central government can't make political concessions as a result of 
demonstrations in Hong Kong without encouraging demonstrations in the 
mainland has some validity, any capable mainland politician of good 
will should be able to overcome this by making the case that broader 
suffrage was encouraged by the Basic Law and negotiated with parties 
that are emphasizing a policy of reassurance.
                       u.s. interests and policy
    The United States has large interests in Hong Kong. Tens of 
thousands of Americans live there, and tens of billions of dollars of 
American money are invested there. We enjoy the ability of our Navy to 
visit Hong Kong. But economic and strategic interests are mostly not at 
stake in the debate over Hong Kong democracy. When Americans and 
American businesses leave Hong Kong, they predominantly move to 
Shanghai, which is less democratic. Militarily the Hong Kong port calls 
are a convenience, not a necessity, and anyway they are not at stake 
unless we have a larger confrontation.
    For the purpose of this hearing, therefore, the American interests 
at stake are our fellow feeling for the Hong Kong people, our sympathy 
for the democratic movement, and our hope that China under its new 
leaders can become as comfortable with democracy in Hong Kong as they 
have become with the rule of law in Hong Kong.
    U.S. policy has a frustrating dilemma. Americans love democracy and 
would like to support it in Hong Kong, but we have limited positive 
leverage and great negative leverage. Stating our views emphatically 
and reasoning with Chinese officials can help; most are in fact open to 
dialogue. Ultimately, no matter what we do, there is no assurance that 
China's central government will move in the direction we prefer. The 
best we can do is to argue our case and to avoid actions that would 
impair chances for a broader suffrage.
    There have been proposals to express our concern over China's 
recent hard line by removing Hong Kong's status as a separate customs 
territory or removing its exemption from export controls. Changing Hong 
Kong's separate trade status would cause grievous harm to precisely 
those Hong Kong people they purport to help. Removing its exemption 
from export controls would destroy the ability of banks, including our 
own banks based there, to upgrade their computers; that would destroy 
Hong Kong as Asia's and America's regional banking center and cause 
grievous harm to the people we wish to help. Turning to political 
strategy, confrontational policies would defeat the moderate strategy 
of the democratic forces in Hong Kong and the desire of Hong Kong 
people for a strategy of moderation as clearly expressed in this 
month's balloting. Nothing serves China's hardliners better than an 
ability to portray the Hong Kong problem as a confrontation with the 
United States rather than a negotiation with some of their own people. 
Times may change, but for now the American posture most supportive of 
Hong Kong's democratic forces combines a clear voice with avoidance of 
confrontation.
    Put another way: We Americans have every right to press China to 
show some respect for the clear mandate the Hong Kong people gave for a 
policy of democratization and moderation. When we make that case, we 
incur our own obligation to show respect for the second part of the 
mandate as well as the first.
    There are also clear implications of this analysis for the roles of 
U.S. government-related NGOs. Teaching all political parties in Hong 
Kong how to organize and raise funds from the electorate provides an 
unexceptionable service. The parties advocating democratization benefit 
disproportionately from such a service, because they don't have Chinese 
enterprises funding their events, but the service itself does not 
discriminate between the DAB and the Democratic Party, and, equally 
important, it does not favor one democrat over another. On the other 
hand, with anti-democratic conservatives basing their influence on an 
argument that democratization in Hong Kong equates to instability, a 
policy of systematic American favoritism toward one particularly anti-
Chinese figure, and awarding him a statue that associates Hong Kong's 
democracy movement with Tiananmen Square 1989, seriously damages the 
prospects of democratization. The ancient rule of the medical 
profession is valid here: When you seek to help a patient, first do no 
harm.
                                 ______
                                 

  Prepared Statement of Hon. James A. Leach, a U.S. Representative in 
  Congress From Iowa, Chairman, Congressional-Executive Commission on 
                                 China

                           september 23, 2004
    2255 Rayburn House Office Building We convene the CECC today to 
examine the progress and prospects of constitutional development in 
Hong Kong. Nothing could be more timely, given the Legislative Council 
elections that just concluded on September 12. Whether the 21st Century 
is peaceful and prosperous will depend on whether China can live with 
itself and become open to the world in a fair and respectful manner. 
Hong Kong is central to that possibility. As such, Hong Kong's affairs 
and people deserve our greatest attention, respect, and good will.
    America and China both have enormous vested interests in the 
success of the ``one country, two systems'' model in Hong Kong. From a 
Congressional perspective, it seems self-evident that advancing 
constitutional reform--including universal suffrage--would contribute 
to the city's political stability and economic prosperity. In that 
light, the September 12 elections had both good and bad news: while a 
record number of Hong Kong's voters turned out and voted heavily for 
candidates favoring continued reform, the bad news is that the process 
was constrained by rules under which the Hong Kong people could not 
enjoy full democratic autonomy. Hence, we continue to be concerned that 
while recent decisions by Beijing that set limits on constitutional 
development in Hong Kong implicitly acknowledged a degree of autonomy 
for Hong Kong, they do not represent a forthright commitment to the 
``high'' degree of autonomy that was promised by the central 
authorities in the 1982 Joint Declaration and the Basic Law.
    Few places on the planet are better prepared for democratic 
governance than Hong Kong. In the LegCo elections earlier this month, 
in which record numbers voted, the people of Hong Kong again made plain 
their aspirations for greater democratic autonomy, aspirations fully 
within the framework of the ``one country, two systems'' formula. They 
previously had shown their keen interest in participatory democracy 
when they turned out in record numbers for District Council elections 
last November. Yet the way forward is now somewhat murky; no one is 
certain what will happen after 2007. The central PRC government says 
that it maintains a commitment to universal suffrage and direct 
election of the chief executive and LegCo, as contemplated by the Joint 
Declaration and Basic Law. But without a timetable, the fullness of 
this commitment lacks clarity and instills uncertainty. We must all 
acknowledge that the recent election is a step forward, but democratic 
frustration continues to build because there is simply no credible 
reason to thwart the pace of democratic transformation in Hong Kong.
    Hong Kong is important unto itself; it is also a model for others. 
What happens there is watched particularly closely by Taiwan. In a 
globalized world where peoples everywhere are seeking a sense of 
community to serve as a buttress against political and economic forces 
beyond the control of individuals and their families, it is next to 
impossible to reconcile political systems based on unlike institutions 
and attitudes. Mutual respect for differences is the key to peace and 
prosperity in a world in which history suggests conflict has been a 
generational norm.
    To help us understand what has just transpired in the Hong Kong 
elections, and how it might affect the progress of constitutional 
development, we turn to our witnesses this morning.
    Randy Schriver joins us from the East Asia bureau at the State 
Department, to give the U.S. government's perspective, and we have a 
distinguished panel of private experts who will share their expertise 
with us a bit later.
                                 ______
                                 

 Prepared Statement of Hon. Chuck Hagel, a U.S. Senator From Nebraska, 
        Co-Chairman, Congressional-Executive Commission on China

                        china september 23, 2004
    A majority of the Hong Kong population supports the development of 
democratic institutions and a local government that fully represents 
their interests. This aspiration is within reach but has not yet been 
realized despite the commitment to universal suffrage in Hong Kong's 
Beijing-promulgated Basic Law. We meet today to examine the road ahead 
to a popularly elected Hong Kong government.
    Mr. Chairman, I congratulate you for holding today's hearing. The 
United States has important interests in Hong Kong. There are over 
1,000 U.S. businesses in Hong Kong and more than 50,000 American 
citizens reside there. The international business community is 
attracted to Hong Kong by its strategic location and international 
status, its open and transparent economy, and its strong tradition of 
rule of law. These are impressive achievements. Hong Kong's economic 
attractiveness is further strengthened by its steady progress toward 
democratic governance, a process set in place by the British in 1991 
and carried forward by the Chinese government after 1997. Despite 
continued steps forward in the recent Hong Kong Legislative Council 
election, I am concerned that recent actions by Beijing toward Hong 
Kong were driven by backward looking policies designed to dampen Hong 
Kong's continued enthusiasm for democracy.
    China's central government continues to state its support for 
eventual universal suffrage in Hong Kong as laid out in the Basic Law. 
However, the continuing process is no longer clear, and lack of clarity 
breeds uncertainty. Hong Kong stands as a successful model for all 
China, but uncertainty will stifle the prospects for Hong Kong's future 
prosperity and development. Beijing is both challenged and charged with 
developing China in a positive way. Mr. Chairman, as you have astutely 
pointed out, ``Hong Kong will only become a threat if China makes it 
so.''
    The United States has a vested interest in Hong Kong's continued 
autonomy and the success of the ``one country, two systems'' model as 
laid out in the 1984 Sino-UK Joint Declaration and the Basic Law. Hong 
Kong's political and economic development has much to offer by example 
to China's leaders as they experiment with reforms elsewhere in the 
county. The United States wants to work with China to build a more open 
and participatory society. The United States and China will not always 
agree, and the United States should not shy away from voicing its 
concerns about human rights and the rule of law. Political change is 
complex and multidimensional, and it should be up to the Chinese people 
to decide where their country goes and how it gets there. But Beijing 
must listen to the voices of all China's citizens and take the first 
steps, and the United States must be ready to assist.
    Thank you.

                                 
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