Speeches, etc.

Margaret Thatcher

Speech to Asia Society in Hong Kong ("Asia: Challenges of the 21st Century")

Document type: Speeches, interviews, etc.
Venue: Regent Hotel, Kowloon
Source: Thatcher Archive
Editorial comments: 1145-2210; embargoed until 2215 local time. Checked against delivery.
Importance ranking: Major
Word count: 3285
Themes: Defence (general), Trade, European Union (general), Foreign policy (Asia), Foreign policy (USA)

Asia: Challenges of the 21st Century

I am grateful to the Asia Society for inviting me to speak on the tenth anniversary of the Joint Declaration, especially on this occasion when you are raising funds to help handicapped children.

I must say that ten years go by very quickly these days and I notice that some of China's senior leaders suddenly seem quite youthful!

The Joint Declaration has survived the test of those ten years remarkably well. In the light of all that has happened since, it is hard to remember what a breakthrough it represented given the totally different philosophies and systems of the two sovereign powers, Britain and China. The biggest contribution to bridging those differences was Mr. Deng Xiaoping's concept of one country two systems, guaranteeing that the people of Hong Kong could continue to enjoy their present way of life and their freedoms - under the rule of law and an independent judiciary - for fifty years after 1997. I am as confident now as I was in 1984 that the Joint Declaration will be observed.

Of course its negotiation was not at all easy. It wasn't just that we had difficulties with China: it wasn't exactly easy dealing with Hong Kong! We had some very tough debates in the Cabinet Room at No.10 with Sir S.Y. Chung and Lydia Dunn (Baroness Dunn as she now is), and Hong Kong could not have asked for two more formidable or persistent champions. I used to wish I had them in my own Cabinet!

The successful outcome of the negotiations also opened the way to a much better relationship between Britain and China over the period up to 1989. We had very successful visits to Britain from Mr Zhao Ziyang and Mr. Hu Yaobang. When I first invited Mr Hu Yaobang, he said he couldn't possibly come because as General Secretary of the Communist Party his face was too red! But come he did for a very productive visit: I remember how he described to me with tears in his eyes the tragedies of the Cultural Revolution and how China must avoid anything similar in future. We also had successful visits from Premier Li Peng and from Mr. Jiang Zemin, who was then Mayor of Shanghai and who amazed us all with his command of English. The Foreign Office forgot to tell us - or perhaps they didn't know - how fluent he is, with an astonishing talent for quoting Shakespeare.

I hope Britain and China can get back to the co-operation and exchanges of those years. I know that is the wish of the Governor and of Ministers in London. Hong Kong needs agreement between Britain and China to give it the best chance for the future.

So I hope that the recent meeting between Douglas Hurd and China's Foreign Minister in New York will be the first step to renewing the better relations of the 1980s.

What a Difference a Decade Makes

But what is remarkable is not so much that ten years have passed since I came here in 1984 to explain and commend the Joint Declaration to the people of Hong Kong. It is that so much change has been crammed into that time: change in Hong Kong, change in China and change in the whole Asia-Pacific region.

The changes in China are the most remarkable of all. Mr. Deng Xiaoping's economic reforms have unlocked China's potential. The economy is growing at an unprecedented pace, probably faster than can be sustained for very long. We are told this is a result of socialism with Chinese characteristics. Thankfully the Chinese characteristics are being allowed to predominate and rightly so. It is the new private enterprise which is acting as the engine of growth, fuelled by investment from abroad and above all from Hong Kong, which supplies the greater part.

Compare the Hong Kong of 1984 with the Hong Kong of today:

In 1984, Hong Kong was the world's 13th largest trading economy; today it is the 8th.

Per capita GDP was then around US$6,000, now it is about US$20,000.

You have the busiest port in the world, and it adds in capacity every year the equivalent of Felixstowe or Seattle.

Hong Kong's performance is proof that when a people's talent is liberated it can work wonders.

I remember that when I asked Mr. Deng Xiaoping at the time of the signing ceremony why he had chosen fifty years as the period during which Hong Kong's way of life should remain unchanged after 1997, he replied that was how long he thought it would take China to catch up with Hong Kong. It seemed a pretty fair assumption at the time: but I doubt now whether it will take quite as long.

When I came to Hong Kong in 1984 immediately after reaching final agreement with Mr. Deng on the Joint Declaration, the mood was sober rather than joyful. People were glad to have certainty about their future. They were glad to know the essential features of Hong Kong's way of life would remain unchanged. But there was understandable trepidation about going back under the sovereignty of a China in which economic change and reform were not nearly as advanced as they are now.

Many of those concerns should have been dispelled by the great advances which China has made since then. In 1984 we could not be certain that the reforms were irreversible or that Hong Kong's economy could mesh successfully with China's. Now there is no doubt: indeed the process is already well advanced and Hong Kong is massively involved in building China's future.

As China's economy is liberated, changes in the way in which China is governed are bound to follow. You cannot for long have a free economy without those who create it also having some say in the laws by which it is governed. No one can predict how fast these changes will come. We certainly under-estimated the pace of change in the former Soviet Union and Eastern Europe. But of one thing I am certain: it doesn't make any difference in the long term whether you start with economic reform or you start with political reform; you will finish up with both. That is the lesson of history.

Hong Kong's remarkable success story since 1984 is another reason for great confidence about the future. Hong Kong has built itself into an important indeed vital participant in world trade and in world financial markets. That gives every other country a vested interest in Hong Kong's continuing freedom and prosperity under a rule of law. That is why so many contracts - not least those involving business in China - are negotiated and signed in Hong Kong because of the rule of law and the independent judiciary.

Hong Kong will be part of China, of course. But its future will be safeguarded, and assured too, by its far-flung international trading and financial links. One can no more hold back Hong Kong than one can hold back Switzerland: it is simply too important a part of the world economy, and the excellent decision to hold the World Bank and IMF Annual Meeting in Hong Kong in 1997 recognises that fact.

Not everything has worked out as we thought it would in 1984: that would be too much to hope. It's a disappointment that the Joint Liaison Group has not been able to settle the practical issues surrounding Hong Kong's return to China as rapidly and effectively as we expected. That really must be put right. A society which depends on the rule of law cannot tolerate a vacuum or uncertainty, either in its international obligations or in all the many day-to-day issues which affect business and thereby prosperity. I hope that both sides will find a way to speed up this vital work.

Only last month President Jiang Zemin on a state visit to France set out four principles to guide China's relations with Western Europe. They included a call to put aside differences and find common ground. The differences between Britain and China over Hong Kong's electoral arrangements should not stand in the way of finding common ground in the Joint Liaison Group.

We need to keep these difficulties in perspective. The Joint Declaration together with the Basic Law provide for the steady expansion of democracy in Hong Kong. Indeed paragraph 68 of the Basic Law says absolutely clearly that “the ultimate aim is the election of all members of the Legislative Council by universal suffrage” . The principle of democracy is therefore agreed. It would be much better if the precise electoral arrangements prior to 1997 could have been agreed too and great efforts were made to achieve that, but sadly they failed.

I am sure China will be watching very closely how the new arrangements for the 1995 elections work in practice. Given Hong Kong's record of steadiness, practicality and good sense, it is impossible to conceive that those elections will in any way put stability at risk. Every expansion of the franchise in the past has shown that people in Hong Kong take their rights and responsibilities seriously. I hope that when China re-assumes responsibility for Hong Kong in 1997, it will conclude that - whatever it may say now - Hong Kong's people have earned the right to move ahead as rapidly as possible towards the agreed goal of steadily more directly elected members of LEGCO, and eventually universal suffrage.

Meanwhile it is vital that China should not act in a way which affects the confidence of foreign investors in Hong Kong or indeed in China itself. Particularly at a time when there is wide support for China's membership of the GATT - which I support and which Britain supports - it should be quite clear that trade and politics should be dealt with separately. That should be the case whether it be a new container terminal which Hong Kong badly needs, or any other contract or project. Nothing would do more harm to Hong Kong's reputation than for it to be perceived that contracts were no longer awarded on a fair, open and equitable basis: and that business dealings were not above-board or governed by the law.

Mr. Chairman, although the focus of this past two years has been on the issues on which Britain and China disagree, that is far from being the whole story. What really counts is the way in which Hong Kong has continued to invest in its future as a part of China. The new airport, the container terminals, the land reclamations, the new bridges and tunnel, all these represent a vote of confidence in that future. I share your confidence.

Asia/Pacific - Great Expectations

Hong Kong has a further inestimable advantage for it is at the very heart of the region which perhaps best represents the exciting opportunities for the future. Just as the scene shifts in a play, so I think the next Act in world history will be played out more in Asia than in Europe, more in the Pacific than in the Atlantic.

The world has never seen such rapid expansion as it is witnessing today. The great economic upsurge in the Asia/Pacific region is unparalleled in scope, even by Britain's Industrial Revolution in the 19th Century, Germany's performance under Bismarck, America's 20th Century climb to world economic leadership or Japan's dramatic recovery from World War II.

The impact of the age of automation will be even more radical than that of mechanisation. “Smart” machines now transfer technology instantaneously from one country to another. Development which used to take years can now be achieved in months.

Hence the economic miracles in the countries of Asia/Pacific, both large and small. Change is transforming your region, delivering millions from poverty and bringing new hope to all. The peoples of the Asia/Pacific are out-stripping much of the rest of the world in growth, investment, new technology and trade.

The performance of Asia's “Tigers” has proved that countries are not rich in proportion to their natural resources; if that were so then Russia would be the richest country in the world; she has everything, oil, gas, diamonds, platinum, gold, silver, the industrial metals, timber, and a fertile soil. Countries are rich whose governments have policies which encourage the essential creativity of man who in order to succeed must work with others to produce goods and services which people choose to buy. So Japan, Switzerland, Taiwan, Singapore and indeed Hong Kong, with few natural resources, are now among the most prosperous economies in the world. Truly man's greatest resource is man himself.

There are those who fear that the growth in the Asia/Pacific region will place an unbearable burden on both world investment and natural resources. But they ignore the fact that this new economic dynamism will in itself generate new wealth, which in turn can be invested. They ignore the high savings ratios in the region and they forget that the pace of technological change is providing us with new ways to unlock resources all the time. Therefore we should not see either East or Southern Asia as a challenger for ever fewer resources but as a generator of new ones.

Competition - the Spur to Wealth Creation

The shifting centre of gravity towards your part of the world poses a particular challenge for Europe. For almost two centuries manufacturers in Europe and the United States have remained relatively unchallenged. Our industrial advantage allowed us to dominate the world markets, competing with one another but insulated from competition from the wider world; complacent about our own costs and working practices. Those days are over.

Low labour-cost economies, whether they be here in the Asia/Pacific, in Eastern Europe or in Central and South America, will place great pressure on the industrialised economies of the West.

America has shown that we can compete. By investing in automation and developing less labour intensive procedures, costs can be reduced, and when labour costs become only a small percentage of total costs, the comparative advantage of low wage countries becomes less marked, thus enabling the West to compete once again.

Europe - a Sad Case to Follow

But the European Union has taken the opposite direction. Instead of becoming more competitive and seeing the challenge from the Asia/Pacific as a catalyst for changing our own priorities, Europe is trying to shield itself from the forces of competition. Its subsidies, quotas and anti-dumping measures distort the free flow of trade, pushing up prices and holding down those countries who are trying to better themselves, particularly in Eastern Europe.

It is ironic that we who have prospered through trade should now be denying that right to others.

The Case for Free Trade

I am dismayed at how long it has taken to agree and ratify the Uruguay Round of the GATT and alarmed that it was Europe which held it up.

Since the signing of the first GATT accord in 1948, world trade in manufactured goods has grown by a multiple of 23. This represents the largest growth in history. At the same time industrial tariffs have fallen from an average of 40 per cent at the end of World War II, to 5 per cent today.

But a global market for industrial goods was bound soon to require a global market in the service and financial sectors and some provision for intellectual property rights to prevent counterfeiting of goods. For Britain and Hong Kong, the inclusion of services is particularly important, especially as there are now more jobs in services than in manufacturing.

Free trade is more than just a set of dry statistics, it has much wider benefits. It is a force for political co-operation - it is no mere chance that rising protectionism in the 1930s preceded global conflict. Genuine free trade is a force which enables poor regions and countries to penetrate international markets.

The danger of increasing protectionism is one which should concern us all. Regional trading arrangements and blocs, and today there are 85 trading blocs, of which the two largest are the European Union and NAFTA, are acceptable as long as they are a spur towards lowering world wide tariffs, rather than part of a movement towards competing protectionist trade blocs.

The GATT was founded so that all might share in the benefits of free trade by operating on the same terms. It created a common status to which all countries could aspire. Most Favoured Nation status was originally intended to be the norm, but with the number of trade blocs which now exist, offering more favourable treatment for those within them, I am afraid that MFN has come to represent something closer to the least favoured trading position which a country outside the bloc system can achieve.

Our task is to strengthen and extend the GATT and to restore its integrity. So long as the trade highways of the world are free, businesses in small countries have the same opportunities to compete as those in large countries. We have still to convince popular opinion in Europe, the United States and even parts of Asia, that opening markets to foreign goods and services raises living standards and generates jobs. We still have to win the argument that just as economic and political freedom go together, so too do open trade and international harmony.

Balancing the Region

Asia is the fulcrum of the world's new trading networks. Today in world trade terms, the “Chinese Trio” of China, Taiwan and Hong Kong, is behind only the United States and Germany. Moreover, the World Bank estimates that the East Asia region as a whole imports $800 billion of goods annually - more than all the imports into the United States and growing at a rate of 15 per cent per annum.

But my present point is that Asia's economic explosion will greatly increase the area's strategic importance. Growing economic rivalry within the region must not be allowed to stir political tensions. Unresolved disputes must not become the pretext for renewed discord.

Already two of the world's three largest military budgets are in this region: China and Japan. The third is America. Their relations will be crucial in establishing a new spirit of co-operation because as the two great regional powers they will set the tone for the whole area.

The USA is of course another factor which will shape the security and stability of the region. With the end of the Cold War, America will focus increasingly on forging friendships in the Asia/Pacific. As the world's main superpower it is vital that the United States continues to play an active, confident and outward-looking role. Where regional tensions overheat, only America has the capability and the will, to hold the ring and we should be more frequent in our thanks to that country in defending our freedom.

Nuclear Ambitions

We must earnestly hope that the framework agreement between America and North Korea will be effective in preventing nuclear proliferation.

Nuclear weapons cannot be disinvented but it is in all our interests to see that access to them remains restricted. No matter where we are in the world or what our governing political philosophy, nuclear proliferation poses a threat to us all.

It is not just a question of more advanced weapons in the world. What matters is who has them and what for.

We need to have a more effective ballistic missile defence such as only the SDI can provide. Nothing could give us more freedom of action in the 21st Century. If we have the means to prevent an aggressor from hitting his target we may well deter him; we may even diminish his desire to build up his missile stocks in the first place.

Gaining Ground

The potential for new dictators to arise and perpetrate new horrors is and always will be there. But overall we can take great heart from the spread of liberty and the rule of law around the globe. More and more of the world is accepting that a free society is a more stable and prosperous one. In 1993 Freedom House, an organisation which monitors these things, found that there were 75 democratic countries, up from 55 a decade earlier. Democracy must remain our ultimate goal and I do not accept the argument which one occasionally hears that democracy and human rights are somehow not suitable or practical for Asia. India's experience makes nonsense of that approach. But I must add that we in Britain would have regarded ourselves as a free people long before we achieved the universal franchise because we enjoyed both economic enterprise and liberty under a rule of law.

Each country comes to freedom in its own way. It may be slow, at times it may be patchy, but freedom is advancing. As Vaclav Havel wrote, ten years before the Velvet Revolution transformed Czechoslovakia, “In everyone there is some longing for humanity's rightful dignity, for moral integrity, a sense that transcends the world of existence” .


Mr Chairman, every time I come to Hong Kong I am caught up in its bustle and excitement. It is a unique place, a special place, and I am sure it will continue to be so, long into the future.

I have visited Hong Kong every year since I left office. I have already booked rooms so that I can be here on 1 July 1997 to witness the end of Britain's excellent stewardship and the birth of Hong Kong's future with China. And I intend to continue to come regularly, well after that; so I hope we shall enjoy many more occasions like this together.