How Two Chinese Towns Became the ‘Pearls of the Orient’
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2017-06-30 03:38:14

Shanghai and Hong Kong are both products of China’s forced opening by foreign colonial powers and ensuing gradual modernization. These twin forces transformed this pair of ordinary coastal towns into China’s primary gateways to the outside world. Yet they also hold great symbolic value: The development of these two cities since the mid-19th century allows us to better understand the evolving relationship between city and nation.

While many historians group Hong Kong and Shanghai together as China’s first colonial cities, this tendency overlooks very real differences in their origins. The Treaty of Nanjing, which ended the First Opium War between Britain and Qing Dynasty China in 1842, established five “treaty ports,” a list that unsurprisingly included Shanghai. In contrast to Shanghai’s status, however, the island of Hong Kong was fully ceded to British control under the terms of the treaty.

Shanghai was ultimately divided into three parts, each with its own laws and regulations: the Shanghai International Settlement, the French Concession, and the area of the city that remained under Chinese administration. Hong Kong, meanwhile, developed along two tracks, with the territory south of Boundary Street — including Hong Kong Island and Kowloon — under full British control, and the New Territories, north of Boundary Street and south of the Shenzhen River, only leased to the British.

While their governance and development may have followed different paths, Hong Kong and Shanghai ultimately both became centers of global trade. By 1860, one-quarter of China’s imports and one-third of its exports went through Hong Kong, while Shanghai had already become the dominant import and export center for the rest of China and was its largest port for foreign trade. During this period, as much as 70 to 80 percent of China’s exports and imports went through either Hong Kong or Shanghai. Foreign capital and firms played an important role in the two cities’ dominance, with the services these firms provided — including trade, shipping, and financing — signaling their future course of development.

The concurrent rise of Hong Kong and Shanghai saw China’s wealthiest regions — the Yangtze River Delta in eastern China and the Pearl River Delta in the south — assume a leading position in connecting China to global manufacturing and trade networks. This, in turn, led to rapid economic and social shifts within the two regions and relegated nearby cities like eastern Suzhou and southern Guangzhou, which both originally ranked among China’s leading cities, to the status of mere regional centers.

Hong Kong continues to serve as the standard against which all other major Chinese cities, past and present, are measured.

As the first two Chinese cities to open up to the world, the exceptionally close economic ties between Hong Kong and Shanghai date back over a century. One example of these ties is the famous Nanyang Brothers Tobacco Co. Ltd., which was founded in Hong Kong but rose to prominence in Shanghai. Even the name of one of the world’s most recognizable banks — HSBC, which stands for The Hongkong and Shanghai Banking Corporation — is evidence of the close ties between the two famed cities of the East.

During the first half of the 20th century, both cities experienced their first golden age. By that time, Hong Kong ranked among the great trading ports of the British Empire behind only London and Liverpool, while Shanghai reigned supreme as the foremost international metropolis in East Asia.

The twin pillars of economic prosperity and safe harbor provided by the colonial settlements saw both cities transformed into international metropolises with populations numbering in the millions, all within 100 years. Whether through the expansion of Victoria — Hong Kong’s capital under British rule — into four districts known as “wans,” or Shanghai’s promotion of foreign-administered “extra-settlement roads” leading out of the international concessions and tying them more closely to the Chinese-administered sections of the city, the core framework of both cities was established during this era.

Beginning in the second half of the 20th century, however, the paths of these two export-oriented cities began to diverge. Shanghai, in accordance with calls to put “production first and life second,” started expanding its industrial capacity. Meanwhile, Hong Kong, with its lack of space and emphasis on commerce and transshipping — moving goods through the city and on to another destination — had no choice but to develop its own local industries due to the British economic and diplomatic embargo on China.

This recalibration led to a shift from a reliance on transshipping goods made in other parts of the world to exporting locally manufactured goods. By 1959, items made in Hong Kong comprised 70 percent of the territory’s exports. Interestingly, at the time, it was a large influx of money from Shanghai that provided the impetus for Hong Kong’s industrial transformation. As China’s capitalists fled south, fearing that the Communists would seize their assets, a new Shanghai-funded industrial system was established in Kowloon, largely centered in the districts of Kwun Tong, Cheung Sha Wan, and Tseun Wan. In Shanghai, state-owned enterprises quickly filled the gap left in the wake of this capital flight, establishing a new industrial system and providing the driving force behind Shanghai’s transformation into China’s most important industrial and financial center.

Shanghai must continue to study the example set by Hong Kong, including its economic system, cultural achievements, rule of law, and concepts and standards of planned management.

After the Second World War, the British government in Hong Kong followed a policy of positive non-interventionism, providing the legal and regulatory framework for economic growth without interfering in the market. Under this initiative, Hong Kong gradually developed its own export-oriented industrial system and supplanted Shanghai as China’s only gateway to the outside world. Following the enactment of the reform and opening-up policy in 1978 and the Sino-British Joint Declaration affirming the “one country, two systems” structure in 1984, Hong Kong took advantage of economic globalization and the large-scale movement of its manufacturing industries to the Pearl River Delta on the Chinese mainland to reinvent itself yet again.

This time, it steadily established itself as a global center for international trade and finance — especially in sectors like funding, procurement, design, marketing, and shipping — as well as an important hub for the Asia-Pacific region. Meanwhile, as China moved into the reform and opening-up period in the late 1970s, Shanghai worked hard to reclaim its status as an all-purpose export-oriented economic center. After a period of economic recovery in the ’80s, followed by the development of a new financial center in Pudong New Area during the ’90s, Shanghai found itself once again linked to the global economy.

At the turn of the millennium, in contrast to the services offered in finance-centered Hong Kong, Shanghai focused on attracting foreign investment and developing the Yangshan Deep Water Port, which allowed the city to make strategic breakthroughs in the fields of heavy industry and shipping, even as it gradually shifted toward a service economy. Following in Hong Kong’s footsteps, Shanghai has re-established itself as an international metropolis and gateway to China. The Hong Kong 2030+ plan includes provisions for “getting more from less” and “ecological protection,” and it served as an important blueprint when it came time to design Shanghai’s master plan for the year 2040.

After nearly two centuries, Hong Kong and Shanghai continue to serve as strategic gateways to the rest of the China. Looking back at the past 20 years of Hong Kong’s history, the city nicknamed “the Pearl of the Orient” continues to serve as the standard against which all other major Chinese cities, past and present, are measured. The position of this Asian metropolis, derived from its status as an international free port, remains vital to the rise of great nations.

As for Shanghai, it must continue to study the example set by Hong Kong — not only its economic system, cultural achievements, rule of law, and concepts and standards of planned management, but also the positive way Hong Kongers responded to the challenges of the British embargo on China and the oil crisis, and how the adversity experienced during the Asian financial crisis, the SARS epidemic, and the Great Recession has only made the city’s residents stronger. This spirit is the most valuable thing an international city can possess.

Translator: Kilian O’Donnell; editors: Lu Hongyong and Matthew Walsh.

(Header image: Left: a night view of the Bund in Shanghai, May 21, 2017. Wang Gang/VCG; right: a view of Victoria Harbor in Hong Kong, July 16, 2014. Liang Xiashun/VCG)