07 May 1992 - 09 May 1992

China, Hong Kong & Taiwan

Chair: Sir Alan Donald KCMG

A joint conference with the Southern Center for International Studies at Ditchley Park

We were glad to welcome to Ditchley for this conference a team assembled by our friends of the Southern Center for International Studies in Atlanta, Georgia. We were fortunate also in having a very expert group from both sides of the Atlantic and Japan, drawn from business, government, the media and the academic world.

The conference attempted to look at the issues under three broad headings: political and economic developments within China, China’s relations with Hong Kong and Taiwan, and China’s international relations and foreign policy more generally. In practice these distinctions proved to be somewhat artificial and we kept coming back to the internal situation in China which was seen as providing the key to many of the other issues addressed. And in the internal field, it was unanimously agreed that forecasting was impossible: we simply did not know enough about the internal decision-making processes, particularly as they related to the leadership and the succession, to do more than hazard an educated guess; and much would depend on the order in which the old men now at the top departed from the scene, which was by its nature unforeseeable. It might be that it would not much matter, since there was a consensus that the leadership would strive to hang together, whatever internal jockeying there might be, in order to ensure an orderly transition; and that the new leadership would in the first instance be collective, with a tendency towards the emergence of a single dominant individual. The priority given in China to law and order, especially among those scarred by the Cultural Revolution, was repeatedly stressed. The picture should be clearer after the 14th Party Congress in six months’ time; the Party would then be compelled to agree on the past, on future policy and on the allocation of jobs. The role of “the young princes and princesses”, many of them Western educated, would be important but was hard to assess.

The question was debated whether economic reform could proceed without political reform (and some questioned what exactly was meant by these terms). Again it was generally agreed, in the light of the examples of Korea, Taiwan and Singapore (Japan and Hong Kong were also mentioned in this context but have characteristics which distinguish them) that indeed economic take-off could be managed and, indeed, might be facilitated in the early stages, by authoritarian regimes; but that in the longer term, especially under the impact of information technology and the returning graduates of Western universities and training colleges, demands for political reform would grow. In their fight to save the Party, the leadership saw economic reform as a shield against such demands but would not be able to stave them off indefinitely. The point was made that it was not correct to distinguish between reformers and opponents of reform: the better distinction was between radical reformers and those who saw the dangers in the form of unemployment, etc... of too swift change and favoured a slower pace. In this context, the collapse of Communism in the Soviet Union had probably not much worried the leadership, who would conclude merely that the Chinese way had been right and the Soviet wrong - the strategic implications of the collapse were another matter.

The process of economic reform was being hastened by the gearing effect of investment in Guangdong, Xiamen and Fujian provinces, emanating from Hong Kong and Taiwan respectively. The question was whether the astonishing prosperity of the South (with annual growth rates of 7-8%) would permeate the North, or whether there would develop a permanent divide between North and South, with the provincial authorities increasingly going their own way. Here the cultural perception of China as a united country was cited, despite differing dialects and differing stages of development. Population growth was unlikely to stabilise under 2bn or before the mid-21st century. Even on the best assumptions of agricultural development, to which the leadership was wisely giving priority, it was estimated that China could feed only 1.5bn and would have to become an importer of food: to pay for it, she would have to export manufactures. That raised the spectre of China as a giant economic power threatening the US, European and Japanese economies, a prospect which the free-traders discounted - indeed this growing population, and perhaps a wider Asian economic zone, although perhaps in itself unwelcome, would absorb much of China’s manufactures. However, China’s dependence on world trade would influence its behaviour in the world market and in its foreign policy generally: access to markets such as the US was already a powerful lever (cf. the MFN agreement). (The EC on the other hand, it was suggested, enjoyed little commercial leverage.)

The importance of environmental issues was noted but there was little discussion.

Questions were raised about the role and future development of the armed forces and Chinese claims against its neighbours’ territory. The army (PLA) had accepted a reduction in defence expenditure during the last 10 years against an understanding that it would receive more later. This was now happening, against a requirement of greater professionalism. That had implications both domestically and externally, especially when allied to evidence that China might be seeking to create a blue-water navy. The PLA probably supported economic reform; but its behaviour in the event of political agitation similar to that of Tiananmen Square in June 1989, was problematical - a more professional force might be expected to obey orders. A long-term concern must be the risk that repetition of traditional Chinese claims to territories outside its current borders, in the South China Sea, in Vietnam, Mongolia, Korea or particularly Taiwan, might not be mere “camouflage”, and might one day be pursued by military force. The capability existed: the experts interpreted Chinese intentions as peaceful; but there had to be a nagging worry, despite the saying quoted to us of an early Chinese Clausewitz that the object of war was to acquire territory without fighting.

In this context, the conference noted that the frontier with the Russian Republic no longer caused tension, but that the frontiers with the Asian Republics of the former Soviet Union might give greater concern - and the influence of Islam from across the borders might stir up trouble. The disappearance of the Soviet threat and the lesson of the Gulf War that China’s forces were even more behind technically than they had thought, had given China food for thought.

The conference not surprisingly devoted much time to China’s human rights record and what might be done to bring about improvement. Chinese ideas of acceptable standards differed widely from ours; they would have in mind not only past history but also current derogations, as they would see them, in the West’s own performance. It was noted that China had not signed two UN conventions on human rights. The Chinese would not respond to pressure if their sovereignty appeared to be challenged. Nevertheless, they would make concessions, where they seemed necessary to obtain other advantages; it was right for the West to maintain their position and to use such levers as they possessed - quiet linkage, or constructive engagement (despite the perhaps unfortunate overtones of that term) was the best policy.

Hong Kong naturally claimed a large measure of attention. Would China honour the Joint Declaration of 1985? While many from across the Atlantic seemed to fear the worst (and believed that China should be warned of the adverse consequences of failure to do so), others more directly involved expressed guarded optimism. China, it was argued, had a good record of observing international agreements and was sensitive to world opinion; Hong Kong was not isolated like Tibet but the repository of much overseas investment; the value to China of Hong Kong lay in its economic performance and if China’s long term ambition was to absorb Taiwan, she would not wish to frighten Taiwanese opinion by acting to destroy Hong Kong. The greatest danger might prove to be creeping inefficiency. Nevertheless, despite words about a Special Administrative Region, it could well be difficult for China to swallow a political system and political freedoms, including an independent judiciary, which appeared to challenge the central government and Chinese traditions. Pressure for greater democratisation in Hong Kong in the run-up to 1997, much of which came from Western parliaments and press, and from Congress, could prove counter-productive, especially if it led China to re-open the Basic Law and to change the careful balance achieved. The essential thing was to embed in Hong Kong before 1997 a regulatory and legal system which could endure and guarantee the business climate to ensure Hong Kong’s continued prosperity.

As for Taiwan, while links with the mainland, both of investment and tourism, were multiplying, in general the conference saw little, even a diminishing, prospect of realisation there of the one country/two systems solution. Indeed, the majority of the population of Taiwan rejected the myth that their Government represented all China, and favoured independence. That could endanger the possibility of a fudged solution but (subject to the caveat above about Chinese claims and the PLA) the conference as a whole did not believe there was a danger of war in the foreseeable future.

In conclusion, while what we wished to see was a peaceful and prosperous China, there was probably little we could do directly to influence developments: we could, and should, use such levers as we possessed, especially in the area of trade, in a process of constructive engagement, without challenging Chinese sovereignty head on: and however things developed within China, it was not unreasonable to believe that the Party, as it was today, would no longer exist in 30 years’ time. In the short term the 14th Party Congress would be a crucial indicator of future trends.

This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: Sir Alan Donald KCMG
Retired from HM Diplomatic Service as Ambassador to People’s Republic of China (1988-91)


Professor Stuart Harris
Chair, Australia-China Council; Convenor, Australian National University's North-East Asia Programme
HE Mr Richard J Smith
Australian High Commissioner, London (1991-); previously Ambassador to Thailand.


Mr John Andrews
Asia Editor, The Economist

Dr Philip Baker
Barrister, Grays Inn, London; Visiting lecturer, London University

The Rt Hon Sir Peter Blaker KCMG
Member of Parliament (Conservative), Blackpool South (1964-92)

Sir John Coles KCMG
Deputy Under Secretary of State, Foreign and Commonwealth Office

Sir Richard Evans KCMG KCVO
Senior Residential Fellow, Wolfson College, Oxford (1988-); Retired from HM Diplomatic Service as British Ambassador to the People’s Republic of China (1984-88)

Mr Henry Keswick
Chairman: Matheson & Co Ltd; Director, Jardine Strategic Holdings; Director, Hong Kong Land Co; Mandarin Oriental International; Member, London Advisory Committee, Hong Kong and Shanghai Banking Corporation.
Miss Bing-sum Lau
Librarian, Chinese section, Polytechnic of Central London; Chair, China Appeal (1989-); Coordinator, Chinese Political Prisoners Campaign (1991-).

Dr Cyril Lin
Director, Centre for Modern Chinese Studies, Oxford University; Research Fellow, St Antony’s College, Oxford; University Research Lecturer, Social Studies Faculty, Oxford

Dr Jonathan Mirsky
China specialist, The Observer, journalist and broadcaster

Mrs Rosemary Righter
Senior Leader Writer, The Times; journalist and writer on international affairs and international organisations.

Dr Gerald Segal
Senior Fellow (Asian Security), International Institute for Strategic Studies

Sir John Swire CBE
Honorary President & Director, John Swire & Sons Ltd; Director: Swire Pacific Ltd

Mr Timothy M Whalley
Head, Group Trade Finance, Standard Chartered pic., London

Dr Michael C Williams
Senior Commentator, Far Eastern Services, BBC World Service

Professor Maurice D Copithorne QC
Associate Counsel, Ladner Downs (Barristers & Solicitors), Vancouver (1987); Professor (part-time), Faculty of Law, University of British Columbia

Mr A Neil Tait
Senior Vice President, Private Banking and Asian Banking, Bank of Montreal; member, Pacific Basin Economic Council; Co chairperson, Trade Services, Canada-Taiwan Business Association; member, Hong Kong-Canada Business Association

Dr Don E Waterfall
Director, North Asia Relations Division, External Affairs and International Trade, Canada (responsible for China, Japan, Korea, Indochina, and APEC);

Mr Simon Nuttall
Director, Relations with China, Japan and the other countries of the Far East, Directorate-General for External Relations, Commission of the European Communities, Brussels

M François Godement
Research Fellow, Institut Français des Relations Internationales, and Head, International Business Department, National Institute of Oriental Languages and Civilisations, Paris; Research Fellow, Centre National de la Recherche Scientifique.

Dr Carsten Herrmann-Pillath
Researcher, Federal Institute for Eastern European and International Studies, Cologne.
Professor Dr Willy Kraus
Professor (Emeritus) and Reader, Economics (East Asia), University of Bochum

Ambassador Dr Klaus Zeller
Ambassador for Asian and Pacific Affairs, Auswärtiges Amt, Bonn

Mr Michael Sze
Secretary for Constitutional Affairs, Government Secretariat, Hong Kong

Mr John Yaxley CBE
Commissioner, Hong Kong Government, London (

Mr Michael MacNulty
Chairman and Managing Director, Tourism Development International, Dublin

Dr Shujiro Urata
Associate Professor, School of Social Sciences, Waseda University, Tokyo

Mr Kunio Takahashi
1st Secretary (Political), Embassy of Japan, London

Mr H Brandt Ayers
Editor and publisher, The Anniston Star; co-owner of 5 newspapers: The Star, The (Talledega)Daily Home, The Jacksonville News, Oxford Midweek, The Piedmont Journal Independent

Mr Mark Grobmyer
Partner, Arnold Grobmyer & Haley, (Attorneys-at-Law); Chairman, American Bar Association Committee on Financial Services Law; Member, National Advisory Council, Center for the Study of the Presidency

Dr Robert J Lager
Director, Center for International Trade and Commerce; Executive Director, Alabama Foreign Trade Relations Commission, Mobile, Alabama

Dr Joseph Massey
Deputy US Trade Representative for Japan and China, Washington DC; Deputy Assistant Director for Commerce and Trade, Office of Policy Development, The White House

Mr Doug Paal
Special Assistant to the President and Senior Director for Asian Affairs, National Security Council

Mr James C Richards
President, member, Board of Directors, Southwire Company, Carrollton, Georgia

Mr A J Robinson
President, Portman Overseas and General Manager, Peachtree Center, responsible for management of all Portman Overseas activities including Atlanta, Shanghai and Hong Kong offices

Mr Alan D Romberg
Senior Fellow for Asia, Council on Foreign Relations, New York
Dr Cedric L Suzman
Vice President, Educational Program Director, and Trustee, The Southern Center for International Studies, Board of Trustees

Dr Jerome Tannenbaum MD
Founder, Chairman and CEO, REN Corporation-USA, Nashville, Tennessee

Ambassador Richard L Walker
James F Byrnes Professor and Ambassador in Residence, and Trustee, University of South Carolina, Columbia

Ms Julia A White
Vice President, Co-Founder and Trustee, The Southern Center for International Studies, Atlanta

Mr Peter C White
Co-Founder, President and Trustee, The Southern Center for International Studies