Contents

Preface and Acknowledgements ix

Maps xii

Part I: The Foundations of Modern Hong Kong

1 War and Peace 3
Tea, Opium and Trade 5
Diplomacy and Conflicts 7
The First Anglo-Chinese War 9
The Treaty of Nanking 14
2 The Foundation of a Crown Colony 16
British Occupation 16
Crown Colony 18
Raison d’être 20
Governance 23
The Question of Representation 26
3 Imperial Expansion 29
The Second Anglo-Chinese War and the Acquisition of Kowloon 29
The New Territories 36
An Appointment with China 39

Part II: The Heyday of Imperial Rule

4 Law and Justice 45
Native Laws and Customs 46
Administration of Justice 47
Rule of Law 52
vi A MODERN HISTORY OF HONG KONG

5 Economy and Society 56

Forces for Economic Development 56
A ‘Colonial Society’ 62
Segregation 65
Governance of the Local Chinese 67

6 Agent for Change in China 73

Inspiration for Chinese Reformers 73
Hong Kong’s Role in the Chinese Republican Revolution 76
A Safe Haven for Dissidents and Political Refugees 80
7 The Great War and Chinese Nationalism 84
The Impact of the Great War 86
Labour Unrest 87
The Rise of Chinese Nationalism 90
The Canton-Hong Kong Strike and Boycott 92

8 Imperial Grandeur 102

The Politics of Stability 102
Economic and Social Developments 106
The Calm Before the Storm 114
Part III: A Colonial Paradox
9 Japanese Invasion and Occupation 119
The Battle of Hong Kong 119
The Destruction of Imperial Invincibility 124
Occupation and Resistance 126
Wartime Planning in London 130

10 Return to Empire 133

The Race for Hong Kong 134
Militar y Administration 138
Status Quo Ante? 141
11 A Fine Balance 145
Rehabilitation and Constructive Partnership 145
The Question of Hong Kong’s Future 149
The Impact of the Korean War 157
Strategy for Survival 158
 CONTENTS vii

12 Economic Take-off 161

From Entrepôt to Industrial Colony 162
The Immigrant Mentality 167
Take-off 170
Economic Maturity and the China Nexus 175

13 The Rise of the Hong Kongers 180

A Settled People 180
The Test of the ‘Confrontation’ 183
The Emergence of a Local Identity 190
14 The Making of a Colonial Paradox 197
The Nature of British Colonial Rule 197
Corruption, Credibility and Benevolent Paternalism 201
The Best Possible Government in the Chinese Political Tradition 206

Part IV: Securing Hong Kong’s Future

15 Fateful Decisions 211
Prelude to Negotiations 212
The Sino-British Negotiations (1982–4) 218
The Joint Declaration 225

16 The Beginning of the End 228

Realignment of Power 228
Flirtation with Democracy 231
Convergence 233
China’s Hong Kong Policy 236
The Basic Law 238

17 The Final Chapter 245

The Impact of the Tiananmen Incident 247
The Last Governor 254
The End of Cooperation 261
‘Building a New Kitchen’ 263
Conclusion: Full Circle 268
Handover 269
British Legacies 273
viii A MODERN HISTORY OF HONG KONG

Notes 279
Bibliography 318
Index 334
 Preface and
Acknowledgements

The history of Hong Kong is a fascinating one. It is not so much

because it transfor med itself from ‘a barren island with hardly a
house upon it’ into a great metropolis of seven million in a century
and a half, though this is itself a great story. It is, in my view, the
British colonial administration’s creation of a government that met
the expectation of as good a government as possible in the Chinese
political tradition that has made it so special. The real measure of
Hong Kong’s extraordinar y achievement was confir med as the
Communist and highly nationalistic g overnment of the People’s
Republic of China committed itself to maintain the system and way
of life in Hong Kong for 50 years when it negotiated an end to
British imperial rule.
British rule also left its mark on Hong Kong in a more important
and sustainable way. It led to the rise of a people that remains
quintessentially Chinese and yet share a way of life, core values and
an outlook that resemble at least as much, if not more, that of the
average New Yorker or Londoner, rather than that of their compatriots
in China. A modern history of Hong Kong must therefore address
how the residents of Hong Kong came of age as a people with a
common identity and shared worldview. The people of Hong Kong
is also by all conventional measures in political science a population
which, though ready for democracy, has not vigorously pushed for
and built one. This is just one of the various paradoxes or ironies
tha t mar ke d H o n g Ko n g u n d e r B r i t i s h r u l e a n d d e s e r ve s a n
impassioned examination and explanation.
With the question of its future hanging in the balance for much
of its history, as Hong Kong transformed itself from an outpost of
the British Empire into a leading trading and financial centre of the
world, a modern history must also account for how this problem
came about and how it was eventually resolved. The issue of Hong
Kong’s future under British rule is consequently a major sub-theme
that receives considerable treatment.
x A MODERN HISTORY OF HONG KONG

Writing a history of Hong Kong shortly after the end of British

imperial rule raises serious questions of perspective and balance. It
has been usual, not least in the former British Empire itself, for post-
colonial historians to err on the side of political correctness and
nationalism. They tend to underplay the role of the British colonists
and overstress the contributions made by the local or indigenous
people. To do so produces a history as inadequate as one that sets
out to blow the imperial trumpet for Hong Kong’s time as a Crown
Colony. A native son of Hong Kong who has lived roughly as long in
Hong Kong as outside it, and having been trained in British imperial
history and having spent two decades working on the history and
politics of China, my intention is to ignore political correctness and
present a modern history that does justice to all who were or have
been part of this shared history. In this book I set out to explain and
analyse clearly, simply and as objectively as possible the forces which
made Hong Kong into what it was when British imperial rule ended
in 1997. Whether I have succeeded or not is for you to judge.
A Modern History of Hong Kong is meant as much for general readers
as for specialists. General readers should ignore the fairly large number
of notes. As I aim to disperse a number of widely popularised
misconceptions and myths about Hong Kong’s history, I have decided
against dispensing with references. General readers may not wish to
get into the academic debates but specialists may like to check on the
authenticity and reliability of the sources or use them to further their
own scholarly pursuits.
Readers are advised that, in China, the surname precedes the given
name. In Hong Kong, most ethnic Chinese follow the same rule –
but not everyone does so. In the case of those who give their names
in the English way, their preference is respected. In the transliteration
of names and Chinese terms, the pinyin system adopted in the People’s
Republic has been followed. Exceptions have been made for personal
or place names in Hong Kong or for Chinese personalities and cities
well known to English readers. In these cases their usual form is used.

Acknowledgements
This volume is the result of research carried out over two decades,
though it was largely written in 2001 and 2002. Some of the basic
work was done in conjunction with other projects. The relentless but
invariably gentle and good-humoured prodding from Dr Lester Crook
of I.B.Tauris has played a key part in making sure this longstanding
ambition of mine was turned into reality. He has also kindly arranged
for some copyright material published in an earlier work, Hong Kong:
An Appointment W ith China, to be used in this volume. My wife,
Rhiannon, ensures that I have the best possible environment to write
in. It was not just her love and tender care but also her understanding
 PREFAC E AND ACKNOWLEDGEMENTS xi

and the many discussions I had with her about elements of this book
that made this venture a joy. To her this volume is dedicated with
love and affection.
In undertaking the research which directly helped the preparation
of this volume I would like to thank Carmen Tsang for her assistance
with various sources in Hong Kong over the years. I am grateful to
Lieutenant-General Fu Ying-chuan for special access to the Ministry
of National Defence archives of the Republic of China, to the For-
eign Ministry for access to its papers in Taipei, and to the Tung Wah
Group of Hospitals for access to its archives. I am also obliged to
the keepers of the Public Record Office (Kew), Rhodes House Li-
brary (Oxford), the Hung On-to Memorial Library (Hong Kong Uni-
versity), the Hong Kong Public Records Office, the Butler Library
(Columbia University), the Eisenhower Library (Abilene, Kansas), and
the Truman Library (Independence, Missouri) for access to and per-
mission to cite from archival material under their care. The staff at
St Antony’s College Library and the Institute for Chinese Studies Li-
brary, both at Oxford, at the University of Hong Kong Library and at
the Institute for Modern History Library (Academia Sinica, Taipei)
have also provided kind assistance and congenial environments for
my work over the years. I am also grateful to colleagues at the Centre
of Asian Studies and Robert Black College at the University of Hong
Kong, which provided a home to me when I conducted some of my
research in Hong Kong.
In the course of the last two decades I benefited greatly from in-
depth interviews conducted with more than 40 former members of
the Hong Kong government, the British diplomatic ser vice, the
Executive and Legislative Councils of Hong Kong and the Basic Law
Drafting Committee. Most though not all of these interviews were
conducted when I was director of the Oxford University Hong Kong
Project. The Hong Kong Project inter views were conducted on a
confidential basis. The oral records and the tens of thousands of
pages of transcripts are kept at the Rhodes House Library and are
mostly still closed to public access. Because of the need to honour
the pledge of confidence, I have made no use of any interview record
still subject to a time-ban. However, I cannot unlearn what I have
learnt. The perspective which I have taken in this volume has been
affected by the many intensive hours of historical discourse. To all
the contributors to the Project – whom I shall not name but you
know who you are – I owe a debt of gratitude.
 114˚E 114˚20'E
GUANGDONG
PROVINCE
Sha Tau Kok Ping Chau

Sheung Shui
Fanling Plover Cove Mirs Bay
y Res.
Ba
p
ee Tai Po
D Tai Mo Shan Tolo Harbour
Yuen Long
3143 ft (958m)
Tuen Mun NEW TERRITORIES High Island
(leased 1898) Sha Tin
Res.
Tsuen Wan Sai Kung
New International Airport Kwai Chung
(to be completed 1998) Tsing Yi Sham Shui Po
22˚20'N 22˚20'N
KOWLOON Kwun Tong
(ceded 1860)
Victoria Harbour North Point
Lei Yue Mun Passage
Mui Wo
VICTORIA Hong Kong Chai Wan
Lantau Island Aberdeen Island
Tai O Lantau Peak (ceded 1842)
3,064 ft
(934m) Cheung Stanley Shek O
Chau
Soko Is.
Lamma Is.
The Colony of Po Toi Group
Hong Kong 1997
0 10 kms
SOUTH CHINA SEA
0 5 10 miles 114˚E 114˚20'E
 Part I

The Foundations of
Modern Hong Kong
 Chapter 1

War and Peace

The Crown Colony of Hong Kong was a product of the First Anglo-
Chinese War (1839–42), popularly known as the ‘Opium War’. This was,
in fact, much more than a war over the opium trade, though the economic
benefit of the trade for the British and the costs to the Chinese were
certainly important considerations for policymakers on both sides. Basic
changes in the modern world were in any event pushing Britain and China
to a major confrontation as the 1830s drew to a close. Two forces stood
out in this regard.
The most fundamental change, which brought confrontation closer
than ever, was the Industrial Revolution. Great advancements in
communication and other technologies as well as in organisational
capacities in Europe had enabled the leading industrial nation, Britain,
to project power in a substantial way across more than 10,000 miles of
ocean. This was greatly assisted by the availability to the British of India
and other imperial outposts as key staging posts for economic and imperial
activities in the East. The continued process of the Industrial Revolution
in Britain was also fuelled by capturing overseas markets, which meant
Britain had, since the start of the Industrial Revolution, adopted an
aggressive foreign policy backed by war and imperial expansion. 1
These changes gave rise to the second factor. For the first time in human
history, Britain – the premier power in Europe after the defeat of Napoleon,
master of the oceans, workshop of the world and an expansionist imperial
power – came face to face with the Celestial Chinese Empire. 2
Although China would soon be revealed to be a ‘paper tiger’ in its
confrontation with Britain, it deemed itself the greatest empire on earth.
It saw itself as the centre of the universe with its emperor enjoying the
mandate of heaven. This apparently extravagant claim of grandeur is
not without basis.
China was clearly the world leader in scientific developments,
communication, production technologies and administrative organisation
until around the sixteenth century. At the height of its power in the early
fifteenth century, China was the only country that had the capability to
deploy a naval taskforce of an estimated 317 ships and 27,000 men across
4 A MODERN HISTORY OF HONG KONG

great distances, as its navy sailed as far as Malindi on the east coast of
Africa, just north of Mombasa. 3 To put this in perspective, Vasco de
Gama did not make the first successful sea journey from Europe to India
and back until 1498, over half a century later. Likewise, the Spanish
Armada that sailed for England in 1588 – the destruction of which marked
the rise of British naval supremacy – boasted a fleet of a mere 132 vessels.
Similarly, the vast Chinese empire on land was held together by superior
organisation and logistics in the pre-modern world. This enabled the Emp-
eror to supervise urgent and important matters through a chain of relay
riders that could deliver a despatch to a distance of 357 miles in 24 hours. 4
The great advantage that China had over Europe was subsequently lost
partly because of the dramatic advancements in Europe following the
Industrial Revolution. It was also because the Chinese had fallen into the
‘high-level equilibrium trap’. By the time of late imperial China, ‘both in
technological and investment terms, agricultural productivity per acre had
nearly reached the limits of what was possible without industrial-scientific
inputs, and the increase of population had therefore steadily reduced the
surplus product above what was needed for subsistence’. 5 Nevertheless,
the Chinese economy continued to expand as its population rose
exponentially. From the time when China first took a population count in
2AD to the end of the fourteenth century or the beginning of the Ming
dynasty, its population fluctuated between 37 and 60 million. 6 It reached
an estimated 100 million in the 1650s, just after the Manchu or Qing dynasty
superseded the Ming, rising to between 400 and 450 million in the 1850s.
This dramatic increase demonstrated how efficient the Chinese economy
had become in the pre-modern mode of production and management but
it also had a negative effect on technological advancement.
Achieving this ‘high-level equilibrium’ allowed China to enjoy a degree
of unity and stability over a vast empire unmatched for centuries in the
pre-moder n world but it also removed the incentive to innovate. 7
Consequently, when the modernity unleashed by the Enlightenment and
the Industrial Revolution enabled Europe to overcome great distance and
knock on the gate of the Chinese Empire, the latter responded mostly by
basking in its old glory and failing to recognise the real significance of
this new development. Late imperial China had continued to operate
without a central treasury, or reliable vital statistics, or civil laws that
linked government operations with the rising economic trends, and had
remained a gigantic ‘conglomeration of village communities’. 8 It was the
greatest and most advanced empire, to use a Western analogy, essentially
still of the late medieval or at least pre-industrial kind when it found
itself forced to deal with Queen Victoria’s emerging modern and rapidly
industrialising British Empire.
Sharing little in outlook or core values in the handling of international
relations, and increasingly tangled in expanding commercial and other
relations that gave rise to conflicts and misunderstandings, the British
and the Chinese empires behaved like all empires had previously done.
They sized each other up, with the more powerful one moving towards a
 WAR AND PEAC E 5

contest for supremacy when the furtherance of its perceived interests

made this desirable. The scene for a major confrontation was set.

Tea, Opium and Trade

Late imperial China exercised strict controls over its external trade. It was
in part because the vast expanse of the empire across various climatic zones
had given it a very high degree of self-sufficiency. This condition underlined
the arrogant claim that Emperor Qianlong made to King George III of
Britain during Lord Macartney’s first embassy to China (1792–4). According
to Qianlong, ‘our Celestial Empire possesses all things in prolific abundance
and lacks no product within its own borders’ and ‘there was therefore no
need to import the manufactures of outside barbarians in exchange of our
own produce’. 9 This attitude towards foreign imports and trade was further
reinforced by the central government’s determination to avoid stability in
the empire being disturbed by foreign influences, particularly the spread
of religious beliefs. This Chinese attitude notwithstanding, trade between
the two countries expanded, but from the middle of the eighteenth century
it was mainly confined to the southern city of Canton (Guangzhou), far
away from the imperial capital of Beijing (Peking). In the conduct of trade,
the Chinese government relied on merchants, known as cohongs, as agents
to deal with the British, who were required to send communications to
senior officials through their Chinese merchant contacts and were subjected
to numerous restrictions. 10
On the British side, prior to 1834 the China trade was handled by the
East India Company (EIC) under a monopoly. The EIC was founded in
1600 by a royal charter granted by Queen Elizabeth I, which gave it great
scope to take any measures necessary to support trade in the perilous
waters and often hostile environment in the East in order to compete
against its bigger European rivals, particularly its Dutch counterpart. This
included the privilege of raising ar med forces and taking over the
administration of territories deemed essential for trade under the charter.
The costs of administration, maintaining order and security in the
Company’s dominion in India were so high that by the late eighteenth
century the EIC was almost constantly under great financial pressure. In
order to augment its revenue and to counter the smuggling or illegal
private trade that was going on between India and China, the EIC granted
licences to private traders who engaged themselves in this increasingly
lucrative country trade. 11
In spite of the distance and the insular attitude of the Chinese Empire,
the China trade was a significant one for Britain and the EIC. For much
of the middle of the nineteenth century, China was the fourth most
important source of imports for Britain and enjoyed a very favourable
balance of direct bilateral trade. 12 The most important British import
from China was tea, followed by raw silk. The tea trade was important
not only because tea had become practically a daily necessity in Britain
by the 1830s, but also because the import duty London extracted from it
was so high that it had also become a significant source of government
6 A MODERN HISTORY OF HONG KONG

income. It amounted to about 16 per cent of customs revenue in Britain

in the five years preceding the First Anglo-Chinese War, and was sufficient
to pay for about 83 per cent of the costs for maintaining the Royal Navy. 13
The unfavourable balance of trade for Britain was redressed by a
triangular trade involving British India, which at that time produced the
only highly sought-after commodity in the otherwise largely self-sufficient
China. This was opium, prohibited in China but imported through normal
channels to Britain where it was openly available. Mainly taken orally for
medicinal purposes and not (as was widely done in China) smoked, using
opium was not at that time illegal or considered dangerous and immoral
in Britain. 14
The combined British and Indian trade with China produced a picture
opposite to that of direct British trade with China. Once the export of
opium from British India to China is included in the trade, the British
side enjoyed a healthy balance of payments. In other words, the British
export of opium from India would more than pay for the British import
of tea and silk from China. 15
For India or the EIC, revenue from the opium trade accounted for
over 8 per cent of the overall revenue of British India for the five years
preceding the First Anglo-Chinese War. 16 By the end of the eighteenth
century, the profits that the EIC generated from India were absorbed by
the huge costs of governing India, and its profit came mainly from the
China trade. 17 Much was therefore at stake in the China trade for Britain
and British India, for which important economic interests required the
continuation of the lucrative opium trade.
This triangular trade was significant to the Chinese in a very different
and almost opposite way. The long-established view that the Chinese
economy suffered from the net physical outflow of silver – the key
monetary medium in this period – as a result of the unfavourable balance
of this trade has now been challenged. 18 The actual flow of silver in and
out of China was in fact distorted by the use of remittance by draft for
settlement of international trade, for which London served as the financial
hub. 19 Whatever the reality, with the flow of silver there was a shortage
in China. 2 0 As a result, opinions within the Chinese officialdom
increasingly depicted an exaggerated outflow of silver, which by 1837
had seriously alarmed Emperor Daoguang. 21
Key policymakers and leaders of powerful cliques in the bureaucracy
and the literati, such as Viceroy Lin Zexu, also believed the shortage of
silver was a result of the opium trade. 22 Furthermore, they were worried
that opium smoking had become so widespread and entrenched that it
had sapped the strength of the country. When military debilitation became
evident in 1832 following the inability of the garrison to suppress a rebell-
ion by the Yao minority in the Guangdong-Hunan border, even Emperor
Daoguang became seriously concerned. 23 Thus, this triangular trade had
also become a matter of major significance for the Chinese Empire.
The 1830s therefore saw major debates among Chinese policymakers
on the subjects of opium suppression and the control of this undesirable
 WAR AND PEAC E 7

trade. Different options, ranging from cutting off the import by a trade
embargo, to suppression to legalisation, were explored, examined and
debated. Such policy deliberations and wider discussions were conducted
in the context of the bureaucratic constraints imposed by the structure
and vested interests of the empire, official jostling for imperial favour, a
limited understanding of the military strength of the British and therefore
the potential costs of a trade embargo. 24 Suppression of the trade did
not become policy until the eve of the First Anglo-Chinese War.

Diplomacy and Conflicts

If Sino-British trade caused friction in bilateral ties, the conduct of formal
relations between the two empires was even more problematic and
acrimonious. The great tension over ceremonial and protocol matters,
particularly over the performance of the kowtow that wrecked Macartney’s
first British embassy to China at the end of the eighteenth century, grew
more problematic in the 1830s. 25 The Chinese Empire did not see or treat
Britain as an equal.
Until the end of its monopoly, the EIC almost exclusively handled
what the British saw as the indignities involved in dealing with Chinese
officials. They were deemed unpleasant and offensive but were tolerated
by what was, above all, a profit-driven commercial organisation.
The taking over of the EIC’s roles in dealing with the Chinese
authorities by a representative of the British government implied a basic
change. The prestige, dignity and honour of the British Empire were
now at stake, but this important development received no recognition
from the Chinese. 26 The basic differences in the correct manner of
conducting relations between the two empires caused regular disputes.
Since no compromise solution could be devised to satisfy both sides, in
the long term either the British Empire – a rising power in the world
scene – would have to continue to defer to the condescending Chinese
approach, or the Chinese would be forced to accept the European norm
in diplomatic relations. 27
Until 1860, when the Chinese finally accepted a resident Minister
Plenipotentiary to represent Britain, relations between the two countries
were in fact conducted without diplomatic relations in the modern sense.
Indeed, China did not send a resident diplomatic representative to Britain,
its first to any Western power, until as late as 1877. 28
Differences over the proper way to conduct bilateral relations came
up as soon as Lord Napier set about discharging his responsibilities as
the first ever British Chief Superintendent of the China trade in 1834,
following the end of the EIC’s monopoly. 29 In addition to taking over
the management of British trade that the EIC used to supervise, Napier
was also instructed by the British government to explore the possibility
of extending trade beyond Canton and establishing diplomatic relations.
The Chinese for m for contacting the Viceroy in Canton was that
communications should be styled as ‘petitions’ and conveyed through
the cohongs. Acting to defend the ‘dignity’ of the British Empire, Napier
8 A MODERN HISTORY OF HONG KONG

broke with the Chinese rule and sailed up to Canton in a naval ship; he
then insisted on announcing his arrival formally by presenting a letter to
the Viceroy. This, from the Chinese point of view, unconventional
approach caused considerable resentment and was firmly rejected by
Viceroy Lu Kun. An impasse ensured for two months. It ended only when
illness left Napier with no choice but to beat a less than dignified retreat
to the Portuguese enclave of Macao where he soon died.
Napier was replaced as Chief Superintendent by two former EIC men
in rapid succession, and both reverted to avoiding confrontation with
the Chinese authorities. 30 Even Napier’s third successor, Captain Charles
Elliot, a Royal Navy rather than a Company man, at first attempted to
take a conciliator y approach after he took up office in 1836. His
preparedness to use the ‘undignified’ form of contacting the Viceroy or
the provincial governor did not gain him much headway. His tolerance
of this indignity was not endorsed by Lord Palmerston, the British Foreign
Secretary, who instructed him to stop this practice. 31 Not much happened
in fact, since London did not as yet have a coherent policy towards China,
and Palmerston generally ‘made do with no opinion with China beyond
the vague feeling that… China was like any other power and should be
treated as such’. 32 This did not mean London was not concerned with the
issue of national dignity; there was simply at this stage insufficient cause
to focus attention on it.
The differences between the two empires in their attitudes towards
the conduct of international relations had a parallel in their approaches
to the administration of law and justice. By the nineteenth century, the
British had already developed and adopted, however imperfectly, the
concept of the rule of law based on the due process, the presumption of
innocence, trial by jury and the testing of evidences through adversarial
discourse in a court of law. Justice, in the British view, was deemed to
have been done when the law had been allowed to run its course, and the
punishment to be meted out was to be directed against the convicted
personally and to be proportionate to the severity of the crime.
The Chinese, in contrast, had a rather different approach. Although
the Chinese legal system was not simply primitive, arbitrary and barbaric,
as it was generally seen by the British at the time, but was in fact highly
developed and rationally based, it worked on principles fundamentally
different from the British system.
To the Chinese, justice was deemed to have been done not when the
law had run its course but when the right decision was reached and
implemented, whether this was achieved by strict adherence to the law
or not. For the magistrate, to do the right thing did not mean to be
arbitrary or simply to enforce the law; it was supposed to be based on
careful deliberation of the results of his investigations, including, where
appropriate, the use of torture to secure a confession from the suspect.
The degree of punishment was usually linked to the social norm and
prevailing morality so that, for example, the killing of a father by an
unfilial son would attract an extremely severe punishment, while the killing
 WAR AND PEAC E 9

of an unfilial son by a father would receive a much lighter sentence. It

was also meant to uphold public morality and through its demonstrative
effect maintain social order. 33 Collective responsibility, in contrast to
individual responsibility in British law, was the norm. While the Chinese
legal system was sophisticated in its own way, the actual administration
of justice was greatly influenced or undermined by endemic corruption
and the non-separation of judicial from other powers.
In light of the basic differences between the Chinese and the British
approaches to law and justice, it was not surprising that cases involving
Britons or Westerners – who were seen as barbarians by the Chinese –
almost invariably proved thorny for both sides and were often causes of
dispute. There is no need to rehearse here various incidents of the early
nineteenth century in which the British and the Chinese were engaged in
disputes over the administration of law and justice on British subjects
who might have broken Chinese laws. 34 Suffice it to say that, although
they were impor tant ir ritants in bilateral relations, they were not
sufficiently serious to provoke the two sides to go to war. However, the
mutual resentment over this issue was longstanding, and it provided added
incentive on the part of the British to seek redress to what they saw as
an unsatisfactory basis for the conduct of bilateral relations, particularly
when this infringed seriously upon British economic interests.

The First Anglo-Chinese War

When Elliot took office as Chief Superintendent of Trade in 1836, the
Chinese government was engaged in a major policy review of the opium
trade and control of the apparent outflow of silver. Emperor Daoguang
was initially more inclined towards legalisation that would provide better
control over the trade and the flow of silver. However, he was persuaded
by one of the influential and ambitious groupings of officials and literati,
known as the Spring Purificationists (zhanchunji), which produced damning
allegations against the pro-legalisation clique to reverse his decision. 35
He now favoured the suppression of opium.
Further deliberations on how to achieve this objective without provoking
a war went on for some time and led to an important official and ally of
the Spring Purificationists, the Viceroy of Hunan and Jiangxi Lin Zexu,
volunteering to take on this difficult task. The Spring Purificationists and
Lin picked Guangdong to start the anti-opium campaign as they realised
that a countrywide one could not be implemented. They reckoned the most
effective way was to cut off the supply where it entered the country. To do
so, they planned to cause a temporary collapse of trade in Canton in order
to produce a commercial panic among the British so that the latter would
sacrifice the opium trade for the profits of other commerce. 36 Lin
volunteered, as he hoped a spectacular success would enable him to gain
sufficient credibility and stature to introduce a crucial and yet sensitive
reform, that of the tribute-grain system. 37
In March 1839, Lin took up office as Special Imperial Commissioner
in Canton and set about his anti-opium crusade. Although generally seen
10 A MODERN HISTORY OF HONG KONG

as a progressive and broadminded mandarin for his time, Lin did not
have a real understanding of his British opponents or the great gap that
the Industrial Revolution had produced between the might of the modern
British Empire and the essentially still medieval Chinese Empire. While
neither he nor the Spring Purificationists expected a war they, for domestic
considerations, were unwittingly steering the Chinese Empire on a
collision course with the British Empire by an attempt to cut off the
most profitable element of Britain and British India’s China trade.
Eight days after he had arrived in Canton, Lin ordered the foreigners
to surrender all opium in their possession and to undertake to bring in
no more. The British merchants were at first hesitant not least because
they thought Lin could be bribed or was probably not really serious.
However, Lin was as determined as he was incorruptible. He put great
pressure on the British in Canton, confining them to the factory or
warehouse compound and cutting off their supplies.
On his return to Canton, Elliot, who was in Macao as Lin issued his
demand, decided that Lin’s demand would be met in order to secure safe
passage for Britons out of Canton, with the costs involved and other
injuries the Chinese inflicted on them to be resolved between the two
governments. With Elliot promising that the British government would
in due course pay for their opium stock, the merchants surrendered their
entire stock of 20,283 chests. The opium became technically the property
of the British government, before Elliot handed it over to the Chinese.
Once he had received the opium, Lin destroyed it in public.
With the value of the opium estimated at £2 million, it caught the
attention of the British and the Indian governments when the news finally
reached them (in August in the case of London). Although not a
formidable sum, neither the British government under Prime Minister
Lord Melbourne, which already had a budgetary deficit of £1 million for
the year, nor the EIC, which had just fought an expensive campaign in
the First Afghan War, found it politically tolerable. When the issue was
discussed in the British Cabinet in September 1839, it was quickly agreed
that the Chinese should be made to pay for this destruction of British
property by the threat or actual use of force if required. 38
The British and Indian governments then proceeded to put together
an expeditionary force. It was to be entrusted to Elliot and his cousin,
Rear Admiral Sir George Elliot, until then Commander-in-Chief of the
Cape Station of the Royal Navy, as joint plenipotentiaries at the beginning
of 1840. The expedition was to be a ‘punitive exercise… to bring an
obtuse Peking government to the conference table’. 39 Britain had decided
on war, not to impose British manufactures on China, nor to bring the
Chinese to salvation by spreading the gospel, though there were groups
in Britain who desired one or the other and used the results of this war
for their purposes. To Foreign Secretary Palmerston, it was not even to
force opium on the Chinese, despite the fact that British opium traders
seized on the war to further their trade and profits. As he emphatically
stressed to the Chinese government, the British government did not
 WAR AND PEAC E 11

question China’s right to prohibit the imports, it merely objected to the

way this was handled. 40 From Palmerston’s point of view, since the
prohibition order had not been imposed for years, its sudden strict
enforcement amounted to laying a trap for the foreign traders, and the
confinement of British traders in Canton with supplies cut off was
tantamount to an attempt to starve them to death or into submission. 41
What the war was meant to do was to ‘efface an unjust and humiliating
act, to recover the value of certain property plus expenses… and almost
by and by to put England’s relations with the Middle Kingdom on a new
and proper footing’. 42 To achieve these purposes, Palmerston gave the
Elliot cousins fairly clear instructions: to occupy one of the Zhoushan
islands off Zhejiang province in East China, to present a letter from
himself to a senior Chinese official for transmission to the Emperor,
then to proceed to the Gulf of Bohai in the north to sign a treaty with
the Chinese, and should the Chinese prove intransigent, blockade the
key ports and both the Yangtze (Yangzi) and Yellow rivers to force the
Chinese hand. 43 Palmerston was so clear in what he wanted that he sent
to Charles Elliot a draft treaty for peace, stressing all its provisions were
to be met. The resources put at the disposal of the plenipotentiaries were
4,000 troops, supported by a fleet of 16 warships and 28 transports. These
included three third-rate, 74-gun ships of the line and four newly designed
armed steamers or gunboats, with a total of 540 guns on board the ships. 44
The Chinese, including Lin, were caught by surprise, as they had
expected the British to seek to resolve the matter in Canton. When the
British demonstrated their naval prowess in Bohai, which was just over a
hundred miles from the imperial capital of Beijing, the Court was shocked
and a senior official, Qi Shan (or Keshen as he was known to the British),
was tasked to persuade the British to retire to the southern city of Canton
and negotiate there. With Qi replacing Lin as Special Commissioner in
Canton, negotiations dragged on through the autumn of 1840. The British
again forced Qi to come to an agreement after a further display of naval
superiority. Qi had no choice and reached a tentative agreement with
Charles Elliot, known as the Chuenpi Convention. By this agreement,
the island of Hong Kong was to be ceded to the British; an indemnity of
six million silver dollars was to be paid over six years; official relations
between the two empires was to be direct and on equal footing and trade
was to be reopened immediately. 45 As a result, the British took possession
of Hong Kong and British rule began on 26 January 1841.
Elliot had chosen Hong Kong rather than Zhoushan as instructed by
Palmerston, because he had reservations about opening more ports in
China. In his judgement, more ports would only create more opportunities
for the scattered British communities to be taken hostage, whereas the
excellent harbour of Hong Kong had proved itself a valuable base to
support the British trading community in Canton. 46
The Chuenpi Convention proved unacceptable to both the Chinese
and the British governments, and the two protagonists were replaced by
their respective governments. Qi’s biggest problem was the territorial
12 A MODERN HISTORY OF HONG KONG

cession, which angered not only the Emperor but also officialdom in
general. As far as the British were concerned, they were unhappy with
Elliot’s performance and his failure to implement Palmerston’s specific
instructions. 47 London thus appointed Sir Henry Pottinger, a Major
General of the EIC’s Bombay army known for his toughness and daring
in the recent Afghan war, to take over as Chief Superintendent and Pleni-
potentiary. Pottinger was given reinforcements that enlarged the fleet to
25 men-of-war (including ten steamers) and the expeditionary force to
about 12,000 men. 48
London was determined to get what it wanted by war. The thinking was
that if British forces could occupy strategic points that would allow them
‘to control the internal commerce of the Chinese empire’ they could exert
‘pressure upon the Court of Pekin irresistible’. 49 Once the forces were in
place and ready in Hong Kong in September 1841, Pottinger started a series
of campaigns in the lower Yangtze region, eventually fighting their way up
this mighty river to threaten the city of Nanjing (Nanking) almost a year
later. By then the British had already taken control of the key points in the
lower reaches of the Yangtze, the most important waterway for commerce
and communications in the richest part of China. They had also cut off
the Grand Canal, historically the designated channel for the transport of
tribute-grain from the south and the east to the imperial capital.
With repeated demonstrations of British naval and military superiority,
as well as great mobility, the Court in Beijing had to take into account
the implied threat that the British forces could swiftly redeploy to threaten
the Beijing-Tianjin area once they had stormed Nanjing. This left the
Chinese with little choice but to make peace, a task that fell on Yilibu
(Elepoo to the British) and Qi Ying, two new Special Commissioners.
The result of the negotiations was the Treaty of Nanking, which was
signed by the plenipotentiaries of both sides on board the 72-gun HMS
Cornwallis in Nanjing on 29 August 1842. Ratification was exchanged in
Hong Kong on 26 June 1843, an act that formally allowed Hong Kong to
be created a Crown Colony.
The real priorities for the British were reflected in the way the war
was handled. The advancement of British economic interests, which meant
maximising trade and seeking Chinese compensation for costs incurred,
was clearly paramount. Although Canton was, for example, on more than
one occasion threatened and could have been taken, no such attempt
was made in order not to disrupt trade, particularly the tea trade which
was also highly profitable. 50 The right for Britain to export Indian opium
to China was not itself a matter of major concern to the British in this
period, but the opportunity for British traders to continue to profit from
it was. Hence, neither in the draft peace treaty Palmerston gave Elliot in
February 1840 nor in the Treaty of Nanking itself did the British demand
the legalisation of the opium trade.
The main British concern was to secure the right to trade in China and
make as much profit as possible. In general, the British government did
not see the opium trade in moral terms and merely treated it as a most
 WAR AND PEAC E 13

profitable commerce that would continue as long as the Chinese general

public desired it and the Chinese officialdom remained too corrupt to
enforce its own prohibition order on a sustainable basis. 51 The distinction
between securing by force the right to trade for which opium was a major
commodity and to wage a war to impose opium on China might seem
spurious but it was not, at least not to the British government. 52 The
difference was between waging an imperialist war for economic benefits
and doing so to impose a contraband drug that the imperial power itself
deemed immoral. 53 The war was not so much a case of a state using its
superior power to impose an illicit drug trade on a weaker state as a classic
case of the flag following and protecting trade in an era when imperialism
carried a positive connotation in Europe.
The inability of the vast Chinese Empire to defend itself against a
relatively small British expeditionary force requires explanation. A couple
of the individual engagements, particularly the battle of Zhenjiang (July
1842), demonstrated that when led effectively the regular Chinese army,
a Banner garrison in this case, could put up a valiant and stubborn fight
against vastly superior numbers and overwhelming odds. 54 Where the
Chinese Empire fell short lay as much in its near medieval defence,
logistical organisation and communication systems as in its antiquated
military and naval technologies. It is true that Chinese military and naval
technologies were such that the British did not lose a single warship to
the Chinese in combat. However, it is not true that the British forces
always won against much larger Chinese forces on land or at sea. In many
of the land battles, the British either fought against a comparably sized
opponent or enjoyed a numeric superiority thanks to superior logistics,
organisation and mobility provided by the fleet.
The inherent weakness of the Chinese defence lay in the military
system. The Chinese national army, to use a modern term, consisted of
the Banner force, comprising Manchurian, Mongolian and Han Chinese
Banners. It was entrusted with the task of protecting national security by
defending the imperial capital and garrisoning the main strategic points.
The mobilisation, concentration and deployment of this main field force,
which totalled less than a quarter of a million, required time and efficient
transportation. Neither was available to the Chinese since the seaborne
British expeditionary force enjoyed elusive mobility. In addition to the
Banner force, there was the territorial army, known as the Green Standard
Army, consisting of fewer than half a million Han Chinese soldiers. The
two ar mies came under completely separate command and control
systems, with the Banner force being strategically deployed to provide a
check against the loyalty of the Green Standard Army. 55 The latter was,
in any e vent, more a g endar merie than an ar my, since its main
responsibility was internal security. It was neither trained, equipped,
organised nor deployed for effective defence against an external enemy,
least of all against a modern European army that had already consigned
most of the weapons used by the Chinese to museum display. In short,
the Chinese army did not have an integrated command and control system
14 A MODERN HISTORY OF HONG KONG

and Chinese commanders did not have the means to gather intelligence
to assess the intention of the seaborne invader, nor to deploy troops for
the effective defence of vulnerable points susceptible to an invasion.
Likewise, the Chinese navy had no headquarters or central command
structure and was basically subdivided and commanded by 15 admirals
stationed in key ports along the coast. The fleets were trained and
equipped mainly as parallel anti-piracy coastguard units rather than as
elements of a modern navy. 56
Furthermore, the Board of War in Beijing served neither as a modern
ministry of defence nor as a chiefs of staff committee. The Chinese
defence failed because its essentially medieval character could not meet
the challenges of a modern army backed up by the most advanced navy
and industrial country of the time.

The Treaty of Nanking

Strictly speaking, the grievances of the British Empire that Palmerston
outlined in his February 1840 letter to the Chinese Emperor at the
beginning of the war, including the perceived insult and harm done to
the British, were redressed by the Treaty of Nanking. Palmerston’s original
demands were met, with only one significant exception. This involved
the territorial cession. Instead of securing one of the islands in the
Zhoushan group, the British accepted Hong Kong, Elliot’s choice, which
was initially dismissed by Palmerston as ‘a barren island with hardly a
house upon it’. 57 This was partly because since British occupation Hong
Kong had proved its worth. It was also because Palmerston had by then
been replaced as Foreign Secretary by Lord Aberdeen, after Melbourne’s
Whig government was succeeded by Robert Peel’s Tory ministry in 1841.
The other main provisions of the treaty settled the war by Britain
extracting from a reluctant China an indemnity of 21 million silver dollars
to cover the value of the destroyed merchandise as well as all British
expenses; the opening of five seaports including Canton to foreign trade
with official British trade and consular representation sanctioned; the
ending of the old cohong system for trade; and equality between British
and Chinese officials. 58
The treaty did not in fact go far enough to create the conditions for
bilateral relations to be conducted in a mutually satisfactory manner, as
the basic problems that had led to the war were not removed. This was
partly because the inherent problems of two pompous and distant empires
becoming involved with each other as a result of changing technologies
were not addressed. To the British, the treaty was meant to open up China
to further trade, to the economic advantage of British citizens. Hong
Kong was taken primarily for these purposes. The British expected the
treaty to enable trade to be expanded and profits to be enhanced though
no serious thought had gone into how these would be achieved. To the
Chinese, the treaty was but a necessary evil to get the belligerent British
barbarians to end the war. They had no intention of expanding economic
or any other ties with the British.
 WAR AND PEAC E 15

Indeed, the treaty did not even deal with the issue, which provided the
impetus for the Chinese actions that became the immediate cause for the
war, namely the export of opium to China by British traders being barred
under Chinese law. Since opium was not even mentioned in the treaty, it
continued to be imported into China by British smugglers working with
the cooperation of their Chinese partners and corrupt Chinese officials. 59
Its illicit nature meant that it remained a source of tension.
More fundamentally, nothing was done to deal with the thorny question
of establishing diplomatic representation, and even the treaty’s provision
for Britain to send consular and trade representatives to the five
designated Chinese ports was not fully respected by the Chinese. After
the ratification of the treaty, there remained no effective channel with
which Britain could settle fresh disputes directly with the government in
Beijing. The British Plenipotentiary, by then based in Hong Kong where
he was also Governor, had to continue to deal with the Viceroy in Canton.
The First Anglo-Chinese War and the Treaty of Nanking did not cause
a fundamental change in the way the Chinese looked at the British, beyond
a limited recognition of the latter’s military and naval superiority and of
the inadvisability of attempting strict enforcement of the opium trade
prohibition lest it should provoke a renewal of hostilities. Once the war
ended, the Chinese Empire merely tried to restore normality as it had
prevailed previously. Neither the war nor the peace treaty shocked China
into seeking a basic reform as American Commodore Matthew Perry’s
squadron of ‘black ships’ did in Japan a decade later. Senior officials in
China, even someone like Viceroy Qi Ying – who was known for his ability
to understand the British and who managed to maintain relatively good
relations with them in the aftermath of the war – merely tried to update
and improve upon the old method of managing the barbarians by
attempting to understand the British customs and practices and avoiding
confrontations. 60 Among ordinary people, the Cantonese were the most
directly exposed to the British. It was in Canton that the ordinary people,
inspired and led by the local gentry, proved most hostile to the British and
threatened the security of the British if the Viceroy were to fulfil the terms
of the Nanking Treaty and open Canton city proper to the British. 61
Although the Treaty of Nanking did not put Anglo-Chinese relations
on a satisfactory footing or remove the underlying conflicts, leading to a
new war within two decades, it did mark the beginning of a new era in
China’s relations with the West. It also gave rise to the British colony of
Hong Kong.
 Chapter 2
The Foundation of
a Crown Colony

British Occupation
Although the British had on occasion used Hong Kong as a base for
operations in the early stages of the First Anglo-Chinese War, they did
not lay any claim to the island until after the Convention of Chuenpi. By
order of Plenipotentiary Charles Elliot, Commodore Sir Gordon Bremer
of the Royal Navy duly took possession in the morning of 26 January
1841. Accompanied by officers of the naval squadron, a few army officers
and a party of Royal Marines, Bremer landed at the north-west shore of
the island, toasted Queen Victoria and claimed Hong Kong in her name
after a royal salute from the men-of-war in the harbour. 1 The scene of
this high drama came to be known as Possession Point. It was kept an
open space and generally used as a place for recreation and entertainment
by the local Chinese under a different name, Tai Tat Tei. It was developed
in the 1980s and incorporated into a hotel and commercial complex, which
is also part of the new Hong Kong-Macao Ferry Terminal. This beautiful
subtropical island whose spectacular landscape reminded generations of
Scots of their home has a great deep-water natural harbour by its north
shore and good quality fresh water supplies, and was at that time home
to fewer than 7,500 Chinese residents, mostly fishermen and farmers. 2
The British occupation met with no resistance.
Since the Chuenpi Convention and the policies followed by both Elliot
and his Chinese counterpart over Hong Kong were subsequently
disallowed by the sovereigns of the two empires, the status of Hong Kong
in fact remained unsettled until after the Treaty of Nanking was signed
and ratified. However, Elliot did not learn of this rebuke and his recall
until August 1841.
After he joined Bremer in this new British possession, for which his
affection grew steadily, Elliot proceeded to proclaim and assert, pending
royal pleasure, the full right of the British Crown to administer the island
as a British dominion and to offer protection to its residents. He also
declared that ‘the natives of the island… and all natives of China thereto
resorting, shall be governed according to the laws and customs of China,
every description of torture excepted’. 3 Despite his preoccupation with
 THE FOUNDATION OF A C ROWN COLONY 17

relations with the Chinese authorities, Elliot laid down the foundations
for a new colony before his departure. 4 He declared Hong Kong a free
port, appointed his Deputy Superintendent of Trade, A.R. Johnston, to
take charge of day-to-day affairs and held the first sale of land by auction
in June. 5 The small beginnings of an administration were formed. 6
In the meantime, entrepreneurial British traders, led by Jardine
Matheson, for their part took advantage of the protection of the British
flag in the enclave to promote their China trade, including particularly
the storage and shipping of opium. 7 After the first sale of land, for 34
lots, construction of buildings, roads and other infrastructure followed
– so much so that the ‘elements of a regular establishment were soon
for med, and the nucleus of a powerful European community soon
planted’. 8 Chinese nationals were also attracted to Hong Kong as labour
was required for the building of a new town, which would become the
city of Victoria, a name that has long since been eclipsed by Central
District in popular usage. The birth of a modern city in Hong Kong thus
started to happen after British possession, despite uncertainty over its
future following the recall of Elliot. Indeed, so much had been done that
within a year of his arrival, Pottinger reported to London, that ‘whatever
may be the result of the war… and whatever may be hereafter decided
upon with respect to other insular positions, this settlement had already
advanced too far to admit of its ever being restored to the authority of
the Emperor consistent with the Honour and Advantage of Her Majesty’s
Crown and Subjects’. 9 The logic of imperial expansion led by trade and
the initiatives of the colonists was gathering momentum of its own.
At the beginning there was a difference of views between London and
its men on the spot in estimating the value of Hong Kong. Foreign
Secretary Palmerston thought it would ‘not be the Mart of Trade any
more than Macao’ when he first learned of Elliot’s insubordination. 10
Even his successor, Aberdeen, had doubts over its acquisition since it
would incur expenses in its administration, and complicate relations with
the Chinese Empire and other nations. 11
In contrast, Elliot believed Hong Kong was both easily defensible
and of ‘first rate importance for our own trade and interests’, as it had
proved itself ‘the chief basis of our operations in China, Militarily,
Commercially, and Politically’. 12 Even his successor, Pottinger, quickly
became a devotee. He saw it as ‘an asset both as a naval base and a
mart’ that ‘should not be abandoned’. 13 In taking this decision as the
m a n o n t h e s p o t , Po t t i n g e r did not act in accordance with his
instructions from Aberdeen, but what he did was in line with previous
directives from Palmerston when the latter was still Foreign Secretary.
As Pottinger set off for China, he was told by Palmerston that he should
‘examine with care the natural capacities of Hong Kong, and you will
not agree to give up that Island unless you should find that you can
exchange it for another in the neighbourhood of Canton, better adapted
for the purposes in view; equally defensible; and affording sufficient
shelter for Ships of War and Commerce’. 14
18 A MODERN HISTORY OF HONG KONG

Whether Pottinger was right or wrong in not following the instructions

of Aberdeen, geography and history have proved that he did right by
British interests. Hong Kong offered an excellent harbour and location
for the purposes that the British had in mind, indeed, it could not have
been surpassed within several hundred miles either side of Canton along
the Chinese coast.

Crown Colony
By Article III of the Treaty of Nanking, under which the Chinese
Emperor ceded to Queen Victoria ‘the Island of Hong Kong, to be
possessed in perpetuity by Her Britannick Majesty, her Heirs and
Successors, and to be governed by such laws and regulations as Her
Majesty the Queen… shall see fit to direct’, the future of Hong Kong
was settled and secured. 15 Following the exchange of ratification in June
1843, the Colony of Hong Kong formally came into existence, with
Pottinger, who had taken over the administration from Johnston in
February 1842, as its first Governor. The necessary authorisation and
instructions for the founding of this new colony were sent from London
ahead of time. 16 The most important documents forming its constitution
were the Letters Patent and the Royal Instructions from Queen Victoria. 17
With these two documents, the constitutional structure of a Crown colony
was prescribed, which was a form of government then shared by most
other British overseas territories.
Under the Letters Patent of 5 April 1843, which is also known as the
Hong Kong Charter, this new imperial outpost was to be governed by a
Governor appointed at royal pleasure and assisted by both an Executive
Council and a Legislative Council. As the representative of the Crown
and chief executive of the colony, the Governor was given ‘full power
and authority’, subject only to review and disallowance from London.
Although the Letters Patent were amended and on occasions reissued
during the 153 years of British sovereignty to accommodate changes of
the time, the basic structure of Hong Kong’s political system remained
essentially as it was defined by the Hong Kong Charter until it was handed
back to the contemporary successor to the Chinese Empire, the People’s
Republic of China, on 1 July 1997.
In light of the high mortality rate in those days, particularly of
Europeans in the tropical world including Hong Kong where the scorching
sun, poorly understood tropical diseases, and inadequate sanitary and
hygienic provisions kept life expectancy low, a clear line of succession to
the tremendous authority of the Governor was defined. In the event of
the Governor dying in office or being absent from the colony – the latter
a real possibility since he continued to hold concurrently the offices of
the British Plenipotentiary and Chief Superintendent of Trade in China
– his authority would be vested in a duly appointed Lieutenant-Governor
or, next in line, the Colonial Secretary. In Hong Kong no Governor in
fact died in office until Sir Edward Youde in 1987. Although the office
of Lieutenant-Governor was almost immediately filled in 1843 by the
 THE FOUNDATION OF A C ROWN COLONY 19

appointment of the General Officer in command of the land forces,

George D’Aguilar, as an office it did not establish itself firmly in the
colonial government and had been allowed to lapse by the early 1870s,
though it had on special occasions been revived temporarily. 18
While the Letters Patent defined the basic constitutional structure, it
was the Royal Instructions that provided the details laying down how
Hong Kong should be organised and governed. Although an Executive
Council and a Legislative Council were provided for to advise the
Governor in the exercise of his authority and in legislation, and they
both consisted of official and non-official members, they were meant to
be strictly advisory in nature. Parliamentary supremacy, which was already
the constitutional norm in Westminster in the nineteenth century, did
not apply to Hong Kong. Nor did it, for that matter, apply in any other
Crown colony. In practice, no sensible governor would consistently and
continuously act against the views of his Councils or the citizens of the
colony, as they had access to the democratically elected government in
London and the failure of a governor to maintain stability, good order
and prosperity would provoke inquiries from London and could lead to
his own removal. Nevertheless, the power and authority of the Governor
provided for in the Royal Instructions were such that the definition of
the government could in its narrowest sense be taken to mean the
Governor, or the Governor working in consultation with his Executive
Council, generally described as the Governor-in-Council.
The executive-led nature of the colonial government was fully reflected
in the Royal Instructions to the Governor that ‘no Law or Ordinance
shall be made or enacted by the said [Legislative] Council unless the same
shall have been previously proposed by yourself, and that no question
shall be debated at the said Council unless the same shall first have been
proposed for that purpose by you’, though the right of Councillors to
express their views fully in debates was enshrined. Indeed, the Legislative
Council was given the authority to pass local ordinances enforceable in
the colony but they must not prove repugnant to English law, and none
of them could sanction the grant of money or land to the Governor, in
order to pre-empt corruption. 19
As to the judiciary, the Governor was empowered by the Letters Patent
‘to constitute and appoint Judges, and in cases requisite, Commissioners
of Oyer and Terminer, Justices of the Peace, and other necessary Officers
and Ministers in our said Colony, for the due and impartial administration
of justice’. As the Crown’s representative, the Governor was also charged
with exercising certain royal prerogatives including that of pardon and
of suspending ‘from the exercise of his Office, within our said Colony,
any person exercising any office or Warrant granted, or which may be
granted by us’. 20
In strictly constitutional terms the Crown Colony system as practised
in Hong Kong did not provide for a clear separation of powers or
constitutional checks and balances. The weakest of the three branches
of government was the legislature, which did not enjoy full parliamentary
20 A MODERN HISTORY OF HONG KONG

power or standing. However, it ought to be recognised that the Crown

Colony system was never meant to be a democratic system. As would
become general practice in the British Empire by the twentieth century,
democratisation in such a system would involve gradual expansion of
representation in the Legislative Council leading to it being given full
parliamentary power, at which point the system would give way to a
responsible government in the Westminster tradition. The independence
of the judiciary was in practice generally respected, since the theoretical
autocratic power of the governor was checked by the British government
in London, which was in turn democratically supervised by the elected
parliamentarians of the United Kingdom. Furthermore, the colony’s court
of final appeal was constituted by the law lords of the Privy Council.
Although Crown Colonies shared much in common in their political
systems, Hong Kong stood out from its earliest days. In the words of
Lord Stanley, the Secretary of State for the Colonies, at its foundation, it
was ‘a small island, geo g ra phically and until now practicall y an
insignificant appendage to the vast empire of which the polity and the
institutions have no counterpart amongst those of the other nations of
the world’ and it was ‘governed by an officer who is, at once, to negotiate
with the Emperor of China or his officers, to superintend the trade of
the Queen’s subjects in the seas, rivers and coasts of his empire, and to
regulate all the internal economy of the settlement itself ’. 21 It was with
such considerations in mind that Stanley agreed that ‘proceedings
unknown in other British colonies must be followed’ in Hong Kong
making the Governor responsible to both his office and to that of the
Foreign Secretary concurrently. 22
The anomalous position of the Governor was finally removed in 1859
towards the end of the Second Anglo-Chinese War (1856–60), as Britain
finally appointed a resident Minister in Beijing as Envoy Plenipotentiary
to take care of diplomatic, consular and trading relations with the Chinese
Empire. This did not alter the reality that the colony was so closely tied
to Anglo-Chinese relations that, as a more recent Governor aptly
observed, ‘practically every major issue that arose in Hong Kong, and on
which London had to be consulted, was a matter of foreign policy’. 23
Existing as it did in the shadow of China, major policy departures in
Hong Kong were often taken only after consideration of their implications
for Anglo-Chinese relations or of the likely reactions from China.

Raison d’être
Hong Kong was not picked for a colony by the government in London,
and was ‘occupied not with a view to colonisation, but for diplomatic,
commercial and military purposes’. 24 It was in an important sense the
unintended result of the British Empire pursuing its economic interests
in East Asia. From the very moment the British government put at Elliot’s
disposal an expeditionary force, it had sought a territorial base along the
coast of China to support the trading relations it wished to establish
with the Chinese Empire.
 THE FOUNDATION OF A C ROWN COLONY 21

As Palmerston explained to the Chinese government, Hong Kong was

seized ‘in order that British Merchants trading to China may not be subject
to the arbitrary caprice either of the Government in Peking, or its local
Authorities at the Sea-Ports of the Empire’. 25 In the instructions he gave
his men on the spot, Palmerston spelt out the criteria for choosing the
territorial bases. It ‘ought to be conveniently situated for commercial
intercourse; not merely with Canton but other trading places on the Coast
of China’ and must ‘have good harbours, and to afford natural facilities
for Militar y defence, and should also be capable of being easily
provisioned’. 26 The British objective was clear from the very beginning:
Hong Kong was taken ‘not at all because of any natural advantages which
it possesses, but simply as subsidiary to the intercourse between the British
and the Chinese empires’ for which the most important was trade. 27
Palmerston’s favoured location for a British trading station was in fact
one of the islands in the Zhoushan group off the coast of Zhejiang
province, close to the rich Yangtze basin. Hong Kong was the choice of
Elliot and was subsequently embraced by Pottinger. Elliot explained his
preference for Hong Kong rather than somewhere else in East China:

Reflection and experience have satisfied me against all my pre-

conceptions and personal wishes, firstly, that Settlement at this point
of the Empire is necessary; and secondly that Settlement to the Eastward,
will only be productive of an indefinite protraction of hostilities in
China, at an enormous expence, and thus defeat or most seriously retard
the very purposes for which it is undertaken – purposes assuredly
susceptible of accomplishment through a quiet possession of that
Settlement to the Southward with which we cannot dispense. 28

The main difference between Elliot and Palmerston was only over the
choice of Hong Kong as an imperial outpost, not over the acquisition of
one, since both deemed it highly desirable for British trade to secure a
territorial base along the Chinese coast free from the whims of Chinese
jurisdiction. In short, the British Empire acquired Hong Kong first and
foremost to promote its economic interests in China, and only secondarily
to support diplomatic contacts for which naval and military backup was
often required. 29
It was indeed because of the primacy of commercial considerations
that Elliot proclaimed Hong Kong a free port as soon as he took
possession in January 1841. He declared that ‘her majesty’s government
has sought for no privilege in China exclusively for the advantage of
British ships and merchants’. 30 This generous offer to open Hong Kong
to traders of all nations including China was made in light of the
ascending might and rising economic power of early Victorian Britain.
These were such that free trade posed little if any threat to British
commercial supremacy in Chinese waters. Instead, free trade worked to
British advantage, allowing Britain to hold the lion’s share of trade and
supporting economic and financial activities in China for the rest of the
22 A MODERN HISTORY OF HONG KONG

nineteenth century. Elliot’s initiative to make Hong Kong a free port was
subsequently endorsed by the British government. 31
Hong Kong’s value for diplomatic purposes was significant but
limited. In its first decade as a Crown colony, it was highly treasured as
the base for the head of the British representation to the Chinese
Empire. However, that was mainly because the entire mode for the
conduct of relations between the two empires remained unsatisfactory.
This made the convenience and protection provided by the British flag
valuable. Hong Kong’s importance, as predicted by Elliot, underlined
the need for the state of relations between the two empires to be altered
in a fundamental way. When that happened after the Second Anglo-
Chinese War, Hong Kong’s place in support of British diplomacy
dropped dramatically, as the consular, commercial and negotiating roles
of the Governor were transferred to the British Minister resident in
Beijing, an office that became separate from the Governorship of Hong
Kong. After 1860, Hong Kong became more an issue for Anglo-Chinese
diplomacy than a base that advanced British diplomatic interests in
China, though it remained the forward base for the projection of power
in support of British diplomacy.
As an imperial outpost, Hong Kong was intended to be a significant
naval station rather than a military base for further territorial expansion.
The British Empire in East Asia was primarily interested in trade and
economic benefits rather than territorial acquisition. Indeed, Aberdeen’s
initial reservation over the retention of Hong Kong was predicated on
the costs likely to be incurred for its administration and defence. 32 One
of Hong Kong’s main attractions for Elliot was the relative ease and low
costs of its security.
With Britannia ruling the waves, the defence of Hong Kong in the
nineteenth century relied heavily on the Royal Navy, leading to a situation
in its early years in which it was unassailable while the fleet was in harbour
but once it ‘left to do its job, Hong Kong was completely defenceless’. 33
It was for this reason that a small volunteer defence force was raised in
1854 when the British Empire went to war with Russia in the Crimea and
China was embroiled in the turmoil of the Taiping Rebellion, as the local
garrison had less than 500 soldiers fit for duty. 34
Throughout its history, Hong Kong seldom maintained a large garrison
except in time of exigency. It was its long historical links with the China
Station (reduced to a mere Hong Kong Squadron towards the end of
empire) and the Royal Marines that evoked a strong bond between Hong
Kong and the Royal Navy. 35 Much as Hong Kong was a valued naval base,
its military and strategic values to the British Empire were mostly limited
to acting as the support base for operations in East Asia. The most
important occasion when Hong Kong proved invaluable in military terms
was during the Second Anglo-Chinese War when it served as the staging
ground for the expeditionary forces. 36 Even as a naval station, the
commander was required from the very beginning ‘to impress upon the
officers of his Squadron the necessity of cultivating as much as possible
 THE FOUNDATION OF A C ROWN COLONY 23

the friendly feelings which it may be hoped that the Chinese Authorities
and People will be disposed to entertain towards them’ in order to enhance
the colony’s utility in promoting British trade. 37
As an outpost of empire, Hong Kong was certainly not founded with
any ‘civilising’ mission in mind on the part of the British government.
Unlike some other nations defeated by the British Empire, China was
recognised by the British as a major civilisation in its own right – it merely
did not follow Christian ethics and European standards in law and the
norm in the conduct of external relations. All that the British had planned
to do once they acquired Hong Kong was to ensure that the Christian
faith would be upheld and certain undesirable conducts proscribed.
The clearest indication of the lack of a civilising mission on the part
of the British government was the instructions sent to Pottinger for
the administration of justice. London was not prepared to go as far as
Elliot, who proclaimed in 1841 that ‘the natives of Hong Kong and all
natives of China thereto resorting, shall be governed according to the
laws and customs of China, every description of torture excepted’. 38
This was disallowed. London decided that English law should in general
prevail in Hong Kong but considerations should be given particularly
by the local legislature to ensure that they would be applicable to the
local circumstances. 39
London’s concern was to uphold the integrity of British jurisdiction
and maintain the basic Christian nature of this imperial outpost, not to
create an enclave to train Chinese Celestials to become yellow Englishmen.
The eventual creation in Hong Kong of a community that happily married
the Confucian culture to Western capitalism and way of life, as well as
embracing the Anglo-Saxon concept of the rule of law, was certainly not
part of the British raison d’etre when it was founded as a colony.

Governance
Until Hong Kong was made a Crown Colony its administration was pro-
vided by a small cadre of assistants at the British Plenipotentiary’s office.
Since it was a product of the war, the initial costs of its governance were
charged against the expedition and thus eventually covered by the Chinese
through the reparation paid under the Treaty of Nanking. 40 Once a British
possession it became the responsibility of the Colonial Office and thus a
charge against British taxpayers since it could not generate sufficient
income to cover its administrative costs in its formative years. As a result,
Hong Kong was subjected to Treasury control. This meant its government
had to submit its annual estimates to London every year before they could
take effect or be put to the Legislative Council. This requirement was
rigorously enforced until 1858, several years after Hong Kong ceased to
receive a Treasury subvention. 41 In its early days, the Treasury was keen
to hold its financial burden to the lowest level and thus required the
colonial government to keep its expenses to a bare minimum. 42
As a result, Hong Kong was used to having as small a government as
possible, from its foundation. To put this in perspective, just prior to the
24 A MODERN HISTORY OF HONG KONG

Second World War, a century after its foundation, the colonial government
was still basically run, in addition to a few specialist officers in charge of
medical services, public works and policing, by an establishment of merely
33 administrative officers filling 23 offices, with the balance being either
on leave, under training or on secondment elsewhere. 43
Being a small colony with a mixed population also affected the nature
of the administration that was created in Hong Kong. The colony was
scarcely more than a township in its first decade and the government
would have little to do if it had handed over municipal responsibilities to
a separate body. The Governor was therefore also its de facto mayor,
though he was answerable to London rather than to an elected municipal
council or to the local ratepayers. 44 Given the great gap that separated
the Chinese from the European residents and the reluctance on the part
of the colonial government to get involved in administering the Chinese
community, the Hong Kong government at first focused its resources
and attention on the much smaller European expatriate community. In
its earliest days, governance was largely a matter of administering justice
and the municipal services, as well as providing security and order for
the small expatriate civilian residents who never exceeded a couple of
percentage points of the total population.
The provision of civil administration to the majority of the people, the
indigenous and fast-expanding immigrant Chinese residents, was not a
matter of priority for the colonial government. In the early years, the
primary concern of the British over the Chinese population, apart from
whether they should be subjected to Chinese or British law, was to ensure
they did not pose a major problem for security or public order. 45 It was not
until 1845 that the government appointed a senior official, the Registrar
General, to take responsibility for the Chinese community. The relative
insignificance of this new office was reflected by its exclusion from
membership of the Executive Council until 1883, four decades later. 46 As
an office the Registrar General was renamed Secretary for Chinese Affairs
in 1913, more accurately reflecting the nature of its responsibilities. It only
acquired the modern-sounding new title of Secretary for Home Affairs in
1969, when it was finally accepted that it would no longer be appropriate
to distinguish the expatriate from the local Chinese communities. 47
What gradually developed into a pattern in the middle of the nineteenth
century was that while the bulk of mundane government activities, such
as the provision of sanitary facilities, policing and licensing, registration
of births and deaths, as well as the collection of rates, taxes and other
dues, in fact affected first and foremost the Chinese community, which
constituted over 95% of the population, the colonial government focused
disproportionately upon the views and interests of the expatriate
community when it worked out its policies. Until a Chinese person, Sir
Shouson Chow, was finally appointed as an unofficial member of the
Executive Council in 1926, the Registrar General was the only member
of the government whose responsibility it was to speak for and defend
the interests of the Chinese community.
 THE FOUNDATION OF A C ROWN COLONY 25

However disproportionately the colonial government might have devoted

its attention and resources to the expatriate community, it also prevented
the British expatriates from establishing themselves as any kind of elected
oligarchy of ratepayers at the expense of the Chinese community by
asserting their right to municipal self-government. Shortly after Hong
Kong’s foundation, the expatriates petitioned the British government for
‘the formation of a Municipal Body, vested with the usual power of deciding
on the appropriation of the monies raised for Local purposes’. 48 This was
rejected, as London believed Hong Kong was ‘different from any state of
Society existing in this country or any British Colony’. 49
Two basic problems applied to Hong Kong. First, ‘it would be almost
impossible to draw the line between Colonial and Municipal matters’
where the colony and the municipality were practically co-extensive. 50
Furthermore, the colonial government was equally unwilling to allow the
Chinese residents, who formed the overwhelming majority of ratepayers
by the latter part of the nineteenth century, to dominate an elected
municipal council as it was unprepared to let the expatriate community
function as an oligarchy over the Chinese. 51
The colonial government took it upon itself to provide what it believed
to be a fair and equitable administration for both communities, though it
did most of the time act on the unspoken but prevalent bias of the time. 52
What this meant in practice was that it responded first and foremost to
the welfare and views of the expatriate community for the entire first
century of British rule and continued to do so to a lesser extent even in
the earlier part of the post-war period, though it also looked after the
Chinese community paternalistically.
The somewhat haphazard start of the civil service in Hong Kong
entered a new stage in 1861, when Governor Sir Hercules Robinson
successfully introduced the Hong Kong Cadetship. This was intended to
redress the clear anomaly where most senior colonial officials could not
communicate with the overwhelming majority of the local population.
This scheme was to ‘supply the Civil Service in Hong Kong with an
efficient staff of Interpreters’, by recruiting young graduates from Britain
to receive intensive training in Cantonese and written Chinese for two
years, before deploying them on a fast track in the civil service. 53 It
followed the introduction of a Civil Service Commission in Britain itself
six years earlier for the recruitment of government officials on merit
rather than by patronage, and a painful inquiry into the misconduct of
Registrar General Daniel Caldwell, upon whom the colonial government
had previously depended heavily in dealing with the local Chinese
community. 54 It was not a scheme unique to Hong Kong, as it was
introduced in parallel to a similar one for Ceylon and for the China
Consular Service. In Hong Kong the experiment proved so successful
that the cadets soon became the elite.
Cadet officers gradually and increasingly formed the backbone of the
civil administration. Some rose not only to head the civil service as
colonial secretaries, but a f ew also advanced fur ther to take up
26 A MODERN HISTORY OF HONG KONG

gubernatorial offices in Hong Kong and in other colonies. Although

administrative officers from other colonies, counterparts to the cadets,
had also been transferred to Hong Kong, the bulk of the administrative
service was always made up of Hong Kong cadets after 1861. The rise of
the cadets gave the colonial bureaucracy its own character. It included a
significant enhancement of the ability of senior policymakers to
understand the views of the Chinese population, the predominance of
the generalists, and a generally paternalistic though benevolent attitude
in dealing with the local Chinese.
A major change that happened after the Second World War was the
recruitment of ethnic Chinese into this small elitist ser vice, which had
previously been reser ved for men of pure European descent. This
relaxation of the colour bar was introduced slowly and was followed by
the recruitment of women officers. They did not change the character,
function or standing of the service. Cadets were eventually renamed
Administrative Officers in the 1950s but they remained the elite of the
civil service until the end of British rule. 55

The Question of Representation

Endowed with a Crown Colony system, Hong Kong was not founded as
a democracy but as an autocracy to serve British interests. Be that as it
may, this was not on its own sufficient to prevent Hong Kong from
following the example of other British dependencies in developing a
representative government and eventually graduating into a self-governing
and democratic dominion or nation within the framework of the British
Commonwealth. Hong Kong did not make any significant progress in
this direction during the first century of British rule, mainly because the
question of representation proved intractable. The basic problem was
rooted in Hong Kong’s position as an imperial outpost at the edge of the
Chinese Empire and the reality that it was populated overwhelmingly by
hardworking and enterprising Chinese, who already constituted over 80
per cent of ratepayers as early as the mid-1850s, a decade after it became
a British colony. 56
There were two dimensions to the question of representation in the
nineteenth century. The first concerns the representation of the Chinese
community in the Legislative Council. The second involves the right of
British taxpayers or ratepayers to be represented in a local council for
the management of their own affairs. They were both separate issues
and at the same time closely intertwined as a growing number of the
Chinese population of Hong Kong were also British subjects by birth
and were ratepayers, even though it was highly questionable whether all
of them could or should be distinguished from other immigrant Chinese
residents in their way of life, general attitude and focus of loyalty.
Although unofficial members were appointed to the Legislative Council
as early as 1850, the issue of elected representation did not arise as an
issue until it was raised by Governor Sir John Bowring in 1856. In an effort
to strengthen the Council, he proposed to enfranchise 2,000 ratepayers,
 THE FOUNDATION OF A C ROWN COLONY 27

including among them ethnic Chinese, out of a population of 75,000,

though membership of the Council was to be restricted to British subjects. 57
This was rejected by London. On the one hand, it did not believe the
Chinese community would use the franchise responsibly. On the other hand,
it deemed it invidious to restrict the franchise to transient expatriates and
exclude the Chinese population since this would ‘give power over the
permanent population to temporary settlers, differing from them in race,
language and religion, and not influenced by their opinions’. 58
The actual selection of a Chinese person to the Legislative Council
only came up in 1880, under the initiative of Governor Sir John Pope-
Hennessy, who was seen by the expatriates as particularly pro-Chinese.
Even on this occasion, when Pope-Hennessy picked Ng Choy (alias Wu
Tingfang), a Chinese born in British Singapore, educated in England
where he was called to the bar, and deemed by Chief Justice Sir John
Smale as the most ‘honourable and straightforward’ gentleman in Hong
Kong, it was met with some scepticism in the Colonial Office. 59 The main
reservation voiced was simply that an ethnic Chinese member could not
be trusted to keep a British secret from the Chinese authorities in the
event of a breakdown in Anglo-Chinese relations. 60 In the end, the sceptics
within the Colonial Office were overruled by the top official and ministers,
who did not feel it right to reject the principle that the Queen’s Chinese
subjects should have a voice in the Council, and Ng appeared to be a
particularly good candidate. 61 Consequently, London sanctioned Ng’s
temporary appointment but only as a reversible experiment. 62 Ng’s service
proved valuable and the appointment of an ethnic Chinese to the
Legislative Council to represent the Chinese community thus became a
general practice. 63
The demand for elected representation in the Legislative Council finally
came up in the 1890s, when the expatriate British community tried to
asser t control over g over nment polic y, par ticularly as related to
expenditure. It culminated in a petition being made by 362 merchants,
bankers and ratepayers to the House of Commons in 1894, in which they
demanded ‘the common right of Englishmen to manage their local affairs
and control the Expenditure of the Colony, where Imperial considerations
are not involved’, mainly through the introduction of elected unofficial
members to the Legislative Council. 64 This petition was dismissed by the
British government since its apparent demand for representation was little
more than a thinly veiled attempt to ‘place the power in the hands of a
select few, and to constitute a small oligarchy, restricted by the lines of
race’. 65 This was indeed so: the petitioners in effect asked for no more
than 800 white British male expatriates to be enfranchised out of a total
population of 221,400, of whom 211,000 were ethnic Chinese. 66 As the
Secretary of State, Lord Ripon, stated, this was objectionable since ‘the
well-being of the large majority of the inhabitants is more likely to be
safeguarded by the Crown Colony system – under which, as far as possible
no distinction is made of rank or race’. 67 Ripon’s successor, Joseph
Chamberlain, went further, observing that ‘the Chinese community is the
28 A MODERN HISTORY OF HONG KONG

element which is least represented while it is also far the most numerous’.
He expressed a desire ‘to attach them more closely to the British
connection, and to increase their practical interest in public affairs’. 68
Following Chamberlain’s ruling, the colonial government increased the
number of Chinese unofficial members in the Legislative Council by one,
giving two of the six unofficial seats to this numerically largest community.
Appointing Chinese unofficial members of the Legislative Council was
a fundamentally different issue from having elected ones. The former
was acceptable to the British government, as the appointment system
allowed for the selection of trusted and sound British subjects, an
outcome that could not be guaranteed under popular elections. In other
words, even had the Chinese British subjects of Hong Kong who were
ratepayers pressed strongly for the election of one or more of their
members to the Legislative Council in the nineteenth century, it would
have been extremely unlikely that the governments of Hong Kong or of
Britain would have accepted it.
T he neg ative reactions of both the colonial and the imperial
governments to the British expatriates’ petition of 1894 set the tone for
handling similar demands from the same community in the earlier part
of the twentieth century. 69 They reflected two important strands of
thinking. To begin with, once the Crown Colony system of government
had settled in, both the colonial and the imperial governments gradually
developed a sense of responsibility for the Chinese people of Hong Kong.
Much as racial prejudice was inherent in the spirit of the time, British
policymakers often found it awkward or unacceptable to defend or uphold
in public a blatantly racist policy. Closely related was the acute recognition
that the British expatriate community of Hong Kong was much more
concerned with advancing their narrow and transient interests than that
of either the colony as a whole or of British interests generally. 70
This commitment on the part of the colonial and imperial government
to protect the local Chinese from the narrow self-interest of the expatriate
community did not mean the latter was in any way disadvantaged. Hong
Kong was a British outpost to serve British interests and British voices
carried greater weight in official circles. The colonial government merely
resisted being turned into an instrument of local partisan interest in the
way it handled the demands of the expatriate community for representation.
 Chapter 3
Imperial Expansion

The British Empire went to war with China between 1839 and 1843 to
secure economic benefits from trade and to redress what it saw as an
unsatisfactory mode for the conduct of relations. The Treaty of Nanking
(1843) was meant to fulfil these objectives for the British. Instead, the
only truly concrete achievement the British obtained was to add Hong
Kong to their Empire. The opening up of four coastal ports in addition
to Canton did not, as the British had hoped, lead to a major expansion
of trade and profit. The conduct of bilateral relations remained
problematic as the British did not gain the right to station a diplomatic
representative in the Chinese capital. The British Plenipotentiary and
Superintendent of Trade did not even enjoy free and ready access to the
Chinese Viceroy and Imperial Commissioner in Canton. Indeed, despite
the provision in the English text of the Treaty, the British were denied
entry to the city of Canton itself, though they were, in accordance with
the Chinese text, allowed access to its port. 1 The opium trade, which was
the immediate cause for the war, also remained contraband under Chinese
law, though enforcement against it was deliberately lax. The state of
economic and diplomatic affairs between the two empires left much to
be desired from the British viewpoint, since their real objectives essentially
remained unfulfilled. 2
Another war was consequently fought between 1856 and 1860, which
put trade and diplomatic relations between the two empires on a stable
and sustainable basis. As had been the case in the original seizure of
Hong Kong, this new war resulted in new territorial acquisition for the
British. Hong Kong was expanded in 1860 to include a small area of the
peninsula of Kowloon on the north shore of its harbour. This was not
envisaged when hostilities started but occurred as a by-product.

The Second Anglo-Chinese War and the Acquisition of Kowloon

The failure of the Treaty of Nanking to deliver to the British Empire
what it wanted resulted in increasing pressure for a revision of the terms
of the treaty. 3 This proved problematic as the treaty itself had no
provision for revision and the Chinese government saw no need for it.
30 A MODERN HISTORY OF HONG KONG

Although the British did not have legal grounds to press for treaty
revision, they raised the issue formally in 1854. 4 Specifically, they sought
to open selected parts of the interior of China to trade; obtain the right
to navigate the Yangtze River up to Nanjing; legalise the opium trade;
avoid taxation on the transit of foreign goods imported to China or local
products in transit between the point of purchase and the port for export;
secure the right to diplomatic representation in Beijing and ready access
to provincial governors where Britain had a consul; ensure cooperation
in the suppression of piracy; and gain acceptance that the English text
of the revised treaty would take precedence in the event of disputes. 5
In its desire to open China, the British Empire enjoyed the support of
other leading Western powers, particularly the French and the Americans.
To the French, who trailed far behind the British in the China trade but
were much m o re suppor tive of the e vang elical effo r ts of their
countrymen, higher priority was put on establishing proper diplomatic
relations. 6 The United States of America, which alone among the Western
powers was entitled under the Treaty of Wanghia (1844) to have its terms
revised, by July 1856 felt the two most important issues were to secure
diplomatic representation in Beijing and to extend American trade as far
as possible all over China. 7 The Americans in fact went beyond the British
demands in desiring ‘a universal grant of freedom of opinion’ and the
opening of all China – not just specified ports – to trade. 8
Whether Britain (or, for that matter, France or any European power)
could have claimed, under the most favoured nation clause, the American
right to treaty revision or not is legally dubious. When the law officers
in the British government were consulted after hostilities started in 1857,
they took the view that Britain was not legally entitled to do so. 9
However, the uncertain legality did not prevent Britain from continuing
its policy to revise the terms of or replace the Treaty of Nanking with
French and American backing.
After the Crimean War ended in 1856 and British resources and
attention were no longer absorbed by it, senior British officials in the
China region favoured a forward policy. The British Plenipotentiary and
Governor of Hong Kong, Sir John Bowring, advocated a forceful display
of naval might in order ‘to extend and improve our relations with China’. 10
Less than two months prior to the Arrow incident that provided the
occasion for a new war (see p.32), Bowring took the view that ‘non-action
is by far the most perilous policy, and that its perils will increase with
time’. 11 His preference to do something was shared by the young and
tempestuous Consul in Canton, Harry Parkes. 12 London, for its part, was
actively consulting the French and the Americans to enlist them to support
an attempt to persuade the Chinese to respond positively to the revision
of the Treaty of Nanking. 13
Closely linked to the issue of treaty revision was that of the right for
the British to enter the city of Canton. The admission of the British to
the city proved a particularly thorny problem as the local people had
become strongly anti-British. This was the combined result of the British
 IMPERIAL EXPANSION 31

assaults on Canton in the First Anglo-Chinese War and, above all, the
creation of the Sanyuanli myth by which the militia led by the local gentry,
in contrast to the regular army, was supposed to have made such a gallant
stand against the British that the latter became afraid of the militia. The
growing myth of Sanyuanli encouraged the local Cantonese to be intrans-
igent towards the British. 14 Since the Chinese officials in Guangdong
‘realised that their continuation in office depended entirely on their ability
to maintain good will of the leaders of local public opinion’ they used
every means available to deny the British entry to the city. 15
The Chinese tactic of procrastination worked for over a decade mainly
because the British government decided entry to the walled city itself
was not worth a new war as trade continued at the port of Canton. Entry
to the city nevertheless remained a major irritant in Anglo-Chinese
relations, particularly during Bowring’s tenure as he was keen to resolve
this problem. 16
In addition to the pro b lem of British access to Canton city,
personalities and differences over protocol for contact between British
and Chinese officials continued to make relations between them tense,
difficult, distrustful and unfriendly. In spite of the Treaty of Nanking,
not all successive British Plenipotentiaries and Consuls in Canton
established good working relations with the Chinese Viceroy and other
senior Chinese officials in Canton.
The situation reached a low point in the mid 1850s after Bowring was
promoted from Consul in Canton to be Plenipotentiary and Governor
of Hong Kong, and was succeeded by Parkes. When he first took up his
office in Canton in 1849, Bowring had a bad start. Having had a
parliamentar y career and an audience with Queen Victoria before
departing for China, he considered himself a man of some standing
despite his modest rank as a Consul. He also had a rather poor
understanding of the Chinese bureaucracy, although he thought he
understood it. Upon arrival in Canton, Bowring asked to be greeted by
an official senior to the provincial Treasurer who had received his
predecessor, though he also mistakenly nominated officials junior to the
Treasurer for this purpose. Since the next senior Chinese official to the
Treasurer was the provincial Governor, his request was declined. An
official junior to the ones Bowring nominated was appointed to play host
to him, which he regarded as a deliberate insult, happening as it did at
the time when the Chinese successfully made a strong stand against the
British demand for access to the city. 17 Bowring thus developed a strong
dislike of Chinese officialdom and an obsession over the issue of access
to the city, which deeply affected his judgement after his promotion to
Hong Kong. 18 Parkes, Bowring’s successor in Canton, was only 28 in 1856.
He was disposed to take an aggressive approach, believing that ‘the only
way of avoiding trouble with the Chinese was to stand firm from the
start on every part of one’s rights, significant or insignificant’. 19
On the Chinese side, Bowring’s opposite number in Canton, Viceroy
and Imperial Commissioner Ye Mingchen had, for his part, ‘imbibed a
32 A MODERN HISTORY OF HONG KONG

thorough distrust of foreigners from his initial contacts with them in

1847’. 20 His negotiating style was that of defending firmly all matters he
deemed to be of basic importance, such as not allowing the British to
gain access to the city, behind a veneer of politeness. 21 To the restless
British, his approach reinforced the stereotypical image of the inscrutable
Chinese mandarin. Thus, in the middle of the 1850s, senior British and
Chinese officials in the Canton region did not have the mutual
understanding, trust and good working relationship needed to defuse a
major crisis even if either or both sides wished to do so.
Against this background, in early October 1856, the detention by the
Chinese authorities in the harbour of Canton of a lorcha, the Arrow, quickly
escalated into a major incident and the immediate cause for a new war.
This Chinese-built lorcha – a ship with a European shape hull and Chinese
rig – was owned by a Chinese, who had registered it in Hong Kong in
order to enjoy the protection of the British flag but was not legally entitled
to such protection at the time as its registration had already expired, albeit
for only 11 days. There is much controversy over what exactly happened.
Parkes claimed at the time that the British flag was flying aboard but was
hauled down by Chinese officers while the ship’s Chinese crew of 12 was
arrested ‘regardless of the remonstrance of ’ the British master, and thus
constituted ‘an insult of very grave character’. 22 This assertion has been
challenged by recent research, which suggests no British flag could have
been flying on board and therefore no insult to it could have happened. 23
Whatever actually happened at the Arrow and the original intention of
the Chinese authorities, the incident was seized on by Parkes and Bowring
to pursue a forward policy which they were already contemplating. In their
efforts to seek redress, neither was prepared to give the Chinese authorities
much scope to work out an amicable settlement. 24 Indeed, a week after the
incident started, Bowring told Parkes that ‘we have now a stepping stone
from which with good management we may move on to important
sequences’, the first of which was British access to the walled city. 25
For his part, Ye failed to grasp the real significance of the aggressive
British overtures. 26 He thus left Bowring and Parkes with great scope to
incite feelings on the British side, persuade the British government to
sanction and support the hostile actions they had already taken against
the Chinese, including the bombardment of Canton, and turn a minor
incident into the immediate cause of a new war.
Although the prospect of war with China was highly controversial in
London, the British government under Palmerston endorsed Bowring’s
actions. It was partly because Palmerston believed the British flag was
insulted, which required redress for the prestige of the Empire, and partly
because he wished to use this incident to seek a full revision of the Treaty
of Nanking. 27 This did not mean he accepted Bowring’s case and gave
the latter carte blanche; rather, Palmerston was aware of Bowring’s
shortcomings. He appointed the Eighth Earl of Elgin Plenipotentiary in
March 1857 to take over from Bowring responsibilities for the military
and diplomatic operations in China with a view to securing a new and
 IMPERIAL EXPANSION 33

satisfactory treaty. 28 Elgin was given additional forces of some 2,500

troops and was instructed to cooperate with his French and American
colleagues in China to pursue various objectives.
France was at that time an empire under Napoleon III, aggressively
pursuing imperial glory. The French agreed to join the British, and ordered
an expeditionary force to Hong Kong under their own Plenipotentiary,
Baron Gros. The French pretext was to avenge the execution by the
Chinese of a French missionary, Père Chapdelaine, in Guangxi province
earlier in the year. Although the Americans also desired treaty revision
they were not prepared to join the British in the use of force. 29
Elgin was given the task of seeking from the Chinese government
reparations for injuries to and compensation for losses incurred by British
subjects in the hostilities that followed the Ar r ow incident, full
implementation of treaties signed, full diplomatic representation at the
Emperor’s court in Beijing, and a revision of existing treaties to expand
trade to other Chinese ports and cities, both coastal and along inland
waterways. 30 In order to secure these terms, London did not share
Bowring’s focus upon Canton and instructed Elgin to threaten Beijing,
stressing the occupation of part of Canton should be the last resort.
The British government was interested not in settling scores with Ye and
the Canton authorities, although Bowring was keen, but in furthering
British diplomatic and above all commercial interests.
Although Elgin arrived in Hong Kong in July 1857, he was not in a
position to force China’s hand, as the Indian Mutiny had broken out in the
meantime and he had ordered most of his army units to India to meet the
military exigency. 31 Indeed it was this Chinese expeditionary army that
relieved the beleaguered British garrisons and communities in Lucknow
and Cawnpore. 32 This redeployment of the army and slow deployment of
the French forces meant only local naval operations were conducted from
Hong Kong for much of the rest of the year. 33 It was not until December,
when it was clear that the Indian Mutiny would continue to tie down most
army units and he would not have the forces required to impose his demands
on the Chinese government near Beijing, that Elgin decided to attack
Canton. This was duly achieved before the end of the year by the combined
Anglo-French force of just over 5,000 marines and armed sailors. Canton
was occupied and the old issue of entry forcefully resolved. The city came
to be administered by an Allied Commission that superimposed itself upon
the Chinese bureaucracy for three years.
It was April 1858 when Elgin found himself in a position to launch an
expedition north to force Emperor Xianfeng’s hand. Still without an army,
the Anglo-French fleet bombarded the Dagu Forts outside Tianjin and
forced the Chinese government to negotiate. Under the Treaty of Tientsin
(1858), the Chinese agreed to all the major British demands, including
the opening of more ports, navigation up the Yangtze, legalisation of
the opium trade and diplomatic representation in Beijing. However,
despite the terms of the treaty, the Emperor had no intention of accepting
either a resident British Minister or the exchange of ratification in the
34 A MODERN HISTORY OF HONG KONG

imperial capital with a British delegation protected by more than ten

armed guards. 34
When the time for ratification came in 1859, Elgin had returned for
England and handed over his responsibilities to his younger brother, Frederick
Bruce, who had served as his deputy. It was upon Bruce’s appointment as
Minister to China that the diplomatic office previously combined with the
Governorship of Hong Kong was separated for good. Once Bowring realised
that half of his responsibilities would be taken from him on a permanent
basis he preferred retirement. From this point onward, the Governor of
Hong Kong no longer had responsibilities for Britain’s relations with China.
Although Bruce sailed north with a modest fleet intending to display Western
naval superiority, he did not expect armed resistance.
As it turned out, Emperor Xianfeng had ordered the Mongolian
General Senggelinqin, who had built up a considerable reputation in
suppressing the Taiping rebels, to take charge of the defence of the
Beijing-Tianjin region, and required the Western envoys to travel to Beijing
not on board their warships but on land and without their instruments
of war. 35 Bruce, his French colleague, and his naval commander chose to
force their way up the Beihe River to Beijing and met with fierce resistance
at the re-fortified Dagu Forts. On this occasion the troops under
Senggelinqin’s command used their artillery effectively against the small
landing force and the 11 gunboats that could navigate the shallow estuary,
sinking, destroying or otherwise disabling half the steamships and causing
almost 1,000 British and French casualties. 36
The British reaction to this unexpected defeat, which was seen to have
undesirable implications for the prestige of its empire, was strong and
forceful. With the Indian Mutiny now suppressed, a land force of 16,500
and some 70 warships, supported by 7,600 French and other support
ships were put at the disposal of Elgin who had again been appointed
Plenipotentiary to take charge. 37
In the summer of 1860, Elgin returned to north China with the greatest
force Britain and France ever assembled in this part of the world. He
outflanked the Dagu defenders and captured the forts without a costly
frontal naval assault, occupied Beijing and razed the magnificent
Yuanmingyuan Palace to the ground until the Treaty of Tientsin was
ratified and an additional peace treaty, the Convention of Peking, was
signed. The French also signed parallel peace treaties with the Chinese.
In imposing these peace treaties, which would form the basis of what
came to be known as the treaty system in China, the British Empire was
determined to get what it wanted and at the lowest cost. Now that the
Chinese Empire had been shocked to its foundation, it became possible
for the British to feel confident that the treaty system would be enforced. 38
This was to be achieved by the stationing in Beijing of a resident Minister
by Britain (and other Western powers) and the creation by the Chinese
of an office for foreign affairs, known as the Zongli Yamen.
Britain intended to maintain itself as the dominant power in China,
maximise its trading and economic advantages in the whole country, and
 IMPERIAL EXPANSION 35

thus guarded carefully against the prospect of a partition. The unity of

China under its central government was therefore highly valued. As a
result the British sought to secure the authority of the Chinese Emperor
against any untoward ambitions of other Western powers, particularly
France, and subsequently against the Taiping and other rebels within
China. 39 The British had no intention of turning China into a second
India in light of the enormous costs involved in its administration. The
British policy was a classic manifestation of what has since been described
as the imperialism of free trade. 40
It was in the course of this conflict – and as a sideshow – that the
British Empire took over the tip of the mainland opposite the island of
Hong Kong known as Kowloon. After the British occupied Canton at
the end of 1857, Sir Charles van Straubenzee, Major-General in command
of the land forces there, took the lead to advocate its annexation. The
main consideration was to enhance the security of the colony, though
the Chinese garrison in Kowloon posed no threat. The objective was to
pre-empt the taking of Kowloon, on the northern side of Hong Kong’s
magnificent Victoria Harbour, by another Western power which could
fortify the place and pose a threat to the British colony and shipping. 41
Van Straubenzee’s recommendation was supported by Governor
Bowring and endorsed by London. However, when London finally gave
its approval, the Treaty of Tientsin had already been concluded. Up to
this stage the annexation was merely a desirable additional objective but
had little real significance for British interests. Once the Dagu debacle
led to the massive deployment of forces to Hong Kong in preparation
for a major assault on China, the flat land of Kowloon proved valuable
training and resting ground for the reinforcements. The tip of this
peninsula was thus occupied by the British. Thereupon, in March 1860,
Consul Parkes secured from the Acting Viceroy in Canton, while the city
was still under Allied occupation, a lease for Kowloon in return for an
annual rent of 500 silver dollars.
This lease was converted into permanent cession and incorporated
into Article VI of the Convention of Peking (1860), and the extension
of British jurisdiction formally came into effect by the issue of a Royal
Order in Council on 4 February 1861. 42 The area concerned included the
land south of what today are Boundary Street and Stonecutter’s Island
and amounted to about 4.3 square miles.
In sanctioning this expansion, Foreign Secretary Lord Russell made it
clear to Elgin that while the annexation ‘would undoubtedly be a great
convenience as far as the interests of Her Majesty’s Colony of Hongkong
are concerned… if it were to for m a precedent for a demand of a
corresponding concession on the part of any other Powers in some other
quarter, the convenience would be too dearly purchased’. 43 While the
British behaved in a classic imperialist manner, their priority was not
territorial expansion. What they were really after was to secure the wider
economic interests to be derived from trading with China as a whole.
This small piece of land was taken because it was desirable from the
36 A MODERN HISTORY OF HONG KONG

point of view of the British colonists and the local commander and it
could be acquired at minimal cost.
What was truly remarkable was not the opportunistic British expansion
but the readiness of the Chinese government to accept this further
territorial cession. Unlike in the 1840s, on this occasion the Chief Chinese
negotiator, Prince Gong, meekly accepted Elgin’s demand, added as it
were at the last moment when the Convention of Peking was being
finalised. 44 Gong and Emperor Xianfeng, who had himself fled from the
capital, had little choice. In October 1860, the survival of Manchurian
rule in China was hanging in the balance, with Elgin in a stronger position
to tip the balance than the Emperor himself. 45 The old arrogance of the
Celestial Empire had to give way to a more sober assessment of the
political reality. The enlargement of Hong Kong was an incidental issue
in this wider scheme of war and peace settlement.

The New Territories

Over the remainder of the nineteenth century, the power of the British
Empire reached its zenith. It was powerful, serene and self-confident. Al-
though the British government had no further territorial ambition, local agi-
tation for further expansion quickly followed. In 1863, some people advised
building a battery on land that still belonged to China on the northern shore
of the harbour’s eastern approach. 46 In the 1880s and 1890s, successive com-
manders of the local garrison urged the War Office to acquire the entire
peninsula of Kowloon for military purposes. Sir Paul Chater, a leading local
advocate for expansion, summed up the thinking behind this:

The same arguments that prevailed in 1860 must prevail now. We

want now only what we wanted then: what is essential to the safety
of the Colony. What was enough then, has become from the changes
in weapons and the alterations in modes of warfare wholly insufficient
now, and we must have more. 47

They enjoyed the support of Sir William Robinson, who was Governor
from 1891 to 1898. 48 Although China was clearly in no position to pose a
military threat, local advocates for expansion nevertheless laid heavy
emphasis on hypothetical defensive requirements.
There were other grounds for local agitation for expansion. Most were
utterly trivial, such as a need for more land and open space on which to
exercise troops, or for cemeteries and barracks. A real driving force was
the land speculators’ urge to make profits. The British Minister to China,
Sir Claude MacDonald, observed in 1898 that ‘[m]any of the Colonists
have been for years past buying up ground on the Kowloon promontory
and adjacent islands as a speculation on the chance of our getting what
we are now more or less on the point of getting’. 49 It was not a coincidence
that the most vocal advocates of expansion, Chater and several of the
local Navy League’s prominent members, were leading land developers
or speculators. They had vested interests in extension.
 IMPERIAL EXPANSION 37

Until the beginning of 1898, London resisted expansion on the grounds

that it worked against Britain’s basic interests in China, which was
economic. Although only 1.5 per cent of its exports that year went to
China, Britain’s share of China’s trade was larger than that of the rest of
the world combined. 50 Almost 62 per cent of China’s external trade was
with Britain. It was therefore in Britain’s interests to keep China as a
whole open to free trade. This would prevent European powers dividing
it into imperial possessions, as had happened in Africa. This explains
why, as late as January 1898, the British government stressed that the
‘integrity and independence of China… may be considered to be the
cardinal base of our policy… We are opposed to the alienation of any
portion of Chinese territory, or the sacrifice of any part of Chinese inde-
pendence’. 51 Britain also generally carried great weight with the Chinese
government, so keeping an ‘open door’ in China best served its interests.
The change in British policy in 1898 resulted from developments the
British were powerless to stop. The chain of events started with the
exposure of the full extent of the Chinese Empire’s weakness when Japan
defeated it in a war over Korea, a Chinese vassal, between 1894 and 1895.
Unlike Europe’s great powers, Japan was an oriental country. It was forced
open to the West by the US Navy only in 1853. Many were therefore
surprised by China’s inability to hold its own against Japan. It tempted
various European powers with imperialist pretensions to turn their
attentions to China. The aggressiveness of the Japanese demand for large
territorial cessions under the Treaty of Simonoseki (1895), including
Taiwan, the Pescadores islands and the Liaodong peninsula in southern
Manchuria, prompted Russia, Germany and France to interfere. They
forced the Japanese to return Liaodong (with its ice-free ports that Russia
coveted) to China in exchange for vastly increased reparations paid by
the Chinese. Behind their protestations of friendship and support, these
powers were seeking to establish territorial bases in China at its time of
weakness. 52 Their actions set an example to other powers. From 1898 to
1899, various countries joined in the scramble for concessions from China.
They were afraid of being excluded in the event of the Chinese Empire
facing the same fate as Africa.
The British government initially responded by declaring that Britain
did ‘not regard China as a place for conquest or acquisition by any
European Power’ but ‘the most hopeful place’ for the commerce of Britain
and the world at large. 53 Despite several attempts, including the offer of
an alliance, Britain failed to persuade Germany to abandon its territorial
ambition. 54 Instead, the Kaiser’s government used the killing of two
German missionaries in November 1897 as a pretext to occupy Jiaozhou
(now part of Qingdao) on the southern side of the Shandong promontory
in north China. By March 1898, the Germans had imposed a treaty on
the hapless Chinese and had leased Jiaozhou for 99 years.
Britain was equally unsuccessful in preventing Russia from taking over
the ice-free ports of Lushun (Port Arthur) and Dalien in the Liaodong
peninsula. Russia followed the German example and occupied the ports
38 A MODERN HISTORY OF HONG KONG

in December 1897. In March 1898, the Russians forced the Chinese to

lease the two ports for 25 years.
British diplomacy’s attempt to maintain the ‘open door’ in China
achieved only two tangible results. These were to guarantee equal trading
rights for ever yone in all foreign-controlled Chinese ports and to
substitute outright annexation for long leases.
Unable to prevent Russia and Germany from pursuing their territorial
ambitions, Britain tried to counter them by leasing the port of Weihaiwei
from China for as long as Russia occupied Lushun. 55 Britain chose
Weihaiwei because it was the only port of any significance remaining on
the coast of nor th China whose occupation could be seen as a
counterpoise to restore British prestige and pre-eminence. 56 It is on the
north side of the Shandong promontory, directly opposite Lushun and
Dalien across the Gulf of Bohai and to the north-east of Jiaozhou.
This turn of events marked a major adaptation of the policy to uphold
China’s territorial integrity. The British government still insisted that it
‘desired neither territorial acquisition in China nor even the extension
of British influence in the Chinese government beyond such extensions
and such inf luences as may be necessar y for the protection and
maintenance of [its] commercial position in China’. Nonetheless, it
accepted the existence in China of foreign, including British, ‘spheres of
interest’. 57 This change was to ‘preserve in an age of competition’ what
Britain ‘had gained in an age of monopoly’. 58 It also marked the end of
London’s resistance to the colonists’ demands to extend Hong Kong.
The French acquisition, again by a 99-year lease, of Canton Bay (now
Zhanjiang), 210 miles south-west of Hong Kong, provided an immediate
reason to expand. 59 The French also tried to get the Chinese to agree not
to alienate cer tain provinces to other powers, including that of
Guangdong, of which Hong Kong was originally a part. This alarmed
the British. 60 The old hypothetical arguments about defence suddenly
seemed relevant, for the French could turn out to be an enemy of a
completely different sort from the Chinese. Britain’s response was to seek
to extend Hong Kong.
The area concerned was the rest of the Kowloon peninsula south of
the Shenzhen River and 230 surrounding islands, a total area of about 370
square miles. This was ten times the size of the colony at the time and
came to be known as the New Territories once it came under British rule.
Though defence was the only argument the British put forward for
the extension, the defensive requirements remained more hypothetical
than real. The long-established enmity towards and imperial competition
with France helped the expansionists’ cause. However, at the turn of the
century, neither France nor any other power posed a military threat to
Hong Kong. Indeed, after the British secured the New Territories lease,
they failed to take possession for ten months. Also, British forces built
no significant fortifications in the New Territories for decades. The
acquisition was naked imperial expansion.
 IMPERIAL EXPANSION 39

An Appointment with China

The Minister in Beijing, Sir Claude MacDonald, represented Britain at
the negotiations. Veteran diplomat and reformer Li Hongzhang led the
Chinese team. MacDonald was anxious not to hasten the dismemberment
of China and saw it in Britain’s interest to ask for only enough to cover
the defence of Hong Kong. 61 Once the negotiations opened in early April
1898, the parties quickly reached an agreement in principle. The whole
process took two months. The Chinese were in no position to resist. For
them it was a matter of minimising the losses. They formally signed the
second Convention of Peking on 9 June and it came into effect on 1 July.
Negotiators from both sides shared an important common ground. They
wanted to prevent other powers seizing on the extension of Hong Kong
to demand further territorial concessions from China. Thus, while the
negotiations were tough, given the circumstances, they took place in a
remarkable atmosphere of cooperation. Both sides proceeded expeditiously.
Although the Chinese fought their corner hard against all major British
demands, they yielded almost immediately to the basic principle of Hong
Kong’s extension. What they tried to secure were above all the non-
permanent cession of any territory and the retention of the symbol of
Chinese sovereignty. 62 The Chinese negotiators were influenced by the
emergence of nationalism as a political force, which, in turn, was a
response to the imperialist encroachments on Chinese sovereignty in the
preceding decades. A significant component of this new nationalist
approach was ‘a willingness to make heavy financial sacrifices in order to
curtail even theoretical infringements on Chinese sovereignty’. 63 The
Chinese manifested this by insisting on the New Territories being leased
for a specific period only. They also insisted that China retain the fort of
Kowloon near its southern tip and that Chinese officials keep their right
of free access to the fort. Though the question of paying rent arose, the
negotiators later dropped it because the Chinese wanted to avoid being
accused of selling off their country’s sacred territories. 64 The Chinese
also wanted to protect their customs revenues, but did not insist on
retaining customs collection houses in the New Territories. Mistakenly,
they relied instead on a British promise not to use the territory to the
detriment of Chinese interests. 65 As it turned out, the Hong Kong
government subsequently prevented the Chinese maritime customs from
operating within the New Territories. However, the Chinese negotiators’
main endeavours were basically successful.
The Chinese managed to minimise their losses partly because the British
were keen to wrap up the negotiations quickly. It was also because
MacDonald and, to a lesser extent, his government were so confident of
British supremacy that they signed the agreement before tying up all the
loose ends. In an important sense, the British saw the preservation of
various Chinese rights merely as a matter of detail.
The British fairly readily accepted the Chinese position that the
instrument for transferring the New Territories should be a 99-year lease.
40 A MODERN HISTORY OF HONG KONG

MacDonald merely deemed it a permanent cession in disguise. 66 From

London’s point of view, it accepted a lease ‘so as to follow the example
of Germany and Russia, and to avoid accusations of going one better
and beginning the break up of China’. 67 The negotiations did not properly
consider the long-term future status of the colony and the implications
for British jurisdiction. Indeed, when the question of jurisdiction came
up later, the Secretary of State for the Colonies, Joseph Chamberlain,
simply pronounced that the New Territories should ‘be treated as an
integral part of the colony’. 68 He did not take seriously the prospect that
China might reform itself sufficiently to build up the necessary strength
to enforce the lease and recover the territory in due course. This was
nevertheless the observation that Chater, the leading local expansionist,
made in 1894. He warned that in a few decades China might turn itself
into ‘a powerful nation fully armed and with the skill and knowledge that
[would] enable her to make use of her vast strength’ to pose a threat to
British Hong Kong. 69 In the era of Rule Britannia, Britain dismissed the
idea that China could ever pose a challenge to the might of the British
Empire – too readily in retrospect.
Other important provisions the Chinese insisted on including in the
agreement concerned the fort of Kowloon and the right of access by
Chinese officials. The fort had a population of 744, of whom 544 were
ser ving militar y personnel under the command of a colonel. The
remaining civilians were either in the employ of the Chinese government
or were dependent on the military. 70 It was not a city in any real sense.
However, as a result of poor translation, it has since generally become
known as the ‘walled city of Kowloon’. The 1898 Convention states that
‘the Chinese officials now stationed there shall continue to exercise
jurisdiction except so far as may be inconsistent with the militar y
requirements for the defence of Hong Kong’. It also states that ‘Chinese
officials and people shall be allowed as heretofore to use the road from
Kowloon to Hsinan [Xinan]’. 71 It was absurd that Britain should extend
the colony to improve its defence but permit the Chinese to maintain a
fort in the New Territories. The Chinese had built the fort in 1846–7
specifically to counter the British presence in Hong Kong. 72 It was equally
ridiculous for the Convention to provide ‘that the existing landing-place
near Kowloon city shall be reserved for the convenience of Chinese men-
of-war, merchant and passenger vessels, which may come and go and lie
there at their pleasure’. It also stated that ‘Chinese vessels of war, whether
neutral or otherwise, shall retain the right to use’ Deep Bay and Mirs
Bay, which the Chinese also leased to the British. 73
At that time, the British obviously did not regard these Chinese
reservations as major problems. Hong Kong’s colonial secretary, James
Stewart Lockhart, who conducted a survey of the territory prior to the
British takeover, considered the fort an issue that would resolve itself.
He believed that the functions of the fort lay primarily in keeping public
order in its vicinity and expected the garrison to be ‘disbanded or
transferred elsewhere’. 74 In a similar vein, MacDonald thought it was ‘not
 IMPERIAL EXPANSION 41

to be supposed that the city of Kowloon will remain outside British

jurisdiction with the surrounding district subject to it’. 75 MacDonald also
took an offhand view about the Chinese navy’s right of access to the
jetties adjacent to the fort, to Deep Bay and to Mirs Bay. 76 With regard to
the exact boundary of the New Territories, MacDonald and the British
government were content that they be ‘fixed when proper surveys have
been made’. 77 The British were so confident of their own dominance
that they were certain such an arrangement could not harm their interests.
Although the Convention for ms the basis of the leasehold, the
authority for the extension of British jurisdiction comes from a different
instrument, the Royal Order in Council of 20 October 1898. By this order,
the New Territories were made ‘part and parcel of Her Majesty’s Colony
of Hong Kong in like manner and for all intents and purposes as if they
had originally formed part of the said Colony’. 78 The duration of this
extension of jurisdiction was, however, limited to the period ‘during the
continuance of the said lease’. 79 Under British law, British jurisdiction
would expire by midnight on 30 June 1997, unless this stipulation were
superseded. The British for mally took possession of and exercised
jurisdiction in the New Territories on 16 April 1899. This was the last
territorial extension of Hong Kong under British rule.
In the short term, the Convention was a diplomatic triumph. It gave
Britain what it wanted at no cost and did not damage its relations with
China or the other powers. MacDonald negotiated it with a cavalier attitude.
He initiated the negotiations without an up-to-date map and was happy to
proceed with only a general idea of the extent of the territory he demanded
for his government. 80 Arrogance characterised Britain’s handling of the
negotiations. In the long term and in retrospect, the Convention must be
seen as a major blunder for British diplomacy. As a treaty, it had left far
too many important issues with significant implications unresolved. In time,
they would haunt the British and raise questions about the long-term future
of even the original colony of Hong Kong.
Whatever assumptions MacDonald and his colleagues in London and
Hong Kong might have made about the 99-year lease, by signing the
Convention they had made an appointment with China. Like other
appointments, it could be overtaken by events, nullified, ignored,
cancelled, altered, forgotten or kept. Unique among the several leases of
territories which the Chinese Empire was forced to concede in the 1890s,
the lease for the New Territories ran its full course. This appointment
Britain made with China would be kept at midnight on 30 June 1997 with
consequences deemed unthinkable by MacDonald and his colleagues.
 Part II

The Heyday of
Imperial Rule
 Chapter 4
Law and Justice

The eventual creation in Hong Kong of a model of British justice in Asia,

admired for its rule of law and independent judiciary, does not mean the
colony had always justifiably enjoyed such a high reputation. In fact in the
early days of British rule the administration of justice was problematic,
and the introduction of the rule of law was not without its deficiencies.
Hong Kong was founded at a time when disorder and social upheaval
prevailed in China. When it was taken over by the British, the island was
merely a peripheral part of the Xinan county. 1 Although it fell into an
area nominally supervised by the Assistant Magistrate of Guanfu, who
could call upon the service of two archers when needed, it really did not
have in place a formal local government. 2 What the British had to do was
to create from scratch a legal and judicial system in a society constituted
by British and other Western adventurers as well as poor and mostly
uneducated labourers from the fringe of Chinese society.
Not a settlement colony, Hong Kong started with merely a few hundred
civilian British persons of whom only a few had legal qualifications or
any strong sense of civic responsibility to this transient community. It
was not surprising, therefore, that the quality of justice that the British
expatriates, whether as law officers or as jurors, could deliver in the 1840s
left much to be desired.
Equally, having inherited a local population of several thousand, mostly
farmers and fishermen, in a remote part of the Chinese Empire, the island
communities of Hong Kong boasted few, if any, scholars or retired
officials who might constitute the local gentry and an established elite,
as was the prevailing pattern in much of China proper. 3 Such local
leadership as existed in the scattered villages on the island did not provide
a ready pool of collaborators for the British, who established their right
to rule by conquest and in any event focused their attention on building
a new town on the north shore rather than at the main villages.
The original Chinese residents of Hong Kong became British subjects
under British law once the Treaty of Nanking was ratified. However, in
reality neither they nor the British administration took this seriously. With
a steady and growing influx of Chinese immigrants, the distinction
46 A MODERN HISTORY OF HONG KONG

between the original Queen’s Chinese subjects and new Chinese settlers
became blurred. 4 The failure to maintain a clear distinction between these
two groups was not due to lack of political will alone; practical con-
siderations also contributed. Given the small indigenous population base,
the need for cheap labour for the building of the new city of Victoria,
and the desire to attract Chinese traders, Hong Kong had to open its
doors widely to Chinese workers and businessmen. Since few Chinese
intended to settle in this British enclave and merely went there for work,
to make profit or seek temporary asylum from disorders at home, the
bulk of the Chinese population was inevitably transient in nature. They
quickly and increasingly swamped the original residents, and their
migratory habits made them ineligible for consideration as British subjects.
With a highly limited ability to distinguish one Chinese from another,
the colonial government made no attempt to treat the two groups of
Chinese differently. To the original Queen’s Chinese subjects, who spoke
no English and had nothing to do with the British expatriates unless they
started to work for the latter as servants or had a brush with the law, the
technical change in their nationality was largely irrelevant even if they
had been duly informed of it. In the administration of justice in early
Hong Kong they hardly enjoyed any advantage in comparison to other
Chinese immigrant workers. It did not take long for the original Queen’s
Chinese subjects as a distinctive group to fade out in usage; for all practical
purposes they quickly merged with the rest of the Chinese community.
In Hong Kong’s formative years there were two particularly pressing
issues for the British authorities to address. The first was to decide on
whether the local Chinese inhabitants should be subjected to the full force
of British law or be allowed to be governed under Chinese law and customs.
The second was to build up a machinery for the administration of law and
justice. The rule of law was a concept taken for granted by the British but
its implementation was affected by local conditions. They included the
prevalence of racism, bigotry based on a sense of racial and cultural
superiority among the British expatriates, as well as conflict of interest
and other inadequacies inherent in a small transient trading community
being required to furnish the resources required, such as sufficient number
of jurors and interpreters, for the British judicial system to function in a
colony overwhelmingly inhabited by people of a different heritage.

Native Laws and Customs

The existence of a long gap between Hong Kong coming under British
occupation in 1841 and its formal foundation as a Crown Colony meant
that, for a period of about two years, Hong Kong was under British rule
before important issues like the appropriate form of government and
the judicial system were settled. The British government’s disallowance
of the initial proclamation by Elliot that the local Chinese should be
‘governed according to the laws and customs of China, every description
of torture excepted’ did not put an end to this issue. 5 The unsettled nature
of the future of Hong Kong and the continuation of hostilities between
 LAW AND JUSTICE 47

the two empires until the Treaty of Nanking was signed meant much
debate continued on this matter.
In the end, the British decided that the local Chinese should be
permitted to be governed by local customs and law in so far as possible,
provided this would not infringe upon Hong Kong’s status as a British
colony, with no distinction being given to visitors and the original Queen’s
Chinese subjects. In setting up British jurisdiction, Pottinger was finally
instructed that while English law should in general prevail, following the
model applied in British India, and no English law ‘shall be in force which
may be inapplicable to the local circumstances of the Colony or of its
inhabitants’. 6 This sanction for the application of Chinese law and
customs to Chinese inhabitants was clearly limited, however. It must not
in any way ‘derogate the Queen’s sovereignty’ or be applied over ‘the
right of succession to immovable property’. Furthermore, ‘if there be
any Chinese law repugnant to those immutable principles of morality
which the Christians must regard as binding on themselves at all times
and in all places, the enforcement of any such law even against the Chinese
must not be permitted within the Queen’s dominions’. 7
In practice a limited application of Chinese law and customs was
allowed in recognition of the great cultural differences between the
Chinese and British people. 8 Although this was originally a well-
intentioned concession, it often resulted in much harsher punishments
being meted out to Chinese than to European residents. In those days,
there was a widespread belief that the Chinese were not deterred from
crimes by ‘lenient’ British criminal justice. There also existed a sense of
racial and cultural superiority among the British expatriates. As a result
few questions were asked when Chinese were routinely punished in
manners that would have caused an uproar if applied to Caucasians. 9

Administration of Justice
In the nineteenth century, there was arbitrariness and serious deficiencies
in the administration of justice in Hong Kong. 10 Indeed, a body of ‘anti-
Chinese legislation’ existed and was enforced. 11 In general terms, Chinese
residents were singled out and subjected to laws, regulations and
punishments that were not imposed on Caucasian residents. They were
discriminated against with regard to personal movement. They also
suffered more from the low standard of justice administered, particularly
in the magistracy, than the expatriates who generally could afford to appeal
against any unfair ruling.
Among the most popular punishments summarily imposed on Chinese
men only was having their queues (the then mandatory hairstyle imposed
by imperial edict of the Manchu Emperor) cut off and then expelled for
no greater offence than loitering or failing to carry a ticket of registration.
This may appear a trivial matter in the twenty-first century, but it was a
serious punishment for Chinese men in the 1840s, as it exposed them to
further punishment. 12 As they were routinely handed back to the Chinese
authorities, which the British considered corrupt, abusive and brutal,
48 A MODERN HISTORY OF HONG KONG

those punished were further put under the tender mercy of the latter. In
addition, only Chinese offenders in Hong Kong could be required to
wear a cangue, ‘a large square wooden frame fastened around the neck to
prevent the wearer from resting’. 13
Equally discriminatory was the public flogging of Chinese for petty
offences. Floggings were regularly meted out on the basis of the mostly
summary and sometimes arbitrar y process administered by a police
magistrate or justice of the peace. In the mid 1840s, flogging was so
widespread that it happened almost daily and it was not unknown for 54
men to be caned in one day. 14 In contrast, corporal punishment would
not normally be imposed on a European without the due process having
run its course in the Supreme Court. Even then its actual administration
was not assured as the public flogging of one of their number in the
presence of Chinese was, for example, deemed to undermine the prestige
of the white race. 15 Equality in the face of the law across ethnic lines was
not always upheld in nineteenth-century Hong Kong.
Various local ordinances also discriminated against the Chinese by
imposing regulations and restrictions on them that were not required of
non-Chinese residents. Although many of them were also class based, as
the Chinese generally occupied the lower strata of the society and worked
in menial occupations that no European would take, the racial overtone
was unmistakable. Many of these requirements were petty, such as sub-
jecting chair bearers and rickshaw pullers to regulation, since only Chinese
persons would be engaged in such work. 16 However, a few restrictions
were much more serious. In 1844, Chinese inhabitants were subjected to
registration and obliged to carry a registration ticket following the start
of the Second Anglo-Chinese War. 17 In 1857, they were further required
to carry night passes. Should one be caught between eight in the evening
and sunrise the following day without such a pass ‘elsewhere than in his
own Habitation’, he could be ‘summarily punished’ by fine, imprisonment,
public f log ging or exposure in the stock. 1 8 This was subsequently
augmented by a requirement for Chinese persons to carry a lighted lantern
after dark. The night pass requirement was not repealed until 1897.
In addition to restrictions being put on their movements, the Chinese
came to be excluded from living wherever they chose. By the European
District Preservation Ordinance of 1888, ‘a certain portion of the Town’
was reserved officially ‘not for exclusively European occupation, but for
houses built according to European models and occupied in much more
limited numbers than is usual with Chinese’. 1 9 Despite the official
disclaimer, the intention was clearly to exclude the Chinese from what
were deemed European parts of Hong Kong, even though the two
communities had, hitherto in any event, largely chosen to live in separate
areas. The racially exclusive overtone became clear with the passing of
the Peak Preservation Ordinance in 1904, which specifically reserved the
Peak, often compared to the Caucasian retreat of Simla in India, as a
residential area for expatriates. 20 Before the Pacific War, the only Chinese
family that was given the privilege to live at the Peak was that of Sir
 LAW AND JUSTICE 49

Robert Hotung. Hotung was in fact Eurasian, though he ‘adopted the

manners, deportment, and costume of a Chinese gentleman and did not
seek to pass as a European’. 21 He was reputedly the wealthiest man in
Hong Kong in the first half of the twentieth century, and was sufficiently
well regarded to be among the first Chinese to be knighted. 22 Making an
exception for him and his family hardly amounted to a breach of the
colour bar. The existence of restrictions against the Chinese from living
at the Peak, which was later augmented by a section of the island of
Cheung Chau, was only removed in 1946 after the Second World War. 23
The Chinese community also suffered a disproportionate share of the
poor quality of justice administered because they were subjected to the
jurisdiction of the magistracy much more than the non-Chinese. As a
matter of fact, the overwhelming majority of criminal cases were tried
by the magistracy, which made it the most important instrument for the
administration of justice. It was at the magistracy that miscarriage of
justice happened most often. This was partly a result of its tremendous
caseload, which could amount to ‘more than 18,000 in the mid-1890s’ to
be handled by two magistrates a year. 24
More importantly, the early magistrates ‘had no legal qualifications
and little formal education’. 25 The first Chief Magistrate, Captain William
Caine, for example, could claim prior training merely on the basis of
service in the army in India and as a magistrate in Zhoushan when it
came under British military occupation in the course of the First Anglo-
Chinese War. 26 They justified themselves ‘by claiming that years of
“experience in the subtleties of Chinese character” were worth much
more than legal qualifications’, and worked on ‘the assumption that
Chinese offenders had to be handled in a special way’. 27 It meant they
did not always follow all the procedures in English law. The rules of
evidence were at times applied so laxly that charges of gross carelessness
were laid. In 1856, for example, Caine’s successor as Chief Magistrate,
Charles Hillier, remarked that ‘my duty is to take down positive and
relevant evidence in support of the charge’ when he was questioned by
the Attorney-General over whether he thought it ‘necessary to take
evidence in favour of, as well as against, the prisoner’. 28 The situation
improved later after Governor Bowring insisted on recruiting a barrister
to replace Hillier upon his departure, and the introduction in the 1860s
of the practice to appoint a cadet officer to fill one of the two magistrate
posts. 29 This was a positive step forward, as cadets were graduates who
were also trained in the Cantonese language and in general terms required
to acquire a knowledge of the law, and a number of them actually earned
a legal qualification.
The quality of justice administered by the magistracy also suffered
because it was the main instr ument by which the ‘early colonial
government sought to deter crime by extensive use of exemplary corporal
punishment and through the imposition of crime prevention measures
that, by necessity, relied more on penal sanctions than on appeals to
cooperation’. 30 The magistracy was not a part of the independent judiciary
50 A MODERN HISTORY OF HONG KONG

but a department of the government, which found itself confronted with

a serious problem of crime in much of the nineteenth century. 31
Most of those responsible for crime were Chinese, not least because of
the ethnic composition of the population. It was also due to the simple
reality that the destitute and outlaws of China were attracted to this foreign
enclave because it offered work, easy plunder on the island and in its
surrounding waters and relatively light punishments if caught. 32 However,
the view among most expatriates that the Chinese were more prone to
commit crime than the Europeans was grossly exaggerated. Many Chinese
found themselves in front of a magistrate because their usual activities
had been criminalised by various local laws and regulations, such as the
requirements for registration or carrying a lighted lantern at night.
For better or worse, the colonial government tended to define its
relations ‘with the Chinese population in terms of crime, or the suspicion
of it’ in early Hong Kong. 33 As a result, and endowed with an incompetent
police, a desire to deter crime and an essentially racist view, the magistracy
functioned with a general presumption of guilt when dealing with Chinese
defendants. This provided the context for the far too many cases of
miscarriage of justice in the magistracy. 34
Even in the higher courts there were numerous obstacles to justice
that worked against the local Chinese. To begin with the Chinese relied
critically on the generally low standard of interpretation. With the Chinese
having come from different parts of China and speaking mutually
unintelligible dialects, being hauled in front of an English-speaking court,
as sometimes happened, the inadequacy in provisions for interpretation
at the courts of law was blatant. This basic problem was compounded by
the fact that there were very few competent interpreters. Daniel Caldwell
was in the first decade ‘the only reliable inter preter the Colony
possessed’. 35 However, in addition to working as an interpreter at the
Supreme Court and the magistracy, Caldwell was for a long time the chief
detective in the police, and was therefore often required to interpret for
the defendant and give evidence for the Crown in the same case in court.
Thus, even a Chinese defendant who had the good fortune to have the
service of the best court interpreter might still have to live with the reality
that this same officer had a vested interest, when wearing another official
hat, in securing his conviction. The inadequacies in the provision of
interpretation were made worse by the fact that in the first few decades
of Hong Kong’s colonial history, only expatriates could serve as members
of the jury. 36 They were also drawn from a very small pool of Caucasians,
some of whom did not understand the English language well. 37
Since most Chinese defendants were also completely ignorant of the
legal procedures and English law, they were at an added disadvantage.
Whether it was due to ignorance of the law or not, Chinese defendants
and witnesses gained a reputation as prone to make false accusations,
malicious counter-charges and inconsistent statements in court. 38 As a
result, their testimonies either in defence of their cases or as witnesses
were generally given less credence by judges, particularly if they
 LAW AND JUSTICE 51

contradicted the testimony of a European. Furthermore, most Chinese

defendants had come from the lower social strata. By and large, they
could not afford to engage a barrister, whose average basic charge of
$50 in the 1840s was roughly a year’s income for a Chinese worker, even
if they knew enough of the legal system to realise the importance of
having a counsel at court. 39 This meant Chinese defendants were much
more exposed to the intimidating atmosphere inherent in the adversarial
nature of the British judicial process. This was made worse by the frequent
‘adoption of bullying’ tactics by the prosecutors, the ‘racial and class
prejudice’ of the jury and some judges’ inclination to set exemplary
sentences to the non-European accused, particularly if property and
personal security of expatriates were involved. 40
The quality of justice was also low because Hong Kong did not have
an efficient, effective, well-managed and honest police force. To raise a
police force from scratch in a multi-ethnic and multilingual society, where
its fast-expanding population was largely transient, was a daunting task
for any new settlement. Having found the early attempts to employ the
local Chinese policemen ‘futile’, Governor Pottinger was keen to raise
‘an efficient European Police’ which he deemed ‘absolutely indispensable
to the welfare and good order’ of Hong Kong. 41 However, Hong Kong
proved unattractive to the right kind of Europeans, and it had to settle
for a mixed force of Europeans, Indians and Chinese. Those Europeans
who joined were mostly discharged soldiers or seamen with the average
length of service being three months until as late as the early 1860s. 42 As
a result, Hong Kong turned to recruiting from seamen, sepoys and then
trained policemen from India, though it ‘did not solve many of the other
problems, including particularly corruption’ and the linguistic barrier
between the police and the majority of the population. 43 Indeed, the police
force was of such poor standing that Governor MacDonnell felt the
government must try to replace it entirely ‘with the exception of those
men who have proved themselves worth retaining’ and do so ‘as far as
the means at its disposal will admit’. 44
Although MacDonnell sought to contain and reduce the endemic
corruption in the police, he laid the heaviest blame on the Chinese for
allowing ‘themselves to be either terrified or cajoled into paying a sort
of black mail to any person clothed with official authority, who chooses
to demand it’. 45 Whether MacDonnell was justified or not, the reality was
that most Chinese residents of Hong Kong had little choice when faced
with a demand from an abusive colonial policeman. Justice was often
perverted when few policemen were honest, efficient or even properly
trained, a state of affairs which did not begin to change for the better
until after the police were put under the charge of a cadet officer and
trained police officers recruited from Britain in 1867.
The celebrated case of Daniel Caldwell illustrates how several obstacles
to justice could act together to the disadvantage of the Chinese
community. Caldwell was born in St Helena, raised in Singapore, married
to a Chinese, spoke excellent Chinese, and settled in Hong Kong in the
52 A MODERN HISTORY OF HONG KONG

course of the First Anglo-Chinese War. 46 He worked as an interpreter in

courts and served in the police, rising to become the Registrar General
before being dismissed in 1862 after an inquiry. For almost 20 years, he
was the most impor tant channel of communication between the
government and the Chinese community. He was much depended upon
by governors, the courts, the police and the Royal Navy for interpretation
and, above all, for advice in the handling of affairs involving the Chinese. 47
It was therefore understandable that he established himself as a powerful
figure in the assessment of the Chinese community. Caldwell was also
‘the partner and accomplice of a notorious violator of the laws’, Machow
Wong, ‘over whom he, on occasions, threw the shield of his influence,
and whose nefarious designs he assisted in carrying out, by the unscrupu-
lous exercise of power which he derived from his official position’. 48
Although eventually dismissed, Caldwell was in a position to pervert
the course of justice regularly at the expense of the Chinese community.
This was achieved ‘by influencing proceedings in the Magistrate’s Court,
and to have used his powers to silence his enemies’ 49 or by selective
enforcement of the law. With Caldwell being their most ‘sympathetic’
friend in the colonial government and seen to be tremendously powerful
over matters affecting their affairs even before he formally took office
as Registrar General and Protector of the Chinese, the majesty of British
justice was often denied to members of the local Chinese community,
unless they happened to be in his good books.

Rule of Law
The serious deficiencies in the administration of justice should not be taken
to mean the rule of law did not exist in nineteenth-century Hong Kong. It
did, though it was a poor comparison to what was in place at the end of
British rule at the end of the twentieth century. The tremendous changes
that happened in between affected the upholding of the rule of law. Courts,
judges, lawyers and juries are all products of the time and the environment.
What are taboos today, such as enforcing a piece of legislation that goes
against basic human rights in an English court, was not unacceptable in
Hong Kong or indeed in England itself during the reign of Queen Victoria.
British women were not, for example, recognised in their own right in law,
and could not own properties in their own names until the Married Women’s
Property Act was passed in 1882. 50 Likewise, working-class people or
domestic servants were, by today’s standards, routinely treated abominably
by their employers and masters.
In colonial Hong Kong, racial bigotry and prejudice added to the social
injustice inherent in the strong class division in Victorian Britain, and
they were reflected in the working of the courts. In general terms, the
Chinese suffered much more than the expatriates from the low standard
in the administration of justice. The colonial establishment, to which
judges, government prosecutors and in a sense even lawyers and many
members of the jury belonged, did not set out to discriminate against
the Chinese in the courts of law. They did so because they shared the
 LAW AND JUSTICE 53

bias of the time. It was so prevalent that few questioned it. Whether the
rule of law existed or not should not be judged by the standard of justice
administered but by whether the law, as it was, prevailed when it was put
to the test.
Although appeals and judicial review of any kind over cases involving
Chinese defendants were rare in the nineteenth century, there were
occasions when the existence of the rule of law itself was tested. The
most spectacular case involved an attempt to poison the entire expatriate
community in the course of the Second Anglo-Chinese War. 51 On 15
January 1857, the bread produced in the main local bakery by the name
of Esing was heavily laced with arsenic and supplied to the expatriate
community for breakfast as usual, while its proprietor, Cheong Ahlum,
took his entire family to Macao earlier the same morning. As an excessive
amount of arsenic was used, it caused stomach upset and was quickly
detected by the consumers. No fatality resulted, though the Governor’s
wife, Lady Bowring, was among the most affected. Nevertheless, this
incident, happening as it did after Imperial Commissioner Ye Mingchen
had asked the Chinese in Hong Kong to help destroy the British
community in the midst of the war, ‘inflamed the foreign community’. 52
Cheong was apprehended in Macao and handed back to the Hong Kong
police by the Portuguese authority. Governor Bowring insisted that
Cheong and his co-defendants be tried by jury, rather than be ‘dealt with
summarily’ in a ‘drumhead court-martial’ as preferred by the Attorney-
General, Chisholm Anstey. 53
What was in fact put on trial in February 1857 was not only Cheong
and his staff, but also the integrity of British justice. The Chief Justice
who presided over the case, the Attorney General who prosecuted, the
defence counsel, and the seven European members of the jury were all
personally victims of this alleged attempt to wipe out the entire expatriate
community. Despite the vehemence of the ‘panic-stricken Attorney-
General’ and the anger of the expatriate community, the evidence
presented by the Attorney-General proved inconclusive. 54 Guided by
Chief Justice J.W. Hulme, who insisted that ‘hanging the wrong man will
not further the ends of justice’, the jury acquitted them. 55 Although
Cheong and his co-defendants were promptly rearrested upon leaving
the court, detained and eventually expelled under the instruction of the
Governor-in-Council, partly to pacify the expatriate community and partly
to ensure creditors of Cheong could exact their payments, including the
defence counsel’s fees from him, there was no doubt that the accused
had had a fair trial. 56
This court case was a magnificent demonstration of British justice at
its best and the existence of the rule of law. The fact that other restrictions
and regulations against the Chinese, such as the imposition of a curfew
on the Chinese inhabitants, were also introduced in this period of war
and tension merely highlighted the nature of British justice in Hong Kong.
It was that the rule of law existed in parallel to the discriminations against
the Chinese in the administration of justice. The latter was regrettably a
54 A MODERN HISTORY OF HONG KONG

fact of life in a colonial society which did not accept the equality of the
races or the social classes. However, when the Supreme Court was put to
the test it did what all properly constituted British courts of law were
supposed to do.
In the modern history of British courts, what unfolded in the Supreme
Court of Hong Kong in February 1857 was an ordinary case, despite the
high drama. Nevertheless, happening as it did in the context of a Chinese
community under British rule in the midst of a war between the two
countries, it was an extraordinary outcome to those Chinese who observed
this incident critically. In this sense the Esing case was one of those
landmark events that helped to establish the good reputation of British
justice in Hong Kong.
The overall performance of British justice in Hong Kong also needs
to be set against the wider context of justice that prevailed in Guangdong
province, the general region of which Hong Kong was a part and from
where most of its population had come and intended to return for
retirement. Although the Qing legal system worked effectively and was
in general terms neither unpredictable nor arbitrary, 57 in the middle of
the nineteenth century public order and social stability had broken down
and the judicial norm no longer functioned in south China. 58 Instead, the
provincial government in Canton routinely resorted to extreme measures
in order to restore order and deter a complete collapse of imperial
authority, particularly when peasant rebellions of various descriptions
were raging. The usual careful review and reference to Beijing in capital
cases were suspended. 59 One visitor’s account suggests that during three
months in the summer of 1855, when Imperial Commissioner Ye
Mingchen was in charge and a year before the Second Anglo-Chinese
War, 75,000 people were beheaded in Guangzhou city. 60 As with many of
the executions that were summarily carried out in this period, it was
estimated that ‘more than half… were declared to be innocent of the
charge of rebellion, but that the accusation was made as a pretext to
exact money from them’. 6 1 The same general pattern of summar y
execution prevailed elsewhere in the province. In one of its eight
magisterial jurisdictions, over a period of 15 months in the relatively less
turbulent time of the late 1840s and early 1850s, before the Taiping
Uprising started, the local magistrate ‘captured 10,744 rebels: of these,
he had executed 8,757, sent 631 to Canton, released 386 and detained,
pending trial, 211; 468 had died of natural causes in custody’. 62 The low
standard in the administration of justice in British Hong Kong happened
in juxtaposition to the extremely harsh judicial regime in southern China.
However well they compared to the situation in Guangdong, British
law could not have a greater appeal to the average (meaning poor) Chinese
working men in Hong Kong than any law or regulation they ever
encountered, as they were mostly at the receiving end of the punitive
effects. Less harsh punishments were still abusive and repugnant if
imposed on offences they did not understand or commit. The rule of
law was not something the average Chinese labourer would have
 LAW AND JUSTICE 55

understood but the relatively benign British legal system that came with
it was undoubtedly one of the reasons that made Hong Kong attractive
to Chinese immigrant workers.
To the small but growing body of intellectuals who received some
Western education, and the better-off Chinese who were building up their
businesses, the British legal system and the independent judiciary steadily
and increasingly proved attractive. The rhetoric of the expatriate
community emphasising the superiority of British Law was either accepted
or seized upon by the local Chinese elite when it petitioned against
Governor MacDonnell’s racially discriminator y policy in licensing
gambling in 1871. 63 By the time of Queen Victoria’s golden jubilee at the
turn of the century, the local Chinese community made ‘a striking
recognition of British justice’ in its ‘splendidly embroidered address’ to
the Queen. 64
However imperfect it was in nineteenth-century Hong Kong, the rule
of law determined the structure and procedures of the legal system,
restrained some governors from pursuing certain policies harmful to the
local community and helped to secure the acquittal of many wrongly
accused. It might have been a little precarious at first but the rule of law
did prevail. It was partly because of the courage and the independence
of the judges, and partly because of the existence of an authority higher
than the local government, which provided a redress to any serious
executive encroachment on its integrity. It was due also to the gradual
acceptance by the residents of Hong Kong, of all ethnic backgrounds,
of its immense value. It took a long time but the rule of law did eventually
have its roots planted in nineteenth-century Hong Kong.
 Chapter 5
Economy and Society

From the very beginning, in the early 1840s, the British intended to build
in Hong Kong not a settlement colony but an imperial outpost for the
promotion of trade and economic exchanges with the Chinese Empire,
and they expected to enjoy the lion’s share of the benefits by virtue of
their unrivalled economic and commercial might. The structure of its
economy and society consequently bore the imprimatur of this basic
policy. Although British links proved highly valuable to its economy, Hong
Kong was not turned into an appendage of the British economy, nor was
its society modelled on Victorian England. While the British expatriates
kept largely to themselves, and in effect turned themselves into the ‘upper
class’ in colonial Hong Kong, and the Anglican Church became the
established church, there was no serious attempt to ‘civilise the natives’. 1
Restricted by the limited resources at its disposal, the colonial government
generally allowed both economy and society to develop freely, as long as
the basic liberal principles – as well as the prejudices – held dear in
nineteenth-century Britain were not breached. Through the colonial
government, the British upheld their interests and kept a benign eye on
socio-economic developments in the local community but the very small
colonial government preferred not to get actively involved unless British
jurisdiction, interests or values were at stake.

Forces for Economic Development

With the British flag planted firmly in Hong Kong following in the
footsteps of the traders, commerce was its bloodline in its formative
years. Led by what would come to be known as the ‘princely hong’, Jardine
Matheson, British traders, most of them involved directly or indirectly
in the export of opium to China, rapidly settled in and started to build
Hong Kong into a base to support their trading operations, even before
its future was decided. 2 After its foundation as a colony, Jardine Matheson
relocated its head office from Macao in early 1844. This lead was followed
by other major hongs, including Jardine’s principal competitor, Dent and
Company, and turned this nascent colony into the main location for the
headquarters of major British and other companies trading in East Asia.
 ECONOMY AND SOCIETY 57

The British efforts to expand trade with China thus provided an important
impetus for economic development.
British jurisdiction provided stability, security and the predictability of
British law and government, enabling Hong Kong to flourish as a centre
for international trade. Shanghai might have had a considerable advantage
over Hong Kong in terms of its location in East China and access to the
Yangtze waterway as well as its vast and wealthier hinterland, but it did not
enjoy the benefits, in the eyes of the Western traders, of undisputed British
jurisdiction. 3 In this early stage of establishing formal relations between
Britain and China, having one’s headquarters where the senior British
representative in China resided and where the Royal Navy based its China
Station had advantages. 4 It gave the traders ready access to key British
policymakers that could not be enjoyed in Shanghai, and reduced the
substantial costs of protecting the opium trade, which was still illegal in
China until 1858 and vulnerable to marauding pirates.
Indeed, the opium trade was the most important economic activity in
the first decade of British Hong Kong and revenues derived from it were
a key source of government funds. 5 Although other trade and economic
activities gradually reduced the importance of the opium trade for Hong
Kong as a whole, the colonial government continued to be dependent on
revenues from its opium monopoly until this was ended with the fall of
Hong Kong to the Japanese in the Second World War. 6
Consequently, Hong Kong became the location of choice for head
offices or regional headquarters for British and other major trading firms
engaged in the China trade, even though Shanghai surpassed Hong Kong
as a metropolis in much of the nineteenth and the first half of the
twentieth century. The rising and well-connected firms like Jardine
Matheson, and at a later stage the Hong Kong and Shanghai Bank, based
in the colony soon built up a social and financial network to leading
international cities in Europe, America and elsewhere in Asia. The links
to London were particularly important, as it was the global pivot of trade
and capital. The construction of such a network provided ‘a relatively
non-redundant set of contacts across the channels of trade and finance,
providing these fir ms with extraordinar y access to commercial and
political intelligence’. 7
The inter national network so important to Western traders also
benefited Chinese traders in providing financial and other services in
support of their international trade. With access to this network and the
protection of British jurisdiction, Chinese merchants who set up
operations in Hong Kong were able to bypass Chinese regulations and
restrictions over foreign trade and ‘join international intermediaries as
full partners in trade with China and the rest of Asia’. 8 Chinese merchants
made good use of Hong Kong, whether they were middlemen in the China
trade of the Westerners or were themselves engaged in trading with
Southeast Asia. Hong Kong therefore ‘became the premier meeting-place
of the foreign and Chinese social networks of capital in Asia’. 9 Even
Chinese traders who focused on trading with Southeast Asia or supplying
58 A MODERN HISTORY OF HONG KONG

the rapidly expanding overseas Chinese communities fully utilised Hong

Kong’s facilities as a free port. 10
The intermediaries between Western traders and the Chinese were the
compradors, who not only acted as agents for their Western employers
but also usually set up parallel trading operations of their own. 11 These
trading activities often allowed the more astute compradors to amass
considerable wealth or capital to finance their own businesses. By 1876,
for example, one of the better known, Kwok Acheong who worked for
the shipping company Peninsula and Oriental (P&O), had himself become
a significant steamship operator and the third-largest ratepayer in Hong
Kong. 12 The rise of the compradors continued. By the early half of the
twentieth century, the most wealthy man in Hong Kong was generally
believed to be Robert Hotung, who worked as a comprador for Jardine’s
before building up his immense personal fortune.
Although the biggest companies and the leading trading houses in early
colonial Hong Kong were all owned and operated by British, American
and other expatriates, economic development was made possible and
supported by Chinese workers who provided the bulk of the manpower
to build a new port city. Chinese labourers not only built houses, roads
and other infrastructure, provided many different kinds of menial services
to the expatriates and made items of daily use, but also manned ships,
loaded and unloaded goods and carried out other tasks essential to
sustaining trade and economic expansion. In about a decade, particularly
after the start of the Taiping Uprising in China in 1850, the contribution
of the Chinese community took on a new and increasingly important
dimension as Chinese merchants who had fled from great social upheavals
in China began to relocate or set up businesses in Hong Kong. 13
This coincided with the development of Hong Kong into the key staging
post for Chinese emigration. The first major wave occurred after the
discovery of gold at Coloma near Sacramento in California in 1848 and
the subsequent gold rush. This trend of emigration was enhanced after
gold was also discovered in New South Wales three years later, triggering
another gold rush which was sustained by further discovery of gold in
Victoria, Australia. This coincided with the collapse of social order in south
China as a result of the Taiping Uprising. With the lure of a new prospect
elsewhere propagated by those engaged in profiteering from this movement
of people, other Chinese left in increasing numbers for Southeast Asia,
Peru, Cuba and other destinations. To give an indication of the scale of
the movement of people through Hong Kong, 30,000 Chinese labourers
sailed from Hong Kong to San Francisco alone in 1852 at a time when its
long-term population was less than 39,000. 14 Their reliance on Hong Kong
as a transhipment centre provided strong impetus for the building of hostels
and other supporting services locally. Much of this movement of people
in fact involved the trafficking of human beings, with many Chinese going
overseas as indenture labourers in appalling conditions. 15 Whatever one
may feel about the morality of this traffic, it was an important economic
activity in the formative years of Hong Kong as a colony.
 ECONOMY AND SOCIETY 59

The increasing emigration of the Chinese also generated a major re-

export trade of Chinese goods to support the rapidly expanding overseas
Chinese communities. Those firms concentrating on supplying North
America, for which San Francisco was a key centre, came to be called
‘Jinshan Zhuang’, whereas those trading with Southeast Asia were known
as ‘Nanyang Zhuang’. 16 Hong Kong also developed a thriving entrepôt
trade between China and Southeast Asia (particularly Thailand, the Malay
Peninsula, Indochina and the Dutch East Indies or present-day Indonesia)
in the 1850s. This came to be known as the Nam Pak Hong (Nanbeihang)
trade. It involved the import to China in the north of goods from the
south in Southeast Asia, consisting mainly of rice, spices, seafood, jewels,
timber and coconut oil, and the export of Chinese products such as silk,
herbal medicines, peanuts, cooking oil and other traditional produces to
Southeast Asia. 17 The growth of this trade really took off at the end of
the decade, as the number of Chinese trading houses more than doubled
within two years from 35 in 1858. This rapid growth was sustained and
the number of traders rose to 315 in 1876 and to 395 by 1881. 18 With
such a beginning, in addition to the servicing of the China trade of the
Westerners, Hong Kong laid the foundation for its entrepôt trade, which
remained the mainstay of its economy until 1950.
With the Chinese community growing fast – rising from 7,500 in 1841
to 22,800 in 1847 and to 85,300 in 1859 – a meaningful domestic market
emerged and grew, generating secondary economic activities and growth. 19
By 1859, there were already 2,000 shops or enterprises owned or operated
by the Chinese, including 278 traditional grocery stores, 49 stores for
Western goods, 51 rice shops, 53 shipbuilders, 92 carpenters, 116 metal
workshops and others. 20 In comparison, the size of the non-Chinese
community rose to only 1,600 in 1859, and much of this expansion
happened after a period of slow growth in the China trade conducted by
Western merchants in the first decade of British rule. 21
Although trade and financial ser vices r un by the expatriates also
expanded much more quickly after the Second Anglo-Chinese War and
the expatriates continued to dominate the economic scene, the balance
of economic importance between the two communities had started to
shift. Forming the overwhelming majority of the population, the Chinese
began to outnumber the expatriates as traders and owners of properties
in a little over a decade, though the value of their houses and investments
remained generally smaller than that of the expatriates. Nevertheless, as
an indication of how much change had taken place, by 1855 there were
already more Chinese than expatriates paying rates, which together with
income from land leases formed the main sources of government revenue.
In that year, among those who paid rates of £10 and above, 1,637 out of
1,999 were Chinese, while of those who paid £40 and above, 410 out of
772 were Chinese. 22 The growing wealth and economic contribution of
the Chinese did not alter the reality that real economic power rested in
the hands of the expatriate community that formed the colonial establish-
ment. This remained the situation even after the Chinese community as a
60 A MODERN HISTORY OF HONG KONG

whole surpassed the expatriates in terms of either total wealth or contri-

bution to the economy towards the end of the nineteenth century.
The centrality of trade in Hong Kong’s economic life also led to the
development of servicing industries to support trade, both international
and regional. The international financial network, of which large British
and American firms such as Jardine Matheson and Russell and Company
were themselves a part, gradually gave way to the development of modern
banks. In addition to the major British and foreign banks which set up
operations in Hong Kong, such as the Chartered Mercantile Bank, the
Char tered Bank of India, Australia and China, and the Comptoir
d’Escompte, Hong Kong became home to a new British overseas bank,
the Hong Kong and Shanghai Banking Corporation in 1865. It was
founded ‘to finance intra-regional trade among the open ports of China,
Japan, and the Philippines’ for which it would engage in ‘financing trading
facilities, for example, local steamship lines, docks, tug boats, and small
industrial enterprises’. 23 However, it quickly took on the role of an
exchange bank, forged a London connection with Westminster Bank and
then set up an office in this pivot of world capital. The bank flourished
both as a bridge between the financial world dominated by silver in China
and sterling in London, and as a regional banking operation based in the
colony. By establishing a sound banking sector, exemplified by the success
of the Hong Kong Bank, Hong Kong developed itself into a growing
financial centre to service trade in East Asia and indeed, to a lesser extent,
even the modernisation of China particularly through the provision of
loans either individually or by syndicates.
In parallel, the development and expansion of traditional native Chinese
banks (or yinhao) helped to finance economic expansion among the Chinese
community. They served as moneychangers, bullion dealers, moneylenders
and remittance houses to the local Chinese businessmen, facilitating their
trade with China, Southeast Asia, Japan, North America and elsewhere. As
most Chinese businessmen in Hong Kong did not have a sufficient
command of the English language or the contacts and knowledge to
approach the modern Western banks, and some of the bigger native banks
used ‘the facilities of modern banks – loans, foreign currency, remittances,
and so on – to strengthen their own operations’, they also ‘acted as
intermediaries between foreign banks and certain levels of the local Chinese
market’. 24 The early native banks numbered 20 by 1886, and over 30 by
1890, and they were usually operated by Cantonese. 25 They were joined by
the formation of modern Chinese banks in the early twentieth century.
Despite fierce competition from the modern banks, the native ones
continued to flourish and help finance numerous small business operations
and remittances until Hong Kong fell under Japanese occupation in 1941.
As far as general economic development in Hong Kong was concerned,
their competition was a positive and complementary factor.
In addition to stimulating the growth of other financial services, such
as insurance, rapidly expanding trade after a slow start in the first decade
of British rule also led to the establishment of shipping businesses and a
 ECONOMY AND SOCIETY 61

shipbuilding and maintenance industry. This applied as much to the rise

of shipping by junks as to the expansion of great British shipping
companies. For an indication of the growth of the junk trade, the tonnage
carried by junks from China to Hong Kong rose from 80,000 tons in
1847 to 1.35 million tons in 1867, a sixteen-fold increase in two decades. 26
Such expansion also provided the impetus for the building and
maintenance of junks, which already existed on a small scale in pre-
colonial Hong Kong. By the end of the 1850s, there were already 53 junk
yards of various size.
In terms of modern shipping, the British dominated. Leading British
hongs like Jardine Matheson or Dent and Company were themselves major
players in the shipping business, even before the colony was founded.
Other great shipping companies not initially involved with the opium
trade, such as P&O, which received its Royal Charter in 1840 and was to
become the world’s largest shipping company, also inaugurated a shipping
and mail service between Britain and Hong Kong in 1845. 27 Butterfield
and Swire, a relative latecomer that eventually emerged as one of the
greatest of British hongs, for its part opened a branch in Hong Kong in
1870 and soon saw its operation there surpass its original regional
headquarters in Shanghai. 28 Although a few Chinese merchants, most
notably Kwok Acheong, did operate a dozen steam ships by the 1870s,
they paled in comparison with the major British shipping firms. 29
This steady expansion of shipping also gave rise to establishment of a
modern shipbuilding and maintenance industry. The first Western-style
shipyard, the Lamont Dock, was built in Aberdeen in 1857. It was intended
primarily to support the Royal Navy after the main British-operated yard
in Canton was destroyed by the Chinese in the course of the Second
Anglo-Chinese War. 30 This was followed by the construction of a handful
of shipyards, culminating in the establishment of the Hong Kong
Whampoa Dock Company in July 1863, which emerged as the premier
dock company in Hong Kong in the nineteenth century. Although the
shipbuilding and maintenance industry was given major support from
the Navy at first, its survival and subsequent prospering depended on
commercial work. 31
The emergence of this modern shipbuilding and repair industry in the
1860s also marked the beginning of modern industries. Indeed, it was
only after the Hong Kong Whampoa Dock Company was founded that
Hong Kong passed its first ever Companies Ordinance. The first limited
liability company to be incorporated under this law in 1865 was also a
shipbuilder. Other major industrial enterprises were later founded by
expatriate investors, including most notably a sugar refinery in the 1870s;
two ice factories, a ropemaker, a steelmaker, and a cement factory in the
1880s; and another sugar refinery in the 1890s.
While the expatriate investors set up all the major industrial enterprises,
the Chinese community also went beyond handicraft industries and started
building factories in the 1870s. The most important industries built by
Chinese investors included a couple of factories for preserved ginger
62 A MODERN HISTORY OF HONG KONG

and other processed food, including traditional Chinese products like

soy sauce and preserved fruits, a tannery, a few machine-makers, a paper
factory and a match manufacturer. 32 On a smaller scale, numerous other
workshops run by the Chinese existed by the early 1880s. These included
workshops for making cigars, tobacco, clothing, glass, oars, rifles, ropes,
umbrellas, spectacles, tooth-powder and soap, as well as small factories
for producing goods in bamboo and rattan. 33
The industrial developments that took place in the nineteenth century
occurred by and large without much support from or impediments
imposed by the government. 34 While the beginning of modern industry
was a milestone in Hong Kong’s history, it was trade, of which opium
remained a significant part throughout the nineteenth century, and not
industry that formed the mainstay of the economy. 35

A ‘Colonial Society’
Since it was an imperial outpost rather than a settlement colony, Hong
Kong developed a ‘colonial society’ that reflected this reality. This was not
the result of a deliberate policy but a product of the time and the prejudice
that prevailed while British imperialism asserted itself on the basis of
superior organisation, logistics and military might. It resulted in the creation
in Hong Kong, as elsewhere in the non-settlement colonies of the British
Empire, of a colonial hierarchy in which Britons, by virtue of little more
than accident of birth, formed the colonial establishment or, for the less
successful, at least an adjunct to it. This was the product of self-confidence
and racial arrogance that came with the power of empire.
The government in Hong Kong, like colonial governments elsewhere
in the British Empire, generally did not bother to legislate to discriminate
against the colonial subjects because it was unnecessary. 36 The vitality
and strength of the British economy, politics, armed forces, science,
technology and, in their own eyes, their way of life governed by liberal
democracy and the Christian faith gave the Victorians venturing to Asia
or, for that matter, Africa a sense of superiority over the so-called
natives. 37 At the same time, although imperial possessions were seized by
force they were mostly maintained by the implied might of British arms
to reassert and extend British control if any of them were attacked by
the ‘natives’. For the highly self-confident and class-conscious Britons
managing a far-flung empire, aloofness and segregation from the ‘natives’
came easily. Exercising authority over the ‘natives’ through local
collaborators under some for m of indirect rule was also both cost-
effective and sufficiently secure in the era of pax Britannica. 38 Hong Kong
was not an exception in having a clear and segregating colonial hierarchy.
The existence of a clear distinction between the communities of the
Chinese and the expatriate Britons, with the former generally occupying
the lower social strata and the latter the upper ones, did not mean social
classes were divided simply on ethnic lines. The segregation between the
races meant social classes existed both in parallel within the two
communities and at the same time across ethnic lines. If the average
 ECONOMY AND SOCIETY 63

Chinese labourers in nineteenth-century Hong Kong had some faint ideas

of class distinction in modern usage they would probably see the senior
expatriate officials and businessmen as members of the upper class, with
expatriates in supervisory roles and Chinese merchants as a kind of middle
class in two largely se parate communities, while they themselves
constituted the lower class. While such a view is far too simplistic as it
focuses upon nothing but the local social distinctions, it nevertheless
provides a useful rough sketch for outlining the complexity of the colonial
society in the first century of British Hong Kong.
As an expatriate community of Britons, Hong Kong had, strictly
speaking, few members of the aristocracy or the landed gentry who would
n o r m a l l y b e d e e m e d m e m b e r s o f t h e B r i t i s h u p p e r c l a s s. T he
overwhelming majority of Hong Kong’s officials and senior business
leaders had come from the middle class in the UK. 39 Together they
constituted the ruling elite in Hong Kong. Their relatively humble
backgrounds did not make them any less status conscious than real upper-
crust Englishmen. The reverse was tr ue, as they insisted on rigidly
following precedence and protocols in society events. 4 0 Whatever
motivated them to do so, their ‘preoccupation with status and position,
with the establishment of a colonial pecking order, unified colonial society
in the way that opposing thrusts help to sustain a stone-work bridge: the
strains help to maintain the structure’. 41 With heads of trading houses
behaving like merchant princes and colonial officials like senior
mandarins, it would be understandable that they would appear ‘upper
class’ if seen only within the confines of the colony. In such a context,
professional people and juniors in government or the business world
constituted the ‘middle class’, while those performing supervisory roles
in government agencies and factories formed the ‘lower or working class’
among the expatriates.
A working class in the sense that it was used in the UK did not or was
not permitted to exist among Britons in Hong Kong, however. Practically
any Caucasian (not just an Englishman), whatever his background, skill
or ability, would be employed as an overseer or supervisor rather than a
mere labourer as long as he was willing to work. 42 A genuine working
class did not exist among the expatriates partly because of strong
competition from Chinese artisans, craftsmen and labourers but mainly
because ‘working class Europeans were seen as lowering the prestige of
the white man’. 43 Indeed, the poor whites, usually beachcombers or
prostitutes, were treated not as lower class but as outcasts in their own
community. In general, they were avoided by other Caucasians in the day,
dealt with harshly by the police and were reduced to become creatures
of the night, as the expatriate community had a vested interest in not
allowing them to, from their perspective, let the side down. 44
Even though the several thousand original inhabitants of the island
of Hong Kong vastly outnumbered the early expatriates, they were
quickly swamped by new immigrants from China. Neither the original
residents nor the newcomers included any number of nobility, scholar
64 A MODERN HISTORY OF HONG KONG

officials or members of the Chinese gentry, who would be counted as

‘upper class’ in English usage. 45 As a result, class distinction within the
Chinese community shared one key element in common with that in
the expatriate community. Neither had any number of people from a
genuine upper-class background from their home country. However, a
kind of local ‘upper class’ among the Chinese gradually emerged, as
merchants, compradors and others who had made fortunes sought to
better their social standing by purchasing official ranks from the Chinese
government, or engaging in much needed and appreciated charitable
work in the local community. A very few even earned British honours
towards the end of the nineteenth centur y and became peripheral
members of the colonial establishment.
The lower class among the Chinese was easy to identify. Immigrant
labourers, most of the original inhabitants who worked the land or
fished for a living, most of their descendants and the destitute in general
ter ms constituted members of the lower class. They for med the
overwhelming majority of the Chinese community and indeed of the
population as a whole.
What is much more difficult to define and identify is the middle class
among the Chinese. There was certainly a small but significant number
of Chinese who occupied the middle ground between the wealthy upper
cl a s s a n d t h e l a b o u r i n g l ower c l a s s. T h e y c o n s i s t e d m a i n l y of
schoolteachers, clerks and assistants in the bigger firms and in government
services, as well as keepers of small enterprises, be they shops, eating
houses, workshops or similar establishments. Set entirely in the context
of the local Chinese community, they could be seen as belonging to the
‘middle class’. However, such a description should be qualified by a
comparison with the ‘middle’ and ‘working’ classes of the expatriate
community. In general terms, members of the local Chinese ‘middle class’
enjoyed substantially lower social standing and poorer living conditions
than members of the expatriate ‘middle class’ and generally even those
of the expatriate ‘lower class’.
In between the expatriates and the local Chinese were Hong Kong’s
Eurasians, most of them born to an expatriate father and a Chinese
mother. Given the racial and other prejudices of the time it was in the
interest of Eurasians to identify and become members of either the
expatriate or the local Chinese community rather than assert themselves
as a distinct community. Since they were not accepted as full members
of the expatriate community and were, for example, barred from becoming
cadet officers, most chose to identify and integrate with the Chinese
community. 46 Although the Chinese community also had its prejudices
against the mixing of ethnicity, it was on the whole more receptive to
Eurasians than was the expatriate community. This was partly because
Eurasians often had English language ability and a modern education
that enabled them to be members of the middle level in the Chinese
social and economic hierarchy. Indeed, some Eurasians were able to
become so successful that they joined the elite of the colonial society, at
 ECONOMY AND SOCIETY 65

least at its periphery, but usually as representatives of the Chinese commu-

nity. The rise of Robert Hotung and his extended family in Hong Kong
society provided the most spectacular example. 47 Most Eurasians ended
up working at the junior level in government, public organisations or in
the hongs and tried to integrate into the ‘middle class’ among the Chinese.
In addition, there were three other significant ethnic groups in Hong
Kong: the Parsees, the Por tuguese and the Indians. 4 8 The Parsee
community originated from Persia and came to Hong Kong after first
settling in India. It was small but influential because it was made up mostly
of wealthy traders who also engaged in philanthropic and civic affairs.
However, Parsees were never fully accepted by the Britons and were only
at the fringes of the colonial establishment.
The Portuguese, who numbered second only after Britons among the
Westerners, had mostly come from the Portuguese enclave of Macao, which
put them in a grey area between the local Chinese and the expatriate
communities. With education in the English language provided mainly by
Catholic mission schools, many Portuguese worked as clerks, account clerks
and interpreters in the colonial government and in Western firms, and
generally belonged to the middle class in the context of the colony. Many
also married Chinese, spoke Cantonese and practised Catholicism. As a
community they tended to inter-marry and maintain a distinctive identity.
The creation of an Indian community was largely the result of the
deployment of Indian regiments to Hong Kong and the recruitment of
Sikh, Punjabi, Muslim and other policemen from India. In class terms,
they generally belonged to the local working class. They became a
community of Indians as they were neither accepted nor adopted by any
of the other communities.

Segregation
When Hong Kong was founded, the expatriate and the local Chinese
communities largely chose to segregate without this requiring government
intervention or legislation. The experiences of their sojourn in Canton
was fresh in the minds of the expatriates and the original inhabitants of
Hong Kong island were treated like their Cantonese countrymen. For
their part, the local Chinese had no more wish to live in mixed quarters
than the Westerners desired to be their next-door neighbours. 49
In the earliest days of British occupation, the main concern of Elliot
with regard to land policy was to encourage British merchants to commit
themselves to Hong Kong by taking out leases but to do so under
regulation of his authority pending a settlement of the future of Hong
Kong. 50 When this issue came up under the first Governor, Pottinger, the
government was again interested mainly in working out a policy that on
the one hand reserved the land for the Crown and on the other allocated
sufficient land for the mercantile community and the armed services to
car r y out their functions. 5 1 T he one notab le occasion w hen the
government was actually involved in encouraging segregation was to
relocate the Chinese settlers in the Upper Bazaar to the Taipingshan area
66 A MODERN HISTORY OF HONG KONG

shortly after the Colony was founded, though this was also motivated by
a desire to regain the land for more profitable developments. 52
Segregation of the two communities was on the whole not an issue
about which the government had to devise or strictly enforce a clear
policy during the first four decades of colonial rule. It came into existence
largely without legislation. Peaceful and parallel coexistence of various
ethnic communities suited everyone.
As the colony developed and prospered, the preferences of the two
communities in their choices of location for settlement or housing
entrenched residential segregation. Although it started mainly on ethic
lines, segregation was also reinforced by class distinctions. In the areas
where the majority of the Chinese congregated, they lived in conditions
that the expa triates would deem cong ested and unhygienic. The
differences in the standard of housing, and indeed of living, between
the expatriate community and the Chinese lower and middle classes were
stark, and reinforced segregation.
Although segregation was not backed by any legislation it was ‘accepted
in the social life of the colony’. 53 However, as more Chinese had amassed
wealth by the latter 1870s, they preferred to live in housing of a much
higher standard. They not only built better housing eastward from the
central district but also started to purchase and take over properties owned
by expatriates. This provoked a strong reaction within the government
when the liberal-minded Governor, Sir John Pope Hennessy, supported
such a development ag ainst strong resistance within the colonial
establishment. 54 Hennessy was overruled by London and ‘the image of
the Chinese encroaching upon areas where Westerners had built their
houses led to the legal provision for residential segregation’. 55
The first legislation to give legality to segregation was the introduction
of the European District Preservation Ordinance in 1888, five years after
Hennessy had retired as governor. This was followed and enhanced by
the Peak Preservation Ordinance (1904), and further restrictions passed
in 1919 to reserve part of the island of Cheung Chau for members of
the expatriate middle class. 56 Although such laws were undoubtedly
introduced to give legal sanction to racial segregation, a formal regime
of apartheid was never introduced. Such a formal arrangement was out
of tone with the liberal façade of Victorian imperialism and was in any
event unnecessary. Segregation was not strongly resented by the local
Chinese community and sufficient flexibility was in any event exercised
to allow the most successful members of the Chinese community, for
example, the Hotung family and the wife of the Chinese leader Chiang
Kai-shek, to reside in the Caucasian citadel of the Peak.
Most Chinese residents never paid any attention to the existence of
such exclusive legislation, let alone took political actions to remove it. 57
The end of the legal basis for segregation came in 1946 as a result not of
local agitation but of a g over nment initiative, after the Japanese
occupation of Hong Kong caused the officials who re-established the
colonial administration to take on a new outlook. 58
 ECONOMY AND SOCIETY 67

Governance of the Local Chinese

Given the primarily commercial raison d’être behind the founding of Hong
Kong, the British had little interest in governing the local Chinese beyond
maintaining the stability and good order deemed conducive – even
essential – to trade and prosperity. Thus, in the early years local Chinese
inhabitants were largely left to their own devices, as long as they did not
break the law or otherwise disturb the peace.
In so doing, the colonial government resorted to reviving a Chinese
arrangement for maintaining peace and order at the local level, the baojia
system, which had been formally in place but not in operation in Hong
Kong previously. 59 Chinese peace officers with ‘the same authorities,
privileges and immunities as any constable’ were appointed in 1844. 60
They were subjected to the general oversight of the police magistrate.
The rationale was that since the mainly non-Chinese police could not
dampen criminal activities among the Chinese population, ‘Chinese in
towns and villages would be best locally governed by their own system
consisting precisely of tithings and hundreds superintendents [sic]’. 61 They
also served as mediators and arbitrators of minor disputes. How effective
they were is difficult to ascertain as there are few records of their work,
but the fact that they were all abolished by 1861 suggests that they were
not deemed particularly valuable by the government. 62
Parallel to the Chinese peace officers was the emergence of respected
local notables to whom the Chinese increasingly turned for mediation
and arbitration of disputes. The most important of such local leaders in
the early days, such as Loo Aqui and Tam Achoy, had generally come
from those who had profited from working for the British in the founding
of Hong Kong, or made fortunes as compradors or in the entrepôt trade.
They differed from the more traditional leaders in a Chinese community
mainly by their very humble and non-gentry background. Loo was, for
example, a Tanka (a kind of outcast boat-people), which would normally
have prevented him from establishing himself as a local leader among
the Cantonese. However, Hong Kong did not have an established scholar-
gentry class, and the wealth Loo gathered provisioning the British enabled
him to rise above his lowly origins. 63
People like Loo and Tam came to be accepted as community leaders
after they used their personal wealth to support local good causes, of
which a landmark event was the building of the Man Mo Temple on
Hollywood Road in the heart of the Chinese community in 1847. As a
temple, it was dedicated to the deities for the fortune of men seeking
advancement through the Chinese Imperial Examinations, and for loyalty
and righteousness particularly among warriors. In addition to being a
centre for worship the Temple quickly ‘became the main social centre
for Hong Kong’s Chinese population, regardless of their regional or
occupational affiliation’. 64
By the beginning of the 1850s, those administering the Temple had
evolved into a de facto local governing board among the Chinese. They
68 A MODERN HISTORY OF HONG KONG

‘secretly controlled native affairs, acted as commercial arbitrators,

arranged for the due reception of mandarins passing through the Colony,
negotiated the sale of [Chinese] official titles, and formed an unofficial
link between the Chinese residents of Hong Kong and the Canton
Authorities’. 65 With the colonial government not keen to get deeply
involved in governing the local Chinese, the local leadership that sprung
up around the Temple filled an important gap and formed the basis for
de facto self-government among the Chinese in most everyday affairs.
The roles which the Man Mo Temple Committee played came to be
eclipsed, though not entirely replaced, by the governing body of the Tung
Wah Hospital after the latter’s creation, with the Temple dealing with
matters more at the local level and the Hospital at the colony-wide level. 66
The Hospital was founded primarily as a result of a public scandal in
1869. This was over the practice in the Chinese community of leaving
terminally ill and destitute individuals in a final resting place to die without
any medical or sanitary care, often laid next to those who had already
died. It prompted the government to act after Acting Registrar General
Alfred Lister accidentally gained knowledge of this practice and reported
it in graphic detail. 67 As a result, the government worked with leaders of
the Chinese community to build a Chinese hospital for the Chinese
residents with government subvention and regular contributions from
the prominent Chinese residents. 6 8 Leaders of various trades and
successful compradors were elected on an annual basis to become
directors and to run and supervise and financially support its operation.
When an ordinance was passed to found the Hospital the following
year, the government finally gave formal recognition to the leadership
role played by the local notables and philanthropists among the Chinese. 69
Directorships of Tung Wah became highly regarded positions, which, in
turn, reinforced the importance of the Hospital Board in the minds of
other Chinese residents. They helped to transform ‘a small class of rich
Chinese businessmen into a group of Hong Kong notables, recognised
as such by their own compatriots and by the British and Chinese
Governments’. 70 Recognition from the Chinese came partly because the
Tung Wah Directors proved themselves a valuable conduit for the Chinese
government to bypass the British authorities in communicating with the
Chinese in Hong Kong, and partly because Tung Wah Directors routinely
purchased official rank or title from the Chinese government.
The Board of Tung Wah thus became the main core around which the
local elite among the Chinese emerged. Below it, the Man Mo Temple
Committee and other similar though less prominent bodies carried on
working for the community. Included in this category were the kaifong
associations, which were groupings of civic-minded, status-seeking,
paternalistic and usually better-off residents of their neighbourhoods
who organised practical affairs and helped the poor in their localities. 71
In the more remote areas where both the government and the Tung Wah’s
reach was limited, they did good work such as ‘repairing bridges, mending
roads, promoting educational facilities, providing free medical aid for
 ECONOMY AND SOCIETY 69

the poor, and providing free coffins for the indigent dead’ until the early
post-war period. 72 These lower-level organisations generally served the
local Chinese in parallel to the Hospital, which looked after the Chinese
community colony-wide. Membership of its board meant high social
position, to which the most successful and wealthy merchants or kaifong
leaders aspired to gain admission.
After its creation in 1872, the Tung Wah Hospital functioned not only
as a hospital but also as the main informal governing body for the Chinese
community, implicitly sanctioned by the colonial government. Its non-
medical activities should in modern terms be classified as social services.
It helped to repatriate destitute people and women kidnapped into
prostitution to their home villages in China, bury unclaimed dead bodies,
fund and organise relief for victims of disasters and house lunatics of
Chinese origins. More importantly, its board of directors came to be seen
and used by the local Chinese as a medium between themselves and the
government. 73 The subjects about which the local Chinese community
sought their advice and help were very wide ranging. They included, for
example, issues involving adulter y or the authenticity of Chinese
marriages, registration of companies or shops, application of night passes,
the state of public security, disputes among both individuals and even
between companies in the Chinese community.
The Tung Wah Hospital Board was able to perform so many functions
because the colonial government was not prepared to commit enough of
its own meagre resources for these services. Allowing the Chinese elite
to look after their less well-off compatriots was a cost-effective and
desirable measure from the point of view of the government.
Putting the matter in a comparative framework, it was obvious that in
terms of governance the focus of the government was the much smaller
expatriate community. In contrast, only one senior official, the Registrar
General and Protector of the Chinese, was tasked specifically to deal
with the overwhelmingly larger Chinese community. To a lesser extent,
the same was true of the allocation of government resources. Even though
in terms of physical infrastructures built by the government both the
ex p atriate and the Chinese communities benefited, most of the
i n f r a s t r u c t u r e s wer e n o n e t h e l e s s g e a r e d p r i m a r i l y t o m e e t t h e
requirements of the expatriates with the Chinese benefiting from them
almost incidentally. Indeed, beyond the most basic physical infra-
structures, such as roads and bridges, most Chinese residents did not use
many of the other facilities provided by the government, including even
government schools and hospitals in the early decades of British rule. 74
Any retrospective criticism of the government’s failure to provide a
level of governance and public service to the Chinese similar to those
for the expatriates in the nineteenth century should be put in context.
To begin with, the Chinese preferred to minimise dealings with the
colonial government as far as possible. Furthermore, the government
did not have enough officers with sufficient command of the Chinese
language to administer the Chinese community effectively even if it had
70 A MODERN HISTORY OF HONG KONG

wished to do so. With little effective communication between the colonial

government and the Chinese community, which were separated not only
by cultural and linguistic barriers but an entire way of life and attitude
towards governance, it was understandable that the government did not
pay much attention to the Chinese residents who were in any event not
making demands for improvements in government services.
The Registrar General and his small department were responsible for
liaising with and overseeing the non-medical work of Tung Wah and
similar organisations such as the Po Leung Kuk, a society for the
protection of women and children, in the Chinese community. 75 Before a
Chinese person, Ng Choy, was appointed to membership of the Legislative
Council in 1880, the Registrar General was the only senior figure in the
colonial establishment in a position to speak for and look after the welfare
of the Chinese community. On the whole, the Registrar General and its
twentieth-century replacement office, the Secretary for Chinese Affairs,
and Tung Wah’s Board of Directors maintained a symbiotic relationship
in looking after the welfare of the Chinese community.
In addition to being there for members of the Chinese community to
approach, the Registrar General relied on the District Watch Force as its
main instrument for dealing with the local Chinese on a daily basis. This
Force came into existence in 1866, after local Chinese leaders proposed
to the government that they should organise a local force of Cantonese-
speaking Chinese constables, recruited, controlled and paid for by
themselves for the protection of their businesses, proper ties and
persons. 76 When the government agreed to its formation, this force was
put under the control of the Registrar General and a District Watch
Committee constituted of prominent Chinese. Until its dissolution in
the early post-war period it existed as a kind of a Chinese police force
for the Chinese community in parallel to the multi-ethnic police. In the
nineteenth and early twentieth centuries, the District Watch Force served
as runners for the Registrar General generally, police guards, detectives
and census enumerators. They also traced runaway girls and intercepted
young women brought into Hong Kong for prostitution, while its senior
officers mediated local disputes within the Chinese community. 77
In the early 1890s, the District Watch Committee was significantly
reformed and strengthened after close consultation between Registrar
General James Stewart Lockhart and various local Chinese leaders. The
result was to turn it into the highest advisory body of the Chinese
community to the colonial government, though it continued to supervise
the District Watch Force. Membership of the Committee became a further
progression in social standing than Directorships of Tung Wah among
the local Chinese.
In its handling of the Chinese community, which had become
increasingly important economically by the latter part of the nineteenth
century, the government also started to co-opt some of the Western-
educated Chinese to join the colonial establishment. Before 1900, sixteen
Chinese were made Justices of the Peace, of whom three were elevated
 ECONOMY AND SOCIETY 71

to become unofficial members of the Legislative Council. 78 As such, these

Chinese became representatives of the community in the colonial
establishment. While their prominence came from colonial patronage,
their standing in the Chinese community depended critically on the work
they did for the community, often by serving on bodies like Tung Wah or
the District Watch Committee and by other philanthropic work.
Their admission to the colonial establishment, usually as members
of the legislature, did not alter the fact that they were merely peripheral
members who could not, in the nineteenth century, block general policies
designed for colony-wide application. However, they were in a position
to voice the concerns of their community and promote effectively issues
deemed to be of particular importance to their most powerful Chinese
constituencies, the merchants and proper ty owners. They proved
successful, for example, in resisting the government’s wish to improve
sanitary conditions in houses for the Chinese in the late 1880s, as it
would have significantly incr eased costs f o r p roper ty owners. 7 9
Governance of the Chinese community outside of the realm of law
and justice continued to be left largely in the hands of the local Chinese
elite in the late nineteenth century.
The basic hands-off attitude of the colonial government towards the
governance of the Chinese community met its most severe test in 1894,
when Hong Kong suffered from the bubonic plague. After the govern-
ment realised the plague had spread from Canton, it faced the choice
between taking swift and strong actions itself or rely on the Chinese
elite, particularly the Tung Wah Directors, to deal with it. Although the
plague was at first raging only among the Chinese, the risk of infection
to the rest of the population could not be ignored. The expatriates took
a strong view that even if the Chinese should have the right to ‘kill
themselves’ they should not be allowed to ‘kill us’ in the process. 80
The government, for its part, was determined to improve the sanitary
conditions in the Chinese community and thus reduce the danger of the
plague spreading. This was a sensitive issue as the Chinese community
still harboured a great distrust of Western medicine, particularly of
surgery, and regarded the sending of sanitary inspectors into their homes
to check and disinfect them as grave intrusions. Instead of following the
advice of the Tung Wah Board to allow the Hospital to deal with it as a
problem within the Chinese community, the government took matters
into its own hands. It deployed a hospital ship to deal with plague victims,
though few Chinese were willing to go on board for treatment, and
employed soldiers as sanitary inspectors to disinfect the Chinese quarters
under protection of police guards when resistance proved strong. 81
The way the government handled the plague illustrates the limits within
which it was prepared to allow the local Chinese elite to run the affairs
of the Chinese community. For matters that it deemed to affect the
Chinese community only with no wider implications, and provided these
matters did not violate some principles held dear by the Victorians, the
government was prepared to let Chinese community leaders handle them
72 A MODERN HISTORY OF HONG KONG

freely, subject to oversight usually exercised loosely through the Registrar

General. It did not hesitate to overrule any initiative that went beyond
this unspoken understanding.
 Chapter 6
Agent for Change in China

However much Hong Kong seemed like a Chinese town to visitors from
the West, as a British colony it was the nearest place for most progressive-
minded Chinese to gain firsthand knowledge of a functioning Western
government. 1 Hong Kong was not founded as a means to change China
and bring it to modernity as defined by the West but it did play a key part
in promoting the modernisation of China. Its government, legal system
and free marketplace for Western ideas provided a living demonstration
of an alternative way of life and government. The benefits of this Western
model, albeit only in a colonial format, were clearly exhibited in its
stability, order and prosperity. Hong Kong’s transformation from a ‘barren
island with hardly a house upon it’ into a thriving, peaceful and well-
organised trading community under the control of a few dozen British
officials inspired the critically minded Chinese intellectuals to explore
the secrets of this successful formula.
Furthermore, being under British jurisdiction at the southern edge of
the Chinese Empire meant that Hong Kong was a particularly well-suited
staging ground for those Chinese dedicated to changing the status quo in
China. It provided a safe haven to those whose attempts at revolution or
major reform in China failed. By saving the life of many key revo-
lutionaries or reformers, its very existence as an emergency exit greatly
enhanced the morale of everyone who sought to change a regime known
for its merciless brutality against dissidents and rebels. This function as
a safe haven also benefited the people of China. It served as a safety
valve in the vicious power politics by providing a way out for those
Chinese leaders or senior officials who lost out in a contest for power.

Inspiration for Chinese Reformers

Although the Chinese Empire’s humiliating defeat in the First Anglo-
Chinese War was, in retrospect, a turning point in the history of China
as it exposed the gap that had developed between rapidly industrialising
Europe and pre-industrial China, it failed to force the Empire to recognise
this momentous change. The Chinese Empire had to wait for another
two decades, after it was engulfed in the upheavals of the Taiping and a
74 A MODERN HISTORY OF HONG KONG

few other major rebellions as well as suffering from the traumatic fall of
the imperial capital to the Anglo-French expeditionary force in the Second
Anglo-Chinese War, to accept the need for reform. 2 However, even then
the realisation of the changes that took place and the need to reform in
order to confront them was limited. Between 1861 and 1900, only 43
individuals commented on record on the significance of the changes
underway. 3 The refor ms introduced in China, as par t of the self-
strengthening movement, were therefore understandably limited both in
their conception and in their scope. The senior officials who supported
refor m, from Prince Kong to Li Hongzhang and other relatively
progressive-minded regional leaders, mainly came to accept the need for
reform after having to deal with the Westerners in their official duties.
They confined their efforts in the 1860s and 1870s to learning from the
most obvious strength of the West, such as modern weapons, steamships
and the management of trade, in order to counter this Western challenge. 4
Without firsthand experience of what a Western society was like or how
the Westerners ran a government their mental horizons were restricted.
This problem existed in addition to the basic attitude that guided most
Chinese reformers until at least the 1890s, which was to rely on Chinese
learning for substance and Western learning for applications.
By the time part of the Chinese elite began to realise that China should
look beyond acquiring Western technologies and armaments and raised
questions of what other important lessons they could learn from the
West, British Hong Kong had left behind the agonies of its own birth
pains. By the 1860s, Hong Kong was a stable and thriving community
and its economy was expanding fast. The colonial administration had
also started to tackle more effectively some of its earlier problems of
inefficiency and corruption. After the 1860s, Hong Kong increasingly
proved itself a positive example of what a reasonably well-administered
British territory, inhabited mainly by Chinese people was like to those
Chinese intellectuals who had the interest and the critical faculty to take
on board this contrast with the situation prevailing in China.
It is therefore not surprising that some of the most perceptive and
progressive-minded Chinese supporters for more far-reaching reforms
at the time of the self-strengthening movement had lived in Hong Kong.
Notable examples include Wang Tao, Cheng Guanying, Hu Liyuan, Ho
Kai and Sun Yat-sen.
Wang Tao was often seen as the father of Chinese journalism, as he
was the founder of the first independent Chinese-language newspaper,
the Xunhuan Ribao, published in Hong Kong. 5 He was among the first
Chinese intellectuals to observe as early as 1870 or so that the self-
strengthening movement did not go far enough. It amounted to, in his
words, ‘merely copying the superficialities of the Western methods, getting
only the name but very little substance’. 6 Wang thought ‘the urgent task
of our nation today lies primarily in the governance of the people’ and
that ‘superficial imitation in concrete things is not so good as arousing
intellectual curiosity’. 7
 AGENT FOR CHANGE I N CHINA 75

Cheng Guanying was a comprador who lived in Hong Kong and

become one of the more important Chinese advocates for reforms as he
also served as an adviser to Li Hongzhang. He was particularly known
for stressing the need for China to change in order to compete against
the West in commerce and wealth creation. 8
Hu Liyuan and Ho Kai were both partly educated in Hong Kong and
spent most of their careers there, where they gained real insight into the
strength of the West by being able to observe British ‘liberal political
philosophy in action’. 9 They used Hong Kong ‘to promote the Chinese
refor m movement’ by writing essays that ‘exposed the corruption,
inefficiency, and oppr ession of China’s g entr y-dominated r uling
bureaucracy’ and ‘advocated a thorough reorganisation of China’s
government, with a ministry of commerce taking the leading position’. 10
Sun Yat-sen was also educated partly in Hong Kong and was a pupil of
Ho Kai at the School of Medicine, predecessor of the Medical Faculty at
the University of Hong Kong. Despite his reputation as a revolutionary he
started his political life advocating wide-ranging reforms to Li Hongzhang,
and only turned to revolution after his approach to Li proved fruitless. 11
Although advocates for reform based in Hong Kong were essentially
outsiders whose impact on Chinese policies was peripheral, key leaders
of the 1898 reform movement such as Kang Youwei and Liang Qichao
were themselves also inspired by this British colony. An accomplished
classical scholar, Kang became deeply interested in Western learning after
‘visits to Hongkong and Shanghai impressed him with orderliness and
prosperity of Western civilisation’. 12 Liang, likewise, only realised that
Westerners should not be dismissed as barbarians in 1881 after he first
visited Hong Kong, where he admired the orderliness, cleanliness and
legal basis of British rule. 13
Kang and Liang went beyond the generation of leaders of the self-
strengthening movement and pushed for constitutional, educational and
other reforms that could have far-reaching implications if implemented. 14
As it turned out, their gallant attempt failed and they barely escaped after
the Empress Dowager Cixi staged a palace coup against Emperor
Guangxu, who supported them. Hong Kong not only inspired Kang, Liang
and some of their comrades to push the ill-fated reforms of 1898 but
also served as sanctuary for them when they had to flee for their lives.
Even in exile Kang, Liang and their followers continued to use Hong
Kong as one of their main bases to advocate a constitutional monarchy
for China in fierce competition with the revolutionaries headed by Sun
Yat-sen. Hong Kong and its Chinese-language newspapers provided a
convenient, safe and free venue for conducting the important debates on
the direction China should follow towards the end of the imperial era.
In Hong Kong, they were conducted between two local Chinese
newspapers, the Zhongguo Ribao of Sun’s revolutionaries and the Shang
Bao of Kang-Liang’s constitutional reformers. 15 What the two groups were
engaged in was not just about winning over the local Chinese community
in Hong Kong. The real issue was to win the hearts and minds of as
76 A MODERN HISTORY OF HONG KONG

many Chinese intellectuals as possible and material backing from the

overseas Chinese communities to support one or the other cause,
particularly after an attempted conciliation between Liang and Sun failed
in 1899. 16

Hong Kong’s Role in the Chinese Republican Revolution

Hong Kong was in an important sense the cradle of the republican
revolution in China. Even though the success of the revolutionary
uprising in 1911 was mainly a result of events in China, the idea for a
revolution was conceived in Hong Kong, where the original organisation
dedicated to revolution also put the idea into action for the first time.
This British colony nurtured and helped to shape the basic ideas of the
most important leader and ideologist for the revolution, Sun Yat-sen. As
he himself admitted, Sun started to think about reform and revolution
after he studied in Hong Kong and saw how well it was administered
compared with China. Although he attributed his ‘ideas for the revolution
as having come entirely from Hong Kong’ what in fact happened was
that he was inspired by his Hong Kong experiences to pursue reform
and then revolution in China. 17
The ideology for the republican movement, the ‘Three Principles of
the People’, was formulated and publicised after Sun embarked on his
revolutionary career. In the meantime he had already been banned from
Hong Kong for a decade, received wider exposure to various Western
ideas and got help from some of his much better educated comrades in
working out the framework and the details of this ideology. 18 Be that as
it may, without Hong Kong’s impact Sun might not have devoted himself
to the revolution or conceived the basic ideas for the Three Principles,
which came to be adopted as the official ideology of the revolution and
its product, the Republic of China.
Hong Kong also produced the first generation of revolutionists who
joined Sun in the first uprising of the revolution in 1895. Although the
original organisation to promote a revolution, the Xingzhonghui or Revive
China Society, was first founded by Sun and his friends in Hawaii a year
earlier, it did not really take off until Sun established a Hong Kong branch.
There it quickly merged with the Furen Wenshe (or the study society to
make sure the right thing is done) under Yang Quyun and started to work
for a revolution.
In its attempts to stage revolutionary uprisings, the Xingzhonghui was
very much a Hong Kong operation. Its most active leaders were mainly
young people from a similar background to Sun based in Hong Kong. As
for the first armed uprising, which took place in Canton in 1895, its funds
were raised, arms purchased, foot soldiers recruited, the plot hatched
and the attempt launched from Hong Kong. 19 The second uprising, which
was also staged by the Xingzhonghui, took place in Huizhou in
Guangdong province in 1900. It, too, was conducted with Hong Kong as
its principal support base, though Sun had also obtained backing from
various secret societies and the Japanese. 20 In the first five years of the
 AGENT FOR CHANGE I N CHINA 77

republican revolution, when the Xingzhonghui was the standard bearer

of the revolutionary cause, Hong Kong was its most important operating,
coordinating and support base.
In its contribution to the final success of the republican movement
that overthrew the imperial government in China in 1912, Hong Kong’s
contributions must, however, be set in a wider context. To begin with,
while a republic was created to take over from the imperial Manchu
monarchy, it is arguable whether the events that led to this result
constituted a revolution in the way that the American or French
Revolutions did. With few fundamental changes following the collapse
of the monarchy, Hong Kong could not claim much credit for making
republicanism work, even if it had played a pivotal role in bringing it
about in China. Furthermore, the success of the uprising in Wuchang in
central China in October 1911, which set off a chain of events leading
to the collapse of the Chinese Empire, was not expected by any of the
top leaders of the revolutionary movement. It was certainly not organised,
coordinated, provisioned or directed from Hong Kong.
The success of the revolutionaries in 1911–12 had much more to do
with the weakness of the Manchu government, the general disaffection
that was by then prevailing in the country and the successful recruitment
by the revolutionaries of members of the modern new army units to
support them than with the monarchy. Much of this recruitment of a
critical mass happened in Japan in the first decade of the twentieth
centur y. What really gave the revolutionaries the critical means to
challenge and bring down the Chinese imperial government was the
opportunity to infiltrate the new ar mies and the bureaucracy of the
Empire. In this regard it was Japan, not Hong Kong, that provided the
biggest scope for the revolutionaries to capture, outside of China proper,
the hearts and mind of the young Chinese students and military cadets
wh o p roved vital to the success of the revolution. Indeed, the
revolutionary movement was ‘more disorganised in 1911 than at any time’
and ‘the Manchu rulers themselves were to blame for the revolution’,
since they ‘gravely disappointed many reformers and generated widespread
opposition’ by ill-conceived policies over the course of the year. 21 The
role that Hong Kong actually played in bringing down the Chinese Empire
was therefore limited.
What Hong Kong did offer the revolutionary movement remained
important. In general terms it played four roles other than being the
cradle of the revolution.
To begin with, it served as the most important forward base for staging
uprisings. In spite of its pedigree and devotion, the Xingzhonghui was
increasingly eclipsed by other newer revolutionary groups that sprang up
after 1900. This happened because China started to send students to Japan
after it was defeated in the Sino-Japanese War in 1895. This process
accelerated quickly as the Boxer Rebellion of 1900 ‘placed the weakness
of the Qing dynasty on full view and energised the forces of both reform
and revolution’. 22 It resulted in new revolutionary organisations being
78 A MODERN HISTORY OF HONG KONG

formed by intellectuals in various provinces. The most important of these

were the Huaxinghui of Hunan and Hubei under Huang Xing and Song
Jiaoren, and the Guangfuhui of Zhejiang and Anhui under Zhang Binglin
and Tao Chengzhang. Together with the other groups, they formed a
revolutionary alliance for China, the Tongmenghui, in Japan in 1905. Sun
was elected its head, as he was the best-known revolutionary. A sensational
attempt by the Chinese Embassy in London to abduct him in 1896 had
failed spectacularly and tur ned his name into an inter na tionally
recognisable one. 23 With the largest concentration of Chinese students
and military cadets outside of China, Japan had by then emerged as the
largest base for the revolutionary movement. However, Japan was too far
from China to serve as a forward base, and Hong Kong continued to
play that role. It housed the most active branch of the Tongmenghui and
served as the key centre for coordinating revolutionary activities in four
southern Chinese provinces and for staging armed uprisings there. All
together, the revolutionaries launched from Hong Kong eight out of a
total of 32 uprisings between 1895 and 1911. 24
The last major uprising staged from Hong Kong was the much
celebrated one in Canton in April 1911, the last to fail before the
successful Wuchang Uprising of the following October. Publicity of its
failure and the subsequent execution of 86 revolutionaries, including many
returned students, became a legend that symbolised the dedication and
sacrifice of the revolutionaries. 25 They were known as the martyrs of
Huanghuagang where they were executed. The creation of this legend
gave the Tongmenghui and its successor, the Kuomintang, much value in
seizing the moral high ground for promoting the republican cause. 26
As a forward base, Hong Kong also functioned as a major recruiting
and training-ground for the revolutionaries. Until they could recruit from
new army units in any number, most of the armed uprisings had to be
carried out by paid soldiers or by secret society or triad members. Many
of the foot soldiers of the revolution for operations in south China were
recruited and given basic military training in Hong Kong. Some extremists
also trained themselves in terrorist tactics, particularly in assassination.
It was the second most important means used by the revolutionaries after
ar med uprising. Between 1895 and 1911, they made 11 attempts at
assassination, of which three were organised and staged from Hong
Kong. 27 The best known was the attempt by Wang Jingwei to assassinate
the Prince Regent in early 1910. 28
In its role as a propaganda centre for the revolution, Hong Kong was
the most important base until the publication in Tokyo in 1905 of the
Min Bao, which replaced the Zhong guo Ribao of Hong Kong as the flagship
of the revolutionary movement’s propaganda machine. 29 While the Min
Bao was the organ in which the most important ideas for the revolution
were set out, expounded and debated, the first major newspaper of the
revolutionaries, the Zhongguo Ribao, continued to play an important role
in promoting the cause. Although it was published in Hong Kong, the
Zhongguo Ribao targeted its readership in China and the overseas Chinese
 AGENT FOR CHANGE I N CHINA 79

communities. Among the many journals and newspapers published by

the revolutionaries, it was one of the most important, both through its
own circulation beyond Hong Kong and in providing support in setting
up other newspapers among various overseas Chinese communities. 30 In
addition to the Zhongguo Ribao, a number of other newspapers advocating
the revolutionary cause were also published in Hong Kong, though they
were less inf luential. Fur ther more, Hong Kong was used by the
Tongmenghui as the key centre to produce dramatic performances to
spread the revolutionary cause among the illiterate general public in
southern China. 31
The third major role Hong Kong played was to give financial support
to the revolutionary movement. Its Chinese community gave generously.
Some of the wealthy merchants also joined the revolution and provided
premises and safe houses for all kinds of overt activities and covert
operations. The exact amount of the financial contribution Hong Kong
or, for that matter, any overseas Chinese community provided cannot be
ascertained precisely as ‘available records are only partial and fragmentary’
given the clandestine nature of the revolution. 32 What is known is that
the early uprisings staged by the Xingzhonghui in south China as well as
the publication of the Zhongguo Ribao were largely financed by supporters
in Hong Kong. Among them the biggest contributor was probably Li
Jitang, who inherited a million dollars and used his wealth to support the
revolution. 33 In addition, Hong Kong’s international financial network
was used to allow it to function as the main centre for receiving funds
raised by Sun and other leaders from overseas Chinese communities all
over the world. It further managed the finances as well as organised the
pur chase of weap o n s, ammunition, and other essentials for the
revolution. 34 Immediately after the success of the Wuchang Uprising and
when the military government of Guangdong in the young republic was
seriously short of funds, Hong Kong contributed between two and three
million Hong Kong dollars in 1912 to sustain its pro-republic activities
in Canton. 35
Finally, Hong Kong served as a safe haven for the revolutionaries to
retreat after unsuccessful armed uprisings. Sun Yat-sen himself escaped to
Hong Kong after the first uprising of 1895 failed. Once they had crossed
the border into this British colony, the long arm of the Chinese security by
and large could not reach them. Even in the few cases where the Chinese
authorities did seek to retaliate against known leaders of failed uprisings,
of which the best-known case was the successful murder in Hong Kong
of Sun’s associate, Yang Quyun, after the Huizhou Uprising of 1900, they
backfired to serve the revolutionary cause. Yang’s murder provoked the
Hong Kong government to provide police protection and a revolver for
self-defence to another well-known revolutionary leader, Chen Shaobai,
when established British policy was not to give the revolutionaries any
help. 36 It also did not deter Yang’s comrades from planning another armed
uprising shortly afterwards. 37 On the whole, the availability of Hong Kong
as a safe haven helped the revolutionaries to conserve their precious human
80 A MODERN HISTORY OF HONG KONG

resources and maintain morale in an endeavour that did not look promising
until the Wuchang Uprising succeeded unexpectedly.
The real sentiments of the Chinese population of Hong Kong towards
the revolutionary movement were revealed after the revolutionaries seized
power in Wuchang in central China. It caught everyone by surprise. The
revolutionaries based in Hong Kong and Guangdong were so unprepared
for this that they were unable to seize the opportunity and take any
meaningful action to support their comrades in Wuchang for two weeks. 38
However, the Chinese people in Hong Kong had already demonstrated
their true feelings in the annual celebration of Confucius’ birthday a week
after the Wuchang Uprising by the deliberate non-display of the Chinese
imperial flag and by a mass attack on the premises of the royalists to
remove the imperial flags displayed by them. 39 Some also jeered at the
newly appointed Manchu Tartar-General of Canton, Feng Shan, when
he passed through Hong Kong to take office. He was assassinated within
hours of his arrival in Canton by a team from Hong Kong. 40 When the
news, which turned out to be false, that Beijing had fallen to the
revolutionaries and the Manchus had fled was reported in Hong Kong
on 6 November, jubilation reigned among the local Chinese. Governor
Sir Frederick Lugard captured their mood: ‘The entire Chinese populace
appeared to become temporarily demented with joy. The din of crackers…
was deafening and accompanied by perpetual cheering and flag-waving –
a method of madness most unusual to the Chinese.’ 41
Once the unravelling of the Manchu Dynasty had started, Canton
became an important prize for the revolutionaries, as the support of
Guangdong province was at stake. The province was at that time under
the control of the royalist Viceroy, Zhang Mingqi. He recognised that
the central authority of the Empire was faltering but preferred to see the
province develop autonomy within a federal arrangement than to support
the revolution. 42 Zhang had to flee Canton in the early hours of 9
November when it became clear to him that the revolutionaries had finally
got their acts together and the loyalty of his sizeable garrison could no
longer be guaranteed. Hong Kong helped to create this condition in
Guangdong over a period of 16 years. More immediately, it was the base
from which the revolutionary leader Hu Hanmin went on to take over
the military governorship in Canton, and the safe haven where Viceroy
Zhang sought protection, rather than test the loyalty of his garrison and
try to suppress the revolutionaries.

A Safe Haven for Dissidents and Political Refugees

By serving as a safe haven for dissidents, political refugees and officials
who had lost power, Hong Kong contributed to political stability and
change in China and so acted as a safety valve in the turbulent politics of
twentieth century China. The Hong Kong government had a clear policy,
which was summarised by an official in the Colonial Office in the
following terms:
 AGENT FOR CHANGE I N CHINA 81

Hong Kong’s policy towards China is one of strict impartiality and

non-intervention in Chinese internal affairs. The Colony is concerned
to maintain friendly relations with the Chinese government… But
the desire to maintain friendly relations with neighbouring Chinese
authorities does not, of course, mean that Hong Kong takes side with
them in any internal Chinese disputes. 43

The implication of this policy was that Chinese dissidents and others
were permitted to live and get on with their legitimate affairs in Hong
Kong, provided no local laws were broken and their presence was not
injurious to British interests. The availability of Hong Kong for those
who failed in power struggles of one kind or another in China was valuable
in reducing political instability in China, since the losers, be they
reformers, revolutionaries, royalists, warlords, Kuomintang or Communist
leaders, could leave the political arena without having to lose everything
and thus be tempted to fight to the bitter end.
Although the basic thinking behind this policy was in place as soon
as the issue arose in the 1890s, its implementation was haphazard and
not always consistent. Much depended on the judgement of the senior
officials in charge. They were influenced by their assessment of what
constituted British interests, the state of relations with China at the
time and their personal bias.
The issue came up after the first revolutionary uprising of 1895. Sun
Yat-sen was banished from Hong Kong for five years, officially on the
grounds that his presence would be ‘dangerous to the peace and good
order of the Colony’. 44 More specifically, it was because Governor Sir
William Robinson had ‘no intention of allowing… Hong Kong to be used
as an Asylum for persons engaged in plots and dangerous conspiracies
against a friendly neighbouring Empire’. 45 If the government had been
consistent it would also have expelled Sun’s comrades, who were also not
British subjects, and suppressed the Xingzhonghui, neither of which it
did. The decision to banish Sun was in fact made not because of a request
from the Chinese government but because the Hong Kong government
believed the Chinese government would be pleased with it. 46 This was an
arbitrary action calculated to curry favour with the Chinese authorities.
W hen the Colonial Office r evie wed the matter as a result of a
parliamentar y question being tabled, it admitted in private that the
ordinance ‘under which this man was banished is of a most arbitrary
character, which might rouse much criticism, if its contents were known’. 47
The banishment of Sun should be contrasted with the helpful manner
in which the colonial government dealt with constitutional reformer Kang
Youwei when his 1898 attempt failed. With Governor Robinson gone,
the Officer Administering the Government, Major General Wilsone Black,
promptly offered Kang ‘accommodation in the Police barracks until
suitable arrangements could be made in a Chinese friend’s house to receive
him’ in order to give him a protective welcome. 48 Black did so because he
considered some of Kang’s reforms ‘wise and reasonable’. 49 Black’s
82 A MODERN HISTORY OF HONG KONG

sympathy for the reformers ensured a different implementation of the

s a m e p o l i c y of n o n - i nvo l ve m e n t i n C h i n e s e p o l i t i c s a n d g o o d
neighbourliness. Hong Kong’s welcome to Kang did not last, however.
Once Kang’s presence was deemed to work against British interests several
years later, a different Officer Administering the Government, Francis
May, banished him. Although not allowing the colony to be used as a
base against the Chinese government was again mentioned, the critical
factor that worked against Kang was that he and his supporters were
arousing ‘strong anti-foreign’ sentiments in their propaganda against the
Chinese government. 50 The British patience for Chinese reformers or
revolutionaries ran out quickly if they came to be seen as harmful to
British interests. 51
The willingness of the British not to allow the colony to be used as a
base for subverting the government of China was always limited in the
first half of the twentieth centur y. First and foremost, the colonial
government reigned over rather than ruled its Chinese population. It did
not try – and in any event did not have enough resources – to monitor
the activities of the Chinese revolutionaries or reformers. It meant they
had tremendous scope for their activities as long as they were not seen
to have broken any Hong Kong law. Second, the British were much more
concerned with maintaining law and order in the colony than with
appeasing the Chinese authorities. As the murders of Yang Quyun and
several others indicated, it was not beyond the Chinese authorities to
take matters into their own hands in striking against revolutionary leaders
based in Hong Kong. Political murder involved the commission of a
serious crime, and the colonial government generally reacted firmly. Its
basic attitude was that while it would:
perform its duty in preventing the Colony from being made the base
of operations against Canton, the result of which would be injurious
to our trade which must suffer from any serious disturbance, the
assassination of persons in Hong Kong who may be obnoxious to
the Chinese government is intolerable. 52

After all, the might of the British Empire in the late nineteenth and early
twentieth centuries was such that it did not need to concede much to the
Chinese g over nment, but for the Hong Kong g over nment it was
advantageous and sensible to keep on good terms with the neighbouring
Guangdong authorities. This provides the context within which
succeeding governors judged the best way to implement the policy of
non-intervention in domestic Chinese affairs.
All in all, even though this policy of neutrality was only haphazardly
and inconsistently implemented, as a general policy it was followed by
the Hong Kong government. It certainly worked to the benefit of the
Chinese people as it provided a safe exit and easy option out for those
Chinese officials and leaders who lost out in very intense and vicious
power struggles, a function that came to be much more valuable in the
 AGENT FOR CHANGE I N CHINA 83

republican than in the late imperial period. The first real tangible benefit
of this policy was enjoyed when the machination of Guangdong politics
revealed the precarious position of Viceroy Zhang Mingqi in 1911. The
established record of Hong Kong as a sanctuary no doubt helped to
persuade Zhang to abandon any idea of using force against the
revolutionaries and thus avoided bloodshed and disorder in Canton and
possibly much of the rest of the province.
This highly valuable function of Hong Kong for China did not come
about because the British had the welfare of the Chinese people in mind.
Similar to many other benefits modern Hong Kong brought to the Chinese
people, this policy was devised with British, not Chinese, interests in
mind. Located at the edge of China, with promoting trade and economic
exchanges with China as its raison d’être, the interests of the British, which
were overwhelmingly economic, could not be advanced by Hong Kong
being embroiled in Chinese politics.
 Chapter 7
The Great War and
Chinese Nationalism

Even though its fortune was much more closely tied to events in East Asia,
as part of the British Empire Hong Kong found itself at war with Germany
when the assassination by a Serb of the heir apparent of the Austro-
Hungarian Empire in the Bosnian city of Sarajevo in June 1914 provoked
a general war in Europe. While Hong Kong did play its part in supporting
the British war efforts, the Great War was largely a European affair with
only limited impact on life in this East Asian imperial outpost. Geography,
as well as strong economic, social and other ties with China, meant even in
the course of the war, Hong Kong was more immediately affected by
developments in China than by the fortune of the Allied Powers.
The Great War coincided with a period of important changes in China,
where the stability and cohesion of the young republic reached breaking
point despite the steady rise of Chinese nationalism. The initial unity
that followed the end of the Manchu Dynasty was achieved at the cost
of a deal between leaders of the revolutionary movement and Yuan Shikai,
the most powerful figure in the service of the last Emperor. Indeed,
Provisional President Sun Yat-sen of the Republic of China handed over
this supreme office to Yuan as a price for securing the latter’s allegiance
and ensuring the abdication of the Emperor. The republican experiment
was derailed a year later when Yuan attempted to build a dictatorship by
assassinating the leading advocate for parliamentary politics, Song
Jiaoren. 1 Song was the parliamentary leader of the Kuomintang, which
was formed by veterans of the Tongmenghui and had just won a landslide
in the first parliamentary elections. 2 His murder provoked Sun to organise
the so-called ‘Second Revolution’, which was quickly suppressed by Yuan.
Whatever his personal intentions, Yuan made an attempt to restore a
monarchy with himself as Emperor in 1915. Seizing the opportunity of
the Western powers’ preoccupation with the War, Japan tried to impose
upon China the infamous ‘Twenty-one Demands’ that would have reduced
China to a protectorate of Japan. 3 Although Yuan managed to resist the
most damaging of the Japanese demands, his monarchical attempt
discredited him. 4 The collapse of his monarchy in 1916 destroyed the
authority of the central government and allowed regional military leaders
 THE GREAT WAR AND CHINESE NATIONALISM 85

to seize control of their own domains. 5 This marked the beginning of

the warlord era, a state of affairs that was not nominally brought to a
close until 1928, when the successful Northern Expedition from Canton
led by General Chiang Kai-shek, a follower of Sun, re-established a
credible national government.
The failure of the republican experiment, the imperialist ambitions of
the Japanese and the sense of helplessness and anger among the
intellectuals, students and labour activists converged to produce a
powerful outburst of nationalism in China. This exploded spectacularly
in the form of the May Fourth Movement, which was a response to what
Chinese intellectuals and students saw as the unfair treatment of China
at the Versailles Peace Conference and the incompetence of the Chinese
government in negotiating the peace treaty in 1919. 6 China had joined
the Great War on the side of the Allied Powers in 1917 and contributed
nearly 200,000 labourers to ser ve as non-combat auxiliaries in the
battlefields of Europe, suffering no less than 2,000 fatal casualties. 7 This
notwithstanding, at Versailles China was treated not as a fellow victor
and ally but an inferior country. Its legitimate claim to restore its sovereign
rights over the former German Concession and naval base at Jiaozhou in
Shandong province was ignored. Instead, the Allied Powers gave the old
German privileges in Jiaozhou to the Japanese as spoils of war, in line
with secret agreements they had reached with Japan during the war. The
public display of indignation and protest among the urban elite of China
that followed dramatically accelerated the rise of nationalism in the
country, and led to a few major incidents in the 1920s with significant
implications for Hong Kong.
The behaviour of the Allied Powers also compared badly with the
apparent generosity of the Communist regime that seized control of
Russia towards the end of the Great War. In July 1919, the Soviet
government announced that it unilaterally gave up the privileges in China
inherited from the old Tsarist regime, though this news did not reach
China until the following March. 8 This grand gesture ‘invoked immediate
enthusiasm in China and provoked a dramatic interest’ in the Communist
ideology. 9 It also encouraged some political leaders, particularly Sun Yat-
sen – whose attempts to secure support from the Western countries had
repeatedly met with rebuff – to explore seriously the prospect of help
from the Soviet Union. 10
The province of Guangdong was caught up in much of the main drama
that unfolded in China. It was one of the most important territorial bases
that the Kuomintang had. A Cantonese himself, Sun relied heavily on
the province to continue his struggle to entrench republicanism in China.
The control of Canton, the provincial capital, changed hands several times
in the 1910s and 1920s. It reflected the rise and fall of various warlords
and Sun, who sometimes cooperated with and sometimes intrigued against
each other. In the middle of the 1920s it also became a major centre for
the Chinese Communist Par ty or CCP (w hich had joined Sun’s
Kuomintang in a united front) to recr uit, train and organise their
86 A MODERN HISTORY OF HONG KONG

supporters. 11 Canton was therefore a hotbed for activists of all kinds.

Whatever their individual political persuasion, most of them were also
deeply nationalistic, which made them not particularly well disposed to
the British colonial regime south of the border.
Hong Kong found itself sucked into the whirlpool of politics in China,
and Guangdong in particular, in this period. Sometimes this was the result
of involvement in Guangdong affairs by certain sectors of Hong Kong’s
Chinese community. More often it was caught up in the rapid rise and
spread of Chinese nationalism that swept across China but did not stop
at the Sino-British border. This was partly because the border was a porous
one and the Chinese population of Hong Kong identified themselves
and their future more with China than with the British colony. It was
also partly because Hong Kong was one of China’s main gateways to the
West, the port through which numerous Chinese sailed to the West. Those
who acquired Western ideas about the rights of individuals, labour unions
and other modern concepts did not merely bring them to China but to
the working people of Hong Kong too.

The Impact of the Great War

When the Great War started, the British community in Hong Kong greeted
it with the same patriotic fervour that prevailed across the British Empire.
Few expected the long drawn out, painful, horrific and unprecedented
scale of slaughter that the War turned out to entail. Hong Kong called
up the locally raised Hong Kong Volunteer Corps to take over most of
the garrison duties so that the regular forces could be freed for service
in Europe. 12
With Germany now the enemy, the colonial government needed to
deal with the existence of the sizeable German community. It numbered
342 out of the Western civilian population of 5,248 by the 1911 census,
and was the second-largest Wester n community after the British
themselves. On the outbreak of war, women and children of German
nationality were made to leave while men of military age were interned.
They were joined by other German nationals sent from Jiaozhou after it
fell into Allied hands. The internment camp was guarded in such a relaxed
manner that internees were given tools to build an earthen stage for a
theatre hut, but they promptly dug a 180 feet tunnel for a mass escape. 13
The attempt failed, and the three men who got away were arrested before
they could cross into China.
Any concern of a German attack disappeared once the China squadron
of the German Navy left its base in Jiaozhou to rejoin the main fleet and
was subsequently destroyed in the First Battle of the Falklands. By
November 1914, what remained of German military power in China was
eliminated when an Anglo-Japanese force, including HMS Triumph which
sailed from Hong Kong, captured Jiaozhou. 14 The security of Hong Kong
never came under any threat in the course of the War.
Hong Kong’s main contributions to the war efforts lay in the support
it gave to Britain. Patriotism among the expatriate British population led
 THE GREAT WAR AND CHINESE NATIONALISM 87

to 579 out of a total of 2,157 men volunteering for military service outside
the colony. 15 In addition, Hong Kong not only paid the normal military
contribution but also made a further financial contribution of $HK10
million, roughly equivalent to the total government revenue for the year
1914. 16 Included in this contribution was $2 million raised from a seven
per cent special charge on rates paid by property owners, most of whom
were Chinese. Individual Chinese also made donations, of which the best
known was Robert Hotung’s gift of two Vickers fighter aircraft. 1 7
Although the Chinese community’s support of the war effort should not
be confused with the patriotic response of the expatriate Britons, it was
nevertheless a reflection of the appreciation the better-off Chinese had
for the British administration.
The economy of Hong Kong did not suffer directly from the war.
Even though its non-Chinese population fell from 20,710 to 13,600, its
population as a whole increased steadily and rapidly, rising from 501,304
in 1914 to 598,100 in 1919. 18 In terms of economic growth, Hong Kong
benefited rather than suffered, not least because of expansion in business
and other economic activities among the local Chinese. The redirection
of British shipping from Hong Kong and China to support the war gave
the local Chinese g reater scope to expand into modern shipping,
particularly in light of the growth of traffic between Hong Kong and
Canton. 19 The rapid development of a modern Chinese banking sector
also roughly coincided with the war. Although the first modern Chinese
bank, the Bank of Canton, was founded in 1912, three others came into
existence between 1914 and 1919, including the largest of them all, the
Bank of East Asia. 20
The continued expansion of the economy did not mean Hong Kong
was insulated from some of the economic disruptions that came to a
head when war finally ended. Severe inflation had occurred as a result of
the shortages caused by wartime disruptions and the rapid increase in
population, which pushed up rent and the price of various commodities
while wages remained static. 21 This rise in the cost of living without a
compensatory increase in wages put a serious strain on the working
people, with the low-paid labourers being hit the hardest. A manifestation
of this problem was the rice riots of 1919. They broke out as prices shot
up following the failure of the rice crop in Thailand, restriction of exports
in Indo-China and India, as well as an unexpected upsurge in demand in
Japan. 22 The fall in living standards among the Chinese working class
created serious social tension and laid the ground for a period of labour
unrest and social changes after the end of the Great War.

Labour Unrest
The first wave of labour unrest was a 19-day strike organised by the Hong
Kong Chinese Engineers’ Institute in March 1920, which had been
established only six months earlier. Since members of this union were in
fact skilled workers who worked mainly as mechanics in dockyards, public
utilities and manufacturing industries, they could not easily be replaced.
88 A MODERN HISTORY OF HONG KONG

They were among the best paid of Chinese workers and occupied a
relatively strong bargaining position in demanding a pay rise to offset
the effect of inflation. 23 After their repeated requests for a 40 per cent
wage increase were rejected, they staged a strike and 9,000 left Hong
Kong for Canton, where the cost of living was lower and the government
under Sun Yat-sen helped them by providing lodging and food for the
duration of the strike. 24 Within three weeks their employers, mostly
expatriate-owned enterprises and the colonial government itself, agreed
to meet most of their demands. It meant a pay rise of 32.5 per cent for
those who earned less than $HK100 per month and a 20 per cent rise for
those earning more, and the strike ended. 25
It was the first large-scale strike organised by a modern labour union
in Hong Ko n g. It had the ef fect of inspiring other s to f ollow.
Consequently, carpenters, bricklayers, cabinet-makers, and other skilled
workers organised strikes the following year. 26 According to one account,
between 1920 and 1922 a total of 42 strikes for better wages occurred. 27
This wave of labour unrest reached a high point with the seamen’s
strike of 1922, which has been described as ‘the most successful labor
movement ever organized by Chinese workers against unfairness and
exploitation’. 28 Despite the implied political overtone of this assessment,
like most of the strikes of this period, it was driven primarily by economic
motives. Organised by the General Union of Chinese Seamen, it was
launched to demand wage increases of between 10 and 40 per cent and
to reform the system for recruiting seamen. The seamen felt justified in
the first demand because their wages had remained static while the cost
of living had gone up significantly. In 1922, a Chinese seaman on average
wage was paid a monthly income lower than the basic expenditures
required to support himself and his family while his Caucasian colleagues
were paid several times more and were given a wage increase of 15 per
cent. 29 Their second demand was essentially to seek redress for a system
of recruitment that allowed the middlemen, the recruiting agencies, to
charge exorbitant fees for arranging for them to work on ships. 30
The strike started with 1,500 seamen on 13 January 1922 after the
Union’s requests for pay rises were rebuffed for a third time. It escalated
as mediation efforts by the government failed. By the end of the month
over 10,000 seamen had left Hong Kong for Canton where they received
a sympathetic reception. The situation got more serious as sympathy
strikes by transpor t workers also star ted, and striking seamen in
Guangdong were sent by their union to stop fresh food from being
shipped to Hong Kong. Further attempts at mediation by the established
leaders of the Chinese community, like the Board of Directors of the
Tung Wah Hospital, failed. 31
The government, under Sir Reginald Stubbs (Governor, 1919–25),
reacted in a heavy-handed manner. Stubbs completely misread the
situation and misunderstood the nature of the strike. Even after it ended,
he continued to think it was politically inspired and ‘organised from
Canton with the sympathy of Sun’. 32 He proscribed the Seamen’s Union.
 THE GREAT WAR AND CHINESE NATIONALISM 89

This provoked the union to call for a general strike in Hong Kong, backing
it up with intimidation. 33 As a result, before February ended a total of
120,000 workers, more than one-fifth of the total population, had joined
the strike and turned the usually bustling and noisy harbour into a
remarkably quiet port full of stranded ships. 34 In order to pre-empt an
exodus to Canton, whose support enabled the strikers to continue their
struggle, the colonial government suspended train services to Canton.
This backfired. Striking workers left on foot, leading to a dramatic
escalation. The police opened fire and killed five strikers in the town of
Shatin on 3 March when they tried to stop the exodus. Outraged by the
perceived brutality of the police, sympathy strikes spread very quickly
and practically paralysed Hong Kong. This left the government and the
shipping companies with little choice but to back down. 35 A compromise
was reached two days later and the seamen returned to work on 6 March,
ending eight weeks of strike.
The seamen secured pay rises of between 15 and 30 per cent, in contrast
to their original demands for 17 to 35 per cent, and a lift of the ban on
the Seamen’s Union, though the recruitment system was not changed.
Although strikes by other unions continued for a short time, they generally
ended with a round of wage increases averaging about 30 per cent. 36 By
any standard, this was a major achievement, both for the union and for
organised labour in Hong Kong. Indeed, it taught the local working men
that ‘unity among themselves was the most powerful bulwark for the
protection of their interests’. 3 7 This lesson proved to be of g reat
significance three years later when organised labour confronted the
colonial authority head on for the first time and as part of a general
political and nationalist movement in Guangdong.
The failure of the Chinese elite, drawn mainly from the merchants, to
mediate also revealed the gulf between them and the workers. This
incident showed that the government’s nineteenth-century practice of
leaving the local Chinese elite to keep stability and order within the
Chinese community had failed. Hong Kong society had changed so much
that the government had to deal directly with its working-class Chinese
population. It sought to prepare for such disruption of social order and
prosperity by increasing the size of the garrison and compiling a register
of expatriate citizens who could be called up to perform essential services
if required. It also kept the Emergency Regulations Ordinance (1922),
which was rushed through the Legislative Council in one day, when the
strike was deteriorating fast in February, to arm the Governor in Council
with sweeping powers to ‘make any regulations whatsoever which he may
consider desirable in the public interest’. 38 The strike prompted the colo-
nial government to keep a more watchful eye over its Chinese population.
The strike ‘was essentially an economic struggle for better wages’,
though Chinese Communist writers claim it carried ‘political meaning in
struggling against imperialism’. 39 The reality that the strike was about
improving wages was reflected in the settlement. Governor Stubbs was
wrong to consider it politically motivated and led by the Communists. 40
90 A MODERN HISTORY OF HONG KONG

The actual role played by the CCP was a negligible one. Although a couple
of key leaders of the strike, notably Su Zhaozheng and Lin Weimin, were
more hardline than were the leaders of the earlier mechanics’ strike and
would join the CCP later, they did not have close contact with it in 1922.
In any event, the CCP was only formed in Shanghai in 1921 and the
‘Communist movement in Guangdong was still in its infancy and had
certainly not yet extended to Hong Kong’. 41
In comparison, the Kuomintang authorities in Canton under Sun played
a more active role. They provided as much as $100,000 to support the
strikers, and made available temples and other public buildings to house
them. 42 Vital as these were in enabling the striking workers to sustain their
struggle, neither the Kuomintang nor the government in Canton was
involved in directing the strike. It was not linked to the rise of nationalism
in urban China that followed the May Fourth Movement of 1919. With
this strike being the largest and most successful one organised by a modern
Chinese labour union, it is more accurate to say the seamen’s strike inspired
both the Kuomintang and the CCP than the other way round.

The Rise of Chinese Nationalism

In China, modern nationalism emerged forcefully in the latter half of
the 1890s after the first Sino-Japanese War (1894–5). The shock of China’s
defeat by what it had hitherto regarded as an inferior, and the scramble
for concessions that followed, had an impact on Chinese intellectuals
and the politically aware residents of coastal regions that surpassed any
humiliation China had suffered from previous Western imperialist
encroachments. This defined the context in which Western-educated
individuals like Sun Yat-sen started the revolutionary movement. Its real
appeal up to 1911 was based on nationalism, though democracy and
advancing people’s livelihood were formally the other two main compo-
nents of the revolution’s ideology. 43 At the popular level, the xenophobic
Boxer Rebellion of 1900 also showed ‘unmistakable signs of an emerging
Chinese nationalism’. 44 However, the place where a kind of proto-
nationalism of the Chinese people first found expression was Hong Kong,
where the Chinese had earlier and greater exposure to Western ideas. 45
The Chinese working men of Hong Kong appeared to show what
Governor Sir George Bowen described as ‘popular nationalism’ in a strike
against working on visiting French warships that culminated in three days
of riots in the course of the Sino-French War (1884–5). This war was
fought as the Chinese Empire attempted to defend its suzerainty over
Indo-China, which was being colonised by the French. What led Bowen
to make his assessment was the perceived contrast in the reaction of the
local Chinese population compared with that during the Second Anglo-
Chinese War (1856–60), when the British and the French apparently had
no difficulty recruiting porters and collaborators in Hong Kong. 46 In 1884,
according to Bowen, as news of the Sino-French conflict spread, ‘Chinese
artisans, coolies, and boatmen refused all offers of pay to do any work
whatsoever for the French ships’. 47 Be that as it may, it is too simplistic
 THE GREAT WAR AND CHINESE NATIONALISM 91

to portray this incident as a straightforward outburst of nationalism

among the Chinese working people of Hong Kong.
The anti-French riots that broke out in October 1884 at the end of a
month-long boycott were the result of several factors working together.
To begin with, the Chinese community in Hong Kong had become much
better informed thanks to the introduction of a Chinese-language press.
As the press reported news of the Sino-French war, it ‘helped to rouse
national awareness among the populace’. 48 The Chinese authorities in
Canton also promised awards to those who sabotaged the French war
efforts and enlisted members of the secret societies or the Triads to help
organise this campaign and intimidate the non-strikers. Consequently, a
significant number of workers refused to work on the French naval ships
that came to Hong Kong for repair. Riots broke out, because the colonial
government was heavyhanded in dealing with the strikers. It imposed a
fine of five dollars, about a month’s income for the average labourer, on
the first ten boatmen who refused to work for the French, and thus raised
the fear among others that their livelihood might be harmed in the same
way too. 49 What finally provoked the riots was that the police fired on
striking workers when the latter threw stones at them. 50 Although the
riots were not simply an expression of nationalism, there were sufficient
nationalistic elements to suggest that an incipient Chinese nationalism
of some kind was beginning to come into existence.
At the turn of the century, the Chinese in Hong Kong had genuinely
subscribed to the nascent Chinese nationalism. When various groups in
Guangdong organised boycotts against the Americans (1905–6) and then
the Japanese (1908), they by and large responded to the appeal of their
compatriots and took sympathetic and supportive action. 51 In the case of
the anti-American boycott, it was over US discrimination against Chinese
immigrants, manifested in periodic acts to exclude Chinese immigration
and the abuse of Chinese immigrants by American officials. The anti-
Japanese boycott arose as the Chinese authorities, which intercepted a
Japanese freighter, Tatsu Maru II, for smuggling contraband arms and
munitions into Guangdong, capitulated to unreasonable Japanese demands
to apologise and to compensate for the costs of the cargo intercepted. 52
The support that various sectors of the Chinese community of Hong Kong
gave to their Chinese compatriots demonstrated that they too shared the
sense of nationalism, which was rising rapidly as a key political force in
China. This was spectacularly demonstrated and reaffirmed by the jubilation
with which the Chinese community of Hong Kong greeted the collapse of
Manchu power and the rise of the Chinese Republic.
Hong Kong’s Chinese community generally responded in a similar way
when external events again provoked major outbursts of nationalism in
China, as it did on the occasion of Japan’s imposition of the Twenty-One
Demands in 1915 and the Versailles Peace Conference in 1919. In 1915,
after the severity of the Japanese demands was leaked by President Yuan
Shihkai’s government, Chinese students and dockworkers in Hong Kong
responded to a campaign to boycott Japanese goods in coastal Chinese
92 A MODERN HISTORY OF HONG KONG

cities. They staged sympathetic protests and some even threw stones at
Japanese shops. 53 In 1919, Chinese merchants in Hong Kong led a boycott
of Japanese goods and a promotion of Chinese products. Chinese-language
schools also helped to spread the message by using the boycott as an essay
topic for students. 54 On the whole, Hong Kong followed Canton in
supporting the anti-Japanese movement, though the intensity of feeling
and actions taken were weaker. While Chinese merchants, particularly those
involved in the modern retail sector, seized the moment to combine
patriotism and their business interests, the more established leaders of the
local Chinese community were less actively involved. Those at the top, like
the two Chinese unofficial members of the Legislative Council, were closely
associated with the colonial regime and had vested interests in maintaining
the stability and order of the colony. The entrenchment of Chinese
nationalism among the local Chinese would prove to be a major force that
the colonial government had to face when another incident in China
provoked another massive outburst.

The Canton-Hong Kong Strike and Boycott

In 1925, Hong Kong was caught up in the first major confrontation
between Chinese nationalism and British imperialism, and found itself
engulfed in a general strike followed by a boycott of 16 months, organised
and supported by the Kuomintang-dominated government in Canton,
which had admitted into its ranks members of the CCP in a united front
the previous year. Although leaders of the seamen’s strike like Su
Zhaozheng and Li Weimin again played an active role in starting this new
general strike, its nature was fundamentally different from the previous
strikes. In 1925, Su and Li acted more as members of the CCP, which
they had joined after the seamen’s strike, than as union leaders. 55 The
new general strike was driven not by economic but by political forces.
The origin of the strike-cum-boycott was labour unrest at a Japanese-
owned cotton mill in Shanghai, where a violent confrontation between
labour and management led to the death of a Chinese worker, Gu
Zhenghong. 56 On the day of the memorial service for Gu, 30 May, his
colleagues were joined by other protestors, including a large number of
students. They marched inside the International Settlement, which was
under the jurisdiction not of the Chinese authorities but of the British-
dominated Municipal Council in Shanghai. Political demonstrations were
illegal there. After some serious confrontation between the police and
the demonstrators outside the Louza police station, a small detachment
of policemen under the command of a British Inspector fired on the
demonstrators when it appeared that the crowd would storm the station. 57
The shootings not only killed nine and injured dozens more, but also
provoked the greatest outburst of Chinese nationalism directed against
the British. The Japanese were spared partly because many of the leading
Chinese felt their country could not take on more than one imperial power
at a time, and partly because the labour unrest that led to Gu’s death had
also resulted earlier in the death of a Japanese. 58
 THE GREAT WAR AND CHINESE NATIONALISM 93

On the day after the shootings, strong reactions among the unionists,
students and the general public in Shanghai were adroitly steered by Li
Lisan and his comrades in the CCP into forming a General Trade Union
to lead a general strike. 59 When the strike started the following day, there
was further bloodshed, as individual or small groups of police officers
found themselves in situations where they felt justified to open fire for
their personal safety, causing more fatalities. A crisis quickly developed:
74,000 industrial workers in the International Settlement had gone on
strike by 4 June, and naval personnel from 22 foreign warships had to be
deployed for security duties two days later. 60 The number of strikers rose
to between 100,000 and 150,000 later in the month. 61
Indignation over the shootings reverberated in other major Chinese
cities. Massive demonstrations against imperialism, focusing on the
British, were organised elsewhere. Before the end of the month, one of
these demonstrations turned into another major shooting incident in
Canton and took the protest movement to a new level with direct
consequences for Hong Kong.
In Shanghai itself, where the Chinese part of the city was under the
control of warlord Zhang Zuolin, who was keen to end the confrontation
with Britain and the foreign powers, tension was slowly eased and
compromises eventually reached among various involved parties. The
general strike ended in Shanghai in late September after the General Trade
Union was disbanded, and most strikes were called off, except by seamen
involved in supporting a parallel boycott against Hong Kong. 62
What happened in Shanghai turned out to be merely the prelude to a
long-drawn and bigger movement. This was the transformation of an
outpouring of Chinese nationalism into a general strike in Hong Kong
and a boycott against this British colony imposed by and directed from
Canton. The Kuomintang authorities in Canton officially sponsored this
combined operation, while its Communist partner actively orchestrated
and directed it. In an important sense, the Communists worked as the
hand inside the glove of the left wing of the Kuomintang, headed by
Liao Zhongkai. Liao was the key architect of the united front, director
of the Kuomintang’s wo rkers ’ de par tment, head of the finance
department of the government in Canton and, until his assassination that
August, the most important patron of the Communists within the
Kuomintang. 63 Whatever successes the Communists achieved in the 16
months of strike and boycott against Hong Kong, as one of the Commu-
nist leaders of the event, Deng Zhongxia, rightly admitted, ‘without the
financial support of the Kuomintang the strike would have collapsed
within a week’. 64 In the first full year of the strike and boycott, the total
fund administered by the Strike Committee was about five million Chinese
silver dollars, of which 2.8 million came directly from the Kuomintang
government in Canton, which also provided further support by putting
many properties at the disposal of the committee and the strikers. 65
Although it had fewer than ten party members and only thirty Youth
League members in Hong Kong in May 1925, the CCP was highly
94 A MODERN HISTORY OF HONG KONG

successful in exploiting the strong anti-imperialist nationalism that

Chinese workers in Hong Kong shared with their colleagues in major
Chinese cities. 66 This was partly because in this period Britain ‘stood as
the chief representative of the Treaty Powers’, which made it ‘inevitably
the main object of attack’. 67 Hong Kong was targeted because it was the
ultimate symbol of British imperialism in China. The CCP did not at
first realise the intensity of the public reaction and only called for a one-
day strike in Guangdong and Hong Kong. 68 However, it adroitly moved
to make the most of the strong anti-imperialist and nationalist sentiments
of the Chinese working men in Hong Kong after the scale of public
support became known. It was only after the party’s original modest goal
was surpassed by the outbreak of a massive strike that it saw ‘a golden
opportunity to expand their following’ and turned to ‘strikers from Hong
Kong as the greatest potential source of new members’. 69
On 19 June, under the influence of the Communists, seamen, tramway
workers and printers started what quickly became a general strike in
Hong Kong. Over the following three weeks, the strike spread to its
height and involved some 250,000 workers, out of a total population
of 725,000. 70 Although most chose to strike, some were intimidated
into doing so, and most strikers left Hong Kong for Canton where they
received an enthusiastic reception. 71 The seven demands which the
strikers made were: support for the 17 demands made by the strikers in
Shanghai; political freedom; equality before the law; introduction of
popular elections; enactment of labour legislation; reduction of rent;
and freedom of residence. 72 Except for the reduction of rent, which
was arguably an economically motivated demand, the rest were all
politically driven. The time lag in Hong Kong’s reaction to the original
incident in Shanghai was due to the existence of a war between the
Kuomintang authorities and two local warlords, which prevented both
the left wing of the Kuomintang and the Communists from taking
effective action to instigate the general strike. 73
What really caught the imagination of the ordinary working men in
Hong Kong and Guangdong was another major shooting incident that
occurred in the foreign concession of Shamian in Canton on 23 June,
three days after the Canton sympathetic protest started. Marching in
Shamian that day were not only workers, students, military academy cadets,
Kuomintang members, Communist leaders like Zhou Enlai and others
from Canton, but also the striking workers from Hong Kong. While the
precise sequence of events and who fired the first shot cannot be
established beyond doubt, shots were fired by both British and French
sentries as well as by Chinese demonstrators. They left scores of Chinese
and one Frenchman dead and many others, including eight Europeans
and one Japanese, injured. 74 This new incident pushed anti-imperialist
and anti-British sentiments to ‘fever pitch’. Inspired also by the
experiences of the seamen’s strike of 1922, striking workers from Hong
Kong were organised into pickets to stop food and other essentials from
being shipped to the British colony. 75 A formal trade boycott against Hong
 THE GREAT WAR AND CHINESE NATIONALISM 95

Kong was introduced on 6 July by order of the Strike Committee, headed

by one of Hong Kong’s first members of the CCP, Su Zhaozheng.
Hong Kong was quickly paralysed, though its expatriate community
and the still quite sizeable Chinese population who stayed behind showed
indomitable spirit which enabled them to endure much economic and
other for ms of hardship. Two days after the strike first started, the
government called out the Volunteer Defence Corps and then invoked
emergency powers. Troops were posted at key points, naval ratings were
deployed to man the cross-harbour ferries and civilian volunteers were
recruited to maintain essential services and serve as special constables. 76
They did not stop the strike, which picked up even greater momentum
after the Shamian Incident. By early July, Hong Kong was ‘like a ghost
town’, where upper-class expatriates used to domestic servants had to do
their own housework, including disposing of their own nightsoil, either
‘by burying it in their garden at a depth of no less than two feet’ or at
sewer manholes ‘opened between 5.30 and 7.30 each morning at
convenient points throughout the colony’. 77 The comfort and luxury of
old colonial Hong Kong that its expatriate and Chinese upper classes
were used to were largely replaced by volunteer work by almost everyone
concerned and an unprecedented degree of cooperation between some
better-off Chinese and the British authorities. The ultimate demonstration
of the willingness of some local Chinese to support the government was
their joining of not only essential services like the ambulance service
but also the Volunteer Defence Corps. 78
Once the boycott was institutionalised in July, Hong Kong’s economic
lifeline was severely restricted. Its previously flourishing entrepôt trade
with Guangdong collapsed, land value tumbled, government revenue fell
drastically, food prices rose six fold, share values dropped 40 per cent in
just over three months and the bankruptcy court was handling 20 cases
every day by September. 79 The scale of losses in trade was reflected by
the drop in import and export in the first calendar year of the strike. The
value of imports into Hong Kong had fallen from £11.67 million in 1924
to £5.84 million in 1925, while its exports dropped from £8.82 million
to £4.71 million in the same period. 80 As for shipping, Hong Kong on
average cleared 210 ships carrying 156,000 tons a day in 1924, but for
the year starting on 1 July 1925, the daily average fell to 34 ships and
56,000 tons. 81 The local economy was ‘devastated’ as it suffered ‘total
economic losses at either $HK2million per day or even £5 million a week’,
while ‘British exports to China and Hong Kong’ for 1925 dropped ‘one-
third from 1924’s total value of £29 million’. 82 Although the figures quoted
above cannot be relied on absolutely, as Governor Stubbs ordered
statistics not to be kept during the strike, they provide an indication of
how severe the economic costs were.
In confronting this first ever and, by any measure, serious challenge
to their imperial position in Hong Kong, the British and the colony were
unfortunate in having Stubbs as Governor. His ability to understand the
political situation in Guangdong and the politics of Chinese nationalism
96 A MODERN HISTORY OF HONG KONG

was demonstrated in the way he handled the strike. When the Shanghai
shootings first happened, he thought they would have little effect on the
overwhelmingly Cantonese workers in Hong Kong. Even after the Hong
Kong strike started, he still dismissed it as the work of the Communists
and did not see the rising tide of Chinese nationalism at work. 83 He thus
resorted to heavy-handed measures when faced with an inherently very
difficult and highly delicate situation. By invoking emergency powers,
Stubbs introduced censorship, gave police officers wide powers to search
and detain suspects and attempted to intimidate the strike organisers in
Canton by trying to cut off the food shipped there from Hong Kong. 84
These measures backfired. The last in particular was at least partly if not
largely responsible for provoking the Strike Committee to institutionalise
a boycott against Hong Kong, putting the crisis on a longer-term footing
than originally envisaged by its instigators.
All the schemes that Stubbs devised to end the strike-boycott by
unseating the Kuomintang government in Canton failed. 85 These included
an operation, never authorised by London, to give $HK100,000 to help
warlord Chen Jiongming stage a coup d’état in Guangdong to set up a
government friendly to Hong Kong. This ended up as a costly mis-
adventure. Other proposals Stubbs had, such as a naval blockade of the
Pearl River, bombardment of the Boca Tigris forts at its estuary or joint
military actions against Canton in collaboration with anti-Kuomintang
northern Chinese forces, were all overruled by the British government. 86
The replacement in November of Stubbs with Sir Cecil Clementi
(Governor, 1925–30), a Cantonese-speaking former cadet with a good
understanding of the Chinese people and their politics, was an
improvement. However, there was little that Clementi could do to end
the confrontation, which had by then already entered its fifth month and
outlived the Shanghai strike. A general pattern had set in and an attempt
by Hong Kong’s Chinese merchants to broker an amicable solution was
already a failure.
Clementi at first took a more accommodating approach and managed
to engage in useful dialogue with senior leaders in the Kuomintang
government. 8 7 However, the rising cur rent of nationalism and the
complexity of the political situation in Canton frustrated his démarche.
After all, it was a time when the Kuomintang government was preparing
itself to launch the Northern Expedition to unify the country and leaders
of the Kuomintang were still working out a succession to Sun Yat-sen,
who had died earlier in March. 88 These preoccupations restricted the scope
for anyone in Guangdong to reach a compromise with the British. As
one of the Kuomintang’s top leaders, Wang Jingwei told Clementi in
December that anyone in government in Canton who sought to end the
strike-cum-boycott without first securing a large ransom payment from
the British to pacify the strikers would be committing political suicide. 89
Clementi then tried to combine conciliation with toughness when
dealing with Canton in 1926. On the one hand, he tried to maintain a
dialogue with members of the Kuomintang government, either directly
 THE GREAT WAR AND CHINESE NATIONALISM 97

or through the British Consul General in Canton. On the other hand, he

was adamant in protecting the dignity and prestige of the colonial
government. He was prepared to use gunboats to back up his policy and
underline the strength of his position. 90 Although he was much more
skilful and diplomatic than his predecessor, he was not able to end the
strike-cum-boycott until the political situation in Canton changed
sufficiently for the Kuomintang authority there to end its support for
the Strike Committee.
Clementi was also much more astute and effective in waging the
political and pro p ag anda campaign ag ainst the strikers than his
predecessor. In countering the propaganda and intimidation used by the
Strike Committee to ensure the support of the ordinary Chinese in Hong
Kong, he did not merely rely on the heavy-handed tactics of Stubbs.
Press censorship, sponsorship of a new anti-strike and anti-Communist
newspaper, the Gongshang Ribao, employment of dubious characters to
counter intimidation and other emergency measures introduced by Stubbs
continued. However, Clementi also sought to win the hearts and minds
of the wealthy merchants and the Chinese population at large by taking
concrete measures to cultivate loyalty.
When the Board of the Tung Wah Hospital got into serious financial
trouble as a result of their acting on Stubbs’s request to finance Chen
Jiongming’s ill-conceived coup, Clementi used public funds to bail them
out and save them from a major predicament. 91 This was a bold step, as
Clementi must have guessed the Colonial Office would consider the Tung
Wah venture ‘scandalous’ though it would have no choice but back him
up and ‘hush up’ the matter. 92
Above all, he demonstrated to the Chinese population his confidence
in them by appointing for the first time an ethnic Chinese person, Sir
Shouson Chow, to be one of the two unofficial members of the Executive
Council. 93 It was a bold step in the midst of a crisis caused by Chinese
nationalism challenging British imperialism. The Executive Council was
roughly equivalent to the Cabinet, to which two unofficial members of
British origins had been introduced only in 1896. 94 Clementi’s rationale
was that showing ‘confidence is one obvious way of encouraging loyalty’
and Chow’s appointment was meant to ‘afford clear proof of the intention
of this Government to frame its policy in close co-operation with leading
Chinese of Hong Kong’. 95
Chinese merchants and capitalists large and small in Hong Kong
generally supported the government because they had vested interests to
protect, and they were financially the most exposed to the harmful effects
of the strike-cum-boycott. They were the most heavily involved in the
entrepôt trade with Guangdong and were most vulnerable to the trade
boycott. Chinese shops in Hong Kong also suffered badly from the
departure of workers in large numbers and the dramatic fall in business
that resulted. Chinese-owned banks, which generally had smaller capital
than British banks and were overwhelmingly dependent on their Chinese
clientele, were substantially more exposed to withdrawals by their Chinese
98 A MODERN HISTORY OF HONG KONG

depositors and were thus hit hard by bank runs. As an indication of how
suddenly Chinese-owned banks faced a cash flow problem, in the first
three days of the strike in June 1925, $16 million were withdrawn from
these institutions and taken out of Hong Kong before this was stopped
by the government’s emergency measures. 96 Chinese banks suffered two
bank runs, had to close for business for a week and could reopen only
after receiving $6 million dollars in loans from the Hong Kong and
Shanghai Bank and the Standard Chartered Bank. 97 Their financial
situation was alleviated only after it became known that the British
government had provided a £3 million trade loan to Hong Kong. 98
The fact that the strike-cum-boycott was mainly directed by the
Communists also reduced its appeal to the merchants, particularly after
the initial furore surrounding the shootings in Shanghai and Canton had
subsided. Unlike their counterparts in Guangdong, who in fact greatly
benefited from the boycott after suffering some initial losses because
much of China’s former trade with Hong Kong was diverted to Canton,
Hong Kong’s Chinese businessmen were the biggest losers. 99
It was therefore unsurprising that leading merchants who were also
leaders of the Chinese community supported the Board of Tung Wah in
trying to play a constructive role in seeking a settlement. 100 Chairman Ma
Zuichao explained the rationale by saying that ‘the Tung Wah was a
charitable organisation in Hong Kong which had hitherto avoided
involvement in national or political affairs’ but the strike ‘has already
lasted two months, and has had a grave impact on all trades and businesses’
and the Board would ‘like to save the community from this awful fate’. 101
The Tung Wah’s efforts, like similar attempts by other leading Chinese,
to broker a settlement failed. The Chinese merchant community of Hong
Kong was also prepared to pay what was in effect a ransom to end the
boycott, but even this would not satisfy the Strike Committee, which
wanted to humiliate the colonial government. 102 Given the political nature
of the strike and the boycott, a solution could not be found until the
political situation in Canton changed.
There was political jockeying in the government in Canton, where the
delicate balance of power between the right and left wings of the
Kuomintang after Sun Yat-sen’s death in March 1925 shifted in the course
of the year and eventually led to the rise of Chiang Kai-shek. Although
Chiang was made Commander-in-Chief of the National Revolutionary
Army when the Kuomintang proclaimed a national government in Canton
in July, he still only ranked fourth in the Kuomintang hierarchy. 103 His
status rose quickly when his senior leftwing colleague Liao Zhongkai was
murdered in August, and another, Hu Hanmin, leader of the right wing,
was implicated and had to leave Canton. In March 1926, Chiang exiled
his other senior colleague, Wang Chingwei, to Siberia after implicating
Wang in a plot to kidnap him using a gunboat – the Zhongshan – which
was under the command of a Communist officer. 104 By launching a pre-
emptive strike, Chiang not only ousted Wang and thus everyone senior
to him in the party leadership, but also disarmed the pickets of the
 THE GREAT WAR AND CHINESE NATIONALISM 99

Communist-dominated Strike Committee. 105 However, he still needed

Soviet military aid and the support of the Communists to play a balancing
game of power politics in order to consolidate his position in Canton. 106
He therefore returned the arms confiscated from the Strike Committee’s
pickets, though he did manage to curb the power of the Communists
within the united front.
It was only after Chiang launched the Northern Expedition in July
and the army under his command successfully reached the Yangtze River
in early September that he could afford to lose the support of the
Communists. Even then he was not in a position to purge the Communists,
a move he could not made until after his forces took Shanghai five months
later. Once his forces reached Wuhan, where there were considerable
foreign interests, Chiang showed that he was keen to avoid provoking
foreign intervention and assured the foreign powers that his forces were
under strict orders not to provoke any incident. 107
Once Chiang had made his position in the Kuomintang almost
indispensable, as his army headed towards Shanghai at the beginning of
Se ptember 1926, the political situa tion within t h e K u o m i n t a n g
government changed. It was by then politically desirable to ensure the
Kuomintang government would not get entangled in further confront-
ations with the British by the Communist-dominated Strike Committee.
To Chiang and most of his colleagues in the Kuomintang, Chinese
nationalism had a new priority – the reunification of the country rather
than anti-imperialism. 108 The CCP, for its part, functioned in this period
as the China branch of the Comintern or Communist International. 109 It
was under orders from Joseph Stalin to continue cooperation with the
Kuomintang and not sustain the boycott against Hong Kong lest it should
provide an excuse for the British to intervene against the Northern
Expedition. 110 The time had finally come for the boycott to be ended.
In the meantime, for much of 1926, Governor Clementi continued to
seek an end to the boycott by negotiations, which were at times backed
up by the threat or actual use of force to put pressure on the Canton
authorities. The negotiations proved tortuous. In early September, just
as the Kuomintang forces were engaged in the bloody siege for Wuchang,
the last round of negotiations appeared to have reached a dead end and
Clementi made a show of force. Royal Navy gunboats were deployed on
4 September to clear strike pickets from the steamer wharves in Canton,
which was achieved without one shot being fired as the picket boats
dispersed upon arrival of the British ships. 111 Followed one day later by a
separate and unrelated incident in Wanxian on the Yangtze, in which
British gunboats bombarded the town in an operation to rescue two
British merchant ships seized earlier by the local warlord, the show of
force in Canton appeared like a warning shot for more vigorous British
military intervention. 112 Negotiations soon resumed between the British
and the authorities in Canton, which led to a compromise, namely that
Canton would impose an additional 2.5 per cent surcharge on the import
tax, which the British tacitly agreed not to challenge. The boycott was
100 A MODERN HISTORY OF HONG KONG

formally lifted on 10 October 1926 by order of the government in Canton,

the same day that Wuchang fell to the Kuomintang.
The strike and boycott were essentially a politically inspired and
externally directed movement against British imperialism. Hong Kong
suffered badly mainly because it was the bastion of British imperialism
in Chinese eyes. It was also partly because Governor Stubbs’s ineptitude
removed any possibility of a relatively quick settlement. The event was a
landmark in the modern history of Hong Kong, as it represented the
highpoint of Chinese nationalism as a force in the British colony.
Although the CCP was clearly responsible for instigating and bringing
about the strike at first and in instituting the boycott, they managed to
do so only because they were championing the cause of Chinese nation-
alism. 113 Workers in Hong Kong responded to the initial appeal and reacted
strongly to the Shamian shootings not because they found Communism
appealing but because they were at least as affected by the rising tide of
nationalism as their compatriots were elsewhere in major coastal Chinese
cities. Once Chinese nationalism was redirected from anti-British
imperialism to reunification under the Kuomintang in China after the
launch of the Northern Expedition, the original anti-British nationalism
in the Hong Kong region lost its momentum, if not its raison d’être.
The tremendous importance of the strike-cum-boycott to the rise of
the Communist movement in China should not be taken to mean the
Communist cause was particularly appealing to Hong Kong’s working
class. It was true that the party numbered only 1,000 across China in May
1925, but that expanded to 30,000 at the peak of the boycott in July
1926. 114 It was also true that the Hong Kong strikers who went to
Guangdong provided fertile ground for the party to expand. However,
the party did not manage to build up an effective network of Hong Kong
cadres for organising labour, still less a revolution in the colony. Although
Hong Kong became an important base for the CCP for coordinating its
activities in southern China after Chiang Kai-shek’s purge of Communists
from within the Kuomintang in the spring of 1927, the primary value of
Hong Kong to the CCP was its relative safety as a base for operations on
the Chinese mainland. 115
What the strike-cum-boycott did for Hong Kong was to complete two
processes already started by the labour unrest of the early 1920s. The
first was to reinforce the transformation of the Chinese population of
Hong Kong from sharing a basically docile and inward-looking attitude
preferring to avoid any dealing with government to a more outward-
looking approach that made demands on government and society more
generally. The second process was the corresponding change in the
attitude of the colonial government towards its Chinese population. The
demonstration of support to the government by some better-off Chinese,
in contrast to those who took part in the general strike, highlighted the
diversities in the Chinese community. Instead of taking its Chinese
population for granted, as had happened in the nineteenth century,
Clementi accepted the need to deal with them directly on a daily basis. 116
 THE GREAT WAR AND CHINESE NATIONALISM 101

Once the idea that Chinese working men were able to organise themselves
to defend or even assert their rights sank in, those in government and
also in the judiciary acted on this recognition and gradually changed the
arbitrary way that many working-class Chinese had routinely been treated
in the previous century.
The government of Hong Kong also learned the impor tance of
maintaining good relations with the government in Canton, not least to
avoid having to deal with similar challenges in the future. Although
Clementi was prepared to use force to back up his policy towards Canton
in the course of the boycott, he preferred to pre-empt the need for such
eventualities by keeping on good terms with Canton. This mirrored the
general shift in British policy towards China, itself the product of a policy
review, the need for which was highlighted by the crises in Shanghai and
Hong Kong, and reinforced by the Northern Expedition. The British
objective in this exercise was to find a way to protect British nationals
and properties in China without appearing weak, and thus they devised a
new policy to divert the focus of Chinese nationalism away from the
British Empire. 117 The spirit of this new policy was encapsulated in a
memorandum issued in December 1926, by which Britain undertook ‘to
consider in a sympathetic spirit any reasonable proposals that the Chinese
authorities, wherever situated, may make’ on matters that affect Chinese
national rights, and to promote this among the great powers. 118
 Chapter 8
Imperial Grandeur

The Great War ended with not only the dismemberment of the German
Empire and the Ottoman Empire but also the transfer of nearly a million
square miles and 13 million people in some of their imperial possessions
to the jurisdiction of the British Empire as mandated territories. As a
result, in terms of its territorial span, the British Empire reached its zenith
in the inter-war years. However, the War exhausted it – if not in resources
then at least in aggressive spirit. 1 The serenity and security of the British
Empire in this period rested as much on its longstanding prestige as on
the Empire’s capabilities and willingness to use them to keep its place in
the premier league of world powers. The fact that, in retrospect, the
Empire had already reached and passed its peak did not reduce its
imposing presence. Policymakers or nationalists in Asia did not have the
benefit of hindsight and the grandeur of the British Empire ensured no
effective challenge was made against it until its weakness and fragility
came to be exposed by the Japanese at the beginning of the Pacific War. 2
Although Chinese nationalists confronted British imperialism in the
middle of the 1920s, they backed off once their more immediate goal of
reunification appeared achievable. They were not prepared to incur the
wrath of the British Empire, which they still believed could have
intervened sufficiently in Chinese affairs to frustrate their hopes of
national unity. While Hong Kong symbolised British imperialism in China
and Chinese nationalists began to feel they would like to reclaim it
eventually, they were not prepared to challenge the British until they were
strong enough to do so successfully. In the 1930s, their focus also
increasingly turned towards Japan as it emerged as the most aggressive
imperial power in the region. 3 Basking in the splendour of the British
Empire, Hong Kong continued to grow, notwithstanding the effect of
the Great Depression that followed the collapse of the New York stock
market in 1929.

The Politics of Stability

The end of the strike-cum-boycott in October 1926 allowed Hong Kong
to rehabilitate its economy and rebuild the conditions that had produced
 IMPERIAL GRANDEUR 103

social and political stability. The focus was on suppressing what the
government saw as the main source of instability, to be complemented
by improving governance for the Chinese in order to pre-empt a repeat
of similar confrontations in the future.
The gover nment under Clementi and his successor kept all the
emergency powers after the crisis and steadily moved against the main
unions and other bodies that played a pivotal role in the general strike
and boycott. Organisations like the General Trade Union and the Hong
Kong branch of the Chinese Seamen’s Union, the most active and
prominent sponsors of the general strike known for their close links with
the CCP, were proscribed. 4 Politically inspired strikes were outlawed. The
police monitored the activities of the Communists, raided their premises,
arrested them and deported them to China if sufficient grounds could
be established to suggest their presence would be detrimental to the
colony’s stability, good order and general interest. Sustained efforts by
the police eventually ‘reduced the Communist existence in Hong Kong
to a bare skeleton’ in 1932. 5 By the autumn of 1934, ‘the entire Communist
machinery had disintegrated or disappeared’. 6 Since the Communists were
the instigators and main organisers of the strike-cum-boycott, breaking
up their organisation in Hong Kong removed a major source of instability
from the government’s point of view.
The government’s suppression of the Chinese Communists, particularly
its agreement ‘to extradite political criminals under cover as ordinary
criminals to Canton’, has mistakenly been portrayed as ‘completely
contrary to the tradition of the British Hong Kong government to offer
asylum to political fugitives’. 7 Such an assessment is based on a
misunderstanding of the British tradition of offering political asylum
and the British policy towards CCP operations in Hong Kong.
The British policy towards Chinese political fugitives was to allow them
to use the colony as a gateway to safety or seek refuge locally but not to
use it as a base for subverting the government of China or to embroil
Hong Kong in confrontations with the Chinese authorities. In the 1930s,
Chinese Communists did not go to Hong Kong to escape political
prosecution at home. Instead, they used Hong Kong as their regional
headquarters for south China to launch armed attacks to overthrow the
authorities in Canton and the government of China. 8 Their first major
attempt was the Canton Uprising of late 1927. In this period, the
Communists in Hong Kong were not political fugitives but members of
a foreign political party dedicated to making the most of the relative
safety they enjoyed under British jurisdiction to subvert a friendly
government recognised by Britain.
More important to the Hong Kong government was that the CCP tried
to destabilise the colony. This made it fundamentally different from Sun
Yat-sen’s revolutionary party a few decades earlier. When it was based in
Hong Kong, part of the CCP’s ‘Central Southern Bureau’s mission was
to make preparations for an uprising to take place in Hong Kong itself ’. 9
Although it failed to stage any uprising, it did try ‘to create an atmosphere
104 A MODERN HISTORY OF HONG KONG

of “red terror”’, usually by murdering Hong Kong police officers. 10 Even

those Communists not involved in the physical act of murder broke the
law if they stored firearms for their comrades or otherwise acted as co-
conspirators. The colonial government had reasonable grounds to treat
the CCP as a criminal organisation.
This is not to say that the Hong Kong police were not sometimes,
even often, arbitrary in dealing with members of the CCP who were
arrested. In this period, the police suffered badly from inefficiency and
corruption. 11 It was still often arbitrary when dealing with members of
the Chinese community, though abuses had been reduced steadily after
the middle part of the nineteenth century. These shortcomings meant
some Communist members arrested were badly treated. However, the
deficiencies of the police also wo rked to the advantag e of the
Communists, as entrenched corruption meant they were sometimes able
to get out of trouble through bribery. The inefficiency of the police also
meant more time and scope existed for the CCP to operate before its
network was destroyed in Hong Kong than if an efficient and effective
police had existed.
As a matter of policy, the Hong Kong government did hand over
detained Communists to the authorities in China from whence they had
come. This was unquestionably followed by a number of them being
tortured or even executed by the Chinese authorities once they came under
Chinese jurisdiction. This does not, however, constitute ‘clear evidence
that the Hong Kong government in fact played a pivotal role in the final
elimination of a considerable number of Communists in Canton’. 12
While the colonial government showed no humanitarian concern for
the fate of Communists it repatriated to China, there is no evidence to
show that it had a policy of sending them to China in order to effect
their physical elimination. The government had had a long-established
policy since the 1840s of deporting undesirable Chinese back to China
with little humanitarian regard for whatever fate might await them.
Whatever else they might be, the deported Communists were members
of an organisation involved in organised crime. They were, in general,
treated no better or worse than, say, other suspected criminals or pirates
of Chinese origins against whom there was insufficient evidence to secure
conviction in a British court of law. The colonial government chose the
easy option, as it routinely did with many other suspected criminals. It
deported the Communists to where they came from if they did not have
the right of abode and it deemed their presence harmful to the good
order of the colony.
In fact, those Chinese Communists arrested by the Hong Kong police
did enjoy the protection of British law if they had the means or were im-
portant enough to the CCP for it to invest in legal counsel. This again put
them on a par with others charged for criminal offences. The arrest and
release of Deng Zhongxia, Li Lisan’s temporary replacement as head of
the CCP in Hong Kong in 1928, shows how senior Communists did benefit
from the British legal system. In light of his importance, a ‘prominent
 IMPERIAL GRANDEUR 105

British attorney’ was engaged by the CCP to represent him. He secured

Deng’s release ‘on the grounds of insufficient evidence’. 13 Other CCP
members were deported and faced their fate in China because they were
not valuable enough to the party for it to invest in their legal representation.
The existence of the rule of law also ensured that Communist members
who could prove they were born in Hong Kong, and thus enjoyed the
right of abode, would not be de por ted. 1 4 Arbitrar y treatment of
Communists arrested in Hong Kong occurred mainly when they were
under police custody, not in front of a court of law.
After the strike-cum-boycott, the Hong Kong government also paid
more attention to its Chinese population, recognising the need to secure
the loyalty of the Chinese community. The first major step was taken
during the strike-cum-boycott, when Sir Shouson Chow was appointed
to the Executive Council. Clementi reinforced this with changes to
significantly strengthen the office of the Secretary for Chinese Affairs.
Not only did the Secretary receive more resources, including the allocation
of more Cadet officers to support his work, he was also made an ex-
officio member of the Executive Council, and his bureaucratic rank was
elevated to that behind the Colonial Secretary in 1929. 15 Such changes
strengthened his hand and demonstrated the government’s acceptance
of the rising importance of the Chinese community. They were also meant
to complement the suppression of Communist activities as part of the
government’s efforts to secure social and political stability.
These changes had the desired result. They succeeded in countering
the CCP’s attempts to win over the working men of Hong Kong, even
during the economic slowdown caused by the Great Depression. 16
As a result of having to deal with the strike-cum-boycott and the force
of Chinese nationalism, Clementi also felt it necessary to tackle the
question of Hong Kong’s long-term security, particularly with respect to
the New Territories’ lease. He raised the issue both during and after the
strike-cum-boycott but London overruled him. 17 He urged London to
review the New Territories’ lease and turn the region into ‘a permanent
part of the colony’. 18
Clementi was not the first British policymaker to raise the issue.
Governor Frederick Lugard (1907–12), had earlier suggested making the
permanent cession of the New Territories a condition for Weihaiwei’s
return to China. 1 9 His successor, Sir Francis May (1912–19), also
recommended ‘seizing the first opportunity to convert the 99-year lease…
into a cession in perpetuity’. 20 The British government in London
considered the matter prior to the Versailles Peace Conference of 1919
and again before the Washington Conference of 1922. On both occasions
the possibility of surrendering the New Territories was raised during
discussions about the German lease of Shandong and, on both occasions,
it was dismissed as out of the question. 21 Although, like his predecessors,
Clementi failed to secure London’s support, he put down a strong marker.
Clementi’s differences with London arose because the colony and
Britain had different interests and concerns, and assessed Chinese
106 A MODERN HISTORY OF HONG KONG

reactions differently. With his deep knowledge of the Chinese and his
experience of handling the strike-cum-boycott, Clementi was alive to the
forces and trends of Chinese nationalism. He persisted in his
recommendation, because he believed that the ‘handing back of the New
Territories would be fatal’ to Hong Kong. 22 Unless Britain took action
while China was divided or weak, China’s rising nationalism and military
power would eventually rule out such an option. The urgency that was
self-evident to the person on the spot was not so apparent to a
government half a globe away.
B y a d o p t i n g a n e w C h i n a p o l i c y, o u t l i n e d i n t h e D e c e m b e r
memorandum of 1926, the British government had already shown a
willingness to deal sympathetically with the rising tide of Chinese
nationalism. It based this on realism, not altruism, but it was a realism
that did not conform to Clementi’s assessment. Essentially, London did
not consider ‘any responsible Chinese authority could be induced in
present circumstances to enter into any agreement which provided for a
cession of territory to a foreign Power’. 23 Raising the issue would merely
indicate British anxiety over the lease. It would also ‘expose a weakness,
which they would not be slow to exploit, and might well lead to [a]
campaign for the rendition’. 24 There was no meeting of minds on this
issue between Hong Kong and London.
In the 1930s, all the successive governors of Hong Kong raised the
issue at least once during their ter ms of office, but none did so as
forcefully as Clementi. In London, the Foreign Office responded to
Clementi’s persistence with internal deliberations that went on for so
long that they outlasted him. The Foreign Office gradually moved to a
position of expecting the Chinese to raise the question of the lease well
before the expiry date. It also surmised that Britain should prepare itself
to lose exclusive control over Hong Kong. 25
As far as the governments of Britain and Hong Kong were concerned,
prior to the Pacific war, there was no ‘Hong Kong question’ – whether
based on the New Territories’ lease or not. Nevertheless, the idea that
Hong Kong and the New Territories stood or fell together came to be
accepted. 26 By implication, Britain realised that the long-term future of
Hong Kong would be tied to the lease for the New Territories. The efforts
Clementi made over this issue were aimed at removing the uncertainty
over the future of the New Territories and thus a long-term source of
instability. With the onset of a world war at the end of the 1930s, the
security of Hong Kong, dependent upon the apparent grandeur of the
British Empire, came to be dangerously exposed as Britain found itself
engaged in a life and death struggle in Europe. By then Clementi’s attempt
to direct local politics to ensure stability and good order had come to be
a hostage to external forces.

Economic and Social Developments

Some major technological developments that started in the nineteenth
century matured to become everyday necessities of modern life in the
 IMPERIAL GRANDEUR 107

twentieth, and they brought about rapid and important changes to both
social and economic life. The technological leaps that impacted upon
people’s everyday life most at the turn of the century were the harnessing
of electricity for everyday use and the motorcar. Some of the new
technologies took time for people to embrace.
Electricity was at first met with ‘innate distrust’, even for lighting, by
the local Chinese. 27 However, once electricity came to be accepted,
economic developments and social life developed by leaps and bounds.
The availability of relatively cheap and fast transportation also made a
major impact. Greater mobility and acceptance of modern technological
progress led to the gradual but steady incorporation of what were
previously deemed as Western ways into everyday life by an increasing
number of local Chinese. 28
As a result of these technological changes, the number of mechanics
and industrial workers among the Chinese expanded rapidly as new jobs
were created in the power generating industry, with the introduction of
trams, motor transportation and other production or servicing indus-
tries. The level of skill, and therefore exposure to all aspects of things
modern, rose steadily among the Chinese working population. The ad-
vent of modern labour unions in the 1920s and the close links they main-
tained with their supporters in Canton, so critical to the success of the
labour movements, were in an important sense a by-product of these
changes. Even if Chinese nationalism had not emerged, technological
advancements were having a major impact upon the economic and social
lives of the Chinese in Hong Kong.
In ter ms of the economy, while tr ade remained its mainstay,
considerable industrial development also took place. Since reliable
statistics on different sectors of the economy are not available for this
period, the exact extent and scope of industrial development cannot be
established. However, there are sufficient indicators to show a good
number of new industries were built. 29 During the Great War, Chinese
capitalists in Hong Kong saw the effect of the disruption of supplies
and used this opportunity to produce some simple industrial goods that
Hong Kong used to import from Europe. 30 Both the scope and pace of
industrial development continued to expand after the war. 31 Most of the
new industries were founded by the local Chinese. 32 They received no
direct assistance from the government though those industries that
exported to the rest of the British Commonwealth, such as producers of
rubber footwear, did benefit from the introduction of a system of imperial
preference in 1932. 33
In addition to the Chinese community’s investments in the industrial
sector, British-owned and generally larger manufacturing industries, such
as shipbuilding, sugar refining and cement manufacturing, continued
to f lourish. They were also augmented by major new industries
introduced by non-Chinese investors. The most notable of these were
the founding of the Hong Kong Electricity Company and the China
Light and Power Company that produced and supplied electricity
108 A MODERN HISTORY OF HONG KONG

commercially. 34 The building, running and maintenance of the Kowloon-

Canton Railway might not have involved any major industrial production
locally but they were a significant new factor in the local economy both
as an employer of skilled and semi-skilled labour and in facilitating the
movement of goods and people.
The range of new industrial establishments that came into existence
in the inter-war years was significant in terms of products manufactured
and the scale of operations. While most establishments were small and
employed only a few workers, there were also at least three new major
Chinese manufacturers that individually employed between 1,000 and
2,600 workers. 35 There were also at least 34 other Chinese industrial
establishments, each with between 100 and 1,000 employees. These
included factories making machine tools, mosquito incense, fireworks,
tins for canning, perfume and for knitting and dyeing. Since most
manufacturing facilities were established by Chinese entrepreneurs who
preferred minimum contact with officialdom, they did not all register
with the colonial administration, which did not, in any event, become a
legal requirement until 1938. This applied particularly to smaller concerns.
Even though the number of registered factories and workshops
unquestionably understates the scale of industrial development, its growth
from 403 establishments in 1933 to 829 in 1938 indicates how fast new
factories were being created. 36
Thus, Hong Kong was industrialising in the inter-war years though trade
remained, at least as far as the British and the colonial governments were
concerned, its economic raison d’être. By the end of the 1930s, the annual
value of manufactured export was estimated at $90 million, which was
roughly one-sixth of Hong Kong’s total export and re-export trade. 37
According to the census of 1931, out of a total population of 850,000 and
an economically active population of 471,000, over 110,000 were engaged
in manufacturing, in contrast with only 97,000 in trade and finance. 38 These
figures confirm the growing importance of industrial production.
The biggest challenge in the economic sphere that the Hong Kong
government had to deal with was the fluctuation of the value of silver,
upon which its currency was based. As a result of the Great Depression,
the value of silver fell. This meant the Hong Kong dollar depreciated by
some 50 per cent and led to a trade boom at the beginning of the 1930s.
However, this was only a short-term advantage. The value of silver went
up later and by 1935 the value of Hong Kong’s trade had fallen back to
its 1931 level. 39 Hong Kong’s problems with the fluctuating value of silver
had a parallel in China, which had also adopted the silver standard. Given
the economic links between the two, which were even closer than Hong
Kong’s ties with Britain, Hong Kong worked on the basis that ‘as long as
China linked her currency to silver, so long must it… do likewise’. 40 The
changing fortunes of their currencies in this period happened in large
part because their other most important trading partners, Britain, Japan
and the USA, went off the gold standard between 1931 and 1933. 41 The
consequent depreciation of sterling, the yen and the American dollar
 IMPERIAL GRANDEUR 109

meant an appreciation of the Hong Kong dollar and the Chinese yuan.
The situation was aggravated by a new American policy to purchase silver
in 1934. While Hong Kong suffered from the revaluation of its currency,
China saw a rapid drain of silver that led to an ‘acute deflationary crisis’. 42
The Chinese government responded by going off the silver standard in
November 1935. Hong Kong immediately followed suit and created an
Exchange Fund to serve as ‘an exchange equalisation fund’. 43 It had the
desired effect of restoring financial stability and economic growth. 44
As the scope of g over nment expanded and the impor tance of
economic and financial matters became increasingly obvious, the colonial
government elevated the office of Colonial Treasurer to that of Financial
Secretary in 1937. This position was at first filled by an official seconded
from the Colonial Office, Sydney Caine, but was subsequently taken by a
senior cadet. In due course, as the management and supervision of Hong
Kong’s budget, finance and economic affairs became more important,
the Financial Secretary replaced the Secretary for Chinese Affairs as the
ranking officer behind the Colonial Secretary in the administration.
Although social life in Hong Kong in the inter-war years continued to
be affected by some of the basic ills inherited from the Victorian era,
particularly institutionalised racial discrimination, considerable pro-
gressive changes also took place. They partly reflected the rapid general
progress during the twentieth century. Social legislation was becoming a
feature of life in Europe and America, and the ideas underlining it were
spreading, albeit slowly, to the rest of the world. The great advancements
in transport and communication that enabled more people to travel and
for information to be disseminated quickly and widely accelerated the
process of social change even in colonial territories. Social legislation
changed working conditions and altered the social environment in which
people lived and interacted usually by reducing or even eliminating some
social ills. Social progress also reflected a change in the way the colonial
government looked at and treated its subjects. Its old attitude that the
local Chinese community could largely be left to its own devices faded.
Whatever effect changes in government attitude might have had on
social development in Hong Kong, the most basic factor that governed
life among its Chinese community, which constituted over 95% of the
total population at any point, was its unsettled nature. The Chinese
community continued to be made up mainly of Chinese immigrants or
sojourners. Hong Kong’s population grew from 301,000 in 1901 to
463,000 in 1911, to 625,000 in 1921, and to 850,000 in 1931. 45 Although
no census figure for 1941 is available because of the Pacific War, reliable
estimates put it at 1,007,000 in 1937 when Japan invaded China, and at
1,639,000 at the outbreak of the Pacific War in 1941. 46 The fivefold
increase in a period of 40 years or an almost threefold expansion during
the inter-war period meant most of Hong Kong’s adult Chinese population
were first-generation immigrants, temporary workers or refugees. Just
prior to the Pacific War, only 38.5 per cent of the Chinese population
had lived there for more than 10 years and only 6.4 per cent for over 30
110 A MODERN HISTORY OF HONG KONG

years. 4 7 Most had not thought seriously about whether they were
immigrants or not. They generally took a merely short-term view about
working in Hong Kong. They lived on the assumption that they would
eventually return to their homes in China, though an increasing number
ended up living in Hong Kong on a long-term basis. Settlement was,
nevertheless, not an issue that most Chinese migrant workers thought
they needed or wanted to address.
Their basic attitude and pattern of life were therefore governed more
by what prevailed in their home country and in a poor and fluid immigrant
society than by government policy or legislation in Hong Kong. Most of
them went to work and live in Hong Kong not because of the rule of law
or other good qualities of its British administration but because they
could find work and opportunities not available at home. Indeed, despite
low wages, long hours and harsh working conditions, they were still ‘better
off in Hong Kong than they were in China’ with many ‘able to remit
money home to China monthly’. 48 This motive was reinforced and
superseded by those who sought the safety of this British colony after a
full-scale Japanese invasion of China started in 1937. Consequently, few
of the new residents developed any sense of loyalty to the British Empire
or to Hong Kong itself.
The colonial government did not try to turn them into citizens by
instilling in them ideas like civic responsibility and political participation
but it would have failed if it had tried. To most new Chinese residents in
this British colony, these concepts were irrelevant. Instead, the minority
among them who had more than a passing interest in politics were more
influenced by Chinese nationalism, and more concerned with civil wars
and Japanese imperialism in China than with local political developments.
This is not to say that there did not exist, among the educated or critically
minded Chinese, a growing recognition, even admiration, for the rule of
law and relative integrity of the colonial government when compared
with the situation in China. 49 The last group existed and was growing but
it remained a minority even among the small number interested in politics.
The scale and pace of the expansion of Hong Kong’s Chinese
population also meant most found employment beyond the colony’s
nineteenth-century economic activities. Although expatriates and writers
on Hong Kong continued to use a nineteenth-century local term, ‘coolie’
(literally meaning bitter labour), to describe Chinese working men, by
then most of them were in reality workers in factories, workshops,
transport services and other public utilities, or assistants in shops, catering
establishments and other menial services rather than physical labourers.
Their general level of knowledge and exposure to the modern world were
substantially better than the illiterate and mostly inward-looking so-called
coolie of the Victorian era. They were no longer satisfied with relying
almost entirely on the local dignitaries like the directors of the Tung
Wah to be arbiters of their lives or disputes.
The inter-war years were a transitional period when long-established
institutions like the Tung Wah or the District Watch Committee continued
 IMPERIAL GRANDEUR 111

to play important roles in the Chinese community, while increasing

numbers of this community also ventured to seek help or redress of
grievances outside of this framework. The Chinese community, or sections
of it, had begun to make demands of the colonial government, the society
or their employers. The economically driven strikes of the early 1920s
illustrated how many changes had taken place since the nineteenth century.
In the case of seeking help from the government, members of the Chinese
community generally went through the Secretariat for Chinese Affairs,
the Urban Council or occasionally even the court system in the urban
areas, and through District Officers in the New Territories.
Social developments were also affected significantly by new legislation
intended to deal with some of the social ills created as Hong Kong grew
and some of those longstanding ones previously ignored by the
government. The most notable batch of social legislation dealing with
the former concerned employment as industries spread. The first labour-
related legislation was the introduction in 1919 of a resolution in the
Urban Council to enable itself to make by-laws regarding child labour. 50
This was followed by the appointment of a Commission to inquire into
the conditions of industrial employment of children in 1921 and the
passing of an ordinance to outlaw the employment of young children in
dangerous occupations. 51 In the following two decades, a series of other
labour laws were passed to deal with industrial accidents, employment of
women, pensions and registration of factories, in addition to those that
governed trade unions. The government now attempted to define the
framework within which Chinese workers were to be treated. In support
of the legislative efforts, a Labour section was created within the
Secretariat for Chinese Affairs in 1927, and a Labour Officer appointed
a decade later. Although enforcement of these laws was weak and working
conditions for most Chinese workers remained appalling, the govern-
ment’s efforts limited abuse and improved the lot of the average worker.
Among the traditional social ills that caught the public imagination
was the Chinese practice of keeping mui tsai (or meizi), a kind of domestic
female bond servant better-off families secured, usually with a one-off
payment and a deed of gift, from poorer families which could not afford
to raise the girl concerned. Great discrepancies existed in how individual
mui tsai fared. They varied from being reasonably well treated as an unpaid
live-in young domestic helper who would be married off when she came
of age to being abused practically as a domestic slave. Since no servile
status was recognised under British law, a ‘mui tsai was entirely free to
leave her master at any time’, but in reality long-established practice and
ignorance of the law on the part of mui tsai meant they accepted their
status as bond servants. 52
A long drawn out campaign to end this practice started in 1917, when
the British Member of Parliament John Ward noticed it. He saw it in
terms of slavery and drew the attention of the Secretary of State to it,
w hich c a u s e d t h e C o l o n i a l O f fi c e t o q u e s t i o n t h e H o n g Ko n g
government. 53 This private approach was followed up by a public campaign
112 A MODERN HISTORY OF HONG KONG

after the War, energetically pursued by Mrs Clara Haslewood, who arrived
in August 1919 following her husband’s appointment as Superintendent
of the Naval Chart Depot in Hong Kong. As Clara’s husband, Hugh
Haslewood, was a government servant, Governor Stubbs reacted with a
heavy hand and forced him to leave his post, and they had left for Britain
by the end of the year. 54 Once back in London, Mrs Haslewood organised
a major public campaign, enlisting the support of the Anti-Slavery Society,
members of parliament, women’s rights supporters and political grandees
to seek its abolition.
Finding himself in the acutely embarrassing position of being required
to defend what was publicly billed as slavery almost a century after its
abolition in Britain, Secretary of State Winston Churchill reacted strongly.
He ruled in early 1922 that Hong Kong must see to it that ‘no compulsion
of any kind will be allowed to prevent these persons from quitting their
employment at any time they like’. 55 Although Governor Stubbs and the
Chinese elite in Hong Kong objected to it and Stubbs tried to evade it,
he had to publish a public proclamation and pass the Female Domestic
Ser vants Ordinance in early 1923. 56 This dampened the agitation in
London but did not bring about much improvement, as few mui tsai knew
of their rights and the colonial government did not enforce the new law.
The issue was revived and gained wide publicity in 1929, an election
year in Britain, by a report in the Manchester Guardian newspaper in Britain.
The election produced a Labour government with Lord Passfield as
Secretary of State for the Colonies. Like Churchill, Passfield overruled
the reservations expressed by Governor Clementi and insisted on actual
progress being made. 57 As a result, three inspectors were appointed in
Hong Kong to enforce the 1923 Ordinance.
The real break happened after Sir Andrew Caldecott became Governor
in 1935. Unlike his predecessors, he was ‘convinced that the mui tsai
system was a thoroughly nasty practice’ and thus pushed through an
amendment in the Legislative Council to add imprisonment as a penalty
for offences under the 1923 Ordinance. 58 With the government now
behind the abolition of mui tsai, much faster progress was made and it
was largely eliminated as an institution by the eve of the Pacific War. In
the end, mui tsai was abolished partly because the government pushed
for it, and partly because enforcement of the new legislation ‘helped to
shift Chinese opinion from tolerance… to distaste for it’. 59
Social legislation on this occasion was driven mainly by the devotion
of a number of expatriate campaigners and pressure from the British
government. Affairs among the Chinese in this British colony were no
longer permitted to be handled virtually without intervention from either
the expatriate community or public opinions outside of Hong Kong. The
Chinese community in Hong Kong was willy-nilly becoming part of the
wider community that interacted and was impacted upon by developments
that happened elsewhere. Government-led social changes to the removal,
reduction, or regulation of social ills like mui tsai, opium smoking or
prostitution, were mainly a result of pressure from London. 60
 IMPERIAL GRANDEUR 113

The colonial government also took very modest initiatives of its own
to improve social conditions for its Chinese community. The most import-
ant of these was to improve the provision of education. In this respect,
efforts to provide primary education or improve basic literacy had a much
wider impact than the support of the few elite English-language
government schools. Even though the government did not provide free
education in the inter-war years, it did start to ‘provide Chinese schools
with strong central direction and to raise their academic standards’. 61
The first major step was taken in the 1910s, when two Chinese graduates
of Cambridge and Oxford were appointed Inspectors of Vernacular
Schools. This was followed by a commission of inquiry in 1921 that
recommended elementar y ver nacular educa tion should be made
compulsory and presumably free. 62 Nothing in fact came out of this
particular recommendation, but active government encouragement and
assistance, in contrast to benign neglect hitherto, helped the spread of
basic literacy. Much of this was achieved by government subvention to
grant-in-aid schools run by missionary societies and other charitable
organisations such as the Confucian Society. By the late 1930s, there were
279 subsidised schools with 20,200 pupils who came mostly from working-
class families and paid no or very low fees. 63 By 1931, 48 per cent of the
119,000 ethnic Chinese children aged between five and 13 claimed to be
able to read and write in Chinese. This was the beginning of a major
change as it improved the life chances of the young people born and
brought up in the colony.
The flagship of the g overnment’s educational initiatives was the
founding of the University of Hong Kong in 1911. At that time there
were only 18 universities in Britain itself, and five were recent creations.
Although the University was officially devoted to offering a higher
education to a standard similar to other British universities, it was also
i n t e n d e d t o a d va n c e B r i t i s h i n t e r e s t s a n d t o ‘ p r o m o t e a g o o d
understanding with the neighbouring empire of China’. 64 Its foundation
had political overtones, as its most important sponsor, Governor Lugard
‘looked on the University as an instrument of British foreign and colonial
policy’. 65 While Lugard left in 1912, two months after the University had
opened, and it did not become in any real sense an instrument for British
policy, it did acquire an importance of its own. 66
Its real value for Hong Kong was to train a small number of local people,
usually from more privileged backgrounds. Its graduates constituted well-
educated human resources for the expansion of Hong Kong’s economy
and their existence undermined the basis for the colonial government to
resist localisation of the civil service. In the inter-war period, well-educated
Chinese had started to be recruited as specialist or technical officers to the
government to serve mainly in the medical, sanitary, education and public
works departments, and a very small number were even employed at the
sterling scale hitherto reserved for expatriate officers. 67
Progress was significant but limited, as there remained a ceiling for
their promotion and no ethnic Chinese would be considered for
114 A MODERN HISTORY OF HONG KONG

recruitment to the elite cadet service. It was against such a background

that the government announced in 1935 that it had ‘fully and frankly
accepted the policy of replacing wherever possible European by Asiatic
employees’. 68 Even though localisation at the more senior level did not
in fact materialise until after the end of the Pacific War, the official change
of policy happened before the might of the Empire was challenged
successfully by the Japanese. The seeds for more progressive changes in
the civil service were sowed but their growth would be gravely stunted,
before being given a real boost, by the inter regnum of Japanese
occupation during the Pacific War.

The Calm Before the Storm

On 7 July 1937, Japanese army units deployed near Beijing started the
full-scale invasion of China. This was quickly followed by a parallel
massive attack on Shanghai. Although the Japanese High Command calcu-
lated that it would take no longer than three months to destroy the Chinese
will to fight, Chinese forces of very diverse backgrounds rallied around
their national leader, Chiang Kai-shek, and put up a stubborn fight. 69
Chiang deployed the best of his army, amounting to 700,000 troops,
almost exclusively infantry, in Shanghai. They had to stop a Japanese
seaborne invasion force of 300,000, supported by over 300 guns, 200
tanks, 200 aircraft and numerous warships. 70 Against all expectations, the
Chinese held off the Japanese for three months. 71 To support and sustain
their invasion the Japanese eventually deployed and maintained 1.2 million
troops and 500 aircraft in China. 71 In October 1938, after a year’s resist-
ance and retreat, the Chinese government withdrew to its wartime capital
of Chongqing in Sichuan province, while Canton fell to the Japanese
after an amphibious landing in Daya Bay, just north of Hong Kong.
The beginning of full-scale war, even though undeclared, between
China and Japan, had important consequences for Hong Kong. Chinese
refugees flooded into the colony. It became an important lifeline to China.
Hong Kong’s value to China was tremendous, since China was still
essentially an agricultural countr y and had quickly lost most of its
industrial base in the coastal regions. To sustain its war efforts, China
had to secure as much equipment and strategic material as possible from
the outside. In addition to supplies from the Soviet Union, Germany and
Italy, the Chinese looked to Britain and the USA for support. 73 Overland
deliveries were possible from the Soviet Union. However, because the
Japanese navy controlled the China coast, supplies from other countries
had to come through Hong Kong or over China’s border with British
Bur ma or French Indo-China. British suppor t was therefore ver y
important to China. The excellent port of Hong Kong played a key role
before the fall of Canton. It also set up new industries to produce helmets,
gas masks and other wartime supplies for China. 74 The new industrial
and economic expansion stimulated by China’s misfortune accounted for
Hong Kong’s ability to absorb a population increase of 63 per cent (over
600,000) in the first four years of the war.
 IMPERIAL GRANDEUR 115

The refugee- and war-driven boom created a strange situation and

atmosphere. Its surreal nature became more acute but did not change in
any fundamental way following the outbreak of war in Europe in
September 1939. By then, Britain was no longer in a position to defend
its empire in the East, including Hong Kong. 75 In the years when China
desperately needed its support, Britain was preoccupied, first with the
Nazi threat and then with war in Europe. On several occasions it was
forced to appease Japan. The British government repeatedly turned down
China’s requests for British pilots to serve as advisers in the Chinese air
force. It also had to, for example, refuse the Chinese permission to set
up a secret aeroplane assembly depot in Hong Kong. 76
Although the British government realised in private that ‘Hong Kong
could not be expected to hold out for long’ against a Japanese invasion
and that ‘delaying action was the best to be hoped for’, it put up a brave
face in public as no British reinforcements could be spared for this
imperial outpost. 77 Indeed, the general public in Hong Kong did not fully
grasp the seriousness of the situation as the Sino-Japanese war dragged
on, and continued to live under the false sense of security inherent in
the grandeur and arrogance of the British Empire.
Complacency prevailed among both the expatriates and the Chinese,
though for different reasons. For most expatriate Britons, longstanding
arrogance based on racism and imperial privileges produced a state of
mind that allowed them to accept incredible intelligence about their
potential invaders. The government’s assessment deemed the little yellow
soldiers of Japan ‘incapable of night movement’, their pilots unable to
cope with night flying, ‘their bomb-aiming… bad’ and ‘they only seemed
good because they had been pitted against inferior opponents’. 78 It was
with such a mentality that the expatriate community released ‘a torrent
of criticism’ against the g overnment after it sensibly (though not
equitably) evacuated expatriate British women and children in the summer
of 1940. 7 9 The Chinese community shared the confidence of the
expatriates as most still believed or preferred to believe in the might of
the British Empire. The destitute refugees, preoccupied with making a
living, had no choice but to trust in the protection of the British flag.
There was an irony about the serenity of pax Britannica. It is true that
some top policymakers, like Sir Alexander Cadogan, Permanent Under-
Secretary at the Foreign Office from 1938 to 1946, already recognised
the Empire’s bluff had been called, not least by the Japanese demands
since 1937 that forced Britain to reduce its support for China’s war
efforts. 80 However, the perception in Hong Kong, and indeed in other
European colonies in East Asia, was different. 81 There, the idea of pax
Britannica still had the desired effect. There were also those who believed
that war between Japan and the West was not inevitable. 82 War clouds
were gathering and disaster awaited but Hong Kong remained remarkably
calm, still basking in the residual glow of imperial splendour until
December 1941.
 Part III

A Colonial Paradox
 Chapter 9
Japanese Invasion
and Occupation

The centenary of the British occupation, 1941, was a landmark in the

modern history of Hong Kong in more than one sense. It was the first
time that its survival and continuation as a Crown Colony came under a
serious threat, as it faced a full-scale invasion by the Japanese Empire.
Even though its defence was poorly prepared and organised, its garrison
put up a gallant though short fight. Thus began the ordeal of Japanese
occupation that lasted three years and eight months. For the first time
since Elliot claimed Hong Kong for Queen Victoria, the British were not
the lord and master but prisoners and internees. Japanese rule did not
last but the impact of Japan’s successful invasion destroyed the myth of
the invincibility of the British Empire. Pax Britannica was reduced from
the basis of Hong Kong’s security to a relic of history. The clock could
not be turned back. In the meantime, both the expatriate British and the
Chinese of Hong Kong did what they could to resist the Japanese. The
British government also put together a small team in London to plan and
work for the restoration of British sovereignty at the end of the war.
There was a recognition among the planners that while Britain must
restore its jurisdiction over Hong Kong, British rule would be different
from what had prevailed before the war.

The Battle of Hong Kong

When Japan invaded China in July 1937, Nazi Germany under Adolf Hitler
had already reoccupied the Rhineland in breach of the Versailles Peace
Treaty and the Spanish Civil War had been raging for about a year. The
British armed forces were in no state to fulfil its worldwide obligations in
imperial defence and meet the rising challenge being posed by a rapidly
rearming Germany at the same time. 1 This was due in large part to the
British government’s strategic assumption during the inter-war period that
there would not be a general war for ten years. 2 The neglect of its defence
consequently ‘placed the British Empire in a position of the utmost danger
by the later 1930s’. 3 This explained Prime Minister Neville Chamberlain’s
view following the Japanese invasion of China that ‘to pick a quarrel with
Japan at the present moment’ was ‘suicidal’, because if Britain ‘were to
120 A MODERN HISTORY OF HONG KONG

become involved in the Far East the temptation to the Dictator States to
take action whether in Eastern Europe or in Spain might be irresistible’. 4
Even before the Second World War started in September 1939, British
defence planning already worked on the basis that in the event of a war
with Japan, ‘delaying action was the best to be hoped for’ in Hong Kong. 5
This was because the military admitted that problems of ‘effective defence
of Hong Kong’ against Japanese air assault were ‘virtually insoluble’. 6
The situation grew worse when war started in Europe and the Royal
Navy became fully occupied in keeping the sea-lanes open for Britain.
By then, London had reluctantly considered Hong Kong expendable. 7
Although staunchly against giving up any British territory, Winston
Churchill, who took over as Prime Minister in May 1940 at the critical
time of the Dunkirk evacuation, accepted that Hong Kong would fall to
the Japanese and that the peace conference would deal with its future. 8
To minimise losses there, Churchill preferred to reduce the garrison to a
nominal size but refrained from doing so in order not to undermine the
prestige of the Empire and China’s will to resist and to tie down a large
number of Japanese forces.
Hong Kong’s defence in the summer of 1941 consisted of four regular
infantry battalions, of which two were Indian, the reinforced battalion-
strength Volunteers, four regiments of artillery, a flight of three obsolete
Wildebeeste torpedo bombers, two Walr use amphibian planes, four
destroyers (three would be away and one in dry dock when Hong Kong
came under attack), four gunboats, a flotilla of eight torpedo boats and
the local naval reserve. 9 Churchill allowed this force to be reinforced
because Canada offered two infantry battalions. After their arrival in
November, three weeks before hostilities started, they brought the total
strength of the defence force to just over 10,000. The Canadian battalions
had not yet completed their training, did not have all their equipment
and were not combat ready. They were sent partly because they were not
ready for service in Europe where the best-trained units were earmarked.
They did not have time to know the terrain or train with the rest of the
defence force before they saw action. They went to Hong Kong to deter
the Japanese, encourage Chinese resistance and boost British prestige
and morale in Asia. 10 There was no expectation that they could enable
this exposed imperial outpost to be held indefinitely, though a handful
of general officers and policymakers indulged in the wishful thinking
that the reinforced garrison could hold out for at least four months. 11
The arrival of the Canadians led British commander Major General
Christopher Maltby to change the defence plan, which had previously
focused upon the defence of the island but not the mainland. Maltby
now deployed one of his two brigades on the mainland. The basic thinking
was to hold the invaders in a prepared defence line, the Gin Drinker’s
Line in the southern part of the New Territories for a week before
withdrawing to Hong Kong island, where the garrison would make a
strong stand. 12 On the island, troops were again deployed for static
defence of prepared positions. There was no mobile reser ve of a
 JAPANESE INVASION AND OCCUPATION 121

meaningful size that could be sent quickly to counterattack and destroy a

Japanese landing force. The involvement of the local Chinese in the de-
fence was largely limited to about 450 who volunteered to join the local
defence forces and a larger number in essential services, such as air raid
wardens or auxiliary firemen. 13 The large pool of Chinese manpower was
not utilised to any serious extent. The defence plan was unimaginative.
By the summer of 1941, the British had reached an understanding with
the Chinese government under Chiang Kai-shek to coordinate their
respective military operations in the event of a Japanese attack on Hong
Kong. 14 The main agreement was that, once hostilities started, the Chinese
Army would attack the Japanese forces from their rear to relieve the
pressure on the British garrison. 15 The British also explored the possibility
of cooperating with the Chinese Communist guerrillas, who operated in
the vicinity of Hong Kong, though no agreement was reached as the
Communists thought the British ‘lacked sincerity in the common defence
against the Japanese’. 16
Poised to attack Hong Kong was the 23 rd Corps of the Japanese Army
under Lieutenant General Sakai Takashi, who was also given overall
command of the air and naval units in support of the assault. The actual
invasion force was Lieutenant General Sano Tadayoshi’s battle-hardened
38 th Division, which was generously reinforced by two brigades and six
battalions of artillery, tanks, and other logistical units. They were supported
by 63 bombers, 13 fighters and 10 other aircraft, as well as a light cruiser,
three destroyers, four torpedo boats, three gunboats, two ancillary ships
and five naval aircraft. 17 The invasion force as a whole was well over 20,000
strong and had a considerable edge over the motley assortment of the
multilingual and multiethnic British defenders. 18 The Japanese forces also
enjoyed the benefit of having the Corps headquarters assuming overall
command, the confidence that Sakai could call on the two other divisions
of the Corps deployed in Guangdong to reinforce or block any Chinese
relief efforts if necessary and the advantage of having been put together
and trained together for this specific operation for over a month. 19
The Japanese also had superb intelligence about Hong Kong’s defence,
which they had gathered over a long period by placing their agents to
work as waiters, barmen, hairdressers, masseurs and prostitutes to service
British officials and military officers. 20 This included, for example, a naval
commander who, for seven years, worked as a hairdresser and patiently
listened to conversations among his British patrons, including two
governors, senior army officers, the commissioner of police and the head
of the special branch. It meant the Japanese had ‘a full and accurate survey
of the whole defensive position’ before the invasion started. 21
At 8am on 8 December, a clear and sunny morning, four hours after
the United States Navy base at Pearl Harbour in Honolulu came under
the most devastating attack ever mounted against the USA, Japanese
bombers effectively destroyed British air power in one attack. Although
two of the Wilderbeestes in fact escaped damage, they were never
deployed against overwhelming odds and were themselves destroyed by
122 A MODERN HISTORY OF HONG KONG

the British before the airport was evacuated. 22 The battle for Hong Kong
had started with the Japanese gaining complete air supremacy within the
first five minutes. Two days later, the Japanese breached the Gin Drinker’s
Line at the Shing Mun Redoubt. Maltby concluded that unless he withdrew
his brigade from the mainland immediately he would not be able to hold
the island for long. Thus began the best-organised operation of the battle,
under which the British disengaged from combat and evacuated their
forces across the harbour with relatively little loss. 23
The second and much more intense phase of the battle started under
cover of darkness late at night on 18 December, when six Japanese
battalions successfully crossed Victoria Harbour at its eastern side, after
an unsuccessful attempt three days earlier. This was the beginning of the
end but much hard fighting was waged by the defenders on the island.
Although Hong Kong’s defenders were inadequately trained and poorly
prepared they gave an honourable account of themselves, which differed
greatly from what happened in Singapore or Malaya. The resolute
leadership of Sir Mark Young, who took up the governorship on 10
September, and Maltby’s tenacity, despite his other inadequacies as a
general, left their marks. They saw to it that Hong Kong’s completely
outclassed defenders followed Prime Minister Churchill’s order to resist
with utmost stubbornness ‘in spirit and to the letter’. 24 They put up a
gallant though badly organised fight for 17 days, and did sufficient damage
to the Japanese 38 th Division to delay its redeployment to the Dutch East
Indies. 25 Some units also demonstrated such courage, resolution and daring
against overwhelming odds that they deser ved to earn, in Churchill’s
words, the ‘lasting honour’ that was their due.
There was, for example, the stand of the ‘Hughesiliers’, a unit of the
Volunteers, at North Point power station the night the Japanese crossed
the harbour. The ‘Hughesiliers’ consisted of four officers and 68 men,
all over 55 or too old for service but volunteered to serve under their
commander Lieutenant Colonel Owen Hughes, a former member of the
Legislative Council. They were, like 70-year-old private Sir Edward Des
Voeux, mostly taipans or seniors in British hongs and were deployed at
the power station to keep them out of the front line. 26 On the night of
the engagement, 36 of them were on duty under Major John Patterson
(Chairman of Jardine and member of the Legislative Council), and they
were reinforced by technicians of the power plant and a small number
of soldiers from the Middlesex Regiment who drifted there following
the tide of battle elsewhere. The power plant happened to be in the way
of one of the advancing Japanese columns. They came under fierce attack
at 1:00am on 19 December and denied the power plant to the Japanese
until 4:00am. They did not surrender and give up their position until
they ran out of ammunition the following afternoon. 27 They halted the
advance of a Japanese column for as long as was humanly possible.
There was also the charge of the motor torpedo boats (M.T.B.s) when
the Hughesiliers were making their last stand. The Japanese were pouring
across the harbour in small craft to consolidate their ‘beach head’ on the
 JAPANESE INVASION AND OCCUPATION 123

morning of 19 December. Six boats of No. 2 M.T.B. flotilla under

Lieutenant Commander George Gandy were organised into three waves
to speed across the harbour from west to east to disrupt and if possible
stop the crossing. 28 They attacked in pairs in broad daylight, though the
Japanese dominated the harbour, both by superior artillery and machine-
gun fire on the north shore of the entire harbour, additional fire from
the south side of the harbour, from North Point to the east, and from
the air. The first wave, which enjoyed the benefit of surprise, disrupted
the Japanese landing, though one boat was badly damaged. 29 The second
pair charged courageously but met with concentrated and accurate fire,
which sank one and severely damaged the other. 30 Since the Japanese had
by then stopped sending any more landing craft into the harbour, the
British naval commander ordered the third wave to abort. It is not clear
whether Lieutenant D.W. Wagstaff, commanding M.T.B.26, did not receive
the order or chose to ignore it. 31 His boat charged into a maelstrom of
fire and bombs and was sunk with its last Lewis gun still firing off North
Point, more than halfway across the harbour. 32 Whether the charges of
the second and the third waves were heroic or, like the charge of the
Light Brigade in the Crimean War, foolhardy, they had the effect of
stopping the Japanese reinforcement of its forces on Hong Kong island
for the rest of the day. 33
Britain’s new ally, China, did try to keep its promise. On the day the
Japanese attacked Hong Kong, Chiang Kai-shek declared war on Japan –
until then the Japanese invasion was resisted without either side declaring
war. On the following day, he ordered three corps under General Yu
Hanmou to march towards Hong Kong. 34 To relieve the Hong Kong
garrison, he planned to launch a New Year’s Day attack on the Japanese
in the Canton region. However, before the Chinese infantry, which had
no motor transport, could get into position to attack, the Japanese had
shattered Hong Kong’s defences.
The end came on Christmas Day. By then, one of Maltby’s two brigade
commanders, Canadian John Lawson, had already been killed. Organised
defence had been reduced to pockets of resistance, some of which were
out of contact with headquarters, and the Japanese were about a mile
from Army and Navy Headquarters as well as from Government House.
That morning, Young sent his Christmas message to what remained of
the defenders in a language resembling Churchill’s own. He urged them
to ‘hold fast for King and Empire… in this your finest hour’. 35 He also
rejected for the third time an offer to surrender, and intended ‘to add
another twenty-four hours to the credit of the account’. 36 At 2:00pm
Maltby checked with the Middlesex Colonel commanding the front in
the central pocket and was told that in an hour or so useful military
resistance would no longer be possible. Maltby telephoned Young with a
recommendation to surrender an hour later. 37 Young asked Maltby to
check the situation again and was informed that the remnants of the
Middlesex battalion could hold out for another half an hour at most,
with the remaining posts manned by remnants of the Punjabi battalion
124 A MODERN HISTORY OF HONG KONG

lasting a maximum of two more hours. 38 After checking with the naval
commander who confirmed Maltby’s assessment and who, like Maltby,
assured Young that they were personally prepared to defend and perish
with their respective headquarters, Young decided further resistance could
no longer justify the costs involved. At 3:15pm, he accepted Maltby’s
advice in order to reduce further heavy loss of life and to avoid provoking
the Japanese to brutalise the civilian population in attempting a repeat
of the 1938 Nanjing Massacre. 39 Darkness descended on this outpost of
‘the empire where the sun never sets’.
The human cost of the battle was high. The British suffered casualties
amounting to 2,232 killed or missing and 2,300 wounded, while the
Japanese reported 1,996 killed and 6,000 wounded. 40 The losses of the
civilians, who suffered from Japanese brutalities, sustained bombardment
and systematic looting by gangsters following the retreat of British forces
and police, cannot be reliably estimated.

The Destruction of Imperial Invincibility

The myth surrounding the might of the British Empire ended when Young
became the first British governor to surrender a colony to an enemy after
the end of the American War of Independence in 1782. The battle of
Hong Kong was in any event greatly overshadowed by the Malayan
campaign and, above all, by the surrender in February 1942 of Singapore,
the symbol of British imperial power in the East. 41 Hong Kong fell because
its defenders were outnumbered at least two to one, vastly outgunned on
land, in the air and at sea and outmanoeuvred. In Malaya and Singapore,
138,708 British ser vicemen were defeated and captured by 50,197
Japanese, who suffered, in comparison to the 17-day Hong Kong
operation, merely 9,824 battle casualties over the ten weeks of the
campaign. 42 The Japanese victory and the British defeat in Southeast Asia
were nothing short of spectacular. They caught the imagination of Asia. 43
The Japanese humiliated the British Empire and in the process
destroyed the myth of the superiority of the white race. As a result, even
long-time supporters of the Empire, such as the Secretary of State for
India, Leo Amery, lost heart. He admitted that ‘we were on the eve of
very great changes in the relation of Asia to Europe’ and it is doubtful
‘whether in the future empires like our Asiatic empire’ could subsist. 44
The destruction of the supposed invincibility of the British Empire
had practical implications for its claim over Hong Kong, as the colony
lay inside the Allied powers’ China theatre, which covered the whole of
China, Indo-China and Thailand. 45 On US President Franklin Roosevelt’s
initiative, Chiang Kai-shek became supreme commander of this theatre
in January 1942. 46 This arrangement was primarily a gesture to Chiang
and at this stage was largely academic with regard to Hong Kong. Indeed,
it was not clarified whether Hong Kong, as a British territory, was within
Chiang’s command. Nevertheless, Chiang was justified in considering it
within his theatre. A shadow was cast over its long-term future as a
British territory.
 JAPANESE INVASION AND OCCUPATION 125

As the shock of the rapid collapse of the Allied defences in Southeast

Asia sank in, responsible officials in both the British and Chinese
governments began to think about Hong Kong’s future. Now that the
myth of British invincibility had been destroyed, the nationalistic Chiang
pondered whether he could use the wider war to end, as soon as possible,
the ‘unequal treaties’ to which China had been subjected since the 1840s. 47
Consequently, he instr ucted the Chinese Ambassador to Britain,
Wellington Koo (Gu Weijun), to explore the British attitude towards Hong
Kong. 48
In London, the Colonial Office was the first to reflect on – and
recognise the implications of – Britain’s failure to defend Hong Kong
for any length of time. 49 While Britain had no illusions about the difficulty
of defending the colony, its rapid fall was a major blow. When David
MacDougall, a cadet officer of the Hong Kong government, joined the
Colonial Office after a daring escape to China on the day the colony fell,
he immediately raised an alarm. He reported that all Chinese officials he
met in China, up to the vice-ministerial level, assumed that Hong Kong
would be returned to China after the war. 50 The Colonial Office accepted
that ‘the arrangements existing before the Japanese occupation would
not be restored’. 51
The question of Hong Kong’s future became the subject of an intense
internal debate within the British government in June 1942, which was
when the Foreign Office took an active interest. The head of its Far
Eastern Department, Ashley Clarke, initiated the debate after he visited
the USA, where he engaged in lengthy discussions with State Department
officials. His US colleagues, particularly Stanley Hornbeck, expressed
strong pro-China and anti-British Empire sentiments. This troubled Clarke
deeply, 52 for he believed that the US would reject the restoration of the
status quo ante in Hong Kong. He thus urged the British government to
prepare itself to give up Hong Kong ‘in order to maintain the really
important things’. 53 The Colonial Office officials, led by Assistant Under-
Secretary Gerald Edward Gent, considered Clarke’s view ‘defeatist’. 54
With the help of MacDougall and the blessings of his senior colleagues,
Gent produced a policy paper to pre-empt an unacceptable one being
put forward by Clarke. 55 The Secretary of State for the Colonies, Lord
Cranborne, strongly supported Gent. 56 The issue was eventually referred
to the War Cabinet, which preferred to avoid giving up Hong Kong.
Churchill felt that ‘questions of territorial adjustment could not be
considered now and must be left to be raised at the peace conference’. 57
The issue of Hong Kong’s future, disguised in the form of the future
of the leased New Territories, did come up when Britain negotiated with
China in late 1942 to end extraterritorial and other privileges it enjoyed
in China. 58 It became the sticking point preventing an agreement to be
reached. A compromise was eventually devised. It was for the Chinese
Foreign Minister to inform the British ‘that the Chinese government
reserves its right’ to raise the issue of the New Territories lease again
‘for discussion at a later date’. 59 Britain formally acknowledged the Chinese
126 A MODERN HISTORY OF HONG KONG

position. 60 What this meant was that Britain accepted for the first time
that there was a ‘Hong Kong problem’ – a problem the Chinese could
raise after the victory over Japan.

Occupation and Resistance

Although the spectacular defeat of Britain and the other Western
imperial powers in Asia by Japan shattered once and for all the myth of
the superiority of the white race, it did not enable the Japanese to build
up a Greater East Asia Co-prosperity Sphere. The Japanese made two
basic and interrelated errors. To begin with, they not only wished to
dominate the region to achieve ‘economic self-sufficiency’ but also to
‘satisfy a psychological craving – the recognition of Japan’s ethical and
cultural superiority… to play the part which the Chinese had once played
in the great days of the Celestial Empire… when China was regarded…
as exemplar and fountainhead of civilised life’. 61 The Japanese tried to
achieve this primarily through the use of force. They did not understand
that China could have done so in the past because she was so vastly
richer and more powerful than all her neighbours that she could afford
to be overly generous to them and thus earned her place. It was a
position Japan did not enjoy and could not afford in the 1940s. The
second mistake the Japanese made was a failure to recognise ‘freedom
for Asia’ par ticularly if only achieved by the iron fist of a new
hegemonic power, even if it was Asian, ‘was not enough, that each
national movement demanded its own freedom’. 62 The Japanese never
intended to trea t other Asians as equals or g enuine par tner s. 6 3
Consequently, even though they technically liberated many Asian peoples
from Western imperialism, they could not secure, with a small number
of exceptions, their loyalty and support. They tried to pacify their new
empire by repressive measures. This meant Japanese occupation in Asia
was brutal. Hong Kong was no exception.
In its incar n a tion as the Ca ptur ed Ter ritor y of Hong Ko n g ,
Lieutenant General Isogai Rensuke took over from Sakai and became
Governor in February 1942. While the Japanese Prime Minister General
Tojo Hideki deemed Hong Kong ‘strategically vital for the defence of
the Greater East Asiatic Sphere’, its future status was not settled. 64 It
was intended that it would be administered as a Japanese territory but
its retrocession to China as part of the post-war arrangement was not
ruled out. 65 As long as the war went on, Hong Kong’s first and foremost
function was to support the Japanese war effort. 66 This underlined
Japan’s occupation policy.
Although real power in occupied Hong Kong continued to rest with
the military, a civil administration was set up and local collaborators were
recruited to give the administration credibility and reduce the need for a
sizable gar rison. For this purpose, two councils were set up with
established local Chinese elite being recruited, cajoled or forced to serve.
At the top was the four-member Chinese Representative Council chaired
by Sir Robert Kotewall. Below that were the 22 members of the Chinese
 JAPANESE INVASION AND OCCUPATION 127

Co-operative Council under the chairmanship of Sir Shouson Chow.

Kotewall was a member of the Executive Council prior to the occupation
and Chow had served in the same capacity from 1926 to 1936. They were
authorised to collaborate by the Secretary for Chinese Affairs R.A.C.
North, Attorney General Grenville Alabaster and Defence Secretary J.A.
Fraser in January 1942, as the British were no longer in a position to act
on behalf of the local Chinese. 67 Although Kotewall was not as enthu-
siastic a collaborator as his two colleagues on the Representative Council,
Chen Lianbo and Liu Tiecheng, and his loyalty to the British Crown was
eventually accepted after the war, his apparent willingness to collaborate
caused serious misgivings upon the Japanese surrender. 68 The same did
not apply to Chow and, indeed, to a number of others like Li Shu-fan
and Man-kam Lo, who had served against their own wishes on the Co-
operative Council. 69 The two Chinese councils were in any event meant
mainly to make Japanese rule easier for the Japanese and to help monitor
the views of the Chinese community. 70 They were not powerful or
influential organisations like the Executive and Legislative Councils under
the British.
Given Hong Kong’s place in Japanese strategic thinking and the logistics
involved in feeding a population of over 1.5 million after its economy
was broken, the Japanese assiduously worked to reduce the population.
This was achieved by requiring all who did not have residence or
employment to leave. Although this policy was odious, with brutal tactics
employed to ensure its implementation, it was highly successful. By
February 1943, the population had dropped to 969,000, falling further to
5–600,000 by the time the Japanese had surrendered in August 1945. 71
Those who stayed behind suffered considerable hardship under a reign
of ter ror. They had to suffer from the arbitrar y and bloodthirsty
behaviour of Japanese soldiers and their terror-instilling military police,
the Kempeitai. Japanese sentries regularly and harshly punished and
occasionally even shot or beheaded any passing Chinese who failed to
bow in the required manner. 72 Some also frequently raided Chinese homes
and took whatever they wanted. 73 Such behaviour reinforced the image
of terror created by atrocities the Japanese committed during the battle,
of which the most infamous was the St Stephen’s College massacre in
Stanley. This happened on the last day of the battle, when 56 British
wounded, two doctors and seven nurses were murdered in cold blood in
this wartime medical station. Even more terrifying to the local community
were random atrocities committed against them, as some civilians ‘were
used for bayonet or shooting practice, or for jujitsu practice, being thrown
heavily a number of times, and bayoneted when unable to move’. 74
They also had to endure great shortages in all kinds of commodities,
including rice. This was caused partly by Tojo’s directive to find and export
all valuable material kept by the British in this wealthy colony for use in
Japan. 75 This resulted in the shipping from Hong Kong to Japan of the
colony’s large reserve of rice, among other valuables like vehicles and
machinery. The result was a severe shortage and dramatic price increase
128 A MODERN HISTORY OF HONG KONG

for this the most basic of essentials for the local community. 76 The
situation deteriorated further as the tide of the war turned against Japan
and its navy could no longer secure the sea-lanes. According to one
account, for much of the occupation between 300 and 400 corpses were
routinely collected everyday from streets, though the highest recorded
was 721. 77 How many of these died of starvation or privation cannot be
ascertained. Whatever sympathy the Japanese gained from the Chinese
in removing their British colonial masters was quickly destroyed and
replaced by fear and hatred. The Kempeitai instituted a reign of terror
by publicising its methods of torture and places for execution. Some of
their favourite methods of torture were pumping water into a victim until
it came out from other parts of the body or pulling off nails from fingers,
both techniques regularly applied to anyone deemed to have committed
minor offences like violating currency control. 78
As for the British, the Japanese sought to destroy their presence by
renaming streets and places, removing old records, replacing the currency
when possible, changing the school curriculum by substituting Japanese
for English and humiliating them in front of the Chinese. 79 British
prisoners of war were kept mainly in the former army barracks in Shum
Shui Po, while most of their officers were kept in the smaller Argyle
Street Camp in Kowloon. Although a small number of the prisoners were
able to escape, including Lieutenant Colonel Lindsay Ride of the
Volunteers, most prisoners remained in their camps or were sent to Japan
to work. Life in the camps was harsh, with food being kept to near
star vation level and any able bodied men put to arduous work on
construction projects like extending the local airport. 80
British and other Allied civilians, numbering about 2,500, were interned
in Stanley next to the local prison on the southern side of the island.
Conditions there were marginally better than in the POW camps since
the internees were not required to supply manpower for work parties.
The collapse of British power had different effects on the internees.
Some Britons continued to indulge in racism and blamed the presence
of Eurasians for the inadequate food, though it was often the Eurasians
who secured extra food from their relatives in the city and sometimes
shared it with others. 81 Others used their ingenuity and resourcefulness
to produce additional food. A notable contribution in this respect was
made by Geoffrey Herklots, a botanist at the university and an authority
on local flora and fish. There was also Franklin Gimson, who arrived to
take up the office of Colonial Secretary the day before the Japanese
attacked and showed himself to be remarkably far-sighted and reflective.
In Stanley, Gimson had to work hard to restore the reputation and
credibility of Hong Kong officialdom, both in tatters as a result of the
rapid collapse of the defence. 82 Above all, he had to battle the old
establishment view, put strongly by Secretary for Chinese Affairs R.A.C.
North, against introducing self-governing institutions to the people of
Hong Kong as a whole. 83 In contrast, Gimson tried to persuade the others
that ‘in future the Chinese will have to play a bigger part in Hong Kong
 JAPANESE INVASION AND OCCUPATION 129

and that the Europeans will have to rely on their co-operation more than
they have done in the past’. 84
Hong Kong’s resistance efforts were made mainly in parallel by two
groups, though some cooperation did exist between them. On the one
side were the British efforts to which young Chinese of Hong Kong like
Francis Yiu-pui Lee and Paul Ka-cheung Tsui volunteered and made
important contributions. They were carried out by the British Army Aid
Group (BAAG), set up and commanded by Lieutenant Colonel Ride, the
best-known escapee from Shum Shui Po. On the other side were the
Chinese guerrilla efforts carried out mainly by Communist partisans.
After his escape in January 1942, Ride persuaded the British military
representatives and the Chinese government to allow him to set up a unit
to help others escape from Hong Kong, for which he was to recruit from
members of the Special Operations Executive (SOE) and particularly from
among those who had served in Hong Kong. 85 The BAAG operated in
close liaison with the SOE but it also coordinated its work with the
Chinese government and had limited contact with Communist partisans
operating in and around Hong Kong. 86 In addition to its function in
rescuing Allied personnel, including airmen shot down and essential
workers trapped in occupied Hong Kong, the BAAG developed a major
role in intelligence gathering. It enabled the British to secure not only
regular military intelligence but also valuable information on the situation
in Hong Kong, including the loyalty of prominent individuals. 8 7
Altogether, the BAAG helped 139 POWs, 33 American airmen, 314
Chinese in British armed services, and 1,400 civilians to escape and rejoin
the war effort. 88
Although technically part of the escape and evasion organisation M.I.9
and coming under the command of the Director of Military Intelligence,
General Headquarters in New Delhi, the BAAG primarily represented
Hong Kong’s resistance efforts. 89 Its agents and runners were mostly
ethnic Chinese even though most of its officers were expatriate British.
This was the first organisation in which expatriate Britons, Chinese and
other nationalities of Hong Kong served together without a clear and
unbreakable racial divide, where ethnic Chinese like Lee and Tsui were,
among others, commissioned as officers. Both rose to the rank of captain.
Indeed, Tsui’s war record was an important factor in his selection as the
first ethnic Chinese cadet after the end of the war. In the resistance efforts
of the BAAG, old colonial Hong Kong was beginning to give way to one
that promised to be different.
The other main resistance was waged by Chinese Communist guerrillas,
who were formally organised into the Hong Kong and Kowloon or the
First Independent Group of the East River Column under General Zeng
Sheng in December 1943. 90 The group was in fact formed in February
1942 with local residents Cai Guoliang as commander and Chen Daming
as political commissar and armed with 30 machine guns and several
hundred rifles left by defeated British forces. 91 Its strength numbered
about 400 between 1942 and 1945. 92 The group operated mainly in Sai
130 A MODERN HISTORY OF HONG KONG

Kung, its stronghold, and in Sha Tau Kok, Taipo, Yuen Long and Lantau
Island, though a special pistol unit operated in the urban areas of Hong
Kong and Kowloon. 93 Its first task was to rescue various prominent
Communist and leftwing individuals who were stranded in Hong Kong. 94
It also developed a role for helping Allied escapees and downed airmen
to evade their Japanese pursuers, a role which was often shared or
coordinated with the BAAG and accounted for the safety of 89 individuals
including Ride. 95 In addition, the Communist cadres used the resistance
efforts to recruit supporters particularly from among the young and
educated people of Hong Kong. 96

Wartime Planning in London

After the initial shock and problems associated with the collapse of British
power in East Asia had sunk in, the Colonial Office started to examine
what the future held for the British Empire there. The first issue for
Hong Kong concerned its post-war status, since the British government
had conceded that the Chinese government had a right to raise the future
of its New Territories after the defeat of Japan. 97
At the beginning of 1943, Colonial Office thinking was that Britain
must try to avoid giving up sovereignty over Hong Kong. Should that
prove impossible, it would negotiate with China and treat Hong Kong
as Britain’s contribution to a general settlement for a new order in the
Far East. 98 The Colonial Office insisted that, in such a situation, Britain’s
contribution must be matched (though in still undefined forms) by China
and the USA. 99 Though official British policy separated sovereignty over
Hong Kong proper from that over the New Territories, officialdom dealt
with the two together in internal deliberations.
The following summer, Assistant Under-Secretary Gent produced a
paper to argue that Britain should retain the New Territories or keep
Hong Kong proper if it could not hold on to the New Territories. 100 In
the event of the latter, he suggested Britain use the early end of the lease
to negotiate with China for joint control over the airport, reservoirs and
other parts of the infrastructure in the New Territories essential for Hong
Kong’s wellbeing. This was the first time in internal discussions that
British officials had seriously proposed examining the possibility and
implications of keeping Hong Kong proper without the New Territories.
Nothing came of this initiative, since the Foreign Office, which was still
inclined to use Hong Kong as a bargaining chip to secure other more
important British interests, refused to take part.
In the meantime, Gent made what arrangements he could within the
authority of the Colonial Office to strengthen Britain’s ability to recover
Hong Kong. He proceeded to create a civil affairs staff for Hong Kong
even before the armed forces were ready to accommodate such a unit in
their organisations or, indeed, to plan an operation to recover the
colony. 101 Thus, a Hong Kong Planning Unit was created under the wing
of the Colonial Office. It was initially put under a recently retired Colonial
Secretary of Hong Kong, Norman Smith. From 1944 onwards, it was
 JAPANESE INVASION AND OCCUPATION 131

headed by David MacDougall, the cadet who had escaped from Hong
Kong. By setting up the Unit at such an early date, Gent tried to build up
an implied acceptance at an official level that Britain would return to
Hong Kong at the end of the war. 102 It also provided Britain with the
human resources, the core of a civil affairs staff, it needed to take over
the administration of the colony as soon as it could be liberated.
In addition to helping the Colonial Office work out specific policy
directives on policing, education, prison, financial policy, immigration,
Chinese Affairs and other matters, the Hong Kong Planning Unit
embarked on a study of constitutional reform in May 1945. 103 Several
proposals, ranging from reforming the Executive and Legislative Councils
to establishing a new municipal council, were discussed though no
conclusion was reached before the Japanese surrendered in August. In
general, Gent felt ‘there should be an extension of democratic forms in
the new era’. 104 With Gent providing a guiding hand, the ‘Colonial Office
wanted a bold approach’, prefer ring measures that would provide ‘a
sufficiently wide range of functions to attract responsible Chinese to
serve on’ the new or reformed councils. 105 Gent had taken to heart the
lessons he learned defending Hong Kong as an imperial possession after
the destruction of the veil of imperial invincibility.
The fortunes of war affected Britain’s attitude towards Hong Kong.
In 1944, China suffered a major reverse when it lost more than half a
million troops to the Japanese offensive known as Operation Ichigo. 106
In contrast, the British counter-offensive in Burma, which was assisted
by the Chinese, was making steady progress. Britain’s successes in the
war and the prospect of instability and weakness in post-war China
hardened its attitude towards Hong Kong. In November, the deputy
prime minister and leader of the Labour Party, Clement Attlee, declared
in the House of Commons that Britain intended to return to Hong
Kong. 107 The British government’s attitude hardened further when the
US Ambassador to China, Patrick Hurley, visited London in April 1945.
In response to Hurley’s suggestion that Britain should return Hong Kong
to China, Prime Minister Churchill emphatically stated that it could only
happen ‘over my dead body’. 108 With the backing of the Prime Minister,
the Colonial Office won the upper hand in its bureaucratic battle against
the Foreign Office over Hong Kong’s future.
The planning undertaken in London suddenly assumed urgency in July.
Although the Americans in China, under Lieutenant General Albert
Wedemeyer, had started planning an operation to liberate south China
earlier in the spring, including the Canton–Hong Kong region, the British
were not informed. 109 Until July, the British worked on the premise that
‘nothing whatever has been settled’ with regard to the manner of Hong
Kong’s liberation and ‘no decision [was] likely for a considerable time’. 110
At the Potsdam Conference, the Americans told them Wedemeyer’s plan. 111
The prospect of the regular Chinese army reoccupying Hong Kong
in the near future galvanised the British into action immediately. The
idea of launching a British attack to liberate Hong Kong was considered
132 A MODERN HISTORY OF HONG KONG

but dismissed, because there were ‘insufficient British forces available

at present to oust the enemy’. 112 The consensus reached was that Britain
should attach a civil affairs unit to the Chinese invasion force. In the
event of Chinese irregular forces retaking Hong Kong, it was agreed
that the SOE would send in a British civil affairs unit in a clandestine
operation mounted outside China. 113 Such options were available thanks
in no small part to Gent’s earlier initiative to establish the Hong Kong
Planning Unit. The Unit was put on standby for incorporation into the
armed forces as civil affairs staff. Its head, MacDougall, was the first
to be commissioned and was given the rank of brigadier.
The British felt they were working against great odds. They felt certain
Wedemeyer was ‘personally opposed to’ their forces in China trying to
recover Hong Kong. 114 This assessment was correct, because ‘Wedemeyer
regarded British intentions and plans as incompatible with American
policy in China’. 115 Nevertheless, the Colonial Office explored every
possible option to enhance the restoration of British sovereignty in Hong
Kong. It arranged with the Admiralty to set aside ‘two or three suitable
fast moving fleet units to be so placed, if Japanese capitulation looks
possible, that they may steam at once for Hong Kong under sealed orders
on given signal’. 116 It also instructed the BAAG to smuggle a message to
Gimson instructing him ‘to restore British sovereignty and administration
immediately’ in the event of Japanese capitulation in Hong Kong. 117
British officials were driven by the belief that the recovery of Hong
Kong was very important for British ‘prestige and future relations with
China’. 118 There was also a feeling that, ‘once in occupation [of Hong
Kong], a Chinese force of whatever nature might prove difficult to extrude
by ordinary diplomatic means’. 119 By then, the Foreign Office had come
a long way from Ashley Clarke’s 1942 position. In July, it modified and
adopted as its own the position paper on Hong Kong that Gent had
originally prepared in 1943. In the new circumstances, the Foreign Office
sought to recover Hong Kong, including the New Territories, on three
grounds. 120 These were:
• British enterprise and good government had built a barren island
with a few thousand inhabitants into one of the world’s great ports;
• with the removal of extraterritoriality and a probability of unsettled
conditions in post-war China, Hong Kong was more important
than ever as a base for British merchants and industrialists
operating in China; and
• having lost the colony to the Japanese, it was ‘a point of national
honour… to recover it, and restore it to its normal state of order
and prosperity’. 121
 Chapter 10
Return to Empire

The end of the Pacific War came when Japan accepted the ter ms laid
down by the Allied powers in the Potsdam Declaration. The tremen-
dous psychological shock of the devastating effects of the atomic bombs
in Hiroshima and Nagasaki and the Soviet Union’s entry into the war,
as well as the Japanese government’s ‘almost paranoiac fear that, sooner
or later, the people would react violently against their leaders if they
allowed the war to go on much longer’, finally persuaded it of the futil-
ity of further resistance. 1 On 14 August 1945, Emperor Hirohito an-
nounced Japan’s unconditional surrender and ordered Japanese troops
to lay down their arms.
Much as this earlier than expected end of the war was a godsend to
the war-weary people of Britain, the British government found itself in
a very awkward situation over Hong Kong. The Japanese surrender had
transformed the internal deliberations and debates over the future of
this imperial outpost in the previous three years into a live issue that
required urgent attention. When the prospect of a military campaign to
liberate Hong Kong had loomed earlier, the British government had
accepted that it was ‘within the operational sphere of Generalissimo
Chiang Kai-shek’. 2 Furthermore, the US President’s General Order No.
1, which laid down the principle for accepting the Japanese surrender,
required all Japanese forces ‘within China (excluding Manchuria), Formosa
and French Indo-China north of 16 degrees north latitude’ to ‘surrender
to Generalissimo Chiang’. 3 In line with the above, the Japanese should
surrender Hong Kong to Chiang. However, the British government saw
this arrangement as har mful to British interests, which required the
restoration of British jurisdiction over all its Asian colonies. It therefore
acted immediately. On the day the Japanese surrendered, the British
proceeded to detach and form a special naval task group to sail towards
Hong Kong. 4
In China, Chiang had much on his mind in working out arrangements
to accept the Japanese surrender, not least to minimise the scope for the
Communist forces under Mao Zedong to use this opportunity to expand
rapidly. He did not expect a dispute over Hong Kong. Nevertheless, he
134 A MODERN HISTORY OF HONG KONG

did not overlook Hong Kong and designated the Thirteenth Corps under
Shi Jue, which had been issued with US equipment earlier in the summer,
to take over Hong Kong. 5 Shi’s corps was in the vicinity of Wuzhou, less
than 300 miles from Hong Kong, when the news broke. 6 Sun Liren’s New
First Corps, which earned a reputation as the most combat effective unit
in the Chinese Army in the Burma campaign was also in the same area,
and was ordered to liberate Canton. The two forces, which together
numbered more than 60,000, could have marched their infantries to Hong
Kong relatively quickly even though the transportation of their heavy
equipment would have taken longer in light of the terrain and badly
damaged infrastructure in the region. 7 They did not proceed at all speed,
as Chiang had not expected serious complications over the liberation of
Hong Kong. He was wrong; Rear Admiral Cecil Harcourt lost no time in
preparing a British fleet to steam towards Hong Kong.

The Race for Hong Kong

By seeking to pre-empt the prospect of having to ask a Chinese liberation
force for the return of Hong Kong, the British provoked a major
diplomatic dispute over its liberation. As soon as they had confirmation
of the Japanese sur render, the y sought the US naval authority’s
cooperation for the redeployment of naval units at that time assigned
for operations under overall American command in the Pacific. On 16
August, the British government informed the Chinese of its plan, lest
Chiang first hear the news from his American chief of staff Wedemeyer
and take offence. 8 The British ignored the fact that Hong Kong was in
Chiang’s theatre and that they should have obtained his consent
beforehand. London now took the position that ‘ir respective of
operational theatres, wherever the sovereign power has sufficient forces
available it should resume its authority and accept Japanese surrender in
its own territory’. 9 The British did not wish to provoke Chiang into a
hostile response, but fully intended to retake Hong Kong before the
Chinese army could get there. Britain started what could have become a
scramble for the liberation of Hong Kong.
The Chinese government was offended when it was informed of the
British action, which it deemed ‘rather high-handed’. 10 It rightly suspected
the British were concerned about Hong Kong’s future. In the absence of
Minister T.V. Soong, Vice-Minister K.C. Wu was in charge of the Foreign
Ministry and negotiated with the British. He tried to assure the British
that China had no territorial ambitions, that it would not take advantage
of accepting the surrender to establish possession and that it regarded
Hong Kong as a matter that would require eventual settlement through
diplomatic channels. 11 The Chinese government also for mally asked
Britain to adhere to General Order No. 1, to act in concert with China as
an ally to ensure peace and order in Asia in taking surrender from the
Japanese, and to refrain from landing any forces in the China theatre
without prior consent. 12 For its part, China pledged to respect all legitimate
British interests and accord them every necessary protection. China tried
 RETURN TO EMPIRE 135

to protect its interests by insisting on following the correct procedures.

Its handling of the matter was reasonable and responsible.
Chiang did not order his army to race against the British fleet steaming
towards Hong Kong. He stood by this decision, even after his insistence
that the British should follow the agreed procedures proved fruitless and
the British turned down his offer of compromise, which from his point
of view would have protected the honour of both sides. This seems
remarkable, particularly since he had at his disposal some of his best
forces, which could probably have beaten the Royal Navy in the race.
Chiang’s decision can only be understood in a wider context. His
primary concern was China proper. To begin with, the Chinese Communist
forces, which were in principle under his command, had openly disobeyed
his orders about arrangements for the Japanese surrender. 13 Under Mao’s
leadership, they were preparing to ‘struggle’ against Chiang’s hold over
the country. 14 They were rushing to take over as much land and military
hardware from the Japanese as possible. 15 To Chiang, this was a race he
could not afford to lose. By comparison, the race against the British was
of little consequence. Losing the former could pose a major problem for
his post-war plans for the entire country. By contrast, he had few worries
about Hong Kong, since he already had an agreement with the British
over the future of the New Territories. He could raise the issue at any
time. He also had to take into account the activities of the Communist
East River Column, which had a guerrilla battalion operating in the New
Territories. 16 By 20 August, the East River Column’s main force had seized
Shenzhen and was at the border of Hong Kong. 17 If Chiang had ordered
his US-trained units to race against the British, he would have generated
a nationalist fervour and provoked the Communists into competing. In
such an eventuality, both he and the British would probably have lost the
race to the East River Column. Indeed, the Chinese government felt that
if its own forces could not liberate Hong Kong, it would rather this were
done by the British than the Communists.
Also, Chiang could not afford to tie down his best units for garrison
duties in Hong Kong. This would be unavoidable should he choose to
confront the British. US Ambassador Hurley had informed Chiang of his
conversations with Churchill the previous April. He believed the British
would not give up Hong Kong without a fight. 18 The Chinese ambassador
to London, Wellington Koo, confirmed that the new Labour government
held the same view of Hong Kong as Churchill’s government. 19 At that
time, Chiang could not afford to use force over Hong Kong. With only 16
truly combat-effective divisions in the whole country – his remaining 250-
plus divisions were of ‘negligible’ fighting value – he could not spare the
New First Corps’ three divisions. 20 These crack units were needed elsewhere
– particularly for the reoccupation of Manchuria and north China, where
the Communists were infiltrating. Thus, though in principle Chiang had
some of his most powerful military units suitably located to back up a
tough stand over Hong Kong, they were largely irrelevant to his diplomatic
manoeuvres. He could not afford to commit them in a showdown with the
136 A MODERN HISTORY OF HONG KONG

British. In any event, because China had just emerged as one of the five
founding members of the United Nations, Chiang had no intention of
confronting the British. His hands were tied.
As soon as the Sino-British diplomatic exchanges began to turn into a
serious dispute, the British ambassador in Chongqing, Sir Horace
Seymour, rightly assessed that Chiang did not want a confrontation, but
was ‘upset’ because the British had ignored his prerogatives as the Allied
commander of the China theatre. 21 He also correctly judged that Chiang
would agree to a settlement for a British fleet to liberate Hong Kong if
his authority as supreme commander were not compromised. In the
ensuing dispute, the senior British officer in China, Lieutenant General
Sir Adrian Carton de Wiart, also felt Chiang had justifiable grounds for
his position. 22 The astute assessments of the British representatives in
Chongqing proved to be of only marginal value, however, for they were
overruled by London.
British officials in London were highly suspicious of Chiang’s intention
and were concerned that allowing Chiang to exercise authority of any
kind in or over Hong Kong would be the thin end of the wedge and
achieve his well-known objective for Hong Kong. 23 Chiang’s predicament
was not fully understood. More importantly, at this moment of victory,
jingoism affected the judgement of the British in London. Chiang’s
responses were deemed ‘unreasonable’ because he ‘could hardly have
expected us not to wipe out the memory of the Japanese capture of Hong
Kong’. 24 The obvious point, that Chiang was being publicly humiliated
by an ally, did not catch anyone’s imagination. British officials felt a sense
of righteousness in their hardline approach. 25 Even Labour Foreign
Secretary Ernest Bevin felt Britain must first recover Hong Kong from
the Japanese. 26 Indeed, within days of the dispute emerging, he publicly
committed his government in a statement to the House of Commons. 27
London was psychologically prepared to face down Chiang over Hong
Kong. Its capabilities to do so were enhanced day by day, for a powerful
naval task group was steaming towards Hong Kong.
As the British and Chinese were unable to agree on the arrangements
for the Japanese surrender, they both appealed to the USA for support.
Chiang did so in general terms through the normal diplomatic channels. 28
The British were a little slower off the mark, but were nevertheless more
effective in securing US backing. Attlee, now prime minister, asked
President Truman to instruct General Douglas MacArthur, supreme
commander of the Allied powers, to order the Japanese in Hong Kong
to surrender to the British. 29
Unlike Roosevelt, Truman was not sentimentally attached to supporting
Chiang over Hong Kong. In fact, he thought poorly of Chiang. 30 Truman
told Chiang he saw the dispute as ‘primarily a military matter of an
operational character’ and had ‘no objection to the surrender of Hong
Kong being accepted by a British officer, providing military coordination
is effected beforehand by the British with the Generalissimo’. 31 The death
of Roosevelt and consequent change of US president earlier that year
 RETURN TO EMPIRE 137

ensured British success in Washington. Isolated diplomatically as well,

Chiang had to compromise with the British.
Chiang proposed to Britain that, in his capacity as supreme commander,
he would delegate authority to a British officer nominated by Britain to
take the surrender in Hong Kong in the presence of a Chinese and an
American officer designated by him. 32 He accepted the British wish to
restore their military honour and reassured them that he respected
legitimate British interests, including their return to Hong Kong. 33 To
demonstrate his sincerity and to dampen jingoism from within his
government, he made an announcement at the Supreme Council for
National Defence categorically stating that he did not intend to send
troops to Hong Kong. 34 In the meantime, appropriate orders were duly
issued to his forces. 35 He even personally told Ambassador Seymour that
he desired to have good relations with Britain, though he also insisted
that he must defend China’s legitimate rights. 36
In return, Chiang asked the British to undertake not to accept the
Japanese surrender in Hong Kong before he had done so in the China
theatre as a whole. This would include the handing over of Japanese ships
and mechanised transport equipment in Hong Kong, and making the port
and related facilities there available for the transhipment of Chinese
troops to north and north-east China. 37 Chiang bowed to the political
and diplomatic reality and, in the light of the rising Communist challenge,
to the military imperative as well. He was as accommodating to the British
as anyone could reasonably have expected him to be.
Deeply affected by their prejudice against Chiang, British officials in
London rejected his face-saving formula. They suspected that if Chiang
were allowed to delegate authority to the British commander, Harcourt,
he could continue to exercise military authority through Harcourt after
taking the surrender. 38 Chiang would be asked to waive his authority in
the case of Hong Kong. When Seymour approached Vice-Foreign Minister
Wu about the situation, the latter strongly advised him against putting
the matter to Chiang. Seymour believed that Wu was sincere when he
advised, on a private and completely confidential basis, that if Britain
could not accept a delegation of authority, it should simply ‘leave the
matter alone and go ahead with surrender arrangements as planned’. 39
As Wu rightly assessed, Chiang felt very strongly about the issue and
stood his ground. 40 He could not be moved. The final compromise was a
British decision for Harcourt to represent both Britain and Chiang, as
supreme commander of the China theatre, when receiving the surrender
from the Japanese, an arrangement in which Chiang acquiesced. 41
As the diplomatic saga unfolded, news of the Japanese emperor’s
broadcast spread in the Stanley camp. The senior British officer Franklin
Gimson was a courageous and far-sighted official who represented the
best in the British Empire. Once he was certain that the Japanese were
surrendering, he went to see the commandant. He informed the Japanese
that, from then on, he would take charge of the administration. He asked
for accommodation for himself and his officers and, pending the arrival
138 A MODERN HISTORY OF HONG KONG

of British forces, demanded that the Japanese troops continue to maintain

order. 42 Shortly afterwards, on 23 August, an ethnic Chinese BAAG agent
delivered the instructions London had ordered the BAAG to transmit to
him. 43 Once he knew London’s intentions, Gimson promptly asked the
Chief Justice in the camp, Sir Athol MacGregor, to administer the
necessar y oath for him to take over as officer administering the
government. Frail and undernourished, Gimson and some of his fitter
colleagues reclaimed British sovereignty over Hong Kong by sheer
courage, stamina and dedication. 44
On 30 August, Admiral Harcourt led a powerful Royal Navy task force,
consisting of two aircraft carriers, a battleship, three cruisers and a
number of destroyers and minesweepers into Victoria Harbour to take
over from the Japanese forces. 45 He was greeted by Gimson and his slender
nucleus of a civil administration. On 1 September, Harcourt formally
proclaimed the establishment of a British military administration with
himself as its head and, on his own initiative, appointed Gimson lieutenant
g o ver n o r. L o n d o n l at e r d i s a l l owe d t h i s l a s t a c t , f o r a m i l i t a r y
administration with full powers coexisting alongside a civilian government
created a constitutional anomaly. 46 MacDougall, now given the rank of
brigadier, and his civil affairs unit (formerly the Hong Kong Planning
Unit) took over the administration when they arrived on 7 September.
Gimson was repatriated for recuperation.
On 16 September 1945, in Government House in the presence of
Major-General Pan Huaguo and a US colonel, Harcourt formally accepted
the Japanese surrender. Hong Kong had finally returned to the British
Empire’s fold. Contrary to Foreign Office concerns, Chiang never made
use of Harcourt having accepted the surrender on his behalf to attempt
to exercise authority over him. Chiang handled the liberation of Hong
Kong in good faith; it was the British who were high handed.

Military Administration
Hong Kong entered an unusual period in its history as it came under military
rule for eight months. Although only a transition period to prepare for the
restoration of civil rule, it was not a period of muddling through by
professional soldiers who knew nothing of good governance. On the
contrary, it was a period when the administration functioned remarkably
efficiently in very difficult conditions. This was helped tremendously by
the fact that Harcourt, the head of the Military Administration, and his
Chief Civil Affairs Officer MacDougall worked well together.
Hong Kong and MacDougall were fortunate in having Harcourt as the
division of duties and chain of command were complex and open to
abuse by the senior military officer. MacDougall was responsible to
Harcourt ‘on matters in which the Admiralty’ or War Office had an interest
and to ‘the Secretary of State for the Colonies with regard to other
matters’. Even for affairs in the latter category, MacDougall had to report
through Harcourt and the Admiralty as Harcourt was given the right ‘to
make such comment on such communication’ as he saw fit on grounds
 RETURN TO EMPIRE 139

of military considerations. 47 As it turned out, Harcourt resisted the effect

of power corruption inherent in the trappings of near absolute power
and did not interfere in areas beyond his professional competence.
Instead, he gave generous support to MacDoug all, which enabled
MacDougall to focus his limited resources not in bureaucratic infighting
but in dealing with Hong Kong’s urgent needs. 48 Under MacDougall’s
able leadership, the civil affairs unit quickly restored the administration
in Hong Kong to a level of efficiency that made it the most shining
example of all the territories liberated from the Japanese.
MacDougall focused himself upon the urgent and vital tasks of getting
supplies to feed the local population and maintain stability. He approached
them in a pragmatic spirit and made the most of what resources he had
at hand. Hong Kong suffered from all kinds of shortages, including not
only food, but also administrators to work in the civil affairs branch.
Even two months after the beginning of the military administration, he
had merely 18 per cent of the established strength in civil affairs officers. 49
MacDougall thus pressed on without regard to pre-war procedures,
protocols, background of individuals or other formal requirements that
could have given rise to bureaucratic delay. 50 The ultimate demonstration
of his pragmatism was to remove a major bone of contention with the
Chinese authorities in Canton over the right of Chinese to enter Hong
Kong. Without clearing the matter with London or the British Embassy
in Chongqing, MacDougall reached an understanding with the Cantonese
that he would not enforce an immigration control that he had no officer
to impose, in exchange for a Cantonese promise to supply Hong Kong
with food that he knew the Cantonese could not spare. 51 On the whole,
and as illustrated by his deal with Canton, MacDougall avoided consulting
the Colonial Office even on major policy matters, went on to do what he
felt was needed and reported to London with such a time-lag that it would
in any event be too late for London to object. 52
He inspired his colleagues to take initiatives and responsibilities in
finding practical solutions to pressing problems that they encountered.
This eight-month interlude was a period marked by administrative
dynamism. To many who served in the military administration and stayed
on to serve in the Hong Kong government, this was one of the most
rewarding times of their careers as colonial administrators.
Among the many tasks the military administration had to deal with,
the immediate military problems were relatively simple. The small British
forces, consisting mainly of naval ratings, Royal Marines, and members
of a Royal Air Force airfield construction unit in the early days, had to
take over control and general police duties from the Japanese, and to
disarm and intern them as soon as sufficient forces were available. 53 As a
result, the British worked on a tacit understanding with the Communist
East River Column that the latter would maintain order in those parts of
the New Territories under its control until British reinforcements arrived
in sufficient numbers to take over the policing in these areas. 54 British
forces also had to liaise with the Chinese army units that used Hong
140 A MODERN HISTORY OF HONG KONG

Kong as an embarkation point for redeployment to north and north-east

China in the autumn and winter of 1945.
The civil affairs problems were more difficult to resolve. Instead of
wasting his limited resources and time to restore the administration to its
pre-war structure and undo the effects of the Japanese occupation,
MacDougall and his team turned their attention to the immediate problems:
currency, labour, public health, food, and fuel. In order to restore the
economy to a sound basis, the military administration promptly substituted
the Hong Kong dollar for the Japanese military yen, even though the
quantity of dollars available was very small, and proceeded to put the dollar
in circulation by paying 30–40,000 unskilled workers to clean up the city. 55
This also had the effect of averting the immediate threat of labour and
general unrest as the jobless people were employed. A moratorium was
also imposed on all debts incurred during the occupation. Banks and utility
companies were given assistance to enable them to resume operation as
soon as possible. In addition, the price of food and other essential goods
was controlled, relief was provided to those who needed it, and ships were
sent to Chinese and Southeast Asian ports for food and fuel. 56
MacDougall also gave his blessing to a significant and fruitful attempt
at self-help initiated by Geoffrey Herklots, the resourceful biologist who
did much good in improving food supplies in the Stanley Internment
Camp. Herklots devised and implemented a fishery cooperative scheme. 57
This made it possible for Hong Kong’s fishing fleet to put to sea almost
immediately, and thus secured an important source of food. Herklots
was largely given a free hand and he later introduced a similar agricultural
cooperative project. 58 These initiatives in fact made remarkable long-term
contributions. They ended the traditional exploitation of fishermen and
farmers by the laans – wholesaler and loan shark combined – who had
previously had firm control over those industries.
It was with this kind of bold approach and initiative that Hong Kong
managed to deal with the severe problem of shortages in supplies and
keep one step ahead of disaster. The worst time was the middle of
September 1945 when the stock of food reached the dangerously low
level of only ten days supply, a situa tion that did not impr ove
fundamentally for almost three months. 5 9 However, the apparent
competence of the civil affairs unit kept public confidence.
Before the end of the year, the situation had improved so much that
the banks were fully operational, public utilities were running and the
colony was reopened to trade. The population had increased from less
than 600,000 when the British returned, to well over one million by early
1946. However, this increase represented mainly the return of residents
who had been forced to leave during the Japanese occupation rather than
an influx of newcomers. Hong Kong was once again bustling with life
and some of the worst fears of its inhabitants ended. The Herculean
task of general rehabilitation and reconstruction of the economy and
society of Hong Kong had barely begun, but this was a long-term problem
for the post-war civil government.
 RETURN TO EMPIRE 141

The remarkable success of the British Military Administration should

not be attributed entirely to MacDougall, Harcourt and their magnificent
lieutenants. As MacDougall privately admitted to the Permanent Under-
Secretary of the Colonial Office, while he ‘would like still more to be able
to assure you that our efforts are solely responsible for the gratifying
transformation… the truth is a good deal simpler: if you give them half a
chance, you cannot keep the Chinese down’. 60 What really enabled Hong
Kong to recover so fast was the existence of a dedicated, hard-working
and honest administration, ran by a small number of British officers who
provided the political infrastructure, order and social stability as well as
vital supplies that inspired confidence in the local Chinese, who in turn
dedicated themselves to make the most of the situation. The resourcefulness
of the Chinese referred to by MacDougall flourished more in Hong Kong
than in any liberated Chinese city as members of the administration worked
with and for the local people rather than for personal gains.
Although Hong Kong had unquestionably recovered sufficiently for
civil g over nment to be r estored by 1 March 1946, the militar y
administration was sustained until the end of April. While this provided
some advantages in terms of enabling MacDougall and his staff to stay
on military ration and utilise their military ranks to secure supplies, the
real cause of delay was the need to wait for Sir Mark Young to recuperate
sufficiently to resume his interrupted governorship. The Colonial Office
took the view that it was ‘particularly important, as a point of prestige
and as a move which would have a striking effect on local opinion that,
if at all possible’ Young ‘should personally take back the government of
the Colony from the Service authorities’. 61 The effect intended was not
to indicate a return to the status quo prior to the Japanese invasion. It
was to assert the point that the Japanese occupation was only a rude
interruption of continuous British imperial rule at a time of temporary
British military weakness, which was supposed to have been relegated to
the dustbin of history by the Royal Navy’s triumphant return.

Status Quo Ante?

Young restored civil rule and reintroduced a Crown Colony system of
government on 1 May 1946. MacDougall stayed on as Colonial Secretary.
By then the urgent immediate post-war problems had largely been solved.
Supply was still tight, but this was the situation worldwide. Allegations
in the early days of collaboration with the Japanese had been potentially
disruptive but had died a natural death. 62 At the time of the handover,
Harcourt considered the main problems for the civil government to be
the introduction of a new constitution, the placing of Chinese into
positions of responsibility in the administration, the elimination of the
colour bar, and the return of some old-timers who failed to realise the
need for a new outlook. 63
What Harcourt, MacDougall and a few others referred to as the ‘1946
outlook’ in their reports to London arose as a result of the initial defeat
of the British Empire at the opening stage of the Pacific War. The clock
142 A MODERN HISTORY OF HONG KONG

could not be turned back or the formal glory of the old colonial regime
simply restored.
This situation was not immediately obvious, as the initial responses of
the local population to the return of the British amounted to a mixed
signal. When the Japanese surrendered the first and foremost concern
of the Chinese inhabitants was that they should now be able to secure
enough food to eat. 64 They saw the return of the British with both relief
and indifference. Uninformed of secret wartime negotiations, they did
not know the Chinese government’s attitude towards the future of the
colony. To them the British had always been in Hong Kong and their
return was unexceptional. With the brutality and hardships of the Japanese
occupation as a comparison they remembered the pre-war British
administration as benevolent and efficient. This notwithstanding, in the
city itself four times as many Chinese national flags as Union Jacks were
displayed. In the euphoria of victor y, the local people identified
themselves with China. For them, as for the rest of the Chinese nation,
the victory was a great moment. They saw not only the end of the war
and misery but the beginning of a new era, one in which China had
become one of the five great powers. 65
The Chinese residents of Hong Kong developed the ‘1946 outlook’
after the initial euphoria had subsided and some of the most pressing
problems successfully tackled. It consisted not only of a sense of national
pride in China, but also of a feeling that the status quo ante was anathema.
Chinese national pride manifested itself in the columns of local
newspapers and in the public reactions to local incidents. The leading
local newspapers occasionally reminded the local people to behave in
ways befitting citizens of a great power. 66 There was a strong and swift
reaction to the death of a Chinese girl at the hands of a British sailor in
early October 1945 and to similar incidents involving Chinese and
Europeans. 67 Two local riots broke out when a police officer on street
duty inadventently caused the death of a hawker. 68 Significantly, the
temper of the crowds was anti-European.
In sharp contrast to the pre-war days, a slap in the face was no longer
meekly accepted by the Chinese. This happened as the immediate memory
of the harshness of the occupation receded. As time went by the local
people put things in better perspective and remembered the pre-war
conditions as they actually were. There had been too much privilege,
snobber y, discrimination, racial prejudice, corruption, and absentee
exploitation against the local Chinese. They began to see the pre-war
government as having failed to give due regard to their interests. This
change in public attitude became an important factor in the socio-political
scene of the immediate post-war period in Hong Kong.
What the more articulate local Chinese wanted was a new deal. They
voiced their desire for better and fairer treatment, removal of corruption,
the appointment of British officials who had at least some knowledge
and understanding of the Chinese and free education for the children of
the poor. 69 Above all they preferred not to see a return of the pre-war
 RETURN TO EMPIRE 143

officials who were deemed a potential threat to the new order. 70 Some of
the pre-war officials, who had not divested themselves of the treaty port
mentality, were in fact keen to restore the old order. The articulate public
made it clear, however, that any attempt to resuscitate the government
machiner y which had failed them so badly in 1941, would not be
acquiesced in meekly. 71 They looked forward to a radical reform which
would provide the people of the colony with a greater say in public affairs.
They wanted the framework of the new constitution to be clearly defined
so that the new civil government would be built on such a basis. 72 They
were, however, not specific about what the y wanted in the new
constitution.
The British government knew about the ‘1946 outlook’ as Harcourt
and MacDougall’s reports were collaborated by views expressed by non-
officials. John Keswick, taipan of Jardine Matheson and a wartime political
adviser at the British Embassy in Chongqing, went further than most. He
strongly urged the British government to transform the Crown Colony
into what he called the ‘Free Port and Municipality of Hong Kong’. 73
Keswick thought that the governor’s title should be changed and that he
should be assisted by an elected council. He was concerned with the
uncertainty over the future status of the colony. He felt reform was
necessary both to fulfil the British policy of leading colonies to self-
government and, more significantly, to take some of the wind out of the
sails of the Chinese and American critics. 74 With an eye to relations with
China, he further proposed to replace the Secretary for Chinese Affairs
with a Secretary for Chinese and External Affairs. 75
Although the re-appointment of Young, the head of the pre-war
regime, as governor appeared to go against the spirit of the time, this
was not the intention. It was indeed because the British government
recognised that post-war Hong Kong needed a new deal that Young was
given only one year before a new and younger man was to take his place,
regardless of how well Young might perform. 76
The irony of history was that Young was in reality remarkably forward-
looking and far-sighted. On the day he restored civil rule, Young declared
that the British government had ‘under consideration the means by which
in Hong Kong, as elsewhere in the Colonial empire, the inhabitants of
the Territory can be given a fuller and more responsible share in the
management of their own affairs’. 77 Admittedly the scheme he referred
to was devised partly in accordance with the policy drawn up under Gent
in the Colonial Office during the war, and modified on the basis of advice
from Harcourt and MacDougall. It nevertheless put Young on the right
footing with the local community as it assured them that Young shared
the ‘1946 outlook’.
Young embraced the idea of political r ef o r m and pursued it
energetically. It was partly because he believed ‘given the Chinese
Government’s determination to recover Hong Kong… the only way to
keep the colony British was to make the local inhabitants want to do
so’. 78 In his view, this could be achieved by turning the local inhabitants
144 A MODERN HISTORY OF HONG KONG

from Chinese sojourners into citizens of British Hong Kong through

popular political participation. 79 While Young’s bold attempt to introduce
representation into the local administration was linked to his wish to
pre-empt the need to return Hong Kong to China, he also genuinely
grasped the need for the ‘1946 outlook’ and quickly ruled out a return to
the status quo ante.
 Chapter 11
A Fine Balance

As a British colony in Asia where the pivot of British imperialism, India, was
moving rapidly towards independence, Hong Kong could not afford to
develop regardless of the momentous changes unfolding in the region. As
the war ended, the power balance also shifted between the British Empire,
for which the resources of India had been crucial, and China, which had
become one of the five permanent members on the Security Council of the
newly founded United Nations. Britain had also lost its place as the premier
power in China, a position now occupied by the USA, which had completely
overshadowed Britain in China in the course of the war.1
The decline in the standing of the British Empire in China made it necessary
for the British government to handle relations with China with much greater
sensitivity than before. This meant the British had to maintain a balance
between the desire to ensure the continuation of British rule in Hong Kong
and the need not to provoke the Chinese government to demand the return
of the New Territories, which was understood to imply raising the issue of
the future of the colony as a whole.2 It also meant the British sought to avoid
getting caught up in the intricate power games in post-war China by
maintaining strict neutrality in the intense and brutal struggle for supremacy
between the ruling Kuomintang and its Communist opponents, as their
wartime truce steadily gave way to a resumption of their long-standing civil
war. After the end of the Pacific War, Britain’s primary concerns in China
were to rebuild its economic interests and, above all, to secure its position in
Hong Kong at the lowest possible cost. 3

Rehabilitation and Constructive Partnership

The restoration of civil rule did not remove Hong Kong’s economic problems
overnight, though it helped the process of rehabilitating the economy. The
thorniest problem in May 1946 remained getting essential supplies, particularly
rice and fuel. The shortage of rice was so serious that the daily ration was
reduced to three ounces per person from the already low allowance of 12
ounces in December 1945.4 There were also problems with the high cost of
living and a severe shortage of housing. However, the end of military rule
reinstated the normal legal framework for regulating commercial transactions,
146 A MODERN HISTORY OF HONG KONG

for protecting security of goods and investments and for the maintenance of
general stability.5 In other words, it recreated the environment for businessmen
to resume their trade and production and to tap all sources of supply to meet
the requirements of a market starved of basic essentials and consumer goods.
It also furnished a secure base for Hong Kong traders to operate in East Asia
where political instability prevailed. To illustrate the tremendous recovery
Hong Kong had made: in 1946, it handled 50–60 per cent of the pre-war
trade in terms of volume. Impressive as this was, it was not until the second
half of 1947 that conditions for trade had been sufficiently restored for it to
expand on a sustainable basis.6
In the meantime, Hong Kong had to live with being reduced to financial
dependence on the British Treasury. In order to end Treasury control, Hong
Kong had to free itself from British subsidy. With this in mind, Young set out
to introduce income tax. It was strongly opposed by leaders of both the local
Chinese and expatriate communities. 7 But the need to balance the budget left
Young with little choice. The income tax legislation was based on the War
Revenue Ordinance (1941).8 It was pushed through despite the determined
opposition of three unofficial members on the Legislative Council. As he did
so, Young made it clear that he saw this as linked to his proposed political
reform, which would enhance representation. As a result of the introduction
of income tax and rapid economic rehabilitation, Hong Kong was able to
end its financial dependency on Britain and thus secure the end of Treasury
control in April 1948.9
Politically, Young moved quickly to mark the beginning of a new era. While
he examined the introduction of a major refor m to increase public
participation in government, he promptly reconstituted his Executive
Council.10 Before the war, the Council comprised seven official, two expatriate
unofficial and one ethnic Chinese unofficial members. Young added another
ethnic Chinese unofficial member and thus gave equal weight to both the
local Chinese and expatriate British communities. 11 This was an important
departure from the pre-war era, when the idea that the much more numerous
Chinese community could be given equal weight to the tiny expatriate
community in the Governor’s top advisory council was anathema.
Young also swiftly removed the symbol of the long-established colour bar
by repealing the legislation that restricted the Chinese from residing in the
Peak district.12 To add substance to this gesture, Young not only reiterated
the policy of localisation but actually appointed, for the first time in Hong
Kong’s history, an ethnic Chinese as a cadet officer.13 He was Paul Ka-cheung
Tsui, who demonstrated his loyalty to the Crown by his service in the British
Army Aid Group.
Young further showed his willingness to cast away old bureaucratic ways
by taking bold steps to meet the special requirements of post-war
reconstruction and rehabilitation. As his administration was still short of
senior officials, Young retained on one-year contracts a number of military
officers who had served under Harcourt.14 Above all, he broke with another
pre-war practice of reserving the top positions for cadet officers. He appointed
the resourceful Geoffrey Herklots, an academic, to head the new Secretariat
 A FINE BALANCE 147

for Development in order to ensure the good work in creating the fishery
and agricultural cooperatives he had started under the Military Administration
could be continued and institutionalised.
Young also recognised the importance and delicacy of Hong Kong’s
relations with China. He deemed it essential that his government should take
a more positive approach to developments in China. Consequently, he pressed
for the appointment of a political adviser who would be a specialist in Chinese
affairs. He suggested seconding the first officer from the Foreign Service
since most senior officials in Hong Kong were out of touch with events in
China.15 In spite of his title, the Political Adviser functioned as Hong Kong’s
secretary for external affairs with a special focus on relations with China.
Young’s original proposal that a diplomat be appointed as a temporary measure
came to be accepted as the norm, as his successor felt Hong Kong fell more
properly into the remit of the Foreign Office than the Colonial Office and
thus welcomed the presence of a seasoned diplomat on his staff. 16
These progressive changes were meant by Young to supplement his
scheme for political reform. What he tried to create was ‘a form of diarchy,
or parallel government’ under which the colonial government was ‘to
continue to control such vital functions of government as finance and
security’, while ‘the creation of a municipal council would allow the inhab-
itants of Hong Kong a fuller share in the management of their affairs’. 17
When he restored civil rule four months later, he followed up on his
forthright statement proclaiming the British government’s intention to
introduce political reform with a broadcast outlining his proposals in some
detail in English and in Chinese. 18 His underlying thinking in fact ‘reflected
British colonial policy dating back to the lessons learned from the American
Revolution: by giving colonial subjects a voice in their own affairs, they
would be co-opted as collaborators in the imperial system’. 19
Whatever his intention, by proactively consulting the local people and
reporting to them the progress he had made, he had projected himself as a
‘far-sighted and capable mandarin who knew the needs of his people and
who would care for them like a father would care for his sons’ – the image of
the best official in the Chinese political tradition.20 Together with the changes
already being put in place, Young’s handling of the proposed constitutional
reform went a long way to dispersing any initial doubts the local community
might have had concerning his return. 21 He tried to forge a constructive
partnership between the colonial government and the local Chinese community
while Hong Kong was being rehabilitated economically.
The responses of the local Chinese community disappointed Young, as they
appeared apathetic. Even though Young did realise the passive reactions of the
local Chinese ‘may be flattering to the system… and to the Government itself ’,
he felt this ‘manifestly needs to be overcome by political education and by an
insistence on the transfer of responsibility’.22 The constructive partnership he
wished to build depended on overcoming political apathy. While Young pressed
on with his plan for reform, it did not outlast his short tenure. Ironically, the
local Chinese community did not sustain their demand for a new deal expressed
in 1945 because Young was accepted as a forward-looking governor who could
148 A MODERN HISTORY OF HONG KONG

be trusted to govern Hong Kong in the spirit of the new era. In the end, Young’s
ideas did not survive his term mainly because they did not get a sympathetic
reception from his successor, Sir Alexander Grantham.
Grantham started his career as a cadet in Hong Kong, learnt the Cantonese
language, and proved himself an able administrator in Bermuda, Jamaica,
Nigeria and Fiji before he was appointed as the first truly post-war governor
of Hong Kong. During his ten-year tour of duty, Grantham established
himself as one of the greatest governors. He was progressive, dedicated to
Hong Kong and willing to defend what he saw as the best interests of the
colony. However, his experiences did not expose him to the kind of changes
that Young and Gimson had personally lived through and keenly observed as
the myth of the invincibility of the British Empire in Asia was shattered by
the Japanese. Grantham’s knowledge of Hong Kong and the Chinese people
was gained between 1922 and 1935. In this period, the events that left the
deepest mark on him were the strike-cum-boycott of 1925–6. They persuaded
him that Young was naïve and misguided in his conception both for a diarchy
and for making the local Chinese loyal to the British cause. 23
To Grantham, the new colonial policy of the post-war Labour government
leading colonies to self-government should not apply to Hong Kong, as it
could ‘never become independent’ and must remain either a British colony or
be absorbed into China.24 He believed the cultural affinity of the Chinese
was too strong and Hong Kong too close to China for the majority of the
local Chinese to develop local loyalty to the colony, let alone allegiance to the
British Empire. 25
Grantham preferred an alternative to Young’s approach: to build up a
constructive partnership with the local community. He thought ‘provided that
the Government maintains law and order, does not tax the people too much
and that they can obtain justice in the courts, they are satisfied and well content
to devote their time to making more money in one way or another’.26 This
was essentially the direction which Grantham followed after he took office in
July 1947. Grantham’s alternative worked, as economic rehabilitation was by
then well advanced, and the local Chinese had become increasingly
preoccupied with matters of livelihood. 27
In the meantime, China descended into chaos as civil war between the
Communists and the Kuomintang resumed. Its debilitating effects deflated
the sense of pride in mother China among the Chinese in Hong Kong, as
their country was engulfed in fratricidal butchery and disorder. The conditions
that gave rise to the enthusiasm for a new deal when Harcourt’s fleet sailed in
had been changed. Young had proved the post-war government embodied
the ‘1946 outlook’, and instability in China revived the traditional Chinese
fear of chaos. With Grantham quickly demonstrating his competence and
steering Hong Kong safely through a period of great regional instability and
tension in the Cold War, they tacitly accepted Grantham’s new conception
for a partnership between the government and the people and focused their
attention upon improving their living conditions.
 A FINE BALANCE 149

The Question of Hong Kong’s Future

While Hong Kong was busy with its rehabilitation, the governments of Britain
and China pondered over its long-term future.28 In London, the Colonial
Office submitted a paper on Hong Kong’s future for incorporation into a
general document setting out Britain’s post-war foreign policy, which the
Cabinet Office’s Far Eastern Planning Unit adopted in October 1945.29 By so
doing, the Colonial Office tried to pre-empt the Foreign Office and seize the
advantage of providing the basis it itself had approved for interdepartmental
consultation. The starting point of this paper was the need to prepare for the
Chinese raising the question of the future of the New Territories. It listed
four options:30
• Britain rejects any Chinese demand for the return of Hong Kong or
the New Territories;
• Britain returns the New Territories with certain conditions;
• Britain enters into a leaseback arrangement whereby it cedes the
sovereignty of Hong Kong proper to China, but leases the entire
territory back for a specific number of years; or
• Britain retrocedes the entire colony.
Although the paper set out the arguments for each of these options, there
was a preference that the last two should not be pursued if avoidable.
The Foreign Office shared the Colonial Office view that something had to
be done. George Kitson, head of its China Department and an old China
hand, thought Britain could not ‘go on treating Hong Kong as a Crown Colony
on an island off the coast of China’. He believed that political reform there
would not stop the Chinese demanding its retrocession.31 In February 1946,
he produced a 14-page memorandum, which he hoped would form the basis
of a Cabinet paper.
Kitson started by trying to explain Chinese feelings by an analogy with the
Isle of Wight. He argued:
Supposing the Chinese had taken the island against our will 100 years
ago and covered it with pagodas, etc., and developed it by means which
they had invented and we had not learned to use, doing all this for their
own purposes, although talking a great deal about the material advantages
to the United Kingdom, and all the time emphasising the value of this
haven of good government, a protection against insecurity, in the Isle of
Wight. Even if they had created a heaven on earth in that small island we
should have only one feeling about it. We should want it back.32

While Kitson also restated the case for retaining Hong Kong he felt it was
essential not to reject outright any Chinese request on the subject. He believed
Chinese cooperation was crucial for the restoration of British economic
interests in China, for international peace and security, and for avoiding
problems on the China-Burma border, in Tibet and even among the Chinese
community in Malaya. He was convinced that Sino-British relations could
150 A MODERN HISTORY OF HONG KONG

‘not rest on a fully satisfactory basis until the Hong Kong issue is faced and
fairly dealt with’. He advocated that Britain take the initiative and raise the
matter. The reason was that the ‘right sort of gesture would… provide the
Chinese government with an invaluable aid in overruling an opposition and
keeping in check a public opinion which, in the absence of any encouraging
sign from our side, might drive the government to extreme and inconvenient
demands’. He urged the British government to declare publicly that it was
prepared ‘as a gesture of goodwill and in a spirit of friendship for the Chinese
nation to enter into negotiations’ for the return of the New Territories ‘on
suitable conditions’.33
Although Kitson demonstrated a good understanding of Chinese feelings,
he showed remarkable naïveté. However apt his analogy with the Isle of Wight
might have been, it was utterly unacceptable to the mainstream British view.
Hong Kong or its New Territories’ future raised issues with wider implications,
such as Britain’s dispute with Spain over Gibraltar.34 The permanent secretary
within the Foreign Office, Orme Sargent, rightly saw Kitson’s assumption as
‘a complete delusion and a very dangerous one’, for its effect on China’s
policy towards Britain would ‘either be nil or of very short duration’. 35 Indeed,
Kitson’s wish to win Chinese gratitude and thus secure their friendship and
cooperation was unrealistic. Given their feelings about Hong Kong, the
Chinese would at best see the gesture he proposed as correcting a wrong
done to them. Furthermore, since the Chinese wanted to recover Hong Kong
in its entirety, a gesture over the New Territories could hardly achieve Kitson’s
hope for Chinese gratitude, even in the short term. Sargent and Foreign
Secretary Ernest Bevin felt Britain had only two reasons to give up Hong
Kong or the New Territories… ‘either because we have no longer the physical
means (military and financial) to maintain our position or because we anticipate
that sooner or later the Chinese Government will be able to hold us to ransom
by paralysing our trade and administration in Hong Kong’. 36
Undeterred, Kitson substantially revised the paper and presented it as a
Foreign Office memorandum in July.37 It listed four options:
• the return of the New Territories in exchange for Anglo-Chinese
control over the airport, reservoirs and other infrastructures in the
New Territories;
• to turn Hong Kong in its entirety into an Anglo-Chinese condominium;
• to place Hong Kong under international control with China and Britain
having a predominant share in its administration; and
• to retrocede Hong Kong in its entirety, but for a new treaty to be
signed by which Britain would lease Hong Kong (with or without the
New Territories) for a period of 30 years.
The paper recommended the last option. It took no account of its implications
for the local people or their views. It also excluded a key option advocated by
the Colonial Office, which was to reject a Chinese demand for retrocession.
The Colonial Office and Young reacted against it strongly. The Under-
Secretary for Far Eastern Affairs, Thomas Lloyd, shared Young’s view against
 A FINE BALANCE 151

taking any initiative or accepting the leaseback proposal.38 Lloyd attempted to

counter the Foreign Office’s greater weight in Whitehall by enlisting the support
of other ministries likely to be sympathetic, including the Treasury, the armed
forces, the Board of Trade and the Ministry of Civil Aviation. All Lloyd would
concede was for the Colonial Office to provide an alternative draft paper, which
would incorporate the views of the Foreign Office. The Foreign Office paper
was unacceptable to the Colonial Office, even as a basis for further consultation.
Lloyd’s opposite number in the Foreign Office, Esler Dening, was, unlike
Kitson, not personally committed to the paper. He accepted Lloyd’s proposal.39
A joint paper, which listed the options and arguments for and against each
one of them, was finally produced in the following year, but it was never
submitted to the Cabinet. By then, in 1947, China was engulfed in a full-scale
civil war and the government’s position was rapidly deteriorating.40 There
was no longer an immediate prospect of the Chinese government raising the
issue, and Foreign Secretary Bevin preferred to keep quiet about Hong Kong. 41
Between the Japanese surrender and 1949, there was a considerable amount
of Chinese nationalist agitation for the recovery of Hong Kong. The Foreign
Ministry considered the issues involved and ‘looked for the right moment’ to
open negotiations with the British. 42 It took the position that whether China
should raise the question of the New Territories or of Hong Kong as a whole
must depend on what circumstances prevailed when negotiations were
started.43 When the British were examining the possibility of building a new
airport in Pingshan in the north-west of the New Territories in 1946, the
Ministry of Defence recommended considering this issue together with that
of the future of the New Territories. 44 Whenever there were disputes in Hong
Kong, such as over the old fort of Kowloon, numerous petitions from county
or provincial assemblies in different parts of the country demanding the return
of Hong Kong were submitted to the central government.45
Despite the public agitation, the Chinese government did not formally
raise the question of either the New Territories or Hong Kong. Chiang Kai-
shek defined the basis of China’s policy in August 1945 in the following terms:

I wish to state here that the present status of Hong Kong is regulated by a
treaty signed by China and Great Britain. Changes in future will be
introduced only through friendly negotiations between the two countries.
Our foreign policy is to honour treaties, rely upon law and seek rational
readjustments when the requirements of time and actual conditions demand
such readjustments. Now that all the leased territories and settlements in
China have been one after another returned to China, the leased territory
of Kowloon should not remain an exception. But China will settle the last
issue through diplomatic talks between the two countries.46

The ties on Chiang’s hands, which produced the restraint behind the above
statement, got even tighter afterwards. Chiang had to face the grim reality that
to reoccupy and rehabilitate a country the size of a continent he had a battered
bureaucracy and, with the exception of the six US-trained divisions, a largely
ineffective army supported by a war-torn economy suffering from hyperinflation.
152 A MODERN HISTORY OF HONG KONG

The biggest problem Chiang faced was the Communist challenge in north
China, which was spreading fast into Soviet-occupied Manchuria. However,
most of his combat-effective troops were in south and south-west China.
For the eventual dispatch of these forces to the north, he had to rely on
Hong Kong’s port facilities. Until they had all passed through Hong Kong in
the spring of 1946, Chiang could hardly afford to create any tension over
Hong Kong that might jeopardise the high-priority deployment of forces.
Chiang also learned a lesson from Britain’s intransigent handling of Hong
Kong’s liberation: unless he had the resources to support a tough stand over
Hong Kong, a robust British stance would backfire on his standing within
China. The intelligence available to him also confirmed – in this case wrongly
– that the British government would ‘under no circumstances return Hong
Kong’.47 Consequently, Chiang understandably refrained from raising the issue
of the New Territories. With the Communist challenge rapidly turning into a
full-scale civil war, the last thing Chiang needed was an embarrassing
diplomatic impasse over Hong Kong. Chiang did try to ascertain the British
intention at the ambassadorial level on two occasions in 1946, which only
confirmed his suspicion that the British would make a stand.48
From that point onwards, the Chinese government accepted that the issue
would have to be tackled at a later date, perhaps when it had re-established
control in China. The preferred solution was based on Chiang’s idea that China
would voluntarily turn Hong Kong into a free port after its return. Options
that compromised Chinese sovereignty, such as turning Hong Kong into the
Far Eastern headquarters of the United Nations, were deemed unacceptable.49
In 1947, senior Chinese leaders close to Chiang announced China’s decision to
defer tackling the Hong Kong question.50 As long as China’s sovereign rights
would be upheld, the Chinese government’s primary concern was to reach an
amicable settlement, as the country was descending into a national crisis.51 In-
creasingly domestic events, not least the tide of the Civic War which was turning
against Chiang’s Kuomintang forces, prevented him from paying serious
attention to the future of Hong Kong or its New Territories.52
By 1949, the back of the Kuomintang’s military power had been broken
by the Communists led by Mao Zedong. The latter crossed the Yangtze River
from north China, captured the capital Nanjing and the financial centre
Shanghai in April. By October, Mao had proclaimed the establishment of the
People’s Republic of China (PRC) in Beijing, and his forces had reached the
Sino-British border. Britain recognised this new regime on 6 January 1950.
For better or for worse, China had a Communist government and this now
handled the Hong Kong question.
In the immediate post-war period, the Chinese Communist view of the
world was based on the existence of the Cold War between the Soviet and US
blocs.53 Mao played a pivotal role in shaping this world view and in making
foreign policy. 54 His thinking was deeply affected by his own experiences as a
revolutionary and in the civil war. As a master strategist, he consistently
emphasised the importance of holding the initiative. 55 This requirement was
adopted as one of the PRC’s basic foreign policy principles and was applied
over Hong Kong. 56
 A FINE BALANCE 153

Hong Kong occupied an unusual place in Chinese Communist calculations,

as it was at the same time a foreign policy and a domestic policy issue. In Beijing’s
view, the treaties that governed the status of Hong Kong and the New Territories
were invalid ‘unequal treaties’,57 and Hong Kong was therefore a domestic issue
for China. With regard to the foreign policy complications, it saw Hong Kong
as a matter ‘left behind by history’, which ‘could be resolved through negotiations
when the conditions were ripe’.58 However, unlike most international disputes,
it was an issue that Beijing maintained ‘the United Nations had no right to
discuss’ as soon as it became a member of this international organisation.59
Mao first made known his views about Hong Kong to a handful of Western
journalists at the end of 1946: he did not seek its early return.60 According to
Gordon Harmon, a British journalist in the group, Mao reportedly said:

China has enough trouble in her hands to try and clean up the mess in
her own country, leave alone trying to rule Formosa, for us to clamour
for the return of Hong Kong. I am not interested in Hong Kong; the
Communist Party is not interested in Hong Kong; it has never been the
subject of any discussion amongst us. Perhaps ten, twenty or thirty years
hence we may ask for a discussion regarding its return, but my attitude is
that so long as your officials do not maltreat Chinese subjects in Hong
Kong, and so long as Chinese are not treated as inferior to others in the
matter of taxation and a voice in the Government, I am not interested in
Hong Kong, and will certainly not allow it to be a bone of contention
between your country and mine. 61

Preoccupied with the civil war, Mao did not at this stage pay much attention
to Hong Kong. This was also because the British enclave was highly valuable
to the Communists. For a short time, when it was unsafe for the CCP to
operate in south China, it surreptitiously located its South China Bureau inside
Hong Kong.62 Even after the bureau had been re-established in China proper,
a sub-bureau was maintained in Hong Kong.63 Hong Kong was ‘more a regional
than a purely local centre’ from which the Party sought to coordinate and aid
the struggle for power on the mainland, and ‘for transmitting directives to
neighbouring countries’.64 The CCP had learned from its lessons in the pre-
war era. In the 1940s, it required its cadres not to break Hong Kong laws
openly and to refrain from challenging or even criticising British imperial
rule there. As they could find no evidence of any subversive activity against
the government of China either, the British ignored its existence. 65
As victory over all China loomed, the CCP sought to reassure the British
of its policy towards Hong Kong. This was carried out in late 1948 by the
local head of the Xinhua News Agency, Qiao Guanghua, an alternate member
of the Party’s Central Committee and its de facto representative in Hong
Kong. Qiao told the British that ‘it was not the Communist Party’s policy to
take the British colony by force when they come into power in China’. 66 He
further ‘inferred that his Party would not agitate for the return of Hong
Kong’. 67 The rationale was based upon, as Mao admitted a few months later,
Hong Kong’s ‘economic value to China’.68
154 A MODERN HISTORY OF HONG KONG

The establishment of the PRC did not fundamentally change the

Communist Party’s policy towards Hong Kong. When their forces were about
to reach the Hong Kong border in October 1949, the local commander was
specifically instructed not to let any incident happen.69 Hong Kong became
even more valuable to the PRC as a result of the outbreak of the Korean War
and the intensification of the Cold War in East Asia. Premier Zhou Enlai
told senior cadres based in Hong Kong in the early 1950s that the PRC would
not attempt to take Hong Kong, for it was a valuable instrument with which
to divide the British from the Americans in their East Asian policies. 70 Zhou
also stressed Hong Kong’s value in helping the PRC break the embargoes the
USA and UN had imposed on it as a result of the Korean War, in serving as
a base to build up the widest united front against the ‘American imperialists’,
and in being a valuable opening for the Chinese Communists to operate in
the Western world, Southeast Asia, the rest of Asia, Africa and Latin America.71
Zhou’s instructions were echoed by Politburo member Peng Zhen, who
explained to cadres within the PRC that it would be ‘unwise for us to deal
with the problem of Hong Kong rashly and without preparation’. This would
‘not only bring unnecessary technical difficulty in the enforcement of our
international policy but would also increase our burden’.72 In 1954, Zhou
admitted privately that, up to then, the PRC government had not deliberated
on Hong Kong’s future. 73 In 1959, Mao reaffirmed the policy of keeping the
status quo there because of its value to China.74
The Party’s Central Committee issued a directive sometime in the 1950s
that Hong Kong should be fully utilised to further the country’s long-term
interests. This emerged as the guiding principle for the PRC’s Hong Kong
policy. It survived the upheavals of the Cultural Revolution and came to be
reaffirmed after reviews in the 1970s and 1980s.75
From late 1948, the PRC continuously maintained that the Hong Kong
question would be settled through negotiations at a time of its choosing. Unlike
Chiang Kai-shek’s government, the PRC rejected the relevance of a technical
distinction in legal status between the New Territories and Hong Kong proper.
It expected to recover Hong Kong in due course. When Sino-British relations
were normalised in 1972, Premier Zhou told a British journalist that he expected
to settle the question through negotiations and had 1997 in mind as the
appropriate time for a solution.76 Beijing could afford to take a relaxed attitude
because, as I explain below, the British did not publicly challenge its position
and thus allowed it to feel it had retained the initiative over Hong Kong.
When the Chinese civil war reached its turning point in December 1948,
the British government rightly concluded that ‘Communist domination of
China’ would ‘only be a matter of time’.77 It started to work out a new China
policy. It recognised that the Chinese Communists were orthodox Marxist-
Leninists on the basis of Communist documents captured by the Hong Kong
police.78 Consequently, it accepted that its relations with China would undergo
fundamental changes. Nevertheless, it decided against abandoning their
position in China and tried to keep ‘a foot in the door’.79
As 1949 unfolded, British concerns about Hong Kong’s future underwent a
basic change. The prospect of Chiang’s government raising the question had
 A FINE BALANCE 155

ceased to be relevant. The new consideration was whether the Chinese

Communists would allow a ‘well-organised, well-run British port convenient
for their trade with the outside world’ to exist, or whether they would seek to
get it back by using ‘every method short of war’.80 The British did not doubt
that the Communists intended to recover Hong Kong, but thought that it was
not imminent. They did not expect an attack.81 The British saw the most serious
threat as internal unrest ‘inspired by the Communist-dominated’ trade unions.82
Before the end of the year, the British government nevertheless massively
reinforced Hong Kong’s garrison from one infantry brigade to about 30,000
troops. These were supported by tanks, heavy guns, a powerful fleet, including
an aircraft carrier, and a sizeable air force.83 This was not so much because of
a changed assessment of the threat as because of an unexpected incident
that occurred more than 700 miles away from Hong Kong.
On 20 April, a British frigate, HMS Amethyst, was shelled and badly damaged
on a routine mission sailing up the Yangtze River to Nanjing. It was held
captive by Communist artilleries massed on the northern bank of the river,
which were preparing to attack Kuomintang forces on the south of the river.
It was not until 31 July that HMS Amethyst eventually escaped after an ordeal
lasting 101 days. The failure of the Royal Navy’s attempts to rescue the ship
was seen in Hong Kong as its greatest humiliation in the East since the sinking
of HMS Prince of Wales and Repulse at the beginning of the Pacific War. 84 The
incident also had a major impact on public opinion in Britain. The government
tried to calm its critics and demonstrate its determination to protect British
interests in East Asia by immediately dispatching a brigade to strengthen the
Hong Kong garrison.85
Irrespective of the Communist threat, once the Hong Kong garrison had
been doubled and the British had committed their prestige to its defence, it
became vitally important not to risk losing Hong Kong and its defence force.
In the view of the chiefs of staff, ‘failure to do so would have a disastrous
effect on morale in Southeast Asia’.86 For a short time, Hong Kong came to
be seen as the most exposed of a line of dominoes vulnerable to pressure
from the Communist camp.87 The British government felt it had to reinforce
Hong Kong massively to deter a Communist attack.88
The reinforcement pushed the question of Hong Kong’s future higher up
the political agenda. A new policy was produced in August. By then, Hong
Kong’s future had come to be seen more from the perspective of the Cold
War than from that of fending off a Chinese claim for retrocession. The
British concluded that the situation they faced in Hong Kong was like that in
Berlin. Just as Britain could ‘not foresee with certainty how the future of
Berlin’ would develop, but were ‘convinced of the necessity of remaining
there’, it felt ‘impelled to remain in Hong Kong without any clear indication
of the extent or duration of the military commitment involved’. 89 Such a
policy was partly based on the armed forces’ assessment of the situation.
They took the view that the reinforced garrison had ‘a good chance of holding
Hong Kong against a full-scale attack by Chinese Communists unless the
latter were receiving appreciable military assistance from Russia’.90 It was also
partly meant to enlist American support for Hong Kong’s security.
156 A MODERN HISTORY OF HONG KONG

The Cabinet paper outlining the new policy laid down that Britain ‘should
not be prepared to discuss the future of Hong Kong with the new Government
unless it were friendly, democratic, stable and in control of a united China’. 91
It further explained:
We cannot agree to negotiate about Hong Kong with a Government which
is unfriendly, since we should be negotiating under duress. We should
equally refuse to discuss the future of Hong Kong with a Government
which is undemocratic, since we should not be prepared to hand the
people of Hong Kong over to a Communist regime. Finally, we should
be unwilling to discuss Hong Kong with a China which is not united,
because its future would be likely to become a pawn in the contest be-
tween conflicting factions. Unless there were a stable Government we
could not rely on it to preserve Hong Kong as a secure free port and
place of exchange between China and the rest of the world.

Since it was obvious that the new Communist government to be set up in China
could not meet any of the above conditions, the issue of discussing Hong
Kong’s future was treated as academic. The New Territories’ lease, which was
due to expire in 1997, posed a different problem. The Cabinet paper suggested:
It does not seem likely that when that time comes any Chinese
Government will be prepared to renew the lease. Without these territories
Hong Kong would be untenable, and it is therefore probable that before
1997 the United Kingdom Government of the day will have to consider
the status of Hong Kong. But we are surely not justified some two
generations in advance of the event in attempting to lay down the
principles which should govern any arrangement which it may be possible
to reach with China at that time.

When the issue was put to the Cabinet, there was a strongly expressed view
that Hong Kong could only be held in the long term with American support. 92
Furthermore, the Cabinet agreed to remove ‘democratic’ from the conditions
to be met, for it precluded discussions with a Communist government in
China. The British government expected the Communists to stay in power
on a long-term basis and had resigned itself to dealing with the Hong Kong
question prior to 1997.
Britain’s attempt to secure American support for Hong Kong’s defence
proved problematic. To begin with, the two countries responded very
differently to the Communist victory in China. 93 Furthermore, the US
government had an ambivalent attitude towards Hong Kong. This was partly
because of its colonial status, but there were also wider strategic considerations.
On the one hand, Washington saw that, with its ‘strongest ally… threatened
with a state of war or a serious loss of prestige’ over Hong Kong, its ‘interests
in the Far East would be involved’.94 On the other hand, it recognised the
disparity between its capabilities and worldwide obligations. 95 In the US
assessment, defending Hong Kong ‘would require the establishment of a
 A FINE BALANCE 157

military position well inland’ and would involve ‘a movement of large-scale

forces into China’, which would risk global war. 96 The USA decided against
helping to defend Hong Kong. It did not ‘expect to retain by force any foothold
in continental China’ in the event of a world war.97
By 1960, the military build-up during President Dwight Eisenhower’s
administration had considerably strengthened his confidence in American
power. He now had the resources to contemplate military intervention to
support a determined British attempt to defend Hong Kong. 98 Nevertheless,
he refrained from making a firm commitment. American policy subsequently
remained noncommittal, even in 1967 at the height of the Vietnam War and
the Cultural Revolution, when local Communists challenged the Hong Kong
government’s authority.99 Thus, though the British had at times expressed
confidence that the USA would come to Hong Kong’s aid should it come
under attack and that American nuclear retaliatory power served as a deterrent
to the PRC, they were always aware that there was no American undertaking
to defend Hong Kong.100

The Impact of the Korean War

The failure of the British government to secure an American undertaking
over the defence of Hong Kong made its position there more precarious as
the Cold War in Asia turned into a shooting war in Korea. Even before the
Korean War broke out in June 1950, Hong Kong was already delicately placed
in the stand-off between the two Cold War blocs. As a result of British
involvement as a leading member of the United Nations and the closest ally
of the USA, Hong Kong found itself serving as a base to support British
militar y and naval operations in Korea. Hong Kong was therefore
understandably jittery in the early stages of the Korean War, even though
both the Chinese and the British governments deliberately ignored the fact
that their respective forces were engaged in combat in Korea when they dealt
with Hong Kong. 101
The outbreak of war in Korea did, however, have a major impact on Hong
Kong as the USA promptly ‘neutralised’ the Taiwan Strait in order to prevent
the conflict in Korea from spreading. This had the effect of preventing Chinese
Communist forces from crossing the Taiwan Strait to destroy the remnants
of the Kuomintang forces under Chiang Kai-shek and conclude the Chinese
Civil War. The situation deteriorated when the PRC interfered militarily in
Korea in October–November 1950. 102 Hong Kong held its breath and prayed
that the Korean War and the Kuomintang-Chinese Communist struggle would
not converge with an explosive outcome which might embroil it.103
With a stalemate imposed on the Chinese Civil War set in the wider context
of the Cold War, Hong Kong found itself unwittingly caught up in the
continuing struggle between the Chinese Communists and the Kuomintang.
To the PRC, Hong Kong was central to its united front in isolating and weakening
the Kuomintang’s Republic of China (ROC) government in Taiwan, described
by Mao as one of the ‘running dogs of imperialism’.104 The Kuomintang, for
its part, saw Hong Kong as a crucial place to stage covert operations against
the PRC. The colonial government had to devise a strategy to prevent, on the
158 A MODERN HISTORY OF HONG KONG

one hand, such activities from turning Hong Kong into a Chinese political
cockpit and, on the other hand, to demonstrate its determination to hold the
territory without provoking an irredentist response from the nationalistic PRC.
The Korean War also affected Hong Kong economically. The imposition
of a trade embargo against the PRC by the USA in December 1950 was
followed by a partial embargo on the export of strategic materials by the UN
in May 1951, and by a tightening of British export control the following
month. They put an end to Hong Kong’s continuous economic boom, which
had followed its successful economic rehabilitation.105 More importantly, the
Western trade embargoes against the PRC meant Hong Kong lost its long-
standing role as the premier entrepôt between China and the West. Hong
Kong’s resourceful people had no choice but to face the challenge and attempt
a transformation of its economy. 106

Strategy for Survival

Finding itself vulnerably placed in the Cold War, caught between the
unfinished Chinese Civil War and the risk of becoming a flashpoint, Hong
Kong tried to separate the first two and deal with them with level-headed
pragmatism. It minimised the effect of the Cold War by ignoring it. It
succeeded because none of the Great Powers interested in Hong Kong in
fact wanted a showdown there. The basic threat to Hong Kong’s security
and, indeed, its survival was the menace of Chinese irredentism on the one
hand, and the danger of being sucked into the unfinished Chinese Civil War
and turned into a battleground between the two protagonists on the other.
The strategy for survival which Hong Kong devised in the 1950s was
consequently predicated on this premise.
This involved upholding a policy of neutrality in Chinese politics. Its
rationale was explained by Governor Grantham:

The strength of our position in Hong Kong depends largely upon non-
involvement in political issues. This can be achieved only by maintaining
strict legality and impartiality in any issues with a political tinge. We have
followed this attitude in relation to Chinese political activities in the
Colony e.g. treating both [the Kuomintang] and Communists exactly
similar and absolutely according to law. Any departure from this… would
weaken our position, both externally and internally. 107

To maintain strict neutrality when one is precariously placed between two

parties engaged in a civil war is like walking a tightrope – one’s real concern
is not to maintain balance per se, but rather not to fall, though this in practice
requires keeping the balance. This was the spirit behind Hong Kong’s strategy.
But to stay totally impartial in Chinese politics was a particularly difficult task
for Hong Kong, since it was ‘geographically and racially a part of China’ and
had in the 1950s ‘no politics of its own but reflect[ed] the politics of China’.108
Impartiality was enshrined as the basis for Hong Kong’s policy but the colonial
government never lost sight of the forest by focusing on the tree in upholding
neutrality for the sake of it.109
 A FINE BALANCE 159

In addition, the government also tried ‘to administer the territory in the
interests of the inhabitants, including those numbering nearly a million who
have come from China in recent years’ and to prevent it being used ‘as a base
for hostile activities against China’.110 Increasingly, it fulfilled the expectations
Mao set out for Gordon Harmon as requirements for the Communists not to
raise the Hong Kong question at the end of 1946. In political terms, Hong
Kong made it a point not to become a thorn in the PRC’s side.
Economically, Hong Kong also made itself valuable to the PRC. In the
1950s, its existence helped procure certain strategic materials, which were
smuggled into the PRC when the US and UN embargoes were in place.111
Among the most valuable materials were penicillin, other medical supplies,
petrol and tyres for motor vehicles. 112 In the early days, local residents’
remittances to relatives on the mainland provided valuable foreign exchange.
During the famine – caused by the failure of the Maoist policy, known as the
Great Leap Forward, to increase steel and agricultural production without
regard to common sense or the laws of physics and biology – in the late
1950s and early 1960s, food parcels and other support from the people of
Hong Kong formed a vital lifeline for many in the PRC. Hong Kong’s
economic take-off in the late 1960s and early 1970s greatly enhanced its value,
particularly after Hong Kong resumed its pre-1950 role as the PRC’s main
entrepôt in the 1970s. 113 This happened as the PRC embarked on its
programme of ‘four modernisation’. Hong Kong became the principal channel
through which the PRC acquired modern technology, management skills and
capital. 114 It contributed almost one third of the PRC’s foreign exchange
earnings. 115 It also provided crucial financial services that were unavailable in
the PRC.116 After 1949, Hong Kong turned itself into the goose that laid
golden eggs for the PRC.
By deliberately avoiding the issue of Hong Kong’s status, Britain gave the
PRC no reason to feel concerned about Hong Kong. Indeed, there was a
clear recognition among key British policymakers that there was ‘a definite
term set to the continuance of Hong Kong’s quasi-colonial status’.117 Sir Robert
Black, who succeeded Grantham as governor shared Grantham’s view that
the year 1997 would be critical for the future of Hong Kong. During his
term, from 1958 to 1964, Black worked on the basis that ‘we hold our position
in Hong Kong at China’s sufferance’, and recommended to the British
government that it would be ‘vital for Hong Kong’s stability that there should
be no official or authorised pronouncement on Hong Kong’s future until and
unless this becomes clearly unavoidable’. 118
Until the end of the 1970s, the British in effect satisfied the most basic
requirement Mao laid down in dealing with Hong Kong, which was to feel
that it held the initiative over Hong Kong. The PRC government had no
reason to disturb the goose that so obligingly laid bigger and bigger golden
eggs. The people of Hong Kong also chose to ignore the fact that the New
Territories’ lease would expire in 1997 and that something would have to be
done about it, at least about the expiry of British jurisdiction there. Because
the PRC regarded the ‘unequal treaties’ as invalid, many people thought that
the PRC might choose to ignore this particular appointment in history. Some
160 A MODERN HISTORY OF HONG KONG

even indulged in the comforting thought that the PRC might allow the status
quo to continue for as long as it proved advantageous to it. Most people
simply preferred not to look beyond the short term. The way the government
and the people of Hong Kong dealt with its future was essentially built on
this formula of not rocking the boat. It was not glamorous but it was Hong
Kong’s strategy for survival.
 Chapter 12
Economic Take-off

The restoration of civil government by Governor Young in May 1946

was meant to mark a return to normality. It largely succeeded in the
economic sphere, but not because the economy had by then been
dramatically improved over the last stage of the Military Administration.
It did so because the local people were determined to make the most of
the situation and simply get on with life. The entrepreneurial spirit,
resourcefulness and business acumen of the local Chinese that made pre-
war Hong Kong what it was were quickly at work. With China’s economic
infrastructure in a sorry state and continuing to be devastated by the
civil war, Hong Kong swiftly resumed its role in servicing the China trade.
Old factories and workshops that existed before the war also resumed
production as soon as the necessary workers, raw materials and other
essentials could be found. The more enterprising added new manu-
facturing facilities, as the disruption of trade and transportation by the
war meant there were demands for basic everyday light industrial goods
in East Asia.
Once the effect of the economic disruption caused by the war receded,
Hong Kong’s economy grew very fast. The number of registered industrial
establishments increased quickly, from 972 in 1947 to 1,522 in 1950. 1
This amounted to an increase of 36 per cent over four years. This
impressive industrial expansion notwithstanding, until after the Korean
War started in June 1950, the ambition of Hong Kong was to restore
itself as the leading entrepôt for the China trade. Although industrial-
isation had already started before the Pacific War, the government and
the colonial establishment still focused their attention mainly upon trade.
Most workshops and factories were small to medium-size facilities. The
overwhelming majority of them were founded and operated by the local
Chinese who were not part of the establishment. The community of local
industrialists was not represented in the Legislative Council and was not
in a position to exert major influence on policymakers in the late 1940s.
Though large industrial concerns owned by expatriates were in a
different category and were represented, their representatives did not
put much emphasis on developing industry. Most of these large industrial
162 A MODERN HISTORY OF HONG KONG

establishments, like shipyards and sugar refineries were in fact part of

large British hongs like Jardine Matheson or Swire Pacific. It is true that
their chief executives or senior directors often sat on the Legislative
Council and even the Executive Council, but the primary interest of these
business conglomerates was trade not industries.
In any event, trade did grow very fast in the late 1940s. It rose from
$HK2,767 million in value in 1947 to reach $HK7,503 million in 1950,
representing an aggregate growth of 63 per cent. 2 This was much faster
than the rate of industrial expansion. The colonial establishment was
therefore not unjustified in hoping that Hong Kong would restore its
place as the premier entrepôt of China, though its attitude mainly
reflected bureaucratic inertia. This working assumption was not seriously
challenged until the United Nations and the USA enforced a total embargo
against trading with the PRC after the latter militarily intervened in the
Korean War.

From Entrepôt to Industrial Colony

What marked out the economic history of the early post-war decades
was the transformation of Hong Kong from its long-established position
as China’s main entrepôt to an industrial colony. From overwhelming
dependence on the China trade in 1950, Hong Kong transformed its
economy into a highly industrialised one within a decade and a half.
According to the by-census of 1966, two-fifths of Hong Kong’s labour
force was engaged in manufacturing, and locally produced goods made
up four-fifths of its exports. 3 As a source of employment, manufacturing
accounted for less than five per cent of total employment in 1950, rose
to about ten per cent in 1960, to about 25 per cent in 1970 and peaked at
just over 40 per cent in 1980. 4
This rapid industrial expansion should not, however, be mistaken to
imply industrialisation started in this period. Although the growth in the
post-war decades marked a quantum leap from the industrial develop-
ments of the pre-war era, the already substantial industrial developments
before the Japanese invasion should not be overlooked.
The most important driving force behind Hong Kong’s industrialisation
was the local Chinese. They accounted for most of the investments in
production facilities. They also provided the bulk of managers and almost
all the industrial workers.
The fast pace of industrial growth in the 1950s was not the result of a
change in government policy. Just as the government did not have an
anti-industry policy prior to 1950 it did not, and indeed could not, reverse
itself and adopt a pro-industry policy either. 5 It recognised the spectacular
boom of 1950 and 1951 was an economic bubble fuelled by speculation
over the PRC’s needs for reconstruction and for other supplies when the
Korean War started. 6 In private, Acting Financial Secretary Arthur Clarke
was not sorry when the bubble burst as he thought it distorted the local
economy and was unsustainable. However, the consolidation he hoped
to have seen as a result centred around putting Hong Kong’s trade on a
 ECONOMIC TAKE - OFF 163

less speculative and therefore more sustainable basis. 7 Transforming Hong

Kong from a trading centre to an industrial colony was not part of
government policy in this period. 8
The government’s recognition of the shifting balance of importance
between trade and industry came after the local people reacted to the
changing economic environment and devoted themselves to industrial
productions. Most of those who made this transition quickly in the early
1950s were Chinese entrepreneurs. The majority were recent immigrants
who brought with them small capital from Guangdong. They knew there
was no safety net for them in Hong Kong. To survive, they altered their
investment strategies as soon as the economic climate changed. Some
moved into small industrial production adroitly when the speculative trade
boom busted in early 1952, and prospered. Others failed, lost what little
capital they had and joined the labour force. They did not expect or get
help from the government.
In parallel to the small entrepreneurs who were predominantly of
Guangdong origin, Hong Kong’s industrial growth also benefited from
the arrival of Shanghai industrialists. They started investing significantly
in Hong Kong as the Chinese civil war resumed. Some Shanghai
industrialists, particularly in the spinning sector of the textile industry,
went to Hong Kong to diversify their risk exposure. It was in the turbulent
years of 1948 and 1949 that the real influx occurred when two-thirds of
Shanghaiese-owned cotton spinning factories were set up in Hong Kong. 9
Two characteristics distinguished Shanghai textile industrialists from
their longer-established Cantonese colleagues in this period: the scale of
their production facilities and their sophistication. Factories built by the
Shanghai immigrants were usually much bigger and more advanced than
the existing local ones. The influx of Shanghai spinners meant not only
the creation of new and bigger production facilities, but also the injection
of more sophisticated management and technology, as well as the
introduction of more advanced and expensive machinery.
In the expansion of its spinning industry, Hong Kong also benefited
from the existence in its warehouses of a large quantity of modern
machinery imported from the West by Chinese spinners for their Shanghai
factories. 10 With strict foreign exchange control in place and uncertainty
during the civil war, some Shanghai industrialists arranged for their newly
ordered machinery to be delivered to Hong Kong first. 11 Some of them
subsequently used this machinery to start their new mills and production
in Hong Kong as the political, social and economic conditions in China,
including Shanghai, deteriorated. 12 Once Shanghai had fallen to the
Communists, what remained of those valuable textile machinery and other
equipment stored in local warehouses quickly found themselves used to
fit out new factories in Hong Kong. 13
The expansion of the Shanghaiese-owned textile production swiftly
overshadowed the longer-established local factories. In 1947, before the
Shanghai entrepreneurs started to invest heavily, Hong Kong already had
405 registered establishments in the textile industry employing 9,328
164 A MODERN HISTORY OF HONG KONG

workers, with most engaged in weaving and knitting. 14 Five years later,
Hong Kong’s textile industry employed 27,394 workers in 502 registered
factories. The cotton-spinning sector, where the Shanghai immigrants
dominated, saw an expansion from five factories with 102 workers in
1947 to 13 factories employing 8,925 workers. 15 The textile industry
became the most important economic activity. When Hong Kong became
known for its textile industry in the late 1950s and the early 1960s, the
image that was projected internationally was usually that of the larger
mills owned and operated by the entrepreneurial immigrants of Shanghai.
They played the leading role in building up Hong Kong’s modern textile
industry, particularly its spinning sector, after the war.
W h at really chang ed Hong Kong’s attitude towards industrial
development was the Western trade embargo against the PRC. American
pressure on Hong Kong to enforce the embargo practically ended its
role as China’s premier entrepôt. 16 It is true that smuggling to the PRC
of some banned material continued. 17 It should also be recognised that
some of the imports the PRC secured through Hong Kong, such as
‘pharmaceuticals (antibiotics and sulpha drugs), machinery and dyes’ were
particularly valuable as they could not be supplied by the PRC’s Eastern
European allies. 18 However, the quantity and monetary value involved
were substantially smaller compared to the scale of the old China trade.
Hong Kong’s share in China’s total trade fell ‘from 32 per cent in 1951 to
five per cent in 1959’. 19 American pressure and Cold War politics meant
Hong Kong had to observe the embargoes. 20 As a result, exports to the
PRC came under stringent control, though legitimate local trade of non-
strategic material between Hong Kong and the mainland survived. With
the bulk of the old China trade cut off, many entrepreneurs had no choice
but turn to small-scale light industrial production.
Even for the export of Hong Kong’s own products to the rest of the
world, a system of certificate of origin had to be introduced by the
government in order to assure much of the world, particularly the USA,
that they were not re-exports from Communist China. The American
embargo was vigorously enforced, though what constituted re-exports
from the PRC was not always easy to define. Hong Kong officials had to
reach an understanding with their American colleagues to devise mutually
acceptable working guidelines. Some of the issues involved were as thorny
as to decide whether meat products from chicken or ducklings hatched
in Hong Kong from eggs imported from the PRC should be deemed to
have sufficient capitalist pedigree for export to the USA. The certificate
of origin system g ained enough credibility to be accepted by the
Americans to resolve such matters.
In its industrial development of the 1950s, Hong Kong’s entrepreneurs
had no master plan and received no leadership or direction from the
government. Unlike some of the leading Shanghai immigrant industrialists
who had long experience in cotton spinning, large quantities of modern
machinery in place and expert knowledge of their chosen industry, most
small local entrepreneurs simply tried to make the most of what they had
 ECONOMIC TAKE - OFF 165

and find the right niche for themselves. Hong Kong had limited land and
few natural resources. What it did have was a cheap and highly flexible
labour force, as well as excellent port facilities and a rapidly expanding
domestic market for basic household goods generated by the presence of
a large refugee population. 21 In their search for the right niche for
manufacturing, most local entrepreneurs chose to engage in export-
oriented, labour intensive, low technology, light industrial production or
the manufacture of cheap basic household utensils. They made the most
of Hong Kong’s comparative advantages not because they had any under-
standing of this economic concept but because it made good business sense.
The government became more positive about industrial development
after the dissipation of Hong Kong’s prospect of restoring its role as
China’s main entrepôt when the Korean War ended in a stalemate in 1953.
Around this time, Governor Grantham came to realise that the bulk of
Hong Kong’s recent immigrants and refugees would not return to the
Chinese mainland as earlier waves of refugees had done in the previous
century. Communism in China put an end to this historical pattern. 22 This
recognition led the government to see the importance of industrialisation.
Since its primary concerns were stability and prosperity, it accepted the
need for industrial expansion to provide employment to the large
immigrant population. 23
The increasingly positive view the government took towards industrial
development did not imply it became less supportive of trade. There was
no shift from a policy of supporting trade to industry. The government
did not see a need to choose between the two. Indeed, with fewer than
50 administrative officers, even at the end of the 1950s, the government
simply did not have the resources to do strategic planning for promoting
economic development in one or the other direction.
The greatest contribution by the government to Hong Kong’s economic
transformation in the 1950s lay in providing the conditions for industries
to develop and grow. It maintained political and social stability at a time
when neither could be taken for granted in East Asia. It provided a
relatively efficient administration that sustained good order without
impeding industrial growth through oppressive or unpredictable policies.
It operated a credible certificate of origin system that allowed local
manufacturers to export despite the trade embargoes against the PRC. It
steadily improved the local infrastructures, building roads, for example,
and improving water supplies that enabled industry and trade to grow. 24
It made land available for large factories to be built, particularly in new
towns, and constructed low-cost, multi-storey industrial buildings in
resettlement estates for light industries. 25 Its massive resettlement or
housing programme, star ted after 1953, meant cheap and heavily
subsidised housing was made available to workers. It also invested in
human resources by providing heavily subsidised education and health
services. As the decade progressed, the government gradually took on
board the importance of industrial development and gave it what benign
support it could. 26 It helped industries and businesses by minimising
166 A MODERN HISTORY OF HONG KONG

bureaucratic red tape and legal formalities in the setting up of new

enterprises. 27 It should, however, be recognised that while these im-
provements helped to nurture industry, some were introduced because
they were needed for maintaining stability and good order as well.
The government also balanced the desirability of regulating conditions
for the employment of labour on the one hand, and the need to allow
the greatest scope for proprietors to manufacture at the lowest cost on
the other. 28 The former was more than just a matter of minimising the
abuse of vulnerable workers, particularly children and women, by factory
owners. As Britain established its own welfare state after the war, the
colonial government came under pressure from London to follow the
British lead in the promotion of labour rights. 29 Although it hosted labour
advisors from London periodically and benefited from their advice in
improving working conditions modestly, it resisted pressure that could
have adversely affected the profitability and competitiveness of its
industries. 3 0 In the 1950s and 1960s, the colonial government was
undoubtedly guilty of not doing all it could to improve conditions for
workers. It did so mainly to support industries in order to maintain
economic stability, though it was also partly due to bureaucratic inertia.
What the g overnment did not do was pick winners or losers in
industries or, for that matter, among various economic sectors. Except
in fish and agricultural distribution and over the supply of rice, it did
not give industrialists and businessmen any directions or special
inducements to develop particular industries or trade. It devoted its
limited resources to its areas of core competence, which was to maintain
a minimalist administration and to buttress the rule of law. It left business
and industrial development to the entrepreneurs. Hong Kong focused
heavily on the textile industry in the 1950s, because it was one area in
which it actually enjoyed competitive advantages. Local entrepreneurs
shifted to other industries when they sensed greater profitability. In so
doing, they often followed each other but they did not rely on a shift in
government policy or on government inducement.
Rapid industrialisation in fact reinforced and extended Hong Kong’s
role as a major trading centre. Industrial development and trade were
highly complementary to each other, as Hong Kong’s small population
and limited natural resources could not in themselves sustain rapid
industrial expansion. The industrial boom benefited tremendously from
Hong Kong’s long-established, extensive and efficient trading networks,
since most of its industrial output was for export, and its industries relied
on imported raw material and machinery for production. 31 Indeed, the
end of the old China trade did not destroy Hong Kong’s position as a
trading centre. Rapid industrialisation generated new trade, and Hong
Kong turned itself into an entrepôt for the East Asia region as a whole.
In Hong Kong’s economic transformation in the 1950s and early 1960s,
the Shanghai immigrant entrepreneurs, who had contributed so much to
the textile industry, made a further significant break with traditional
practice that had wider ramifications. Hong Kong’s longer-established
 ECONOMIC TAKE - OFF 167

Cantonese entrepreneurs historically turned to the local Chinese banks

to finance their expansions, though some of the larger loans might have
involved the local Chinese banks working with their big ger British
counterparts in a syndicate. Few local entrepreneurs directly approached
the leading British banks for loans. Those who came from Shanghai, which
was a more cosmopolitan society than Hong Kong before the Pacific
War, behaved differently. They were not deterred by the language barrier
and the long separate and parallel existence of the local Chinese and the
expatriate communities. 32 They took the lead in breaking the barrier and
approached British banks for loans for their enterprises. 33
The positive response of the British banks to the Shanghai entrepre-
neurs encouraged other Chinese entrepreneurs to approach British banks
directly. 34 The old communal barrier came to be eroded steadily as Hong
Kong’s rapid industrialisation induced the local Chinese and the expatri-
ates to work more closely together. 35 The involvement of British banks
in financing the local manufacturing sector did not mean local Chinese
banks were displaced. Growth was so fast that both the local Chinese
and the international British banks expanded. The availability of this new
and very large source of finance enabled the local entrepreneurs to ex-
pand even faster than they otherwise would have managed.
In time, a symbiotic relationship developed. The British banks had
the financial resources, expertise and ready access to the rest of the world
through their excellent international financial networks. They became
available to the local Chinese entrepreneurs who surpassed the long-
established British hongs in exploiting the economic opportunities. The
British banks themselves benefited greatly as the business environment
in Asia in the 1950s and early 1960s did not provide them with much
alternative scope for expansion. 36 By taking the lead in lending to the
local industrialists, the Hong Kong and Shanghai Bank benefited most
from this symbiotic relationship. As the British banks helped the local
industrialists to enter international markets and make considerable profits,
Hong Kong prospered as it combined to good effect the resources of
entrepreneurial industrialists, expert exporters, trade financiers and
international bankers. 37

The Immigrant Mentality

Hong Kong’s population expanded from about 600,000 in 1945 to over 2
million in 1950, and to 2.5 million in 1955. 38 It is true that a large number
of those who went to Hong Kong from China in this period had either
previously lived in the colony or had families there. However, there was
no dispute about the size of the immigrant population. Even as late as
1961, 33 per cent of the workforce had arrived after 1949 and 13 per
cent had lived there for five years or less. 39 Whether they had lived in
Hong Kong before the war or not, they went to this British colony again
as either refugees or economic migrants. 40 The immigrant nature of the
population, the uncertainty over whether they would make it their
p e r m a n e n t h o m e , a n d t h e i r l a ck of d e a l i n g s w i t h t h e c o l o n i a l
168 A MODERN HISTORY OF HONG KONG

administration on policy matters left important marks on the society and

the business culture of Hong Kong.
The Chinese community of post-war Hong Kong not only inherited the
legendary entrepreneurial spirit of the Chinese people but also reacted to
a desperate need to succeed in order to survive. The uncertainty that
prevailed was captured by a visiting British labour adviser in the late 1950s:

A feeling of insecurity colours nearly everyone’s lives [sic] in Hong

Kong – trade unions, and individual workers are never sure of work,
housing, food or even the right to stay in Hong Kong. Capitalists
(factory owners and house-owners) want quick returns – money back
in 5 years, not 20 – for fear something happens before. No one knows
how long Hong Kong will exist, or how long it will prosper. 41

This reality induced the Chinese immigrants to make the most of what
they had, be they entrepreneurs or unskilled working persons. Flexibility
and ing enuity, whether in investments, nature of business or in
employment, were the keys for survival. Post-war Chinese immigrants to
Hong Kong developed their entrepreneurial spirit to the full because they
felt they could only rely upon themselves in this foreign enclave.
While the British labour adviser’s reference to a five-year investment
cycle probably applied to the larger business and industrial concerns, it
was in fact far too long a duration for most of the smaller entrepreneurs.
In the early post-war decades, few of these had sufficient capital to invest
in an enterprise without seeing a sufficient return to support their family
within a much shorter time frame. Loans and their servicing costs were
expensive. The local entrepreneur’s single-minded determination to make
money was driven by the need to survive in an environment in which the
only alternative to success was financial ruin. An extremely short-term
approach was therefore commonplace.
This reality forced most entrepreneurs, who were generally not well
educated, to stay highly focused upon their core businesses. It meant
that industrialists, for example, usually operated as contract manufacturers.
They produced against firm orders for goods designed and to be marketed
by the purchasers. They focused upon the task they knew best, which
was to manufacture the specified goods within their capabilities to a
designated quality in an agreed time frame, and leave the rest to others. 42
Where one manufacturer could not fulfil a large order it would sub-
contract a reliable peer to share the work. Indeed, according to one
account, about 24 per cent of orders for manufacturing came from peer
sub-contracting. 43 Small factories could operate as a network of producers
as they did not have to compete against each other in the design or
marketing of the finished products.
Dealings with overseas buyers were usually left to the numerous trading
companies. A relatively small number were part of the large British hongs,
while most were small outfits operated by other local entrepreneurs. These
trading firms not only served as the interface with the overseas purchasers,
 ECONOMIC TAKE - OFF 169

but would also handle shipping, insurance and the documentation

required. 44 Thus, even though most Hong Kong industrialists devoted
themselves to a narrowly defined scope of manufacturing activity,
networks of trading and servicing firms provided them with excellent
access to global markets. 45
In Hong Kong’s numerous small factories, productivity by conventional
measure was low. Most industrialists and managers had little formal
training themselves. They were also generally ‘uninterested in any form
of training other than the teaching of skills and actual workshop
processes’. 46 Notwithstanding this and the low level of capital and techno-
logical input, production was cost effective. 47 In the 1950s and 1960s,
most local factories and trading firms were run not by people with higher
education or formal industrial or management training but by astute
managers who kept a keen eye on the bottom line. The sense of insecurity
and the immigrant mentality encouraged manufacturers to maximise
output from capital investment. Allowing machines to stay idle because
of poor maintenance or missing spare parts was an expensive folly that
few could afford. Thus, in most factories practically every machine was
manned and run while every square foot of space was utilised. 48
The same mentality and low standard of formal training meant Hong
Kong entrepreneurs also had to be willing to move on to alternative lines
of manufacturing or business quickly. They had neither the capital nor
the human resources to do any research and development work or to
learn about the state of the market. Few could upgrade their products on
their own. Functioning largely as contract manufacturers, they were highly
vulnerable to changes in the international market place. To survive they
had to be able to move to different kinds of production or even different
lines of business, once profitability for their particular products fell
significantly. What this meant in practice was that many of the smaller
factories existed for a relatively short time for specific productions. When
the time came, the enterprising ones would reinvent themselves and set
up new factories or modify the old ones to produce the next hot
commodity within their technical competence. Proprietors of factories
often had to close down no longer profitable workshops and move on to
the next profitable line of work. Those who failed to do so fell by the
wayside. The competitiveness of Hong Kong’s industrial economy rested
on the survival of the fittest. 49
The labour force was also employed to maximise production by
allowing unskilled workers to do specific simple tasks, and by a brutal
incentive regime. Wage differential between unskilled, semi-skilled and
skilled workers was large and most workers were paid at piece rather
than time-rate. 50 They were meant to provide incentives for individuals
to upgrade their skills and to keep costs low. Working hours were
extremely long and health and safety standards low. Despite the harsh
working conditions, there were few complaints or industrial actions by
workers in the 1950s. 51 Most preferred to work, which generally meant at
terms offered by industrialists, rather than risk being dismissed and penni-
170 A MODERN HISTORY OF HONG KONG

less. Even by the 1960s, the most important source of job satisfaction
for the average working person was still the size of the pay packet. 52
Trade unions generally did not help to improve the conditions of the
working people much in the early post-war decades. The trade union
movement was weakened by the polarisation of the big ger and more
powerful unions into the Communist-dominated Federation of Trade
Unions and the Kuomintang-dominated Trade Union Council. 53 Their
political division and rivalry also gave the government reasonable grounds
to resist the promotion of union activities, as they were seen to be
potentially subversive to stability and good order. The subservient nature
of these organisations, particularly of the left-wing Federation of Trade
Union to the Chinese Communist Party, meant the union movement was
often not directed with the interests of the local workers in mind. 54 Indeed,
the Federation was known to have modified its programme to fall in line
with the political situation or policy requirements of the PRC. 55 Their
external political links also made union leaders fearful of being deported
by the colonial government should they take too activist an approach. 56
A weak union movement heightened the sense of insecurity among
workers. It also made the tasks of well-intentioned labour advisers from
London to persuade the Hong Kong government to take the lead in
improving the conditions of workers more difficult. 57 It produced a
vicious circle and inhibited the development of genuine unionism. It
meant relatively little was done to improve working conditions in the
1950s. Apart from four or five days of paid holiday a year, workers
generally did not have a weekly paid rest day in the 1950s. Sunday as a
rest day only became the norm in the latter half of the 1960s as the
effect of growing wealth filtered down to the workers.
The refugee mentality meant most entrepreneurs and workers saw this
British enclave as the lifeboat with China being the sea. Those who had
climbed into the lifeboat did not want to rock it. 58 Enterprising as they
were, they did more than just stay passively on board and wait to be
rescued. They used all their imagination, ingenuity, available resources,
hard work and sheer single-minded determination to make sure the
lifeboat sailed to safety. The foundation of Hong Kong’s spectacular post-
war economic miracle was built on the blood and sweat of its workers as
much as on the resourcefulness, business acumen and spirit of enterprise
of its entrepreneurs.

Take-off
With a solid foundation in light industrial production and export trade
thus established, Hong Kong’s economy truly took off towards the end
of the 1960s. 59 This economic transformation roughly coincided with
significant political changes that followed the Maoist-led confrontation
of 1967. 60
By the end of the 1960s and the beginning of the 1970s the Hong
Kong government took on a more positive and proactive approach in
social policies. This was partly because a generational change had occurred
 ECONOMIC TAKE - OFF 171

within the administration. 61 The older and more backward-looking senior

officials had all been replaced by younger, more forward-looking and
energetic ones. The colonial government had also realised how vulnerable
it was during the Maoist-led riots of 1967 and the value of popular
support. 62 It accepted the importance of turning itself into a government
for the people and acted on this recognition. 63 Above all, rapid economic
growth had given the government the necessary resources to expand the
civil service and fund new expenditures for social purposes. Economic
take-off had enabled the government to raise revenue substantially
without increasing tax. 64
The fundamental guiding principles behind the government’s financial
and economic policies did not change despite the economic take-off. They
came to be popularised by Philip Haddon-Cave (Financial Secretary, 1971–
81) as the positive non-intervention policy. 65 However, as a policy its origin
should be traced back to his predecessor, John Cowperthwaite.66 A man of
considerable intellect and integrity, Cowperthwaite (Financial Secretary,
1961–72) is Gladstonian in outlook over public finance and a self-confessed
‘Hong Kong chauvinist’. 67 His basic attitude to the management of Hong
Kong’s public finance and economic policy was to do everything within
the means of the Treasury to help the economy and improve Hong Kong,
provided he, as the controller of the public purse, was satisfied of the
soundness of any proposed public expenditure. 68 He also worked on the
basis that the private sector was better placed than the government in
managing businesses. He publicly accepted that private enterprise in Hong
Kong had ‘a good record of productive re-investment’ and professed ‘a
keen realisation of the importance of not withdrawing capital from the
private sector of the economy’. 69 These principles were adhered to by
Haddon-Cave, which ensured continuity in policy for two decades. 70
What had also not changed was the importance of the government as
a factor in the local economy. It remained the largest employer, the biggest
developer of real estate, the leading constructor, the largest landlord and
the biggest provider of education and health services. 71
What had changed was the amount of resources at the disposal of the
government. It had consistently maintained a budgetary surplus after the
war in order to avoid financial control by the British Treasury. 72 However,
it was not until the end of the 1960s that a comfortable safety margin, a
reserve the size of two-thirds of annual government expenditure, had
been secured. 73 As a result, the government could use the benefits of
previous austerity for the good of the community. What were unaffordable
luxuries in the early years of Cowperthwaite’s tenure as Financial Secretary
had become affordable by the time he handed over to Haddon-Cave.
Indeed, the government started to invest in highly desirable but non-
essential major infrastructural projects like the Cross Harbour Tunnel
and introduced a public assistance scheme for the poor as well as free
compulsory primary education shortly before Cowperthwaite retired. It
also expanded public expenditure substantially in housing, health services,
higher education and the civil service on a scale unimaginable a decade