Hong Kong's Policy of Positive Nonintervention: A Critical Appraisal of the 1998 Stock Market Intervention

Hong Kong's success as an international commercial and financial center has often been attributed to a policy of "positive nonintervention" adopted by the government. Market forces were allowed to determine the level of supply and demand in a variety of areas related to public affairs. This has allowed Hong Kong to maintain a relatively small public bureaucracy and has led to a general acceptance of the administrative style and principles followed by the government. Disagreements have been expressed over the claim of "positive nonintervention" made by the Hong Kong government, however, with analysts suggesting that interventions have been made in several areas such as housing, welfare, education, and health. This paper examines the policy of "positive nonintervention" with reference to a massive injection of funds by the Hong Kong government to bolster the sharply declining stock market in 1998, and reassesses the relevance of this claimed policy under current circumstances. The argument of this paper is that modern polities cannot be successfully governed by following a policy of "nonintervention." The government of Hong Kong, this paper finds, had to take a proactive role in developing services and regulating activities in the public interest. The Hong Kong government's claim to "positive nonintervention" relates simply to trade and commercial policies.