First, a theoretical framework for the concept of the world system has been constructed using current literature. Second, the political and economic history of China and HK has been examined. Finally, the development of China and HK since the 1980s will be compared.
World-systems theory is a set of nested and overlapping interaction networks which focuses on understanding the development of multicultural territory labour division across core and periphery regions (Chase-duun, 1993, 1995; Wallerstein 1974, 2000).
Wallerstein (1974) defines the world-system as a multicultural territorial division of labour, and defines two types: core and periphery. These are defined by the nature of their industries: core regions are characterized by capital-intensive, well-developed tertiary industries and periphery regions by labour-intensive primary and secondary industries.
The specific claims of world-system theory can be separated into system structure and system dynamics. System structure defines the characteristics and relationships of the system components, with reference to core, periphery and semi-peripheral regions1. System dynamics concerns the processes of the upward or downward mobility within the structure (Shannon, 1996).
When Mao Zedong established the People's Republic of China in 1949, the government's priority was the forcible redistribution of property (Kenneth, 1992). Marrin (1993) and other critics describe the first few decades after the creation of the Republic as being full of chaos, famine and class struggles.
The Korean War induced the United States and United Nations to enforce a series of embargo punishments on China. Furthermore, the Soviet Union withdrew loans and technicians in 1960 due to a downturn in their relationship. The Great Leap Forward and the Cultural Revolution (1958-1976) not only paralyzed internal production and economic activities, but also separated China from the world-system economy (Marrin, 1993). Because China rigidly controlled international investments and trade, Hong Kong became the only port where China could buy foreign currency and items that were not obtainable locally (Miners, 1991).
Hong Kong (pre-1980s)
Hong Kong became a British colony at the end of the Opium War in 1842. Although its governor was appointed by Britain, colonial government did not promote any ideology to enhance its political legitimacy. Hong Kong has often been described as a free society (So & Kwitko, 1990). Colonial government adopted a "positive non-intervention" policy towards the economy while maintaining a competitive business environment to attract foreign investment, and pursued export-led industrialization in the early 1950s (Haddon-Cave, 1995).
After China's political upheaval in1949, an influx of over sixty thousand refugees to HK (Hambro, 1955) brought substantial capital and labour resources, which were used to set up manufacturing factories. The embargoes imposed on Chinese trade in the 1950s helped subsidize the HK economy, with HK acting as a buffer zone between western countries and the Chinese market.