Hong Kong has suffered not from a political crackdown but rather from a severe economic downturn.

Decades of growth suddenly ended and the inhabitants of the colony-turned-special administrative region have learned at first hand such concepts as recession, deflation, negative equity and joblessness.

The concept of 'one country, two systems' has generally worked, and this is acknowledged by those who monitor Hong Kong events, including the United States and Britain. That is not to say there has been no interference by Beijing: there has, though much less than there could have been.

One example was the endorsement by Chinese leaders more than a year ago of Tung Chee-hwa for a second term.

This was followed by Mr Tung being declared the winner without an election being held. Perhaps no challenger would have emerged in any event, but it is certainly possible that China's endorsement made it appear pointless for anyone else to contest the election.

Clearly, however, Beijing did take steps to allow Hong Kong a high degree of autonomy. Foreign affairs and defence are reserved for the central Government but, while China's concept of foreign affairs is very wide, including accreditation of foreign journalists, this was not extended to Hong Kong.

Despite the presence of a Chinese garrison, the soldiers are virtually invisible, ordered to remain within barracks. Last week's military display to celebrate the handover anniversary offered a rare glimpse of the PLA. Beijing also severely limited visits to Hong Kong by Chinese officials, and even tourists, until urged by Hong Kong to allow more mainland tourists in.

China is also doing everything it can to assist the ailing Hong Kong economy and is currently considering how to give SAR companies privileges above those accorded to other economies without violating World Trade Organisation rules.

The attitude of Hong Kong people towards the mainland has also changed greatly. Fear of the communists is much less than before. And while in the past many people saw the mainland as the source of most of Hong Kong's problems, today many see the mainland as the solution to many of Hong Kong's ills.

The problems that have plagued Hong Kong during the past five years have largely been the result of forces beyond its control, such as the Asian financial crisis and the global economic downturn. But still, its leadership is widely seen as being fumbling and uninspiring.

The record of the SAR itself is spotty. The early decision not to prosecute publisher Sally Aw Sian, only her executives, in a fraud case will remain a black mark.

But the decision to delay implementation of Article 23 of the Basic Law, calling for legislation against subversion, secession, sedition and treason, was welcome.

The immediate priority of everyone in the aftermath of the handover was stability and continuity. It is a tribute to Chief Executive Tung Chee-hwa and the Chinese leadership that they were willing to accept the entire administration left behind by the last governor, Chris Patten. This helped to lessen the shock of the change in sovereignty.

But it also resulted in the new Chief Executive being saddled with a team not of his own choosing. Now, Mr Tung has put into place an accountability system, with ministers who will assume political responsibility if things go wrong. Finally, he is able to pick his own people to help him run the Government.

The Chief Executive has also appointed the leaders of two major parties into the Executive Council, or cabinet. This may mark a major step in the evolution of political parties in Hong Kong. It has, at the least, created a link between the executive and the legislature. The Government will no longer be able to claim that its work is being hampered by a hostile legislature.

The SAR Government faces many challenges in its second term. Legislation on subversion can no longer be deferred and will have to be drafted carefully so as not to impact upon current rights and freedoms. And preparations will have to be made for greater democratisation, allowed by the Basic Law after 2007. Only time will tell how well the new ministerial system will work.

Although Mr Tung has been accused of concentrating power in his hands, he has explained that his intention is actually to delegate more authority to his principal officials, thus providing for more efficient government.

One of the main problems of his first term was a tendency towards vacillation and indecisiveness. If the ministerial system works as it is supposed to, things should be better in the second term.