His sensitivity to cross-cultural issues is enhanced by his dual role as a public intellectual and an active participant in journalism and film scriptwriting.

Speaking in Hong Kong, which he still calls home, Chan offers a fresh perspective on the city's identity and how it interacts with the growing affluence of the mainland.

The starting point, he says, is to get to know what China has become of late. China, aside from being a big fat man, is obsessed with being No1 and receiving international recognition. "It's like a host presenting a 10-course dinner, and expecting everyone to praise every course, from appetiser to dessert," he adds.

This lack of self-confidence is somewhat ironic given China's nouveau riche status, he observes. "Back in Mao's days, despite being quite poor, China was confident enough to export revolution to Third World countries."

It was around the time of the 2008 Beijing Olympics that Chan noticed young Chinese beginning to stand up and defend the nation against criticism from the West, on everything from human rights to fake products.

"That is very much like us in Hong Kong in the 1970s, who took issue with biased views from the outside world and defended the city, even though we knew things were not perfect around us. But after the economic take-off in the 1980s, our defence mechanism was no longer necessary as we were already No1. China is in that transition right now, so it will pass," he says.

This transition is leading to a level of wealth and power not seen since the "fat years" of Kangxi-Qianlong reign three centuries ago. And the rise will go on.

"But ... those prosperous years did not bring about an ideal China. There were bloody wars on the frontier, lots of literary inquisition at home, and a low status for women. So, to a lot of people, fat years were nothing good at all. But then you can't negate the nation's power," he says.

Given the dynamics of the mainland's rapid development, Chan advises Hong Kong to remain sober and composed with its own core values and "avoid jumping up and down in China".

Hong Kong's situation, he says, is comparable to that of former Soviet republics such as Georgia and Ukraine, where the populations polarised into those for or against the big nation next door, and both camps subdivided into radical and moderate factions.

"The small state has been drawn into the web of economic activities with the big neighbour and thus becomes very divisive among its population," he says. "The initiative to resolve confrontation lies in Beijing, and whether or not it is willing to change its way of thinking." Chan expects to see more confrontation before change comes.

"Colonial flags being raised at rallies was the result, not the cause, of the confrontation. Things will only get smoothed out when China changes its policy, such as allowing a tour to Beijing for the pan-democrats. But I don't see any sign of change."

Being the smaller party of the two, Hong Kong is passive and can do little to bargain for itself.

"That is frustrating for sure but it does not mean we do nothing," he says. On that point, Chan coins a new expression, , meaning "Settle down China and protect Hong Kong", as opposoed to the pro-establishment term , or "Love the country and love Hong Kong".

"Our choice is neither confrontation nor surrender. We should avoid such extremes," he says. " We should make China relax, and that is the best protection for Hong Kong. But that doesn't mean we surrender our values. We are persistent without being confrontational.

"Hong Kong people need to adopt a new attitude. On one hand we must accept the fact that we are to co-exist with a China that is getting richer and stronger. On the other hand we must hold fast to our values and way of life, build up our identity, and be able to articulate it to let others and ourselves know who and what we are. It is a protracted defence we must be prepared to uphold."

Chan stresses the importance of Hong Kong remaining composed and articulate in upholding its values and conveying them to people who come from a difficult culture.

"Our values are all here. Even the mainlanders know it. Otherwise they wouldn't have come for the milk powder because they know products in Hong Kong are guaranteed by law," he says.

"But when it comes to freedom of speech and rule of law, the mainlanders may not understand why there are always different opinions because that's something non-existent in China. That is where we in Hong Kong have to talk it up, not just to the mainlanders but also to our own government, to abide by it."

Chan warns against Hongkongers' speculative instincts. "If they bend with the wind and place their bid on the winning side of vested interests against the core values, the whole thing will crumble."

As for the contentious issue of national education classes for Hong Kong students, the subject of mass protests before the scheme was withdrawn by the government last year, Chan says he supports a broad civic education for the young.

"It is fine to impart the country's history, language, a citizen's duty as well as that of a world citizen," he says. "As for patriotic education, I think it should focus on constitutional education, using the European model that applies to a multi-ethnic mix. It should not be about one ethnic group or one culture, but the constitution, the one promulgated in 1982 and the Hong Kong Basic Law, under which we live and exercise our rights. That is also the essence of the rule of law."

Chan's broad ethnic perspective is reflected in his latest novel, , whose main character is Tibetan. Although the focus is on the young man from Lhasa and his encounters in Beijing - including a rather graphic portrayal of his relationships with a rich woman and her daughter - the story is by no means limited to the post-modern hinterland-capital interaction.

In a clever twist, post-1997 Hong Kong is also brought into the narrative. The woman, a Beijing resident, has a Hong Kong ID card and travels regularly between the two cities. "I based the character on a real person I know in Beijing," he says. "She is one of many Beijingers who got the Hong Kong status after the handover through public security connections and came to live and do business. They didn't give up their mainland status and were in fact rather boastful of their dual residency. I have no idea why the government then gave it out so easily."

Still, the increasing number of mainland immigrants to Hong Kong has not diminished Chan's confidence in the city's vibrancy.

"It's extraordinary for Hong Kong to uphold its own character for so long. Its future lies in the overall world situation and where China is going. Changes in the mainland will bring about a different scenario for Hong Kong. After all, China is huge, and changes are slow to come by."

From his 13 years living in the Chinese capital, Chan believes the government is the key obstacle to change.

"Civil servants as a group are stable and conservative. The middle-ranking officials I know of are ignorant about the outside world and never go beyond the official websites," he says. "A propaganda official recently disclosed that some two million workers have been employed to write blogs and on behalf of the Beijing city government - that's one in 10 people in Beijing.

"But still there has been noticeable change over the years, such as the gradual emergence of the middle class, and with it a new set of values and behaviour.

"The recent news of urbanites protesting against construction of a chemical plant is essentially nimby (not in my backyard), as the Western saying goes. That's something very different from the old days of peasants fighting for their fields," he said.

This ever-changing landscape inspired Chan to turn to novel writing in 2005, a vehicle to convey subtle messages without spelling out the specifics that could get him into trouble.

"But I have worries over every single work I publish," he admits. "In Hong Kong, the worst that happens to a writer is when readers don't buy your book. But in China, you just never know what you have stepped on and what comes out of that."