As 2010 draws to a close, it is evident that, more than 13 years after Hong Kong's return to Chinese sovereignty, the relationship remains uneasy, with the two parties still struggling to understand each other and the former British colony's role in China's future still something of a question mark.
While Hong Kong's executive authorities tread ever so softly while dealing with the central government, providing extensive security for the liaison office here, the judicial branch of the government continues to put political considerations aside and looks at issues purely from the legal standpoint. This is something of which Hong Kong can be proud. But judicial independence cannot be taken for granted.
Last Monday, six activists were acquitted of unlawful assembly. They had staged a protest inside the compound of the liaison office on Christmas Day last year, demanding the release of mainland dissident Liu Xiaobo. The acquittal came exactly 10 days after the Norwegian Nobel Committee formally conferred the peace prize on Liu, who is serving an 11-year prison term on sedition charges.
So while Beijing continues to denounce the Nobel committee for honouring a 'criminal', that 'criminal' remains a hero to many in Hong Kong. And the law here continues to protect the rights of those who wish to demonstrate against the central authorities.
This is a vivid illustration of 'one country, two systems' at work and, it must be said, the central government deserves credit for largely abiding by its promises to allow Hong Kong to preserve the rights and freedoms that it had under the British.
Economically, however, the two systems are merging. The day of the acquittal, Chief Executive Donald Tsang Yam-kuen was in Beijing meeting with Zhang Ping , minister in charge of the National Development and Reform Commission, putting forward Hong Kong's case for greater involvement in the preparation of the next five-year plan, calling it 'a crucial moment'.
There are virtually no voices in Hong Kong today who oppose greater economic integration with the mainland. This is very different from the situation in 1997, when many thought Hong Kong's future lay in keeping the mainland at arm's length. Nowhere is Hong Kong's closeness to the mainland better reflected than in Shenzhen, which has grown from a sleepy fishing village 30 years ago to a metropolis bigger than Hong Kong.
The central government has decided that the Qianhai area of Shenzhen will become a world-class centre for service industries. Some people say it will become the Manhattan of the Pearl River Delta.
This may not be too far-fetched as the central government has given Qianhai a status similar to that of Pudong, which has developed to such an extent that it now overshadows old Shanghai itself.
Hong Kong has little choice but to co-operate fully in this project even though it may be building up a powerful competitor.
The city is already losing its competitiveness. True, Hong Kong has again been named the most competitive city in China. But in terms of growth potential, Hong Kong ranked only 10th, while Shanghai and Shenzhen came first and second respectively. The rankings were prepared by the China Institute of City Competitiveness, whose chairman, Gui Qiangfang, forecasts that Hong Kong will be replaced by Shanghai as the most competitive city in China in five years.
Hong Kong's competitive advantage lies in the integrity of its institutions and the standards they maintain. Judicial independence is a prime example but not the only one.
For years, the Hong Kong stock exchange has attracted listings from Chinese companies, even though they may already be listed on the mainland, because of the assumption that Hong Kong would not allow companies to list that are not properly run.
Now, however, the stock exchange has decided that, beginning December 15, mainland companies no longer have to abide by Hong Kong accounting standards. As The Wall Street Journal has reported, this change is 'raising concerns that fraud might now more easily slip through the regulatory cracks'.
As the mainland develops, Hong Kong can compete only if it is able to show that its laws and institutions can be relied upon. There can be no relaxation of standards. We must avoid the slippery slope, from which there is no turning back.
Frank Ching is a Hong Kong-based writer and commentator.