When Hong Kong reverted to Chinese sovereignty, there were concerns worldwide about what Beijing might do. Eighteen months later, the mainland's main response is clear - it has not done much. As promised, Hong Kong has largely been left to manage its own affairs for better or worse. Though senior British officials have gone, Chinese bureaucrats have not moved in or begun issuing orders to their local counterparts. That has brought a sense of relief but also a nagging anxiety, according to many citizens who ponder the SAR's future. They welcome the extra autonomy, but with it has come more responsibility, along with an increasingly complex set of issues which need to be tackled. To date there is only a limited consensus about how to meet these challenges. The problems come in two broad categories. Many are pressing economic issues which stem from the current financial crisis in East Asia. These include plunging property prices which have shattered the net worth of property tycoons and ordinary flat-owners alike, worker lay-offs and a big drop in the retail trade. Overall, the economy shrank at least five per cent last year, and most estimates for this year predict a further one per cent to three per cent decline. Because so many of these problems are caused by the region's financial relapse, they remain largely beyond Hong Kong's control. Optimists predict the economic tide will turn by year's end, with the SAR and much of Asia again registering positive growth figures. Others say it will take somewhat longer before the good times can roll again. But beyond these more immediate problems - however serious they may be - are longer-term questions about how Hong Kong should define itself, how it should be governed and what basic policies it should follow. These involve, among other things, how to maintain or improve education, the environment, the legal system, job creation and the business climate. So far, there are many suggestions but little agreement on any of these items. Today the South China Morning Post begins a week-long series of articles which explore some of these issues. They are intended to help define and explain basic choices which need to be made, rather than to prescribe solutions. The hope is to add a bit of clarity to public debate about the future. The concerns start with the issue of the SAR's fundamental identity. No longer someone's overseas colony, Hong Kong now is part of China and separate from it - 'one country, two systems', as officials on both sides of the border say repeatedly. But that does not necessarily give useful guidance about how closely Hong Kong should be integrated into Guangdong province or to what extent it should seek an independent international identity. Opinions differ. Over dinner not long ago, two leading property magnates berated bureaucrats for failing to see the former colony as part of a greater China. Even official maps, these businessmen complained, show neighbouring areas as mostly blank spaces rather than as a region of tight interconnections. But others say preserving the differences, both civil and commercial, is crucial to Hong Kong's prosperity. They want to strengthen its role as an international, bilingual business centre which operates in global markets - even while exploiting a special access to China. As Victor Fung Kwok-king, chairman of the Trade Development Council, has written: 'Simply put, Hong Kong must become a world city. To do this will mean becoming more externally focused in economic matters - and more internally focused on quality of life issues.' Discovering the golden mean will not be easy. There is a widespread belief that Tung Chee-hwa's top priority so far has been to reassure Beijing that Hong Kong poses no political threat while also promoting a sense that it is part of a greater Chinese nation. And there is general agreement that he has done this quite well, strengthening the SAR's autonomy in the process. But some observers believe Mr Tung has done it too well. They would rather have him speak up more firmly whenever rights need defending, such as on matters of legal jurisdiction. And they would like to see him ready to push China more aggressively on issues like launching cross-border environmental clean-ups. 'We need to find a middle way between a lack of national identity, which we can't have, and an overly chauvinistic Chinese attitude on the other hand,' says one executive who has been a business and political leader for two decades. Much depends upon what kind of relationship China itself wants with the SAR. On this point, Beijing's spokesmen are sending a clear message. It goes something like this: Hong Kong has been extremely important to the mainland for 20 years as a source of capital, services and technology, and thereby has contributed to China's own development. This could continue for more decades, with the SAR continuing to enjoy the many personal freedoms not available to mainland citizens. That is because China has great need for modern commercial and financial services, and Hong Kong can also teach it much about such things as administration, regulation and law. But to remain useful, Beijing's representatives continue, the territory must run a bit faster than China itself as the mainland economy grows. As one PRC official puts it, Hong Kong must 'stay on the leading edge' of China's development, 'a step ahead'. The unstated implication: the SAR's special privileges might be in jeopardy if it becomes just another Chinese city. How the SAR fares also will depend to a great degree upon its own politics. Here there often seems to be more heat than light as politicians and government officials argue about what kind of system to have both today and after 2007, when the Basic Law permits major changes. Unresolved questions include how far and fast to extend fully democratic voting, how power should be divided between the legislative and executive branches and whether Hong Kong someday should have an elected chief executive who runs the government with an appointed cabinet - perhaps one without civil servants. Many business leaders believe the politicians - notably Martin Lee Chu-ming and his Democratic Party - are proving too fractious, endangering both relations with China and the business environment (and thus their profits). One magnate who has gone public, Li Ka-shing, has threatened to cancel an unspecified $10 billion investment due to divisive politics. (Acquaintances say this may refer to planned investment in his telecommunications holdings, which face new competition, rather than any single project.) Mr Li is not alone in his criticism. The executive who has senior business and political experience refers scornfully to party leaders as 'ankle biters'. However, the politicians contend they are doing as much as anyone to guarantee Hong Kong's future well-being. They say implementing fuller democracy will help preserve the civic freedoms and legal system that make it such a desirable place for doing business. They also believe a fully democratic system would be more responsive to public needs, such as improving education and fighting pollution. 'If you do well, you'll get re-elected. If not, somebody else will take over. That's what democracy is all about,' Mr Lee says. However Hong Kong is managed, there's no doubt that it faces new competition as a business centre. Singapore has been lowering taxes, simplifying bureaucratic rules and courting foreign companies with renewed intensity - all designed to make it, not Hong Kong, the region's leading business centre. In the longer run, Shanghai also poses a threat, even though China does not yet have a wholly reliable legal system or a convertible currency. Some proud Shanghainese claim that as a university centre, particularly for science and technology, their city already surpasses Hong Kong. When Mr Tung's foreign advisory panel met last week, members sent him two strong messages: improve the environment to make Hong Kong a better place to live and lower the cost of doing business. A survey released last week by the Economist Intelligence Unit ranked Hong Kong as the third most expensive business centre - trailing only Tokyo and Osaka, and with the cost gap closing. One key cost issue involves government land policy. Many businessmen, especially from overseas, consider the high property prices a kind of hidden tax which offsets other advantages. They say property prices should drop further to help the city meet global competition. But bringing prices down, mainly by increasing supply through larger government land sales, can run contrary to the interests of leading developers who wield great political and economic influence. Yet some say it must be done. 'What is good for Hong Kong's property sector might not be good for other businesses in Hong Kong . . . and it is these businesses - more than property - that have established Hong Kong as an international business centre,' says Robert Broadfoot, head of Political and Economic Risk Consultancy. According to a senior official, however, the Government plans only modest land sales this spring when it ends a freeze. This will be intended more to hold prices near present levels than to lower them further, he explains. Whether that is a good long-term economic policy seems certain to draw further debate. Among other subjects which need addressing are: Education: Many people believe the education system, despite large-scale spending, does not produce the graduates needed for modern economic life. For one thing, they find too much dependence on rote learning, and too little emphasis on innovative or creative thinking. Complains one university professor: 'All the students want to know is what do they have to memorise for exams.' She finds teaching in her native Beijing more stimulating, because students there are more willing to challenge their professors. Many critics also say the standard of English has declined in schools, even though mastering that language can bring graduates better jobs and higher pay - and is crucial to Hong Kong's international role. For example, Vivian Lam, a director of the consulting firm Vision In Business, says she has great difficulty finding university graduates with the proper language skills. After saying he understood that English was required, one recent applicant then asked to be interviewed in Cantonese so he could understand the questions. The environment: If there is anything that people agree on, it is that pollution is increasing. Just last week, results of a two-year study prompted one University of Hong Kong expert to predict the city will be 'unliveable' in 15 years unless something is done. Mr Tung's foreign advisers cited this as one obstacle to attracting overseas financial and technical specialists. There is no doubt more could be done to clean up the air and water and improve recreational facilities; tougher limits on diesel fuel would help, for example. But much of the pollution drifts in from the mainland and reducing that would require greater cross-border co-operation. Though a joint commission sometimes discusses common problems, it remains more a talking shop than a source of action. Some critics contend Mr Tung's administration needs to push mainland officials more aggressively for effective clean-up measures. Job creation: Officials generally agree new job sources are needed, that the old mainstays of property and construction cannot be relied on for growth. But just where these jobs will come from remains uncertain. Mr Tung is promoting Hong Kong as a source of traditional Chinese medicine as part of the answer. Others believe the SAR can become a repackaging centre for products from elsewhere in Asia. Much could be done to increase tourism, say officials in that industry. Above all, the Government hopes to make Hong Kong a leading technology centre, attracting clean industry and high-paying jobs. In his policy address in October, Mr Tung said he wanted investments which would 'enhance the capability of our firms to innovate and to stimulate technological development and encourage its commercialisation and application'. But sceptics abound. They cite steep land prices and relatively high labour costs as obstacles. More importantly, they say Hong Kong does not have the tradition of science education and research that has been key to the growth of technology centres such as California's Silicon Valley.
