With the support of more than 700 of the 800 Election Committee members, what little doubt there was about Tung Chee-hwa's re-election as Chief Executive has disappeared. The real issue is what Mr Tung proposes to do in his second term and how he will lead Hong Kong through what will be one of the most challenging periods in the territory's history. The challenges facing Hong Kong are clear. A boom economy based on ever-increasing property prices has now fallen flat. Hong Kong will have to go through a painful period of restructuring if it is to get back on the path to sustained economic growth. In human terms, this will mean learning to live with a rate of unemployment higher than we have experienced for many decades, as well as lower wages. It will mean a gradual lowering of property prices in the long term and increasing negative equity. It will also mean getting used to paying new taxes as the traditional method of financing government - land premiums, delivers less and less revenue. All of these: unemployment, lower wages, lower property prices are necessary if Hong Kong is to restructure its economy. But these necessary evils will generate a great deal of social and political discontent which will inevitably focus on Mr Tung's leadership. If he is not to be swept off course by this discontent, the Chief Executive will have to learn to communicate much more effectively with the public, be more inspirational, and give ordinary people the clear sense that he can lead them through this difficult period. Under the new quasi-ministerial system of government, Mr Tung's appointed 'ministers' are expected to play a crucial role in acting as his messengers to the public. Though we do not know who the new appointees will be, they are expected to come from the ranks of the civil service and business. Neither of these two groups of people are known to be particularly good at the politician's art of leading large masses of people. What has really been missing from Mr Tung's leadership in the first term is political savvy. The knack of cutting deals with opponents, building public support for policies and using the media to build favourable public opinion which is the bread and butter of politics. Mr Tung has begun to learn these skills, but he will have to hone them rapidly in the months and years ahead. In addition to managing Hong Kong's internal restructuring, Mr Tung will also have to work towards ensuring the continued success of 'one country, two systems', while at the same time pursuing closer integration with the mainland economy. This twin course of political, social and judicial autonomy on the one hand, and greater economic integration on the other to derive the maximum benefits from the growth of the mainland economy post-WTO will be a difficult balance to strike. Getting better access to the Chinese economy will require favours and support from the central Government, whether it is for a free-trade agreement, or for help in developing Hong Kong into a financial, trade and logistics centre for the mainland. It will be tricky to keep asking for central Government support while at the same time maintaining and strengthening the territory's autonomy. Building and nurturing the relationship between Hong Kong and the mainland will be made more difficult by the fact that China itself will be passing through an uncertain period as it grapples with the enormous task of integrating with the world economy and maintaining political and economic stability. Mr Tung will also have to tackle an issue that he has never been comfortable with - the political transition to a more representative form of government. After 2007, it is possible under the Basic Law to change the method of election to the Legislative Council as well as the Chief Executive. There will be pressure within Hong Kong to move to a directly elected Legco as well as a directly elected Chief Executive. Meeting concerns from the mainland about political stability, while at the same time meeting Hong Kong's demands for greater political participation will be a huge challenge for both Mr Tung and possibly his successor as Chief Executive. The sooner he prepares to get to grips with it, the better. Hong Kong's future depends on how well Mr Tung meets these challenges. We can only wish him well.