As every schoolboy would once have known, traditionally the Chinese
have believed that a dynasty reigns because it has been vouchsafed
divine approval--the Mandate of Heaven. According to this belief,
extensive natural or man-made catastrophes demonstrate that the
Mandate has been revoked, and that the reigning dynasty will soon
fall. Natural catastrophes began in Hong Kong the instant the regime
appointed by Beijing to succeed British rule took office in July 1997.

It rained continually for months. Landslides swept away buildings and
imperiled lives. The people slipped into dejection under the
seemingly endless rain pelting down day after day. The business slump
had already begun and was soon to dip--and then plunge--further. But
initially it was the weather, not the economy, that depressed the
people of the new Special Administrative Region (SAR) of the People's
Republic of China.

That was not a good start. Neither was it the end.

A few weeks later, Hong Kong was afflicted by a virulent influenza
carried by a virus that could leap from its normal habitat in
chickens or ducks to human beings. Naturally fearful, the government
ordered millions of fowl destroyed. The mass slaughter, which all but
impoverished poultry breeders and traders, was not carried out
adeptly. Stray dogs and cats gnawed and clawed at black refuse sacks
containing dead chickens, as well as some that were not quite dead.
Highly efficient under British control, the Hong Kong Civil Service
made a mess of that essential execution under Tung Chee-hwa's aegis.

Still another natural disaster struck early in 1998. Hong Kong's
inshore fishing had already been curtailed by noisome pollution and
by competition from Japanese, Taiwanese, and Korean boats.
Nonetheless, Hong Kong's trawlers and motorized junks were still
finding good catches not too far away. Then came the "red tide", a
flood of scarlet algae that poisoned innumerable fish and imperiled
the industry. Within two months fifty to sixty people were struck by
the virulent enterovirus called Taiwan flu.

A man-made catastrophe, however, was to all but eclipse nature's
malign deeds. A new airport some twenty miles away was built at great
speed to replace the dangerous and inadequate old airport at the
center of the city. Costing more than $20 billion, it is, after
Japan's Kansai Airport, the most expensive in the world. Originally
scheduled to begin operations in mid-July, it was prematurely
commissioned so that President Jiang Zemin could be the first
traveler to set down--and thus mark the first anniversary of Hong
Kong's acquisition by China. Opened to normal traffic on July 6, it
was so spectacularly incompetent that air cargo to and from Hong Kong
had to be suspended for more than a week, at a cost of around half a
billion U.S. dollars. Even more gravely, given the nearly
simultaneous opening of competing new airports nearby in Macao and
Guangzhou, the dismal spectacle severely undermined Hong Kong's
reputation for brisk efficiency.

What, then, Hong Kong's people asked, of the Mandate of Heaven? What
indeed. To see ahead, let us start by looking back.

In the fifth decade of the nineteenth century, Britain took the
island called Hong Kong from China at gunpoint. In the last decade of
the twentieth century, China took back from Britain, by force majeure
if not directly at gunpoint, not only Hong Kong Island but the small
Kowloon Peninsula, which had been seized later, and the broad New
Territories, which had been leased for ninety-nine years in 1898. In
none of these exchanges was the indigenous population asked its view.
Nor were its interests seriously considered. In each case, too, the
transfer of sovereignty ran counter to the wishes of the majority of
the inhabitants.

The few thousand part-time fishermen part-time pirates using the
island in 1840 preferred the nominal rule of the Manchu Dynasty in
far distant Beijing to the meddling British. In 1898 the tens of
thousands in the farming villages of the New Territories were not
eager to exchange ineffectual Chinese rule for British intrusiveness.
In 1997 the well over six million Chinese living in the Crown Colony
of Hong Kong were happy with the highly effective and low taxing
British administration that had made Hong Kong prosperous even by the
standards of economically buoyant Asia. They also cherished civil
order based upon general consent rather than coercion, as well as a
degree of intellectual freedom and expression rare in authoritarian
Asia. Opinion polls, and the belated introduction of a measure of
democracy by the Colony's last British governor, affirmed as much. In
1995 the people of Hong Kong elected legislators sworn to resist
communist tyranny. Three years later they humiliated Beijing's
candidates in the first legislative election under China's
sovereignty, indeed the first free election on mainland Chinese soil
since the communists established the People's Republic in 1949.

Most communist leaders would have preferred a Hong Kong that
continued to serve their economic interests by providing financial
services and large sums of foreign money. But, above all, they wanted
a Hong Kong that would not imperil their hold on power through its
constant example of a more relaxed, more free, and much happier
political entity next door to the mainland they ruled so harshly.
Still another imperative impelled Beijing to demand the return of all
Hong Kong when the lease on the New Territories expired on June 30,
1997. The sting of the humiliation and depredation inflicted on China
by foreign powers from the early nineteenth century onward could only
be salved by reclaiming every inch of territory that had once been
Chinese. Aside from Hong Kong, minuscule Portuguese Macau was the
only other foreign enclave remaining. Since it was effectively under
Chinese rule already, formal reversion was less pressing. Taiwan
presented a different kind of challenge--already under Chinese rule
but not Beijing's suzerainty.

Hong Kong, the very first and the most conspicuous of the territories
Britain had stolen from China, had to be reclaimed to expunge the
shame of the past. And it had to be reclaimed no later than July 1,
1997, lest it appear that Beijing was truckling to London.

A very senior and very influential British diplomat assured me years
ago that Hong Kong would not suffer as a result of the disorder he
correctly foresaw in China, but would remain prosperous and happy
after it came under Chinese rule. He was wrong. The mood in Hong Kong
is now sour and pessimistic.

Such diplomats--and many in the business community--still insist that
such dejection is largely the fault of Chris Patten, the last British
governor, who was not one of them but a politician. Patten, they say,
aroused false expectations by introducing a measure of democracy.
But, they contend, the autocratic rule of previous London-appointed
governors had nurtured a populace that was contented, docile, and
"not interested in politics." If Patten had not interfered, the
argument continues, Hong Kong would today still be a happy land. The
discontent and political demonstrations that regularly test the
authority of the Beijing-appointed government of the SAR would never
have arisen.

Besides, this school of thought would add, the depressed state of
Hong Kong today is due not to Beijing's rule, but to the fiscal
crisis that has shaken all of East Asia from South Korea to
Indonesia. Hong Kong's blues are economic, nothing more. That
contention, however, is only half of a half-truth.

The Hong Kong economy was depressed even before the Asian downslide.
The proprietor of a shop selling linen and embroidered garments
replied glumly when I asked how his business was doing, "I haven't
made the smallest profit since July 1st '97. Just losses all the
way--and getting worse. I can't even cover the rent." A campaign to
reduce greatly inflated business rents by 40 percent has been
overtaken by events. But he added, "Forty percent reduction wouldn't
be enough. I'd still go broke."

The old Pedder Building houses factory outlets and other cut-rate
shops. All now display signs offering even greater bargains,which
literally translated from the Chinese is "Great Price Cutting." By
changing one of the three words, one shop has made its come-on read
"Great Bloodletting! Eighty percent off!"

For the beginning of Hong Kong's economic stagnation the fall in
tourism is largely to blame. The number of visitors has fallen by
more than 50 percent since July 1, 1997, a slump caused by both the
change in Hong Kong's political status--as witness the many empty
hotel rooms the week of the handover--and by the Asian recession,
which is keeping many Asian tourists at home.

But general dejection also reflects a peculiar Hong Kong psychology.
Most people still repose greater confidence in Great Britain--now a
small, far away, third-rate power entangled with the European
Union--than they do in their presumed motherland, a colossal
resurgent power on their doorstep. A majority of Hong Kong's people
are either themselves refugees from People's China or descendants of
refugees. During the decades I lived in the Crown Colony I found it
hard to discuss China with them. They automatically disbelieved
Beijing's every statement and discounted its every achievement. Their
fixed conviction: "The communists only know how to lie!"

Manifestly, and however much they look alike, the people of Hong Kong
are not only different from their presumed compatriots across the
border, but are alienated from China. Once, in Shanghai, I fell into
conversation with two men whose features were wholly Chinese,
although their clothing, their confident demeanor, their command of
English, and their obvious prosperity set them apart. Both were from
Hong Kong. I realized after exchanging a few sentences that they were
referring to the Shanghailanders as "they" and to the three of us
from Hong Kong as "we", regardless of my not being Chinese at all.

In an oddly upside-down way, I recently encountered similar scorn.
The common language of Hong Kong is a Chinese dialect called
Cantonese. To my shame my Cantonese is poor despite all the time I've
spent in Hong Kong. I therefore spoke to a non-English speaking
salesman in Mandarin, which is known as putunghua, the common
language of all China. He retorted in Cantonese, "Don't talk that
language to me. I'm not Chinese. I'm a Hong Kong man!"

The alienation, all but antagonism, between mainlanders and Hong Kong
people has been aggravated rather than allayed by the Colony's
transformation into an integral part of the People's Republic.
Immigration policy is one reason. The border between the New
Territories and Guangdong Province was for five decades closely
guarded to keep out "illegal immigrants", that is, refugees from
China. Yet many slipped across, in part because the heart of the
largely British-officered Hong Kong Police was not really in the
assignment. Today the border is more closely watched, and much less
permeable. Beijing does not want an influx of mainlanders seeking a
better living standard and greater freedom in Hong Kong. Above all,
Beijing does not want large numbers of mainlanders visiting Hong Kong
and returning to compare conditions there with those at home.

Before the transfer, tourists and businessmen from China were readily
distinguishable from the locals. Their clothing was shabby and badly
cut, and their complexions were rather muddy. They also tended to be
uninhibited, released, albeit temporarily, from harsh discipline at
home. Even in free, easy, and very rude Hong Kong, the mainlanders
were notably uncouth.

They still are. Looking for a particular trinket in one of the many
gold shops that line Queens Road Central, I was jostled by twenty or
so men and women who--even had they not been wearing plastic tags
reading Guangdong Province Tour Group--were obviously mainlanders by
their clothes, complexions, and behavior. All could afford the small
solid gold objects they were eagerly pricing--and buying. Gold does
not change in value as abruptly as fundamental situations can change
in unstable China.

The group was shepherded by three older men wearing dark blue,
high-buttoned Mao Tse-tung tunics, which are rarely seen even in
China nowadays. When I began talking with a young man, one of those
shepherds gently shouldered me aside. He was clearly not worried
about my learning more about conditions in China; I can go to
Guangdong and talk freely with most people any day. Although the
authorities there would like to stop such spontaneous conversations,
they cannot do so entirely without affecting trade, investment, and
tourism, all big money spinners. Rather, it appeared, the man in the
Mao suit was anxious to prevent his charges from learning more about
Hong Kong. Still, he could not keep them from seeing prosperity
unrivaled anywhere in mainland China.

Despite recession, Hong Kong glitters with riches and throbs with
commerce compared even with go-ahead Shanghai. But Hong Kong is now
suffering a recession that is sliding fast toward a depression. The
woes are by no means limited to the merchants and hoteliers who
depend on tourist dollars. Everyone is singing the blues, and with
good reason. By early August it had become clear that early
predictions of economic trouble were too optimistic. Data showed that
the economy had shrunk 2.8 percent in the first quarter of 1998, and
was estimated to contract a full 3 percent in the second quarter.
Release of that data, along with news that Hong Kong's major banks
were in much worse shape than anticipated, sent stocks
tumbling--which in turn completed the circle of economic gloom.

There are less transient explanations for Hong Kong's troubles as
well. Little is manufactured there today. Almost all industry has
migrated to China itself, lured by much lower wages and by greater
latitude regarding working conditions. The chief money-maker in the
SAR is money itself. Investment, insurance, banking, finance, and
speculation bring in the big bucks. But employment in finance has
fallen some 20 percent recently, and those who hang on to their jobs
have been taking swingeing salary cuts.

Rents for luxury flats have not yet dropped decisively, but they are
sagging. Domestic rents are faltering, instead of rising 20 to 40
percent on each renewal of a lease, as they did only recently. Firms
that happily paid $12,000 a month or more for an employee's flat are
now radically reducing such benefits or cutting them off entirely.
Former beneficiaries of such largesse are looking for cheaper housing
on offshore islands like little Lama, which had been virtually a
hippie colony--by staid Hong Kong standards at least.

Overall property values are also falling, particularly commercial
property. Hong Kong's formerly buoyant economy floated on inflated
property values that allowed low taxation, which in turn attracted
investment and the Asian headquarters of foreign firms. Taxes have so
far only increased slightly. But the pledge by Tung Chee-hwa,
Beijing's appointed chief executive, to build eighty-five thousand
new flats for the underprivileged in each of the next three years,
however meritorious, will certainly drive down rents and will
probably require tax increases.

Good for the less well off if it really happens, the promised
expansion of housing will not be good for the economy in general.
Property values are already down 30 to 40 percent from their peak,
and, to repeat, overvalued property has been the foundation of Hong
Kong's prosperity. In order to prevent further steep decline, all
sale of government land has now been suspended until March 1999. The
government is the sole landowner in Hong Kong, leasing land to
companies for extended periods of time, like 99 years, at very high
prices. Therefore, high land prices underwrite low taxes, while
declining land prices make higher taxes necessary.

All local trade is down for firms, except of course for essentials
like food and funerals. Newspaper and magazine advertising has fallen
sharply. And so it goes: a long, slow, funereal drumbeat. Optimists
contend that the present shakedown will make Hong Kong much more
competitive when the general Asian recovery occurs. That recovery is
inevitable, though none can say when it will start or how far it will
go. It will, of course, help Hong Kong greatly. But it will not heal
the territory's fundamental malaise, for non-economic woes beset the
government of the Special Administrative Region.

The heart of government in Hong Kong is its old Civil Service.
Stripped of all but a few of its British members, it is, first,
encumbered with an appointed executive arm that is inexperienced,
impractical, and slavishly obedient to Beijing despite the pledge
that "Hong Kong people will rule Hong Kong!" Second, it is encumbered
with a timid judiciary that has ruled itself out of cases presenting
issues that could affront Beijing; the highest court is specifically
forbidden to try any case involving politics, which can mean anything
Beijing wants it to mean. Third, Hong Kong was encumbered with an
appointed legislature that is hardly representative--and is now
encumbered with a legislature "elected" under various circumstances
that prevent true representation.

Tung Chee-hwa and his sycophants have repeatedly asserted that Hong
Kong enjoys real democracy for the first time, because the chief
executive is no longer a governor appointed by Britain. He might just
as well say, "Hong Kong people aren't interested in politics, only in
making money!" That reiterated justification long comforted those
Britons who felt a twinge of guilt at the arbitrary, indeed despotic,
way Britain ruled the Crown Colony for most of its 155 years. By and
large, the virtually absolute British governors were benevolent, but
they were still despots.

The lack of interest in politics was true--but chiefly for a small
minority of the population, the well-to-do. The rich really
didn't--and still don't--care who ruled Hong Kong or how it was
ruled, as long as they were free to make money. They were left free,
virtually untethered by law, for the Colony practiced almost perfect
economic laisser faire--and profited greatly thereby. However, the
efficient execution of the vital functions of government, which said
government reserved to itself, and the impartial administration of
British justice provided by independent courts, were essential to
Hong Kong's growth. Within that secure framework the ingenious,
hard-working, and risk-taking native Chinese population transformed
that "barren rock with hardly a house on it" described by Lord
Palmerston in 1840.

All the people were interested in making a good living; the mass of
the people was also vitally interested in practical politics. The
emerging middle class, the managers, the professionals, the
shopkeepers, the artisans, and even the workers had a stake in basic
fairness, stability, and lawfulness. It was precisely their vital
concern with politics that in 1989 first alarmed Beijing, which in
its doctrinaire ignorance had thought the people of Hong Kong little
different from the people of China.

Ironically, the event that put Beijing on its guard demonstrated
strong sympathy between the people of Hong Kong and the mainlanders
whose interest in democratic politics Beijing sought to crush. In
1989 Hong Kong was profoundly moved by the June 4 massacre in Beijing
of students and workers campaigning for democracy, and by the
persecution of all dissidents, however mild, throughout China. A
million men and women gathered in a candle-lit vigil in Hong Kong.
Such vigils on a somewhat smaller scale have occurred every year
since, including 1998. Hong Kong was until July 1, 1997 a haven for
refugee dissidents and provided funds for their movement. Naturally,
Beijing is determined to crush that independent spirit.

The people of the Crown Colony of Hong Kong again proved themselves
vitally interested in politics in 1995, when the second legislative
election in its history took place. Twenty of the sixty seats were to
be filled by direct public election, twenty by the governor's direct
appointment, and twenty by "functional constituencies", which meant
groups demarcated by occupation. That election was a further step
toward democracy, not a great leap. Governor Patten, who would have
liked a far more democratic election, was constrained by the
diplomats' prior agreement with Beijing that only a third of the
legislators would be directly elected.

Still, some 35 percent of those eligible came to the polls--and voted
overwhelmingly for the Democratic Party of barrister Martin Lee. He
stood for increased democracy and for vigorous resistance to the
encroachment on freedom that he foresaw when Beijing took power in
July 1997. The Democrats could do nothing about the handover, of
course. That was an irreversible fait accompli. But the elections did
show Beijing that most of the people did not want Chinese rule.

That election and the legislature it produced were the centerpiece of
the democratic innovations introduced by Patten. Those limited
changes evoked the vehement protests of the Foreign Office clique
dedicated to serene Sino-British relations at any cost. Those
protests were echoed by both British and Chinese taipans--the big
businessmen who have accumulated hundreds of millions, even billions,
of dollars. Among the paradoxes of Hong Kong, the rich are for the
communists, while the masses definitely are not.

Both the Foreign Office and the taipans are now busily chipping away
at Patten's solid reputation in retaliation for his reforms, which
they still contend have impeded Hong Kong's chief business--which is,
of course, business. Both those groups had wanted a smooth transfer
of sovereignty because they believed their own interests were best
served by truckling to Beijing. Neither the diplomats nor the taipans
could imagine that Beijing's suzerainty would signal an economic
decline. They believed--or professed to believe--that the mass of
Hong Kong's people would be just as well--if not better--off under
Chinese rule. Yet from the very beginning the new regime was dogged
by unforeseen problems that have severely impeded both general
economic development and corporate profits.

The first was simply a problem of credibility. Even before the
takeover, the government-to-be had declared the 1995 legislative
election invalid and had appointed its own legislature in waiting. An
elaborate and intricate process handpicked committees to select
committees to choose committees that finally elected the legislators.
That complicated mummery convinced no one that the legislature that
took its seats on July 1, 1997 reflected the popular will. No more
did the layers of committees that selected Tung Chee-hwa as chief
executive carry conviction. Everyone knew that Tung had been chosen
by President Jiang Zemin, who confirmed his choice by ostentatiously
shaking hands with Tung under the television lenses long before the
charade of selection by committee began. Tung was selected because he
would do Beijing's bidding without question. He was, after all,
indebted to Beijing. Having mismanaged his father's shipping fleet
into near bankruptcy, he had survived by borrowing some $250 million
through friends of the regime.

Nor did the procedure for electing a new legislature in May 1998
enhance the regime's democratic credibility. There were still sixty
seats, and again only twenty were filled by popular election. Of the
rest twenty were appointed directly, as under Patten's reforms,
because the Sino-British agreement provided for such a procedure.
Twenty were again chosen by "functional constituencies", associations
of, say, gold traders, doctors, bankers, lawyers, and the like. So
too had they been under Patten, because the Basic Law drafted by
Beijing and the Foreign Office so provided. This echo of Benito
Mussolini's corporate state was either not recognized as such or else
failed to disturb the architects of the new Hong Kong, which was to
be ruled by democracy Beijing style--essentially a more efficient and
more invasive authoritarianism than Mussolini's fascism.

Nonetheless, the first legislative election after the handover was a
stunning repudiation of Tung Chee-hwa's reign. In torrents of rain
and with winds of near typhoon violence, a remarkable 53 percent of
the general electorate turned out to choose the twenty legislators
representing the general public. They returned fifteen candidates
from Martin Lee's Democratic Party and its close allies. The
remaining five came from the Democratic Alliance for the Betterment
of Hong Kong, a mildly leftist, old-line labor party that does not
truckle to Beijing. Although the voting pattern had been rigged to
favor pro-Beijing candidates, not a single one was elected by the
general public. In the functional constituencies, five more Democrats
were chosen, although the number eligible to vote by occupation had
been reduced from some 1.15 million to less than 150,000.

It was a smashing victory for the advocates of democracy and
independence, a stinging repudiation of Tung and his puppet-masters
in Beijing. In immediate practical terms it was something less. A
majority of the sixty legislators will vote as Beijing directs, for
the twenty appointed directly and the functional constituencies,
largely the realm of big business, returned some fifteen pro-Beijing
candidates. Martin Lee is now all but literally the leader of the
opposition in communist China, since nowhere else in the sprawling
nation is any opposition party tolerated. Of course, the SAR will
continue to run as Beijing directs. But a spark of democracy will
glow in Hong Kong until either Beijing stamps it out or until the
Chinese capital itself changes even more radically than it is
changing at the moment.

In the year 2002 a committee of eight hundred is to select the next
chief executive, either Tung Chee-hwa or another equally subservient
to Beijing. In 2007 the successive chief executive is supposed to be
popularly elected, although Tung has already said he feels that may
be too soon. He has also decried Hong Kong's excessive Westernization
and restricted teaching in English, a measure originally planned by
the outgoing colonial administration to facilitate the Sinicization
of Hong Kong. Yet switching to Cantonese as the language of
instruction is downright silly. Not only will graduates of the newly
restricted schools not have mastered the international language,
English, but they won't even be adept in Mandarin, China's common
national language.

The press, radio, and television are already constrained, mostly the
result of the fears of reporters and editors under pressure from
proprietors. Such self-censorship is probably more effective that
outright censorship, since it knows no bounds. Direct censorship has
not been imposed, but the Chinese-language media are harassed. The
frankly oppositionist Apple Daily has been charged with violations of
employment laws and other non-journalistic offenses. The
English-language press, the barometer by which most outside observers
assess Hong Kong's political weather, is still reasonably free of
interference. But only a few regularly read the English press and
they are predominantly foreigners who are mostly transients and thus
don't really matter. But Radio Television Hong Kong, an editorially
autonomous public entity rather like the BBC which broadcasts in
English and Cantonese, has been fiercely attacked for failing to
present government policy "positively." Hong Kong's new regime really
cannot see the difference between a quasi-independent broadcasting
service financed by the government and a wholly government-controlled
service--no more than can Beijing.

Deng Xiaoping, China's paramount leader who died a few months before
the handover he had enforced, made several promises to Hong Kong to
sweeten the pill. He did so in part to save British face by fostering
the illusion that London had successfully negotiated modifications of
Beijing's original conditions, for the benefit of the people of Hong
Kong. But his chief purpose was to reassure the people so that they
would, as he advised, "set their hearts at ease." Deng did not want a
frightened or agitated populace that would reduce a prosperous SAR's
ability to spin money for the People's Republic.

Despite Deng's reassurances, tens of thousands of the emerging middle
class fled each year from 1984 onwards. More would have left had they
been able. They were quite right to doubt Deng's promises.

The paramount leader had guaranteed that Hong Kong's social and
economic system would not change for at least fifty years after the
handover. He had encapsulated his guarantees in a simple formula: One
country, two systems. However, Tung Chee-hwa recently declared that
whenever the two principles clashed, one country took absolute
precedence over two systems. The principles clashed repeatedly during
the first year of Tung's term. He further assured his own followers
that dissenting voices on Radio Television Hong Kong would be
silenced--all in good time. So would public demonstrations protesting
government actions.

Such demonstrations, reasonably free at the beginning, are now much
restricted. Four men have been convicted for demonstrating, two of
them for defacing the scarlet flag of the People's Republic of China.
Neither defacing the Union Jack nor public protest was an offense
under "oppressive colonial rule." Beyond doubt, Beijing is gradually
reducing Hong Kong to authoritarian servitude under cover of
apparently moderate policies. We should have expected nothing else.
Hong Kong cannot be allowed to become a threat to Beijing's
absolutist rule of China by its example of a happier people under a
more lenient government. But absolutism will be enforced "slowly,
slowly", as Tung observed of the ultimate suppression of the media,
electoral rights, and all freedom of expression.

Foreign influence has slowed that inexorable process--and could slow
it further. Paramount is American influence, since President Jiang
Zemin needs the public approval of the Clinton administration to
enhance his personal prestige. American goodwill is also vital to
China's industrial progress. But such influence can only slow the
process. It cannot stop the smothering of the SAR's transient
freedoms and residual prosperity. It cannot stop corruption either.

Tung's administration has been further marred by a general rise in
crime, as well as public and private corruption. To be fair, armed
robbery and bribery were already increasing under Patten's
admini