Hong Kong wrestles with China Dream

In better times, expats were drawn to the city's Eastern mystique and booming economy

HONG KONG, China (CNN) -- When Mary Painter came to Hong Kong in 1976 with her husband, a civil engineer, she was one of hordes of British who flocked to the colonial outpost.

Drawn in part by the mystique of the Far East, and the dream of making it rich in a colony, British opium traders, backpackers and bankers have made the Pearl of the Orient with its tiger economy their home for more than 150 years.

"In the 1970s Hong Kong was booming and there was so much work," says Painter, who is secretary of the Royal Asiatic Society in this Asian megalopolis.

While the "West meets East" entrepot has suffered setbacks over the decades -- among them an invading Japan and a communist revolution next door -- the city has been in a real funk since it changed hands in 1997.

"Before the handover, Hong Kong had a story, it was a British colony," said Tim Bredbury, who has lived in the city for 33 years and runs a sports management company.

"But now it is another Chinese city."

Fin-de-siecle

AUDIO CNN Senior Asia Correspondent Mike Chinoy on Hong Kong's future 2.13MB / 3min. 23secs WAV sound   RESOURCES Photo gallery: 1997-2002 through the lens  Timeline: Five years under Chinese rule    CNN NewsPass VIDEO The People's Liberation Army stages training drills for the Hong Kong news media. CNN's Mike Chinoy reports. Play video Five years after its handover to China, fears over Hong Kong's political fate have given way to concerns about its economic viability. CNN's Lisa Barron reports. Play video   IN-DEPTH One Country Two Systems: 5 Years On    MORE STORIES • Hong Kong tops economic freedom rating  • Gloomy forecast for Hong Kong democracy  • Repression marks anniversary  • China assures economic push  • Who needs Hong Kong?

The handover of the British outpost perched on the edge of a communist giant was a global drawcard.

People flocked for the fin-de-siecle party, putting up with skyrocketing prices to witness a freewheeling Hong Kong, a gateway to China and one of the world's most dynamic economies.

But after the clock struck midnight on July 1 in 1997, and the so-called Special Administrative Region fell under the "one country, two systems" formula, much of the buzz faded.

"Hong Kong has lost one of its charms, but it hasn't gained another," says Stephen Ezekiel, an Australian who has lived in Hong Kong for six years and worked for a number of multinational companies.

The Asian financial crisis and the dot.com blowout added to the territory's woes, prompting its unpopular chief executive to admit on the first day of his second term that the city is "facing unprecedented difficulties."

As Hong Kong marks five years under Chinese rule, it is wrestling with a swathe of economic troubles -- record unemployment, skidding confidence and property prices -- and expatriates are leaving in droves, or not coming at all.

There are now only half as many Americans as there were one year before the handover.

Meanwhile, only 25,418 Britons still live in the tiny territory on China's southern coast, a mere trickle of the 175,395 that lived here in 1996.

The cultural landscape has changed so much that caucasians are now a minority in some international schools, there is more pressure to speak Chinese, while sports clubs are catering to locals to keep their games alive, says Joseph Bosco, a professor at the anthropology department of the Chinese University of Hong Kong.

Expatriates now view this tiny territory of 6.7 million people in a different way, experts say.

"People are self-conscious now when they say "China" as if it does not include Hong Kong," says Bosco.

China rises

Such self-consciousness may well be a prelude to the greater identity struggle that Hong Kong has with China as it finds a new reason for existing.

The city knows it cannot give up what it has to more fully embrace "China," analysts say, but it also doesn't want to be left out of the "China Dream."

Hong Kong wants to keep its independence, its passports and its own way of doing things, but the meteoric rise of China since the handover has sparked worry about where it fits in as part of the "China story."

Administrators worry not only about the trouble the city has had in breaking the back of the Asian crisis, they are also concerned about burgeoning competition from Guangdong province and Shanghai.

As Hong Kong firms flock to the mainland and shoppers clog checkpoints to get to cheaper malls, students are making moves across the border to chase the China dream, a move that was "unimaginable" a few years ago, says Gordon Mathews, anthropologist at the Chinese University of Hong Kong.

Expatriates too have been swept up in this mood. Those who speak Chinese and work in China are choosing Shanghai and Guangzhou where living is cheaper and "you are closer to the ground to what is happening," says Bosco.

With the setting up of direct channels to China, concerns abound that Hong Kong's already vulnerable finance and high-end edifice may crumble.

City of the World

Hong Kong's fragility is only compounded by China riding an economic wave it can't control, economists say.

It is difficult to know how long Hong Kong can remain the world's freest city

The most skeptical say China is at best heading for a recession, and at worst, a complete collapse.

In a bid to survive, Hong Kong is courting China as well as the rest of Asia so that it can be a "gateway to the rest of the world," Financial Secretary Antony Leung has said.

Even as the world's freest economy vies for communist Beijing to throw it some bones, it is "internationalizing" the city as it realizes its drawcards won't last forever.

Hong Kong has branded itself "Asia's World City," with tourist groups pining its hopes on a massive influx in and out of China, while the city is building a Disneyland and a high-tech cyberport.

Meanwhile, the Hong Kong Football Club, a long-time bastion of expatriate exclusivity in Happy Valley, is now about half local Chinese as it caters to all groups, says its general manager, Mark Pawley.

Universities, such as the Chinese University of Hong Kong, have embraced "internationalization" to attract students from all over Asia and the world.

"Whereas before the handover, there was concern about embracing Chineseness, now, the university seems to realize that it must transcend Chineseness to be internationally first-rate," says Mathews.

"At least in my students' attitudes, it is not 'just another city in China' but rather a city in the world."

Such words may cheer Leung, who has already boasted that since 1997, there are now 30 percent more foreign companies who have chosen their Asian headquarters to be in Hong Kong.