At midnight on July 1, 1997, the British flag was lowered over Hong Kong and the new Special Administrative Region (SAR) flag raised, returning the region to Chinese sovereignty after 156 years. Despite Beijing’s promise that Hong Kong would enjoy fifty years of autonomy under “one country, two systems,” and the continuation of the capitalist economic system, many feared for the fate of the region’s 6.6 million residents. One year after the handover, however, it is the economy which is the focus of attention as the SAR faces a host of financial difficulties. Dire predictions concerning the loss of political freedoms for residents have not been borne out, although some analysts decry setbacks in political rights and media freedom.

Hong Kong is in the grip of a recession, and the celebrations marking the first-year anniversary of the handover were subdued. Chinese President Jiang Zemin, presiding over the celebration and the opening of the new airport, delivered a speech in which he admitted that the SAR’s economic difficulties would not be resolved quickly. Frontier party leader and legislator Emily Lau remarked that because “both the economic and political situations looked quite dismal” there was very little to celebrate on the one-year anniversary.

Evidence of financial crisis can be seen all over the SAR. Property prices and retail sales have fallen, as has the stock market, while unemployment is at a fifteen-year high. Beijing has, however, endeavored to halt the financial crisis in Hong Kong, resisting pressure to devaluate the yuan, and hurting its own exports to assist the Special Administrative Region.

One year ago, viewers around the world saw waves of PLA soldiers enter Hong Kong en route to the new garrison there. Yet the garrison and the government have kept a low-profile since then.

Hong Kong still enjoys considerably greater freedom of expression than China. Indeed demonstrators marked the first anniversary with protests. They condemned the 1989 Tiananmen Square incident, demanded Jiang Zemin’s resignation, and called for the freeing of Chinese dissidents. In addition, a protester burned a picture of Jiang in front of police, an act unimaginable in the mainland. However, new laws have put a damper on some types of protest. Recently two youths were arrested and convicted of desecrating Chinese and Hong Kong flags.

The media has also retained much of its freedom in the past year. Hong Kong reporters still report on many controversial issues unacceptable for mainland journalists, such as independence for Taiwan or Tibet. However, nearly all of the mainstream media organizations have owners with connections to Beijing and may be engaging in some form of self-censorship. Apple Daily, whose owner is not linked to Beijing, has found that its journalists are not allowed to make official visits to the mainland.

In addition, Article 23 of the Basic Law, Hong Kong’s constitution, requires the territory to pass a law regarding treason, subversion, and sedition. Many journalists and political analysts are concerned for the future as it is not yet clear what will constitute sedition under the new law. Furthermore, in what appears to be further erosion of the SAR’s autonomy, the lower courts have also ruled that China’s National People’s Congress can overrule Hong Kong’s Basic Law.

Although after the return to Chinese sovereignty, pro-democracy politicians were replaced by un-elected members of pro-China parties in the legislature, opinion polls repeatedly listed Martin Lee and his Democratic Party as the most popular in the SAR. On May 24, 1998, a record 53.3 percent of voters turned out in the driving rain to vote in the SAR’s first Legislative Council elections. The Democratic Party achieved an overwhelming victory but due to the structure of the legislature, they secured only twenty of the sixty seats and therefore can still always be outvoted.

The situation in Hong Kong has been closely monitored by foreign observers and Chinese alike and the mainland is touting Hong Kong as the model for the future return of Macao and eventually Taiwan. Yet the support and confidence of the public in Tung Chee-hwa, Hong Kong’s chief executive who was chosen by a selection committee of pro-China members, seems to be deteriorating along with the economy. As Hong Kong enters its second year under Chinese rule, economic concerns are paramount to most residents, and it is not yet clear if the SAR’s economic woes will lead to more strident demands for political change.

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