Quotes of the Day

The campaign headquarters of Hong Kong's Chief Executive, Donald Tsang, is unusual for an election nerve center. For one thing, it's clean, and quiet: no spilled coffee, no half-eaten pizza slices, no one cursing into a phone. The staff are unfailingly polite, and they don't run—they walk. As befits Hong Kong's profile as a financial town above all else, Tsang's election office is in a commercial tower, on the 28th floor. (Hong Kong people consider 28 to be an advantageous number because, in Cantonese, it sounds like "easy to prosper.") In case that isn't powerful enough joss, a large Chinese character written on gold paper stands above the reception counter; it's the word "luck."

Tsang doesn't need any. The 62-year-old is running for a second term as Chief Executive—the strangely apt title for the head of Hong Kong's government. But the vote is restricted to the 800 members of an electoral college who are drawn from assorted business, professional and social groups. Most of them tend to bend whichever way the wind from Beijing is blowing. And, these days, it is blowing in Tsang's favor. Though he is facing a challenger from the city's democratic camp—lawyer and lawmaker Alan Leong—Tsang already commands 641 nominations from the Election Committee, and will defeat Leong handily in the ballot, which takes place on March 25.

But Tsang is acting as if he's in a real race. He has gone to the trouble of releasing a manifesto that spells out his ambitious plans to make Hong Kong a richer, cleaner, more equitable and more democratic society. In a town run by an aggregation of élites, he has pressed the flesh in working-class neighborhoods, engaged in televised candidate debates with Leong, and even taken a ride in an open-topped bus, waving to people who can't vote for him. Tsang is doing all this because he wants a wider mandate; he is a man with something to prove. "My objective," Tsang told TIME in an interview in his campaign office, "is not only to win the votes of the 800 people who are the delegates of the Election Committee. My campaign is to win the hearts of the 7 million people of Hong Kong."

The key point about Hong Kong's election is not about the contest, even though this is the first time an incumbent has been taken on. Nor is it about the result, which is not in doubt. What Hong Kong's people want to know is whether Tsang and his team can address the many challenges faced by one of the world's truly great cities. On the surface, Hong Kong is doing just fine, thank you. The economy is humming along—gdp growth was 6.8% in 2006 and is forecast to be at least a respectable 4.5% this year, not bad at all for a mature, first-world city. The stock market has dipped in recent weeks because of the global slump in equities, but is still up about 20% against a year ago. Real estate—a key and much-watched variable in Hong Kong—is robust again, and retail sales rose 7.3% in 2006 from the previous year's figure. It's not just car fumes in the air, but the smell of money.

Yet this year, as Hong Kong marks the 10th anniversary of the end of British colonial rule and the start of its existence as a Special Administrative Region of the People's Republic of China, the city is perhaps in a greater state of uncertainty than ever before. Tsang himself compares Hong Kong to New York and London. "As an international financial center, [they are the only] two global benchmarks for Hong Kong," he says. "Other places cannot compare with us." But Hong Kong does not have some God-given right to be a success; others would like some of its wealth. Though the World Economic Forum last year rated the territory as the world's 11th most competitive economy, Hong Kong is in a race for global business not just with obvious local rivals such as Tokyo and Singapore, but with cities from Shanghai to Dubai who are seeking to benefit from globalization.

Compared to others, Hong Kong can look less than exemplary. For a developed economy, the gap between rich and poor is high. Air pollution remains atrocious, making greener Singapore and Sydney more appealing to expatriate executives. The standard of English, especially among youths, is deteriorating, threatening to undermine Hong Kong's aspiration to be a global financial center. "At the moment, we're still pretty competitive," Anson Chan, a senior official in both the British and post-'97 administrations, told TIME. "But it's not something we can take for granted. People don't realize that our competitive edge comes from the rights and freedoms we enjoy." In that context, Hong Kong's political status is a problem. The territory is stuck in a halfway house of confusing, semi-democratic electoral procedures that do not do justice to its well-educated and sophisticated citizenry. While Hong Kong's sense of economic confidence today is palpable, many residents also believe the city has to move on—the reason why Leong was able to win enough nominations in the Election Committee to run in the first place. Hong Kong, for all its strengths, needs some fixing.

Tsang says he's the man to take the territory forward. "I want to tell people what I propose to do in the coming five years," he says, "and why those things are important to them and to me." But Hong Kong is no longer as straightforward to govern as it was during British colonial times. Besides accommodating Beijing, the Chief Executive has to balance powerful local interests, especially a conservative business sector, with a growing civil-society movement agitating about everything from higher wages to "universal suffrage" (the local political jargon for full, direct elections) to clean air. Once known for their political apathy, Hong Kongers now want a greater role in the running of their city. Though he won't say it outright, Tsang knows that he needs to go beyond his formal—and narrow—base of support of China's leaders and Hong Kong's business tycoons to win wider public backing in order to get things done. "I think he's sincere," says Chinese University of Hong Kong political scientist Ivan Choy. "But [his] is a difficult job, if not mission impossible."

His political opponents say that Tsang has not yet shown the kind of world-class leadership Hong Kong needs and deserves. A former civil servant, Tsang was Financial Secretary under Britain's last Hong Kong Governor, Chris Patten, and No. 2 in the administration of Tung Chee-hwa, Hong Kong's first Chief Executive after the 1997 handover to China. Tung—who came from a Shanghainese family rather than from Hong Kong or its neighboring province, Guangdong—was never wildly popular and proved ineffectual, unable to meet the challenges of either a downturn in the economy or of the SARS epidemic that hit Hong Kong in 2003. In March 2005 Tung stepped down. Tsang became acting Chief Executive, and was confirmed in the job by the Election Committee in June that year (there was no other candidate then).

If only because he was not Tung—and because he was a local boy made good—Tsang came into office with much goodwill. But his first two years as Chief Executive were marked more by what he could not accomplish than what he did. In 2005, he was unable to push through a limited set of political reforms that would have increased the size of the body that picks the Chief Executive and added 10 seats to the legislature. The proposals were blocked by democratic lawmakers who felt the changes didn't go far enough and who objected, also, to the fact that Tsang's plan did not have a clear timetable for a transition to full democracy. "People wanted it; there was majority support for it," Tsang says of his plan. "Some bloody-minded politicians wouldn't allow it through in the Legislative Council—against the people's wishes."

Then there was the West Kowloon Cultural District, a $5 billion greenfield project to build a residential, commercial and cultural complex on 40 hectares of prime harborfront owned by the government. In a city where land is worth its width in gold, the scheme, launched by Tung, ran into legislative gridlock amid concerns of a sweetheart deal for the developer that would be chosen. Critics also questioned the government's wisdom—and expertise—in creating a costly arts hub without first gauging the level of public interest in it. Today, West Kowloon, possibly some of the most valuable real estate on the planet, stands idle—a dirt wasteland. Tsang has failed to advance other elements of his agenda, too. Air pollution, a perennial problem Tsang has vowed to combat, continues to choke the territory, harming public health and hurting Hong Kong's international reputation as a wonderful place to live.

His administration also lobbied hard to introduce a tax on goods and services, arguing that it needed to diversify its revenue base in case a major source of income, like government land sales, took a hit. But the proposal was roundly opposed by almost every segment of society. Retailers reckoned it would hurt their businesses. Economists believed it would unnecessarily complicate a straightforward tax regimen and deter foreign investors. And ordinary folk felt it would unduly burden low- and middle-income consumers. The government's gambit turned into an embarrassment when Financial Secretary Henry Tang, the moving force behind the gst, underestimated his numbers and revealed last month that Hong Kong had posted a surplus of $7 billion for the year, and would give back $2.4 billion of that in tax breaks. The upshot: the government didn't really need the extra cash.

Even Tsang's one major legislative success, getting the go-ahead for a new $665 million government headquarters on the harbor's southern edge, has run into criticism that the new development is unnecessary and will aggravate downtown gridlock. Tsang counters that his administration has been productive: "We have passed nearly 300 pieces of legislation of one kind or other. People just listen to one piece of law being a stumbling block, without realizing that a lot of things are going through every day." He admits that "some things I tried to do did not come through," but adds, "I am patient."

Anywhere else, such setbacks would not harm someone's political reputation for long. But Hong Kong is such a can-do town of winners that just a couple of reversals can be magnified to give you a loser's image. Tsang's supporters say his retreats are a sign of pragmatism. "He is bold and determined," says Choy So-yuk, a Legislative Council member from the pro-Beijing Democratic Alliance for the Betterment and Progress of Hong Kong (DAB). "In areas like West Kowloon, he knows when to give up when facing public opposition." Yet for an official who declared in his first policy address that his goal was "strong governance," giving up doesn't strike the right tone. "Politically, Donald is more compromising and accommodating than Tung, which is good," says Ma Ngok, a political scientist at the Chinese University of Hong Kong. "But that doesn't meet the public's idea of strong governance."

To be fair, the blame for a lack of sparkle in Tsang's administration so far cannot be laid solely at his door. Hong Kong's system is intended to have a strong Chief Executive, but the top official cannot be a member of a political party, which means that he has to build support from parties with often competing agendas, like the pro-business Liberal Party and the DAB, which champions Hong Kong's working class. Some believe that limiting the Chief Executive election to just an élite 800, who in turn are selected by only about 200,000 voters in various sectors and industries, robs Hong Kong's leader of the mandate that would come from being chosen in a direct, Hong Kong-wide ballot. "It's very much the structure of the system," says Larry Diamond, a senior fellow at Stanford's Hoover Institution who is a student of Hong Kong. "This is what happens when you're stuck halfway."

Tsang's boosters say that the best is yet to come, and point to his great strength: he's popular. With approval ratings consistently in the mid-60s, Tsang does not lack for support. "He's pretty good," says Johnny Lau, 35, an advertising worker taking a cigarette break beneath a campaign billboard for Alan Leong. In Mongkok, on the Kowloon side of Hong Kong harbor—and one of the most densely populated tracts of land on the planet—Rex Lau, 37, who is working in a bicycle-repair shop, echoes the sentiment. "Donald Tsang is doing okay," he allows. But then he adds a rider. "But he basically listens to what people in China want. It's like you have a say, but you don't really."

Born and bred in Hong Kong—his father was a policeman—Tsang rose through the ranks of the colonial civil service, a common career choice for Hong Kongers with plenty of brains but little money. A devout Catholic (like a surprising number of key people in Hong Kong), Tsang has his roots deep in the city. Because of his background as an official in the British administration, for which he received a knighthood, Hong Kong's leftist camp has never fully trusted Tsang as a Beijing loyalist. Indeed, the conventional wisdom is that China's leaders are still feeling him out. But among his own people, that doesn't necessarily hurt Tsang. "They see him as someone who is not a partisan of these groups," says Michael DeGolyer, who heads the Hong Kong Transition Project at Hong Kong Baptist University. "He basically identifies with [Hong Kongers] against these outside forces."

For the sake of both Hong Kong and Beijing, the future political arrangements of the city need to be settled soon. The Basic Law, Hong Kong's post-1997 constitution, which is based on a Chinese agreement with Britain on the colony's handover, allows that direct elections for the Chief Executive and the Legislative Council are Hong Kong's eventual goal. But the document does not specify a road map or timetable toward it. While China's leaders are committed to the Basic Law, they seem in no hurry to embrace direct elections. "They're anxious about moving too fast," says Anson Chan. "They're worried that there will be implications for stability; that Hong Kong will become a welfare state; that the wrong people will get elected." Most of Hong Kong's top business leaders have traditionally been lukewarm toward full democracy, too, fearing that it could lead to populist policies that would undermine both the economy and, perhaps, their influence.

But a growing number of Hong Kong people feel the time for full democracy is already long past, and that any attempt to delay it is demeaning. Earlier this month, a group of democrats led by Chan unveiled a compromise proposal that would gradually implement universal suffrage. It's hardly a radical blueprint, and it dovetails with Tsang's own target of achieving full democracy by 2012, when his new five-year term will end. The response out of Beijing to Chan's plan, however, was anything but welcoming. Chen Zuo'er, the deputy director of the Hong Kong and Macau Affairs Office, was at pains to stress that it was Beijing—and by implication, not local Hong Kongers—that took the lead on political reform during negotiations with the British prior to the handover. Present-day activists in Hong Kong, Chen said, were just "people who now pretend to be democratic heroes."

Tsang says he can bridge the gap between Hong Kong and Beijing: "Perhaps I'm the only person able to do this [democracy] deal," he told TIME. Though he has stumbled once already on political reform, Tsang remains nothing if not confident. His campaign slogan is i'll get the job done. No question, he'll get the job. But whether he gets it done will determine Hong Kong's future for years to come.

• Austin Ramzy