HIGH AND MIGHTY: The view, known around the globe, from Hong Kong island's Victoria Peak on May 30
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Trying to resolve when to use English, Mandarin and Cantonese (all three are important and useful) is difficult enough. But the most sensitive, divisive and intractable issue in the relationship between Hong Kong and Beijing involves democracy. Especially since 2003, the year of SARS and Article 23, a democratic movement has emerged in Hong Kong, reflecting the belief that a well-educated and well-heeled city deserves representative and responsive government. Currently, the 60-member legislature is a convoluted mix of directly and indirectly elected seats. The Chief Executive, the title of Hong Kong's leader, is selected by an 800-member electoral college heavily influenced by big business, which religiously believes that greater democracy will reduce its considerable clout (it will), usher in populists and a welfare state (it won't—Hong Kong people are too pragmatic), and anger China, where Hong Kong tycoons do their deals (it might).
The standoff between conservatives, who want the status quo, and democrats, who want a Chief Executive chosen by the people and a fully elected legislature, has paralyzed politics, which, in turn, has paralyzed everything from ways to diversify the economy to tackling pollution. Both sides are deadlocked over blueprints, numbers and deadlines, and seemingly unwilling to engage in the only way out: compromise. The Chief Executive, Donald Tsang, told TIME in March that "I will resolve the question of universal suffrage totally, completely, within my next term," which ends in 2012. But as a former civil servant under the British who was knighted for his services, he still needs to prove his loyalty to Beijing—and you don't do that by pushing democracy. "We are [geographically] so close to China that we can't but help influence the mainland," says Regina Ip, a former Secretary of Security who now heads a think tank. "That's why the leaders in Beijing are very cautious." Indeed, when Tsang visited Beijing in April, Chinese President Hu Jintao told him, among other things, that democracy should be advanced "in a gradual and orderly manner."
Hong Kong must also think about its economic future. Being a part of a booming China almost guarantees that it will stay prosperous. But the mainland is a competitor as well as a partner. China's new ports siphon trade away from the SAR, and its lower labor costs siphon away jobs, previously in manufacturing, now in services. As China continues to relax investment rules and become more business friendly, more and more companies may opt to operate directly in the mainland rather than out of Hong Kong.
So Hong Kong needs to have an economic Plan B. Chief Executive Tsang benchmarks Hong Kong against New York and London and says he wants Hong Kong to be at least Asia's top financial center. David O'Rear, an American who is chief economist of the Hong Kong General Chamber of Commerce, believes that's perfectly doable: "Financial services is about as high value-added as you can get, and we're the financial center for half the world between San Francisco and Frankfurt." But Hong Kong faces stiff competition from Tokyo and Singapore, both of which, besides being cleaner and greener than Hong Kong, are also culturally richer—all extra incentives for the expatriates you need to boost your financial profile. And while Singapore is becoming a biotech center, pumping money into R&D and wooing academics and academic institutions, Hong Kong is still dependent on its traditional sources of wealth, like real estate and, yes, financial services. "We have not been able to innovate," says Ip. "On matters like developing a global research economy and R&D, we've stalled."
As far as fresh ideas go, the SAR seems stuck at a crossroads. Even as civil society takes root, democracy hits a wall. Even as the economy chugs along, the gap between rich and poor widens. Even as awareness of the environment grows, air quality worsens. Even as Hong Kong people become better educated, their English deteriorates. Even as Hong Kong wants to cash in on the China boom, it is trying to maintain a distinct character. And Hong Kong's angst is compounded by China's own. The mainland itself faces a crisis of identity and values: to be capitalist or communist, Chinese or Western, material or spiritual. With its own motherland confused, how can Hong Kong not be?
Confusion should not be mistaken for despair, however. True, China's leaders didn't really know what they were getting back in 1997. That's why they pressured the outgoing British to keep things as they were (top-down rule, cozy nexus between government and big business, no politics); they wanted to inherit a known quantity. China didn't want any surprises, and some believe that's still Beijing's attitude. "Since 1997, China wants one thing from Hong Kong: no trouble," says Tsinghua University's Yan. "Don't cause financial problems, don't cause political problems, don't cause social problems; don't cause trouble."
Yet that assessment is so pre-handover. China's leaders today are worldlier than ever. They know, if only from the experience of their own nation, that no place stands still, that if it does, that's when financial and political and social pressures build; that's when you're really in trouble. China and Hong Kong are both moving on; it's just not clear whether they will run parallel, merge or collide.
Hong Kong is a pulsating organism made up of the most enterprising conglomeration of humanity the world has ever known. That will never change. Identity crisis or no, Hong Kong understands that it's damned lucky to have become a part of China at so fortuitous a time, when the mainland is becoming ever freer and more open and in a position to give its hybrid, somewhat alien, child more opportunity than it could possibly have dreamed of. "I can't see what reason people in Hong Kong have to be pessimistic," says economist O'Rear. "We're part of China, but we're not subject to China's rules. What could be better than that?" What indeed, when you are 10 and have the world before you?