Many were gloomy about Hong Kong's future 10 years ago when the British colony of dazzling skyscrapers and gung-ho capitalists returned to the communist Chinese motherland.
There were fears Chinese troops would be goose-stepping down the streets, muzzling any whisper of political dissent. Masses of peasants would stampede across the border, filling the city with beggars and thieves. And the most talented Hong Kongers would become "yacht people," fleeing to Australia, Canada, America and other places welcoming their business savvy, workaholic ways and cash.
Fortune magazine's headline, two years before the British flag came down, proclaimed "The Death of Hong Kong."
Ten years later, the soldiers are here, but are rarely seen in uniform on the streets. Mainland Chinese are pouring in, but many are big-spending tourists buying Rolex watches and shark-fin soup. Many rich Hong Kongers are back, resettled in a booming city, happy that their fears have proved groundless.
Queen's statue still stands
Queen Victoria's statue still stands in the middle of town, in a park where thousands of protesters rally each year to denounce China's undemocratic system and remember the Chinese killed in the crackdown on pro-democracy demonstrators at Tiananmen Square in Beijing — the 1989 bloodbath that spurred an exodus of Hong Kong Chinese fearful that they would one day face a similar fate.
But even as memories of Tiananmen fade, not all is well in Hong Kong. Media critics say some formerly outspoken newspapers now pull their punches to avoid angering China. Hong Kong is far from fully democratic. Its laws guarantee Beijing's candidates a majority in its partially elected legislature, leaving the popular pro-democracy parties permanently in the minority. The political and legal system is highly vulnerable to meddling by the Communist overlords in Beijing.
"I don't think Beijing is seriously ready for democracy in Hong Kong," said Steve Tsang, an expert on Chinese politics at Oxford University in Britain.
When Britain's 156-year rule ended, in a lavish ceremony on the rainy midnight of June 30-July 1, 1997, the deal was that the city could keep its capitalist ways and civil liberties for 50 years.
One country, two systems
The formula called "one country, two systems" promised a wide degree of autonomy, and in many ways, Hong Kong still acts and feels like a country separate from China. It has its own currency and telephone country code. Its legal system remains British and its judges wear wigs.
And the election system, however limited, is far freer than anything in China. Hong Kong's leader, or chief executive, is the highly popular Donald Tsang, a policeman's son steeped in the British civil service tradition and knighted in the final days of British rule.
So far, the former colonial masters say things are going jolly well.
"Over the past 10 years, there have been some very bumpy moments — politically and economically," British Foreign Secretary Margaret Beckett said in a speech during a recent visit.
"But some of the more dire predictions I remember so vividly from 1997 have not come true," she added. "One country, two systems has worked."
Former British Prime Minister Margaret Thatcher, whose government negotiated the handover agreement 13 years before it came into force, recently told the BBC that the worries about Hong Kong's future "have largely proved groundless."
Just a dot on massive China's southern coast, Hong Kong — islands and mainland — consists of 6.9 million people crammed into an area the size of Nashville, Tenn.
It was a sparsely inhabited clump of rocks with a spectacular deep-water harbor when the opium-pushing British seized it in 1841, to the annoyance of their then-foreign secretary, Lord Palmerston, who dismissed the new possession as just a commercially worthless "barren island with barely a house upon it."
Today, massive container ships cruise in and out of Hong Kong's busy ports, pinstriped businessmen throng the financial district and harbor-front skyscrapers house many of the world's richest investment banks.
Last year, Hong Kong's stock market surpassed New York as the second most popular place —after London — to float new stock listings.
It's another example of Hong Kong's incredible knack for evolving, reinventing itself and confounding the naysayers. And the many crises it has faced since the handover are rarely China's doing.
Despair in the air
The troubles began on the first day of Chinese rule when Thailand's tumbling currency triggered an Asian financial meltdown that spread from country to country. Hong Kong's stock market plummeted by 60 percent. Unemployment nearly tripled to 6 percent by the end of 1998. Homes lost half of their value. Despair gripped the city.
Before Hong Kong could recover, it recorded the first known cases of the deadly H5N1 bird flu virus in humans. It killed six people and prompted the government to slaughter the entire poultry population.
A few years later, a mysterious virus crossed the border from China and turned Hong Kong into the epicenter of what became known as SARS — severe acute respiratory syndrome — which killed nearly 300 people in the territory.
Tourism shriveled and the economy again slipped into recession. Meanwhile, another challenge was becoming increasingly evident: Hong Kong, once the only major Western gateway to a China breaking out of its communist mold, was facing increasing commercial competition from Shanghai and other mainland Chinese cities.
As Hong Kong was recovering from the SARS crisis, the government began pushing an anti-subversion bill which many feared would threaten civil liberties. On July 1, the sixth anniversary of the handover, a staggering 500,000 people rallied in protest.
Compounding their anger was a sense that the government had bungled the SARS crisis and was dragging its feet on democratic reforms. The massive rally rattled Beijing and Hong Kong's chief executive, Tung Chee-hwa.
Two years later Tung resigned, citing failing health. The beefy former shipping tycoon was accused of being too cautious, too deferential to his overlords in Beijing, too out of touch with the people. It was widely believed China had lost confidence in the man it handpicked for the job, and preferred Tsang, a savvy veteran administrator trusted by the people. In March, he was selected to serve a new term by an 800-seat election committee loaded with members loyal to Beijing.
Speaking to foreign correspondents before he began his new term, Tsang dismissed the notion that Hong Kong "has been carried away by the force of communism and that we are all living in constant danger."
Tsang argued that Hong Kong is one of the world's freest places. Although it lacks full democracy, he said, it has a free press, rule of law and a full range of civil liberties.
He also said Hong Kong was much better off than before China took over.
"One can say Hong Kong is a more civilized place, a much more open society and perhaps economically more robust after going through the Asian financial crisis and tidying up our fiscal system," he said.
Tsang has promised that his government will settle the democracy issue before his five-year term ends.
But veteran pro-democracy lawmaker Martin Lee dismissed Tsang as a "puppet of Beijing" and doubted he would deliver meaningful democratic reforms. Lee also warned against feeling complacent about Hong Kong's civil liberties.
"The problem in Hong Kong is that we do not have a democratic foundation," he said. "I've always believed that without democracy, our freedoms, which are OK up until now, will not survive for long." With Beijing controlling the balance of forces in the legislature, "How can you be sure that your freedoms are protected?"
Freedom issues remain
Tsang's assertion that the press remains free was questioned by media tycoon Jimmy Lai, owner of Apple Daily — a best-selling newspaper that takes a strong pro-democracy line.
"In the last 10 years, I do think Hong Kong media still has its freedom of speech," said Lai. "At least no one has been arrested. We have never been threatened by anyone."
But he claims his paper's views have lost it advertising, and that media bosses concerned for their investments in China make their publications censor themselves.
Predicting Hong Kong's political future is difficult because Beijing has yet to thoroughly explain when it thinks the city will be ready for full democracy.
As a so-called Special Administrative Region of China, or SAR, Hong Kong has to walk a fine line between "one country" and "two systems," and Tsang, the Oxford professor, thinks the Chinese leadership is worried that a free election may give Hong Kong a leader who would put it on a collision course with China.
But he said Beijing should trust the electorate.
"If you give the Hong Kong people the scope to go their own way, they always come back to support China and the SAR government," he said. "They can't afford to have the government fail."