Hong Kong, one year later. (includes related articles on Hong Kong's Provisional Legislature and interview with American expatriate in Hong Kong Steve Knipp)(Cover Story)

A new flag flies. The army remains out of sight. Yet, is this still the Hong Kong we knew and loved?

The typhoon rains that soaked Hong Kong during last year's handover to the People's Republic of China (PRC) were considered harbingers of good luck by China and Hong Kong alike. But when the rains continued for several weeks, some wondered how much luck Hong Kong could sustain. Since then, the Hong Kong Special Administrative Region (SAR) has been buffeted by the financial crisis that shook much of Asia and has delayed opening its new airport. As Hong Kong celebrated the lunar new year, which started on January 28, some small shops announced plans to close, real estate projects were put on hold, and massive layoffs were under way at real estate development firms. Despite these problems, everything else in Hong Kong seemingly remains untouched. "The world... hasn't realized that nothing has changed," says Owen Chi, assistant executive director of the Hong Kong Trade Development Council. "There are no soldiers on the streets," he says, and the laws and the business climate remain intact. The greatest difference is that, for the first time in its history, Hong Kong is governed by the people of Hong Kong. In May, Hong Kong elected its first Legislative Assembly under the PRC (see box on page 13). And the government is led by a well-educated, well-heeled, savvy group of business leaders who are determined to govern Hong Kong even more effectively than did the British.

But the Hong Kong government also must take into consideration the wishes of the PRC, which could impose restrictive regulations in the region. Today, it is understood that no governmental actions take place in Hong Kong without the tacit approval of leaders in Beijing, and Hong Kong's current leaders are reluctant to rock a boat that, so far, is stable. Although business leaders uniformly emphasize that "nothing has changed" and that China itself is dramatically improving its own policies and views, there is a quietly voiced concern that Hong Kong is a "frog in the pot." The saying goes that China is turning up the heat so gradually that the frog will be cooked before it realizes it is in danger.

Freedom of Information

Any changes related to the handover actually began a few years ago, as people and businesses began to censor themselves to fall more closely in line with Beijing's view of the world. As a result, the ability of local and international businesses in Hong Kong to get accurate, unbiased news from the Hong Kong media has been compromised.

In the communications industry, for example, the Malaysian owner of the leading English-language newspaper, the South China Morning Post, appointed Feng Xiliang, the founder of China's state-sponsored English-language newspaper, as a consultant. Ming Pao, a leading Chinese-language newspaper, fired two columnists who were strong critics of the PRC authorities in April 1996 and advised other columnists to share their column space with contributors and thereby write less.

Perhaps more worrisome, information may not be disseminated without government authorization if it relates to security, intelligence, defense, international relations, confidential information from international organizations or other states, crimes and special investigations carried out under statutory warrants. Even air crashes and fires could be considered issues of state security and therefore may not become public, according to The Die Is Cast, the 1997 annual report of the Hong Kong Journalists Association.

Additionally, amended privacy laws restrict press operations by limiting the information available about public figures, according to Carol Pui-yee Lai, chairman of the Hong Kong Journalists Association. This could mean that certain illegal business dealings may be more easily concealed under the guise of "privacy," making corruption more difficult to unearth.

For Hong Kong firms openly critical of the PRC, conducting business in mainland China may become impossible, and Hong Kong operations also may feel the brunt of the PRC's ire. In one example, when Jimmy Lai Chee-ying, owner of the infamous Apple Daily newspaper and Next Magazine, called Chinese Premier Li Peng "a turtle's egg with a zero IQ" (interpreted as a high insult) in 1994, his …