By BBC News Online's Joe Havely

On 20 December 1999 more than five centuries of European colonialism in Asia came to an end with the return of the tiny Portuguese enclave of Macau to Chinese control.

The handover marks another step in realising Beijing's dream of a reunited greater China, leaving Taiwan as the only part that remains outside of its control.

Following the path of Hong Kong - the former British colony which reverted to mainland rule in 1997 - Macau will become a "Special Administrative Region" of the People's Republic under the "one country two systems" formula developed by Deng Xiaoping.

Apart from defence and foreign policy issues, Macau's partially elected legislature will be given pretty much a free hand to run the territory. Its Portuguese-influenced legal system will remain largely unchanged.

Trading mission

Macau was first settled in 1557, shortly after the first Portuguese ships appeared off the Chinese coast.

Initially a place for ships to seek shelter from the frequent storms that hit the South China Sea, it quickly developed into a busy trading mission with a hybrid culture that brought together elements of Iberian and Chinese tradition.

The colony prospered until the mid-19th century when the British established the deep water port of Hong Kong further along the coast, offering greater opportunities for trade with the mainland.

As Hong Kong took over, the territory went into a steady decline - its Portuguese leadership more concerned with lining their own pockets than the development of the territory's economy or people.

In 1974 Portugal's socialist "Revolution of Carnations" and the consequent change of leadership brought about a rethink in Lisbon's attitude towards its overseas possessions.

Macau was offered back to China, but the communist leadership - still reeling from the aftershocks of Mao's cultural revolution - said it would rather wait.

'Colonial humiliation'

A quarter of a century later and China - infinitely more confident of its role in the world - is ready to take Macau back, bringing an end to what it calls the "humiliation" that the colonial era wrought upon the motherland.

Unlike the Chinese community in Hong Kong, many of whom were wary of the return to mainland rule, the reaction to the handover in Macau has been overwhelmingly positive.

Lavish celebrations welcomed the change of leadership and many Macau Chinese - accounting for around 96% of the 450,000-strong population - dug deep into their own pockets to pay for the festivities.

There is a strong faith among them that China will want the handover to succeed, not least as an example to Taiwan that returning to mainland control offers many benefits.

There are a few voices of dissent, mainly from church leaders concerned about future religious freedoms.

But for the vast majority of Macau's residents, many of whom came from the mainland over the past 15 years, the handover represents an opportunity to take charge of their own destiny with a government more interested in the concerns of local people.

Bright lights - bright future?

The incoming Chief Executive, Edmund Ho Hau Wah, has promised a bright future for Macau, reducing the territory's heavy dependence on gambling and tourism.

But transforming the former colony into the dynamic and prosperous business centre he envisages will not be without its difficulties.

More than 50% of government revenue and around a quarter of the labour force rely on the neon-draped casinos that have earned Macau the nickname Vegas of the East.

As with its Nevada namesake, Macau's gambling industry has become inextricably linked with extortion, loan sharking and prostitution rackets.

Triad gangsters are engaged in a bloody turf war and although actual crime rates are relatively low - compared with, say, Las Vegas itself - a series of highly publicised murders and assassination attempts has badly dented the territory's image

With the handover to Chinese rule, many residents are hoping that the presence of a 200-strong Chinese garrison in the territory will signal to gangland bosses that the war is over.

Edmund Ho has promised that under his administration the triads will be considered "public enemy number one".

Chinese gateway

He has also pledged to invest more in education, particularly in English and Chinese language schooling as a way of transforming Macau into an international business gateway for the mainland.

But some economists say Macau may have already missed the boat.

China's trading links with its major European markets are already well established, either directly or via Hong Kong, and the territory will have to work hard to encourage new investment.

What Macau can do to avoid becoming a post-colonial backwater is as yet unclear.

The majority of its residents have high hopes for the future, but as it enters the 21st century Macau faces the challenge of redefining itself.