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Thursday, December 25, 1997 Published at 04:56 GMT

Special Report

Hong Kong settles down to life under China
image: [ The end of an era for Britain and Hong Kong, as the former colony ris returned to China ]
The end of an era for Britain and Hong Kong, as the former colony ris returned to China

At midnight on June 30 more than a 150 years of British rule in Hong Kong came to an end. Chris Patten, the territory's last governor, signed his final piece of legislation and sent a message back to Britain:

[ image: Chris Patten, the last governor of Hong Kong at the rain swept departure ceremony]
Chris Patten, the last governor of Hong Kong at the rain swept departure ceremony
"I have relinquished the administration of this government. God save the Queen," he said.

The colony was returned to China and became a Special Administrative Region. Hong Kong faced an uncertain future.

Pro-democracy activists were worried that Beijing might not allow public demonstrations or political dissent.

The new Chief Executive of Hong Kong, Tung Chee-Hwa, dismissed their fears and said that it was a time for everyone in China to celebrate.

[ image: Chinese troops arrived in Hong Kong immediately]
Chinese troops arrived in Hong Kong immediately
But now with the fireworks and dancing long over, Hong Kong has begun to adjust to the reality of life under Chinese sovereignty.

The first problems

The first issue facing the new government was not one related to human rights, as many had predicted, but instead an economic problem. On October 23, the Hong Kong stock market crashed, after interest rates had been raised to protect the Hong Kong dollar from currency speculators.

Millions of dollars were lost overnight and the government struggled to defend the Hong Kong currency's link to the US dollar. The high interest rates contributed to a slump in Hong Kong's property market, with prices down by about 20% and still falling.

[ image: The stock market crashed in October]
The stock market crashed in October
Roughly one third of estate agents are likely to close and many householders are now stuck with rising mortgage rates and depreciating homes.

Elkie Yuan, the manager of an international bank, said: "Six months ago my family looked into moving to England for the kids, but now my husband and I would have to save more money, because our flat has deflated, and maybe we would have to work a few more years before we can go on with our plan."

The main concern for Hong Kong while its currency was coming under attack was to maintain international confidence in its economy.

[ image: Henry Tang said the economy was 'stable']
Henry Tang said the economy was 'stable'
Henry Tang, a member of the new provisional legislature, said: "The Hong Kong dollar peg has actually provided the stability that we needed over the handover. After the handover it has provided the backbone for stability in addition to our fundamental economy. So I think, even though our south east Asia neighbours have gone through a lot of turmoil, we have actually come out of it quite well ... because we are resilient and also because financially we have very good fundamentals."

The BBC's Hong Kong correspondent, Jill McGivering, said that immediately after the handover the popularity of the new chief executive, Tung Chee-hwa, was at a record high because people felt that he had brought stability and prosperity Hong Kong.

[ image: The Chief Executive of Hong Kong, Tung Chee-Hwa has inspired much confidence in its people]
The Chief Executive of Hong Kong, Tung Chee-Hwa has inspired much confidence in its people
"But with the new economic problems there seem to be a drop in confidence in the new government," she said.

Elections in May 1998

The provisional legislative council was established by Beijing to replace the chamber elected under Chris Patten's political reforms.

As well as dealing with economic problems, the council is paving the way for landmark elections due to take place in May 1998.

One third of the councils' seats are to be elected through proportional representation. But the pro-democracy groups have said that the rules set by the provisional council are weighted against them, and that the elections will not be a fair test of public opinion.

Former legislative councillor and pro-democracy activist, Emily Lau, said: " I think the election for the legislative council ... is not going to be fair because only one third, that is twenty seats, will be returned by universal suffrage ... but the rest, the forty seats will be returned by very, very limited franchise."

Political debate

Before the handover many were concerned that political debate in Hong Kong would be stifled and that journalists would feel inhibited about speaking out on topics that might offend Beijing.

Ms Lau says that the media adopted a policy of self - censorship well before the handover so there have been no dramatic changes in the past few months.

Jill McGivering, said: "The disappearance of dissenting voices from the legislative council has done little to help Hong Kong maintain a culture of healthy public argument But the extent of self censorship is notoriously hard to judge."

Henry Tang denied that the press was more timid under Chinese rule:

"If anything they are just as aggressive as ever if not more so ... as far as political subjects go, you may see less political coverage simply because there are less things that controversial politically, so I don't think it is a matter of censorship or self censorship, but rather a matter of what the papers feel the readers want to read," he said.

Education and welfare

[ image: Children will learn about Chinese history and literature]
Children will learn about Chinese history and literature
Changes have also been taking place in the education system in Hong Kong. Under British rule children spoke Cantonese at Primary school, but at secondary school many were taught in English. As a result of a new policy bought in by the provisional government only one in four secondary schools will use English in 1998.

The decision has attracted controversy because some parents see learning in English as the better option. Mandarin has also been introduced into primary schools by the new government who want to move away from the previous colonial style of education. There will also be more classes on Chinese literature, culture and history.

Elkie Yuan said she was pleased about the new way in which her children would be taught:

"I think it good because they are Chinese and should know their own history of the country and also literature," she said.

The new government has already brought greater prosperity to some of the very poorest people in Hong Kong through welfare reforms such as providing low cost housing and raising pensions.

Elkie Yuan's father, Yuan Kai, who arrived in Hong Kong as an immigrant from China, and is now retired, welcomed the changes that have taken place. He said that the new government has done more for him in practical terms than the British administration had ever done.

"Tung has given a lot of welfare to the poor and has improved life for old people ... he has been very successful," he said.

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