Who's Taking Over Whom in Hong Kong?

July 1 handover will confirm the enclave's influence in southern China

When the Britain leaves behind its last outpost in Asia a week from now, Hong Kong will resemble not a cast-off piece of empire, but a rising colonial power.

Beijing is hailing Hong Kong's return after 156 years of British rule as one of the events of the century, while others are calling it a symbol of China's advance on the world stage.

The world's statesmen and journalists will gather here in the days ahead to watch the first-ever handing over of a prosperous, free-market democracy to communist rule.

While some analysts expect Beijing to quickly absorb this freewheeling capitalist enclave, the transition is actually likely to speed up Hong Kong's ongoing takeover of southern China. Over the past two decade, Hong Kong's entrepreneurs, armed with financial might and management know-how, have peacefully invaded and colonized huge sections of their giant northern neighbor's economy.

The enclave's economic clout in the southern Chinese province of Guangdong is so great that the region could just as easily be called a subsidiary of "Hong Kong Inc.," say both Chinese and Western scholars.

"Hong Kong businesses now employ many more workers in southern China than in Hong Kong itself," says David Shambaugh, a China scholar at George Washington University in Washington.

And just as its factories, managers, and capitalist system have spread out across the border, so has the Hong Kong dollar become the second currency of south China, says Y.Y. Kueh, an economist at Lingnan College in Hong Kong.

Hong Kong's invasion of south China, along with Taiwan's infiltration of the mainland's east coast, is creating an informal economic union that could in the decades ahead rival Japan and the United States.

Many analysts say that regardless of the political minefields that lie ahead between Beijing's Communist rulers, Hong Kong's democrats, and Taiwan's independence activists, the economic grouping known as "Greater China" is likely to strengthen.

"As the new millennium approaches, one has the sense that the world is in transition from one epoch to another," says Professor Shambaugh. "Among the new realities of our era is the emergence of Greater China."

Hong Kong, as a global financial powerhouse, is likely to cement its role as the economic capital of Greater China following the July 1 reversion to Chinese rule.

"The handover is likely to accelerate the economic integration of Hong Kong and China," says Shambaugh, editor of the book "Greater China: The Next Economic Superpower?" The political union of Hong Kong and China, even without Taiwan, will create a formidable trading power with combined foreign exchange holdings of about $170 billion.

And while Beijing may be calling the political shots, Hong Kong's business expertise is likely to continue its march northward.

Hong Kong's banks and stock market are used by investors the world over to channel funds into China, and much of Guangdong Province in turn has sought to copy "the Hong Kong miracle." When Beijing granted Shenzhen legislative autonomy five years ago, the border city began adopting neighboring Hong Kong's labor and tax laws.

The city, a backward fishing village 20 years ago, has seen its living standards skyrocket with Hong Kong's growing influence. Last year, Shenzhen's per capita income hit nearly 15,000 yuan ($1,800), compared with 1,900 yuan for China's 800 million peasants.

Hong Kong's "annexation" of Guangdong has been cultural as well as economic. Most of the province's ubiquitous satellite-dish antennas pick up broadcasts from nearby Hong Kong rather than from remote, staid Beijing. Hong Kong pop, not Beijing's political anthems, sets the beat in Guangdong's discos, and the market rather than Marx dominates most provincial newspapers.

Guangdong, which is slowly being transformed from a window to a mirror of Hong Kong, has become a magnet for the best and the brightest of China's free-thinking youths.

Guangdong's cosmopolitan capitalism, rather than fostering a well-organized core of pro-democracy forces, as in Hong Kong, has instead given birth to a largely apolitical populace. "I moved to Shenzhen not only to get rich, but also to escape the politics of Beijing," says a young stock analyst who asked not to be identified. "There's a saying in the capital that even if you're not interested in politics, politics is interested in you," she adds. "That's not true in Shenzhen."

In much of Guangdong Province, where the drive toward upward mobility has replaced the class struggle of days gone by, some Chinese yuppies' ultimate wish is to move up the ladder to Hong Kong.

But just as most Hong Kong residents under British rule were not permitted to live in England, so will most Chinese citizens be banned from entering the financial capital of Greater China.