With One Year to Transition, Hong Kong's Future Unclear

It has been a dozen years since London and Beijing signed an agreement returning Hong Kong to China under Chinese patriarch Deng Xiaoping's famous formula "One country, but two separate systems."

Now, with just one year to go before the July 1, 1997, transfer date, the two sides are still addressing troublesome issues that must be resolved before then. Who will become the first chief executive under Chinese rule? How much of the promised "high degree of autonomy" will be realized? And will residents continue to enjoy personal freedoms?

The outlook:

Chief executive: The answer is fairly straightforward. A 400-member electoral college, known as the Selection Committee, is being formed. It will chose the first Chinese leader of the territory, to be known as the "Chief Executive," probably before the end of this year.

If the post were decided in a popular election, there is no doubt who would win. Anson Chan, who holds the No. 2 post of chief secretary in the current administration, far outdistances any other candidate by a wide margin in opinion polls.

Most observers, say that the chances of Mrs. Chan becoming Chief Executive have been damaged by her loyal support of British-appointed Gov. Christopher Patten, who has made democratic reforms. Beijing plans to replace the legislature elected last year with a temporary, appointed one on transition day and insists that civil servants do nothing to obstruct this.

The acknowledged front-runner is a businessman, C.H. Tung, head of a family-owned shipping concern. He is strongly backed by other tycoons, such as billionaire Li Ka Shing, and reportedly has the tacit support of the leadership in Beijing. He recently resigned from Mr. Patten's inner cabinet to avoid a conflict of interest.

Local autonomy. China has approved a special passport for Hong Kong residents, but it is gaining international recognition slowly. So far, only Britain and Singapore offer visa-free entry to those holding the passport of the Special Administrative Region, as the territory will be known after July 1, 1997.

More than 1 million of the territory's 6 million residents have taken the precaution of obtaining citizenship in Australia, Canada, the United States, or elsewhere. They are concerned whether they will be treated as permanent Hong Kong residents since China does not recognize dual nationality.

Beijing has taken a practical approach to the problem. Lu Ping, the director of China's Hong Kong and Macao Affairs Department, said in a recent speech that China basically will turn a blind eye to a resident's foreign nationality. So long as residents don't make a big deal of it, their foreign passports will be treated as mere "travel documents."

China also has promised not to dip into Hong Kong's huge cash reserves, even though it would be tempting. The territory's approximately $60 billion reserve nearly equals the $80 billion held by China itself. Chen Yuan, deputy governor of the Bank of China, also has promised to maintain the stability of the Hong Kong dollar.

But the recent acquisition on very favorable terms of 36 percent of Dragonair, Hong Kong's second-largest air carrier, by a Chinese airline has caused shock waves in business circles. It raises the specter of the "soft" nationalization through stock purchases of industries, especially "strategic" sectors such as aviation, banking, and communications.

Because of this concern, many companies have re-registered in other countries. More than half of the companies on the Hong Kong stock exchange are legally based abroad.

Personal freedoms. Thousands of people jammed a Hong Kong park June 4 to mark the seventh anniversary of the massacre in China's Tiananmen Square in anticipation that it might be the last time such a celebration can be held. Though next June 4 still falls under British rule, all venues may be "under renovation" in anticipation of the handover ceremonies a few weeks later.

Freedom of expression is guaranteed by the Basic Law, Hong Kong's post-1997 charter. But Article 23 of that law can "prohibit any act of treason, secession, or subversion against the Central People's Government." Beijing considers the Tiananmen Square affair to have been seditious.

The new government also may roll back some of the laws enacted in recent years to curb arbitrary police powers, such as the power to declare martial law. This would amount to a return to the stricter controls that were also available to the British, who usually applied them with a light touch. The concern is that might not be the case with the China.