Cloud Over Hong Kong Isn't China

Ng Sang lounges on his idle rickshaw outside the Star Ferry entrance, wondering whether to get out of the business and move back to mainland China where he came from.

"This is supposed to be the peak season, but I'm not earning anything," he says.

Mr. Ng isn't the only person feeling the blues in Hong Kong six months after China took over the British colony. A buoyant optimism that accompanied the July 1 handover has turned into gloom.

At Union Church, the Rev. William Teng chooses an unusual topic for his Sunday sermon: fear.

It is not so much fear of China and whether its Communist leaders would curtail liberties or take property. Those fears have receded.

Beijing continues to keep its promise of maintaining local autonomy under the "one country, two systems" formula. "The Chinese government is doing something right. It's the Hong Kong government that is doing something wrong," says Michael De Golyer, whose Hong Kong Transition Project sampled public opinion in January.

The malaise is partially rooted in the economic uncertainty that has engulfed East Asia in recent months, along with growing alienation with the government of the new Special Administrative Region - as Beijing calls Hong Kong now - because of several well-publicized foul-ups.

Many middle-class parents of secondary-school children are upset over education department plans to make elite schools teach classes in the local Chinese dialect instead of English. The health department was embarrassed after discovering that a government hospital was dispensing mouthwash instead of cough syrup to babies.

Every morning, people wait in long lines outside Hong Kong's banks. No, they aren't taking their savings out, not yet, anyway. They are lining up to buy coins and grumbling about why, after six months, the government still can't solve the coin shortage (originally caused by hoarding of coins with Queen Elizabeth's face on them).

Even during last week's Chinese Lunar New Year holiday, a time for festive family banquets, Hong Kong Chinese could not be sure what was safe to eat. The traditional favorite, chicken, was in short supply because the government slaughtered all of the territory's poultry in the last days of 1997 to stop an avian flu strain.

Tourism has been in a profound slump since the handover. Nobody is entirely sure why. Certainly, the Asian economic crisis has cut into pleasure travel all over the region. High prices in shops and hotels also have discouraged visitors who used to come to Hong Kong in search of bargains.

ANOTHER possibility for the fall-off may be that Hong Kong has lost some of its allure for Westerners when it ceased to be a British colony and became just another Chinese city. Whatever the reason, arrivals are down by about 35 percent, and the effects are rippling through the economy.

The local air carrier, Cathay Pacific Airways, recently announced it will lay off more that 700 of its staff, including 460 here in Hong Kong. Unemployment used to be a subject that Hong Kong people only read about. Now, for the first time in a long time, people are beginning to worry about keeping their jobs.

The official unemployment rate, at 2.5 percent, is remarkably low by Western standards. But that figure could jump as the number of bankruptcies rises.

Indeed, the Lunar New Year used to be a time for job-hopping, as people pocketed their year-end bonuses and sought better prospects. This year the bonuses may not be so big, and many fear what local companies may do as they reassess their manpower needs for the year.

Already, several paging and communication companies announced plans to lay off 1,800 workers after the celebration.

Even people assured of holding onto their jobs have seen their wealth substantially reduced due to falling local stock and property prices. Others holding variable interest mortgages on expensive new apartments have to pay more because of high interest rates needed to defend the Hong Kong dollar's value. Rates have shot up as high as 30 percent.

Of course, Hong Kong is not as bad off as some other Asian economies hit by the slump.

The currency has lost none of its value in relation to the dollar. The government still predicts growth in the economy this year, and many think the fall in property values represents a necessary correction to the super-heated market.

Nevertheless, people are on edge and looking for somebody to blame. For the first time, the territory's new chief executive, Tung Chee Hwa, was jeered when he appeared outside government offices Jan. 22 to console about 200 demonstrators. The people claimed the government had not done enough to protect their savings in CA Pacific Securities Ltd., a failed securities company.

Despite the furor, Mr. Tung remains popular, although his job approval rating has slipped below 60 percent for the first time since he assumed office in July.