Next Step : China Makes Itself at Home in Hong Kong : The formal hand-over is more than two years away. But changes from Beijing are already transforming life in the British colony.

By MAGGIE FARLEY

May 2, 1995 12 AM PT

SPECIAL TO THE TIMES

HONG KONG —

Time is nearly up for this bustling British colony.

In faraway Beijing and just across the frontier in the Shenzhen industrial zone, the government of China has erected giant electronic digital clocks that tick off the days and minutes until July 1, 1997. On that date, a century and a half of colonial rule will end, and this sophisticated capitalist entrepot will come under the rule of a slowly waking Communist giant.

Never before, short of revolution or war, have so much wealth and so many people been exchanged between sovereign powers, not to mention between alien systems. No event better symbolizes the shifting fortunes of an ascendant Asia and a static Europe.

The formal hand-over is still two years and change away. But the transition is already in full swing, touching and transforming nearly every aspect of Hong Kong life.

From the top of Hong Kong’s office towers to the rice fields in the countryside, businesses are being restructured and institutions reordered to prepare for the transfer.

Already, long-term contracts must be ratified by Beijing. History textbooks are being revised so that they are palatable to the new order. Demand for lessons in Mandarin, the language of the mainland, is at an all-time high. Ethnic Chinese are replacing British and other foreign officials in government and business. Police officers and civil servants in key jobs have begun an overseas exodus. Queen Elizabeth II’s visage on Hong Kong stamps and coins has been replaced by a bauhinia, a tropical plant that the British designated Hong Kong’s national flower.

The steady changes measure the transition as surely as the clocks in Beijing and Shenzhen counting down Hong Kong’s future.

“We don’t have to wait 800 days,” says Alan Yu, a computer salesman. “China is already here.”

Hong Kong business people and politicians, with their well-developed sense of where power lies, are turning from Britain toward Beijing. Even the colonial chief secretary, Anson Chan, is distancing herself from the outgoing British administration.

“I am Chinese through and through,” Chan told local journalists. “I never regarded myself as British. I have very traditional Chinese values, about family for instance. I want to see China succeed.”

Such sentiments dovetail with a Chinese-sponsored effort to drum up patriotism and to Sinicize Hong Kong. To deal with the details of the transition--ranging from what to rename Queen’s Road, a central boulevard, to who should be the chief executive after the takeover--Beijing has commissioned a group of 69 Hong Kong and Chinese citizens.

China calls it the Preliminary Working Committee. But many in Hong Kong think of it as a shadow government. The committee is sinking deep roots. One member, Sir S.Y. Chung, has all but traded his knighthood from Queen Elizabeth for this recognition from the Chinese motherland. Another member, real estate developer David Chu, went one step further, renouncing his U.S. citizenship in a burst of Chinese patriotism. Now he is featured on Chinese television holding up his canceled U.S. passport, proving, he says, that “there are people who are willing to go the other way.”

“China is moving in the right direction, and I don’t see any reason that I need an American passport,” Chu says. “I would rather be a Chinese Chinese than an American Chinese.”

Opinion polls show that people in Hong Kong are divided about the impending unification with China. A majority still say they would prefer independence or a continuation of British rule rather than switch to Chinese administration.

Meanwhile, the New China News Agency, Beijing’s unofficial embassy and headquarters in the territory, is doing its best to spark enthusiasm about the return of Chinese sovereignty here after what will be 155 years of British rule. It has opened three district offices, backs three Hong Kong newspapers and funds assorted pro-Beijing groups, from trade unions and neighborhood associations to a political party to send its message.

It is even trying populist-style public relations, promising to sponsor “countdown carnivals” every 100 days until the transition--with lion dances, magic shows and pop stars singing about the Basic Law, the Chinese-drafted mini-constitution for post-1997 Hong Kong. Organizers called it a “lighthearted” approach to celebrate the return of Chinese sovereignty, but others see a more serious side to it.

It is the United Front at work, the advance guard of the Communist Party, preparing to take control of Hong Kong, as it once took over Shanghai, says Prof. Sonny Lo, a political science lecturer at Hong Kong’s University of Science and Technology.

“These are classic United Front tactics: Draw friends into your camp, isolate your foes, then destroy them,” insists Lo, whose specialty is analyzing pro-China groups in the territory.

Mainland factions have been active here for the last several decades, though suppressed since the late 1960s after sparking riots in Hong Kong during the first two years of the decade-long Chinese Cultural Revolution that ended in 1976.

“The emphasis used to just be on co-opting elites,” Lo points out. “But now, the United Front is cutting across class lines, so it is very influential.”

Even schoolchildren will notice some changes, as publishers revise textbooks to change the colonial view of history.

“We’re dealing with new political realities. We can no longer write about ‘the governor who is appointed by the queen,’ ” notes Tom Ng, an educational publisher. “The new books also have to pay attention to Chinese nationalism. We are a part of China now.”

Hong Kong’s current and probably last British governor, Christopher Patten, is unlikely to make much of a splash in the new books.

He came to the colony in 1992, hoping to make his mark in history as the one who brought a bit of democracy to the territory and allowed Britain to withdraw with honor. At first, the energetic former British politician was wildly popular--he staged unprecedented “town hall” meetings with the people and pressed popular causes such as environmental protection and a lower voting age. But he met with steadfast opposition from China.

To Beijing, the sooner he disappears, the better. Chinese media have called him a “serpent,” a “prostitute,” and a “criminal for a thousand years” for what they view as his grandstanding efforts for democratic reforms in the final days of British rule over what, in little over two years, will become China’s Hong Kong Special Administrative Region.

The effort to expunge him from history has already begun.

In Tian An Men Square in Beijing, an exhibition at the Museum of the Chinese Revolution celebrates the return of Hong Kong. The show features more than 200 photographs, many of China’s 90-year-old senior leader, Deng Xiaoping, who has said his last ambition is to step on Hong Kong soil when it reverts to the mainland in 1997. Also appearing are dozens of British officials, including ex-Prime Minister Margaret Thatcher and former Foreign Secretary Geoffrey Howe.

But there is not one photograph of Patten.

The governor has drawn the hostility too of Hong Kong’s business people, who claim that he has wrecked Hong Kong’s smooth transition and upset business prospects.

“The only way to get him out is to buy out his contract,” says Shiu Sin Por, executive director of a Hong Kong think tank, offering a classic Hong Kong solution.

Patten’s $329,000-a-year salary--more than British Prime Minister John Major’s or President Clinton’s--makes him one of the highest-paid public officials in the world.

“There are a lot of people in Hong Kong willing to put up the money,” Shiu says.

Patten vows to stay until June 30, 1997. But many senior British public officials will have sailed home before him, their jobs designated for local replacements under the policy “Hong Kong ruled by Hong Kong people.”

Eric Lockeyear, a public relations officer with the Royal Hong Kong Police Force, and his wife, after 37 years each of government service, consider themselves Hong Kong people but will have to retire by 1996 anyway.

“We will in effect be sacked,” he says with a stiff upper lip, “because we happen to be European.”

In the private sector too, a new generation of local leaders are replacing the old British taipans, and companies are adapting their image to appeal to the lucrative China market. Of the four major hongs , or British-founded trading houses, all but one are now in the control of ethnic Chinese.

The holdout, Jardine Matheson, kept its British management but moved its business registration to Bermuda, switched its stock market listing to Singapore and diversified its holdings outside Hong Kong. Swire Pacific Ltd., one of the territory’s oldest trading houses, has swapped its British image for a more Asian one, replacing the Union Jacks on the tails of its Cathay Pacific airplanes with a bird-like brush stroke of Chinese calligraphy.

With an eye to the future, companies such as Swire and Hongkong Telecom Ltd. have teamed up with mainland firms such as “red capitalist” CITIC Pacific Ltd., a firm backed by Beijing, to protect their monopolies in the face of political change. Rong Yiren, CITIC’s former top official, is now the vice president of China.

At the same time, China is staking out its territory in Hong Kong. Mainland money accounts for an estimated 30% of the commercial property market and nearly 5% of the residential market--at least $10 billion, though some estimates run to many times that amount. One of the biggest neon signs in the world shines over Hong Kong harbor advertising 999, a pharmaceutical company owned by China’s People’s Liberation Army.

That kind of high-profile investment by Hong Kong’s future sovereigns reassures business people who fear, more than political change, economic interference. Hong Kong continues to grow faster than most Western countries, and the colony’s per-capita gross domestic product of $24,000 surpassed colonial master Britain’s several years ago. Hong Kong is the base for 700 multinational companies, Hongkong & Shanghai Banking Corp.--the world’s most profitable bank--and at least six billionaires.

“We are still on the doorstep of potentially the world’s biggest economy,” says Tony Clark, secretary of Hong Kong’s Port Development Board. “Hong Kong businesses employ 4 million Chinese workers in neighboring Guangdong province. That’s not going to change in 1997. Nor is our geographic position.”

Hong Kong’s tycoons say they have already encountered the worst China has to offer, and have thrived.

“Why should I be scared?” real estate developer Chu asks. “My business in Beijing is doing well, so why should I be afraid of doing business in Hong Kong?”

But even the most vocal of Beijing bulls are worried about protecting the freedom to make money.

Corruption on the mainland adds 5% to 10% to the cost of doing business. A Hong Kong government report shows that 18 foreign investors have been illegally detained in China in the last five years. Such cases make business people here want to ensure that their future rulers live up to the promise of “one country, two systems.”

During a visit to Beijing last week, a group of leaders from the territory’s Business and Professional Federation told Chinese Premier Li Peng that their confidence was falling. Fighting between Beijing and Britain has left critical issues unresolved, making investors put long-term projects on hold, said Henry Tang, a textile tycoon and Legislative Council member.

“The Chinese side has often said that ‘there’s no problem whatsoever,’ ” Tang said after the visit. “That’s not the case.”

Says Chief Secretary Chan: “The basic worry is whether Hong Kong will stay as it currently is. Everybody wants to stay, work and live in Hong Kong if Hong Kong can continue to function like now. It would be dishonest of me to pretend everybody has 100% confidence in the Basic Law.”

The “Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China,” enacted by China’s National People’s Congress in 1990, promises that Hong Kong will retain its freedoms for 50 years after the takeover.

But key institutions that could guarantee that autonomy--an independent legislature, legal system and press--are already under attack by Beijing.

China will not have actual power until 1997, but it can do a lot in Hong Kong simply by doing nothing. All issues that straddle July 1, 1997, need China’s agreement, and this potential for a pocket veto makes Beijing already part of the decision-making process.

After a 19-month stalemate with Beijing, for example, the Legislative Council went ahead and approved controversial democratic reforms proposed by Patten. But China immediately stole the thunder from the British governor by announcing that it will disband the legislature in 1997, and undo any further changes Hong Kong made without Beijing’s approval.

Now the two sides are deadlocked over the Court of Final Appeals, Hong Kong’s equivalent of the Supreme Court. Beijing insists that all sitting judges must resign in 1997 and be reappointed. Some in Hong Kong fear that would amount to a rigged judicial system, making the rule of law meaningless.

Hong Kong’s press, once one of the freest and liveliest in Asia, has been under increasing pressure from China to lay off critical stories. Xi Yang, a mainland Chinese reporter for a local paper, received a 12-year prison sentence in China for reporting economic statistics considered state secrets. A Hong Kong entrepreneur and magazine editor, Jimmy Lai, saw the Beijing branch of his clothing store shut down after his magazine printed an article deemed to have insulted a senior Chinese leader. Mainland companies will not advertise in publications considered unfriendly to China.

The result, says Frank Ching, founder of one of the colony’s earliest pro-democracy parties, the Hong Kong Observers, is self-censorship.

“Right now there is an environment in which people are fearful of the future, fearful of the consequences of what they do,” he says.

That atmosphere of fear has seeped into Hong Kong’s public institutions as well. Police officials are resigning at rates much higher than expected in the run-up to 1997. Of 500 senior officers, at least 20% will leave service in coming months, as will 90% of those nearing retirement age, estimates the One Country Two Systems Economic Research Institute.

Even the man in charge of persuading the ranks to stay, Deputy Police Commissioner Peter So, did not take his own advice. Halfway through a campaign to reassure officers that there will be no problems after the hand-over, So quit. He explained that, in addition to the handsome retirement package, he had some “concern at serving under Chinese rule.”

“You have a cross-section of people who are accommodating to Beijing, and then you have a group who say, ‘Stuff it!’ ” police officer Lockeyear says. “They’d no rather work for the Communists than fly in the air.”

For those who remain on the force, Britain has promised asylum if they receive political threats because of their job, Lockeyear says. “Chinese friends in the police force have said, ‘What do I do if there’s another Tian An Men Square? What do I do if I’m in charge and I’m told to stop it?’ ”

With all the “what ifs,” the more China makes its presence felt, the more anxious Hong Kong’s ordinary folks--the ones without political power or foreign passports--become.

More than half of Hong Kong’s people or their parents fled China’s Communist regime over the last 50 years, and they are wary about being returned to it. Beijing’s 1989 crackdown on demonstrators in Tian An Men Square brought half a million supporters to Hong Kong’s streets in a mixture of sympathy and fear that, just a few years later, the same thing could happen here.

That fear has been mitigated by China’s booming economy and a mainland government that is growing more concerned with the market than Marx, but a strong distrust remains of Beijing’s regime and of what it might bring to Hong Kong after 1997.

Mrs. Liu, who works in a photo shop, says that although she would like to, she can’t leave Hong Kong. That is why she does not want her full name printed, and why she stops criticizing the Chinese government when a customer enters her store.

Last year, she says, a group of mainland Chinese who came to her shop got upset with her and said: “Just wait until after 1997. If you don’t do what we say, we can kill you.”

“I think Hong Kong will be much worse after 1997,” she says. “Look at China. There, you can work hard and make money, but people decide when you’ve had enough and take the rest away from you. It isn’t reassuring.”

Times staff writer Rone Tempest in Beijing contributed to this article.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

POLL

Poll: Would you leave or seek to leave Hong Kong in changes are unsuitable to you after 1997?

* Feb. 1993:

Yes: 50%

No: 35%

Like to but can’t: 8%

Don’t know: 7%

Feb. 1995

Yes: 41%

No: 38%