1997 was always going to be a turning point in Hong Kong, as Britain's colonial mandate expired and the territory was reclaimed by China. The transition was smooth, however. It was the financial crisis that swept across Asia-Pacific the following year that shook Hong Kong. The economy shrank by 5% in 1998, land transactions dried up and property developers sat on land they had bought at the top of the market.
The economy appears to have bounced back, but the financial crisis caused Hong Kong to re-examine its position in Asia-Pacific. As it has transformed from a manufacturing economy to a financial centre, factories have moved to China, where labour costs are lower. It now faces the threat that China will soon be able to offer international financial services at a bargain price, too.
China’s entry into the World Trade Organisation, expected in early 2001, will increase its economic pulling power as a trading nation.
In this climate, Hong Kong had to reposition itself – it is becoming a provider of information technology. It is determined to expand its capacity as an entrepot for China.
Many Hong Kong-based British firms have set their sights on mainland China, which was untouched by the recession. Atkins China is designing the titanium roof of the £400m Beijing Opera House and Terry Farrell’s Hong Kong office is focused on the £120m Guangzhou Daily Cultural Plaza, and a 520 ha masterplan for Shenzhen.
So what does the future hold for Hong Kong? Most of the territory is convinced that the territory's economy will be boosted further, as it handles 40% of mainland China's foreign trade, which rose 36.7% in the first eight months of 2000.