Hong Kong celebrates the 10th anniversary of its return to Chinese sovereignty, July 1. Ten years ago, many feared Beijing would renege on its pledge to allow Hong Kong to retain its capitalist system and its autonomy. But those fears did not materialize. VOA's Heda Bayron in Hong Kong looks back at the first decade under the "one country, two systems" arrangement and the challenges ahead.
When the British flag was lowered in Hong Kong on July 1, 1997, the former colony was anxious about its future under communist China.
Yet for most people, little has changed. Under China's "one country, two systems" policy, Hong Kong remains a capitalist economy. It retains its political autonomy and its people continue to enjoy wide-ranging freedoms not found in the rest of China.
But Hong Kong's fortunes did change after its return to China. The Asian financial crisis, which began in July 1997, sent the city into a long recession.
Then in December 1997, Hong Kong recorded the world's first human deaths from bird flu, leading the government to slaughter all poultry in the territory. Six years later, the outbreak of Severe Acute Respiratory Syndrome (SARS) killed almost 300 people in the city and further crippled the economy.
Ming Chan, a Hong Kong expert at the Hoover Institution at Stanford University, says the problems did not arise from Chinese control.
"Hong Kong's worst fears did not materialize," Chan says." Hong Kong survived the initial shock of a shift to a different system. But then Hong Kong's challenge did not come from the functional area, did not come from the political attack but rather from the economic downturn."
Those events proved daunting for the government of Tung Chee-hwa, the city's chief executive, handpicked by Beijing. Many considered Mr. Tung, an industrialist with no political experience, an indecisive leader out of touch with ordinary citizens.
Political analysts say Beijing took a loose approach on Hong Kong in the first few years after the handover. They say Beijing was afraid too much control would kill its "one country, two systems" policy, which is meant to be a model for Taiwan's eventual peaceful reunification with China.
But some analysts say giving Mr. Tung too much of a free hand led to headaches for Beijing.
On July 1, 2003, half a million Hong Kong residents, already angry over Mr. Tung's handling of the SARS outbreak and the economy, rallied to protest a proposed law that could have curtailed civil liberties. The demonstrators demanded the right to directly elect their leader.
Only a group of 800 largely pro-Beijing business and political leaders are allowed to vote for Hong Kong's chief executive. Only half the legislature is directly elected.
Ma Ngok, a politics professor at the Chinese University of Hong Kong, says the protest was a turning point in Beijing's administration.
"After the July 1 march, they (Beijing) adopted a more proactive attitude both economically and politically to handle the affairs of Hong Kong," Ma notes.
China tried to boost the economy by adopting a free trade pact with Hong Kong, allowing Hong Kong banks to do Chinese currency transactions, and allowing more Chinese tourists to visit.
But the pressure on Mr. Tung continued and he stepped down in 2005. Donald Tsang, the city's well-regarded top civil servant, took over.
Since then, Hong Kong has snapped out of its slump. The economy has recovered and this year, the government posted a budget surplus, enabling it to cut taxes.
But prosperity has not eased public demands for a greater say in their government. This man says economic health is not enough for the city.
"I'm a little bit disappointed about political reform. I think we need more democracy, universal suffrage," he says.
But China has ruled out direct elections for the next several years, even though the concept is enshrined in Hong Kong's Basic Law.
On July 1, while local and mainland officials celebrate the unification anniversary, activists are expected to march again to demand universal suffrage.
Albert Ho, chairman of the opposition Democratic Party, says the prospect of achieving democracy is "very, very difficult". But he says without democracy, Hong Kong people could easily lose the freedoms and rights they are enjoying now.
"The rule of law tradition as well as the system of independence of judiciary can be very fragile," says Ho. " The high degree of autonomy and rule of law in Hong Kong can be eroded very quickly and can even be taken away overnight."
Democracy advocates say a greater public voice in the city's government will only help Hong Kong face any new challenges that may come in the next decade.