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This is an attempt to evaluate the implications of Hong Kong's political transition topost-colonial rule for economic governance in the SAR beyond the 'Beijing versus HongKong' perspective. The article examines the changing government-business dynamics inHong Kong after the reversion by focusing on three inter-related dimensions: economicideology; institutional and policy framework; and the new political environment inpost-colonial Hong Kong. By challenging the assertion that Hong Kong is returning to thepre-Patten colonial order under Chinese management, it argues that economic governancein Hong Kong has always been more complex than has been characterized in the literature.A conceptual framework incorporating the dynamic interplay of domestic and internationalfactors is needed to comprehend the changing nature of government-business relationshipsin the SAR.

The political handover of Hong Kong on 1 July 1997 turned out to be a non-eventwith little political drama. Emotions ran high when the Union Jack was loweredand was replaced by the Chinese national flag (wuxing hongqi), peacefully endingover one and a half centuries of British colonial rule in Hong Kong. The handovertook place smoothly, despite the heavy rain, without political and social turbulence.The Sino-British disagreement over the abolition of the Legislative Council marredthe occasion, but the swearing-in of a pro-Beijing Provisional Legislative Councilwas largely accepted as a fait accompli.

Characterizing Hong Kong's international status can be a hazardous endeavour.As a British colony and not a sovereign state, the territory has not been seen asan independent actor on the international stage. Attempts to identify theterritory's status have been further complicated by the 1984 Sino-British agreementto transfer Hong Kong's sovereignty from Britain to China in 1997. WhenHong Kong becomes a Special Administrative Region (SAR) with a 'highdegree of autonomy' under Chinese sovereignty after 1997, it will continue to bea non-sovereign territorial entity in international terms. Nonetheless, under the'one country; two systems' formula it has been granted extensive authority andpower in its internal governance, and the scope of autonomy in its externalrelations as agreed upon between the British and Chinese governments isextensive.