THE way in which the Chinese authorities manage the return of Hong Kong will greatly affect the next stage of China's integration into the international community. China is already a major player in international politics and in the international economy. However, its domestic political and economic structures and practices are not yet fully congruent with those of the international community. Hong Kong, by contrast, is in many ways regarded as a model of good practice according to the conventions and ideals espoused by the leading institutions of the international economy. Although Hong Kong, as a British colony, has not been an assertive political entity on the world stage, it has nevertheless been of political importance. In part, that importance has flowed from its role both as an international financial center of major regional significance and as a meeting point between different Chinese communities.

If the return of Hong Kong is managed well – so that its autonomy as a separate system follows in practice the outline of the Sino-British agreement and the Basic Law – the beneficial consequences for China will inevitably serve to accelerate and deepen its integration into the international community. This will enable the Chinese Communist authorities to demonstrate a capacity to encompass, within the sovereignty of the People's Republic of China (PRC), an enclave that follows laissez-faire capitalism under the rule of law, with an independent judiciary, a freely and fairly elected legislature, and an autonomous executive guided by a politically neutral and efficient civil service that allows its people basic freedoms.