Ignore the British breast-beating about the handover of sovereignty, says Sheila Parker; Hong Kong is already part of China, and generally happy to be so

Who's afraid of the Red Dragon?

Back in Britain, meanwhile, the discussion about Hong Kong's future is very different. Hong Kong's return to China at midnight on 30 June has been the subject of many introspective television news reports and newspaper articles, all predicting the worst. The Independent, for example, started printing the Lily Wong cartoons that used to appear in the South China Morning Post, in anticipation of a clampdown on a free press. There are fears that skilled people will leave the ex-colony and take their money with them. Many commentators voice concerns about the lack of human rights in China and the repression exemplified by the Tiananmen Square massacre of 1989, and fear that Hong Kong will go the same way. The new Hong Kong government-in-waiting has made no secret of its plans to reverse some of the recent liberalisation regarding the right to assembly introduced by Governor Chris Patten. The media has jumped upon this as a sign that Hong Kong will be turned into a police state under Beijing rule.

The handover, or rather handback, of Hong Kong crystallises the different ways in which Britain and China see themselves and their future. The British authorities view the end of their rule in Hong Kong with ambiguity and a degree of anxiety.

On the one hand, the international focus on the Crown colony of Hong Kong serves as an embarrassing reminder of Britain's colonial record, and its racial degradation of the Chinese in the last century. A senior British official who has been directly involved with the negotiations recently referred openly to Britain's humiliation of China through the Opium Wars which culminated in the 'Unequal Treaties'. Many within the British establishment will be grateful that they can now absolve themselves of past sins.

However, at the same time, there is a sense of loss and nostalgia about Britain's imperial past. Midnight on 30 June will be a stark reminder to the world that Britain is not what it used to be and never will be again. In laying to rest the ghosts of Empire, the British establishment has to admit that its future is uncertain. The British government ministers and generals who subjugated China had an absolute sense of their power and their mission to 'civilise' the world with the cannon and the Bible. Their successors today are impotent figures, standing on the sidelines and pleading with America to monitor human rights in Hong Kong. Even a Foreign Office official working in the British administration in Hong Kong had to admit to me that they could do nothing should China choose not to honour the Sino-British Joint Declaration signed in 1984. Britain has lost its grip, and is having a hard time coming to terms with it - made harder still by the obvious relish with which the Chinese regime has humbled its old masters at every turn.

The nostalgia for past certainties is behind all of the discussion in Britain about the threat to democracy and human rights in Hong Kong after the handover. Having lost their political power in Asia, the British authorities are attempting to reassert their moral authority over the East. The message is that we are still one of the few civilised and democratic nations on Earth, while the Chinese barbarians remain a 'yellow peril' that will destroy liberty and freedom in Hong Kong. Whatever happens in the future, 'It wasn't our fault' will be the cry from Whitehall, where the different factions are already trying to pin the blame on somebody else and wash their hands of responsibility for anything.

To listen to some of them talk, you would think that Britain had run Hong Kong as a model citizens' republic. In fact Hong Kong has been run under direct British rule as a Crown colony - and often run with a rod of iron. It was the place where the British authorities first introduced baton rounds to control public protests, and where thousands of Vietnamese boat people who fled to Hong Kong in search of Western-style freedom have spent years under armed guard, caged in camps, awaiting deportation.

Britain only began liberalising its regime in Hong Kong in the run-up to the handover, as a cynical exercise in displaying the superiority of the British system. Governor Patten's reforms introduced the first direct elections to a Legislative Council (Legco) in September 1995. Although this has been heralded as democratic reform, the Legco is not the ruling body. Hong Kong has been run by the Executive Council (Exco) headed by the Governor. All members of the Exco are appointed, not elected. Were the British genuinely so concerned about human rights and democracy then they would surely have left some real democratic institutions behind, rather than this pathetic last minute botch-job. All Britain is doing is displacing its own responsibility for keeping democracy and freedom out of Hong Kong onto the Chinese. Any future problems due to the lack of democracy, which will undoubtedly be blamed on the Chinese, will in fact be the legacy of British rule.

While the British have tried to play down the real significance of the loss of Hong Kong, China has declared the handover to be an important political milestone. It is the pay-back for the way in which British imperialists humiliated the Chinese in the past. But there is more to it than that for China. If the handover goes smoothly, Beijing sees reunification with Taiwan as the ultimate prize. A smooth transition will place immense pressure on Taiwan to negotiate eventual reunification. More broadly, replacing the Union Jack with the red Chinese flag before the eyes of the world symbolises China's emergence as a modern power on the world stage - just as it signals Britain's withdrawal into the wings.

The handover of Hong Kong does present China with some challenges, too. The free market may be all the rage in China, but talk to any businessman and they will confirm that it is still difficult to do business there. Contrary to popular belief this is not because of too much red tape, but often because there are no regulations. For example, the lack of any adequate contract law makes doing deals extremely hazardous. A new and formalised set of institutions and laws on the mainland will be necessary if Hong Kong is truly to be integrated into China. The Chinese bureaucracy is also as concerned as the Hong Kong business elite that mainland corruption will spread to Hong Kong. What Beijing wants is to emulate Hong Kong's prosperity elsewhere in China, not to destroy it.

But even with these difficulties, the transition will go ahead, because Hong Kong has in practice been part of China for years. The events of 30 June/1 July are a formality only. Hong Kong's population is 98 per cent Chinese. Many have family connections in mainland China. Business links are also well established; Hong Kong capitalists did much to create the conditions in which a market economy could mushroom in the neighbouring Chinese province of Guangdong. As early as 1993, 80 per cent of local manufacturing firms in Hong Kong had transferred some or all of their production to mainland China; about 60 000 Hong Kong people were managing factories or other investments in China, while as many as four million workers in southern China were directly or indirectly employed by Hong Kong firms. In the other direction, China has been a net lender to Hong Kong since 1982. Hong Kong and China are already joined at the hip.

The view from Hong Kong itself of the handback, as illustrated by Mr and Mrs Li, has largely been squeezed out of the public debate in Britain. The only opinions heard from Hong Kong are those of dissidents who have every reason to fear Chinese rule, or the minority of stateless individuals who by now should have been issued with British passports. The voices of the majority of ordinary Hong Kong working people have not been reported. Among them there is a widespread mood of indifference - 'A new government? So what? Life is hard and will carry on being hard'. But at the same time there is an air of optimism about the return to their increasingly powerful Chinese homeland. The British press may not like to report it, but the fact is that the majority of Hong Kong people do not like the British. They see them as arrogant, elitist foreigners. They may not be warmly embracing the Beijing bureaucracy, but they certainly will not shed a tear when the British finally leave.

Nor are the Hong Kong Chinese elites worried about a Chinese threat to democracy. Indeed those who have run Hong Kong under British supervision tend to be the most anti-democratic of the lot. 'Why do we need democracy?' asks a senior Hong Kong civil servant schooled in the imperial tradition of contempt for the masses: 'We provide some of the best housing and services to the people without their participation. We do not need to be accountable to them. Why do they insist on making us accountable?' This particular civil servant's real fear was that, after the handover, millions more Chinese people would get into Hong Kong and place the government under intense pressure, undermining the idyllic social relations of colonial Hong Kong.

The newly emerging elites in the East are every bit as authoritarian minded as their Western predecessors. They might not use the same racially-loaded language when they talk about the Chinese masses, but their message is similar. Providing for the natives, rather than giving them any say in running their own affairs, is an approach which unites Western governments and corporations with Hong Kong officials and every ruling bureaucrat in China. All the panics about the unfree future of Hong Kong are no more than British bombast, empty attempts to cover up the fact that Britain's anti-democratic record in Hong Kong, is, if anything, something the Chinese government would love to emulate. Hong Kong is probably the best example of how the market has thrived in the East, not in spite of, but because of the absence of liberal democracy.

Hong Kong's future will be affected far more by what China achieves within the international economy than by what the Chinese bureaucracy does within Hong Kong itself. As they accelerate their drive to become a major economic power, the Chinese have every interest in maintaining Hong Kong's prosperity. New China's ambition is to become more like the red-clawed capitalism of Hong Kong rather than trying to make Hong Kong become more like the old, red-in-name, Stalinist China.