BEIJING'S CAPITALIST

By Sandra Burton/Hong Kong

Of Hong Kong's 6.3 million citizens, only 400 had a vote in the matter. And last week that elite group of electors arrived at the Hong Kong Convention Center in a procession of Rolls-Royces and Mercedes-Benz to cast their ballots for a winner anointed long before. Indeed, the deciding vote for shipping magnate Tung Chee-hwa may have been recorded in January, when China's President Jiang Zemin singled him out from a crowd of his peers for a handshake when he was in Beijing. The votes cast last week by the 400--themselves carefully screened by Beijing--were almost a formality. It may have been historic: to elect the first Chinese chief executive since Hong Kong became a British colony in 1842. But it was also ominous.

With the news of Tung's landslide victory (320 votes to his nearest rival's 42), the usually forbearing Hong Kong police arrested 29 noisy protesters outside the convention center. "This sends an appalling message," a senior government official said afterward. "There is concern that some police might feel they need to act a certain way because of the Chinese." As for Tung, he went off to the Chinese city of Shenzhen the next day to receive Beijing's formal endorsement. He will officially take office on July 1, 1997, the day Hong Kong reverts to China.

In Hong Kong, where business holds the real power, Tung, 59, has the proper pedigree. C.H., as he is widely known, is the scion of a major Asian shipping dynasty, and was educated at Britain's University of Liverpool and schooled in business on the job in the U.S. He's on a first-name basis with the Asia-Pacific region's political and business leaders, as well as many of those in the U.S., where he co-chairs the U.S.-Hong Kong Economic Cooperation Committee with former U.S. Federal Reserve Board chairman Paul Volcker. More important, his family bridges the chasms separating the communist mainland from capitalist Hong Kong and a defiant Taiwan.

His father, C.Y. Tung, flamboyant founder of the Orient Overseas shipping empire, cultivated close relations with Chiang Kai-shek after Chiang's Nationalists fled the mainland for Taiwan. C.Y.'s Hong Kong-registered fleet became a valuable icon of "free China's" economic dynamism. By the time C.Y. died in 1982, however, the company was on the verge of collapse, with 24 tankers on order at a time when a global oversupply of vessels had sent shipping rates plummeting. It fell to C.H., the eldest son, to announce in August 1985 that the company could not repay $2.68 billion in debt to some 200 banks. Thus ensued history's third largest corporate bailout, after the Chrysler and Lockheed rescues.

To avoid the global financial crisis that would result if some of Orient's lenders toppled, most creditor banks agreed to restructure the tangle of public and private family companies on condition that C.H. remain at the helm. For the next 17 months he worked nonstop to persuade all the lenders to sign on. When Japanese banks, which stood to lose the most money, demanded an injection of new capital as "a show of confidence" in the restructured company, Tung turned to Taipei, which said no. So he approached Beijing. Henry Fok, a Hong Kong businessman known for close connections with the mainland, made a timely investment, kicking in $120 million in return for 8% of the shares. Tung recently admitted what many suspected: Fok was backed by Beijing. Tung stresses that it was a commercial deal in which everyone made a handsome return.

Tung emerged from the experience transformed into "silent steel," says Hong Kong businessman David Chu. The silence is his greatest liability. "We worry that he might have been the collateral for that deal with China," says a civil servant. Tung's conservative comments during the campaign have reinforced that impression. At a candidate forum, Tung was asked whether human-rights groups could remain in Hong Kong and scholars could study controversial issues like Taiwan and Tibet. "Of course human-rights organizations have the right to stay," he said, "but it should not be permissible for anyone to champion independence for Taiwan or Tibet. As a Chinese, I find this unacceptable." Nationalism played a part in what Tung has described as an agonizing decision to declare his candidacy. "I feel a sense of mission," he told TIME. "I want Hong Kong's success to continue after 1997, and as a Chinese person I would like to see Hong Kong contribute to China's modernization."

Tung subsequently resigned as chairman and transferred control over his family's holdings to his brother, who succeeded him. Preparing to set up shop in the shadow of British Governor Chris Patten, Tung said that "one of the reasons for Hong Kong's success has been the rule of law and the independence of the judiciary, and this is a part of Western culture so steeped in our tradition it will not change." However, Tung must also prove to China that an integrated Hong Kong will not become "a base for subversion." As if those demands were not test enough of Tung's reputation as the consummate consensus builder, he will be obliged to govern for at least a year with an appointed Provisional Legislature that many in Hong Kong regard as illegitimate: it will replace a body that was democratically elected to a four-year term in 1995 but that Beijing refuses to recognize.

China may have got the chief executive it wanted, but the choice makes Tung the most visible symbol of the new Hong Kong. If he disappeared into Beijing's pocket, confidence in the territory's future would vanish with him, robbing Hong Kong of the very prosperity and stability that China has pledged for its own self-interest to protect.

--With reporting by Lulu Yu/Hong Kong

With reporting by LULU YU/HONG KONG