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Next Step : Taiwanese Worried Over Hong Kong : China's heavy-handed treatment of the British colony is seen as a warning against dreams of unity.


HONG KONG — No one is watching this territory's reversion to Chinese rule more closely than Taiwan--the 1997 Hong Kong transition, after all, is supposed to be the model for Taiwan's own eventual return to the Chinese fold. And what Taipei's representatives here see gives them the jitters.

Far from tempting Taiwan home by gentle handling of British-ruled Hong Kong, Beijing is growing increasingly heavy-handed as the July 1, 1997, transfer of power nears, disrupting the delicate balance of the triangle of Chinese interests.

Just ask the people of Rennie's Mill, an enclave of pro-Taiwan sentiment in Hong Kong's rural New Territories. Here, where the white starburst of the Taiwan flag flutters above the settlement's jumbled stone buildings, residents say they see no reason for confidence in rule by China. They are being forced out by redevelopment but also because Beijing does not want to inherit a camp full of Taiwanese supporters in 1997. Chinese officials have warned the residents to cool their ardent stance before the transition.

"There will be no difference between being based in mainland China and Hong Kong after 1997," says Paul Lau, who was born in Rennie's Mill and grew up there. "Beijing promises 'one country, two systems,' but the two systems for us will be believe it or leave."

That Communist leitmotif, "one country, two systems," which pledges 50 years of autonomy for Hong Kong after the hand-over, sounds increasingly hollow to Taiwanese interests.

Examples of China's economic interference alarm Taiwanese here the most. Beijing recently obstructed Hong Kong's renewal of commercial air service agreements between the territory and Taiwan, and in June, blocked an agreement that would allow Taiwanese investors into Hong Kong's futures market.

But the real signal that the party will soon be over in Hong Kong came this fall when China tried to stop a celebration of Taiwanese Founding Day organized by the Kuomintang, Taiwan's ruling Nationalist Party. Beijing immediately protested that Hong Kong was encouraging the creation of "two Chinas." The Hong Kong government refused to withdraw its permission, but celebrations throughout the colony had a wistful tone.

"This may be the last year we can do this," said a party-goer at a National Day banquet in the Hong Kong Hilton, as Taiwanese politicians and starlets linked arms and belted out nationalistic tunes. An event planned for the 100th anniversary of the founding of the Kuomintang itself in November was quietly canceled.

"It's not even 1997 yet," said Suzie Chiang, a top Taiwanese representative in Hong Kong. "It's a little bit early."

Hong Kong has acted as a neutral middle ground between the two Chinese governments since 1949, when the Communist Party won a bitter civil war and the Nationalist Party set up a rival administration in Taiwan. Although links between Taiwan and the mainland are still strained, billions of dollars in goods are transshipped through Hong Kong. The territory also is a transit point for traders and tourists. But when the British territory returns to Chinese sovereignty in 1997, Taiwanese organizations here fear that they will be on unwelcome ground.

Until now, Taiwanese organizations have operated discreetly but freely. Because Britain recognizes China, not Taiwan, Taiwanese organizations maintain a shadowy profile: the de facto Taiwanese embassy goes by the name Chung Hwa Travel Service; Taiwan's economic office here is known as Far East Trading Co. Suzie Chiang's government information office just changed its name from the provocative Free China Review to the Kwang Hwa Culture and Information Center.

"It's schizophrenic, it's crazy, but it's something we have to do," a Kwang Hwa staff member said.

Like half of a bitterly divorced couple, China will not show up anywhere Taiwan is invited and constantly tests the loyalties of friends who try to maintain polite relations with both.

The conflict makes international meetings, from economic summits to Asian sporting events, awkward. Although Taiwan is the world's 14th-largest trading nation and a full-fledged member of the Asia-Pacific Economic Cooperation group, it cannot send its president to APEC summits. Beijing recently argued against Taipei's bid to re-enter the United Nations, and threatened to pull out of October's Asian Games in Hiroshima, Japan, if Taiwanese President Lee Teng-hui showed up. The Asian Olympic Committee rescinded its invitation to Lee, though a Taiwanese deputy premier went, and China stayed in the competition.

"I think it's absolute nonsense," said Wu Chieh-ming of Taiwan's Far East Trade Service.

"They welcome our investment in mainland China," he said--up to $15 billion worth, most of it funneled through Hong Kong. So Beijing should not disturb those who help get it there, Wu argued. "It's difficult to promote trade and investment if people are scared," he said.

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