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Hong Kong's Next Act

In France the creatures would have been dead and safely buried in a sauce, but in Hong Kong they're taken alive, squirting and wriggling. I'd come with an old friend to Po Toi O, an atmospheric fishing village in Hong Kong's New Territories where you select your meal from an elaborate living menu: lobsters, crayfish, crabs, squid, eels. While we ate, I assumed that the food on our plates had been caught by the poor fisherfolk themselves. Silly me. After the hefty bill arrived, the waiter informed me that the rock oysters had been flown in from Ireland, the grouper from South Africa—all to satisfy the relentless lust for epicurean novelty for which the Cantonese are famous.

This hunger, of course, may have been the root cause of one of the worst economic crises Hong Kong has faced in 50 years. The mysterious SARS virus, which arrived here in March from neighboring Guangdong province, is thought to have transferred itself to humans from an animal, possibly a civet cat, that had been penned up in a restaurant before being eaten. The epidemic ended up devastating the city. By the time it was over, 299 people here had died, and the tourism industry was reeling. According to some sources, travel businesses may have lost nearly $500 million in April and May, when room occupancy hovered around 20 percent and the number of visitors had shrunk by nearly 70 percent.

Just a few months later, however, when I returned to the city after nearly a year's absence, little evidence of the crisis remained. Surgical masks were nowhere to be seen; shopping malls and restaurants were busy again. In August, 1.64 million people visited Hong Kong, exceeding the typical monthly average of slightly more than 1 million. Hotel occupancy had returned to pre-crisis levels of nearly 80 percent.

Some things, in fact, seemed better than before. Taxi drivers and shop assistants, I found, were much more polite and eager to help than they used to be—some even wore a HONG KONG WELCOMES YOU! badge. SARS had also prompted much-needed improvements in public sanitation, especially in trendy areas such as Soho and Lan Kwai Fong, where modish restaurants, bars, and shops occupy run-down tenement blocks.

Most of all, SARS forced the city to rethink its economy, and especially its status as a tourist destination. For whether or not the virus reemerges this winter, as some public health officials fear, tourism in Hong Kong is facing an unprecedented set of challenges—and new opportunities—from China.

Up until 1997, when Hong Kong officially changed hands and became a Special Administrative Region of China, one of its chief attractions for many visitors was its nature as "a borrowed place on borrowed time." Famous novels—from Han Suyin's Love Is a Many Splendored Thing to John Le Carré's Honorable Schoolboy—traded on the city's exoticism and painted an exciting, romantic picture of an Asian bazaar, where spies, journalists, diplomats, and speculators of all stripes mingled against a fantastic backdrop of harbor, mountains, and skyscrapers. All this added a certain spice to even the most mundane of travelers' activities, like hunting down the latest camera or buying a made-to-order suit.

But when the British left—taking their red postboxes and cocked hats with them—Hong Kong began to feel much like any other modern Asian city. And as China itself opened up in the late nineties, another of the city's draws was lost: for many years, it had only been in Hong Kong that most people could see something of China. "Hong Kong is just not that special anymore," says David Webb, a longtime British resident and investor.

Today, Hong Kong's economy is shaky. Property values have plummeted, and the city is struggling with record unemployment (8.7 percent). High costs drove manufacturing across the border years ago, and the worry is that tourism, which pre-SARS accounted for 6 percent of the GDP ($30 billion in 2002), could be headed for a downward slide.

Eating and shopping rank as the top two activities of visitors to Hong Kong. Yet I found the Suzie Wong bar girls in Wanchai complaining that their customers are crossing the border to Shenzhen, where prices are much lower. And many shoppers appear to be doing likewise, finding that the same brand names (not to mention counterfeit and pirated goods) are available on the mainland for less.

If mainland China is one of the biggest threats to tourism in Hong Kong, right now it's also the city's savior. Figures from August show that arrivals from Japan and the Americas are down 36 and 13 percent, respectively. Arrivals from Europe, Africa, and the Middle East are down 21 percent. On the other hand, the city is attracting more travelers than ever from the mainland—the number of Chinese visitors in August grew 43.4 percent compared with 2002; they now account for more than half of Hong Kong's tourists. To further encourage travel here, the central government in Beijing has reversed its former policy and now grants individual visas instead of only group ones. "The impact of SARS wasn't as severe as expected, thanks to the mainlanders," says Richard Tsang Yok-sing, head of the Democratic Alliance for the Betterment of Hong Kong, which supports Beijing's efforts to prop up the city's economy through tourism. "Now hotels are even thinking of raising prices again."

Some in Hong Kong are optimistic enough to project that the number of visitors will climb from 16.5 million this year to 22.5 million by 2010 and 56.6 million by 2020, with the bulk of the increase coming from mainland China. To meet the demand, hotel groups including Marriott, Accor, and Shangri-La have suggested that twice as many hotel rooms may be needed in the city by 2020.

What kind of hotels—not to mention tourist activities—the mainlanders will want is something that still needs to be worked out. Currently, many wealthy Chinese use the trip to Hong Kong not simply to enjoy themselves but also to protect their savings. "The first thing many businessmen and professionals do is head for a bank or a stockbroker to open an account and get their money out of China," says Willy Lam, a writer and longtime China watcher. "This isn't traditional tourism." Beijing has increased the limit on the amount of cash mainlanders can take with them to about $4,800; this, combined with growing wealth in China, is a welcome sign for the city. For the moment, though, their spending doesn't entirely compensate for the loss of American, Japanese, and European travelers: although the Chinese, on average, don't necessarily spend less in Hong Kong than Westerners, they do tend to limit their purchases to particular things—such as gold and jewelry—rather than shopping at electronics and clothing stores and eating in top restaurants.

The economic crisis and changing visitor demographics have resulted in a bout of unfamiliar introspection in Hong Kong. The Tourism Board is now questioning what the city is really about.

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