HONG KONG'S RESIDENTS welcome the Year of the Rat next Monday, but many in this British colony will be doing more than celebrating: They will be making

plans to be somewhere else by July 1, 1997, when China reasserts sovereignty over this free market enclave.

If that happens, Beijing may find that it has scored something of a Pyrrhic victory in winning back Hong Kong. Indeed, the territory's most valuable resource is its people - particularly its educated, experienced business professionals. China's own self-interest, then, lies in keeping Hong Kong a bastion of free enterprise. To ensure that future, China must prove to a skeptical world that it will maintain Hong Kong as a "special administrative region" for the next 50 years, as it has pledged to do.That pledge, part of the 1984 Joint Declaration with Britain that set terms for Hong Kong's handover, is beginning to look like an empty promise. Beijing, for example, failed to include any members of Hong Kong's Democratic Party, which swept local elections last summer, on a newly formed committee that will pick the territory's future leaders. Chinese officials also have refused to meet with Chris Patten, the energetic British governor who has moved to establish democratic institutions in Hong Kong - even though the British can be faulted for showing little interest in fostering democracy until the past few years.

Hong Kong's jitters are hardly surprising, especially after China's recent threats of military force against Taiwan. By July of next year, some 20 percent to 25 percent of Hong Kong's residents will have acquired the necessary documentation to live elsewhere if they don't like what's happening at home. Many are entrepreneurs who acquired foreign passports over the past decade but who returned to Hong Kong because of the business opportunities there and in nearby Chinese cities like Guangzhou and Shenzhen.

If many of Hong Kong's top business people leave for good, China will inherit a much-devalued asset. Such a brain drain would be especially ironic considering China's huge financial stake in Hong Kong - $31 billion to date - and the $66 billion that Hong Kong-based businesses have invested in China. Those investments would be in jeopardy if Hong Kong's economy collapsed, posing a threat to China's own economic growth. A harsh takeover also could damage Beijing's relations with its Asian neighbors, with the United States, and with other markets for China's exports - all at a time of growing concern over Beijing's big trade surpluses.

A smooth transition in Hong Kong, on the other hand, would provide some much-needed evidence that China can act responsibly and live up to its commitments. It also would enhance China's prospects for entry into the World Trade Organization, if it has not gained admission by then. Finally, the Taiwan question might be easier to resolve if China manages the Hong Kong transition peacefully.

The United States has very little leverage over China and its actions in Hong Kong. A law passed several years ago requires the State Department to issue periodic reports on China's compliance with the terms of the 1984 Joint Declaration with Britain. Still, the Clinton administration has had a hard time pressuring China on a number of fronts - human rights and trade, in particular - and would have even less influence over Hong Kong's future. Nonetheless, the United States should reassert its desire to see China respect the rights of Hong Kong's residents.

Ultimately, China itself will determine what kind of Hong Kong it inherits less than 17 months from now. Does it want a thriving territory that will help foster China's growth, or does it want a Hong Kong that's firmly under Beijing's thumb? How China responds to that question could have a major impact on its own role in the 21st century.

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