I N1841 the British Empire was enlarged in minute degree through the addition by conquest of Hong Kong, a tiny remote island in a remote corner of the Chinese Empire. Further enlargements took place as Kowloon (1860) and the New Territories (1898) came under British control, the latter being ceded on a ninety-nine-year lease which will run out on June 30, 1997.' In 1841, Hong Kong was inhabited by 5,500 fishermen and smugglers; in 1985 it was a considerable manufacturing, commercial and financial centre, an power on a world scale. However, twelve years before the lease was due to expire, anxiety about the future was growing, although for long periods it was believed that China would ignore both the lease and the 1997 date because its gains from Hong Kong were too great to jeopardize by unwise political action. This argument rested on the proposition that China's claims to sovereignty over Hong Kong would be set aside for essentially reasons. The benefits in terms of foreign exchange alone were of the order of US$6 billion, enough to finance about 40 percent of China's needs for hard currency.2 The Chinese have now rejected the economic argument-if they ever did believe it-in favour, apparently, of their sense of national dignity. Until 1982 the Chinese leadership never made the rejection explicit, and Western observers both inside and outside Hong Kong assumed that for China, prosperity had an irresistably seductive attraction. The Chinese have now shattered this assumption. They assert a simple message: when the British give up sovereignty to China, prosperity will not be lost and China will still benefit from Hong Kong's wealth. Everything will then belong to China, not merely the loose change of foreign exchange.' Paradoxically, during the period of