This report covers the importance of the democratization of Hong Kong to U.S. foreign policy as well as to Hong Kong itself. It specifically looks at two recent election changes which indicate the Hong Kong government's willingness to press for democratic reforms and also give more power to current government officials over incumbent officials.

In the months approaching China's resumption of sovereignty over Hong Kong on July 1, 1997, policy analysts are trying to assess how the territory will fare under Chinese rule. The answer is important to U.S. interests because of the enormous U.S. economic presence in Hong Kong; because any adverse developments in Hong Kong are likely to affect U.S.-China relations; and because China's promise to give Hong Kong a high degree of autonomy under the "one-China, two-systems" policy has major implications for Taiwan. But given the political situation, the American ability to affect the course of events in Hong Kong seems marginal unless the U.S. decides to confront Beijing more directly. Developments in U.S.-China relations in 1994-1995 suggest Washington might be hesitant to do so.