Klosson made the remarks in a speech entitled One Country, Two Systems, Five Years: US Perspectives on Hong Kong at a luncheon given by American Chamber of Commerce.

This was his last major speech in Hong Kong before his scheduled reassignment next month.

"Over the past five years, Hong Kong has witnessed lots of changes, but also confirmed important constants," the consul general noted. "The unfolding story of Hong Kong's transition has been a positive one. China has kept its fundamental promise to respect Hong Kong's autonomy, and the Hong Kong people have demonstrated their continuing commitment to their unique way of life and institutions," he said.

Hong Kong continues to evoke a variety of images, Chinese but also quite international, modern but traditions abound. It is a place where people lived for decades with their backs to China, but now they have turned around to build a platform for riding China's opening and its economic growth, Klosson said.

Klosson said Hong Kong has been a place that puts business in the driver's seat, but it is no longer just an "economic city." Speaking of the US-Hong Kong relations, the consul general said in the years since 1997, the partnership has been significantly strengthened with high-level visits painting a striking picture. Hong Kong has been the 15th largest trading partner of the United States since 1997, and the bilateral trade amounts to roughly US$25 billion.

Klosson said after five years and much effort, Hong Kong has transformed itself into a regional pacesetter for tough legislation and enforcement.

Educational exchanges between the two places also have been expanded. His consulate teamed this year with the Research Grants Council to inaugurate the Fulbright Hong Kong Scholar Program administered by the Hong Kong-America Center.

He also mentioned US Navy ships continue to make calls in Hong Kong. Over 5,000 US servicemen are in town this week.

Looking forward to the future of Hong Kong, Klosson said there are reasons for anxiety about the future - especially with depressed property prices, an international economic slowdown, significant changes in the structure of Hong Kong's economy due to globalization, and challenges posed by China's WTO accession.

"But to concentrate solely on these anxieties is to ignore an important thread in Hong Kong's historical experience, its ability to adapt to changes in its environment and the entrepreneurial prowess of its people," he stressed.

Considering Hong Kong's rapid transformation in the 1980's and 1990's, over 650,000 manufacturing jobs moved north, but the average unemployment rate remained low as workers found other -- mainly service sector jobs, Klosson explained.

With hard work, sound policies and strong leadership, there is no fundamental obstacle that would prevent Hong Kong from continuing to adapt as it confronts these new challenges, Klosson predicted.

To concentrate on difficulties and to be mesmerized by China's economic growth is also to ignore the role of "Hong Kong Inc." played in transforming southern China into a modern export production platform with the highest average standard of living on the mainland, Klosson added.

Hong Kong has been a stimulus for the mainland's dramatic transformation by providing capital, management and experience. As a window on China's potential future, Hong Kong shows a way forward toward prosperity that rests on openness, tolerance, the rule of law, transparency and corruption-free dealings, Klosson said.

"By protecting its fundamental values and capitalizing on its flexibility, there is no reason why Hong Kong won't continue to prosper," the consul general commented.

Looking at longer-term trends around the region -- movement toward the rule of law and increased respect for civil liberties, movement toward more open markets, and China's entrance into rules-based international organizations, all of these play to Hong Kong's traditional strengths, he pointed out.

Klosson said Hong Kong is an open textbook for the fundamental lesson that is increasingly taking hold, namely that free societies and free markets work and bring incredible benefits to the people.

Through its embrace of free markets, adherence to the rule of law, and a level playing field for business, Hong Kong has capitalized on the forces of globalization -- the explosion of trade, travel, communication -- transforming the region.

Hong Kong's future lies not just in its role as the richest city in China. It aspires to be something more -- the most globalized city in Asia, Klosson said.

(China Daily June 7, 2002)