So much for autonomy. Under the British, the Hong Kong papers grew as irreverent as any London tabloid. No view was forbidden, and at the handover, China promised to leave the Chinese of Hong Kong free to practice their Anglicized ways for the next 50 years. Now, following recent Beijing jabs at the freedom of the judges, legislators and clergy of Hong Kong, Qian’s threat comes as the first overt sign that the press will not be quite free, either. To some, it seems Beijing is starting to tear down the rule of law–the British cornerstone on which Hong Kong’s freewheeling Chinese capitalism is built. “Hong Kong is sinking,” says Jimmy Lai, publisher of the Apple Daily and one of the city’s foremost entrepreneurs. “It’s changing into a place with a Chinese value system where the rule of law doesn’t matter and expediency rules.”

The change starts at the top. China has drafted Hong Kong to help fight its diplomatic duel with Taiwan, and Hong Kong Chief Executive Tung Chee-hwa hasn’t refused the call. Earlier this month, when Beijing rejected a visit by the pope to Hong Kong on the grounds that the Vatican is too friendly to Taiwan, Tung quietly seconded the rebuff. After Beijing all but banned airing Taiwan’s views last week, Tung followed suit again. Through a spokesman, Tung criticized Chan’s broadcast as “inappropriate,” reinforcing the sense that Beijing’s party line now guides Hong Kong.

At times, Tung’s government seems to anticipate Beijing’s wishes. Earlier this year, Hong Kong’s highest court granted residency rights to mainlanders with parents in Hong Kong. Beijing protested, saying the court had usurped the authority of China’s national legislature to control immigration. Soon Tung was warning that the decision could swamp Hong Kong in a flood of 1.6 million mainland migrants. In May he asked Beijing to “reinterpret” the court. Beijing effectively overturned the decision by the Hong Kong Court of Final Appeal, whose rulings no longer look so final. “I ask [Hong Kong people] to put their hearts at ease,” Tung said. “We will never permit the rule of law to be compromised.”

Critics say Tung is doing just that. Many multinational companies based their Asian headquarters in Hong Kong because they trust the business rules and courts to be fair, and very few are leaving. But doubts have been raised. Hong Kong’s leading lawyers marched in June to protest against the reversal of the high court’s immigration ruling. “Clients looking at deals here are beginning to ask” about the case, says one of the marchers, a senior partner at a top American law firm. “And I have to tell them that yes, Hong Kong is becoming a little less special than it used to be.” Already, some companies are demanding contracts that provide for commercial arbitration in London and New York rather than Hong Kong. “People are worried the system is being undermined, and you can’t really rely on an independent judiciary,” says Edward Turner, managing partner for Asia of the American law firm Shearman & Sterling.

Tung faces even tougher questions from local tycoons, who accuse the former shipping magnate of favoring business cronies the way many politicians do on the mainland. Their main target: a blockbuster contract to build Cyberport, Hong Kong’s answer to Silicon Valley. Rival developers are furious that the project and a huge parcel of land were awarded without competitive bidding to Richard Li, son of fabled billionaire Li Ka-shing, who is a former business partner of Tung’s. Ten top property developers met in March with Chief Secretary Anson Chan and Financial Secretary Donald Tsang to protest the deal. “Favoritism is now openly perceived,” says James Tien, a textile manufacturer and former head of the Hong Kong Chamber of Commerce, who endorsed the developers’ protest. Tung’s top officials say they viewed Cyberport as crucial to maintaining Hong Kong’s position as a business center in Asia. “This was an exception,” says one high-level Hong Kong official, adding that the government did not simply bend to Li’s demands. At one point, according to a witness, Chief Secretary Chan stormed away from the negotiating table, angry at Li’s attitude that he was doing the government a favor. For his part, Li shrugs off the charges as “uninformed,” saying the Cyberport was his original idea, and that a consultant for the government found that his company was the only contractor qualified to build it.

Hong Kong’s image as a hub of capitalist creativity depends on Tung’s next steps. He is a gentlemanly Confucian who prefers polite private discussion over noisy democracy. Ever since the handover Tung has emphasized Hong Kong’s “Chineseness,” which some read as a call to respect authority and order, the way people do in Beijing. His government appeared to follow that call when it pursued fraud charges against employees of the Hong Kong Standard newspaper, but not against owner Sally Aw, a friend of Tung’s. Secretary of Justice Elsie Leung said she chose not to prosecute Aw for fear of disrupting the economy, and has urged Hong Kong people to “open our eyes and know more about the mainland system.”

One result is a nationalistic public backlash against independent journalism. Officials have lectured editors of the South China Morning Post about their “responsibility” to portray Hong Kong and China in a kindly light. The Post owners decided not to renew the contract of top editor Jonathan Fenby, though they insist it had nothing to do with his refusal to follow management’s orders, among them that the bloody Beijing protests of 1989 should be called an “incident,” not a “massacre.” Fenby says he advised writers to use their own judgment. His fate was mild compared with popular radio host Albert Cheng’s. Gangsters slashed Cheng with meat cleavers last year in retaliation for on-air comments about their business interests. “After the handover, people got carried away because they feel they own the country,” says Cheng, who is still recovering. “They are the masters now; that means they can take laws into their own hands.”

Or they can rewrite the rules. The Tung government is considering the establishment of a “press council,” ostensibly to prevent the gross intrusions of privacy for which some Hong Kong tabloids are notorious. (Apple Daily paid a recent widower to pose with prostitutes, then ran headlines trashing his callousness.) Journalists concede the excesses, but worry that the council will evolve into a weapon politicians can use to punish legitimate coverage. Chan, the radio producer, points out that special handover rules allow the chief executive to adopt China’s tough sedition laws with the stroke of a pen, if he chooses. Tung has no known plan to do so, says Chan, “but a lot of people, including me, are worrying.” The list of worries keeps getting longer.