All that remains in Hong Kong is the raising of the Chinese flag

PRIVATE Craig Munro from Fife in Scotland squinted through mounted binoculars which enabled him to read car number plates in …

PRIVATE Craig Munro from Fife in Scotland squinted through mounted binoculars which enabled him to read car number plates in Shenzhen, the Chinese border city a mile distant. The 23 year old Black Watch soldier spotted a white People's Armed Police van and entered it in a book headed Guide to Logging Chinese Security Force Registration Plates.

This type of intelligence gathering has been going on for 99 years, since Britain took over the New Territories and added them to Hong Kong, but there were only 10 British soldiers yesterday along the whole 32 kilometre border, peering into China from the five "Mackintosh Cathedrals", as the concrete lookout posts are called.

"This surveillance is pretty symbolic," said Chief Insp Charles Parker of the Hong Kong police, as we drove along the barbed wire fence past banana and vegetable patches. It's all they do. And they will be gone by 6 p.m. on June 30th."

Patrolling the border yesterday with the Hong Kong police confirms what everyone in the territory suspects. China might not officially regain the British colony until July 1st, but the process is in fact complete, bar the ceremonials.

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A notice in a border post, with 12 brown armchairs on an elevated verandah overlooking China, informs visitors that as far back as October 4th, 1992, the British army handed over anti immigration work to the Hong Kong police.

"The change has already occurred," said Insp Parker, echoing a sentiment I heard from business people and politicians. "All that has to happen is for the flag to come down and the governor to leave."

Those who are not going to stay in Hong Kong have practically all gone, from British military personnel to dissidents. The companies who have decided to locate their Asian headquarters elsewhere have already done so, like Reuters which has moved to Singapore. Anticipating the takeover, more regional headquarters of foreign firms have actually come in to Hong Kong, where the number increased from 581 to 793 between 1990 and 1995.

Those expatriates still here, entrepreneurs, consultants, clergy - and 400 British and Irish officers in the 27,000 member Hong Kong police force - long ago made the decision to stay on, expressing confidence in varying degrees in Hong Kong's future after June 30th as a Special Administrative Region of China.

An occasional communist flag hung limply yesterday in the languid air inside the New Territories a visible indication of the fact that the 6 million ethnic Chinese, who never called themselves British, have made the psychological adjustment already to the new reality.

"We, the Chinese people, see the handover as a coming together, a natural reconciliation ending a period of unnatural separation," was how Chief Executive designate Mr Tung Chee-hwa put it.

For all Chinese, the existence of the British colony, however desirable as a refugee camp or a city of opportunity, was a reminder of defeat in the Opium Wars. This is partly why the population acquiesces in the first peaceful transfer of territory to a communist country since the end of the second World War.

The economic merger between Hong Kong and China has also already been consummated, creating a new trade and financial powerhouse where Chinese are the economic elite. Thousands of Hong Kong companies have located factories in China and 60 per cent of foreign investment in China comes from Hong Kong, whose port handles 40 per cent of China's trade.

Mainland companies in Hong Kong control 24 per cent market share in banking, 25 per cent in transport, 22 per cent in foreign trade and 50 per cent in tourism. Seventy mainland companies are listed on the Hong Kong stock exchange. Big Chinese companies own many of the city towers.

Since Mr Tung was named chief executive in December, he has become the effective leader of the territory, meeting people, negotiating with Beijing, presiding over his cabinet. The provisional legislature which will take over from the Legislative Council on July 1st has already been drafting laws for Mr Tung to sign, including making July 1st a holiday.

All 21 department heads in the 180,000 strong civil service will remain a their posts.

The Chinese government is already in Hong Kong in the form of the 350 members of the Xinhua news agency. The People's Liberation Army is here as a liaison force of 40. The garrison commander will hardly raise an eyebrow among members when he becomes the new chairman of the colonial era United Services Recreation Club in July.

China will have nearly 200 People's Liberation Army troops in Hong Kong before taking over, the two sides agreed yesterday.