Young Chinese are poor imitators of the West in dress and open-society behaviour. Beijing gives you a friendly look except that you are labeled `Hindu'. I was told this started after the BJP came to power. Intellectuals and the people feel no love for the BJP, which has rubbed them up the wrong way. They are sceptical about good relations developing. Misconceptions exist about India's nuclear policy and the `Hindu' government's politics. The Chinese are irked that India hasnot bothered to dispel the misconceptions. Nor has the Indian Embassy attempted a PR exercise.

The rigidity of the old communist regime has made way for a more relaxed system, a so-called democracy. The economic and political upheavals of 1996-97 have left an impact on intellectuals in their thirties and forties. This section is keen to change the old one-party system and bring political reforms. The socialist market economy introduced in 1978 is paying off with the East Asian fiscal crisis helping to stabilise the yuan.

China today ranks first among developing countries. It is striding towards modernisation. The pace has its drawbacks: shortage of capital, poor infrastructure and growing unemployment plus an erosion of its traditions and culture. Problems are surfacing with 100 million jobless and 12 million `Xia Gang' (laid-off workers on dole), largely from the rural areas. Housing and jobs are scarce, with subsidies withdrawn since July. Real-estate reforms have boomeranged as they have brought highrents and a buy-your-own-home policy, leaving apartment building untenanted or unsold.

Direct foreign investment in the first four months of 1998 was $11.7 billion. Arms trading through Hong Kong is a lucrative business. Nearly 200 companies have a foothold in Hong Kong with strong links to the defence and aerospace industries. After the economic crunch billions of dollars earned by companies had to be sold to state banks to shore up the yuan. Cut-throat competition among foreign firms and shift in consumer spending brought a slump. Chinese conglomerates have been brought under tight control.

China's forex position is strong and Prime Minister Zhu Rongji is confident of not having to devalue the yuan. Exports of machinery run to more than $25 billion. But growth has slowed down. The all-powerful People's Liberation Army may not go all the way with President Jiang Zemin's pro-American stance. PLA traditionalists are critical of the `decadent western culture' that the young are emulating.

The one-timetourist Mecca of Hong Kong has lost its dazzle. A year since the mainland began to remote-control the island, the economy is in the dumps. The real-estate bubble has burst, with a 50 per cent increase in property and rents and no takers. Investors are moving to Taiwan or Singapore. Except for the massive Chep Lap Kop airport, a British venture, Hong Kong is going to seed. Tourism has declined by 22 per cent, unemployment risen by 7 per cent. The SAR government (Special Administration Region) tried to save the economy with a $44 billion rescue package. Banks have become insolvent and small enterprises are running losses. In a sluggish market and recession Hong Kongers celebrated the first anniversary of merger with the mainland with a $16 million budget.