When Hong Kong was handed back to China in 1997, its status as one of the world’s great financial hubs seemed uncertain.

The Great Chinese Takeaway, as it was widely, if predictably, termed, looked like it might prove difficult to digest. Though China had promised to maintain the former British colony’s capitalist way of life under the One Country, Two Systems principle, there was no shortage of people worried that it would not keep its word.

In the run-up to 1997, a number of big international corporations shifted their Asia operations from Hong Kong to Singapore. Large numbers of the most talented Hong Kong citizens who worked in financial services booked themselves Canadian, American, Australian and British passports as a fallback should things turn ugly.

As it turned out, of course, it was not China’s takeover that really sapped faith in Hong Kong’s future, but a series of calamities that befell the territory straight after. The Asian financial crisis caused a collapse in confidence in Hong Kong and sent property prices down by more than 50 per cent in a few years, leading to a brief bout of broader deflation in the economy. That was followed by the Sars health crisis, which forced activity in Hong Kong to come to a near-standstill.

Yet today, as the territory approaches its ten-year anniversary, Hong Kong’s status is, if anything, even greater than it was a decade ago.

China has not only left Hong Kong’s financial freedoms essentially intact, the awakening economic giant has also used Hong Kong as its principal conduit to international financial markets.

Since the yuan remains a non-convertible currency, Hong Kong is the natural destination of choice for Chinese companies to raise international funds. Last year it hosted a succession of some of the largest IPOs in global history, including the biggest ever — the $22 billion offer by ICBC, the Chinese bank.

As China continues to expand at developing country rates and Chinese companies’ thirst for global capital grows, all seems very positive for Hong Kong. Sir Donald Tsang, the former colonial bureaucrat turned communist-approved chief executive who won re-election at the weekend in an odd but entertaining race, campaigned on a promise to make the territory a financial capital to rival London and New York over the next five years.

But there’s a cloud on the sunny horizon — small now, perhaps, but looming larger. The fear is that the city is in danger of becoming too Chinese; of losing its unique international status.

Although Hong Kong was always a Chinese city, even when it was nominally British, there has been a noticeable shift in the outlook of the place in the past decade. Mainlanders occupy more powerful positions in the skyscrapers of Central and Wanchai. Shopkeepers will tell you that their Cantonese-speaking staff now prefer to learn Mandarin rather than English to deal with the inflow of tourists and workers from the mainland.

So what’s the problem? Losing some of the polyglot aspects of this great city is a small price to pay, surely, for being China’s main financial gateway to the rest of the world. Yes, you may lose a bit of that exotically cosmopolitan flavour, but you gain a status as the New York of the massive Chinese economy.

The problem is, according to some of Hong Kong’s old hands, that while the place may play its role as China’s financial capital now, while the yuan remains a hermit currency and foreigners have virtually no access to the Shanghai Stock exchange that will not last.

What happens as China liberalises its capital markets in the next decade or so? The signs are that China wants Shanghai to be its financial centre of choice, not Hong Kong, which is still a bit alien to the politburo bosses in Beijing.

As one seasoned investment banker here put it to me: “Hong Kong had a window of opportunity to become a truly international financial centre over the past 15 years — and it missed it.”

Senior financial officials in the territory dismiss this fear. Ron Arculli, the head of the Hong Kong Stock Exchange, told me last week that he was unfazed by the Shanghai threat: “Tension and competition will always be there, but we are confident we have the right ingredients to be a dominant financial centre.”

Officials also seem to be trying to rebalance Hong Kong’s financial role. They have made a push over the past year for more Asian business — launching a series of roadshows to advertise Hong Kong’s virtues for companies in South-East Asia and even the Middle East. But they are latecomers: Singapore has been on this trail for a while.

Of course, Hong Kong may yet achieve financial supremacy inside China. Henry Tang, the territory’s thoughtful and urbane financial secretary, told me last week that the one thing that the world’s great financial centres — London, New York, Hong Kong — have in common is their legal system. The rules and principles that govern business in those cities are all rooted in the English common law, a system that has proved an unrivalled genius for creating the kind of fairness and flexibility that capitalism needs to survive.

So expect to hear a lot more about the virtues of English law in the next few years – an odd but still perhaps potent weapon with which to challenge China for global financial supremacy.

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