Shortly before Hong Kong's handover on July 1, 1997, the Commission undertook to monitor developments in the new Special Administrative Region (SAR) through annual reports. The first of these reports, published in January, concluded that Hong Kong's basic rights, freedoms and autonomy have been broadly upheld.

A high degree of liberty has been maintained in the fields of human rights, political freedom and public order. Regular demonstrations and unbridled press criticism continue to be a feature of Hong Kong's political culture, while no detentions or harassment of political opponents or human right activists was reported. Commemorations of the Tiananmen Square incident have also passed unchallenged. The independence of the judiciary has clearly been respected in the vast majority of cases.

The report also noted that the SAR is suffering its worst recession for decades as a consequence of the Asian financial crisis. The Commission praised the Hong Kong government's reaction to the crisis, including its bold defence of the peg between the local currency and the US dollar. Although the authorities intervened heavily in the stock market to fend off speculators last August, the report concluded that this was necessary market regulation and did not herald a permanent department from the government's traditional commitment to open markets, transparency, clean government and fiscal prudence. The SAR's continued adherence to these principles, and its ongoing fight against corruption, was welcomed by the Commission for offering an important example to other countries in these difficult times.

The steps taken towards greater suffrage in last May's elections were praised in the report. The Commission noted a growing appetite for democracy among the public and advocated the adoption of universal suffrage as soon as is permissible under Hong Kong's constitution, the Basic Law.

In the trade field, the report stated that the SAR and the EU continue to share common goals for the further development of the international trading system. These aims will continue to be pursued through multilateral bodies such as the World Trade Organisation (WTO) and bilateral agreements such as the EU-Hong Kong Customs Cooperation Agreement initiated in the presence of Commission President Jacques Santer in Hong Kong last November.

Sir Leon Brittan, Vice President of the Commission, said of the report's findings: "The success of the post-handover period in such adverse conditions is a tribute to the determination of both Hong Kong and Beijing to safeguard the wide-ranging autonomy enshrined in the Basic Law" This bodes well for the future.