Thirteen years have passed since the Chinese flag replaced the Union Jack over Hong Kong. Many observers at the time assumed that China would exert increasingly onerous political and economic control over the former Crown Colony, with significant economic activity in particular diverted to Shanghai. The political changes have been more subtle than egregious, however, while Hong Kong’s economy continues to expand. High-rise construction seems endless throughout what China has labeled the Special Administrative Region, whether in Hong Kong Central, Kowloon or parts of the New Territories. Hong Kong’s financial activities proceed apace; it remains one of the world’s great financial centers. The port is packed with container ships. High priced shops, with all the familiar Western brand-names, are full of customers and appear to be doing a rollicking business. Shanghai may be booming, but apparently not at Hong Kong’s expense.

Crossing by land into Shenzhen, the first big Chinese city opposite Hong Kong, reveals similar economic expansion. The entire Guangdong region, in which Shenzhen is located, will be hosting the November 2010 Asian Games, and both Shenzhen and Guangzhou are completing major state-of-the art stadiums. Roads are being cleaned, high rises continue to go up. Construction cranes are everywhere. Business is good.

But while Hong Kong’s economy is booming like those of its neighboring cities, in other respects it has retained its external identity. It maintains an independent legal system based on English Common Law. It still issues its own stamps. Its currency remains the Hong Kong dollar—the world’s ninth-most-traded currency—not the renminbi. Cars still drive on the “British”, or left, side of the road, creating interesting challenges when they cross into China, where cars drive on the right. The border crossing between Hong Kong and mainland China is no different than a crossing between two members of the European Union. Passports are required, and passengers in vehicles returning from China to Hong Kong are surprised by a masked Hong Kong policeman (or policewoman) who fires a thermometer gun in their faces to ensure that no one with a high fever gains entry.

Analysts have long postulated that Beijing holds out Hong Kong as the model for Taiwan’s future relationship with the mainland. While better relations between Taipei and the mainland do not necessarily signify a closing of the political gap between the two, much less Taiwan’s absorption by Beijing, the vector of increasing economic ties increases the probability of that taking place over the long term.

There are now direct flights between Taiwan and the mainland. The two signed a trade agreement in June. Taiwanese investors have poured over $100 billion into Guangdong and Jiangsu provinces. Chinese firms continue to invest in major Taiwanese companies. Most recently, Yangzijang Shipbuilding, China’s fourth largest shipbuilder, announced that it plans to raise $116 million from a Taiwan Depository Receipt listing on the Taiwan stock exchange. More major Chinese companies are expected to follow suit. As they do, more and more Taiwanese will hold Chinese shares, giving them, like those who have invested directly in the mainland, a vested interest in both the Chinese economy and political comity between Taipei and Beijing. Taiwan may be a very long way from becoming another Hong Kong, but Beijing’s goal now seems to be to absorb the island republic as it absorbed Hong Kong, which is to say, peacefully, without firing a shot in anger.