High Noon in Hong Kong puts the markets to flight: The territory's business sector is trying to dilute reform plans to pacify China. Teresa Poole reports

AS HONG KONG's roller-coaster stock market took its investors on a stomach-churning ride last week, not everyone's nerves were fraying. Among the 4,812 people who had visited the show flat at the Parc Oasis development in Kowloon the previous weekend, there were still Hong Kong Chinese buyers for the final 200-odd appartments - minimum price dollars HK3m (pounds 263,000).

While shell-shocked stockbrokers grimly postponed most share issues, unofficial local reports claimed that the new listing of Guangzhou Investment, the property investment arm of the government in the booming southern Chinese province of Canton, had been oversubscribed by 235 times.

And outside one skyscraper in the frenetic business district of Central, someone was still paying for workmen to assemble giant Christmas presents. Some people, at least, were looking beyond the fall-out expected this week from Chris Patten's attempts at modest political reform in the colony.

It will not just be the belligerent Peking politicians that the Hong Kong Governor has to fend off this week. On Friday evening, it emerged that the stockbrokers and fund managers had been preparing their revenge. A group of more than 400 were said to be backing a campaign to publish an open letter in the next few days calling on Mr Patten to withdraw his blueprint. Perhaps with visions of this well-heeled mob marching on Government House for a public lynching, the former Conservative Party chairman told reporters he was looking forward to reading the missive.

He might also have reminded them that after Friday's unexpected 290-point rebound, the Hang Seng index was still 12 per cent down on the week but only 5 per cent below its level on 6 October, the day before he unveiled his proposals for greater democratic representation. And, at the moment, the index is still a healthy 22 per cent up on the beginning of the year. Much of what was knocked off the market last week was the gains after Mr Patten's speech. North American institutions, optimistic that a Sino-US trade war had been averted at the last moment and encouraged by the commitment to economic liberalisation at the Chinese Communist Party's 14th Party Congress, had bought heavily into the Hong Kong market for its exposure to China's fast-growing economy - despite the impending row over the Patten plan.

But an internal revolt this week would highlight accusations that Mr Patten has lost the support of Hong Kong's business and financial communities, traditionally the bedrock for any Governor. As China's opposition to his plans for political reform has intensified, so has the outcry against him from some sections of the business lobby.

The first concerted attack came on 9 November, just three days before the stock market surged to its all-time high. The Business and Professionals Federation (BPF), which has about 160 of the biggest companies and professional organisations as members, urged Mr Patten to drop the two proposals at the heart of China's objections. Both concern the arrangements for the 1995 elections to Hong Kong's parliament, the Legislative Council (Legco). Echoing demands from China, Vincent Lo, the BPF's chairman, said: 'We are very concerned that some elements of what the Governor proposed in his constitutional reform are not going to achieve a smooth transition (in 1997) and convergence with the Basic Law (China's mini-constitution for Hong Kong after sovereignty reverts back).' The platform amounted to a call for capitulation to Peking's pressure tactics - and this was while the market was riding high.

Mr Lo's claim that the BPF's stance had the support of its members was soon called into question after the Hongkong Bank, Swire Pacific and Jardine Matheson said they had withheld their backing. It then emerged that Mr Lo had circulated the BPF's paper to all members, on the understanding that no response would be taken as agreement. Only 19 members did respond, of whom 10 opted out. Therefore, the main support was essentially passive, though the BPF had clearly tapped into real anxieties.

In the weeks since, pro-Beijing business groups have become increasingly vocal in their criticisms of Mr Patten. The Federation of Hong Kong Industries, headed by Legco councillor and businessman Stephen Cheong, last week urged Britain and China to resolve their differences, adding that China was the 'ultimate constitutional authority' to interpret the Basic Law. The British side maintains that all the proposals are consistent with the Basic Law.

Hong Kong Chinese businessmen with close links to Peking are also routinely given access to senior mainland officials - and they return to the colony bearing their bad tidings. Legco member Henry Tang Ying-yen headed a Textile Council visit that returned last week after a meeting with the Director of the Hongkong and Macau Affairs Office, Lu Ping. The message was that China was willing to go further to force the Governor to back down.

If this gives the impression that Mr Patten is now isolated from most of the Hong Kong business world, things seem more fragmented behind the scenes. 'There are those businessmen who honestly disagree with Mr Patten's strategy because they think China will never back down and Hong Kong will be damaged in the process. Then there are those who have, or hope to have, extensive business and trade interests with the mainland and who are looking to improve that relationship by coming out against Patten. Then there are those, perhaps younger and with smaller companies, who support him but who cannot risk antagonising the mainland and therefore keep silent,' said one observer.

After all, Hong Kong's much-vaunted economic prospects are primarily as the gateway to southern China, the world's fastest-growing region.

Jimmy McGregor, the Legco member representing the General Chamber of Commerce, is something of a lone voice from business in backing what Mr Patten is trying to do, though he also points to growing anxiety about the lengths to which China is willing to go in response.

While backing most of Mr Patten's package, he also believes that some of the proposals will have to be amended.

Mr McGregor says it is wrong to assume that Mr Patten has little support among Hong Kong Chinese businessmen. 'Many Chinese support what I am saying - smaller and bigger companies. And many non-Chinese companies that are sitting on the fence are opposed to Patten.'

John Walden, once a senior Hong Kong civil servant and now a commentator on the territory's affairs, said: 'There is, I think, a lot of unarticulated support for Patten. With the rule of law goes the unviolability of contracts.' Last week's share price plunge was prompted by Peking's threat not to accept any Hong Kong government contracts that run beyond 1997, unless first approved by China.

The political row has also eclipsed the early widespread business support for the rest of Mr Patten's policy speech. Martin Barrow, a Legco member and director of Jardine Matheson, said Mr Patten's popular pro-business initiatives, such as the drive for government efficiency, should be remembered. The business community has maintained its advisory role and a new Governor's Business Council has been formed.

This week, there may be further stand-offs when the Sino-British Joint Liaison Group meets in Hong Kong. In October, Mr Barrow quoted an old Chinese proverb in the Legco debate on Mr Patten's plans: 'If one does not start with a bit of a fight, one does not build a close understanding.'

(Photograph and graphic omitted)