Officials are cautiously optimistic that Peking has decided to negotiate on the issues of regaining sovereignty over the colony in 1997, although they intend to scrap the political system left behind by the British.
The two sides announced yesterday that the Sino-British Joint Liaison Group (JLG) will start a long-delayed round of talks for three days next Tuesday. British officials hope they will agree on non-political questions held up by the row over the reforms introduced by the Governor, Chris Patten.
This week, senior Chinese officials have made remarks that suggest they are willing to negotiate. Hong Kong trade union officials who visited Peking quoted Qian Qichen, the Chinese Foreign Minister, as saying that soured ties between the two countries should be 'corrected and improved'.
Yesterday's official People's Daily newspaper quoted Lu Ping, the most senior Chinese official for Hong Kong affairs, saying he hoped the financing of the new airport could be settled quickly. On Monday he said an agreement on Hong Kong's military sites 'will be achieved rapidly'. Another positive sign is the expected visit in July to Peking by Alistair Goodlad, a minister of state at the Foreign Office, at the invitation of China's Foreign Ministry.
Next week's JLG meeting, the first since December, will provide a test of the new climate. It is the job of the JLG to sort out the technical, legal and administrative issues concerning Hong Kong's incorporation into China.
Informal meetings appear to have laid the groundwork for an agreement on military lands, including the contentious question of how many prime real estate sites will be inherited by the People's Liberation Army.
Compromise over political disputes remains out of the question. The colony's Legislative Council is to vote on the final part of the political reform bill on 29 June. But China said again this week that whatever the outcome, the system would be scrapped in 1997. Analysts suggested Peking's new co-operation over non-political matters was an attempt to sideline Mr Patten's democratic reforms to the voting system.