AP

Hong Kong goes crazy for cute. This is the city where mobs fight not over politics or religion, but over the Snoopy dolls handed out at McDonald's. Young toughs cruise around town in pastel sports cars festooned with stickers, while the surliest of cab drivers peer over dashboards populated by rows of tiny, bobbing, powder-blue Smurfs. Don't even ask about the Hello Kitty Cafe.

So it's no wonder that much of Hong Kong virtually squealed for joy last week over the chance that Disneyland--the very Shangri-La of Cute--might come to town. During the week of anticipation the local bourse rose 7.5%; the stock of one property company that owns land on Lantau Island, the site of the proposed new theme park, shot up 28%. Even Donald Tsang, Hong Kong's starchy, bowtied Financial Secretary, seemed on the verge of glee when he announced last Wednesday in his annual budget speech that officials hoped to ink a deal with Disney by June 30. Both Shanghai and Manila quickly squeaked that they remained in the running, but most Hong Kongers seemed convinced that they had won the race--and a reprieve of sorts. One columnist described the plan as "the only substantial good news" since Hong Kong returned to China in 1997. That, however, may be too good to be true.

The exuberance of Disney boosters--some 90% of the population, according to one poll--has much to do with the city's otherwise black mood. Unemployment runs at a record-high 5.8%. In his budget address Tsang also announced that GDP fell 5.1% in 1998, while retail sales volume dropped 16.7%; tourism receipts declined 14% last year. The past two years have witnessed bizarre health crises--avian flu, flesh-eating bacteria in local waters--and an embarrassingly clumsy opening for the city's overhyped new airport. "In a place that's been battered with so much negative news, it's very important to have some sense that things are turning around," says Peter Hills, director of the Center of Urban Planning and Environmental Management at the University of Hong Kong.

A Disney theme park could bestow much more than a psychological lift. Analysts estimate that reclaiming the land for the complex would generate some $774 million in spending. Building the facilities themselves could add another $645 million, while a surrounding network of hotels, restaurants and shops could drum up $1.3 billion. Credit Suisse First Boston predicts that during an estimated five years of construction the project could contribute 0.3% annually to the territory's GDP growth--and 0.2% after the park opens. Close to 100,000 low-skill jobs could be created, and according to a February report from DBS Securities, a local Disneyland could draw more than 6 million visitors a year. (By comparison, Disney parks in Tokyo and Paris--the only other locations outside the U.S.--drew 17 million and 12 million visitors last year, respectively.) Those customers, says Credit Suisse First Boston, could spend more than $900 million on mouse ears and Mulan dolls--equal to 4% of Hong Kong's total retail sales.

But such visions of a magically rejuvenated kingdom remain little more than fantasy at this point. After a four-day meeting in Orlando, Florida last month, Hong Kong officials only convinced Disney to begin negotiations; relations are still so fragile that authorities--who speak of the American conglomerate as a lover whose "dowry" they are deciding--have imposed a gag order on the talks. Analysts warn, too, that even a successful deal does not guarantee instant riches for the territory. Property giants Cheung Kong Holdings, HKR International and Sun Hung Kai Properties--who all own land around the Lantau site, a small cove named Penny's Bay--would likely enter into joint-venture agreements with Disney and see revenue only after the facility opens. The government, which reportedly owns most of the land intended for the facility itself, may well offer the parcel to Disney for free as an incentive.

PAGE 1  |  2