Anyone pondering the fate of Hong Kong after 1997 should spend some time with James Louey, grandson of the founder of the Kowloon Motor Bus Co. At 30, he's one of Hong Kong's young, privileged, never-idle rich. He works at the family-controlled company, heading the human-resources section, but also runs Phantom, a public relations and music company he founded for fun in 1992. "Before five I'm at the bus company," says James, "after five I'm at Phantom. It's as simple as that."

And so it was, James, for Hong Kong until very recently: Britain ran the government, spoke for its colony in international trade negotiations, built the housing blocks that are home to almost 3 million people and dispatched a few too many lawyers and stockbrokers to apartments with ceiling fans in the elite midlevels of the Peak--the mountain that towers over the territory--where they mumbled to themselves about the "locals." All the Hong Kong Chinese had to do was work and get ahead. They did, and everything operated fine, since everyone knew his task. Hong Kong is rich by any standard--per-capita income exceeds that of Britain--and toiling as hard as ever, before five and after.

Now comes a new era--and quickly. In 22 months, China will regain control of the territory wrested away a century and a half ago in a defeat that ever since has festered as a national shame. And as China prepares to take back its lost territory, Hong Kong's vaunted economy is suddenly stumbling with persistent inflation and a nine-year high of 91,000 unemployed. The colonial administrators, weary of their tussles with Beijing, and with an eye on the clock that seems to be ticking ever faster the closer the world gets to 1997, are leaving office early to roll up the carpets. Suicides are climbing--unemployed fathers have killed themselves and their families--along with divorce and substance abuse. As never before, there is talk in Hong Kong of families living below the poverty line--a term that few realized existed in the local vernacular. Insecurity is in the air, as well as a very un-Hong Kong tinge of depression. What to do?

The answer is pure Hong Kong: work at it. In the past few amazing weeks, interest and participation have surged in a sphere that never before concerned the Hong Kong people: politics. Famously apathetic about local elections--there weren't many, and the results were largely meaningless--Hong Kong is suddenly alive with public debate and civic concern.

The focus is the Sept. 17 elections--the last under British rule--for the Legislative Council, or Legco, which used to be a rubber-stamp lunch club appointed by the British governor. The first direct elections, for 18 of the 60 seats, were in 1991. This time, voters in 20 geographical districts will elect their representatives directly, while the remaining 40 legislators will be chosen from elected members of district boards or through an arcane system of indirect elections with "functional constituencies'' based on membership in various trade groups, occupations and professions. China has promised to dismiss Legco in 1997, and cynics have long predicted its most notable attribute would be its stillbirth.

But it is easy to forget the cynics out on the stump; in Hong Kong's narrow, neon-lit, urban caverns, a lusty little democracy is aborning. A canny, articulate and startlingly responsible-talking political class has emerged from law offices, newsrooms, brokerage firms and family businesses to lead a sophisticated public debate on the issue that concerns all: how to deal with China. That is the first surprise. The second is the support being shown these neo-politicos--many with accents acquired at Oxford and Stanford--by members of the factory and clerk class who finally see a chance to seize their future.

The result is an almost new Hong Kong, taking on politics as it took on fresh industries and economic competitors in the past. "We were never given the chance to participate," says Suen Leung, a 65-year-old retired taxi driver who turned up to query candidates at one of the many public forums held across the territory. "Now we have the chance, and we're going to go for it."

Such enthusiasm may be rewarded with disappointment, bitterly and brutally, with Beijing as an adversary. But there's a growing hope it won't. China has fulminated against the election and vowed to abolish it the moment Beijing resumes sovereignty. The question is whether it appoints its own succeeding body--or reappoints the legislators elected this coming Sunday. The latter is a notion put forward even by the pro-China political groups. Tsang Yok-sing, leader of the pro-Beijing Democratic Alliance for the Betterment of Hong Kong, or DAB, says, "We want to prove to the Chinese government that there is nothing threatening about this kind of election." By personally lobbying in Beijing, Tsang got permission for his group to take part in an election the communist leadership publicly re nounced. "What the Hong Kong people fear most," he admits, "is that on June 30, 1997, the legislature will be abolished, and China will appoint people to sit in the provisional legislature." The Chinese, he says, "are well aware that the biggest problem in the transfer of government is how to win the hearts of the Hong Kong people."

Those words hold a promise, how ever speculative, that this remarkable Hong Kong awakening will endure. And if politics is new to the bloodstream of the Hong Kong body politic, speculation surely is not. "These people will not give up," says Martin Lee, chairman of the Democratic Party, the big winner in the 1991 Legco elections. "When I tell them there is no hope, they still hope. The people who lose hope leave"--an option available to only a minority of residents. Adds James Louey, caught between double shifts that he bridges with a Rolls-Royce: "Hong Kong people are highly adaptable and intelligent. They're brave survivors as well."

It is a very late bloom for political consciousness in Hong Kong, for sure. But the colony was always a unique element in the British empire. Born for the purpose of trade, and living on it for 154 years, it is a place where the local populace, themselves a complex blend of peoples and dialects, have kept an unusual distance from their colonial rulers. When the first legislative council was formed in 1843, the Chinese were excluded, of course, along with the more dubious members of the European merchant class, particularly those in the opium trade, Hong Kong's dishonorable founding industry. Even after World War II, when Britain gave colonies around the globe independence or autonomy, the Hong Kong people remained aloof, satisfied with mercantile opportunities and asylum from the Chinese civil war and 1949 communist victory.

By 1986, when British journalist Jan Morris researched her book Hong Kong, she found "the very last of the classic British crown colonies," and went on to describe a political and constitutional immaturity at odds with Hong Kong's stature as one of the world's most advanced financial centers. Although Chinese tycoons had been awarded seats on the council by then, Legco remained a synonym for pomp and impotence. Full-page pictorials of its proceedings in the local press showed black-gowned members yawning, dozing or, in the case of female members, sporting the latest fashions in millinery.

But real change had begun in 1984, when Britain agreed to relinquish its 18th century treaty claims on Hong Kong island and Kowloon. The deal called for a hand-over of the whole colony to China when Britain's 99-year lease on the so-called New Territories expired on July 1, 1997. An annex to the Basic Law that was subsequently adopted for the Special Administrative Region of Hong Kong stipulated that if the last Legco was "in conformity" with the Basic Law, and its members swore loyalty to the new government, they could be reappointed for a two-year term.

When Governor Chris Patten arrived in Hong Kong in 1992, he introduced a package of election-reform measures designed to broaden the electoral base. The alterations, he said, were in accordance with the Basic Law. Beijing angrily disagreed. Relations plummeted, and hopes that the legislature that would serve before the hand-over and for two years after--a "through train," in local parlance--fell apart. As a result, China has pledged to disband the Legco sworn in by Britain and replace it with a provisional legislature.

Patten maintained that such a late fling with the democratic process was important to Hong Kong's future under China. His critics said it was a hypocritical scam, designed to cloak the British retreat in a tatter of honor. Whoever heard of a democracy based, they scoffed, on a legislature with a guaranteed life of 20 months? What good was a new Legco: Would it help Hong Kong stand up to China, or merely antagonize the leaders in Beijing? That was the debate, and it seemed destined to simmer permanently and soporifically on the op-ed pages. Until recently, when campaigning for Legco began, and the debate, in its full complexity, finally arrived on the streets of Hong Kong.

Wanchai is the Suzie Wong waterfront world of bars and dance saloons, but the streetwalkers of that era are today campaign workers distributing leaflets and chanting slogans. The Wanchai contest is between Peggy Lam, a sprightly widow with deep district roots and strong backing from the pro-China groups, and Christine Loh, an independent advocate of democracy who is a former commodities trader accused of capitalizing on her good looks and collecting modern art to boot. In Kowloon Central district, candidate Tsang of the DAB is smeared as an "astronaut" by his opponent, an epithet signifying that with family abroad, Tsang has the option of emigrating if things get really rough. But in all the Legco races, amid the usual campaign rhetoric, there's one main subject: China and how to cope with it. In an eastern district of the New Territories, Ray Lau is running against Hong Kong's most popular overnight politician, firebrand former journalist Emily Lau (no relation). Ray tells his constituents that Emily is a dangerous choice because she infuriates the mainland with her outspokenness. His campaign slogan: "To play safe, vote for Ray."

How to play safe with China is the main issue in a surprisingly ideological contest. The election presents voters with several major parties, plus a significant number of independent candidates, promoting very different ideas of what a safety net looks like. One view is that Hong Kong's main chance for the future is to elect a slate of leaders of such moral and political strength that Beijing will be forced to deal with them. That's a view embraced most passionately by the so-called democrats, composed of Lee's Democratic Party and independents such as Lau and lawyer-columnist Margaret Ng. Says candidate Ng: "My only hope is in the Legislative Council, and our ability to learn real fast."

Sitting in his book-lined law office during a break in campaigning, Martin Lee, the colony's most outspoken democrat, ticks off the three pillars of a democratic system--executive, judicial and legislative branches--and says the first two have already fallen, as they will be dominated by Beijing. "If I can get one," he says, "it will be better than none. The question voters will be asking themselves in this election is, Do we want to elect a legislature that will speak up for us on the important and sensitive issues, meaning anything to do with China, or do we want to elect people acceptable to China so as to ensure stability?"

The latter is the main arguing point of the pro-Beijing DAB, although Tsang says there's an important distinction between elected, pro-China legislators and those who may be merely appointed in the future: "We hope we can prove to the Hong Kong people that people like ourselves with the pro-China label and strong ties with the Chinese government can still win support from the general public." The third main party, the pro-business Liberal Party, has virtually the same pitch: elect a sufficient number of non-boat-rocking businessmen and China may actually accept the Legco.

The distinctions are subtle to the newly politically conscious, and no transcendent ideology is emerging. According to voter surveys, the new Legco will be fairly evenly divided between the democrats and pro-Beijing forces. "This election," stresses Tsang, "need not give rise to a legislature dominated by anti-Beijing politicians in Hong Kong."

There are other concerns, including the government's scheme to import some 25,000 cheap laborers, largely from China and elsewhere, and the slim benefits given to the unemployed. But the debate reverts again and again to whether the Legco elected Sunday will be a shield against China or a great, flapping red cape that incites rebuke. Already the next debate has begun. It concerns how to react if China dissolves Legco because it gets too aggressive in the next 20 months on either geopolitical or social-welfare issues. "If it [Legco] were to behave in a mindlessly populist way," warns Patten, "it would provide ammunition for all those who say we should do away with political parties"--such as those in Beijing. There's also concern that China will reconstitute it, minus a few of the more fiery members such as Martin Lee. "That's when our courage will be tested," says Emily Lau, who vows to resign if even a single legislator is excluded. "That is when we will find out who among us has guts to turn them down."

Guts and energy: Hong Kong has always had them. But considering that until 1990 membership in political parties was banned, few believed the former colony would be so susceptible to election fever. However, a six-year study by the Hong Kong Transition Project, led by a nine-member international team of social scientists, has proved that the political spirit has been alive in Hong Kong at least since Beijing's Tiananmen massacre in 1989. Though the voting rate was a low 39% in 1991's Legco elections, it's a deceptive statistic. According to Transition Project, 10% of the population feels it lacks the education to vote; 15% thinks the elections are a colonial ruse. And 7% to 10% of adults don't bother because they have foreign passports or plan to leave. Once those nonvoters are discounted, says project leader Michael DeGolyer, a political scientist at Hong Kong Baptist University, political enthusiasm among the remainder is running higher than in Eastern Europe, where political change also began in 1989.

Far larger territories have been absorbed by neighboring countries in the past; arguably, greater cities have been threatened, overtaken and even destroyed. What distinguishes the situation in Hong Kong is a radical change in destiny for a population so educated, self-reliant, averse to cant and so empowered by a belief, based on experience, in the possibility of achievement in life.

Listen to Lee, and imagine his words being uttered anywhere else in the world: "The success story of Hong Kong is built by people who operate on the philosophy that even though I am driving a bus, when I see a Rolls-Royce I don't resent it; I want my son to be sitting in the back of it one day."

The Legco elections, in their flourishing last hurrah, have given the lie to any notion that the people of Hong Kong are incapable of the group leadership never asked of them before. For only when it was given the chance could Hong Kong prove that it is one of the few places that doesn't need leadership, but breeds it.

--Reported by Sandra Burton, John Colmey, Francis Moriarty and Lulu Yu/Hong Kong