A student passes a billboard of Hong Kong in Hong Kong June 12, 2007. Ten year after Fortune predicted that the return of Hong Kong to the motherland would sound the death knell for the Pearl of the East. In a cover story on its latest issue entitled "Hong Kong's future: Sunshine, with clouds", Time admits it made a mistake. [Reuters]

Ten years ago, Time's sister magazine, Fortune, predicted that the return of Hong Kong to the motherland would sound the death knell for the Pearl of the East. But in a cover story on its latest issue entitled "Hong Kong's future: Sunshine, with clouds", Time admits it made a mistake. The following are excerpts of the article.

These days, 10 is practically the new teen - as knowing, and as confused, an age. You think you understand who you are, but you don't, not really. You want to be independent, but you still need adult supervision. You are developing a sense of righteousness, but find it runs up against a pragmatic world where compromise is a necessity. Ten is a neat number, but a messy stage in life.

So it is with Hong Kong. At just past midnight on July 1, 1997, in a glittering and poignant ceremony, Hong Kong passed from being the last jewel of an old empire to a component of a new global power

Hong Kong matters not only because it is a vital driveshaft of the global economy, transmitting the raw power of China's (the mainland) manufacturing capability into a worldwide system for distributing consumer goods. The city matters because it is a unique experiment that will probably succeed but could possibly fail: the creation of a free, international city within China. In the short period since a collection of fishing villages were turned into a modern metropolis, Hong Kong has survived war, waves of refugees, pestilence, drought and economic near-implosions, consistently defying the doomsayers, repeatedly rebounding.

In the past 10 years alone, Hong Kong has lived through a crippling regional financial crisis, bird flu, SARS... The city's run of luck has often seemed near the end; Time's sister magazine Fortune once infamously, and incorrectly, predicted that its return to China would bring about its death.

Yet Hong Kong is more alive than ever. On the eve of the handover, the stock market index, a key barometer of Hong Kong's health, stood at the then record of 15,200; today it hovers near the 21,000 mark.

Property prices - in many ways the best measure of the territory's success because they are followed so closely by the man (and woman) on the Kowloon minibus - dipped after the handover and again after SARS, but are now once again rising to stratospheric levels.

"Things did not come to a grinding halt in 1997," says Sir David Akers-Jones, 80, a former acting governor who stayed on in Hong Kong after retiring. "Things continued Life went on."

But not, of course, in the way it had. Neither China (the mainland) nor its SAR has stood still in the past 10 years. Once, Hong Kong's preeminent preoccupation was the pursuit of wealth, and the place remains obsessed with money. (Only in Hong Kong would the website for an investment seminar be www.icanrich.hk.)

As it becomes ever richer, however, Hong Kong has realized that there's more to life than making a fortune. A civil-society movement has come into being, agitating about everything from the filthy air (though it is probably the cleanest of all China's cities) to preserving old buildings to helping the poor...

Hong Kong is a pulsating organism made up of the most enterprising conglomeration of humanity the world has ever known. That will never change. Identity crisis or no, Hong Kong understands that it's damned lucky to have become a part of China at so fortuitous a time, when the mainland is becoming ever freer and more open and in a position to give its hybrid, somewhat alien, child more opportunity than it could possibly have dreamed of.

"I can't see what reason people in Hong Kong have to be pessimistic," says economist David O'Rear.