By Stephen Vines reporting from Hong Kong

Hong Kong has just completed a rather subdued series of celebrations to mark the fifth anniversary of its reversion to Chinese sovereignty.

They were subdued because the former British colony has spent most of these years struggling to overcome an unexpectedly tenacious economic recession.

When the Union Jack was hauled down five years ago a former shipping tycoon called Tung Chee-hwa was installed as the new head of government.

At last, so we were told, this quintessentially business city was to have a business leader and just to emphasise the point his title is chief executive.

Weathering the storm

Before taking office he made all the usual noises about being committed to free markets and maintaining the government's well established laissez-faire policies.

Tung Chee-hwa: a former shipping tycoon

However Mr Tung could not possibly have known that he would be hit by the full force of the Asian financial crisis within days of taking office.

At first the new chief executive and his colleagues went into denial, asserting that Hong Kong was different from the rest of East Asia and would weather the storm without too much turbulence.

Denial was soon abandoned when it became clear that not only was the storm mounting but that Hong Kong was getting even more battered than elsewhere.

Stock prices slumped, economic growth went from impressive to depressing and then the most holy of Hong Kong holy cows, the property market, slammed into rapid decline.

Squeals of anguish

As an avowed believer in free markets it might have been expected that Mr Tung would have allowed the property market to find its own level.

However the tycoons who control this market are very influential both in Hong Kong and on the Chinese mainland.

The government virtually paid to build Disneyland

Their squeals of anguish were answered by a freeze on land sales and a decision to slash government property sales.

Then, in the summer of 1998, the government launched an unprecedented raid on the local stock market, allegedly to prevent speculation against the local currency but in reality providing an enormous boost to share prices - albeit temporarily.

There was also intervention in the foreign exchange markets and the stock futures market.

However it did not end there.

Government involvement

Next the government concluded that it needed to direct business development and took the extraordinary step of luring a Disney theme park to Hong Kong by becoming the majority shareholder in the project and virtually paying for it to be built.

Elsewhere the government decided that it needed to create hi-tech clusters to encourage the development of added values industries.

Two of these centres have just opened for business amidst considerable scepticism about why the government should be involved in the first place - and whether the private sector will follow where the government has led.

Meanwhile the economy keeps sinking.

Jobs threatened

Fortunately there is still a great deal of wealth in Hong Kong and things are far from reaching desperation level.

However desperation is apparent in some quarters as more and more people are being thrown out of work, many more are threatened with unemployment and even more have had to accept pay cuts.

Those facing the consequences of the recession have been firmly told by the government that they should not look to the state for help because, yes, you've guessed, such assistance would contradict Hong Kong's cherished laissez-faire polices.