Hong Kong is the most capitalist place in the world, yet since July 1st, 1997, it has been an autonomous region of the sole communist superpower. The mainland's economy has been described as "socialism with Chinese characteristics"; one description of the people who live in Hong Kong is "Chinese with Hong Kong characteristics".

The agreement in 1984 between Britain and China allowed Hong Kong to enjoy its autonomy for 50 years, while Beijing took charge of foreign and military affairs - one country, two systems.

The concept was launched by Deng Xiaoping as the solution to the problem of how to recover the British colony for China without undermining its wealth-creating success. Hong Kong would pursue its capitalist destiny without threatening the dominance of the communist regime.

Jonathan Fenby knows his subject well. He was editor of the South China Morning Post, Hong Kong's leading English-language newspaper, from 1995 to 1999.

His book begins with a brief introduction to Hong Kong and China, respectively, followed by a diary-like account of events throughout 1999. He has a journalist's easy-to-read style and, as a newspaper editor, had access to all echelons of Hong Kong society. The account of daily life in the city offers a fly-on-the-wall view of the realities of a unique economic experiment.

Contradictions are everywhere. Followers of a religious sect are imprisoned on the mainland, Hong Kong's favourite pigtailed leftist got a suspended sentence for shouting from the public gallery in the Legislative Council. The prevailing myth of Chinese brotherhood hides the reality that China is Hong Kong's biggest competitor, in particular Shanghai (Alcatel, which employs 10,000 in the region, is locating its Asian headquarters there).

Perhaps the biggest problem is that Hong Kong may not fulfil its massive potential because its people are not allowed to have a say in its future.

Jonathan Denby succeeds in teasing out these problems, but his story frustrates the reader in the end. A take on luxury-yacht parties, gangsters, pollution and all the rest is entertaining, but no sustainable arguments are offered to answer the big questions posed in Dealing With The Dragon.

Which is all very well if you want to add to your collection on south-east Asia or would not say no to a good light read.

jmulqueen@irish-times.ie