Something of an institution in Hong Kong, David Tang is rarely out of the news for long. Often photographed in traditional Chinese attire, cigar never far from hand, Tang's friends are an eclectic group including everyone from senior Party officials to British royalty.

His China Club, set in the heart of Central in the old Bank of China building is a throwback to 1930s Shanghai and a popular hangout for Hong Kong's glitterati.

Tang's high profile and often-forthright opinions have made him one of the most recognizable faces in Hong Kong - his views encompass a wide variety of the issues that face Hong Kong today - some of which may raise more than an eyebrow. Though proudly Chinese, his education in England (he is trilingual, being fluent in Cantonese, Putonghua and English) and his network of contacts both local and foreign, leave him ideally positioned to see Hong Kong from both inside and out. "I don't think much has changed in business in Hong Kong since 1997," he notes on the day after the seventh anniversary of Hong Kong's return to the PRC. "We are still an economy underpinned by property, because that has always been the focus of government revenue and people's escalating wealth. Chinese think about whether you own your own place - it's a very Chinese thing."

Tang's business interests include the China Club in Hong Kong and its sister clubs in Beijing and Singapore, the distribution of Cuban cigars through Asia via his Pacific Cigars, the private club Cipriani Hong Kong, as well as Shanghai Tang, his flagship designer boutiques.

The Shanghai Tang brand harks back unabashedly to 1930s Shanghai, combining as it does traditional Chinese fashion in a contemporary context or as Tang has succinctly put it himself: "Shanghai Tang is the best of 5,000 years of Chinese tradition exploding into the 21st Century."

Established in 1994, Shanghai Tang is being positioned as the first global luxury Chinese brand. With 15 branches worldwide, including ones in Paris, London and New York and the 12,000-square-foot flagship store in Central, Hong Kong, the brand can already be said to have begun to bridge the East-West fashion gap. But Tang does acknowledge that the success of the Shanghai Tang brand in kick-starting the popularity of traditional Chinese clothes in the West may be harder to replicate in China. "Persuading those yuppies not to wear jeans and T-shirts and not to eat Kentucky Fried Chicken is much more difficult than you think," he says with typical directness. "The mindset is that the local ginger is not as hot. There's just simply much more status for mainlanders to be swishing around in West-ern clothes."

After suff-ering a 70 per cent loss in turnover over a period of three months last year during the SARS crisis "which couldn't have been worse", Tang notes that Hong Kong's natural resilience is coming to the fore. "What is extraordinary about Hong Kong is that notwithstanding all the political arguments, regional turmoil and SARS, Hong Kong has been very resilient. That is partly because we have not devalued. And that is also a reflection on the economy improving back from SARS to a level where property prices have gone up," he says.

Recent developments - particularly the mainland's Individual Visit Scheme allowing greater numbers of mainland Chinese to visit Hong Kong independent of tour groups - are but a taste of the potential the mainland has to offer Hong Kong.

"Hong Kong has been propped up by an enormous increase of mainlanders and the sky's the limit in terms of retail and tourism. They might, on average, not spend as much or stay in Hong Kong as long, but the sheer numbers compensate for that."

Tang readily acknowledges the importance of the Western markets, especially as out of the 15 Shanghai Tang boutiques, only two are in the mainland and these are "very modest at the moment". But he expresses a keen desire to develop the business on the mainland. "My vision was always that having established a foothold in the West and having established Shanghai Tang as a global brand, we should always go back to the mainland; as we Chinese say, "'having been soaked in salt water'." Even if you take the whole of western Europe and North America, you are only talking about 500 to 600 million people, whereas China alone has 1.4 billion. And there's no reason why mainland Chinese should not be wearing more Chinese clothes."

Talk of the imminent decline of Hong Kong as the mainland economy revs on is refuted point blank. "There is also another fallacy that we are just a service industry and not a manufacturing industry. I've looked at that proposition and it might not be as true as it first appears to be.

Although we have pushed our manufacturing base across the border, the actual companies are still based here. In my view, it doesn't make a manufacturing company any less of a manufacturing company just because it doesn't manufacture physically in Hong Kong," he says.

But a note of caution underpins Tang's confidence in Hong Kong's economic recovery. "I am very worried because it is an artificial revaluation [in property prices].

Land is something which, contrary to popular belief, is an intangible commodity, certainly in Hong Kong because the government chooses to release land for sale and if they don't, there is no supply. And it is also alarming to me sometimes that the plots of land offered are invariably taken by the usual suspects, and I'm not sure that that's a 'market'," he says.

Tang's also views the Hong Kong dollar as overvalued - a view that is all the more credible given his contacts include some of the "most senior people in government".

"There is no way in which our Hong Kong dollar is not overvalued by at least 20 to 40 per cent," he says. "That's why the people, or certainly the government, are very reluctant to think about unpegging the Hong Kong dollar from the US dollar, simply because nobody would know how far it would fall. If it were to be unpegged tomorrow, it could freefall as far as 50 per cent."

He also mischievously cites the impact on the 200,000 or so civil servants should there be such a devaluation of the Hong Kong currency.

"The civil service effectively runs Hong Kong, and if the dollar were to devalue by say 30 to 40 per cent, the effect on their pensions would be catastrophic," he says.

(HK Edition 07/07/2004 page16)