BEIJING: The July 1 demonstration in Hong Kong showed that its dissatisfactions were not primarily economic, as Beijing assumed.

Since a year ago, the economy has picked up and unemployment has declined. But 500,000 people still came onto the streets, braving record heat and suffocating pollution. The lessons for Beijing go beyond constitutional issues.

Hong Kong's protests are an assertion of its right to be different; to implement the "One Country, Two Systems" concept, to retain freedoms of expression and not to be bossed around by party apparatchiks and local big business protecting its oligarchic privileges and mainland investments.

Beijing need not worry too much about Hong Kong per se. It is too small and its population too well-behaved to cause the instability that Beijing purports to fear as a byproduct of liberal ideas.

But the lessons are there, and if not learned could eventually result in a repeat of the student uprisings of 1989. They may not be learned if Beijing closes its mind to the fact of the demonstrations as illustrated by its news media either ignoring it or providing a willfully dishonest explanation of the Hong Kong crowds.

Indeed, mainland denial has only reinforced Hong Kong's fears of an erosion of its freedoms. These have been under threat from a nasty mix of personal threats against outspoken people, tycoon pressure on the media and mainland demands for "patriotism."

Beijing believes that prosperity and removal of many social controls have dimmed memories of 1989 and that continuing economic growth will buy stability for one-party rule. But Hong Kong suggests that this formula does not last forever, even assuming that fast growth can continue without an occasional sharp recession.

July 1 also showed that Hong Kong was resentful of patronizing claims that the economy had picked up thanks to the beneficence of Beijing. For sure, it has benefited from mainland growth as well as from the global pickup.

But people are well aware that the Tung Chee-hwa government grossly exaggerates the benefits of the Closer Economic Partnership Arrangement (CEPA) with the mainland, which was hastily concluded last year.

While Tung trots out patriotic phrases about profiting from closer cross-border links, ambitious Pearl River Delta administrations are busy competing more fiercely with Hong Kong. Unlike Tung, local officials on the mainland usually put local interests first.

The demonstration was as much driven by dissatisfaction with the nature and quality of Hong Kong government as by the lack of political representation.

The two are now closely connected. Beijing's efforts to discipline incompetent and corrupt officials may at times seem half-hearted, but in principle it recognizes that venality is a major threat to party rule. Yet Tung's government has appeared even less willing than its master to admit error or to dispense with incompetent officials.

The Hong Kong demonstrators clearly had in their sights the connections between politics and big business in Hong Kong. Barely a day goes by without one property tycoon or another being given some special deal.

In the past two weeks two companies controlled by the biggest of them all, former Tung business associate Li Ka-shing of the Cheung Kong/Hutchison group, have received the latest of many waivers from the rules of the stock exchange.

Vested interests also ride roughshod over Hong Kong's rapidly deteriorating environment and conspire with bureaucrats to bypass good governance procedures in the name of "development." The central government is trying to fight similar ills on the mainland, but is effectively encouraging them in Hong Kong.

These abuses do not in themselves prove the merit of government being elected by all, but they certainly create the kind of resentments that led to 1989.

It is naturally hard for a communist party system to allow diversification of political power. But for its own preservation it needs to recognize the sentiments at work in Hong Kong.

If it is unwilling to soften its position on the franchise, it should at least learn lessons from China's recent history and replace its appointees with ones Hong Kong people believe to be trustworthy and dedicated to advancing Hong Kong's interests.