The grave economic and social problems of the Hong Kong Special Administrative Region (HKSAR) are closely associated with the Hong Kong-style capitalism as well as its deeper constitutional contradictions. The HKSAR was established under the shadow of the powerful remnants of the old regime and has created a structural dilemma for governance. The issue of political dominance in the HKSAR pits the “Gradualist Democracy” establishment against the “Radical Democracy” opposition in a zero-sum game, which has hindered the construction of the new regime. Furthermore, the establishment camp is by no means homogenous, as the discord between the new and old forces cannot be smoothed away. Due to the lack of necessary tools for unifying them, there is no guarantee that the establishment will always stand together with the executive branch of the HKSAR and the expected governance coalition has not materialized. The nature of Hong Kong’s problem is the identity problem, and in the future the mainland and Hong Kong need to strive for the utmost flexibility under an inflexible framework. Ultimately, the solution lies in whether the central government has sufficient institutional confidence to reshape its internal and external image.