In January 1841, as a result of the defeat of the Qing Dynasty of China in the First Opium War, the Chinese government were force into ceding Hong Kong Island in perpetuity to the British Crown under the Convention of Chuanpee, beginning the British administration of Hong Kong. The agreement was later rectified in August 1842 in the Treaty of Nanking, after which the Crown Colony of Hong Kong was established with Victoria City (present day Central) as the capital. After the defeat of China in the Second Opium War, the Kowloon Peninsula was occupied by Britain in 1860 as a result of the Convention of Peking, adding to the Crown Colony. A 99-year lease of additional land on the mainland (the New Territories) and surrounding islands for defense and further development was granted in 1898 as the colony’s final territorial change.
When World War II broke out, British Prime Minister Winston Churchill declared that Hong Kong was an “impregnable fortress.” However, it was only a reality check for the British as most of their troops were tied down fighting the Germans in Europe, and Hong Kong was not given enough resources for its defence. As a result, after just slightly more than two weeks of fighting, Hong Kong was surrendered to the Japanese on 25 December 1941, making it the first time the British lost a colony to an invading force. After the war, despite American assurances that Hong Kong would be restored to China, the British moved quickly to regain control of Hong Kong. However, they had lost their aura of invincibility and could not continue to rule Hong Kong the way they used to before the war and all racist restrictions on non-Europeans owning property on prime real estate land were lifted. Hong Kong’s post war recovery was astonishingly swift and within 2-3 months all post-war economic restrictions were lifted and Hong Kong became a free market once again.
After the communists took control of mainland China in 1949, many Chinese people, especially businessmen, fled to Hong Kong due to persecution by the communist government. Unlike the restrictive policies imposed by the communists in China, the British government took a rather hands off approach in Hong Kong, as proposed by former financial secretary John James Cowperthwaite, which led to a high degree of economic freedom. Under such conditions, businesses flourished in Hong Kong and its economy grew rapidly, earning it a place as one of the East Asian Tigers. In 1990, Hong Kong’s GDP per capita surpassed that of Britain, the first time a colony’s GDP per capita surpassed that of its colonial masters. Hong Kong is now the world’s fourth largest financial centre after London, New York and Tokyo.
The massive influx of mainland Chinese refugees led to the rise of the Kowloon Walled City, which was a convolution of maze-like alleys, utter darkness, cramped space, and unsanitary conditions. Reports claim that dog meat was served (something which is quite common in Mainland China, but considered intolerable by the British) and that unlicensed physicians practised there. The Walled City was evacuated and subsequently demolished in 1993, and the Kowloon Walled City Park was built on the site.
After negotiations between China and Britain in 1984, it was declared that the New Territories and outlying islands were to be given back to China in 1997. As Hong Kong developed, these regions became heavily integrated with the permanent cession. As a result, by the time the lease was approaching expiration, it was considered highly impractical to separate the colony into two. Initial British proposals for joint administration of the entire colony were rejected by China and the international community, and in 1984 the Sino-British Joint Declaration created a “one country, two systems” policy on the Question of Hong Kong, giving Hong Kong back to China on 1 July 1997. Hong Kong thus became a SAR of the People’s Republic of China. Under the principle “One Country, Two Systems”, Hong Kong is to be granted a high degree of autonomy for at least 50 years after the handover, including remaining in charge of its own capitalistic economy, maintaining a separate border and immigration control from China, and not being affected by various restrictions that apply in mainland China such as news censorship and foreign exchange controls.
In accordance with the Joint Declaration, the Basic Law was enacted to serve in effect as a mini-constitution for the Hong Kong SAR. In theory, Hong Kong enjoys a high degree of autonomy in most matters except foreign affairs and defence. In practice, it is more complex than that. On the one hand, Beijing exerts much influence, on the other, there are increasing calls pushing for a more democratic regime and universal suffrage. In fact, the campaign for full democracy has been a major issue for China regarding Hong Kong in recent years, with protests drawing hundreds of thousands of residents demanding for full elections and denouncing the Chinese Communist Party, with some even proposing outright independence from China. In fact, Hong Kong today is far more democratic than it ever was under British rule. In those days, a colonial governor with unlimited powers was appointed by the British without any local election or input at all. Now, a chief executive, chosen by an electoral college, has replaced the Colonial Governor.
Although part of China, Hong Kong operates like a tiny country with its own currency, laws, international dialling code, police force, border controls and the like. It is also a member of international organisations that are normally restricted to sovereign states such as the WTO, APEC and the IOC.