Hong Kong is one of the most famous locations in the entire world. Its sprawling and majestic skyline makes Manhattan look like Toledo, and its bustling harbor port creates the ideal background for this cosmopolitan territory of 6 million inhabitants. The major issues facing this sleek and modern area, are the ramifications of the recent merging of Hong Kong into the sovereign power of the Peoples Republic of China.

Before it was reestablished as part of China in July 1997, Hong Kong had been one of the pearls of the British Empire. Great Britain annexed Hong Kong after the Opium War at the Treaty of Nanking in 1843, and subsequently established a lease of Hong Kong at the Convention of Peking in 1898, a lease which was to last 99 years.

Two major developments are essential in understanding the reunification of Hong Kong and China. The first is the Sino-British Joint Declaration of 1984, which established that Hong Kong's social and economic system would remain unchanged until 2047. The other major factor in the assimilation of Hong Kong into China is the basic law of 1990 which provided the established framework of Hong Kong's reunification with China and continues to act as the primary legal precedent for Hong Kong's governmental structure. Under the provisions of both the Joint Declaration and Basic Law, Hong Kong became a Special Administration Region (SAR) of China, or as Deng Xiaoping so lucidly described, "one country, two systems."

Since the turn over of Hong Kong in 1997, the Chinese promise of "one country, two systems" has appeared in danger of dissipating into nothing more than a cheap slogan. Everything depends, however, on what China meant by "two systems." Basic Law 5 states that "the previous capitalistic system and way of life (of Hong Kong) shall remain unchanged for 50 years." At the time the Basic Law was enacted, Hong Kong was thoroughly undemocratic. Almost all power in running the British territory was in the hands of a Royal appointed colonial governor and a governmental approved bureaucracy. It was not until the last years of British control that democratic changes were pursued with such vigor. Many democratic reforms were made to Hong Kong in the early 1990's, which severely hampered the transition process that had already been agreed to by the Chinese and British governments. The Chinese rightfully viewed the democratic initiatives as a slight against its authority, for it appeared a bit odd for an authoritarian government to abruptly clamor for reform after 90 years of undemocratic rule. Therefore, when China insists on "one country, two systems," it is referring to the continued system of authoritarian rule already in place before the hasty democratic reforms of Hong Kong took place. The Basic Law was approved on April 4, 1990, well before democratic influences penetrated the regional government.

Now, one may claim that Chinese authoritarian rule is much less appealing than British authoritarian rule, but one can not legitimately claim that the Chinese system under the Basic Law is any more restrictive than the old British regime. In fact, a greater proportion of native Hong Kong residents are involved in the current government than at any time under the British Crown.

This does not mean that China has somehow reformed its tendency for overreaction when dealing with Hong Kong. China's preoccupation with stability and control worked negatively in the initial stages of Hong Kong's reunification, as it often found itself at variance with even the Basic Law. In order to stamp out the democratic reforms of the former government, China went as far as abolishing the Legislative Council approved under the Basic Law and appointed a Provincial Council closely linked to Beijing. The Provincial Council in turn selected Tung Chee-hwa, widely considered a Beijing loyalist, as Hong Kong's Chief executive. China also attempted to provide a litmus test for civil servants and judges by requesting an oath of loyalty to the PRC regime. Many of these violations of the Basic Law were not carried out to their full extent, but they tarnished the reunification policy of China to a very great extent.

There was a victory of sorts for the Basic Law and the SAR status of Hong Kong in February of 1999. At the beginning of the year, the first major confrontation arose between the Beijing and the Hong Kong administration region since the reunification of 1997. The row was over Chinese immigration into Hong Kong. The Hong Kong Court of Final Appeal ruled that Chinese born children with one parent legally living in Hong Kong had the right to citizenship in the province. The court also ruled that the Chinese immigration restrictions on the children of Hong Kong residents were invalid under the Basic Law. This was a cause of concern for the Chinese government, which had established a policy to deter wide scale emigration into Hong Kong. The Beijing government asked the Hong Kong court to review its decision. Although under great political pressure from Beijing to reverse the ruling, the court stood firm in upholding the autonomous powers granted to Hong Kong via the Basic Law. The court, however, angered many by clarifying its decision a month later after considerable urging by both the Beijing and Hong Kong governments. In its clarification, the Court of Final Appeal reiterated the supremacy of the National People's Congress (NPC) over the sovereignty of Hong Kong and recognized Beijing's power to amend the Basic Law.

Nonetheless, the issue was resolved, at least temporarily, by preserving the legitimacy of the Basic Law as the supreme legal source for the Special Administration Region of Hong Kong. President Jiang Zemin and the NPC do not intend to press the Hong Kong Court of Final Appeal any further on the matter of immigration laws.

Jiang and the NPC have been very careful about disrupting the stability of Hong Kong. Though China's political interpretation of the Basic Law does not always coincide with that of Hong Kong's residents, China is extremely receptive to the economic assets of Hong Kong, which are immense. China knows better than most that political and social instability could lead to a flight of international capital and trade from Hong Kong. It therefore will attempt constructive dialogue, mutual trust, and limited autonomy for Hong Kong.

It is because of Hong Kong's economic vitality that its reunification with China became such an important issue, not only for Great Britain and China, but for the world. This small region of approximately 400 square miles is an extremely important economic hub for banks and financial institutions worldwide. Hong Kong is also the US's fifteenth largest trading partner and has the world's busiest container port, making it of strategic economic interest to the United States, Japan, Taiwan, Korea, and especially China. Hong Kong Executive Summary Country Commercial Guides USDOC, International Trade Administration. It was the economic reforms of Deng Xiaoping in the late 1970s that drastically elevated the economic importance of Hong Kong. China is Hong Kong's largest export and contributes significantly to Chinese world trade. In 1997, almost 60% of cumulative foreign investment in China originated from or transmitted through Hong Kong, plus over 5 million Chinese workers are employed in Hong Kong. Given these statistics, it is no wonder that China not only welcomes the capitalistic system of Hong Kong, but also is attempting further capitalistic reforms in the mainland itself.

Despite the Asian Economic Crisis of 1997-1998, Hong Kong managed to hold its own in a region stricken with economic hardship. The Hong Kong stock market did suffer some serious hits, but unlike other Asian governments, Hong Kong was quick to react to the crisis with assertive economic reforms. Though unemployment has been a major problem for this region, other economic indicators point to a recovery in the coming year or so. Ironically, in its first year of reunification, Hong Kong depended heavily on the continued expanding economy of China, upon which Hong Kong relies for exports. At a time when other Asian countries were incapable of absorbing Hong Kong's exports, China's economy remained relatively robust, giving Hong Kong an export outlet besides the US.

The parameters of Hong Kong's new status as a part of the People's Republic of China appeared to have been laid out in the first year of reunification. They are: (1) The capitalistic system of Hong Kong will be tolerated and even supported by China, (2) Governmental reforms of the Basic Law will not be accepted unless Beijing approves, (3) Democracy in Hong Kong will be unwelcome by Beijing, (4) Beijing will push for a greater influence of Chinese language and culture in Hong Kong, and (5) Hong Kong will fully be assimilated under the sovereignty of China and under the jurisdiction of the National People's Congress.

Hong Kong will remain what it was in the past: an authoritarian, capitalistic and entrepreneurial centered society, much like that of Malaysia, Singapore, Indonesia, and Thailand. Except now the authoritarian rule will be the responsibility of the Peoples Republic of China, a stipulation which still deserves much prudent evaluation.

Tsang, Steve. Hong Kong, An Appointment With China. New York: (I.B.Tauris, 1997).

Buckley, Roger. Hong Kong: The Road to 1997. New York: (Cambridge, 1997).

Wang, Enbao. Hong Kong, 1997. London: (Lynne Rienner, 1995).

Rafferty, Kevin. City On The Rocks. New York: (Viking, 1989).

Hong Kong: Executive Summary Country Commercial Guides USDOC, International Trade Administration. http://www.stat-usa.

"This Man Tung." The Economist 1 Feb. 1997 p. 39

Platt, Kevin. "Hong Kong's Rules Rule, For Now To Protect Hong Kong's Free-Market Image, China Lets A Row Fade Over A Court Challenge To Its Power." The Christian Science Monitor 12 Mar. 1999, p.6.

"Undermining Hong Kong." The Economist 30 Mar. 1996 p. 38.

Landler, Mark. "In Clarification on Immigrants, Hong Kong Court Bows To China." New York Times 27 Feb. 1999, late ed., sec. A:5.

Richburg, Keith B. "Hong Kong Accepts China's Legislature; Clarification Sought on Residency Ruling." The Washington Post 27 Feb. 1999, final ed., sec. A:13

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