One China, Two Systems

 China’s relationship with Hong Kong is a long and complicated one that can be confusing to outsiders. I can’t count the number of conversations I’ve had with my parents explaining that if my Chinese visa expires I can just go to Hong Kong. “But Hong Kong IS China” they say. They aren’t wrong…entirely…no wait, are they? The answer is…yes? 

Why All the Confusion?

As of July 1st, 1997 the sovereignty of Hong Kong was transferred from the British empire to China. Despite the transfer, Hong Kong has its own currency (Hong Kong Dollar), maintains a patrolled border with China, and Hong Kong residents have Hong Kong passports. Despite these differences, Hong Kong is officially a part of the People’s Republic of China (PRC) as a territory known as the Hong Kong Special Administrative Region (HKSAR).

Travelling to Hong Kong has a completely set of rules and procedures and it’s nearly impossible to use Chinese RMB in Hong Kong. Let me try explaining away this confusion with a bit of history.

The Opium War

 An Artists' Depiction of the Opium War

An Artists' Depiction of the Opium War

During the final decades of the Qing dynasty, the British Empire and China maintained a very strained, one way economic relationship through the ports of Canton (Guangzhou). Britain was highly dependent on Chinese goods such as tea, silk, and porcelain while there was no market in the Chinese interior for British goods. To compound this trade imbalance, China exclusively accepted payment in silver, which was a major bottleneck since at the time Britain was operating on the gold standard

The British empire realized that they could simultaneously obtain silver and begin making a profit on their Indian colony by trading Opium to China. At the time Opium wasn’t illegal in China but wasn’t a major industry either. Britain’s opium trade with China was a success on all fronts. It was in fact so successful that the net flow of silver into China was reversed in 1820. There was more silver being exported from Chinese coffers than was coming in. This created a problem for the Qing treasury.

Looking to stem the abuse of opium and regain control over its silver reserves, China banned the trade, sale and use of opium. Opium traffickers that were caught, were given the death sentence. The tension between the British and Chinese led to the Opium war which was won by the British and was terminated with the signing of the Treaty of Nanking. The Treaty of Nanking opened the Chinese market to global commerce  (including opium) and also included the handover of Hong Kong to the British in 1841.

The Handover

In the late 70’s and early 80s after more than a century of British rule, China began talks with Britain to regain sovereignty over Hong Kong. The negotiations resulted in the Sino-British Declaration which stated that on July 1st 1997, the sovereignty of Hong Kong would be transferred back to China.

The Hong Kong Basic Law

The Sino-British Declaration outlined the transfer of sovereignty and provided the framework for Hong Kong Basic Law. The Hong Kong Basic Law functions as a constitution for the Hong Kong SAR and ensures the following:

  • Hong Kong will retain it’s capitalist system while China retains its socialist system
  • Hong Kong would retain the Hong Kong Dollar
  • Hong Kong would retain their own existing legal and parliamentary system
  • Hong Kong will control its own borders, immigration and visa policies
  • Hong Kong will maintain its own diplomatic relationships including membership in international organizations such as the WTO and IOC
  • The people of Hong Kong are guaranteed their existing rights and freedoms
  • The Hong Kong Basic Law is set to expire in 2047, and it isn’t certain how this will affect Hong Kong.
 Hong Kong in the 50's

Hong Kong in the 50's

 Present Day Hong Kong

Present Day Hong Kong

The existence of Hong Kong under Chinese sovereignty but with a completely separate government, judicial system, economy, and immigration policy is commonly referred to as “One China, Two Systems”. A term that was coined by Deng Xiaoping.

I recently had the pleasure of travelling to Hong Kong and it’s fairly obvious that they function under a completely separate system than the rest of China. The culture is different. It’s much more expensive to live in Hong Kong. Even traffic is completely different in Hong Kong. With that being said, it isn’t entirely obvious until you visit as to how different it is from the mainland. The only way you can truly understand it (other than reading a wordy historical blog post *ahem*), is by visiting both.

PS I’m not a historian. Leave me alone. 


Mohit is GoEast's CTO. He's currently learning about Chinese, Chinese culture, and Chinese business. He one day hopes to be a Chinese man.