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On 1st July 1997 the crown colony of Hong Kong officially reverted to Chinese sovereignty, ending 156 years of British rule.

The island of Hong Kong held little more than a few fishermen until the arrival of Europeans in the 19th century. British merchants had been exporting opium to China in exchange for Chinese goods, outraging the Chinese and leading to the first Opium war (1839-1842), in which the victorious British occupied Hong Kong. British victory in a second Opium war (1856-60) added the territory of Kowloon.

Nature having provided it with an excellent natural harbour, the next half-century saw Hong Kong transformed into the hub of Britain’s China trade. In 1898, the colony was expanded when Britain negotiated a 99-year lease of the New Territories. The colony’s population expanded to reach 1.6m by 1941 but by the end of the Second World War the effects of Japan’s harsh occupation left the colony with just 650,000 inhabitants.

However once peace resumed people were quick to return and Hong Kong’s populations reached 2.2m by 1950 and Hong Kong became a major centre for the manufacture of cheap goods of all sorts. By the 1970s, financial services began to take on increasing importance, and as low-wage jobs moved to the mainland and the importance of manufacturing fell as Hong Kong became a global financial hub.

At the same time tensions began to grow between Britain and China over the future of the colony. With the opening of China to international trade and investment in 1978, the potential for Hong Kong to be China’s economic gateway to the world became increasingly evident, and Deng Xiaoping, China’s leader, refused to consider an extension of British control.

In 1984 Deng and Margaret Thatcher agreed that Hong Kong would revert to Chinese rule on 1st July 1997 with the expiry of the lease on the New Territories, but that it would be a “special administrative region” under the principle of “one country, two systems”. Hong Kong’s political, social and economic freedoms were to be largely preserved.

Tensions quickly surfaced between relatively free Hong Kong and less-free China. The Legislative Council, a mini-parliament, has half its seats reserved for (generally pro-China) business and professional groups. Hong Kong’s chief executive is not directly elected, but chosen by committee. The Chinese-approved constitution that governs Hong Kong, calls for eventual universal suffrage, but China refuses to consider direct elections until 2017 at the earliest. Since 2003 an annual pro-democracy march has been held on July 1st each year.

In recent years the Hong Kong economy has become more integrated with that of the mainland, and Beijing is now taking more open control of Hong Kong’s stock exchange.

Capitalism has flourished in Hong Kong to the extent that the Council has made tackling inequality a priority. They have their work cut out. The city, long famous for having the highest concentration of Rolls-Royces per head of population in the world is now selling 96 Ferraris like they were going out of fashion.

But the democratic deficit is still there – no elections for at least another 10 years.

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