How a Colony Became a
Dynamic Economic Giant
Asia History

Research Report
Web Resources

“Hong Kong has shown the world how dynamism and stability can be the defining characteristics of a successful society”
– Prince Charles of Wales.

    The following contains the detailed account of how the British were able to transform a barren island into a great economic force in Southeast Asia.  The overall story of Hong Kong is one that has never been seen throughout history. Hong Kong gains uniqueness within the international community due to the fact that its survival and history are complete legal matters that were never expected to work.

Historical Background

     The island of Hong Kong is one that is full of amazement and uniqueness.  The history of the island is one that has set the foundation for its present and its future. In the 1840s, Hong Kong was an empty land mass populated by a few thousand fisherman and villagers, living both on the land and on boats (Shipp 7).  The events that would soon overtake the island would transform it into one that the world has never seen.  It was this barren island that the British saw tremendous potential and wealth.  The Hong Kong that the world knows today was transformed and acquired by the British as a trophy in a drug war over one hundred fifty-six years ago. The British had controlled the trade on the Indian subcontinent for some time so they set up a trade route from India to China.  Britain strengthened their control in the area by trading English silver, cotton, woolens, furs, and other goods for Chinese silks and teas and then gradually adding a flow of opium into China.  The British learned of the tremendous economic strength of the opium trade.  It was in this commodity that the British saw endless amounts of financial prosperity (Shipp 7-8).  It was the opium trade that would change future of Hong Kong and the position it would take in the modern world.

    With increasing amounts of opium entering China throughout the years of trade, the Chinese government tried to implement a drug control that would stop the trade as much as possible.  These actions resulted in retaliation in 1840 when sixteen ships and four thousand soldiers moved from Hong Kong up the southeastern China coast to Guangzhou (Shipp 8).  This act and retaliation started what history has named the Opium War.  The British won a quick victory and within the terms of the Treaty of Nanjing, the British crown claimed Hong Kong.  Along with Hong Kong and a large reparation fee, Great Britain had the Chinese open up five new ports for international trade.  These ports were located in Xiamen, Fuzhou, Ningbo, Shanghai, and Guangzhou.  A British consul would be in charge of trade and the welfare of British citizens in each city (Flowerdew 8-11).

Research Report

    Total control of Hong Kong was reached in a process of three stages.  First was the formal ceding of Hong Kong in 1842, second was the Kowloon peninsula in 1860, and finally the British took control of the New Territories in 1898, which was to be for a ninety-nine year lease (Flowerdew 16).   The treaty that lost the New Territories was a big slap in the face for the Chinese, signed by Li Hung-chang, who has gone down in China’s history as a shame because he accepted the unequal treaty (Roberti 42).  With Hong Kong completely under British control they were able to implement rule of law and control their newly acquired colony.  Hong Kong underwent changes that most likely would not have occurred without the presence of a western rule.  From total control that the British crown was able implement reforms that made Hong Kong into the one known in the present day.  Though at first, the transition wasn’t easy due to the fact that a large percentage of the land was destroyed by typhoons and most the population was ill from fever.  Along with these misfortunes, crime was sweeping the newly claimed territory because of the uncertainty and unruliness of the population.  With Hong Kong being a trading zone for the west to the east, it developed into China’s main center of trade.  Over the next few years the British government and the Chinese took steps in promoting trade within the Treaty of Tianjin in 1858 and then the Convention of Beijing in 1860.  These two events enabled the right to travel in China and the opening of more treaty ports.  By the time 1880 hit, Hong Kong controlled twenty-one percent of China’s total exports and thirty-one percent of its imports (Flowerdew 16-17).

    Since the day that Hong Kong was colonized by the British it was used as a center of commerce.  Over the years Hong Kong developed into an economic leader in Southeast Asia.  It is said that Hong Kong’s economy took a positive turn when Sir john Cowperthwaite served as Finance Secretary from 1961 through 1971. Cowperthwaite was able to maintain complete control over the colony’s finances.  During his service he was able to raise the standard of living for most residents of the island.  Though it is believed that Cowperthwaite’s policies widened the economic gap between the classes (Welsh 460-462).  Then as the years went on, Hong Kong’s economy took off in ways the world had never seen before.  “Hong Kong’s phenomenal growth is a success story. Indeed, explanations are necessary to help explain a “developmental pattern which has no counterpart in the world””(Chan 133).  It is commonly believed that Hong Kong success is a direct result of the political stability the British maintained. The ability for Hong Kong to stay away from socio-cultural and political degradation enabled a rapid growth in the economy (Chan 133-137).  Hong Kong’s free market economy is highly dependant on international trade.  Due to the fact that natural resources are scarce, items like food and raw materials must be imported.  In Hong Kong, imports, exports, and reexports, are all higher than the GDP in dollar value.  With exports of clothing, textiles, footwear, electrical appliances, watches, and toys, Hong Kong plays a significant role in the world economy. “From a global perspective, Hong Kong’s importance comes from its role as the eighth largest world trade entity”(Chan “Global” 1).  One of Hong Kong’s largest trading partners is China, when it comes to investments and other business maters.  Hong Kong’s economic success has made its per capita GDP comparable with big economic countries in Europe.  The GDP averaged a strong growth rate of five percent in 1989 through 1997 (CIA).   The theory of why this was so, was the way the British maintained the government and did not encourage the people to take active roles in politics.  This meant that the people of Hong Kong were to be more devoted to economics.  Hong Kong was intended to be a moneymaker for the British Empire and that is the way that it was maintained (Chan 133-137).

On September 26, 1984 the United Kingdom and the People’s Republic of China accomplished a landmark decision.  The Joint Declaration on the Hong Kong question was signed on December 19, 1984 and was officially ratified on May 27, 1985.  The Joint Declaration contained over eight thousand words, which is the second longest international agreement the People’s Republic of China had ever devised. These eight points as appearing in The Future of Hong Kong by Chiu, Jao, and Wu were the main factors in the Joint Declaration that was devised and agreed upon by the British and Chinese governments (Chiu, Jao, and Wu 10).

1. After 1997, Hong Kong will become a Special Administrative Region of
    The People’s Republic China under Article 31 of the PRC Constitution.  It will
    enjoy a “high degree of autonomy” except in foreign and defense affairs.
2. Hong Kong will be vested with executive, legislative, and independent judicial
    power, including that of final adjudication.
3. Hong Kong’s chief executive will be appointed by the PRC after elections or
    consultation in Hong Kong.  The government of Hong Kong will be composed
    of local people.
4. Hong Kong shall maintain the capitalist economic and trade system for fifty
5. The existing social and economic system will remain unchanged. Freedom of
    Speech, movement, the press, assembly, strike, and religion and other freedoms
    will be protected by law.  Similarly, private property rights will be protected.
6. Apart from displaying the national flag and national emblem of the PRC, Hong
    Kong may use a regional flag and emblem of its own.
7. Hong Kong may participate in relevant international organizations and
    international trade agreements.  It may establish a official and semiofficial
    economic and trade missions in foreign countries, using the name “Hong Kong,
    China” to maintain and develop relations and conclude and implement
    agreements with states, regions, and relevant international organizations in
    appropriate fields.
8. The PRC defense force stationed in Hong Kong shall not interfere in the internal
    affairs in Hong Kong and the expenditures for these military forces shall be
    borne by the PRC’s Central People’s Government.
    According to Deng Xiaoping, “China would resume exercising sovereignty over Hong Kong. The colony would be allowed to maintain its capitalist system.  China would continue to practice socialism”(Roberti 42). The “one nation two systems” idea of rule was what the planed implementation was for the future of Hong Kong.  This meant that Hong Kong was to return to China’s sovereignty but have a completely different system of politics and economics.  The name that Hong Kong would obtain is, Hong Kong Special Administrative Region, also known as Hong Kong SAR.  When the Joint Declaration was ratified it was met with positive thoughts and feelings amongst the public of Hong Kong.  There were however fears about what would happen after the transfer from within Hong Kong and the rest of the world. These fears were logical even though Deng Xiaoping stated that, “Everything will remain the same” (Roberti 42).

    On the eve of July 1, 1997 the world stood still and watched history in the making.  Midnight stuck and Prince Charles spoke his somber goodbyes and wishes of hope for the future to a land and a people that have been loyal subjects to the crown.  The scene in the newly finished convention center was one that placed every one in silence.  Among the many Chinese dignitaries present, Jiang Zemin sat motionless with the other dignitaries from the PRC on the left and Prince Charles, Prime Minister Tony Blair, and Christopher Patten, Hong Kong’s last governor, sat on the right.  Above their heads rustling in a generated wind were the flags of the United Kingdom and the colonial flag of Hong Kong, which were then lowered as he concluded his speech.   At that time the two flags were lowered and were replaced with the red flag of the People’s Republic of China and new flag of Hong Kong SAR took to the wind, one hundred fifty-six years of colonial rule ended.  It was then that it was realized that the two British flags would never fly over the island of Hong Kong again.  Then President Jiang Zemin approached the podium and spoke.  “After Hong Kong returns to the People’s Republic of China, the “one nation two systems” will be implemented…Nothing will change.  The PRC will control foreign affairs and defense.  Hong Kong SAR will remain an open and free port”(Jiang Zemin/Televised Ceremony). Then the world watched as the British left saddened the Chinese threw the biggest celebration and the second largest fireworks display ever (Televised Ceremony).  The uncertainty and questions of Hong Kong’s future that were once fears became a reality.

Historical Significance

    The topic of Hong Kong is one that has interested the world for over a century.  Being a barren land stolen from one empire by another during a drug war.  The occupation of Hong Kong was unlike any other occupation that the United Kingdom had performed.  Instead of having negative affects on the land as was seen in India and in America, the British were a positive presence.  The demographics of the island were that of the Chinese-Asian decent.  This made it difficult at times to make maters easier and more importantly gave the PRC more justification to want the land back.  The question of future of Hong Kong SAR is one that will only be answered when the world witnesses the events first hand.  Hong Kong has grown into a society that must be maintained and the PRC needs to realize that “one nation two systems” needs to be maintained.  The people of Hong Kong are Chinese and have the same pride about their culture as those living on the mainland.  The difference between the two is that the population of Hong Kong SAR has had a different past, a past with different fortunes and misfortunes.  After the fifty years of Basic Law and when the Joint Declaration expires it is up to the PRC to make the best and ethical decision in regards to the future of Hong Kong Special Administrative Region.


Works Credited

“Hong Kong.” Encata Encyclopedia 2000.  Microsoft Corporation 1993-1999.

“Hong Kong Transfer.” Televised on ABC. July 1, 1997.

Quote by Jiang Zemin. “Hong Kong Transfer.” Televised on ABC. July 1, 1997.

Quote by Prince Charles. “Hong Kong Transfer.” Televised on ABC. July 1, 1997.

Works Cited

Chan, Ming K. Global Dimensions of Hong Kong’s Transition Toward 1997.  Center for
     International Studies: Milwaukee, 1995.

Chan, Ming K. Precarious Balance. M.E. Sharpe Inc: Armonk, 1994.

Chiu, Hungdah, Y.C. Jao, and Yuan-li Wu. The Future of Hong Kong. Greenwood Press:
    Westport, 1987.

Flowerdew, John. The final years of British Hong Kong. St. Martin’s Press, Inc: New
    York, 1998.

Roberti, Mark. The Fall of Hong Kong. John Wiley & Sons, Inc: Toronto, 1994.

Shipp, Steve. Hong Kong China. McFarland & Company, Inc: Jefferson, 1995.

Walsh, Frank. A Borrowed Place. Kodansha America Inc: New York, 1993.

Web Resources

“Hong Kong.”  CIA: The World Fact Book 2000. January 2000.  World Fact Book. 14 April. 2002 <>  This Web page is a United States Government site with facts about multiple world states with information on all topics.

"Hong Kong en Images." Hong Kong Photo Travel Guide. July 2001.  14 April. 2002
 <>  This Web page is an informational travel guide that offers many great photos of top sites in Hong Kong. Photos from this report also appear on this page.

Site Created by:
Michael V. DeFilippis