History

The British took control of Hong Kong in 1841 following the Opium Wars. European trade with China had been taking place since the 16th century, but as European demand for tea and silk grew, the balance of trade became more and more unfavourable to Europeans, who were expected to pay in silver. In 1773, the British unloaded 70,000kg of Bengal opium, and the Chinese taste for the 'foreign mud' grew exponentially. Alarmed at the drain of silver from the country and the increasing number of addicts, the emperor banned the drug trade. The Europeans, with the help of corrupt Chinese officials, managed to keep the trade in opium going until 1839, when the emperor again issued orders to stamp it out.

The British sent an expeditionary force to China to exact reprisals, secure favourable trade arrangements and obtain use of some islands as a British base. The force blockaded Canton (now called Guangzhou) and a number of other ports, ultimately threatening Beijing. The British pressured the Chinese into ceding Hong Kong Island to them in perpetuity. Both sides ultimately repudiated the agreement, but Commodore Gordon Bremmer led a contingent of naval men ashore on 26 January 1841 and claimed the island for Britain. A series of conflicts followed, with the British backed by French, Russian and American interests. A combined British and French force invaded China in 1859, forcing the Chinese to agree to the Convention of Peking, which ceded the Kowloon Peninsula and nearby Stonecutters Island to the British. In 1898, the British also gained a 99-year lease on the New Territories, which they felt essential to protect their interests on Hong Kong Island.

Prior to WWII, Hong Kong began a gradual shift away from trade to manufacturing. This move was hastened by the civil war in China during the 1920s and by the Japanese invasion in the 1930s, when Chinese capitalists fled to the safer confines of the colony. When the US embargo on Chinese goods during the Korean War threatened to strangle the colony, it was forced to increase its manufacturing capacity and develop service industries, such as banking and insurance. Hong Kong's existence was threatened again when the Communists came to power in China in 1949 and during the Cultural Revolution in the 1960s. Although the Chinese could have re-taken Hong Kong with ease, China was as reliant on Hong Kong as Hong Kong was on China.

In December 1984, the British agreed to hand over the entire colony when the lease on the New Territories ran out in 1997, rather than hang on to a truncated colony consisting of Kowloon and Hong Kong Island. The agreement theoretically allows Hong Kong to retain its pre-1997 social, economic and legal systems for at least 50 years after 1997. As the handover approached, controversies raged over the building of Hong Kong's expensive new airport and the amount of democracy the Chinese were willing to accept.

Hong Kong has suffered fallout from Asia's economic crises in the late 1990s, and has experienced rising unemployment, falling property prices and close to zero growth. However, although not as robust as it has been, Hong Kong is still a vibrant financial centre - and one of the world's great cities. China's official policy with regard to Hong Kong is 'one country, two systems', and the common view is that as long as Hong Kong continues to make money (and little noise) its autonomy is assured. But a number of crucial interventions by Chinese authorities in Hong Kong's affairs have made it evident that there is not quite as much autonomy going on as the slogan suggests. Nevertheless, the European Commission has described Hong Kong as one of the freest societies in Asia despite not having full democracy. It appears, on the surface, that little has changed since the handover.

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