Hong Kong was a colony of the United Kingdom, ruled by a governor for 156 years (except for four years of Japanese occupation during WWII) until 1997, when it was returned to Chinese sovereignty. China had to accept some conditions, stipulated in the Sino-British Joint Declaration, such as the drafting and adoption of Hong Kong's mini-constitution before its return. The Basic Law ensured Hong Kong will retain its capitalist economic system and own currency (the Hong Kong Dollar), legal system, legislative system, and people's rights and freedom for fifty years, as a special administrative region (SAR) of China. Set to expire in 2047, the current arrangement has permitted Hong Kong to function as its own entity in many international settings (e.g., WTO and the Olympics) rather than as a part of China. The Chinese renminbi is not legal tender in Hong Kong. Likewise, the Hong Kong Dollar is not accepted in stores in China. With this arrangement, a permit or visa is required when passing the borders of Hong Kong and China, people in Hong Kong generally hold Hong Kong SAR passports rather than Chinese passports. The official languages are a major factor besides the history of the former colony that has made Hong Kong and China distinct from each other, as Cantonese and English are the most widely used languages in Hong Kong while Mandarin is the official language of China. The central government in Beijing maintains control over Hong Kong's foreign affairs as well as the legal interpretation of the Basic Law. The latter has led democracy advocates and some Hong Kong residents to argue that the territory has yet to achieve universal suffrage as promised by the Basic Law, leading to mass demonstrations in 2014.
Deng Xiaoping proposed to apply the principle to Hong Kong in the negotiation with the British Prime Minister, Margaret Thatcher over the future of Hong Kong when the lease of the New Territories (including New Kowloon) of Hong Kong to the United Kingdom was to expire in 1997. The same principle was proposed in talks with Portugal about Macau.
The principle is that, upon reunification, despite the practice of socialism in mainland China, both Hong Kong and Macau, which were colonies of the UK and Portugal respectively, can retain their established system under a high degree of autonomy for at least 50 years after reunification. What will happen after 2047 (Hong Kong) and 2049 (Macau) has never been publicly stated.
Chapter 1, Article 5 of the Hong Kong Basic Law, the constitutional document of the Hong Kong Special Administrative Region, reads:
The establishment of these regions, called special administrative regions (SARs), is authorised by Article 31 of the Constitution of the People's Republic of China, which states that the State may establish SARs when necessary, and that the systems to be instituted in them shall be prescribed by law enacted by the National People's Congress in light of the specific conditions.
The SARs of Hong Kong and Macau were formally established on 1 July 1997 and 20 December 1999 respectively, immediately after the People's Republic of China (PRC) assumed the sovereignty over the respective regions.
The two SARs of Hong Kong and Macau are responsible for their domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Important cultural effects are exemption of the SARs from mainland laws mandating the use of simplified characters in publishing and Mandarin in public education and most broadcasting. The diplomatic relations and regional defence of the two SARs however, is the responsibility of the Central People's Government in Beijing.
Hong Kong continues using English common law and Macau continues using the Portuguese civil law system.
In Hong Kong, the system has been implemented through the Basic Law of Hong Kong, which serves as the "mini-constitution" of the region, and consistent with the Sino-British Joint Declaration. Similar arrangements are in place with Macau. Under the respective basic laws, the SARs have a high degree of autonomy and enjoy executive, legislative and independent judicial power, including that of final adjudication. They formulate their own monetary and financial policies, maintain their own currencies, formulate their own policies on education, culture, sports, social welfare system, etc. within the framework of the basic laws.
As stipulated by the Basic Law, while the Central People's Government of the PRC is responsible for foreign affairs and defence in relation to the SARs, representatives of the Government of the SARs may participate, as members of delegations of the PRC, in diplomatic negotiations that directly affect the Regions, and in other international organisations or conferences limited to states and affecting the region. For those international organisations and conferences not limited to states, the SARs may participate using the names in the form of Hong Kong, China and Macau, China. As separate economic entities, both SARs of Hong Kong and Macau are members of the World Trade Organization. Hong Kong is also one of the member economies of APEC.
The Hong Kong Basic Law also provides constitutional protection on various fundamental human rights and freedoms. Specifically, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and international labour conventions which are implemented under Article 39 of the Hong Kong Basic Law and the Hong Kong Bill of Rights Ordinance.
Some international observers and human rights organisations have expressed doubts about the future of the relative political freedoms enjoyed in Hong Kong, and about the PRC's pledge to allow a high degree of autonomy in Hong Kong. They considered, for example, that the proposals in Article 23 of the Basic Law in 2003 (which was withdrawn due to mass opposition) might have undermined autonomy. On 10 June 2014, Beijing released a new report asserting its authority over the territory. This ignited criticism from many people in Hong Kong, who said that the Communist leadership was reneging on its pledges to abide by the "one country, two systems" policy that allows for a democratic, autonomous Hong Kong under Beijing's rule.
Nonetheless, the governments of the People's Republic of China and Hong Kong both consider the principle to have been successfully implemented, quoting official reports of both the United Kingdom and the United States.
The Central People's Government in Beijing maintain relations with Hong Kong government through the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region in Hong Kong. For Macau, Beijing uses the Liaison Office of the Central People's Government in the Macao Special Administrative Region in Macau. While the counterpart offices of the Hong Kong government for the Central People's Government in Beijing is the Office of the Government of the Hong Kong Special Administrative Region in Beijing, and Macau government's office in Beijing is the Office of the Macau Special Administrative Region in Beijing.
The disappearances of five staff at Causeway Bay Books – an independent publisher and bookstore – in October to December 2015 precipitated an international outcry. At least two of them disappeared in mainland China, one in Thailand. One member was last seen in Hong Kong, but apparently had found his way to Shenzhen, across the Chinese border, without the necessary travel documents. The October disappearances were muted, as unexplained disappearances and lengthy extrajudicial detentions are known to occur in mainland China. The unprecedented disappearance of a person in Hong Kong, and the bizarre events surrounding it, shocked the city and crystallised international concern over the possible abduction of Hong Kong citizens by Chinese public security bureau officials and their likely rendition, and the violation of several articles of the Basic Law and the one country, two systems principle. It was later confirmed that they are under detention in mainland China although most had reappeared in Hong Kong and cancelled their missing persons' reports with the police. On 16 June 2016, shortly after he returned to Hong Kong, Lam Wing-kee gave a long press conference in which he detailed the circumstances surrounding his eight-month detention, and describing how his confession and those of his associates had been scripted and stage-managed. Lam indicated the involvement of the Central Investigation Team, which is under direct control of the highest level of the Beijing leadership. His revelations stunned Hong Kong and made headlines worldwide, prompting a scurry of counter-accusations and denials from mainland authorities and supporters.
This system has also been proposed by the PRC government for Taiwan, but the Government of the Republic of China has refused this suggestion (it has also been claimed that the system was originally designed for Taiwan in order for it to be reunified with the PRC). More specifically, special provisions for the preservation of the military in Taiwan have also been proposed by the Chinese Communist Party (the ruling political party of the PRC), unlike that of Hong Kong and Macau, which are territories protected by the People's Liberation Army (PLA) of the PRC. All of the major political parties in Taiwan, however, including those that lean towards Chinese reunification, have come out strongly against the "One country, Two systems". Some proposed instead "One country, Two governments", which was opposed outright by the PRC government, while some proposed that the "one country" highlighted in the system should be the ROC instead of the PRC. One of the few Taiwanese who have publicly supported the "One country, Two systems" is Li Ao, a Mainland-born novelist.
Although the "one country, two systems" guarantees that Hong Kong's economic and political systems will not be changed for 50 years after the British handover in 1997, Mainland Affairs Council of the Republic of China has cited 169 cases in which they claim the PRC has breached the right of the people of Hong Kong to self-rule and severely intervened in the judicial system as well as freedom of speech.
Since the accession of Hu Jintao as the General Secretary of the Communist Party of China on 15 November 2002, the PRC has stopped promoting immediate unification via "one country, two systems", although it remains official policy. The "one country, two systems" framework was not mentioned in the Anti-Secession Law of the People's Republic of China passed on 14 March 2005 to prevent the growing Taiwan independence movement at that time. A new policy of gradual economic integration and political exchanges is now preferred under the 1992 Consensus: this new policy was emphasised during the 2005 Pan-Blue visits to mainland China in April 2005 as well as all subsequent major cross-strait exchanges, especially after Ma Ying-jeou from the pro-reunification Kuomintang party won the 2008 Republic of China presidential election. During his visit to Beijing in March 2012, former Kuomintang (KMT) Chairman Wu Po-hsiung proposed the one country, two areas (Chinese: 一國兩區) framework to govern the cross-strait relations. During the 2013 National Day of the Republic of China address on 10 October 2013, President Ma Ying-jeou addressed the public stating that people of both sides of the Taiwan Strait are all Chinese by ethnicity and that cross-strait relations are not international relations.
Due to the growing pressure for the pro-independence Democratic Progressive Party (DPP) to engage in the cross-strait development over the past recent years developed by KMT-CPC, the DPP finally softened its stance on its Taiwan independence movement when the former chairman Frank Hsieh visited Mainland China on 4–8 October 2012, a groundbreaking visit by the highest rank in DPP, although he claimed that this trip was done in his private capacity and as a non-politician. The DPP also established its party China Affairs Committee on 21 November 2012 and proposed the Broad One China Framework (Chinese: 大一中原則) on 27 May 2014 led by former chairman Shih Ming-teh.
Jiang (2008) notes that the concept of "one country, two systems" is based on the Seventeen Point Agreement for the Peaceful Liberation of Tibet signed in 1951, and that its mechanism is similar to how the Qing emperor integrated new territories it had conquered by permitting local elites in these regions to continue to enjoy power for a time and to exercise autonomy without apparently threatening distinct local customs. As the concept was merely a "tactical and transitional arrangement", a point of view argues that the territory of Hong Kong will gradually experience the same fate as Tibet since 1959 – forced assimilation and tight direct control by the central government. Over time, full assimilation, and abolition of local autonomy, would take place in a manner "illustrative of a similar Chinese imperial expansionist mentalité".
However, international law expert, Eckart Klein, opposes argumentations based on the Seventeen Point Agreement for the Peaceful Liberation of Tibet, stating "The so-called Seventeen-Point Agreement of 1951 also in no way constitutes such consent, since, as a contract signed under duress, it is legally invalid."
The 14th Dalai Lama's 2005 proposal for "high-level autonomy" for Tibet, evolved from a position of advocating Tibetan independence, has been compared to "one country, two systems". He has said that his proposals should be acceptable to China because "one country, two systems" is accommodated for in the Chinese Constitution. State media rejected this claim, pointing out that "one country, two systems" was designed for the capitalist social systems of Hong Kong and Macau, which had never existed in Tibet.