Introduction
Hong Kong is a special region of the People's Republic of China (PRC) with certain political and economic freedoms based on the notion of "one country, two systems." The former British colony is a global financial capital that has thrived off its proximity to China, but in recent years many in Hong Kong have become frustrated by growing economic disparities in the city and weary of delays in democratic reform.
Democracy activists in Hong Kong rally against the 1997 handover to China and the 1989 Tiananmen Square crackdown every year, but protests in the fall of 2014 reached record levels. Experts say that Beijing views these demonstrations as a direct challenge to its legitimacy, and fears a political compromise could have dangerous implications for other regions like Taiwan or Tibet.
Hong Kong is a special administrative region (SAR) of China that is largely free to manage its own affairs based on "one country, two systems," a national unification policy developed by Deng Xiaoping in the 1980s. The concept was intended to facilitate the reintegration of Taiwan, Hong Kong, and Macao with sovereign China while preserving their unique political and economic systems. After more than a century and a half of colonial rule, the British government returned Hong Kong in 1997. (Qing Dynasty leaders ceded the territory to the British Crown in 1842 after China's defeat in the First Opium War.) Portugal returned Macao in 1999, and Taiwan remains independent.
Hong Kong's Basic Law, the city's constitutional document, safeguards the city's "capitalist system and way of life" and grants it "a high degree of autonomy," including executive, legislative, and independent judicial powers for fifty years (until 2047). Chinese Communist Party officials do not preside over Hong Kong as they do in mainland provinces and municipalities, but Beijing still exerts considerable, although indirect, influence through loyalists that dominate the regions political sphere.
Freedom of the press, expression, assembly, and religion are protected rights. Hong Kong is allowed to forge external relations in certain areasincluding trade, communications, tourism, and culturebut Beijing maintains control over the region's diplomacy and defense.
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A metropolis of more than seven million people, Hong Kong is a global financial and shipping center that has thrived off its proximity to the world's second-largest economy, ranking first in the world in trade as a percentage of GDP. Relatively low taxes, a highly developed financial system, light regulation, and other capitalist features make Hong Kong one of the world's most attractive markets and set it apart from mainland financial hubs like Shanghai. (Beijing unveiled the Shanghai Free Trade Zone in September 2013 to test some free market reforms, but it has disappointed investors thus far.) Hong Kong continues to take top spots in global economic competitiveness reports, ranking third in the World Bank's 2015 Doing Business report. Most of the worlds major banks and multinational firms maintain regional headquarters in the city.
Though Hong Kong's economic power has diminished relative to the mainlandits GDP has fallen from 16 percent of China's after the handover in 1997 to just 3 percent in 2014but commercial ties remain extremely tight. Hong Kong is China's second largest trading partner (after the United States), accounting for close to 10 percent of Chinas total trade. The city is also China's largest source of foreign direct investment (FDI) and a place where Chinese firms raise vast amounts of offshore capitalnearly eight hundred mainland enterprises list on the Hong Kong stock exchange. Meanwhile, Hong Kong relies heavily on the mainland. China accounted for just over half of the city's total trade in 2013, and was also the top source of FDI in Hong Kong.
Beijing's reluctance to allow Hong Kong to develop into a full-fledged democracy with free and fair elections is a perennial bone of contention. Experts say a source of the problem is ambiguity in the Basic Law, which Beijing continues to reinterpret. The document states that Hong Kong's chief executive "shall be selected by election or through consultations held locally and be appointed by the Central People's Government," and that "the ultimate aim is the selection of the chief executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures." The nature and timing of electoral reform are unclear.
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Democracy in Hong Kong