The region of Hong Kong, which had long been barren, rocky, and sparsely settled—its many islands and inlets a haven for coastal pirates—was occupied by the British during the Opium War (1839–42). The colony prospered as an east-west trading center, the commercial gateway to, and distribution center for, S China. It was efficiently governed, and its banking, insurance, and shipping services quickly became known as the most reliable in SE Asia. In 1921 the British agreed to limit the fortifications of the colony, and this contributed to its easy conquest (Dec. 25, 1941) by the Japanese. It was reoccupied by the British on Sept. 16, 1945.
After 1949, when the Communists took control of mainland China, hundreds of thousands of refugees crossed the border, making Hong Kong's urban areas some of the most densely populated in the world. Problems of housing, health, drug addiction, and crime were the target of aggressive governmental programs, and Hong Kong's long-standing water problem was eased by the construction of an elaborate system of giant reservoirs and the piping in of water from China.
In May, 1967, Hong Kong was struck by a wave of riots and strikes inspired by China's Cultural Revolution. The government reacted firmly, and, although the Chinese retaliated by briefly stopping the piping of water and by attacking British representatives in Beijing, relations between Hong Kong and China soon resumed the surface harmony that had existed since the late 1950s.
After several years of negotiations, on Dec. 19, 1984, Britain and the People's Republic of China agreed that Hong Kong (comprising Hong Kong Island, Kowloon, and the New Territories) would become a special administrative region of China as of July 1, 1997, when Britain's lease expired. Declaring a policy of "One Country, Two Systems," China agreed to give Hong Kong considerable autonomy, allowing its existing social and economic systems to remain unchanged for a period of 50 years.
The crackdown in 1989 at Tiananmen Square in Beijing inspired fears that China would not respect Hong Kong's autonomy, and in the next few years many business people left, affecting Hong Kong's economy. In 1991, Hong Kong's first direct legislative elections (which accounted for about 30% of the seats) were won almost entirely by liberal, prodemocracy candidates, and no pro-China candidates were elected.
In 1992, Britain introduced a number of democratic measures, which were denounced by China. Talks between the two countries proved fruitless, and in 1994 Hong Kong's legislature approved further democratic reforms in the colony in defiance of strong Chinese objections. In the subsequent elections (1995) prodemocracy candidates received about 60% of the popular vote. Upon Hong's return to China, Beijing abolished the legislature set up by the British and established a provisional legislature; a chief executive, Tung Chee-hwa, was also appointed. Elections were held in 1998, with prodemocracy parties taking 16 of the 20 directly elected seats (the rest of the 60 seats were mostly chosen by professional constituencies).
Hong Kong was affected by the Asian financial crisis of 1997–98, but its economy began to rebound in 1999. A setback to Hong Kong's independent judicial system occurred in 1999, when Beijing overturned a Hong Kong court ruling that had granted residency to children born in mainland China who had at least one parent living in Hong Kong. In the Sept., 2000, legislative council elections, prodemocracy parties won 15 of the 24 directly elected seats.
Tung was reelected as chief executive in 2002. Although not popular, he was supported by the Chinese government, and no other candidate was nominated by the electoral committee responsible for electing the executive. In 2003, Hong Kong's economy was hurt by measures undertaken to control an outbreak of SARS (severe acute respiratory syndrome), which spread there from China. A trade agreeement was signed with China in June; the pact gave Hong Kong businesses greater access to Chinese markets. Proposed new antisubversion laws led to significant antigovernment demonstrations the following month, and Tung subsequently withdrew the legislation.
In Apr., 2004, the Chinese government ruled that Hong Kong would have to petition China in order to make any changes in its electoral laws, including increasing the number of legislators chosen by direct election. In 2004 half the legislators were directly elected, but prodemocracy forces won a total of only 26 seats in the election, which was fiercely contested and marked by heavy-handed Chinese tactics. Tung resigned in Mar., 2005, and was replaced as chief executive by Donald Tsang, who had been chief secretary.
Tsang subsequently resigned to campaign for election to the post, which he secured in June. Two governmental reform proposals failed to pass in late 2005 when prodemocracy legislators rejected them as constituting minor tinkering with the laws governing the election of the chief executive and the size of the legislature. Tsang was reelected chief executive in Mar., 2007. Later in the year the Chinese government indicated that it would consider allowing the direct election of the chief executive beginning in 2017. (In 2013, however, a senior Chinese official said that China would ultimately decide if the person who is elected becomes chief executive.) Elections in 2008 resulted in pro-democracy candidates winning 24 legislative seats.
In 2010 legislators passed a compromise bill that increased the size of the electoral council and expanded the size of the legislature; the changes were supported by pro-Beijing and some prodemocracy legislators. Leung Chun-ying, a business executive and former senior government adviser with close ties to China, was elected chief executive in Mar., 2012. Prodemocracy candidates won 27 legislative seats in Sept., 2012, a result that represented a slight decrease percentagewise in the enlarged legislature.