The area constituting Hong Kong is located on the southeast coast of China, east of the mouth of the Pearl River and bordering Shenzhen City in Guangdong Province. It consists of Hong Kong Island, Kowloon and the New Territories, with a total area of 1,092 sq km. Hong Kong has been Chinese territory since ancient times.

Hong Kong was occupied by Britain after the Opium War in 1840. In accordance with the Sino-British Joint Declaration on the Question of Hong Kong signed on December 19, 1984, the two governments held a hand-over ceremony on July 1, 1997, announcing the resumption of sovereignty by China over Hong Kong. Thus the common, long-cherished wish of the Chinese people to recover Hong Kong was fulfilled. Meanwhile the Hong Kong Special Administrative Region (HKSAR) of the PRC was formally established. The Basic Law of the Hong Kong Special Administrative Region, adopted in April 1990 at the Third Session of the Seventh National People's Congress, came into effect. The Basic Law makes clear and definite specifications on a high degree of autonomy, and the political, economic, cultural and educational systems of the HKSAR.

A High Degree of Autonomy The Chinese government carries out the basic policies of "one country, two systems," "administration of Hong Kong by the Hong Kong people" and "a high degree of autonomy." "One country, two systems" refers to the fact that in China, a unified country, the mainland practices the socialist system, and Hong Kong's previous capitalist system and way of life shall remain unchanged for 50 years; "administration of Hong Kong by the Hong Kong people" means that the HKSAR is administered by the Hong Kong people on their own, and the central authorities shall not send officials to the HKSAR to fill local official posts; and "a high degree of autonomy* means that apart from foreign and national defense affairs that should be administered by the central authorities, the HKSAR shall fully enjoy the power of decision over matters within its autonomous jurisdiction, including executive, legislative, independent judicial and final adjudication powers.

The high degree of autonomy of the HKSAR has the following features: First, the central authorities shall not interfere in affairs within the scope of autonomy of the HKSAR. Second, the HKSAR government shall have the final say on matters within its autonomous jurisdiction as prescribed in the Basic Law, calling for no approval by the central authorities. And third, the government of the HKSAR may, within the limits prescribed by the Basic Law, choose its own means of exercising its functions and powers.

Political System A democratic political system is practiced in the HKSAR. Its major organs of power are the Chief Executive, the Government, the Legislative Council and the Court of Final Appeal. In addition, there is the Executive Council, a body which assists the Chief Executive in decision-making, and the Commission Against Corruption and the Audit Commission, which function independently and are accountable to the Chief Executive. Under the Government, the executive power organ of the HKSAR, there are the Department of Administration, the Department of Finance, the Department of Justice, and various bureaus, divisions and commissions. In the conditions and following the procedures prescribed by law, the Chief Executive shall have the power to dismiss the legislative organs; the legislative organs shall have the power to impeach the Chief Executive; the administrative organs shall be accountable to the legislative organs; the Chief Executive, administrative and legislative organs shall supervise and cooperate with each other.

The Chief Executive of the HKSAR shall be the head of the HKSAR, as well as the head of the HKSAR government. His or her dual status gives him or her extensive functions and powers. The Chief Executive shall be selected from among residents of the HKSAR by election or through consultations held locally, and be appointed by the Central Government. The term of office of the Chief Executive shall be five years. He or she may serve for not more than two consecutive terms. Tung Chee Hwa was elected the first Chief Executive of the HKSAR.

Economic System A free economic system is practiced in the HKSAR. The operation mechanisms of this economic system are mainly manifested in the fields of finance, banking, trade, industry and commerce, real estate, shipping and civil aviation. For instance, in accordance with the law, the HKSAR shall protect the property rights of individuals, and shall have independent finances, using its financial revenues exclusively for its own purposes. The financial revenues shall not be handed over to the Central Government. The Central Government shall not levy taxes in the HKSAR; the HKSAR shall practice an independent taxation system and a low-tax policy, and shall enact laws on its own concerning types of taxes, tax rates, tax reductions, allowances and exemptions, and other matters of taxation. The HKSAR shall maintain its status as an international financial center, work out its monetary and financial policies on its own, and safeguard the free operation of financial business and the financial market. No foreign exchange control shall be applied in the HKSAR. The Hong Kong dollar shall continue to be freely convertible. Markets for foreign exchange, gold, securities, futures and the like shall continue to operate. The HKSAR government shall safeguard the free flow of capital within, into and out of the Region. The HKSAR shall maintain its status as a free port, adopt the policy of free trade, and safeguard the free movement of goods, intangible assets and capital. The HKSAR shall maintain its status as an international shipping center and may, on its own, stipulate the concrete functions and responsibilities in this field. The HKSAR shall maintain its status as an international and regional aviation center, and shall be responsible for the daily work and technological management of civil aviation.

As a separate customs territory, the HKSAR may, using the name "Hong Kong, China," join the WTO and other relevant international organizations and international trade agreements.

Cultural and Educational Systems The HKSAR shall, on its own, work out policies on education, culture, science and technology. Educational institutions of all kinds shall retain their autonomy and enjoy academic freedom. They may continue to recruit staff, and use teaching materials from outside the HKSAR. Students shall enjoy freedom of choice of educational institutions and freedom to pursue their education outside the HKSAR. The HKSAR government shall neither restrict the freedom of religious belief, nor interfere in the internal affairs of religious organizations. Religious organizations and believers in the HKSAR may maintain and develop their relations with their counterparts elsewhere; religious organizations may, according to their previous practice, continue to run seminaries and other schools, hospitals, welfare institutions, etc. Non-governmental organizations in various fields, including education, science, technology, culture, art, sports, and medicine and health in the HKSAR, may maintain and develop their relationships with relevant organizations of other countries and regions, and with international organizations. They also may participate in relevant activities in the name of "Kong Kong, China."

In addition to the Chinese language, English may also be used as an official language by the executive, legislative and judiciary authorities of the HKSAR.