In 1997, the British handed Hong Kong back to China, the end of a 99-year lease and an event that was dreaded and anticipated by the residents, Chinese, English, and rest of the world. Hong Kong includes 426 square miles of territory in the South China Sea, and it is today one of the most densely occupied and economically independent parts of the world. That lease came about as a result of wars over trade imbalances, opium, and the shifting power of Queen Victoria's British empire.

Key Takeaways On June 9, 1898, the British under Queen Victoria brokered a 99-year lease agreement for the use of Hong Kong after China lost a series of wars fought over the British trade in tea and opium.

In 1984, British Prime Minister Margaret Thatcher and Chinese Premier Zhao Ziyang negotiated the underlying plan for the lease to end, such that Hong Kong would remain a semi-autonomous region for a 50-year period after the lease ended.

The lease ended on July 1, 1997, and since then tensions between the democratically minded Hong Kong population and the People's Republic of China have continued, although Hong Kong remains functionally separate from the Chinese mainland.

Hong Kong was first incorporated into China in 243 BCE, during the Warring States period and as the Qin state was beginning to grow in power. It remained almost constantly under Chinese control for the next 2,000 years. In 1842, under British Queen Victoria's expansionist rule, Hong Kong became known as British Hong Kong.

Trade Imbalances: Opium, Silver, and Tea

Nineteenth-century Britain had an insatiable appetite for Chinese tea, but the Qing Dynasty and its subjects did not want to buy anything that the British produced and demanded that the British instead pay for its tea habit with silver or gold. The government of Queen Victoria did not want to use up any more of the country's reserves of gold or silver to buy tea, and the tea-importation tax generated during the transactions was a major percentage of the British economy. Victoria's government decided to forcibly export opium from the British-colonized Indian subcontinent to China. There, opium would then be exchanged for tea.

China's government, not too surprisingly, objected to the large-scale importation of narcotics into its country by a foreign power. At the time, most of Britain didn't view opium as a particular danger; to them, it was a medicine. China, however, was experiencing an opium crisis, with its military forces suffering direct impacts from their addictions. There were politicians in England such as William Ewart Gladstone (1809–1898) who did recognize the danger and objected strenuously; but at the same time, there were men who made their fortunes, such as the prominent U.S. opium trader Warren Delano (1809–1898), the grandfather of future president Franklin Delano Roosevelt (1882–1945).

Opium Wars

When the Qing government discovered that banning opium imports outright did not work—because British merchants simply smuggled the drug into China—they took more direct action. In 1839, Chinese officials destroyed 20,000 bales of opium, each chest containing 140 pounds of the narcotic drug.﻿﻿ This move provoked Britain to declare war to protect its illegal drug-smuggling operations.

The First Opium War lasted from 1839 to 1842. Britain invaded the Chinese mainland and occupied the island of Hong Kong on Jan. 25, 1841, using it as a military staging point. China lost the war and had to cede Hong Kong to Britain in the Treaty of Nanking. As a result, Hong Kong became a crown colony of the British Empire.

Leasing Hong Kong

The Treaty of Nanking did not, however, resolve the opium trade dispute, and the conflict escalated again, into the Second Opium War. The settlement of that conflict was the first Convention of Peking, ratified on Oct. 18, 1860, when Britain acquired the southern part of the Kowloon Peninsula and Stonecutters Island (Ngong Shuen Chau).

The British grew increasingly worried about the security of their free port in British Hong Kong during the second half of the 19th century. It was an isolated island, surrounded by areas still under Chinese control. On June 9, 1898, the British signed a deal with the Chinese to lease Hong Kong, Kowloon, and the "New Territories"—the remainder of the Kowloon Peninsula north of Boundary Street, more territory beyond Kowloon into the Sham Chun River, and over 200 outlying islands. Hong Kong's British governors pressed for outright ownership, but the Chinese, while weakened by the first Sino-Japanese War, negotiated a more reasonable cession to finally end the war. That legally binding lease was to last 99 years.

To Lease or Not to Lease

Several times in the first half of the 20th century, Britain considered relinquishing the lease to China because the island simply wasn't important to England anymore. But in 1941, Japan seized Hong Kong. U.S. President Franklin Roosevelt tried to pressure British Prime Minister Winston Churchill (1874–1965) to return the island to China as a concession for its support in the war, but Churchill refused. At the end of World War II, Britain still controlled Hong Kong, although the Americans continued to pressure it to return the island to China.

By 1949, the People's Liberation Army led by Mao Zedong (1893–1976) had taken over China, and the West was now afraid that Communists would get their hands on a suddenly invaluable post for espionage, especially during the Korean War. While the Gang of Four did consider sending troops to Hong Kong in 1967, they ultimately did not sue for the return of Hong Kong.

Moving Toward the Handover

On Dec. 19, 1984, British Prime Minister Margaret Thatcher (1925–2013) and Chinese Premier Zhao Ziyang (1919–2005) signed the Sino-British Joint Declaration, in which Britain agreed to return not only the New Territories but also Kowloon and British Hong Kong itself when the lease term expired. According to the declaration's terms, Hong Kong would become a special administrative region under the People's Republic of China, and it was expected to enjoy a high degree of autonomy outside of foreign and defense affairs. For a period of 50 years after the end of the lease, Hong Kong would remain a free port with a separate customs territory and sustain markets for free exchange. Hong Kong citizens could continue to practice capitalism and political freedoms forbidden on the mainland.

After the agreement, Britain began to implement a broader level of democracy in Hong Kong. The first democratic government in Hong Kong was formed in the late 1980s, consisting of functional constituencies and direct elections. The stability of those changes became doubtful after the Tiananmen Square incident (Beijing, China, June 3–4, 1989) when an undetermined number of protesting students were massacred. Half a million people in Hong Kong went on marches to protest.

While the People's Republic of China rejected the democratization of Hong Kong, the region had become enormously lucrative. Hong Kong only became a major metropolis after the British possession, and during the 150 years of the occupation, the city had grown and thrived. Today, it is considered one of the most significant financial centers and trade ports in the world.

Handover

On July 1, 1997, the lease ended and the government of Great Britain transferred control of British Hong Kong and the surrounding territories to the People's Republic of China.

The transition has been more or less smooth, although human rights issues and Beijing's desire for greater political control cause considerable friction from time to time. Events since 2004—particularly in the summer of 2019—have shown that universal suffrage continues to be a rallying point for Hongkongers, while the PRC is clearly reluctant to allow Hong Kong to achieve full political freedom.