Hong Kong came to a standstill once again this week after more than a million protesters filled its streets in protest over a proposed extradition bill for the second week in a row.

Key points: China agreed to retain Hong Kong's freedoms under 'one country, two systems'

China agreed to retain Hong Kong's freedoms under 'one country, two systems' Hong Kong has become one of the largest financial hubs in the Asia-Pacific

Hong Kong has become one of the largest financial hubs in the Asia-Pacific The Hong Kong identity is torn between its former colonial power and China

Protestors are demanding a proposed new law — which would allow extradition to mainland China — be scrapped, claiming it could be used to stifle political opposition in the Special Administrative Region (SAR) and used to extradite dissidents to China.

However, what is at stake for Hong Kong is far wider in scope than just the recent protests.

Here's how its near-200-year history transitioning from a British colony to an expected-yet-uncertain Chinese state by 2047 shaped the territory while prompting the largest protests in Hong Kong's history.

Where did the 'one country, two systems' policy come from?

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Hong Kong became a British colony in the 1840s — and later the United Kingdom signed a 100-year lease with China to also obtain sovereignty over Hong Kong's surrounding territories in 1898.

Fast forward to 1949, and controversial reformer Mao Zedong appeared on the cusp of controlling the entire Chinese mainland — the city would, for the first time, think about how it might have to fend off a communist incursion.

In 1984 an agreement was made that would reshape Hong Kong's future when the UK agreed to return the region to China when the hundred year lease expired in 1997 — many Hong Kongers left the region in the years in between fearing Chinese rule.

However, it was under the condition that Hong Kong would retain some of its democratic institutions, including its judicial system and independence, for 50 years after the handover, set to expire in 2047.

The agreement of a principle of "one country, two systems" was eventually reached with the idea that Hong Kong could retain a high degree of autonomy while still being a part of China.

Protests have long been in Hong Kong's DNA as a result of such history — in the mid-1960s, for example, it was against British rule, years later, it was again fear of Beijing's creeping power.

Hong Kong's historical status as both a former British colony and a part of China continues to feed into tensions about the territory's rule, politics and its cultural identity.

Hong Kong torn between Western and Chinese identities

A protester raises his umbrellas in front of tear gas which was fired by riot police during the 2014 pro-democracy protest. ( Reuters: Tyrone Siu )

Under British colonial rule, Hong Kong's national ties with mainland China were wound back, and over the years, Hong Kong developed its own cultural identity, associated with its own way of life in attempt to fuse Chinese values and British norms and regulations.

For example, today, Hong Kong's legal system is based on the English Common Law — where the judiciary is independent of the executive and legislative branches of government.

However, the final interpretation of its constitution — referred to as the Basic Law — is still in the hands of a division of the Chinese Communist Party back in Beijing.

Meanwhile, English remains an official language, spoken fluently by half the population and widely seen on national signs and transport, while nearly all Hong Kongers speak Cantonese, a Chinese language native to south-eastern China — in mainland China, though, Mandarin remains the official language.

The crucial distinction in Hong Kong and mainland identities are the difference in general public attitudes towards things like press freedom, freedom of speech, privacy and inequality, according to experts.

People who associate themselves with a Hong Kong identity are more openly willing to defend the region's values — prompting uprisings like the 2014 Umbrella Movement as well — in order to maintain its unique characteristics and cultural identity.

Transition from a 'tiger economy' to a high-income economy

The HSBC headquarters in Hong Kong (right) is one of many multinational corporations based in the territory. ( Supplied, file )

Hong Kong's free market economy and its democratic institutions have allowed it to flourish and become one of the world's most important financial and economic hubs.

It was one of Asia's four "tiger economies" throughout the 20th century along with South Korea, Taiwan and Singapore witnessing rapid economic growth before establishing itself as a high-income economy in the 21st century.

Its economic growth have been underpinned by minimal government market intervention, minimal taxation and an established international financial market, which attracts many corporate headquarters in the Asia-Pacific region.

The territory has also become a gateway for foreign direct investments in China due to its ties to the Chinese stock exchanges, with the Hong Kong Stock exchange also being one of the largest in the world.

Hong Kong is also one of the largest home to Australian expats overseas with 100,000 Aussies living in Hong Kong, and 96,000 people born in Hong Kong living in Australia.

Rising demonstrations in recent years — what might happen next?

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Beijing's perceived interference into Hong Kong faced significant backlash in 2014, when tens of thousands of pro-democracy protesters threatened to shut down Hong Kong's Central financial district.

The protests, which lasted 77 days, were sparked by China's proposed reforms to the island's electoral system and its rejection for open nominations for Hong Kong's chief executive — it was dubbed the Umbrella Revolution.

It was declared over nearly three months after it kicked off, and police arrested more than a dozen of activists, including elderly people who refused to move.

Now Hong Kong finds itself once again in a similar yet even more concerning situation for Hong Kongers: if the proposed legislation to allow extradition to China goes ahead, many fear their voice and demands for democracy will no longer be heard.

Hundreds of thousands are now demanding that Beijing-backed Hong Kong Chief Executive Carrie Lam step down and scrap the extradition bill, even after it was suspended amid debate and an apology forwarded by Ms Lam.

However, so far, Ms Lam has avoided answering questions about whether she would actually step down and appealed to the public to "give us another chance", leaving Hong Kongers future in limbo as it fights for the city lived in and loved by millions for its culture, history, and freedoms.

Meanwhile, the concerns raised have shown little sign of abating, as the 22nd anniversary of its 1997 handover from the British to the Chinese on July 1 — a date usually marked by protests and demands about civil liberties — looms.