The Practice of the "One Country, Two Systems" Policy in the Hong Kong Special Administrative Region

Information Office of the State Council

The People's Republic of China

June 2014, Beijing

Contents

Foreword

I. Hong Kong's Smooth Return to China

II. Establishment of the Special Administrative Region System in Hong Kong

III. Comprehensive Progress Made in Various Undertakings in the HKSAR

IV. Efforts Made by the Central Government to Ensure the Prosperity and Development of the HKSAR

V. Fully and Accurately Understanding and Implementing the Policy of "One Country, Two Systems"

Conclusion

Appendix

Foreword

"One country, two systems" is a basic state policy the Chinese government has adopted to realize the peaceful reunification of the country. Following this principle, the Chinese government successfully solved the question of Hong Kong through diplomatic negotiations with the British government, and resumed the exercise of sovereignty over Hong Kong on July 1, 1997, fulfilling the common aspiration of the Chinese people for the recovery of Hong Kong. As a result, Hong Kong got rid of colonial rule and returned to the embrace of the motherland, and embarked on the broad road of common development with the mainland, as they complemented each other's advantages.

Hong Kong's return to the motherland turned "one country, two systems" from a scientific concept into vivid reality. The central government strictly adheres to the Basic Law of Hong Kong, earnestly performs its constitutional duties and stands firm in supporting the administration of the chief executive and the government of the Hong Kong Special Administrative Region (HKSAR) in accordance with the law. The HKSAR exercises a high degree of autonomy in accordance with the law, and is vested with executive, legislative and independent judicial power, including that of final adjudication. The previous capitalist system and way of life remain unchanged, and most laws continue to apply. Hong Kong continues to prosper, its society remains stable, and full development is being witnessed in all undertakings. The "one country, two systems" policy enjoys growing popularity in Hong Kong, winning the wholehearted support from Hong Kong compatriots as well as people in all other parts of China. It is also thought highly by the international community.

"One country, two systems" is a new domain in which we constantly explore new possibilities and make new progress in pioneering spirit. A summary of the policy's implementation in the HKSAR, and a comprehensive and correct understanding and implementation of the policy will prove useful for safeguarding China's sovereignty, security and development interests, for maintaining long-term prosperity and stability in Hong Kong, and for further promoting the "one country, two systems" practice along the correct track of development.

I. Hong Kong's Smooth Return to China

In the early 1980s, China's state leader Deng Xiaoping put forward the scientific concept known as "one country, two systems" in an effort to realize the peaceful reunification of China, and this ingenious design was first applied to solve the question of Hong Kong. According to Deng Xiaoping, "one country, two systems" means there is only but one China and under this premise the mainland adheres to the socialist system while Hong Kong, Macau and Taiwan may retain their capitalist systems over a long time to come.

On December 4, 1982, the Fifth Session of the Fifth National People's Congress (NPC) endorsed a new Constitution of the People's Republic of China. Its Article 31 provides, "The state may establish special administrative regions when necessary. The systems to be instituted in special administrative regions shall be prescribed by law enacted by the National People's Congress in the light of the specific conditions." Giving expression to the "one country, two systems" concept, this Article provides the constitutional basis for the establishment of special administrative regions in certain areas that adopt different social systems and different policies from those on the mainland, as the Chinese government makes efforts to realize the peaceful reunification of China. After in-depth investigations and research, the Chinese government formulated 12 basic policies regarding the question of Hong Kong, known as the "12 Principles," in early 1983. The main contents were: (1) The Chinese government decided to resume the exercise of sovereignty over Hong Kong as of July 1, 1997. (2) After resuming the exercise of sovereignty over Hong Kong, the central government would establish a special administrative region in Hong Kong in accordance with the provisions in Article 31 of the Constitution. The Hong Kong Special Administrative Region would be directly under the authority of the Central People's Government and would enjoy a high degree of autonomy. (3) The HKSAR would be vested with legislative and independent judicial power, including that of final adjudication. The laws, decrees and regulations currently in force in Hong Kong would remain basically unchanged. (4) The government of the HKSAR would be composed of local inhabitants. The principal officials would be selected by election or through consultations held locally and be appointed by the Central People's Government. Those previously working in the public and police services in the government departments of Hong Kong may remain in employment. British and other foreign nationals may also be employed to serve as advisers to government departments of the HKSAR. (5) The current social and economic systems in Hong Kong would remain unchanged, and so would the life-style. Freedoms, including those of speech, of the press, of assembly, of association, of travel, of movement, of correspondence, and of religious belief would be ensured in the HKSAR. Private property, ownership of enterprises, legitimate right of inheritance and foreign investment would be protected by law. (6) The HKSAR would retain the status of a free port and a separate customs territory. (7) The HKSAR would retain the status of a financial center, and its markets for foreign exchange, gold, securities and futures would continue. There would continue to be a free flow of capital, and the Hong Kong dollar would continue to circulate and remain freely convertible. (8) The HKSAR would have independent finances. (9) The HKSAR may establish mutually beneficial economic relations with the United Kingdom, whose economic interests in Hong Kong would be given due regard. (10) Using the name "Hong Kong, China," the HKSAR may on its own maintain and develop economic and cultural relations and conclude relevant agreements with states, regions and relevant international organizations. The government of the HKSAR may itself issue travel documents for entry into and exit from Hong Kong. (11) The maintenance of public order in the HKSAR would be the responsibility of the government of the HKSAR. And (12) the above-stated policies would be stipulated in the Basic Law of the HKSAR by the NPC of the People's Republic of China (PRC), and they would remain unchanged for 50 years.

During his meeting with the visiting British Prime Minister Margaret Thatcher on September 24, 1982, Deng Xiaoping made clear the Chinese government's position on the question of Hong Kong, pointing out that sovereignty was not a matter for discussion and that China would take back Hong Kong in 1997. It was under this premise that China and Britain would negotiate to ensure the smooth transfer of Hong Kong and clarify what was to be done about Hong Kong 15 years later. This marked the beginning of the negotiations between China and Britain on the question of Hong Kong. On December 19, 1984, after 22 rounds of negotiations, the governments of China and Britain signed the Joint Declaration of the Government of the People's Republic of China and the Government of the United Kingdom of Great Britain and Northern Ireland on the Question of Hong Kong in Beijing, confirming that the government of the PRC would resume its exercise of sovereignty over Hong Kong with effect from July 1, 1997. The Chinese government also made clear in the Joint Declaration its basic policies regarding Hong Kong based on the "12 Principles." The signing of the Sino-British Joint Declaration marked the entry of Hong Kong into a 13-year transition period before its return to China. During this period, the Chinese government unswervingly followed the "one country, two systems" policy, closely relied on the Hong Kong compatriots, and resolutely held off interference to promote the preparation work for Hong Kong's return.

On April 10, 1985, the Third Session of the Sixth NPC decided to form the Drafting Committee for the Basic Law of the HKSAR of the PRC. In July, the Drafting Committee began its work. It completed its mission in February 1990, taking four years and eight months to develop the Basic Law of Hong Kong. The drafting of the Basic Law of Hong Kong was highly democratic and open, and the compatriots of Hong Kong were widely involved. Twenty-three of the 59 members of the Drafting Committee came from various walks of life in Hong Kong, and the Drafting Committee entrusted its Hong Kong members to set up a 180-member counseling committee in Hong Kong to collect the views and opinions of the people of Hong Kong. In April 1988, the Drafting Committee published the Basic Law of Hong Kong (draft) for comments, and in February 1989 the Standing Committee of the NPC made public the Basic Law of the HKSAR (draft) and twice widely solicited views in Hong Kong and on the mainland. People from all walks of life in Hong Kong and the mainland took active part in the deliberation and discussion of the draft, and in Hong Kong alone nearly 80,000 files of views and comments were collected. The Basic Law of Hong Kong embodies the common will of all Chinese people, including Hong Kong compatriots, and encapsulates the wisdom of the Chinese nation.

On April 4, 1990, the Third Session of the Seventh NPC passed the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China, and made the decision to establish the HKSAR. The Basic Law of the HKSAR is a basic law formulated in accordance with the Constitution of the People's Republic of China. It stipulates the system and policies to be instituted in the HKSAR, and is the legalization and institutionalization of the "one country, two systems" policy. It also provides a legal basis for the implementation of "one country, two systems" in the HKSAR. The Basic Law was lauded by Deng Xiaoping as a "law of historic and international significance" and "a creative masterpiece."

Following the promulgation of the Basic Law, the Chinese government began preparation work for the establishment of the HKSAR. In July 1993, the NPC Standing Committee authorized the formation of the Preliminary Working Commission of the Preparatory Committee of the HKSAR (the Preliminary Working Commission). In January 1996, the Preparatory Committee of the HKSAR of the NPC (the Preparatory Committee) was established. Both the commission and the committee did a great deal of work for the smooth transition and transfer of government in Hong Kong.

On July 1, 1997, the Chinese government resumed its exercise of sovereignty over Hong Kong. At the same time, the HKSAR was established and the Basic Law came into effect. Hong Kong entered a new epoch characterized by "one country, two systems," "Hong Kong people governing Hong Kong" and a high degree of autonomy. As members of the big Chinese family, the people of Hong Kong and the people of the mainland share the pride and glory of the great mother country, and bear the common responsibility and mission of rejuvenation of the Chinese nation.

II. Establishment of the Special Administrative Region System in Hong Kong

The system of the special administrative region, as prescribed in the Constitution of the People's Republic of China and the Basic Law of the HKSAR, is a special administrative system developed by the state for certain regions. Under this system, the central government exercises overall jurisdiction over the HKSAR, including the powers directly exercised by the central government, and the powers delegated to the HKSAR by the central government to enable it to exercise a high degree of autonomy in accordance with the law. The central government has the power of oversight over the exercise of a high degree of autonomy in the HKSAR.

1. The Central Leadership Directly Exercises Jurisdiction over the HKSAR in Accordance with the Law

As prescribed in the Constitution of the People's Republic of China and the Basic Law of the HKSAR, the organs of power by which the central leadership directly exercises jurisdiction over the HKSAR are the NPC and its Standing Committee, the president of the state, the Central People's Government, and the Central Military Commission. The NPC decided on the establishment of the HKSAR, formulated the Basic Law of the HKSAR to prescribe the system to be instituted in the HKSAR, and has the power of amendment to the Basic Law. The NPC Standing Committee has the power of interpretation regarding the Basic Law of the HKSAR, the power of decision on revising the selection methods of the chief executive and the Legislative Council of the HKSAR, the power of supervision over the laws formulated by the legislative organs of the HKSAR, the power of decision on the HKSAR entering a state of emergency, and the power of making new authorization for the HKSAR. The HKSAR comes directly under the Central People's Government, and its chief executive is accountable to the Central People's Government. The Central People's Government appoints the chief executive and the principal officials, is responsible for foreign affairs relating to the HKSAR in accordance with the law, and issues directives to the chief executive. The Central Military Commission is the leading body of the Hong Kong garrison, and performs defense and other duties. The central authorities perform overall jurisdiction and constitutional duties as prescribed in the Constitution of the People's Republic of China and in the Basic Law of the HKSAR, and exercise effective administration over the HKSAR.

-Forming the power organs of the HKSAR. Prior to the return of Hong Kong, the Preparatory Committee of the HKSAR completed the organization of the Selection Committee of the First Government of the HKSAR. The Selection Committee elected Tung Chee-hwa as the first chief executive of the HKSAR, and then the Central People's Government appointed him as the chief executive. The Selection Committee also elected members of the interim Legislative Council. The first chief executive, Tung Chee-hwa, appointed the judges of the Court of Final Appeal, and the chief justice of the High Court. The completion of the above work ensured the effective administration of the HKSAR by the central leadership upon its establishment. After the return of Hong Kong to China, the Central People's Government appointed Tung Chee-hwa, Donald Tsang and Leung Chun-ying, all elected, as chief executives of the HKSAR in that order, and appointed and dismissed key officials of their administrations. China's state leaders attended the inauguration ceremonies of the chief executives and key government officials, and heard them take their oaths of office.

-Supporting and guiding the administration of the chief executive and government of the HKSAR in accordance with the law. The chief executive reports his/her work to the central government on an annual basis, on the implementation of the Basic Law and other items for which he/she is accountable to the central government; and the state leaders give guidance to the chief executive on major matters related to the implementation of the Basic Law. The central government has established the Hong Kong and Macau Affairs Office of the State Council as an administrative office of the State Council to handle Hong Kong and Macau affairs. The office works to implement the "one country, two systems" principle and related directives of the central government, and is responsible for communicating with the government of the HKSAR. The Liaison Office of the Central People's Government in the HKSAR is a resident organ of the Central People's Government in Hong Kong. Its duties involve communication with the Office of the Commissioner of the Ministry of Foreign Affairs in the HKSAR and the PLA Hong Kong Garrison, the promotion of exchanges and cooperation between Hong Kong and the mainland in various areas, communication with personages from all sectors of Hong Kong society, and the handling of affairs involving Taiwan.

-Responsible for foreign affairs involving the HKSAR. First, the central leadership supports the HKSAR in actively carrying out international exchanges and cooperation; supports and assists the HKSAR in participating in international organizations and conferences in a proper capacity; assists the HKSAR in bidding to host important international conferences of various kinds, and supports the HKSAR in developing international conference centers, regional legal services and dispute settlement centers; supports the recommendation of Hong Kong residents to take up posts in international organizations; supports the promotion of visa waivers for HKSAR passport holders in other countries and regions; and supports the work of trade offices of the HKSAR government in other countries and regions. Second, the role of the central leadership also includes properly handling legal issues involving Hong Kong, such as the application of international conventions in Hong Kong. The number of multilateral treaties and amendments that have become applicable in the HKSAR now exceeds 170, and the number of agreements concluded with other countries with the authorization of the central government regarding investment protection, civil aviation, taxation and judicial assistance has reached 338. The central government assists the HKSAR in accepting reviews on the implementation of international conventions, supports it in maintaining and developing ties, and in signing and implementing treaties and agreements with other countries, regions and related international organizations in the name of "Hong Kong, China" in the areas of economy, trade, finance, maritime transport, communications, tourism, culture and sports. It also authorizes and assists Hong Kong in conducting judicial cooperation with other countries. Third, it ratifies the establishment of consulates and other governmental or quasi-governmental organizations of foreign countries in the HKSAR. Currently, there are 66 consulates-general set up by foreign countries under related agreements in the HKSAR, with 73 honorary consuls. Fourth, it strives to ensure the safety and legitimate rights and interests of Hong Kong compatriots while in other countries, and actively offers consular protection to Hong Kong travelers abroad. By the end of 2013, Chinese embassies and consulates overseas had handled over 10,000 cases of consular protection involving Hong Kong residents. Fifth, it prevents foreign forces from interfering in Hong Kong's affairs. Hong Kong's affairs are internal affairs of China, and the Chinese government has made timely representations with certain countries through diplomatic channels regarding their words and actions of interference. The Ministry of Foreign Affairs has established the Office of the Commissioner in the HKSAR to attend to foreign affairs involving Hong Kong.

-Responsible for the defense of the HKSAR. The central leadership made the decision and authorized the formation of the People's Liberation Army (PLA) Hong Kong Garrison in January 1996, and on December 30 the same year, the 23rd Session of the Eighth NPC Standing Committee adopted the Law of the People's Republic of China on Garrisoning the Hong Kong Special Administrative Region. At midnight on July 1, 1997, troops of the PLA Hong Kong Garrison entered Hong Kong to take over the defense of the HKSAR. The Garrison's duties include guarding against and resisting aggression, ensuring the security of the HKSAR, performing defense services, managing military installations, and handling military affairs involving other countries in accordance with the law. The Garrison adheres to the law in performing its duties, and oversees military conduct in accordance with the law. It diligently fulfills its duties in defense, organizing sea and air patrols and carrying out search and rescue exercises in case of maritime or air emergencies, joint exercises of combined arms, and cross-district maneuvers, vigorously safeguarding China's sovereignty and territorial integrity. The Garrison also actively takes part in activities to promote the public good in Hong Kong, inviting local residents to visit the Garrison barracks and holding summer military camps for young students, in an effort to strengthen ties between the Garrison and the local community. All this has helped enhance the mutual understanding and trust between the Garrison and the people of Hong Kong, fully exemplifying the valor and good conduct of the PLA.

-Exercising power granted to the NPC Standing Committee by the Constitution of the PRC and the Basic Law of the HKSAR. First, the NPC Standing Committee keeps record of the laws drawn up by the legislature of the HKSAR for review. By the end of 2013, the HKSAR had reported a total of 570 local laws to the NPC Standing Committee for the record. Second, it adds or subtracts national laws applicable in the HKSAR as listed in Annex III of the Basic Law of the HKSAR. Currently, 12 national laws are listed in Annex III of the Basic Law of the HKSAR for implementation. Third, it makes new authorizations to the HKSAR. In 1996, the NPC Standing Committee empowered the HKSAR government to appoint its immigration department as the office to accept applications for nationality in the HKSAR and handle the applications in accordance with the Nationality Law and its interpretations. In 2006, the NPC Standing Committee authorized the HKSAR to run the Hong Kong section of the Shenzhen Bay Port in accordance with the laws of the HKSAR. Fourth, it makes interpretations regarding the Basic Law of the HKSAR. The NPC Standing Committee made interpretations of the related articles of the Basic Law in 1999, 2004, 2005 and 2011 on the following questions respectively: the right of abode in Hong Kong for permanent Hong Kong residents' children born outside Hong Kong and with Chinese nationality, the legal procedure for modifying the selection methods of the chief executive and the Legislative Council, the length of the term of a by-elected chief executive, and the principles of state immunity, and interpretations of relevant provisions in the Basic Law and its appendixes. Fifth, it decides on issues relating to the constitutional development in the HKSAR. The NPC Standing Committee made decisions in 2004 and 2007, respectively, on the selection method of the chief executive for 2007 and the Legislative Council for 2008, and the selection method of the chief executive, the Legislative Council and the general election for 2012. Sixth, it ratifies and keeps record of the amendments to the selection methods of the chief executive and Legislative Council of the HKSAR. In 2010, the NPC Standing Committee ratified the HKSAR's amendment to the selection method of the chief executive for 2012, agreeing to put on record the amendment to the selection method and voting procedure of the Legislative Council for 2012. Seventh, it keeps records of the appointment and removal of the judges of the Court of Final Appeal and the chief judge of the High Court of the HKSAR. In addition, according to the Basic Law of the HKSAR and relevant decisions of the NPC, the Basic Law Committee of the HKSAR of the NPC Standing Committee, established on July 1, 1997, when the Basic Law came into effect, is composed of members from the mainland and Hong Kong, and is responsible for providing opinions to the NPC Standing Committee on issues such as whether the laws drawn up by the HKSAR's legislature comply with the provisions of the Basic Law on the range of affairs responsible by the central government and the relationship between the central government and the HKSAR, on adding or subtracting the national laws applicable in Hong Kong as listed in Annex III and on the interpretation or revision of the Basic Law, and related issues.

2. The HKSAR Exercises a High Degree of Autonomy in Accordance with the Law

After the establishment of the HKSAR, the previous capitalist system and way of life remain unchanged in Hong Kong, and existing laws remain basically unchanged. Adhering to the law, the HKSAR protects the right of ownership of private property, maintains the status of Hong Kong as a free port and a separate customs territory, maintains independent finances, practices an independent taxation system, and formulates its own policies regarding trade, finance, education, science, culture, public health and sports. In accordance with the Basic Law of the HKSAR and the decision of the NPC Standing Committee on handling the laws previously practiced in Hong Kong, the laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law are maintained, except for any that contravene the Basic Law and are subject to any amendment by the legislature of the HKSAR. On this basis, the HKSAR exercises a high degree of autonomy, and fully exercises its administrative, legislative and independent judicial power, including that of final adjudication.

The chief executive of the HKSAR is the head of the Special Administrative Region. He/she represents the HKSAR and is accountable to both the Central People's Government and the HKSAR. The chief executive is also the head of the government of the Special Administrative Region, and exercises powers and functions conferred by the Basic Law, such as leading the government of the region and being responsible for the implementation of the Basic Law. While exercising his/her powers and functions, the chief executive shall implement the directives issued by the Central People's Government in respect of the relevant matters provided for in the Basic Law of the HKSAR. The government of the HKSAR is composed of permanent residents of Hong Kong in accordance with the relevant provisions of the Basic Law, with a Department of Administration, a Department of Finance, a Department of Justice, and various bureaus, divisions and commissions to exercise powers and functions such as formulating and implementing policies and conducting administrative affairs, as prescribed by the Basic Law. The HKSAR enjoys administrative power in a wide range of areas, including the economy, education, science, culture, sports, religion, social services, public order, and control of entry and exit of the region. In addition, the HKSAR conducts external affairs as authorized by the Central People's Government.

The Legislative Council of the HKSAR is the legislature of the HKSAR. It is formed by election, and exercises the following powers and functions in accordance with the Basic Law: enacting, amending or repealing laws in accordance with the provisions of the Basic Law and legal procedures; examining and approving budgets introduced by the government, and approving taxation and public expenditure, among others. The HKSAR enjoys legislative power in a wide range of areas, and is empowered to formulate laws relating to civil, criminal and commercial affairs, as well as judicial proceedings, for application in the region in accordance with the Basic Law. The laws drawn up by the Legislative Council of the HKSAR must be reported to the NPC Standing Committee for the record. If the NPC Standing Committee, after consulting the Committee for the Basic Law of the HKSAR, considers that any law enacted by the legislature of the region is not in conformity with the provisions of the Basic Law regarding affairs within the responsibility of the central leadership or regarding the relationship between the central leadership and the region, the Standing Committee may return the law in question but shall not amend it. Any law returned by the NPC Standing Committee is immediately invalidated.

The courts of the HKSAR at all levels are the judiciary of the region, exercising the judicial power of the region. After the establishment of the HKSAR, the Court of Final Appeal was established to exercise the power of final adjudication in the region. The judicial system previously practiced in Hong Kong is maintained except for those changes consequent upon the establishment of the Court of Final Appeal. The common law and relevant judicial principles and systems previously practiced in Hong Kong, including the principle of independent adjudication, the principle of following precedents, and the jury system, continue to apply. The courts of the HKSAR have no jurisdiction over acts of state such as defense and foreign affairs. They have jurisdiction over all civil and criminal cases in the region, except that the restrictions on their jurisdiction imposed by the legal system and principles previously in force in Hong Kong are maintained. When adjudicating cases, the courts of the HKSAR may refer to precedents of other common law jurisdictions, and the Court of Final Appeal may as required invite judges from other common law jurisdictions to sit in the Court of Final Appeal.

III. Comprehensive Progress Made in Various Undertakings in the HKSAR

Since the establishment of the HKSAR, the government of the Special Administrative Region has, with energetic support from the central government and the mainland, rallied people of all walks of life in Hong Kong, worked hard and overcome difficulties, made full use of the advantage of the policy of "one country, two systems," maintained overall social, economic and political stability, promoted the development of all undertakings and made new achievements one after another.

-HKSAR residents' fundamental rights and freedoms are fully protected. Hong Kong residents enjoy basic rights and freedoms in accordance with the law, which are under the full protection of the Constitution, the Basic Law and the local laws. The Constitution and the Basic Law safeguard the HKSAR residents' fundamental rights and freedoms at the constitutional level. The HKSAR provides further protection to residents' rights and freedoms by enacting the Sex Discrimination Ordinance, Race Discrimination Ordinance, Personal Data (Privacy) Ordinance, Independent Police Complaints Council (IPCC) Ordinance, Minimum Wage Ordinance and other ordinances. A multitude of organs, including the Equal Opportunity Commission, Office of the Privacy Commissioner for Personal Data, Office of the Ombudsman, Legal Aid Department, Independent Police Complaints Council, Legal Aid Services Council, Women's Commission and Commission on Poverty, have been set up by the HKSAR government to help promote and protect HKSAR residents' fundamental rights and freedoms.In addition, the Basic Law explicitly stipulates that Chinese citizens who are residents of the HKSAR shall be entitled to participation in the management of state affairs according to law. In accordance with the assigned number of seats and the selection method specified by the NPC, the Chinese citizens among the HKSAR residents elect deputies of the region to the NPC to participate in the work of China's supreme organ of state power. The HKSAR has held in succession four such elections and 36 deputies were elected each time by the broadly representative Conference for Electing Deputies of the HKSAR to the NPC. The Chinese People's Political Consultative Conference (CPPCC) always values the participation of Hong Kong compatriots. Aside from specially inviting Hong Kong personages, other CPPCC groups also include representatives from Hong Kong. The 12th CPPCC National Committee had a 124-member Hong Kong group, and 16 other CPPCC groups had 82 members from Hong Kong.

-The democratic political system has been steadily promoted. Before the return of Hong Kong to China in 1997, the United Kingdom designated governors to enforce colonial rule over Hong Kong for more than 150 years. Since 1997, the HKSAR government and the legislature have been composed of local residents. The chief executive of the HKSAR is appointed by the Central People's Government on the basis of the results of elections or consultations held locally; the legislature of the HKSAR is established by elections. The Basic Law of the HKSAR explicitly stipulates that the chief executive and all the members of the Legislative Council must be elected by universal suffrage, making universal suffrage a legal objective. Since the establishment of the HKSAR, the central government and the HKSAR government have unswervingly and steadily promoted Hong Kong's democratic political system, featuring the election methods for the chief executive and the Legislative Council, according to the Basic Law and relevant decisions of the NPC Standing Committee.

The election of the chief executive of the HKSAR has become increasingly democratic. Candidates for the first chief executive were elected by a 400-member Selection Committee, while candidates for the second, third and fourth chief executives were elected by the Election Committee, the membership of which in the meantime had grown from 800 to 1,200. Members of the Election Committee came from the four major sectors of "industry, commerce and finance," "the professions," "labor, social services, religious and other sectors" and "members of the Legislative Council, representatives of district boards and Heung Yee Kuk, HKSAR deputies to the NPC, and representatives of HKSAR members of the National Committee of the CPPCC" in equal proportions. Such a composition is an expression of equal participation and broad representativeness.

The election of the Legislative Council is becoming more and more direct. The first Legislative Council formed in 1998 had 20 members elected directly by geographical constituencies, 30 members by functional constituencies, and ten members by the Election Committee. The second Legislative Council formed in 2000 had 24 members elected directly by geographical constituencies, 30 members by functional constituencies, and six members by the Election Committee. The third and fourth Legislative Councils formed respectively in 2004 and 2008 both had 30 members elected directly by geographical constituencies, and 30 members by functional constituencies. The membership of the fifth Legislative Council elected in 2012 expanded to 70, including 35 members elected directly by geographical constituencies and 35 members by functional constituencies. The additional five members elected by functional constituencies were nominated by district boards, and elected by voters who had enjoyed no right to vote under functional constituencies.

The timetable has been set for universal suffrage. The 31st Session of the Standing Committee of the Tenth NPC made a decision on December 29, 2007 "that the election of the fifth chief executive of the HKSAR in 2017 may be implemented by the method of universal suffrage; that after the chief executive is selected by universal suffrage, the election of the Legislative Council of the HKSAR may be implemented by the method of electing all the members by universal suffrage," thus setting a timetable for the selection of the chief executive and all members of the Legislative Council by universal suffrage. From December 4, 2013 to May 3, 2014, the HKSAR government initiated a five-month public consultation on the election of the chief executive in 2017 and that of the Legislative Council in 2016, starting the relevant procedures for introducing universal suffrage.

-The HKSAR has maintained steady economic growth. From 1997 to 2013, Hong Kong's Gross Regional Product (GRP) grew by 3.4 percent annually in real terms, and its per-capita GRP increased by a total of 39.3 percent calculated in US dollar. According to the 2013 statistics of the International Monetary Fund (IMF), Hong Kong's GRP and per-capita GRP, respectively, ranked the 35th and 7th in the world, as calculated by purchasing power parity.

Hong Kong has maintained and enhanced its status as an international financial, trade and shipping center. As an important international banking center, Hong Kong boasts the world's sixth-largest securities market and fifth-largest foreign exchange market. Hong Kong ranks high in various lists of international financial centers. As the world's ninth-largest trading economy, Hong Kong has regular trading ties with almost every country and region in the world. Hong Kong is one of the world's largest container shipping ports and fourth-largest ship-registration center. The Hong Kong International Airport is one of the world's busiest. Its air freight volume has led the world for many years, and its passenger transport volume ranks fifth.

Hong Kong's robust industries have been strengthened even further. Trade and logistics, tourism, finance, and professional services and support services for industry and commerce continue to play an important role as Hong Kong's four pillar industries. In 2012, these four sectors employed 47.2 percent of Hong Kong's total working population, and their added value accounted for 58 percent of Hong Kong's total GRP. Hong Kong also focuses on the cultivation and development of the cultural and creative, innovation and technology, testing and certification, and environmental protection industries.

Hong Kong has maintained a sound business environment, and is generally recognized as one of the world's freest economies. For many years, it has ranked high in the World Bank's evaluation of business environments of 185 economies. In its World Investment Report 2013, the United Nations Conference on Trade and Development (UNCTAD) ranked Hong Kong the third in the world in attracting foreign direct investment (FDI). For many years, Hong Kong has been listed among the world's most competitive economies by the World Competitiveness Yearbook compiled by the International Institute for Management Development based in Lausanne, Switzerland.

-Social programs have been further enhanced. Hong Kong leads the Asia-Pacific region in education, as the HKSAR government continues to increase its investment in education, the biggest government expenditure item. During the 2014-2015 fiscal year, the HKSAR government's current budgetary spending on education reached HK$75.37 billion. Since the 2008-2009 school year, Hong Kong has implemented 12-year free education in public schools. The University of Hong Kong and the Hong Kong University of Science and Technology are among Asia's top-ten universities, according to the Times Higher Education Asian University Rankings 2013. The University of Hong Kong was the 43rd according to the World University Rankings 2013-2014. Hong Kong continues to rank high in the global test of the Program for International Student Assessment (PISA) 2012, which reflects the quality of primary education.

Hong Kong continues to provide quality medical and health care services. During the 2014-2015 fiscal year, the HKSAR government's budget for expenditure on medical and health care is HK$52.4 billion, accounting for 17 percent of the government's recurrent expenditure. All Hong Kong residents enjoy equal access to affordable public medical services. By the end of 2012, Hong Kong had more than 35,500 beds in various medical institutions. The infant mortality rate dropped from 4 per thousand in 1997 to 1.6 per thousand in 2013, which is among the world's lowest. In 2013, the life expectancy of Hong Kong's male and female residents was 80.9 years and 86.6 years, respectively, which are among the world's highest.

Cultural and sports activities are flourishing in Hong Kong, where the Chinese and foreign cultures intermingle. The HKSAR government encourages the diverse development of Hong Kong's culture and promotes cultural exchanges. Four unique Hong Kong cultural events were added to the third batch of the State-level Non-material Cultural Heritage List, namely, Yu Lan Ghost Festival, Tai Hang fire dragon dance, Tai O dragon boat parade, and Cheung Chau Jiao Festival. Hong Kong hosted the equestrian events of the Beijing 2008 Olympic Games, and the fifth East Asian Games in 2009. Hong Kong athletes have excelled themselves in events such as windsurfing, table tennis, cycling and martial arts during the Olympics, World Championships and Asian Championships.

Hong Kong's social security service has been continuously improved. During the fiscal year 2014-2015 the HKSAR government's budget for social welfare reached HK$61.9 billion, 3.03 times as compared with the HK$20.4 billion during the fiscal year 1997-1998. Hong Kong has put in place a multilayer and diversified social security and welfare service system. Hong Kong has more than 400 social service agencies, and the number of registered social workers has increased from 8,300 at the end of 1998 to more than 18,000 today. The HKSAR government actively promotes the construction of public housing, moves low-wage residents into public housing, and provides financial aid to those who purchase housing units. Around half of Hong Kong's residents live in housing provided or funded by the government. Among them, more than 2 million live in rented public housing, and over 1 million have purchased housing units with government financial aid.

-Hong Kong's international exchanges and its international influence have further expanded. Hong Kong's international exchanges have been broadened. By June 2013, Hong Kong, as a member of a Chinese government delegation or in other appropriate capacities, had participated in 41 events held by inter-governmental international organizations, and joined 37 inter-governmental international organizations whose membership is not limited to sovereign states. As a member of a Chinese government delegation or in other appropriate capacities, Hong Kong has attended more than 1,400 international meetings; using the name of "Hong Kong, China" it has attended more than 20,000 international meetings not limited to states. It has also hosted or co-hosted more than 1,000 international meetings. The HKSAR has visa waiver agreements with 42 countries, and 150 countries or regions provide visa-free entry or grant visas upon arrival to HKSAR passports holders. Hong Kong has civil air transport agreements, agreements on avoidance of double taxation, agreements on investment promotion and protection, and agreements on criminal justice assistance with many countries. The HKSAR government has economic and trade offices in 11 places, such as Geneva, London, Tokyo, New York and Berlin. Six international organizations, including the European Commission, have representative offices in Hong Kong.

Outstanding Hong Kong professionals have taken important positions in international organizations. Supported by the central government, Chan Fung Fu-chun, former director of health of the HKSAR, was elected director-general of the World Health Organization (WHO) in November 2006, and was reelected in May 2012. She is the first Chinese to head an inter-government international organization since the founding of the United Nations. Shun Chi-ming, director of the Hong Kong Observatory, was elected president of the Commission for Aeronautical Meteorology of the World Meteorological Organization in February 2010.

IV. Efforts Made by the Central Government to Ensure the Prosperity and Development of the HKSAR

The central government has always given high priority to Hong Kong's economic development and improvement of its people's livelihood, and fully supported it in meeting various difficulties and challenges. It gives full play to its role in adopting and executing the national development strategy, and actively promotes exchanges and cooperation between Hong Kong and the mainland, thus providing solid backing for Hong Kong's prosperity and stability.

1. Supporting the HKSAR in Defusing Risks and Meeting Challenges

-Supporting Hong Kong in the fight against the Asian financial crisis. In 1997, the Asian financial crisis broke out, and spread rapidly around the region. Hong Kong was attacked by international speculative forces, its financial market was volatile, its dollar pegged exchange rate system came under attack, and its financial system faced a grave threat. Given these circumstances, the central government solemnly announced that it would safeguard the stability and prosperity of the HKSAR at all costs, strongly support the HKSAR government in protecting the pegged exchange rate system, and not depreciate the RMB. With this support from the central government, the HKSAR government took swift measures that ensured the stability of its financial system and the Hong Kong society.

-Supporting Hong Kong in the fight against SARS. In the first half of 2003, the SARS epidemic hit Hong Kong. It not only posed a threat to the lives and health of the Hong Kong people, but also dealt a blow to Hong Kong's economy that had not recovered from the Asian financial crisis, resulting in deflation, market slump and a high unemployment rate of 8.7 percent. To ensure the safety of life of the Hong Kong people and help the Hong Kong economy climb out of recession, the central government promptly lent a helping hand. Although the mainland also needed medical supplies in the fight against SARS, the central government provided a large quantity of free medical supplies to Hong Kong. The Chinese leaders also went to the hardest-hit areas and hospitals of Hong Kong to inspect local conditions and console victims. On June 29, the mainland and Hong Kong signed the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), which outlines the steps that the mainland and Hong Kong should take in trade in goods and services, and trade and investment facilitation as well as the goals to be achieved. Later, the Individual Visit Scheme was introduced, allowing mainland residents to visit Hong Kong on their own. These measures helped Hong Kong overcome the SARS attack and boosted its economic growth.

-Supporting Hong Kong in the fight against the international financial crisis. When the international financial crisis broke out in the second half of 2008, the central government was highly concerned about its impact on Hong Kong. In December of that year, it introduced 14 policies to ensure economic and financial stability in Hong Kong. In January 2009, the central government launched more policies, including the signing of a RMB200 billion currency swap agreement by the People's Bank of China with the Hong Kong Monetary Authority. Later, when visiting Hong Kong, the Chinese leaders announced a number of policies to support Hong Kong's economic development, improve the local people's livelihood, and strengthen its exchanges and cooperation with the mainland. All these policies played a positive role in boosting confidence, strengthening capability to defuse risks and stimulating the economic recovery of Hong Kong.

2. Supporting the HKSAR in Reinforcing and Enhancing Its Competitive Strengths

-Supporting Hong Kong as an international center of finance, trade and shipping. The central government supports Hong Kong in launching individual use of RMB, issuing RMB bonds and conducting trials of RMB settlement in cross-border trade, thus consolidating Hong Kong's position as a leading offshore RMB market. It has continued to encourage the listing of mainland enterprises on the stock market in Hong Kong, and introduced other measures to support Hong Kong's financial sector. In 2013, a total of 216 Hong Kong banks joined the RMB clearing platform, and the amount of cross-border RMB settlement in Hong Kong reached RMB3.84 trillion, accounting for 82.9 percent of the total cross-border RMB settlement of China. The balance of Hong Kong's RMB customer deposits and depository receipts reached RMB1 trillion. Hong Kong has become the world's largest offshore RMB trading center. After the signing of the CEPA in 2003 and its coming into force in January 2004, the mainland signed and implemented ten supplementary agreements with Hong Kong. The mainland now gives zero tariff treatment to all products of Hong Kong origin. From that time to the end of 2013, the mainland imported from Hong Kong goods worth US$7.161 billion under the CEPA, with tariff preference of RMB3.983 billion for Hong Kong. The mainland also adopted a total of 403 liberalization measures in respect of trade in services. Based on WTO classification, the mainland has opened to Hong Kong 149 areas of trade in services under the CEPA and its supplementary agreements, accounting for 93.1 percent of the total number of such areas of the mainland. This makes the CEPA the most open agreement on free trade that the mainland has ever signed. In addition, Guangdong Province has adopted 82 pilot measures to open its services industries to Hong Kong. When drawing up the National Plan for the Layout of Coastal Ports, and the 12th Five-Year Plan for the Comprehensive Development of Transportation Systems, the central government took into account the need to consolidate and enhance Hong Kong's position as an international shipping center.

-Supporting Hong Kong in developing its tourism and retail sectors, and Hong Kong-invested companies on the mainland. At the request of the HKSAR government, the central government gradually expanded the Individual Visit Scheme to 49 pilot cities, with a total population of over 300 million. By the end of 2013, some 129 million mainland residents had visited Hong Kong under the Individual Visit Scheme. According to estimate of the HKSAR government, in 2012 alone the Individual Visit Scheme contributed to 1.3 percent increase of Hong Kong's GRP of the year, and it created more than 110,000 jobs, accounting for 3.1 percent of the local employment. To bring more benefits to medium-sized and small businesses and residents in Hong Kong, the central government also allows Hong Kong residents to start individual businesses on the mainland. By the end of 2013, a total of 5,982 individual businesses opened by Hong Kong residents had been registered on the mainland, employing 16,476 people. The central government encourages the development of Hong Kong processing and trading companies on the mainland, and has assisted the transformation and upgrading of Hong Kong-invested companies on the mainland. In 2009, Guangdong Province introduced 30 policies to help companies established with Hong Kong, Macau and Taiwan investment weather the international financial crisis and accelerate their transformation and upgrading. In December 2011, the central government issued the Guidelines on Promoting the Transformation and Upgrading of Processing Trade, and set up demonstration zones and pilot cities for the transformation and upgrading of processing trade in Suzhou and Dongguan, as well as 44 key areas in central and western China to relocate enterprises of processing trade in a phased way.

3. Supporting the HKSAR in Strengthening Exchanges and Cooperation in Various Fields with the Mainland

Since Hong Kong's return to China in 1997, the central government has made the maintenance of its prosperity and stability an important part of the country's overall development strategy. Both the 10th and 11th Five-Year Plans stress the need to ensure lasting prosperity and stability in Hong Kong, and strengthen its position as an international center of finance, trade and shipping. In the 12th Five-Year Plan, for the first time, the development of Hong Kong and Macau is dealt with in an independent section. This has further defined Hong Kong's strategic position in China's development strategy and stressed the state support for Hong Kong in enhancing its competitive edge, fostering emerging industries and deepening economic cooperation with the mainland.

-Supporting the HKSAR further in developing economic and trade cooperation with the mainland. The implementation of the CEPA and its supplementary agreements has removed a great deal of institutional barriers in trade, investment and other sectors between Hong Kong and the mainland, strengthened their economic and trade relations, and broadened the range of cooperation, with both sides benefiting from their cooperation. Currently, the mainland is the largest trading partner of Hong Kong. According to Hong Kong statistics, in 2013 the trade volume between Hong Kong and the mainland reached HK$3.8913 trillion, 3.49 times that of 1997 and accounting for 51.1 percent of Hong Kong's external trade. At the same time, Hong Kong is the mainland's most important trading partner, a key export market and the mainland's largest off-shore financial center. By the end of 2013, mainland enterprises listed in Hong Kong had totaled 797, accounting for 48.5 percent of the total number of Hong Kong listed companies. In addition, their total market value had reached HK$13.7 trillion, accounting for 56.9 percent of the total value of the Hong Kong stock market. In addition, the mainland and Hong Kong are each other's largest source of overseas direct investment (ODI). By the end of 2013, Hong Kong's ODI from the mainland had exceeded US$358.8 billion, accounting for nearly 60 percent of the mainland's total ODI; the mainland had approved nearly 360,000 projects with Hong Kong investment, involving US$665.67 billion in total and accounting for 47.7 percent of the mainland's total ODI.

-Supporting the HKSAR in strengthening cooperation with mainland provinces, autonomous regions and municipalities directly under the central government, particularly Guangdong Province. The central government has endorsed the establishment of the Hong Kong-Guangdong Cooperation Joint Conference, and the Pan-Pearl River Delta Regional Cooperation and Development Forum. It approved the implementation of the Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), the Overall Development Plan of Hengqin, the Overall Development Plan for the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, and the Development Plan for the Nansha New District of Guangzhou, and approved the signing by Guangdong with the HKSAR of the Framework Agreement on Hong Kong-Guangdong Cooperation, which identifies the three key areas of cooperation, namely, building the Hengqin New District of Zhuhai, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and the Nansha New
District of Guangzhou, the central government has urged Guangdong and Hong Kong to work together to build more competitive world-class urban cluster with cutting-edge manufacturing and service industries. The central government has also approved the establishment by the HKSAR of regional cooperation mechanisms with Beijing and Shanghai, and supported the HKSAR government to set up offices on the mainland. Currently, in addition to its Beijing Office, the HKSAR government has also set up commercial offices in Guangzhou, Shanghai, Chengdu and Wuhan, and liaison offices in Shenzhen, Chongqing and Fuzhou, which are instrumental in promoting Hong Kong's economic and trade cooperation with the various localities in the mainland and exchanges in other areas.

-Supporting efforts by the HKSAR and the mainland in cross-border infrastructure construction and facilitation for personnel and cargo customs clearance. The Hong Kong-Shenzhen Western Corridor, which opened to traffic in 2007, has become the fourth land passage linking Hong Kong with the mainland. The Hong Kong-Zhuhai-Macau Bridge, the construction of which started in 2009 and scheduled for completion in 2016, will connect Hong Kong in the east and Zhuhai and Macau in the west, and will become a new road transport corridor linking eastern and western banks of the Pearl River. The Guangzhou-Shenzhen-Hong Kong High-Speed Railway, when completed, will connect Hong Kong with China's national high-speed rail network. As things stand now, the mainland and Hong Kong have achieved full mutual recognition of inspection results at all land and water ports. In 2013, a total of 40.75 million mainland residents visited Hong Kong, which was 17.3 times that of 1997; while 76.88 million Hong Kong residents visited the mainland, up from 39.77 million in 1997.

-Supporting the HKSAR in strengthening exchanges and cooperation with the mainland in education, science and technology, culture and some other fields. The central government has supported universities of Hong Kong and the mainland in enrolling students from each other; supported cooperation in academic affairs between institutions of higher learning of Hong Kong and the mainland, and supported teaching staff and students from the two sides in carrying out exchange activities. It has supported Hong Kong's institutions of higher learning, research bodies and the science and technology parks in Hong Kong in setting up Partner Labs of Key State Laboratories, the Hong Kong branch of the National Engineering Research Center and the National High-tech Industrialization Base; supported Hong Kong universities in establishing research institutes in Shenzhen; supported Hong Kong science workers and institutions in applying for projects under China's National Research Program; and endeavored to make the country's key sci-tech projects more accessible to Hong Kong. In 2005, the mainland and Hong Kong signed the Mainland and Hong Kong Closer Cultural Ties Arrangement Agreement, launching overall cooperation in cultural conservation, and industrial development and exchanges. The central government supported Hong Kong, Macau and Guangdong in jointly and successfully including the Yueju opera in the UNESCO's Representative List of Intangible Cultural Heritage of Humanity in 2009; and supported Hong Kong's successful bid to list its Geopark in Sai Kung as part of the UNESCO Global Geoparks Network in 2011. It has also supported Hong Kong in joint production of films with the mainland; since the signing of the CEPA, Hong Kong and the mainland have worked together in producing 322 films, accounting for 70 percent of mainland's total in such area. The central government has supported Hong Kong in cooperating with the mainland in sports personnel exchanges, training and some other aspects. It invites Hong Kong athletes to take part in National Games and other events. It has also supported exchanges and cooperation between the two sides in the development of traditional Chinese medicine, health care management, notification and prevention and treatment of infectious diseases, notification and cooperation in cases of public health crises, etc.

-Supporting the HKSAR government in establishing exchange and cooperation mechanisms with relevant departments of the central government. The HKSAR government has established a number of exchange and cooperation mechanisms at different levels and covering different areas with relevant departments of the central government to coordinate and promote related work. For example, the two sides established the CEPA Joint Steering Committee to oversee the implementation of the CEPA, solve problems, and supplement and amend the CEPA; and cooperation mechanisms in the areas of entry-and-exit control, customs, inspection and quarantine, finance, public health, tourism and other fields, to promote communication, jointly handle emergencies and combat illegal activities. In addition, the central government established a Joint Inter-ministerial Conference System for the Promotion of Qianhai, Nansha and Hengqin, to strengthen guidance, coordination and services for the development and building of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, Nansha New District in Guangzhou and Hengqin New District in Zhuhai; and the HKSAR government is a member of this system. These mechanisms have played a positive role in promoting mutually beneficial cooperation between Hong Kong and the mainland, and in handling related issues of regional development and governance of common concern.

4. Ensuring Secure and Stable Supplies of Basic Necessities to the HKSAR

Because of the limitations of its natural environment, Hong Kong mainly relies on the mainland for the supply of fresh water, vegetables, meat and other basic necessities. Since the early 1960s, when the mainland opened "three express trains" to supply Hong Kong with fresh and frozen goods, and started the Dongjiang-Shenzhen Water Supply Project, the central government and the relevant local governments on the mainland have made great efforts to ensure the supply of foodstuff, agricultural and sideline products, water, electricity, natural gas, etc., to the HKSAR. By the end of 2013, some 95 percent of live pigs, 100 percent of live cattle, 33 percent of live chicken, 100 percent of freshwater fish, 90 percent of vegetables and 70 percent or more of flour on the Hong Kong market had been supplied by the mainland. The first pass yield of foodstuff supplied by the mainland to Hong Kong has maintained at a fairly high level. In 2013, in accordance with the revised agreement, Guangdong supplied Hong Kong with 606 million cu m of fresh water. From 1994, the Daya Bay Nuclear Power Plant started to supply Hong Kong with electricity, and now its annual power supply accounts for a quarter of the annual power consumption of Hong Kong. In 2013, the mainland supplied Hong Kong with 2.531 billion cu m of natural gas.