 
### The Question of Sovereignty

### A study of Chinese and British negotiating positions with regard to the colonisation and decolonisation of Hong Kong.

### Justin Cahill

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Copyright 2014 Justin Cahill

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PO Box 108, Lindfield, 2070  
New South Wales, Australia

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To Professor John Wong,  
on the 40th anniversary of his arrival  
at the University of Sydney

" _I will proceed with my history, telling my story as I go along of small cities no less than of great. For most of those which were great once are small today and those which used to be small were great in my own time. Knowing, therefore, that human prosperity never abides long in the same place, I shall pay attention to both alike._ " – Herodotus, _The Histories_ , I:7

Cover: The cartoon on the cover, entitled 'China: the cake of Kings and ... of Emperors', was first published in the supplement to _Le Petit Journal_ on 16 January 1898, p.8. It shows, from left to right, Queen Victoria, Kaiser Wilhelm II, Tsar Nicholas II, Marianne (representing France) and Mutsuhito, Emperor of Japan, carving up China between them.

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TABLE OF CONTENTS

Preface

Forward by Professor John Wong, University of Sydney

Acknowledgments

Romanisation

Note on primary sources

Introduction

I. Imperialism

II. National Sovereignty

III. Towards Decolonisation

IV. The Joint Declaration

Conclusion

Bibliography

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**PREFACE**

An undergraduate thesis is not supposed to see the light of day. Professor Harold Laski counselled Joseph Kennedy against publishing his son's. Other students, Laski warned, "...don't publish them for the good reason that their importance lies solely in what they get out of doing them and not in what they have to say." Kennedy did not agree. John Fitzgerald Kennedy's thesis, published as _While England Slept_ in 1940, became a best-seller. He remained proud of his work, even after he became President.

While conscious of its flaws, I remain proud of my thesis. It was written in 1995, two years before the final act in the events it examined, the return of Hong Kong to China. It was my first piece of original research based on unpublished primary sources. It was also my first opportunity to examine, at length, the clash of world powers and the fate of empires, with Britain bringing its might to bear against a tottering Imperial China - only for the process to reverse itself a century later.

My work was patiently supervised by Dr John Wong, then deeply engaged in his own work on the Arrow War, later published as _Deadly Dreams: Opium and the Arrow War (1856-1860)_. I took Dr Wong's course 'China and the World' in 1994. During the course, I read his _The Origins of an Heroic Image: Sun Yatsen in London_. I was impressed with his willingness to challenge orthodox interpretations of Chinese history and enthusiasm for field-work: which included, while writing his work on Sun Yatsen, pacing out the walking time between the Chinese Legation and the residence of its English Secretary, Sir Halliday Macartney, in London. These qualities led me to ask Dr Wong to be my supervisor. I still remember the day he took several of us to Fisher Library to show us the microfilms of Foreign Office correspondence – it was my first introduction the raw material of history.

Dr Wong was a firm believer in leading by example. He would read out parts of his draft of _Deadly Dreams_ and the comments he received on it from eminent colleagues to encourage us to greater efforts. When Dr Wong says in his preface that the structure of his _Deadly Dreams_ "... _continued to be erected, demolished, and rebuilt [as] chapters were drafted, taken apart, and re-written_ ", he really meant it. I recall one supervision meeting when he informed us he had, like Archimedes, had a sudden insight while in the bath that morning that led to major amendments. He also kindly introduced us to leading protagonists in events in Hong Kong, including Martin Lee, QC, then a member of the Colony's Legislative Council and _de facto_ leader of the Colony's pro-democracy movement.

The mid-1990s were very difficult times for the History Department. Significant funding cuts created a tense environment, magnifying the petty rivalries and jealousies to which academics are often prone. Dr Wong serenely guided us past its less collegial members, encouraging us instead to follow his example and be the river that slowly wears away the rocks of adversity. While I preferred to meet rocks with rocks, it was a valuable lesson nonetheless. It was no surprise Dr Wong was later elected to the Academy of the Social Sciences in Australia.

Revisiting my work evokes other memories. It was written when we lived at Slade Road in Bardwell Park overlooking the Wolli Creek Valley. I had few responsibilities and, thanks to Austudy, the luxury of much free time. Most days, after several hours writing, I'd walk around the corner to 'My Cake Shop' and get a pie and chocolate brownie for lunch. Later, I'd stroll through the Valley thinking through the issues while watching the birds go about their daily round.

Much has changed since then. We had to leave Bardwell Park when the lease came up. I went to Law School, seduced away from the uncertainties of academic life by the prospect of a more immediate career. While I regret this decision, my regular mortgage statements remind me that good fortune comes in many forms. It probably goes without saying, I was unable to sustain the pie and chocolate brownie diet. While I don't get much bird-watching done now, I did produce two works about the birds found along Wolli Creek: _Birds of western Wolli Creek_ (2013) and _Introducing the birds of Wolli Creek_ (2014).

My thesis lay packed away for years, much as Professor Laski intended. It was only in 2012 that I inadvertently discovered Dr Wong had used it as a source in _Deadly Dreams_ \- an honour I was unaware of. So, for all its faults and with the benefit of some light editing, I have decided to make it available to a wider readership.

Justin Cahill

Lindfield, 2014.

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**FORWARD**

by

Professor John Wong, University of Sydney

This is a very good thesis on a topical issue, for which Mr Cahill has provided an admirable historical background for an examination of the decolonisation process in Hong Kong.

The thesis begins with the colonisation of Hong Kong island, then Kowloon peninsula, and then the lease of the New Territories, all of which form the present-day Hong Kong. It reveals a most interesting pattern of acquiring territory initially for trade purposes, then pushing for the acquisition of more territory for reasons of defence, security and provisions.

It also illustrates a maxim in international relations: Might is right. When Britain was a super power, her arguments for acquiring territory were irresistible. Now that the tables have turned, China's denial of the legality of the treaties that exacted the territory from her seems equally irresistible. In this context, the opening quotation in the thesis is particularly appropriate: "Knowing, therefore, that human prosperity never abides long in the same place, shall pay attention to both." Mr Cahill has paid attention to both in a most persuasive manner.

The original sources used included some of the most authoritative in the field: the British Foreign Office records (F.O.17). Mr Cahill does not allow his inability to read Chinse to hinder his work in any way. He has asked me to help him with classical Chinese documents such as those in the _Ch'ou-pan i-wu shih-mo_. This I find commendable and admirable. The result is an impeccable piece of analysis of the colonisation and decolonisation of Hong Kong, episodes which have captured the attention of the world.

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**ACKNOWLEDGEMENTS**

Many debts of gratitude have been incurred in preparing this thesis, especially to my supervisor, Dr John Wong. His patience, cheerful advice and encouragement are deeply appreciated.

My colleague, Andrew Lewis, kindly lend me books, articles and documents. Librarians at the University of Sydney's Fisher Library the National Library in Canberra, the New South Wales State Library and University of New South Wales University Library assisted me with inquiries regarding books, articles and microfilms.

**ROMANISATION**

The _pinyin_ system is used throughout this thesis for the romanisation of Chinese names and places. For example, Teng Hsiao-ping as Deng Xiaoping, Keshan as Ch'i-shan, Keying as Ch'i-ying and Elepoo as Il-li-pu, Lyemun or Lyeemon as Lei Yue Mun Pass and the Qing Dynasty as the Ch'ing Dynasty.

Wade Gillies romanisation of names and places are retained where they have passed into common use. For example, Mao Zedong is rendered Mao Tse-tung, Guangzhou as Canton, Li Hong-zhang as Li Hung-chang Xiamen as Amoy and Beijing as Peking.

**NOTE ON PRIMARY SOURCES**

The principal source of original documents utilised in this study consists of the Foreign Office's General Correspondence Relating to China, microfilmed by the Public Records Office of Great Britain. This series, denoted by the prefix FO 17, contains the despatches to and from the Foreign Secretary and British representatives in China, including the Superintendent of British Trade in China, Governors of Hong Kong and various plenipotentiaries and consuls.

Other primary documents used in this study include those summarised and translated in Dr Wong's _Anglo-Chinese Relations 1839-60: A Calendar of Chinese Documents in the British Foreign Office_ , Oxford, Oxford University Press, 1983. These Chinese-language documents, denoted by the prefix FO 682, consist of despatches exchanged by British and Chinese plenipotentiaries. They constitute an important primary source of information not utilised by the authors of the standard reference works on Sino-British relations, such as those of Morse, Costin, Greenberg or Endacott.

Several primary documents contained in _The Complete Account of the Management of Foreign Affairs under the Ch'ing Dynasty: Tao-kuang Period: 1836-1850_ ( _Ch'ing-tai Ch'ou-pan i-wu shih-mo, Tao-kuang Ch'oa_ ) Taipei, 1963 have been utilised. As with the FO 683 series, this collection of imperial edicts and memorials to the Chinese Emperor from his plenipotentiaries has received little attention from writers on Sino-British relations.

Several documents printed in the _Chinese Repository_ , an English-language newspaper published at Canton between May 1832 and December 1851, have also been used. These include translations of imperial edicts, memorials to the Chinese Emperor from his plenipotentiaries and proclamations issued by the British Superintendent of Trade.

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**INTRODUCTION**

The Chinese and British governments' negotiating positions on the colonisation and decolonisation of Hong Kong resulted from the collision of Britain's desire for economic gain with the Chinese concept of national sovereignty. In this study, the questions of free trade imperialism and Chinese national sovereignty are approached thematically to illustrate their development in the context of negotiations over Hong Kong.

In chapter one, the influence of free trade imperialism on the British negotiating position regarding the annexation of Hong Kong is discussed. In analysing the development of the British negotiating position regarding the expansion of Hong Kong, it becomes apparent that the nature of free trade imperialism varied over time. Initially, mercantile interests were influential in the development of the British government's policy towards China. However once Hong Kong was annexed, concerns over the Colony's security prompted the acquisition of Kowloon Peninsula in 1860, the lease of the New Territories in 1898 and assumption of jurisdiction over Kowloon City in 1899. This preoccupation with the extension of Hong Kong's territory reflects the strategic defence functions, rather than the economic influences, of free trade imperialism and was accompanied by a decline in the influence of mercantile interests.

In chapter two, the Chinese concept of national sovereignty is discussed in the context of the Chinese government's response to British demands for the cession of Hong Kong. The Chinese government's attempts to turn Hong Kong into another Macao, over which it would retain nominal sovereignty, and its reluctance to conceded sovereignty over Hong Kong's Chinese residents clearly illustrate this concept. With the signing of the Treaty of Nanking in 1842, British informal, 'free trade' version of imperialism commenced in China. The Chinese government's response to Britain's expansion in Hong Kong through the lease and subsequent annexation of the Kowloon Peninsula in 1860 and lease of the New Territories in 1898 further illustrates this concept of national sovereignty. In the latter case, this concept of national sovereignty is reflected in the Chinese government's attempts to retain jurisdiction over Kowloon City.

In chapter three, the development of the concepts which provided the basis of the Chinese government's negotiating position on the return of Hong Kong are discussed. They include the assertion that the treaties which compelled China to cede and lease the constituent parts of Hong Kong to Britain were unequal and therefore invalid under international law and the 'One Country, Two Systems' proposal, designed to facilitate China's reunification with Hong Kong and Taiwan by providing for the co-existence of socialism and capitalism. Both reflect China's desire to regain control over parts of its territory and as such are the products of its concept of national sovereignty.

The development of the British negotiating position on the future of Hong Kong is also discussed in chapter three. Although it relinquished its extraterritorial rights and concessions in China during what Fung describes as "a strategic retreat from informal imperialism", Britain had retained Hong Kong. Commercial considerations resulting from the gradual expiration of its ninety-nine year lease on the New Territories constituted the major influence on the British negotiating position. These concerns prompted the British government to initiate negotiations with China on the Colony's future.

During these negotiations, discussed in chapter four, the British government conceded sovereignty over Hong Kong to China and sought to retain administrative control over the Territory after 1997. Yet the Chinese government's refused to divide sovereignty and administration again illustrates the Chinese concept of national sovereignty. The strength of Chinese opposition to continued British administration prompted the British to press for a legally binding agreement based on China's 'One Country, Two Systems' proposal. This agreement, the Joint Declaration, commits Britain to relinquishing its sovereignty over Hong Kong in 1997 and China to retaining Hong Kong's capitalist system for fifty years after its return.

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I

**IMPERIALISM**

i

Britain's industrial growth, Gallagher and Robinson assert, caused it to integrate new regions into its expanding economy by forcing entry into foreign markets. As a result, British imperial expansion continued throughout the nineteenth century by means of informal economic control, a process Gallagher and Robinson describe as 'the imperialism of free trade.' The colonisation of Hong Kong provides an example of this continuity. Mathew, in testing Gallager and Robinson's hypothesis against Britain's relations with Peru between 1820 and 1870, provides a framework that assists with applying it to Hong Kong.

In defining 'the imperialism of free trade', Gallagher and Robinson note that while it is "a function of economic expansion, it is not a necessary function" which may only be indirectly connected with economic integration "in that it sometimes extends beyond areas of economic development, but acts for their strategic protection." To this, Mathew adds the criteria of subordination, asserting that imperialism is indicated by "the employment of economic and military superiority as a means to force concessions, secure privileges or remove impediments on economic activities in foreign territories." Under these definitions, imperialism is motivated not only by economic expansion, but strategic defence requirements. The colonisation of Hong Kong shows that the degree of influence of these aspects of free trade imperialism may vary over time.

The development of the British government's negotiating position on the annexation of Hong Kong Island clearly shows Britain intended to force China into a subordinate, and therefore imperialistic, relationship with it. British mercantile interests in China which supported free trade, especially Jardine Matheson & Co, prompted the British government to use military force to secure trading concessions from the Chinese. Subsequent negotiations over the annexation of the Kowloon Peninsula in 1860 and lease of the New Territories in 1898 reflect the strategic defence requirements of imperialism. Having annexed Hong Kong, ensuring its security from China and other imperial powers with interests in the region became necessary. This is reflected in the increasing influence of defence concerns on the development of Britain's negotiating position on the acquisition of these areas and the decline in the influence of mercantile interest on its policy towards China.

ii

Demands for the acquisition of an island off the east coast of China on which British merchants could conduct their trade with China resulted from the restrictive system of trade instituted by the Chinese at Canton. During the mid-eighteenth century the Ch'ing Dynasty, concerned over coastal security, restricted trade to certain ports where foreign merchants were confined to factory establishments. In 1757, an Imperial edict made Canton the sole port of trade for all foreign goods, except Russia's, and prohibited foreign trade at any other. Another Imperial edict in 1760 set out regulations controlling the activities of foreigner merchants at Canton. These regulations, designed to concentrate the foreign merchants in one place, ensured that trade was closely supervised and customs duties levied by the central government were collected.

British merchants at Canton regarded these regulations as excessively obstructing their access to China's markets and sought redress. Yet they were in no position to make demands on the Chinese government. Under the regulations of 1760, they were prohibited from directly communicating with its officials. Any requests they had could only be presented to the Chinese government in the form of a petition via the Chinese merchants responsible to it for the conduct of their foreign counterparts. Attempts by the British government to appeal directly to the Chinese monarch were unsuccessful. The missions of Lords Macartney, Amherst and Napier, which sought to have the regulations at Canton relaxed and other ports opened to foreign trade, had foundered on Chinese intransigence.

British subjects also felt intimidated by the arbitrary nature of Chinese justice. The _Lady Hughes_ affair, in which a British sailor was summarily executed at Canton because his ship accidentally killed a Chinese subject while firing a ceremonial salute, clearly showed the Chinese government was prepared to enforce its laws on the foreigners under its jurisdiction and prompted demands for extra-territoriality. The Chinese siege of Canton and the expulsion of all foreigners from Macao at the beginning of the Opium War strengthened the belief that British merchants required their own depot, preferably an island, from which they could conduct their trade with China under British administration and without interference from the Chinese government.

Proposals of this nature dated back to 1793, when Macartney was instructed to obtain "one or two cessions" in convenient locations, where "English traders might reside and where English jurisdiction might be exercised." The idea was also favoured by the East India Company, which held a monopoly on British trade with China until 1834. In 1815, Elphinstone, President of the Select Committee of the Company at Canton, recommended to the Court of Directors that a diplomatic representative and naval force be established at "a convenient station on the east coast of China" to supervise British trade with China. Sir George Stauton MP developed Elphinstone's proposal. During the parliamentary debate over the abrogation of the Company's monopoly of trade with China in June 1833, he moved that "in the event of its proving impractical to replace the influence of the East India Company's Authorities by any system of national protection, directly emanating from the Crown, it will be expedient ... to withdraw altogether from the control of the Chinese Authorities and to establish the trade in some insular position on the Chinese coast where it might be carried on beyond the reach of acts of oppression." A former head of the British factory at Canton, Sir J. Urmston, also encouraged the government to remove the trade from Canton, recommending the island of Chusan as the most convenient place for British commerce.

Lord Napier, appointed Superintendent of British trade with China in 1833, was the first to draw attention to the facilities offered by Hong Kong. In August 1834, aware of Macao's vulnerability in any potential confrontation with the Chinese, he recommended to Palmerston, British Foreign Secretary during the 1830s, that a small British force "should take possession of the Island of Hong Kong, in the eastern entrance of the Canton River, which is admirably adapted for every purpose", especially as a defensible refuge for British merchants and their families and a trading depot.

Napier's Master Attendant and the future British plenipotentiary, Captain Charles Elliot, favoured occupying Bonin Island off the coast of Japan. He believed its sheltered harbour had the potential to provide a station from which to facilitate "commercial intercourse with the richest part of the Chinese Empire and with the South Coast of Japan." Palmerston initially favoured Elliot's suggestion, noting in a letter to the Colonial Secretary, Sir George Grey, that "it seems to me that no objection could arise to the occupation of the Island, from any embarrassment which such occupation could create with reference to our relations with China", although he later changed his mind.

Sir George Robinson, Napier's successor as Superintendent, also believed in the value of an island depot. In December 1835, he advocated the establishment of a British commission at Lintin for the regulation and control of the affairs of British merchants, so as to avoid the "impediments, difficulties, and annoyances" they experienced at Canton. Palmerston forwarded copies of Robinson's dispatches to the India Board and sought its opinion, which the Board declined to give. By April 1836, Robinson had concluded that without intimidation and resort to hostilities, an understanding could not be reached with the Chinese and suggested the occupation of one of the islands near Canton, they being "so singularly adapted by nature in every respect for commercial purposes [and] would promptly produce every effect we desire."

Merchants and mercantile associations familiar with the situation at Canton also offered Palmerston their opinion. The London East India & China Association went as far as to recommend another embassy be sent to Peking "with the view of extending the commercial intercourse with the Chinese." To ensure greater protection for British trade, the embassy was to secure the "possession by negotiation or purchase if necessary, of an Island on the eastern coast of China, where a British Factory may peaceably reside, subject to the laws of its own government and removed from all ... disputes with the Chinese subjects or authorities."

A similar suggestion was made in a memorial to Palmerston from the Glasgow East India Association. Both appear to have been prompted to approach Palmerston by James Matheson, a British merchant at Canton and staunch advocate of free trade. In 1830, he published a pamphlet suggesting the government send a plenipotentiary and small naval force to China to secure one of the islands off the east coast to establish British trade away from Canton. He also drafted a petition to the House of Commons signed by forty seven British subjects in China requesting the British government acquire "an insular position near the coast of China [to] place British commerce in this remote quarter of the globe beyond the reach of future despotism and oppression."

Matheson, his partner, William Jardine and their firm Jardine, Matheson & Co were to have a decisive influence on the development of the British negotiating position. Jardine advocated the occupation of three or four islands, Taiwan, Amoy, Quemoy and Chusan to force China into reforming the system of trade, while Matheson favoured acquiring one of the Lintin Islands for a depot. Clearly, Hong Kong was only one of a variety of options and preferences for a British depot.

By the mid-1830's mercantile interests which supported free trade, especially Jardine, Matheson & Co, constituted a major influence on British policy towards China. In 1829, they vigorously campaigned for the abrogation of the East India Company's monopoly on the trade with China, opposing its passive attitude towards the Canton system of trade which they regarded as an obstacle to the development of new export markets in China. Immediately after the Company's monopoly was cancelled in 1834 they, again led by Jardine, Matheson & Co, sought to abolish of the restrictive Canton system of trade. Drawing the British government's attention to the importance of trade with China and the insecure position of British merchants at Canton, they requested it intervene and use military force to impose their demands on China.

The merchants found a strong ally in Palmerston. Imbued with the doctrine of free trade at Edinburgh University by Dugald Stewart, during his time as Foreign Secretary Palmerston was always ready "to include in his despatches to foreign governments an exposition of Stewart's views on the merits of free trade." For Palmerston, utilising force to secure free trade in China was consistent with his general belief that in the "usual and unavoidable stages of intercourse of strong and civilised nations and with weaker and less-civilised ones", the stronger may be required to assert its dominance with "a successful display of superior force."

The seizure of British opium and detention of British subjects at Canton provided a sufficient pretext for war. In March 1839, the Special Commissioner appointed by the Emperor to supervise the Chinese government's prohibition on the trade of opium, Lin Tse-hsu, ordered foreign merchants to surrender the opium they had imported to China. When they prevaricated, Lin suspended all trade and confined the merchants to their factories at Canton until they agreed to surrender their opium. The merchants agreed to do so only after receiving Elliot's commitment that the British government would remit its full value. They were ultimately expelled from Canton by the Chinese authorities for refusing to sign an undertaking to cease importing opium.

When the British forces and plenipotentiaries arrived at Canton in June 1840, the acquisition of a trading depot was a major consideration. For Matheson the cardinal point of the expedition was "the future mode of conducting the foreign trade in China." In May 1839 he expressed hope that the war would result in British merchants obtaining "a settlement of our own on which to establish ourselves under the British flag, besides safe and unrestricted liberty of trade at the principle marts of the Empire." Yet Jardine and Matheson's preferred to secure trading concessions from China, rather than the annexation of Chinese territory to facilitate that trade. As Wong notes, an informal empire was built on economic control and did not necessarily require the annexation of territory.

By contrast, Palmerston's policy included the retention of an island on a permanent basis. This was reflected in his response to Elliot's proposal regarding the Portuguese settlement at Macao. In April 1839, having had his plans for the withdrawal of all British subjects to Macao vetoed by its Governor, Elliot recommended to Palmerston that the Portuguese territory be ceded to the British government. Palmerston chose not to comment on Elliot's suggestion, noting only that "the present notion of H.M Government is to...seize and occupy one of the Chusan Islands, or...any other Insular positions which may serve as a Rendezvous and basis of operations for the Expedition, and afterwards as a secure basis for the British Commercial Establishments; it being intended to retain permanent possession of some such station."

Under the influence of Jardine and Matheson and their London agent, John Smith MP, whom Palmerston depended on almost exclusively for information from Canton, Palmerston's policy regarding occupation on a permanent basis soon changed. In November 1839, Palmerston sought the advice of the London East India & China Association, of which Smith, Jardine and Matheson were members, of the situation there. In its memorandum to Palmerston, the Association set out articles virtually identical to those contained in the draft treaty Palmerston was to send Elliot three months later. While among their proposed articles, they considered that "supposing the Chinese...refuse opening their ports generally, the cession by purchase or otherwise, of an Island be obtained upon which a British factory could be established", they emphasised that "in the future conduct of the Trade it would be most desirable to obtain a commercial treaty with the Chinese."

Palmerston accepted this advice. The British negotiating position was now to offer the Chinese government the alternative of trading concessions or the cession of an island and such an island was to be occupied to prompt the Chinese government to reach a favourable settlement with Britain. In February 1840, Palmerston enclosed a copy of this draft treaty with his instructions to the plenipotentiaries, Charles Elliot and Admiral George Elliot, in which he outlined these options. If the Chinese government expressed "a wish that, instead of ceding Islands, it should permit British Subjects to establish Factories and to make permanent arrangements for carrying on trade on the main" then the article of the treaty in which the Chinese government ceded an island to Britain was to be replaced with several which granted its merchants commercial concessions. Palmerston did not outline these options in his letter to the Minister to the Emperor of China, in which he demanded that "one or more and sufficiently large and properly situated islands on the coast of China...shall be permanently given up to the British Government as a place of residence and commerce for British subjects." However, in his additional instructions to the Elliots, he noted that the government regarded only the articles concerning trading concessions as "sine qua non, without the conclusion of which, or of articles substantially equivalent thereto, hostilities are not to cease."

Clearly, Palmerston now regarded the security of British trade as the most important concession to be obtained from the Chinese government. He thought it expedient to abstain from territorial acquisition and concentrate instead on securing access to the ports of Canton, Amoy, Foochow, Ningpo and Shanghai. The difficulties in defending an island base were among the reasons he set out in a letter explaining his position to Admiral George Elliot. "We want certain things from the Chinese" Palmerston observed "[the best arrangement] would be no islands, but Commercial Security in certain Towns...such an arrangement would make our people safer in some cases than if we had an island, because if we went to war with France or the United States or enemy might send a force to surprise our island, whereas they could not meddle with our people in a town on the mainland of China."

Although retaining an island was no longer a priority, Palmerston did not completely rule it out. In his instructions to the Lords of the Admiralty regarding the dispatch of a naval and military force to China, Palmerston ordered the British forces to take possession of an island on the Chinese coast, to be "held as a security for the compliance of the Chinese government with the demands to be made upon it." This island was to serve as a place of rendezvous, as well as a base of operations. While the Admiral commanding the expedition was to exercise his discretion in choosing an Island, Palmerston noted it should "afford good and secure anchorage for the shipping ... be capable of defence against any attack on the part of the Chinese..." and might be permanently retained only "if circumstances should render its permanent retention expedient."

Initially, Chusan was to be the island occupied for this purpose. Although Jardine had advised Palmerston to occupy Hong Kong in September 1839 "should it be deemed necessary to possess ourselves of an Island, or harbour, near Canton", he and Smith later preferred Chusan and convinced Palmerston to order its occupation. Palmerston had also received recommendations on Chusan's suitability as a depot from agents of the East India Company, noting in his letter to the Admiralty that it appeared to have the features required, as its position "midway between Canton and Peking, and near the Estuaries of some large navigable rivers, should, in many points of view, render [it] a convenient Head Quarter Station."

iii

The Kowloon Peninsula stretches out from the Chinese mainland to within three quarters of a mile of Victoria, the capital of Hong Kong. Its strategic importance to the Colony's defence had been apparent to the British since the Opium War, when the Chinese had set up batteries on the Peninsula to protect the harbour separating it from Hong Kong. In his negotiations with the Chinese plenipotentiary, Ch'i-shan, in January 1840 Charles Elliot had clearly recognised its importance and requested the cession of both Hong Kong and the Kowloon Peninsula. When Ch'i-shan refused to cede both, Elliot accepted Hong Kong and instructed Ch'i-shan to have Chinese soldiers withdrawn and fortifications destroyed so the British would not be required to garrison more troops or build extra forts at Hong Kong.

Palmerston had also recognised the Peninsula's value, noting that as part of the coast opposite Hong Kong commanded one of the Island's principle harbours, it was necessary to ensure the Chinese did not station a military force there. Yet later British plenipotentiaries did not include the Peninsula's cession among their demands. Pottinger deliberately did not refer to Kowloon Peninsula during his negotiations with the Chinese over the Treaty of Nanking. Aberdeen, the Foreign Secretary, approved of his approach, noting that unless the Chinese built fortifications there he did not intend to raise the question of its status. Lord Elgin, the plenipotentiary appointed by the British government to negotiate and secure ratification of the Treaty of Tientsin in July 1857, does not appear to have been aware of the Peninsula's strategic value.

During the Arrow War (1856-1860) several British military officials advocated the Peninsula's acquisition. In March 1858, Captain Hall of the HMS _Calcutta_ wrote to the Earl of Hardwicke of the Admiralty, intent on bringing to his attention "the great importance of Kowloon Point and Stonecutter's Island" arguing "that if the present opportunity is lost in obtaining its cession, which we should insist on, before long another power will occupy it." Hall listed several other reasons for occupying the Peninsula, including the need for more land on which to construct storehouses and commercial buildings to manage the increase in trade at Hong Kong and the need to accommodate the British troops arriving there.

The British military commander, Major-General van Straubenzee, made similar suggestions to the War Office, advocating the Peninsula be acquired for military purposes. In his dispatch to Elgin urging its occupation, he emphasised the advantages to British shipping "to be derived from its being in our possession" and warned of "the danger, not only to our shipping, but to the port of Victoria itself should it become hereafter the possession of any other European power."

At this time, the British government was sensitive to such threats. The islands of Chusan were still considered by some to offer superior facilities to Hong Kong. In 1857 Robert Fortune, a British traveller, noted that the island would "afford shelter to our troops [and] our fleet might rendezvous in its...commodious harbours. This Island is more healthy than Hong Kong...and this fact is one of very great importance to the welfare of our troops...I can point to no better place than Chusan as the headquarters for our troops." In September 1856 Bowring, the Superintendent of Trade, reported to Clarendon, the Foreign Secretary, that the Chinese government were rumoured to have ceded part of Chusan to the Russians and sought instructions should the rumours prove correct. In his response to Bowring's inquiries, Yeh, the Imperial Commissioner, replied that official permission had not been granted to the Russians "to appropriate to their use Chusan or any other of those Islands." Clarendon approved of Bowring's action and instructed him to continue to direct attention to the matter.

In forwarding van Straubenzee's letter of March 1858 to Clarendon, Elgin requested he be "furnished with instructions for my guidance on this point, as I find nothing in those received from your Lordship which authorise me to insist on concessions of territory from the Chinese government, as I presume there may be grave political objections to such a proceeding on my part." Malmesbury, Clarendon's successor as Foreign Secretary, instructed Elgin, if the opportunity arose, to "obtain from the Chinese government a cession by Treaty of those places [Kowloon Peninsula and Stonecutter's Island] to the British Crown."

By the time Elgin received Malmesbury's instructions the Treaty of Tietsin had been signed, although not yet ratified, without provision for the cession of Kowloon Peninsula. In his dispatch to Malmesbury, Elgin noted that although the Peninsula "being a territorial question was necessarily excluded from consideration" he was prepared, if possible, to settle it before his departure from China. Bowring, aware of this correspondence but not consulted, supported this view, writing in August 1858 to the Colonial Secretary, Sir E. Bulwer-Lytton, that the land was worthless to the Chinese, but valuable to the British for military and commercial purposes. As the Treaty of Tientsin had already been drawn up, Bowring volunteered to arrange the cession with the Viceroy at Canton.

In March 1859 Elgin, having broken off negotiations with the Imperial Commissioner, noted that the acquisition of Kowloon was among the matters left unsettled. Three months later, Malmesbury instructed him to include the Peninsula's acquisition among the points he was to raise with the Chinese government. While Costin notes that Jardine, Matheson & Co were consulted about the peace terms in February 1860, the opinion of military officers regarding the security of Hong Kong were clearly the most influential factor in the development of the British government's negotiating position on the Peninsula's acquisition.

iv

Concerns over Hong Kong's defence and threats to Britain's position in China from other imperial powers were the major influences on Britain's negotiating position over its eventual leasing of the New Territories. Mercantile interests do not appear to have been as influential as they were under Palmerston. Although Wesley-Smith argues that the 1898 Convention of Peking was "the result of a well-organised campaign by commercial interests in Hong Kong", he does not provide sufficient evidence to sustain this assertion. Alternatively, Pelcovits argues that constant disagreements between the Foreign Office and British mercantile interests in China precluded the latter from influencing British foreign policy towards China, especially between 1860 and 1905. An apparent decline in mercantile influence, evident during to the development of the British negotiating position on the Kowloon Peninsula, may be more clearly illustrated during to the development of the British negotiating position on the acquisition of the New Territories.

The initial push for Britain to acquire additional territory on the Kowloon Peninsula to extend Hong Kong's boundaries resulted from the concerns of Hong Kong's military commanders, who put forward arguments regarding China's strategic dominance of the Kowloon Peninsula and the Colony's main harbour similar to those advanced by their predecessors' in the late 1850s and early 1860s. In November 1884, Lieutenant-General J. Sargent urged the War Office to acquire the entire Kowloon Peninsula. The Governor, Sir George Bowen, who had not been consulted, opposed the suggestion, arguing that as the Chinese were at war with the French, Sargent's proposal would result in a "sort of scramble for their territory." Sargent's successor, General Cameron, proposed the cession of the small promontory on the Chinese side of Lei Yue Mun Pass, the eastern entrance to Hong Kong harbour, in 1886. This plan was rejected by the Committee for Imperial Defence, which did not regard China as a threat and did not proceed with plans to construct extensive fortifications on the British part of Kowloon Peninsula.

China's defeat in the Sino-Japanese war renewed concerns about the Colony's defence. In November 1894 its Governor, Sir William Robinson, pushed for the acquisition of additional territory for defence purposes, noting that if "China itself or a foreign power at war with China or England could by disembarking troops at the north of the Canton River, or outside Lei Yue Mun Pass in Mirs Bay and descending upon the Peninsula of Kowloon, not only take our fortifications...but easily shell Victoria from Chinese territory as well as cut off the entire food supply of the colony." Robinson recommended extending the Colony's boundaries to encompass this territory, along with "all islands within three miles of Hong Kong" and noted if the border was not extended "the position of this colony in the event of any war must I think be very insecure from a defensive point of view."

Enclosed with this dispatch was a memorandum Robinson had requested from Major-General Barker, President of Hong Kong's Joint Naval and Military Committee, which emphasised the disadvantages which would result from Chinese military control of the harbour and also drew attention to the presence of Kowloon City. In April 1894, Barker had inquired into the defence capabilities of Hong Kong and made the Colonial Defence Committee aware of the problems associated with its close proximity to Chinese territory. In May 1895, the Joint Naval and Military Committee recommended the Colony's boundary be extended, as the adequate defence of Hong Kong required the absolute control of the waters between the Island and the Chinese mainland as well as command of the northern and southern shores beside the Lei Yue Mun Pass. This recommendation was approved by the Secretary of State for War and the Lords Commissioners of the Admiralty, but not the Colonial Office.

So anxious was Robinson to acquire this territory that he and Sir Claude McDonald, the British Minister in Peking, considered reversing the British law on sedition, then not an extraditable offence, in return for the cession of additional territory on the Kowloon Peninsula. Robinson sought to improve Hong Kong's relations with China, which he had strained in July 1896 by refusing its request for the extradition of the Chinese revolutionary, Sun Yatsen. Anxious to mollify China and ensure Britain's surrendering of this principle would not be viewed as a sign of weakness, he and McDonald proposed to extend the Colony's boundaries in return for this concession. Salisbury, the Prime Minister and Foreign Secretary, firmly rejected the scheme, anticipating outrage from Parliament, while Chamberlain, the Colonial Secretary, was morally repelled at the thought of trading a Chinese political refugee for territory.

Yet Robinson's concerns were reinforced in August by a Colonial Defence Committee Memorandum. The Committee had previously noted the growth of Japanese, Russian and French naval and military power in the Far East, and pointed to the growth of Kowloon City. It urged the government to proceed with negotiations for an extension of Hong Kong's boundaries. Although the War Office and Admiralty concurred with this recommendation, Salisbury refused to act as negotiations with China regarding other concessions were in progress. The threats to Britain's interests from Russia, France, Germany and Japan increased the pressure on Britain to extend Hong Kong's boundaries. This push for concessions by other imperial powers resulted from China's defeat in the Sino-Japanese War in 1895. In response to Japan's demands for territorial concessions, Russia, France and Germany intervened under the pretence of defending China, only later to demand commercial and territorial concessions from the Ch'ing government in return for their assistance. To preserve its interests, Britain initially sought to prevent the dismemberment of China by the other powers, but was forced to join the scramble for concessions after Germany secured the lease of Kiaochow and Russia of Port Arthur and Talienwan in March 1898. To offset German and Russian threat to its interests in the north, Britain acquired a lease over Weihaiwei in July 1898. However, it was France's acquisition of a lease in April over Kwangchow Bay, only 210 miles south of Hong Kong, that prompted Britain to press for the extension of Hong Kong's boundaries to defend its interests in China's south.

The influence of mercantile interests appears to have weakened considerably. In September 1895, the Hong Kong Chamber of Commerce advocated the opening of the West River and extension of Hong Kong's boundary. Its views were strongly supported by the unofficial members of the Legislative Council and endorsed by Robinson in a telegram sent to the Foreign Office in September 1895. Robinson was also close to Catchik Paul Chater of the Hong Kong Land Company. Although Wesley-Smith argues "[t]he 1898 Convention of Peking was the result of a well organised campaign by commercial interests in Hong Kong..." initially led by Chater, the evidence he provides for this 'well organised campaign' consists of two letters from Chater to Robinson, one of which Robinson enclosed in his dispatch to Rippon, the Colonial Secretary, in November.

In this letter, Chater argued that the Colony's boundaries should be extended to facilitate more efficient administration and afford it greater protection. He asserted that the Chinese Customs revenue stations could be done away with and that the extra territory would provide the Colony's population and industries with more space and a better water supply, as well as allowing it to become independent of Canton for supplies of cattle, poultry and vegetables. In his letter to Robinson of 25 September, written on behalf of his fellow legislative councillors, Chater re-iterated his arguments on defence, noting that Britain should take advantage of "favourable circumstances" to adjust its concessions in China, as had other imperial powers, and secure the extension. The Colonial and Foreign Offices did not respond to Robinson and Chater's concerns.

In November 1895, representatives of the London East India and China Association secured an interview with the Foreign Secretary, Lord Salisbury, to clarify his Far Eastern policy. At this meeting, the Association's chairman, William Keswick, a partner in Jardine, Matheson & Co, argued that increased Russian influence in China should be balanced by the acquisition of Chusan and the extension of Hong Kong's boundary to include Mirs Bay and both sides of the Lei Yue Mun Pass on the basis that it would give greater freedom to local commerce by pushing back the cordon which Chinese revenue cutters drew around the Colony. Salisbury assured Keswick he recognised the importance of British interests in China and that the views of the Association would be taken into consideration. Under Palmerston mercantile interests, especially Jardine and Matheson, had greatly influenced the development of British policy towards China. By the late nineteenth century, their influence had evaporated. Where they had once advised the Foreign Secretary, they now relied on him to advise them

II

**NATIONAL SOVEREIGNTY**

i

Britain's desire to force China into a subordinate economic relationship with it through the means of an informal empire conflicted with the Chinese concept of territorial sovereignty. During negotiations over the cession and lease of Hong Kong's component parts, the Chinese government strongly resisted the loss of sovereignty over its territory and people. China's reaction to the unequal treaties imposed on it enshrined this concept of territorial sovereignty as the central element of modern Chinese nationalism and deeply influenced the development of its negotiating position on Hong Kong's return.

Nationalism, Hayes argues, is "a fusion of patriotism with a consciousness of nationality." In addition to a common language, the cultural basis of nationality consists of historical traditions, which include a peoples' territorial past and a popular reverence for the land of one's ancestors. When, Hayes concludes, a nationality "extols its common language and traditions, the result is cultural nationalism." The Chinese people, Laitinen concludes, possessed this cultural nationalism. While Hayes asserts an intensive educational process is required to make the elements of cultural nationalism the objects of popular patriotism and produce political nationalism, in the case of China, Laitinen replaces this process with the impact of western imperialism and argues that Chinese nationalism was "born as a result of the military, commercial and cultural penetration of the West."

As previously noted, the British negotiating position was to offer China the alternative of granting trading concessions to British merchants or ceding the British government an island on which those merchants could reside and trade under British jurisdiction. If the Chinese government accepted the latter option the British plenipotentiaries were to ensure they obtained a treaty valid under international law guaranteeing Britain full sovereignty over the island and not simply permission to trade and reside there as the Portuguese had at Macao. However, the Chinese government was not prepared to cede full sovereignty over its national territory to a foreign power, except on terms similar to those at Macao. In this regard, the Sino-British negotiations regarding Hong Kong's colonisation illustrate the Chinese government's concept of national sovereignty.

The importance of this concept to the development of China's Nationalist and Communist government's negotiating positions on the return of Hong Kong has often been underestimated. In his article on nationalism in Asia, Wang Gungwu confines his discussion to the nationalism "which started in the late nineteenth and early twentieth centuries." Although he notes that concepts of nation and national consciousness existed beforehand, he concludes they are "unlikely to have great significance for the understanding of the phenomenon of nationalism in modern history." Kohn expresses similar doubts and argues that while some feeling of nationality existed before the development of modern nationalism, it did not "influence the thought and actions of men in a deep and all-pervading way. It found a clear expression only in times of stress or provocation. It did not determine their aims or actions permanently or in the long run."

Yet the Chinese concept of national sovereignty did not suddenly appear in the late nineteenth century. It was extant in 1840 when the Ch'ing government consistently refused to cede sovereignty over Hong Kong, or any other island, to the British and when forced to do so sought to retain jurisdiction over the Colony's Chinese residents, albeit unsuccessfully. Regaining sovereignty of areas annexed by foreign powers constituted the central influence on the present Chinese government's negotiating position on the Colony's return.

ii

On 5 July 1840 the British expeditionary force Palmerston sent to impose Britain's demands on China captured the Island of Chusan and occupied Tinghai, its principle town. On 15 August the British plenipotentiaries, Charles and George Elliot, delivered Palmerston's letter to the Chinese Emperor's minister to the Provincial Governor, Ch'i-shan, who had been appointed by the Emperor to negotiate with the British. Ch'i-shan and Charles Elliot conducted the initial negotiations on 30 August and 12 September at Peiho. Ch'i-shan vigorously opposed the cession of an island to Britain, insisted all foreign trade continue to be restricted to Canton and rejected the proposal to allow British subjects to reside in some of the uninhabited islands along the coast of Kwangtung.

Ch'i-shan's objections prompted the Elliots to note in their dispatch to Palmerston their belief that the British government's extensive demands were "doubtful of complete achievement without a protraction of hostilities." Instead, they felt "that there would be no great difficulty involving an early and temporary settlement...probably of gaining an insular station near Canton, and of opening out the trade at that point...on the condition that we evacuate Chusan."

The plenipotentiaries arranged to continue negotiations at Canton, and the Elliots left Pehio for Tinghai on 15 September. On 6 November, they concluded an armistice with Ch'i-shan on the understanding that negotiations would continue at Canton, with Chusan being held as a guarantee. On 29 November, Admiral George Elliot's retirement left Charles Elliot to conduct the negotiations alone.

During December 1840, the negotiations proceeded unsuccessfully. While Morse asserts they "were broken off at the point of the cession of Hong Kong [as] Ch'i-shan knew that the cession of national territory would never be forgiven by the Emperor" they did not break down over this point alone. Ch'i-shan again rejected all of Elliot's demands and requested the British forces to leave Tinghai. He advised Elliot that no islands would be ceded and that British trade would continue to be restricted to Canton, it would be placed on a more secure basis. While Hong Kong was not specifically mentioned, as Costin notes, the cession of an island was discussed in general terms.

As these terms fell short of those outlined by Palmerston, Elliot pressed for the retention of Chusan and the opening of trade at other ports. Ch'i-shan refused to consider the cession of Chusan. Elliot, as Wong observes, in complying with Palmerston's instructions that should the Chinese government express a willingness to allow the British to trade on the mainland, the question of the cession of islands should not be pressed, offered to drop this demand if the Chinese government opened Amoy, Canton and Chusan for trade and allow merchants to reside there. Ch'i-shan would only concede that while trade might be allowed at a second port, British merchants would not be allowed to reside on shore. Elliot responded that although his government had instructed him to open five ports to trade, he would evacuate Chusan if the Chinese Emperor ratified an agreement to this effect.

In January 1841, Ch'i-shan advised the Emperor that the British were anxious to secure two places, Hong Kong and the island to its west, Ta Hsu Shan and suggested the port of Amoy be opened for trade as a substitute for the cession of an island to the British. The Emperor rejected Ch'ishan's proposal and when Ch'i-shan advised Elliot that the agreement could not be ratified, Elliot responded with an ultimatum. Unless a definite basis for an agreement was proposed by Ch'i-shan, the Chinese batteries along the Bogue, the strait at the mouth of the Pearl River, which flows to Canton, would be taken on 7 January.

When Ch'i-shan failed to reply Elliot had the Chinese batteries at Chu'en-pi and Taikoktow, which commanded the entrance to the Bouge, occupied. The Commander of the Chinese fleet at Canton, Admiral Kuan T'ien-p'ei, requested an armistice to allow for further negotiations. A Chinese source utilised by Eitel asserts that it was at this time that Ch'i-shan drew up a proposal which offered Elliot Hong Kong in exchange for the batteries at Chu'en-pi and Taikoktow and Tinghai. Eitel concludes from this evidence that the proposal to cede Hong Kong came from Ch'i-shan, although Ch'ishan's memorial to the Emperor in January 1841 implies the suggestion came from Elliot.

While Elliot's correspondence with Ch'i-shan and Kuan does not clear up this point, it shows that Hong Kong was not Elliot's first choice. In his letter to Kuan setting out the terms for an armistice, Elliot declared that the island of Sha-chiao, which the British now occupied, would remain under their control as a place where British subjects could live and trade. Three days later, Ch'i-shan wrote to Elliot, undertaking to forward the British request for an island to the Emperor, but advised him that as many Chinese soldiers had been killed at Sha-chiao, it would be an inauspicious place for the British to establish a settlement.

In his reply to Ch'i-shan the same day, Elliot requested instead that the Kowloon Peninsula and "shores and harbour of Hong Kong ... be ceded to the British government for a Factory Establishment." If both were ceded, Elliot undertook to waive his demands for other ports of trade and return the islands of Sha-chiao and Ta-chiao to China. Ch'i-shan declined to cede both and after drawing to Elliot's attention that Kowloon and Hong Kong were two places, reminded him of a previous verbal arrangement "to choose but one place as a site for residence anchorage of vessels." On 16 January, Elliot accepted Hong Kong. Four days later, he concluded a preliminary agreement with Ch'i-shan, often referred to as the Convention of Ch'uenpi. Under the terms of this preliminary arrangement with the Chinese government, the island and harbour of Hong Kong were ceded to the British Crown.

Under this Convention, British sovereignty over Hong Kong was not absolute, as it contained a condition that "all just charges and duties to the Empire of China upon the commerce to be carried on at Hong Kong should be paid as if the trade were conducted at Whampoa", a Chinese station seven miles south-east of Canton. The condition implies that Elliot and Ch'i-shan had reached a compromise under which Hong Kong would be a "cross between a treaty port of China and a British Colony, the soil being owned by Great Britain, but trade charges levied by Chinese officials." As Wong notes, it is not clear whether "this condition had been dictated by Ch'i-shan, envisaging Hong Kong to be another Macao" or whether it was "a self-imposed restriction on the part of Elliot to increase his chances of obtaining an island." Either way British sovereignty was incomplete.

Ch'i-shan's subsequent actions and the Chinese government's concept of sovereignty strongly indicate the former view. The Portuguese had been given permission to reside at Macao in 1557. Although they asserted their independence from Chinese jurisdiction, the Portuguese paid rent to the Chinese authorities until 1849. A Chinese official was appointed by the Emperor to govern the territory, where he resided and decided all judicial cases in which Chinese were involved. Trade, the levying of taxes on persons and goods landing or embarking at Macao were supervised by Chinese officials. Ch'i-shan clearly intended to arrange the British settlement at Hong Kong along similar lines.

On 27 January, Elliot met with Ch'i-shan to discuss the cession of Hong Kong. However, on 20 January, Ch'i-shan had received an imperial edict ordering him to assemble four thousand provincial troops to make "a most dreadful example of severity" of the English. In his reply to the Emperor, Ch'i-shan noted that "previous to the receipt of Your Majesty's sovereign commands, [I] had, with, with a view to preserve the territory and the lives of the people, ventured rashly...to make certain conditional concessions to the English foreigners, promising that I would earnestly implore on their behalf a gracious manifestation of Your Majesty's goodness."

When the rough draft of the treaty prepared by Elliot was presented to Ch'ishan, he criticized the articles dealing with the cession of Hong Kong and Imperial ratification and stated that China could not cede the whole island of Hong Kong, but only as much as was required for the purpose of residence and anchorage. As they could not come to terms, the final signing of the agreement was postponed until the British evacuation of Tinghai was confirmed, with Ch'i-shan agreeing to sign the convention when he returned to Canton.

Although no formal treaty had been signed, Bremer proceeded to occupy the Island, advising the Chinese to withdraw their military forces. Elliot and Bremer issued proclamations on 29 January declaring the Island to have been "ceded to the British Crown under the seal of the Imperial Minister and High Commissioner" and that the Island "has now become part of the Dominions of the Queen of England." In his dispatches advising Palmerston of his intention to annex the island, Elliot had again noted his conviction that British commerce would "be better advanced by moderation and restraint at the first point of practicable adjustment, than by extensive concessions wrung from the Government..." Hong Kong, Elliot asserted was a potentially valuable possession and he enclosed letters in his dispatch to Palmerston from Major-General Sir Hugh Gough and Morrison, the Acting Secretary and Treasurer supporting this view.

Ch'i-shan's memorial to the Emperor on the Cheunpi agreement clearly shows Hong Kong had not been ceded. Due to the British return of Tinghai, Ch'i-shan requested "Your Majesty's gracious favour to allow [the British] to come to Canton to trade as on previous occasions and grant them [Hong Kong as] a place for temporary dwelling." Although the British had already occupied Hong Kong and proclaimed its annexation, he requested the Emperor's "exceptional and compassionate permission...to allow the [English] foreigners, from 1841 onwards, to resume trading at Canton, and, following the precedent of Macao, to anchor their ships and live on a place called Hong Kong." There was, as Wong notes, no formal cession, simply a preliminary draft agreement allowing the British to reside temporarily on Hong Kong.

Elliot and Ch'i-shan met again on 11 February to consider the draft convention, which Ch'i-shan agreed to sign in ten days time. Yet, by this time it had become clear to the Chinese government that Ch'i-shan, by reaching this provisional agreement, had disobeyed his instructions not to accept any British proposal. Ch'i-shan's actions were revealed in a memorial to the Emperor by Yi-liang, the Governor of Guangdong province, who reported that he had received a copy of a British diplomatic dispatch "in which the occupation of Hong Kong was announced [and] whereby all military establishment therein were ordered to leave." Retribution was swift. The Emperor, who had already demoted Ch'i-shan for arguing on behalf of the British, commanded that he be put in chains and returned to Peking.

Upon receipt of Elliot's report of the Ch'uen-pi agreement, it become apparent to Palmerston that Elliot had mishandled the negotiations. Palmerston rebuked him for failing to secure the commercial concessions required and ensure the complete cession of an island, "[y]ou have obtained the cession of Hong Kong, a barren Island with hardly a House upon it and even this cession as it is called, seems to me, from the conditions with which it is clogged, not to be a cession of the Sovereignty of the Island, but to be permission for us to make a Settlement there, upon the same footing on which the Portuguese have an Establishment at Macao."

Palmerston had been careful to provide Elliot with detailed instructions on the preparation of international treaties and had sent him all five volumes of Hertslett's _Collection of Commercial Treaties_. Yet the agreement he had reached with Ch'i-shan was invalid, with Palmerston noting in his reply to Elliot that "no part of the Territory belonging to one Sovereign can be ceded and made over to another...except by a formal Treaty, ratified by the Sovereign whom the cession is made by."

Palmerston recalled Elliot and sent out Sir Henry Pottinger to secure the British government's demands in full. In his instructions to Pottinger, Palmerston again set out the two alternatives which constituted the basis of the British negotiating position. While conceding that Hong Kong was "supposed to be in many respects well qualified to become a commercial station of some importance for our trade with China", Palmerston believed that it "could not a great length of time afford to our merchants any new facilities for trade." The retention of Hong Kong was not to take priority over gaining either permission for British subjects to reside in some of the principle cities on China's eastern coast, or another island closer to Canton, for which Hong Kong could be exchanged.

To avoid the difficulties Elliot's failure to secure a valid agreement had almost caused the British government, Palmerston instructed Pottinger that any arrangements he came to with the Chinese plenipotentiary were to be embodied in a treaty. Only after it had been signed by "yourself and the Chinese plenipotentiary, in the name of your respective sovereigns: and to afterwards be ratified by each sovereign... can [you] consider the Treaty as valid."

In June 1841, Palmerston changed his policy on permanent retention. He now believed that Hong Kong ought to be retained and the Kowloon Peninsula secured to ensure its defence, "it seems some portion of the opposite coast commands one of the principle anchorages of the island; and it will therefore be necessary to stipulate that the Chinese shall not erect any fortification or work, or plant any cannon, or station any military force, within a certain distance of those points from which the anchorage at Hong Kong is commanded." However, the British negotiating position was soon to change again.

By October 1842, British forces had re-occupied Chusan Island, along with several important mainland towns, including Amoy and Ningpo and Palmerston had been replaced as Foreign Secretary by Lord Aberdeen. While Aberdeen continued to pursue Palmerston's demands on China, he made an important change to Pottinger's instruction. Chinese territory occupied during the war was not to be regarded as having been permanently acquired. Instead, Pottinger was instructed to secure, by means of a treaty, "permission to trade with four or five of the principle towns on the east coast of China."

Yet Pottinger, like Elliot, was convinced that Hong Kong should be retained. A week before receiving Aberdeen's revised instructions, he noted his belief that "within six months of being declared to have become a permanent colony, it will become a vast emporium of commerce and wealth." In his reply to Pottinger, Aberdeen firmly re-stated the government's policy, noting that "the island of Hong Kong is to only be considered at present as a place militarily occupied, and liable to be restored to the Chinese Government on the attainment of the objects which Her Majesty's Government seek from China." Pottinger was instructed to suspend all works of a permanent nature on the island "until such time as Her Majesty's Government shall determine whether it is to be restored to the Chinese Government or retained as a possession of the British Crown."

Upon receipt of Aberdeen's instructions, Pottinger ceased all further construction work and allocations of land, but continued to note his reservations, believing the settlement had "already advanced too far to admit to its being restored to the authority of the Emperor consistently with the honour ... of Her Majesty's Government." Lord Stanley, the Colonial Secretary, agreed, and led a change of opinion in the British Cabinet, as he believed it was too late to withdraw from Hong Kong and had been drafting instructions for Pottinger's administration of the island before the treaty was signed.

Pottinger resumed his campaign in March 1842, arriving at Nanking in August. To prevent the City's destruction, the Ch'ing accepted the British government's terms and on 29 August 1842, its plenipotentiaries I-li-pu and Ch'i-ying, signed the Treaty of Nanking. Against Aberdeen's express instructions, it provided for the permanent cession of Hong Kong to Britain.

iii

The Chinese concept of national sovereignty encompassed not only the land, but also its people. While Ch'i-shan's reluctance to cede Chinese territory to Britain and attempt to turn Hong Kong into another Macao illustrated the territorial aspect of the concept, the other side of the Chinese concept of national sovereignty was reflected by its plenipotentiaries' attempts to retain jurisdiction over Hong Kong's Chinese residents.

Article 2 of the Treaty of Nanking left the matter of jurisdiction over the Chinese in Hong Kong open to interpretation. It stated only that the Colony was to be governed by "such laws and regulations as Her Majesty the Queen of Great Britain, &c, shall see fit to direct." The status of Chinese residents in Hong Kong was therefore not directly addressed. Initially, British policy on this matter was conciliatory. Elliot's proclamation on 29 January 1841, declared that "the natives of the Island of Hong Kong, and all natives of China thereto resorting" were to be "governed according to the laws and customs of China, torture excluded" while all others would fall under the jurisdiction of British law. In a second proclamation issued by Bremer and Elliot on 1 February 1841, this policy was clarified. Although it stated that the Chinese residing in Hong Kong "must understand that they are now subjects of the Queen of England" it noted that "pending Her Majesty's further pleasure" the Chinese in Hong Kong would be governed by the elders of their village, subject to the control of a British magistrate.

In September 1842, the Chinese Imperial Commissioner, Ch'i-ying wrote to Pottinger requesting that jurisdiction of Chinese residents of Hong Kong remain the responsibility of Chinese officials. In his reply, Pottinger proposed that Chinese residents who had committed criminal offences be handed over to the Chinese authorities in Kowloon, while those who committed civil offences would be dealt with locally by British officials. Ch'i-ying replied that all offences committed by Hong Kong Chinese should be dealt with by a Chinese official to be stationed at Kowloon for this purpose.

Pottinger advised Aberdeen he had received a reply to his proposal regarding jurisdiction over the Chinese in Hong Kong from Ch'i-ying and I-li-pu in October 1842. Pottinger's suggestion, they argued, that Chinese who committed crimes worthy of death or severe punishment would be handed over to Chinese Mandarins for trial and punishment while those guilty of lesser offences would be dealt with by British authorities, was inconsistent with Chinese law. In drawing attention to the potential for conflict if "the people of Hong Kong should refuse submission to punishment by English Officers" they suggested implementing the system adopted at Macao, where a Chinese assistant magistrate was stationed, by appointing a similar officer to reside at Kowloon.

In February 1843 l-li-pu, appointed Imperial Commissioner for Foreign Affairs at Canton in January, again raised the issue with Pottinger, suggesting a Chinese official be stationed at Kowloon to help settle the disputes of the Chinese resident in Hong Kong. Although it was an arrangement he preferred to avoid, in February 1843 he noted in a memorandum his "perfect willingness" to allow the Chinese residing in the Colony to be "be governed by their own laws, and Mandarins to be stationed at Kowloon for that purpose", on the proviso that British authorities in Hong Kong be allowed to exercise "police jurisdiction to a certain extent."

In March, Il-li-pu advised Pottinger he had given instructions to the judicial authorities for the selection of a district officer who, after the arrangements were approved by the Emperor would be stationed at Kowloon. Pottinger approved the proposal, noting he would issue instructions advising the Chinese residing of Hong Kong to apply to the Chinese district officer at Kowloon to have their disputes settled. That same month, Aberdeen referred the question of jurisdiction to be exercised over Chinese residents of Hong Kong to the Crown Law officers and sent a copy of their report to Stanley, the Colonial Secretary. While Aberdeen could not see any reason why Chinese in Hong Kong should not continue to be subject to Chinese law or why a Chinese official should not exercise criminal jurisdiction over them, he noted difficulties were being experienced in "making the Chinese Government understand that the cession of sovereignty of the Island carries with it a cession of sovereignty of the Chinese people established on the Island."

The British government countermanded these arrangements, as it felt that unless all Chinese inhabitants of Hong Kong came under British jurisdiction, the Island could not be regarded as having been ceded, weakening the enforcement of British 1aw. Ch'i-ying, who succeeded I-lipu as Imperial Commissioner in June 1843, disagreed and after the exchange of ratifications of the Treaty of Nanking stated his objection to the Chinese in Hong Kong being governed by British law. Although Hong Kong Island "had been graciously given by the Emperor to the English as a place of residence and trade" he asserted that its Chinese residents were "subject to the rule of the Central Kingdom." The Treaty of Nanking had not provided that Hong Kong's Chinese inhabitants should become British subjects and therefore, they should not be governed by British law. As there was no Chinese magistrate resident in Hong Kong to administer Chinese law, Ch'i-ying requested Pottinger to abide by the agreement he had made with I-li-pu.

Robert Thom, an interpreter for the British Superintendency of Trade who had collated the Chinese and English versions of the Treaty of Nanking, advised Pottinger that as Hong Kong was now English ground, "he may do with the people on it just as he likes...Why have further correspondence about the matter ?" The matter remained unsettled. In May 1844, British authorities arrested one of the leaders of a Chinese gang charged with stealing goods and murdering British soldiers in Hong Kong. He was passed over to the Chinese authorities in Kowloon for questioning about his accomplices. When Davis, Governor of Hong Kong, requested his return for trial, Ch'i-ying refused, asserting that under the Treaty of Nanking, Chinese in Hong Kong were under the jurisdiction of the Chinese government.

A subsequent case further illustrates these jurisdictional disputes. On 20 November 1844, a British magistrate at Hong Kong ordered the arrest of a junior Chinese official for selling fishing licences to its Chinese residents. In his letter to Ch'-ying on the matter, Davis drew his attention to this "violation of territorial sovereignty" and reminded him that "these persons must pay taxes to us and also receive papers from us." In his initial reply, Ch'i-ying gave Davis an undertaking to investigate the matter. In a later reply, Ch'i-ying asserted that under the Treaty of Nanking, British subjects were to be placed under the jurisdiction of British officers while "Chinese subjects shall be tried by their own mandarins." As the official was a native of China and the fishermen along the coast "are not to be compared to Englishmen, they ought according to the Treaty be dealt with by the Chinese mandarins and be treated according to the laws of the Central Empire." He requested Davis to hand the official over to the Chinese authorities at Kowloon.

Davis would not concede the matter. In his reply to Ch'i-ying, he stated that "none but the Officers of my Sovereign, the Queen of Great Britain, can by the law of England exercise authority in Hong Kong" and his intention to "command all the civil and military officers of this Colony to exercise the greatest vigilance in preventing any Chinese Officer from attempting to exercise authority in any part of Hong Kong..."

Ch'i-ying later conceded the matter of jurisdiction over the Chinese in Hong Kong, with Davis receiving his written acknowledgment of British sovereignty over the Island and its people. On 11 December 1844, Davis received an official dispatch from Ma, the Chief Magistrate at Kowloon, in which he quoted his instructions from Ch'i-ying regarding the licence matter, in which Ch'i-ying stated that "the territory of Hong Kong belongs to England and none ought to go there and levy duties."

iv

The British negotiating position on the lease and eventual cession of the Kowloon Peninsula was influenced by concerns over the defence of Hong Kong. As Lane-Poole noted, the Peninsula had become the "invariable refuge" of local criminals and its possession was regarded as "essential to Hong Kong on military as well as civil grounds." While the ease with which the Chinese authorities granted a lease on the Peninsula would appear inconsistent with their concept of territorial sovereignty, the Portuguese held a similar lease over Macao and, as discussed above, Ch'ishan attempted to arrange the British depot at Hong Kong on a similar basis. An important factor appears to have been the local Chinese authorities' difficulties in maintaining local order and they were prepared to agree to the lease after the British gave an undertaking to facilitate its restoration. With China defeated in the Arrow War and the Emperor's Summer Palace burnt to the ground by Anglo-French forces, the Chinese were in no position to oppose Britain's demands for the Peninsula's cession.

In January 1859, Fredrick Bruce was appointed Minister plenipotentiary to the Chinese government at Peking. Arriving in Hong Kong in April, he consulted its Lieutenant Governor, Mercer, over the question of acquiring the Kowloon Peninsula and requested him to prepare a memorandum on the area to facilitate his negotiations with the Chinese government regarding the matter. Mercer's memorandum addressed concerns related to the defence of Hong Kong and local order. The Peninsula's occupation would prevent it being acquired by another power and as crime had increased in the Kowloon area, its occupation became increasingly necessary to ensure the maintenance of law and order in Hong Kong. An additional consideration addressed by Mercer was the rapid development of the Colony and the need for more land to accommodate its expansion.

Mercer concluded that the Peninsula's occupation by British forces would strengthen the authority of the Chinese officials in Kowloon City and prevent a repeat of its occupation by insurrectionists, which had occurred in 1854. While he believed the land was of no value to the Chinese government, he proposed a small amount of money be paid to it as legal compensation for the Peninsula's acquisition. Copies of Mercer's memorandum were received by Newcastle, the Colonial Secretary and Russell, the Foreign Secretary. Newcastle agreed with Russell's proposal to acquire the Peninsula, noting that due to the law and order problems there, British forces in China should occupy the area if the opportunity presented itself. Russell sent Bruce a copy of Newcastle's letter and advised him that until the Chinese government officially ceded the Kowloon Peninsula, its occupation could only be temporary.

Bruce proceeded to arrange the Peninsula's occupation. On 19 February 1860, he sought General van Straubenzee's opinion on the matter, drawing his attention to the British government's desire to occupy the Peninsula to guarantee the security of Hong Kong Harbour, maintain order and receive British troops. Once the Peninsula was occupied, Bruce asserted, it would not be difficult to get the Chinese to agree to its cession. In his reply, van Straubenzee advised Bruce that while he preferred not to act until the arrival of Sir Hope Grant, the matter could not be deferred. Having consulted with Admiral Hope and Robinson, van Straubenzee noted that Hope opposed the plan as did Robinson, who believed that a lease over the Peninsula would undermine British jurisdiction over it.

Support for the Peninsula's acquisition was also expressed by Admiral Sir James Hope. In March 1860, he wrote "as respects Kowloon there is no doubt that its occupation is necessary to the defence of the anchorage, and that some works would be requisite on it for that purpose, as well as on Stonecutters Island. These ... if confined to that object would be neither very expensive to erect or to garrison ... As respects the quantity of level ground available for building, it is very superior to Hong Kong ... As respects depth of water for shipping, facilities for docks, shelter from typhoons, is far superior to Hong Kong." These amenities apparently had not gone unnoticed by the French, rumoured to desire a similar base, a consideration Elgin and Russell would later deal with.

While van Straubenzee believed the Peninsula should not be occupied unless "absolutely necessary for the accommodation of troops", on 4 March he had sent a copy of Bruce's letter to Harry Parkes, British Consul at Canton. He instructed Parkes to advise Lao, Governor General of Kwangtung and Kwangse, that in view of the expected arrival of British troops shortly and the "want of space" at Hong Kong to accommodate them, the Kowloon Peninsula would be temporarily occupied for an encampment.

In his reply, Parkes noted that Lao "evidently entertains no objection, or at least expresses none, to see the contemplated encampment founded on the Kowloon Peninsula." Parkes sought Lao's opinion on the "disposition of the Chinese Government to cede this slip of land to the English" as part payment of the indemnity which would probably be demanded at the end of the war. While Lao advised Parkes he did not have the authority to negotiate a cession, he was willing to "apply to his government, or to advise the Secretary of State, Kweilang, to assent to any proposal of the kind," as the Chinese authorities placed little value on the spot and believed the British presence would check the Peninsula's criminal elements.

When the Commander-in-Chief of the British forces, Sir Hope Grant arrived at Hong Kong on 13 March, he proceeded to land his troops on the Peninsula, as the shores of Hong Kong afforded little space for their encampments. On 16 March Parkes, Sir Hercules Robinson, Governor of Hong Kong, and Sir Hope Grant discussed the matter. Parkes appears to have recommended the Peninsula be leased from the Chinese government and with Bruce's concurrence, he was requested to return to Canton and arrange a lease on the Peninsula with the local authorities.

By 19 March, Parkes had drafted the proposal to lease the Peninsula. After receiving Grant's approval, he met with Lao, "and got him to agree to the whole of the scheme." A deed of lease and a proclamation were drawn up. In his dispatch to Lao, Parkes drew attention to the disordered state of the Peninsula and the inconveniences its inhabitants, mainly criminals, caused to British and proposed leasing the area until "permanent measures could be taken to meet these difficulties." While the Treaty of Nanking had placed the area under Chinese jurisdiction, repeated British complaints to the assistant magistrate at Kowloon regarding local disturbances had been made with no effect. Parkes noted that if the area was ceded to Britain, it would be able to take measures to secure order among the Peninsula's population.

In his reply to Parkes, Lao noted that as the matter had not been laid before the Imperial government, he could not take it upon himself to arrange the Peninsula's cession. He agreed to lease the Peninsula for an annual rent of 500 taels in silver and signed the deed of lease, noting that it only remained for the magistrate at Kowloon to issue a proclamation "commanding the honest people of the locality...to continue in their ordinary employments." The deed of lease noted that "all that part of the Kowloon Peninsula lying south of a line drawn from a point near but south of Kowloon fort to the most northern point of the Stonecutters Island, together with that island...shall be leased, as a preliminary measure", in order that the British government may "take measure for the protection of the good population, and the expulsion or punishment, of the bad, as well as bringing the whole locality into order."

A public notice was drafted for the officer commanding the British detachment on the Peninsula, which advised the population that while they would be allowed to pursue their various occupations, "no new comers will be permitted to settle there, and stringent measure swill be taken to prevent its becoming a resort for thieves and outlaws..." A proclamation was issued by the assistant magistrate of Kowloon advising them that the Peninsula had been leased by the Governor-General "with a view to the expulsion of wrong doers, the protection of honest men and the maintenance of amity between the Chinese and foreigners." On 26 March 1860, Kowloon Peninsula and Stonecutters Island were permanently leased to Britain for an annual rent equivalent to £160.

The British government promptly sought to convert the lease into a cession. Russell, with the support of Newcastle, the Colonial Secretary, instructed Elgin in April 1860 to "provide for the cession of the Kowloon Peninsula in any new treaty with China." In July 1860 he repeated these instructions, noting that while "Her Majesty's Government have learnt that Mr. Parkes has obtained from the Chinese authorities a perpetual lease" on the Peninsula and was "sensible of the immediate advantages resulting from that lease, H.M Government upon consideration of all the circumstances, are of the opinion that it would be very desirable to obtain the cession of the Kowloon Peninsula and I have accordingly to instruct Your Excellency to endeavour to obtain this object."

Having advised Elgin that "Her Majesty's Government would gladly acquire possession of Kowloon Peninsula", Russell left it to Elgin's discretion the best means of doing so, noting ... the least objectionable mode of achieving that object would be to obtain the cession by purchase in lieu of what might be deemed an equivalent portion of the indemnity to be demanded from the Chinese." Russell was also concerned that the acquisition of Kowloon would set a precedent for corresponding demands for concessions from other powers and he instructed Elgin to abstain altogether from attempting to acquire the Peninsula's cession if it lead to other demands "injurious to China and unfavourable to British interests."

Elgin shared Russell's concerns and had recommended the Peninsula be ceded as part payment of the indemnity in his dispatch in April 1860. He was aware the Peninsula's acquisition might set a precedent for demands by the other powers, noting that "even if the necessity for negotiating a new treaty were to arise, it may be doubtful whether it would be expedient to stipulate in any such instrument for a cession of territory. Our allies might consider the distinction an invidious one, if a stipulation to this effect were inserted in the English and not the French Treaty with China and might seek to remove it by preferring a similar claim."

Before his return to China, Elgin was advised by the French Emperor that France had plans for territorial gain there. Yet by July, Russell had dispensed with his concerns over reciprocal French demands for Chinese territory, reasoning that as "the amount of territory is so small and the reasons for its acquisition so obvious, that the cession could hardly give a pretence to France to ask for Chusan, or any other cession on the coast of China."

In October 1860, the Anglo-French forces occupied Peking and burnt the Emperor's Summer Palace prompting Prince Kung, the Chinese plenipotentiary, to agree unconditionally to Elgin's demands, including the Peninsula's cession. Under article 6 of the Convention of Peking, the lease of the Peninsula was cancelled and it was ceded outright as a dependency of the Colony of Hong Kong "with a view to the maintenance of law and order in and about the Harbour of Hong Kong."

v

The British government's desire to extend Hong Kong's boundaries further north into the New Territories resulted from defence concerns similar to those which prompted the lease and cession of the Kowloon Peninsula in 1860. Britain initially occupied the New Territories under the Convention of Peking signed with the Chinese government in June 1898. Unlike Hong Kong Island and Kowloon Peninsula, which were ceded to Britain in perpetuity, the New Territories were leased from China for 99 years. As this lease gradually ran out in the 1980s, the British government was prompted to initiate negotiations with China over Hong Kong's future.

The Chinese government's refusal to consider allowing Britain to annex the New Territories and its desire to retain jurisdiction over Kowloon City, the local centre of Chinese administration, again illustrates the Chinese concept of national sovereignty. While Britain agreed to a lease more as a consequence of imperial rivalry than consideration of Chinese sensibilities, its assumption of jurisdiction over Kowloon City in December 1899 provoked strong opposition from its Chinese officials.

On 2 April 1898, Sir Claude MacDonald, the British Minister at Peking, advised the Chinese government that his Government required an extension of Hong Kong's boundaries. Li Hung-chang, the Grand Secretary agreed that an extension could be made, as long as it was "not of great extent." Although MacDonald was concerned that the amount of territory demanded might be excessive, Balfour, who acted as Foreign Secretary while Salisbury recovered from an illness, replied that Kowloon City "is necessary to us however much we limit our demands, and we are advised that all the territory south of the line from Deep Bay to Mirs Bay and including the waters of those two bays and adjacent islands is desirable for the purpose of military and naval defence." To placate the Chinese Balfour gave an undertaking that should land sufficient for the defence of Hong Kong be granted, no new territorial demands would be made. He did not, however, give a firm assurance that the territory required would not include Kowloon City, noting only that "we want no more than is necessary from a military point of view whether it includes the town of Kowloon or not."

On 24 April, MacDonald formally presented the British government's demand to Li Hung-chang for an extension of Hong Kong's boundary to a line from Mirs Bay to Deep Bay. Li again insisted that Kowloon City not be included in the lease as it was a centre of Chinese administration and he did not have the authority to include it in any agreement. In his dispatch to Salisbury, MacDonald drew attention to the Chinese concerns over the City. He proposed a concession be made on this point, noting that if the Chinese were permitted to retain administrative control over Kowloon City, it would expedite negotiations. In his reply Salisbury indicated that the concession could be made if the Chinese accepted Britain's demand for the New Territories.

While it recognised the need for an extension, the Chinese government sought to limit it to only as much as would "enable the British authorities to fortify both sides of Hong Kong harbour and to defend the hills looking over it" and it objected to the large extension demanded. The Chinese also refused to consider the area's cession and would only agree to a lease, as it was concerned other Powers leasing Chinese territory, such as Germany at Kiaochow and Russia at Port Arthur would demand similar concessions.

The British shared these concerns and sought to ensure China was not partitioned among the Powers, as it would undermine British commercial interests there. When the French sought to acquire the port of Pakhoi in April 1897, McDonald asserted that "they will make use of any opportunity which may be afforded to them by the actions of other powers for demanding further concessions from the Chinese." McDonald expressed similar concerns when Germany sought to acquire a coaling station at Shangtung in November 1897. Salisbury instructed McDonald to advise the Chinese government "that if they give a port or coaling station to the Germans, we shall expect a countervailing advantage." When the German Government backed down, McDonald asserted, it only did so because it "appeared to have...recognised that the demand for a cession would lead to territorial demands from all other powers."

At a meeting with Li on 28 April, it was agreed that McDonald would draft an agreement. Li again pressed for the retention of Kowloon City under Chinese jurisdiction and MacDonald agreed to convey this view to the British Government on the condition that the Chinese government accept the entire area the British government proposed to lease. On the same day, MacDonald telegraphed Salisbury and again drew his attention to the question of Kowloon City. Salisbury authorised him to sign a lease in which the Chinese Government retained jurisdiction over the city.

On 9 June 1898, the Treaty of Peking was signed, leasing the New Territories to Britain for ninety nine years. The Treaty and the Order in Council issued by the British Government on 20 October stated that within the city of Kowloon "the Chinese officials now stationed there shall continue to exercise jurisdiction except so far as may be inconsistent with the military requirements for the defence of Hong Kong."

Kowloon City now became the focal point of British concerns. Mercantile interests, including the China Association, military officials and the acting Governor of Hong Kong, Major-General Black, expressed opposition to the Chinese retention of jurisdiction over Kowloon City. In his dispatch Black suggested that article 4 of the Peking Treaty and Order in Council under which Chinese officials retained jurisdiction "so far as may be inconsistent with the military requirements for the defence of Hong Kong" be used to abolish Chinese control.

On 8 October 1898, Lockhart, the Colonial Secretary of Hong Kong, reported the stationing of Chinese troops in Kowloon City. As this, he argued, was inconsistent with the defence interests of Hong Kong and the retention of Chinese jurisdiction over Kowloon City could not be justified. On 20 April 1899, Bax-Ironside, the acting British Minister at Peking presented a demand for the removal of these troops to the Chinese authorities in Kowloon City. As the city was under Chinese jurisdiction, the British demand was refused.

On 9 May 1899 Salisbury requested Chamberlain, the Colonial Secretary, to order Blake to occupy Kowloon City. The City's occupation on 16 May was promptly denounced by the Chinese government and on 22 May, the Chinese minister in London, Luo Fenglu, presented Salisbury with the Chinese Foreign Office's request for the withdrawal of the British forces. In his reply on 30 May, Salisbury asserted that as the Chinese government had been unable to guarantee local security, the British government had intervened. On 2 November, Chamberlain instructed Blake to advise the Chinese authorities that Kowloon City was to be administered by British authorities. Article 4 of the Order in Council of 9 June 1898 was revoked on 27 December 1899, "whereas the exercise of jurisdiction by the Chinese officials in the city of Kowloon having been found to be inconsistent with the military requirements for the defence of Hong Kong, it is expedient that Article four of the [previous] Order in Council should be revoked."

In securing Hong Kong, Britain had imposed three 'unequal treaties' on the Ch'ing government, which was held responsible for the humiliations inflicted on China by the foreign powers. The result was the development of Chinese nationalism, which Laitinen asserts was "born as a result of the military, commercial and cultural penetration" of the West." China's defeat in the Sino-Japanese War in April 1895 proved the Ch'ing government's 'Self Strengthening Movement' had failed, provoking widespread patriotic concern over China's future. The 'Hundred Days Reform' of September 1898 designed to reform the corrupt, inflexible Ch'ing government was abruptly ended by a conservative _coup_. After its defeat by a coalition of foreign powers during the Boxer Rebellion in 1900, the Ch'ing government was forced to accommodate their demands. As many believed the Ch'ing had collaborated with the foreign powers, disenchantment with the dynasty grew.

III

**TOWARDS DECOLONISATION**

i

There were two major elements of the Chinese government's negotiating position on the return of Hong Kong. They included the assertion that the 'unequal treaties' imposed on it by the foreign powers were invalid under international law and the 'One Country, Two Systems' proposal. The Chinese concept of national sovereignty lay at the heart of both these elements. The strength of this concept is reflected by the fact it was maintained as the central element of China's position by two ideologically-opposed regimes. At the Paris and Washington Conferences and in negotiations with the British government during the late 1920s and early 1940s, China's Nationalist government pressed for Hong Kong's return on the basis that it had been seized under unequal treaties. These efforts continued under its Communist successor, which developed the 'One Country, Two Systems' proposal to facilitate its return to China.

The development of the British negotiating position centred on the question of the New Territories lease, due to expire in 1997. While Britain had renounced its extraterritorial rights in China in 1942, it sought to retain control over Hong Kong, which after the Second World War became a centre of international finance, through an extension of that lease.

ii

The most urgent issue confronting the Nationalist government, which replaced the Ch'ing dynasty after the 1911 Revolution, was the continued presence of foreign powers in China. Through the treaties they imposed on it, the Powers had annexed Chinese territory and acquired control over its economic resources. This abuse of China's sovereignty constituted a source of deep national humiliation, which was exacerbated by the Chinese government's acceptance of Japan's 'Twenty One Demands' in January 1915. These affronts to Chinese sovereignty provoked serious discussion over the abrogation of these treaties.'

China's position on sovereignty over leased areas was initially raised in 1916 by Wen-sze King, a Chinese diplomat. Influenced by the opinions of European jurists, including Hall and Wilson, King argued that the 1898 Convention of Peking implied China reserved sovereignty over the New Territories, asserting that "the sovereignty thus retained over a leased territory ... should never be so construed as to become meaningless ... because it is not unlikely that a lease may be terminated on expiration of time, or by retrocession."

The views of China's diplomats were also influenced by Tyau, a lecturer at Qinghua University in Peking. Tyau asserted that the treaties should be revised to cancel extra-territorial rights in China and facilitate the return of all leased territory, including the New Territories, as the circumstances which had called those treaties into existence had changed. Arguing that China's post-imperial political order made the principle of international law _rebus sic stantibus_ ('so long as conditions remain the same') applicable, Tyau held that the terms of a treaty may be deemed invalid if the circumstances under which it was negotiated have changed. In China's case, it obligations under these treaties had constrained its development and endangered it defence, "it cannot be denied its claim to have its treaty relations so revised and amended that her primary duties as an independent sovereign state may be properly fulfilled."

The Chinese government's first presented its case for the revision of the unequal treaties at the Paris Conference in 1919. On 19 May, the Chinese delegation presented a memorandum to the conference urging the return of leased territory and the abolition of extraterritorial rights, which they held seriously undermined China's territorial integrity, political independence and economic autonomy. In pursuing the return of leased territories, the Chinese delegation argued that "though the exercise of administrative rights over the territory leased is relinquished by China to the lessee power during the period of the lease, the sovereignty of China over them is reserved in all causes."

While the Paris Conference failed to address China's concerns, the unequal treaties issue was again raised at the Washington Conference's committee on Pacific and Far Eastern Questions. On 6 November 1921, China's ambassador to the United States Dr. Sao-ke Sze presented a statement of principles, the 'Ten Points', which requested the powers to "respect and observe the territorial integrity and political and administrative independence of the Chinese Republic."

The New Territories lease was among those raised for discussion at the Conference. Although the Chinese delegation conceded the British argument that the New Territories were a special case as they were required for the defence of Hong Kong, it pressed for the abrogation of all territorial leases. While the British gave an undertaking to return Weihaiwei, Balfour excluded the New Territories from consideration, asserting that they "had been obtained for no other reason except to give security to the port of Hong Kong...". Wellington Koo, the Chinese ambassador to Britain responded that "while there may be a necessity to provide for the protection of the Hong Kong Harbour...", the New Territories' retention was not necessarily the only solution to the problem.

Although China secured no change to the extra-territorial rights of foreign powers and the status of leased territories at Washington, or from the commission set up by the conference to report on extraterritoriality, it continued to assert that as the conditions under which the unequal treaties were signed had changed, they would not be recognised. In February 1928, the Chinese Foreign Minister, General Huang Fu, announced that the Nationalist government was preparing to renegotiate the unequal treaties, "on the basis of equality and mutual respect for territorial sovereignty." In June 1928, the new Foreign Minister, Wang Zhengting, issued a statement, declaring that "all unequal treaties between the Republic of China and other countries which have already expired, shall be _ipso facto_ abrogated and new treaties shall be concluded. The Nationalist government will immediately take steps to terminate ... those unequal treaties which have not yet expired, and conclude new treaties."

While Britain, among others, renounced their concessions and extraterritorial rights in China, Hong Kong was not discussed during negotiations, as the return of mainland concessions were the Nationalist government's main priorities. For their part, the British were determined to retain the Colony, with Clementi stating in March 1927 that "His Majesty's Government have no intention of abandoning...in any way its rights or authority in any part of the adjacent mainland territories under British Administration..." While a draft Sino-British treaty abrogating extra-territorial rights had been prepared by June 1931, the Japanese invasion of Manchuria in September forced the Nationalist government to suspend negotiations.

China again attempted to regain sovereignty over the New Territories in 1942 during negotiations with the British government over the abolition of its extra-territorial rights in China. On 10 October 1942, the Chinese government received from its British counterpart a draft treaty which provided for the renunciation of British extra-territorial concessions in China and the retrocession of its concessions at Tiensin and Canton. In December, Sir Horace Seymour, the senior British negotiator for the Treaty received the Chinese counter-draft, which included a demand for the addition of an article providing for the return of the New Territories.

The inclusion of such an article was completely unacceptable to the British government, which regarded the New Territories as economically and strategically vital to Hong Kong. Sir Anthony Eden, the Foreign Secretary, regarded the maintenance of British sovereignty over the New Territories as a matter beyond the scope of discussion and ordered this negotiating position to be adhered to even if it caused a break-down in negotiations with China. Although the Chinese Foreign Minister, Song Ziwen, advised Seymour in December that he seriously doubted Chiang Kai-shek, China's nominal leader, could be persuaded to agree to a settlement if it did not include the cancellation of the Kowloon lease, a compromise was proposed by Soong's representative, Han Wi-wu. The Chinese government would advise Britain that while it regarded the New Territories issue as outside the scope of the current negotiations, China would raise it at a more appropriate date.

Seymour informed Soong of his government's acceptance of Han's compromise on 25 December, noting that if the Chinese government desired that the terms of the lease of the New Territories be reconsidered, the matter could be discussed after the war. Yet Soong was concerned that the expression 'terms of the lease' may commit China to its continuance. On 27 December the Chinese government declared that the treaty would not be signed unless Britain clearly indicated its intention of returning the New Territories, and that this could be done outside the treaty. The Foreign Office and War Cabinet refused to do so.

Although the Chinese government insisted the treaty include the return of the New Territories Tung notes Wellington Koo recommended to Chiang that he conclude the treaty on the abrogation of extraterritorial rights "but reserve the right of later negotiation on the Kowloon question." Chiang and other government leaders concurred with Koo's advice and the Treaty for the Relinquishment of Extraterritorial Rights in China was signed on 11 January 1943. On the same day, the Chinese government presented a formal note to the British stating that it reserved the right to recover Kowloon and that negotiations concerning Kowloon could be initiated at any time.

The Chinese Communist Party's ('CCP') victory in the Civil War and establishment of a central government over China placed it in a strong position to demand the return of Hong Kong. As had the Nationalists, the CCP held that the treaties under which Britain acquired Hong Kong were unequal and sought their abrogation. While the Nationalist had defined the unequal treaties in terms of international law, the CCP regarded this approach as implying they were originally valid, defining them instead in terms of Lenin's principle that "negotiations can only be conducted between equals, and therefore, genuine equality between both sides is an essential condition for reaching a genuine agreement."

While the CCP strongly opposed colonialism and imperialism, it was extremely reluctant to discuss its policy on Hong Kong and consistently reassured Britain that it would not take measures affecting the Colony's status. This approach was designed to preserve the economic advantages Hong Kong afforded China, with Mao stating in 1959 that it "... is better to keep Hong Kong the way it is. We are in no hurry to take it back. It is useful to us right now." The Chinese government set out a similar policy at the United Nations Special Committee on Colonisation in March 1972. Huang Hua, China's ambassador to the United Nations presented the Committee with a letter requesting that Hong Kong be removed from the list of colonies to be granted independence, declaring that the settlement of the question of Hong Kong, which resulted from a "series of unequal treaties" imposed on China, "is entirely within China's sovereign right." The Chinese government, Hua concluded "has consistently held that [it] should be settled in an appropriate way when conditions are ripe." For the next eight years, this vague statement constituted China's negotiating position on the return of Hong Kong.

iii

Along with the issue of the unequal treaties, Deng Xiaoping's 'One Country, Two Systems' proposal constituted the other major element of the Chinese negotiating position. Originally designed to facilitate Taiwan's reunification with China, one country, two systems rested on the principle that there is only one China, where socialism is the dominant ideology. The rapid industrialisation of South Korea, Singapore, Taiwan and Hong Kong convinced Deng and his supporters that capitalism would have to be partially accepted if China was to modernise. Under one country, two systems, socialism would dominate, with capitalism being permitted in smaller areas, including Hong Kong and Taiwan. The dominance of socialism would make it easier for China to practise one country, two systems, as socialism would not be threatened by the subsidiary role of capitalism and in turn "...the existence of capitalism in small areas could profit the development of socialism."

By admitting a positive role for capitalism, the one country, two systems proposal threatened to undermine the mixture of Marxist, Leninist and Maoist ideology that bound the CCP together. Deng and his supporters had to work out a theoretical basis with which to legitimise the adoption of their policies within the CCP's ideological framework. As the proposal was conceived on the basis of China's realities and would be employed in resolving the "practical problem confronting China ... the questions of Hong Kong and Taiwan", Deng reasoned that one country, two systems was consistent with Marx's "dialectical materialism and historical materialism, or in the words of Chairman Mao Zedong, [with] the principle of seeking truth from facts" as it reflected international realities.

One country, two systems provided a solution to the Hong Kong question that appealed to both Britain and China. In her memoirs, Britain's Prime Minister, Margaret Thatcher noted it "effectively unlocked the way to a solution in Hong Kong." During his talks with Thatcher after the signing of the Joint Declaration in December 1984, Deng argued that "to settle the Hong Kong question peacefully, we had to take into consideration the actual conditions in Hong Kong, China and Britain ... the only solution to the Hong Kong question that would be acceptable to all three parties was the 'One Country, Two Systems' arrangement."

The other major theoretical justification for the concept comes from the assertion that one country, two systems represented a primary stage in the development of socialism with Chinese characteristics. As China was only at the beginning of its progress towards socialism, socialist modernisation would not be achieved for another fifty to sixty years. While public ownership would remain dominant during this primary stage, it would be accompanied by private ownership, joint ventures with other countries and foreign-owned ventures to increase productivity. During his talks with Thatcher in December 1984, Deng noted China would require around fifty years to become a developed country. To facilitate this, he argued "we need to open China to the rest of the world...it is in China's interests to keep Hong Kong prosperous and stable."

Deng first disclosed China's negotiating position on the return of Hong Kong in June 1982 to representatives of the Colony's Chinese community. Details were leaked to Hong Kong's political press and two Chinese language magazines published accounts of the meeting. Deng apparently declared that China would reassert sovereignty over Hong Kong "sometime about 1997", but that this would be achieved in a way which would preserve Hong Kong's stability and prosperity. One account then listed the "five principles and policies" of the Chinese position: Hong Kong and Kowloon are Chinese territory, over which China should exercise complete sovereignty; the treaties entered into in the past with aggressors are unequal and China cannot recognise their legitimacy; restoring sovereignty over Hong Kong is a matter which cannot be postponed; the method of one nation, two systems will be used to facilitate its restoration and Hong Kong will be allowed to continue as a capitalist society.

iv

Concerns over Britain's lease of the New Territories were initially expressed by Clementi, Governor of Hong Kong from November 1925 to February 1930. Clementi was anxious to annex or at least secure an extension of Britain's lease over the region through military force or diplomatic pressure to maintain the long-term confidence of investors. In January 1927 he put forward two proposals to the Colonial Secretary, Amery, which recommended that Britain demand the cession of the New Territories from China in return for having relinquished Weihaiwei at the Washington Conference or make it a condition of the resumption of friendly relations with China should there be a repeat of the boycott of Hong Kong arranged by China's Nationalist government between July 1925 and October 1926. Amery replied that it would be inappropriate to draw attention to the lease "in view of the strength which the present movement for the restoration of Chinese sovereign rights has attained" especially as it might "lead to a campaign for the rendition not only of the leased area but even of the Colony itself."

Clementi persisted, arguing that the uncertainties associated with 1997 were already influencing investors and constrained Hong Kong's economic development. If Britain were to retain the Colony, it had to reassure investors by selling leases to land in the New Territories which ran beyond 1997. The Colonial Office opposed Clementi's proposal, asserting that the granting of leases on such terms would allow the Chinese government "to infer that we mean to give up the Territories in accordance with the agreement of 1898 [while] the lessees [will] infer that we shall retain them..." While he disagreed with Clementi's proposals for extending the lease, Amery agreed that the New Territories could not be returned. During a meeting with Clementi on 7 November 1928, Amery assured him that "we shall certainly never contemplate giving up the leased territory of Hong Kong and that I was still pressing to enable him to give 99 year leases."

Two of Clementi's successors also pressed for the New Territories' retention. In 1930, Sir William Peel drew up a memorandum on the importance of the New Territories to the Colony and concluded it was essential to the economic progress and defence of Hong Kong. In 1938 Sir Geoffrey Northcote, having reached similar conclusions, advocated purchasing a cession or an extension of the lease. The Foreign Office rejected these concerns.

China's demand in 1942 for the retrocession of the New Territories, Tsang argues, was a factor taken into "serious consideration" by the British government when reviewing the Colony's post-war constitutional arrangements. But Tsang's basis for reaching this conclusion is that its papers dealing with these issues were filed together and that Gent, the Under-Secretary supervising Far Eastern affairs in the Colonial Office, "...was at the time supervising the examination of both problems." Tsang offers no other evidence to support his view and does not develop it further.

In January 1978, with nineteen years of the lease remaining, a plan to resolve concerns over the New Territories and test China's attitude towards continued British rule in Hong Kong after 1997 was devised by T.S Lo, a Hong Kong Legislative Councillor. Observing that the legal basis for the New Territories incorporation into Hong Kong, and therefore British rule over the region, lay in the 1898 Order in Council, Lo proposed a new Order in Council be issued by the British monarch to extend British rule beyond 1997.

When businesses in the New Territories applied to extend their commercial leases, the Hong Kong government would grant them twenty-five year extensions backdated to 1970, then 1971, 1972 and so on to show the Chinese government the pattern. If it did not object to a lease being issued beyond 1997 and to ensure it understood the arrangement, the Hong Kong

government would issue a lease expiring after 1997 to a company controlled by the Chinese government, whose silence would evince a desire to maintain the status quo in Hong Kong and allow the British government to quietly issue a new Order in Council.

A variation of Lo's plan was published in the _Financial Times_ in November 1978. China, Wilson assumed, wanted the British to remain in Hong Kong "for some time" as its resumption of sovereignty would discourage capital investment and it needed to "ensure that the economic value of Hong Kong to China is not diminished by a lack of confidence on the part of its capitalists." Facilitating this, the Governor "in 1981 or 1982, would quietly order his legal officers to write individual leases for homeowners, developers and industrialists in the New Territories running beyond 1997... China's acquiescence would be secured by prior diplomacy", although it was recognised that "China could not formally extend the 99 year lease, for that would be to recognise what it regards as an illegal and unequal treaty..."

Lo took his plan to MacLehose, Governor of Hong Kong since November 1971. MacLehose shared Lo's concern that the shortening commercial leases in the New Territories would erode confidence in Hong Kong's economic future. In November 1977 he discussed the issue with Owen, the Foreign Secretary, however Owen did not regard the matter as urgent and did not raise it in Cabinet. MacLehose believed Lo's plan had merit and agreed to forward it to the Foreign Office. Foreign Office officials were divided over whether the plan was legal and were concerned it would leave Britain open to charges of abrogating the 1898 Convention of Peking. They concluded that the Chinese government should be directly asked to permit the issue of leases extending beyond 1997.

In December 1978, China's vice-minister of foreign trade, Li Qiang, visited Hong Kong to advise MacLehose of its importance to China's modernisation and of his government's desire that MacLehose visit China. MacLehose believed the invitation provided an opportunity to resolve the issue of the New Territories lease. After discussions with Owen, due to visit China on 12 April 1979, the Foreign Office proposed that if conditions seemed appropriate, MacLehose would ask Chinese officials if the Hong Kong government could extend commercial lease in the New Territories beyond 1997. If they agreed, it would be a strong indication that the Chinese government intended to be flexible on the New Territories lease. Owen, who had discussed Lo's plan with Callaghan, the Prime Minister, and obtained his approval to proceed, would then propose that Britain formally recognise Chinese sovereignty over all of Hong Kong, in return for which the Chinese government would formally allow the British to continue administering Hong Kong beyond 1997.

In his memoirs, Owen notes he was advised a new Order in Council would be required to allow continued administration of Hong Kong under British law. He rejected the proposal as "legalistic", asserting that if the Chinese government agreed to allow continued British administration, he could not see who could challenge it. Although Owen "decided that [MacLehose] should not raise the need for an order in Council" in Peking, Roberti asserts a new Order in Council was drafted and if the Chinese government's response was positive, would have been issued by the Queen.

On 28 March 1979, MacLehose met with Deng, who opened discussions by stating he hoped Hong Kong would assist with China's modernisation and asking MacLehose to encourage business investment in Guangdong Province. As the meeting drew to a close, MacLehose raised the lease issue, explaining that the Hong Kong government could not issue commercial leases beyond 1997 and that business would not be willing to invest without an assurance that they could hold land beyond 1997, resulting in the deterioration of business confidence. If China allowed the Hong Kong government to issue leases beyond 1997, investors would have faith in the Colony's future.

Deng had not been advised that MacLehose would raise this issue. MacLehose hoped that by discussing it with him, he might understand and accept the plan's practical benefits. Deng did not appear to grasp the proposal's subtlety and thought MacLehose was asking him to extend Britain's lease on the New Territories. Having no prepared response, Deng stated that although Hong Kong was part of China and sovereignty would be recovered, the Chinese government would respect its special status. He asked MacLehose "to tell investors to put their hearts at ease. China's policy towards Hong Kong is guaranteed ... Hong Kong can go on being capitalist ... in 1997, if we take over Hong Kong it will not affect investments."

That Deng had effectively rejected the proposal became clear when the Foreign Office followed up MacLehose's initiative in July 1979. During a series of meetings with Zhang Wenjin, China's Vice Foreign Minister, Britain's ambassador to China, Sir Percy Cradock, explained the need to resolve the issue and described Lo's plan. Zhang advised Cradock that China would not allow the Hong Kong government to issue leases beyond 1997 and that the issue must be resolved through bilateral negotiations.

When the British Foreign Secretary, Lord Carrington, visited Peking in April 1981, Roberti asserts, "to draw the Chinese out on their policy towards the colony", he had little success. Cottrell notes Huang refused to discuss the issue and advised Carrington to raise the matter with Deng. But Deng would only repeat the reassurances he had offered MacLehose two years before. Roberti provides a more detailed account of their meeting. Carrington explained to Deng the concerns held in Hong Kong over 1997, noting that if the issue was not addressed, business confidence and investment would decline. Deng replied by outlining China's plans for reunification with Taiwan, implying Hong Kong would be recovered in a similar manner, and noted detailed plans would be announced shortly.

In July 1982, the development of the British government's negotiating position passed to Richard Clift, Head of the Hong Kong and General Department of the Foreign Office, who drew up a policy on Hong Kong for Prime Minister Thatcher. Noting that Hong Kong Island and Kowloon Peninsula had been ceded to Britain in perpetuity and that China wanted to maintain the economic advantages it derived from Hong Kong, Clift recommended that Thatcher should offer to recognise China's sovereignty over Hong Kong, while emphasising that it would serve both China and Britain's interests to maintain the _status quo_ , as Britain had more experience in administering the region than China.

While Roberti states that Thatcher gave no indication of how she would handle the negotiations with the Chinese government later that month, Cottrell recounts the substance of a meeting with Cradock and Sir Edward Youde, the then Governor of Hong Kong, on 28 July 1982 to discuss preparations for the visit. At this meeting, Thatcher observed that Britain held title to Hong Kong by three treaties, only one of which was a lease. While China denounced the treaties which ceded Hong Kong Island and Kowloon Peninsula to Britain as being unequal, they were valid under international law. If China wanted all of Hong Kong returned, the only legal means of achieving it would be to obtain Britain's agreement to amend the terms of the two cessions. Youde explained that the New Territories were an integral part of Hong Kong and that the Colony could not survive economically by falling back on the ceded areas. Cradock noted that any attempt to defy China's claims to sovereignty would probably cause it to resume control of Hong Kong on much less amenable terms than those it appeared ready to discuss and suggested that the objective at Peking be a declaration from both governments that formal negotiations would begin to maintain Hong Kong's stability and prosperity.

In her memories, Thatcher indicates she was initially prepared to follow the Foreign Office's advice, noting that "although my negotiating stance was founded on Britain's sovereign claim to at least part of the territory of Hong Kong, I knew that I could not ultimately rely on this as a means of ensuring the future prosperity and security of the Colony. Our negotiating aim was to exchange sovereignty over the Island in return for continued British administration of the entire Colony well into the future."

Thatcher's first discussions concerning Hong Kong were held with China's Premier, Zhao Ziyang, on 23 September 1982. Moments before the meeting, Zhao stated to a group of journalists that "China will certainty take back its sovereignty over Hong Kong. However ... the problem of sovereignty will not affect Hong Kong's stability and prosperity [as] China will certainty take a series of policies and measures to guarantee [this]." By publicly stating the Chinese negotiating position, Zhao made it clear there could be no compromise on the issue of sovereignty. Thatcher responded that as both China and Britain gained from Hong Kong's prosperity, the best way to maintain this advantage was to allow Britain to continue to administer the Colony after the New Territories lease expired in 1997. If an acceptable arrangement could be negotiated, Britain would formally recognise China's sovereignty over Hong Kong. Zhao replied that sovereignty and administration were inseparable and repeated his statement that China would maintain the Colony's stability and prosperity, noting that the National People's Congress had amended China's constitution to allow the establishment of special administrative regions which could operate under different economic systems.

Thatcher met with Deng Xiaoping the next morning and repeated the arguments she had advanced at her meeting with Zhao. Deng responded by asserting that sovereignty and administration were not negotiable and would be recovered in 1997. The Chinese government would "then take into full consideration the territory's special circumstances and adopt special policies in order to maintain the prosperity of Hong Kong" and these policies would be announced within "one or two years." He expressed hope that consultations between China and Britain would minimise the prospect of unrest during the transitional period and agreed that negotiations should begin, but with the understanding that China would take over Hong Kong in 1997.

Thatcher, according to Cottrell and Roberti, replied that two of the treaties concerning the Colony had ceded Hong Kong Island and Kowloon Peninsula to Britain in perpetuity and argued that they were valid until the two governments came to another arrangement. While she understood the importance of the issue of sovereignty to China, it was important that arrangements be made for the future administration of Hong Kong to guarantee its stability and prosperity and that these arrangements would have to be discussed before the issue of sovereignty could be addressed. Thatcher stated that she could not see how this could be guaranteed by Hong Kong operating as a special part of China and asserted that only continued British administration of the Colony could maintain its current prosperity. If a satisfactory agreement were reached on administration, Thatcher undertook to make recommendations to the British Parliament on the issue of sovereignty. Until then, China and Britain should pursue discussions to see whether such an agreement could be reached.

Deng's refusal was absolute. The unequal treaties under which Britain secured Hong Kong were invalid. China would resume sovereignty and administration. Deng again expressed hope that Britain would co-operate during the transitional period and was prepared to enter into discussions to that end, but China would not be bound by their results. If they failed to produce an agreement acceptable to China within two years, China would announce its policies on Hong Kong unilaterally.

In a communique issued after the meeting noted that "both leaders made clear their respective positions on the subject. They agreed to enter talks through diplomatic channels...with the common aim of maintaining the stability and prosperity of Hong Kong." Thatcher's assertion that the three treaties signed by China and Britain concerning Hong Kong were not invalid provoked a strong response from the _Beijing Review_ and provided an indication of what the Chinese negotiating position in those negotiating positions would be. Declaring that Thatcher's statement was "absolutely unacceptable to the Chinese people", it argued that as the unequal treaties were the products of "British imperialism's gunboat diplomacy" and were forced on China "they are illegal and therefore null and void."

IV

**THE JOINT DECLARATION**

i

The British government's decision to enter into negotiations with China over Hong Kong had resulted "from the fact that the New Territories are subject to a lease with a fixed expiry date." Under its own laws, Bonavia notes, the Hong Kong government could not issue leases for land to which it would not hold title in 1997. In order to initiate negotiations on the future of Hong Kong, Thatcher had to first back down from her assertion that Britain could retain control over the parts of Colony which had been ceded to it in perpetuity. Then, during the negotiations over Joint Declaration between July 1983 and September 1984, the British government conceded its claims to sovereignty over all of Hong Kong and to retaining an administrative role in the Colony after 1997.

The major reason for the British government abandoning its stance was the strength of the Chinese negotiating position regarding national sovereignty. The Chinese negotiators consistently refused to make any concession on this aspect of Hong Kong's future. Their British counterparts, especially Cradock, were concerned that negotiations would break down if these concessions were not made. Cradock believed this would undermine the stability of Hong Kong. The decline in confidence in Hong Kong's economy, a direct result of the lack of progress in negotiations between August and October 1983, appeared to support his view. Another important consideration was the September 1984 deadline set by Deng for the completion of an agreement. Cradock was concerned that if an agreement was not reached by then, China would unilaterally announce its policies for Hong Kong. The British negotiators sought to prevent this by ensuring a binding agreement was reached with China that would guarantee Hong Kong retained its capitalist system.

In July 1984, the Chinese negotiators made several concessions on the nature and level of detail in the agreement, While the Chinese government's negotiating position was based on the 'unequal treaties' arguments and its 'Twelve Points', a policy for the future of Hong Kong based on one country, two systems, it acknowledged investors had to be reassured that Hong Kong would retain a high degree of autonomy after 1997.

ii

After Thatcher's meeting with Deng in September 1982, Cradock met with the Vice-Foreign Minister, Zhang Wenjin, to discuss preparations for the negotiations. Zhang stated that negotiations could not begin until Britain conceded sovereignty over Hong Kong. Cradock repeated Thatcher's assertion that while Britain was prepared to accept Chinese sovereignty over Hong Kong, it was in Britain and China's interests to allow Britain to continue administering the Colony after 1997 and that negotiations should proceed to reach a satisfactory arrangement facilitating this. Zhang replied that Hong Kong was part of China's territory and any negotiations would not be over whether Hong Kong would be returned to China, but on what terms.

China continued to delay negotiations until the British government conceded sovereignty over Hong Kong. In her memoirs, Thatcher gives details of a meeting she held with Youde and other "ministers and officials" on 28 January 1983 to review the position. While Thatcher proposed that "that in the absence of talks, we should now develop the democratic structure in Hong Kong as though it were our aim to achieve independence or self-government within a short period..." she conceded that the Chinese government would not accept this approach.

Cradock, at a meeting with Thatcher, Francis Pym, the Foreign Secretary and Youde on 7 March 1983, argued that the only way to get negotiations started would be to move towards the Chinese position. He proposed the issue of sovereignty be set aside and discussions begin over arrangements to maintain Hong Kong's stability and prosperity after 1997, emphasising that the only way to facilitate this would be to allow Britain to continue administering Hong Kong. Thatcher accepted Cradock's proposal and in a letter to China's Premier, Zhao Ziyang, stated that "provided an agreement could be reached ... on administrative arrangements for Hong Kong which would guarantee the future prosperity and stability of Hong Kong, and would be acceptable to the British Parliament and people of Hong Kong as well as the Chinese government, I would be prepared to recommend to Parliament that sovereignty over the whole of Hong Kong should revert to China."

Thatcher asserts that Howe and "the Foreign Office" argued strongly she take a step further and concede early in the talks that British administration of Hong Kong would not continue after 1997. Thatcher notes she "saw no reason to make such a concession" and administration was not conceded until October 1983, three months after negotiations began. However, her indirect acknowledgment of China's sovereignty allowed talks to proceed.

An indication of the Chinese government's response to Thatcher's proposal was provided by Xi Zhongxun, Vice-Chairman of the National People's Congress, in his remarks to a delegation from Hong Kong on 19 May 1983. While Xi stated that China would "not change the capitalist system in Hong Kong" and that sovereignty over Hong Kong was "non-negotiable", he concluded "there are many problems now which will have to be resolved through bilateral negotiations."

By June, the Chinese and British governments had agreed to terms for the negotiations. Two rounds of procedural talks would be held in July to prepare for more substantial negotiations. The three issues to be discussed included the arrangements for the maintenance of Hong Kong's stability and prosperity after 1997, arrangements in the Colony between 1983 and 1997 and matters relating to the transfer of sovereignty. A Sino-British communique issued on 1 July stated that "following the discussions between the leaders of the two countries in September 1982 and subsequent useful exchanges, it has been agreed that a second phase of talks on the future of Hong Kong will begin in Peking on 12 July 1983."

Cradock was appointed leader of the British negotiating team, which also included Youde. Yao Guang, Vice-Minister of Foreign Affairs, was appointed Chairman of the Chinese delegation. During the first round of negotiations on 12 and 13 July, Cradock pressed for continued British administration of Hong Kong after 1997 and presented a series of papers on the Colony's economic and financial arrangements designed to emphasise the indispensable nature of Hong Kong's administrative attachments to Britain. They also served to place on the record of discussion what the Britain government regarded as the important features of Hong Kong, so if the negotiations broke down, it would be able to demonstrate it had sought to preserve Hong Kong's stability and prosperity. While Yao rejected this proposal, arguing that sovereignty and administration were inseparable, the joint communique described the talks as "useful and constructive."

Almost no progress was made during the second round of negotiations held at Peking on 25 and 26 July, described only as "useful" in the joint communique. It was, Bonavia asserts, at this or the next round of negotiations that the British negotiators asked if China would accept a prolonged British official presence after 1997 to help preserve Hong Kong's stability and prosperity.

On 29 July, the Chinese government's Hong Kong and Macao Affairs Office issued the 'Twelve Points', a broad statement on the Chinese government's policy for Hong Kong after 1997. Declaring that "sovereignty and administrative power cannot be separated", it noted that after 1997, Hong Kong would retain its capitalist system, run its own affairs without interference from the central government, except in matters of foreign affairs and defence, retain its present legal system, conduct its own social reforms and tolerate political activities.

During the third round of negotiations on 2 and 3 August, Yao again rejected the British proposal for continued British administration after 1997 and indicated Chinese troops would be stationed in Hong Kong after 1997. The British were deeply concerned that this would undermine confidence in Hong Kong's stability. This issue and Yao's refusal to include any adjectives in the joint communique, reinforced perceptions that the negotiations were not going well and prompted the Hong Kong dollar to drop sharply.

On 15 August, Hu Yaobang, General Secretary of the Chinese Communist Party's Central Committee announced to a group of Japanese journalists that China intended to recover its sovereignty over Hong Kong when the lease expired on l July 1997 and that the present negotiations between Britain and China "are confined to the ways of preserving Hong Kong's prosperity and stability and the gradual transition from now to the time of recovery." This was the first public declaration that China would take back Hong Kong on a specific date. Hu, probably referring to the Twelve Points, assured the journalists that China had "a complete set of policies" on the maintenance of Hong Kong's prosperity.

Cradock met with Thatcher on 5 September to reassess their approach. According to Roberti and Cottrell, Thatcher instructed him to not to offer any concessions to the Chinese. In her memoirs Thatcher makes no mention of her instructions to Cradock, but acknowledged "it was clear that the talks would break down ... unless we conceded administration as well as sovereignty to the Chinese" and that if the Chinese followed this course "damage would be done to confidence in Hong Kong." The Chinese government's position remained unchanged. On 22 September, the CCP's newspaper, the _People's Daily_ , described the proposal for a British presence in Hong Kong after 1997 as an attempt to impose "a new unequal treaty" on China.

During the fourth round of negotiations on 22 and 23 September, Cradock denied Yao's accusation that the British government had engineered the currency crisis to pressure China into accepting British administration after 1997 and reiterated the argument that continued British administration was required to guarantee Hong Kong's stability and prosperity after 1997. Yao responded that sovereignty and administration were indivisible and stated that arrangements for Hong Kong after 1997 could only be discussed when Britain accepted this position. The joint communique issued after the meeting again contained no adjectives, causing the Hong Kong dollar to drop 8% in value.

Cradock returned to London, meeting with Thatcher and Sir Geoffrey Howe, who had replaced Pym as Foreign Secretary in June 1983, to discuss the negotiations on 7 October. Arguing that if the British government continued to press its current negotiating position, China may break off talks and announce a unilateral policy, Cradock proposed amending the British position on administration, as it had on sovereignty in March. While the British position on a continued presence after 1997 would remain unchanged, Cradock recommended that it be prepared "entirely on a conditional basis" to discuss China's arrangements for Hong Kong after 1997 to see if a suitable arrangement could be found for maintaining Hong Kong's stability and prosperity without British administration. Thatcher, Youde and Howe agreed with Cradock's proposal. On 19 October, Thatcher sent another letter to Zhao Ziyang stating she was prepared to see whether, on the basis of the Chinese proposals, China and Britain could reach an agreement that would provide for Hong Kong's continued stability and prosperity under Chinese rule. If this could be done, the British government was prepared to recommend a treaty containing those provisions to Parliament.

The British position was now to seek guarantees from China that the socio-economic system that contributed to Hong Kong's success would remain intact after 1997 rather than asserting that the continuing British administration would be required for this purpose. During the fifth round of negotiations on 19 and 20 October, Cradock discussed the changed British position and emphasised its desire to discuss the Chinese proposals and suggested smaller working groups be set up to address particular issues. The joint communique's description of the talks as "useful and constructive" was prompted, as Bowring and Ma note, the British and Chinese governments' recognition of the need to improve the atmosphere of the talks to prevent a collapse in confidence in the Colony's economy.

Cradock sought to allay Chinese suspicions regarding the British government's concession over continued British administration after 1997 during the sixth round of talks on 14 and 15 November. He reaffirmed Britain's genuine desire to discuss the Chinese proposals for Hong Kong and gave a formal assurance that Britain sought no links of authority with it after 1997 if other arrangements were agreed to. The talks were again described as "useful and constructive." During the seventh round of negotiations in December, the British presented papers showing how the Territory could continue without British administration. The Chinese did not present any new policies beyond the 'Twelve Points' of July. Negotiations for 1983 concluded with a joint communique, which stated that the two sides had "reviewed the course of the talks and the progress made so far."

Thatcher was less optimistic. In her letter to Zhao she had hoped that by emphasising "those aspects of the Chinese negotiating position which might conceivably lead to as much autonomy for...the people of Hong Kong as possible" some progress may have been made. By now she had "abandoned any hope of turning Hong Kong into a self-governing territory."

iii

Having conceded sovereignty and administration, the British concentrated on securing a legally binding agreement from the Chinese to ensure Hong Kong retained a high degree of autonomy after 1997. By the opening of the eight round of negotiations on 25 and 26 January, Cradock had been replaced as head of the British delegation by Sir Richard Evans, Cradock's successor as ambassador to China. Yao, head of the Chinese delegation was replaced by his assistant, Zhou Nan Discussion centred on Hong Kong's post-1997 legal system and constitutional arrangements, with the British presenting papers on economic management, shipping and administration to demonstrate to the Chinese how to maintain the status quo while making as few changes as possible. The British also raised concerns over the stationing of Chinese troops in Hong Kong after 1997, believing it would undermine confidence in the agreement.

In February, the Chinese negotiators presented a draft protocol intended to supplement the main agreement. It proposed establishing a Sino-British joint commission to supervise arrangements for the management of Hong Kong before and after 1997. The protocol assigned the joint commission a considerable amount of power. Up to and especially during the last four years of British administration of Hong Kong, virtually no major decision could be taken without the Chinese government's approval. Thatcher was concerned it "would become an alternative power centre to the Governor."

Having decided that the Chinese proposal raised issues which required negotiations at the ministerial level, Evans proposed at the ninth round of talks on 22 and 23 February that the Chinese government invite the British Foreign Secretary, Geoffrey Howe, to Peking for talks on outstanding issues. The Chinese agreed and Howe's visit was scheduled for April. During the three rounds of negotiations conducted before Howe's visit, the 'Twelve Points' and protocol on the Joint Commission remained the basis of the Chinese negotiating position. The British asserted that the 'Twelve Points' required substantial supporting detail.

After arriving in Peking, Howe met with Ji Pengfei, head of the Chinese government's Hong Kong and Macao Affairs Office. He sought assurances from the Chinese government that the agreement reached would be legally binding and contain a detailed description of China's policies regarding Hong Kong after 1997, not just a statement of principles, such as the 'Twelve Points'. Ji replied that while China's policies could be included in an annex to the main agreement, China could not agree to include its future policies regarding part of its territory in a treaty with another country and refused to include a clause in the agreement that said both sides were bound by its terms. Howe accepted that the agreement would be a joint declaration in which China and Britain would state their own policies.

During meetings with Wu Xueqian, the Chinese Foreign Minister, and Premier Zhao Ziyang on 16 and 17 April, Howe again outlined these concerns and discussed the difficulties raised by the Joint Commission. On 18 April, Howe met with Deng Xiaoping, who approved several of his proposals, noting that as long as China's 'Twelve Points' were included in the agreement, a certain amount of detail on China's post-1997 arrangements for Hong Kong could be included in an annex, which would have equal legal status to the main text. Other points remained unresolved. Deng strongly favoured the establishment of the joint commission as he was concerned that the British would disperse Hong Kong's wealth before 1997 through the sale of large quantities of Crown land and proceeding with extensive spending programs. He also defended China's right to station troops in Hong Kong after 1997, declaring it was part of the substance of sovereignty.

On 20 April, Howe held a press conference in the Hong Kong Legislative Council Chamber on the progress of the negotiations and announced "it would not be realistic to think of an agreement that provides for continued British administration in Hong Kong after 1997." The British government, he stated, now sought to ensure China signed a joint agreement securing Hong Kong a "high degree of autonomy under Chinese sovereignty." Yet during late April and May negotiations stalled again, with Zhou rejecting Evans' request for detailed terms of reference for the proposed joint commission and guarantees that it would not interfere in Hong Kong's affairs before 1997. The British proposal to make the joint declaration legally binding was also rejected.

Concerns were again expressed over the stationing of Chinese troops in Hong Kong after 1997. Although Britain had stationed troops in the Colony, it sought assurances from the Chinese government that units of the People's Liberation Army would not be stationed at Hong Kong after 1997. This left Britain open to charges of "asking a sovereign nation to accede to another nation dictating how it should dispose of its own forces within its own frontiers." Deng had no intention of conceding the issue, declaring "how can Hong Kong be described as Chinese territory if we don't have the right to station troops there ?"

Some progress was made in the working groups set up after the sixteenth round of negotiations on 12 and 13 June to "consider documents submitted by the two countries" and concentrate on the text of the main agreement. Although it was agreed that the British legal system would remain unchanged, Hong Kong's post-1997 constitutional arrangements remained unsettled. While the British pressed for an elected legislature and governor, the Chinese proposed that the future legislature be constituted by elections or local 'consultations', with the governor being appointed by the Chinese government.

Howe returned to Peking to iron out these differences. On 28 July, he again met with Wu Xueqian to discuss the joint commission, which the British sought to reduce to a joint liaison group. It was at this stage of the negotiations that the Chinese made two major concessions. At a meeting with Cradock, Wu noted the Chinese government was about to make several major decisions regarding Hong Kong. In order to reach an agreement by September, it was prepared to accept the British proposal to limit the powers of the joint commission and allow the agreement reached to be detailed and legally binding on both sides, with its annexes having equal status with the main text. Howe cabled the Chinese proposal to Thatcher, who approved the arrangement.

During negotiations, agreement was reached on these points. Zhao agreed that the British government alone would administer Hong Kong until 1997 "with the object of maintaining its economic prosperity and social stability", while a joint liaison commission would facilitate consultation and the exchange of information, but not have any administrative role. Zhao also agreed that the Joint Declaration and its annexes would be equally binding on Britain and China, but made it clear that China would exercise its right to station troops in Hong Kong after 1997. Howe appears to have conceded this point. According to Deng's account of his meeting with Howe, the Foreign Secretary "admitted ... that since the Chinese government is recovering sovereignty over Hong Kong, it has the right to station troops there."

Deng approved the other agreements reached during a meeting with Howe, Cradock, Evans and Youde on 31 July, which Wu stated had been reached through "mutual understanding and accommodation." At his second press conference in the Hong Kong Legislative Council Chamber on 1 August, Howe outlined the agreements reached, and concluded with an assurance that "Hong Kong's economic and social systems, its distinctive way of life and its position as a financial, trading and industrial centre will be secure."

Two major issues remained to be settled, nationality and land leases. During the twentieth round of negotiations on 8 and 9 August, Evans presented papers on these issues. Regarding nationality, it was agreed that the two sides would exchange memoranda stating their position on the issue. Although the Chinese government considered all Hong Kong Chinese to be Chinese citizens, it recognised a concession would be required on this point to maintain business confidence in Hong Kong.

The British memorandum noted that while British Dependent Territories Citizens in Hong Kong would cease to hold this status after 1 July 1997, they were "eligible to retain an appropriate status which, without conferring the right of abode in the United Kingdom, will entitle them to continue to use passports issued by the Government of the United Kingdom." The Chinese memorandum noted that Hong Kong residents who held British Dependent Territories Citizen passports could continue to use them as travel documents after 1997, however they would be unable to claim British consular protection in Hong Kong and China.

Now that sovereignty and administration had been conceded the lease issue, which had dominated the development of the British negotiating position since Clementi first expressed concerns regarding it in 1927, was quickly passed over. During the twenty-first round of negotiations on 21 and 22 of August, it was agreed that leases could be extended to 30 June 2047, the fifty year period after British rule during which the Chinese government had undertaken not to make any significant changes to Hong Kong's capitalist system.

When negotiations were adjourned on 6 September only the method of how the legislature would be constituted remained unresolved. Without an elected government, the British believed the people of Hong Kong would feel there was no way the territory could exercise a high degree of autonomy. Howe wrote to Wu, proposing that the governor and legislature be democratically elected. During a meeting with Evans, Wu conceded that the legislature would be "constituted by elections" and that the Governor would be "accountable to the legislature."

On 15 September, Youde discussed the agreement with Thatcher. It received Cabinet approval the next day. On 22 September, a joint Sino-British communique noted that the talks on the question of Hong Kong had concluded and, four days later, the draft Joint Declaration was initialled by Zhou Nan and Evans. The Joint Declaration was then approved by the Standing Committee of the National People's Conference on 14 November and by the House of Commons on 5 December. It was signed by Thatcher and Zhao Ziyang at Peking on 19 December 1984.

**CONCLUSION**

In his address to Thatcher after the signing of the Joint Declaration, Deng stated that the "agreement has removed a shadow over Sino-British relations." It was a shadow cast by Britain's free trade imperialism, which compelled China to become part of Britain's informal empire. Through the imposition of unequal treaties, including the Treaty of Nanking and the two Conventions of Peking, China was deprived of sovereignty not only over its territory, but also over its people. This concept of national sovereignty provides a strong thread of continuity in this study. Aroused by British imperialism in mid-nineteenth century, it constituted the central element of China's Ch'ing, Nationalist and Communist governments' negotiating positions on Hong Kong.

In annexing Hong Kong, the British government reacted to the demands of mercantile interests for the acquisition of an island on which they could conduct their trade with China under British jurisdiction. When Hong Kong was secured for this purpose, concerns over its strategic defence prompted the extension of its boundaries through the lease and subsequent cession of the Kowloon Peninsula and the lease of the New Territories as well as the assumption of British jurisdiction over Kowloon City. Mercantile interests had little influence over these extensions of territory, reflecting the changing nature of free trade imperialism over time.

During the negotiations over these cessions and leases, the Chinese concept of national sovereignty formed the basis of its position. It was this concept that prompted the Chinese government to oppose the cession of Hong Kong to Britain, to assert that it retained jurisdiction over the Island's Chinese residents and to pursue the retention of Chinese jurisdiction over Kowloon City. In response to Western intrusion, the Chinese developed the unequal treaties concept, based on the assertion that the foreign concessions and extraterritorial rights imposed on China undermined its territorial sovereignty.

Although subsequent British negotiating positions were directed at retaining Hong Kong, the British government acceptance of a ninety-nine year lease over the New Territories effectively limited the Colony's lifespan. While previous agreements had emphasised the acquisition of Chinese territory by cession, by 1898 the reaction of other imperial powers in China to the annexation of Chinese territory had to be taken into consideration. It was the gradual expiry of this lease that prompted the British government to enter into negotiations with China over the future of Hong Kong.

To facilitate the return of Hong Kong, the Communist government adapted the one country, two systems proposal it had developed to achieve reunification with Taiwan. Along with the unequal treaties argument, it was based on the Chinese concept of national sovereignty. During negotiations on Hong Kong's future in 1983 and 1984, the Chinese government consistently refused to separate the issues of sovereignty and administration over the Colony. The Chinese government's adherence to this concept forced the British government to concede sovereignty over Hong Kong and renounce its claim to an administrative presence in the territory after 1997.

Under the 1984 Joint Declaration, sovereignty over Hong Kong reverts to China in 1997. While British free trade imperialism forced China to cede and lease parts of its territory, it is the Chinese concept of national sovereignty that has triumphed.

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