Hong Kong has been a free market economy for many decades. Its status as a free market economy can be traced back to its colonial history. In 1842, after the First Opium War, the Treaty of Nanking was signed between China and Britain, ceding Hong Kong Island to Britain. Later, in 1860, the Kowloon Peninsula was also ceded to Britain through the Convention of Peking.
During British colonial rule, which lasted until 1997, Hong Kong developed into a major international financial center and trading hub. The colonial administration pursued a free market economic policy, characterized by minimal government intervention, low taxation, free trade, and a business-friendly environment. This approach allowed businesses and trade to flourish and contributed significantly to Hong Kong’s economic success.
When the sovereignty of Hong Kong was transferred back to China in 1997 under the principle of “one country, two systems,” Hong Kong retained its free market economy, separate legal system, and other unique characteristics for 50 years from the handover date. This arrangement is known as the “one country, two systems” framework, which aims to preserve Hong Kong’s existing economic and political systems while integrating them with mainland China.