The British Crown Colony of Hong Kong comprises Hong Kong Island, Kowloon, the New Territories and the Outlying Islands which together cover a land area of approximately 1,000 square kilometres to the south of China's Guangdong province. Hong Kong Island, Kowloon and some of the Outlying Islands were ceded to Britain in 1842 and the remaining land area is held by Britain on a lease from the Government of the People's Republic of China ("PRC") which expires on 30th June, 1997.

Under a Joint Declaration between the Governments of the PRC and the United Kingdom made in September 1984, sovereignty over the whole area of the Colony will revert to the PRC on 1st July, 1997. Hong Kong will then become a Special Administrative Region of the PRC vested with its own executive and legislative power and an independent judiciary with the power of final adjudication. The Joint Declaration provides for the system prevailing in Hong Kong to continue for 50 years despite PRC sovereignty. The Hong Kong Dollar is to continue to circulate and be freely convertible, the free flow of capital is to be safeguarded, the central government of the PRC is not to levy taxes on Hong Kong and Hong Kong is to retain its status as a free port and separate customs territory. The social and economic systems in place in Hong Kong at the time of transfer will be continued. Private property, ownership of enterprises, legitimate rights of inheritance and foreign investment will be protected by law.

Pursuant to the Joint Declaration, the National People's Congress of the PRC promulgated on 4th April, 1990 the Basic Law of the Hong Kong Special Administrative Region, which will come into effect on 1st July, 1997 as Hong Kong's "Constitution". The Basic Law contains detailed legal provisions reflecting the various policies expressed in the Joint Declaration including provisions stating that the "previous capitalist system and way of life shall remain unchanged for 50 years" and that an appropriate economic and legal environment should be provided "for the maintenance of the status of Hong Kong as an international financial centre".

With its proximity to and its unique relationship with the PRC, Hong Kong is ideally placed to take advantage of the huge and, to a large extent, still untapped Chinese marketplace. Hong Kong also serves as a base for and source of investment in South East Asia - for example, there are already significant business links with Thailand while increasing interest is being shown in Vietnam. Hong Kong naturally sees itself as a vital component in the rapidly developing Pacific Rim region.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor"