Hong Kong’s Land Leases & Asia’s Prosperity and Stability†

In early July, a new Hong Kong law extended nearly 400 land leases in the formerly British-governed city for another 50 years, making the leases go beyond June 30, 2047—the critical date marking the potential expiry of the Beijing-approved governance system operating in the city since its handover to China in 1997.  More leases are expected to be extended in the same manner.  If the extension of these leases—which has broad implications—is handled well, Beijing will be able to significantly contribute to the prosperity and stability of not only Hong Kong, but also Asia.

Land Leases in Hong Kong and the “One Country, Two Systems”

Since July 1, 1997, China has exercised its sovereignty over Hong Kong, designating the city as a “special administrative region” governed under the “one country, two systems” principle for 50 years.  The arrangement enables Hong Kong to continue practicing capitalism alongside its common law system until June 30, 2047, while the rest of China practices socialism with Chinese characteristics and utilizes a legal system primarily based on legislation.  What will happen to Hong Kong after June 30, 2047 has remained unclear.

According to the new law mentioned above, the extended leases, which now have new expiry dates beyond June 30, 2047, are subject to “the same encumbrances and interests as applied immediately before the period of the extension [emphasis added]” (e.g., mortgages).  As the interpretation of such encumbrances and interests depends on these leases’ governing law and the underlying constitutional system, two questions should be asked:

• Does the fact that these leases are promised to have the same encumbrances and interests before and after June 30, 2047 mean that Beijing has implicitly authorized the leases’ governing law, i.e., the law of Hong Kong rooted in common law culture, to remain applicable after June 30, 2047? 

• Does this further suggest that Beijing is prepared to continue to apply the “one country, two systems” principle in Hong Kong for at least a certain period of time after June 30, 2047, if not indefinitely? 

The “2047 clock” in Hong Kong is ticking and the circumstances surrounding China are increasingly challenging.  Chinese leaders’ provision of unequivocal answers to these questions—as soon as possible, if not immediately—is of utmost importance.

Solving the Hong Kong Puzzle Before 1997

“How Chinese leaders addressed uncertainties arising in the 1970s from land leases in Hong Kong […] may provide useful reference for those seeking to solve the Hong Kong puzzle today.”

How Chinese leaders addressed uncertainties arising in the 1970s from land leases in Hong Kong—and, thereby, answered the broader question about the city’s future in the several decades after June 30, 1997—may provide useful reference for those seeking to solve the Hong Kong puzzle today.

In the 1970s, there were mounting concerns about land leases in the New Territories, an area that accounts for 90 percent of the land in Hong Kong.  Unlike Hong Kong Island and Kowloon Peninsula—two areas that were ceded to Britain in perpetuity in treaties imposed on the Qing Dynasty in the 19th century—the New Territories was leased to Britain for a 99-year term ending on June 30, 1997.  The unclear situation reportedly led one banker at the time to conclude: “[w]e can’t write a mortgage on a piece of land in the New Territories”.

Amid such concerns, in March 1979, Sir Murray Maclehose, Governor of Hong Kong, visited China, the first such visit by a Hong Kong governor since the People’s Republic of China was established in 1949.  It is worth noting that the visit occurred only a few months after the Eleventh Central Committee of the Chinese Communist Party held its Third Plenary Session in December 1978 to set China on the course for economic reforms, a pivotal step that ultimately led the country to become the second largest economy today.

Then, in late September 1982, Margaret Thatcher, the Prime Minister of Britian, met with DENG Xiaoping, China’s paramount leader.  After the meeting, Prime Minister Thatcher read a joint statement, indicating that both sides “agreed to enter talks [about the future of Hong Kong] through diplomatic channels […], with the common aim of maintaining the stability and prosperity of Hong Kong”.  However, the joint statement issued by the New China News Agency included an additional, crucial paragraph: “The Chinese Government’s position on the recovery of the sovereignty of the whole region in Hong Kong is unequivocal and known to all.”

A few days later, on October 1, 1982, the Chinese government issued a statement to leave no doubt about its position.  The statement reads:

[…] The treaties concerning the Hong Kong area between the British Government and the Government of the Manchu [i.e., Qing] Dynasty of China were unequal treaties […]  China is not bound by these unequal treaties and that the whole Hong Kong area will be recovered when conditions are ripe.

[emphasis added]

In December 1984, after multiple rounds of negotiation, the Chinese government and British government signed their Joint Declaration, which allows the former to adhere to its firm position (i.e., recovering Hong Kong in its entirety with effect from July 1, 1997).  In return, the Chinese government offered its concession: Hong Kong can continue practicing capitalism and maintain its way of life for 50 years, with details to be provided in the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (“Basic Law”), a constitutional document for Hong Kong scheduled to take effect on July 1, 1997.

In April 1990, China’s national legislature passed the Basic Law, based on a key provision that was not added to the Chinese Constitution until December 4, 1982, i.e., merely two months after Prime Minister Thatcher’s above-mentioned meeting with DENG Xiaoping.  The provision, which is Article 31 of the Chinese Constitution, reads:

The State may establish special administrative regions when necessary.  The systems instituted in special administrative regions shall, in light of specific circumstances, be prescribed by laws enacted by the National People’s Congress.

Solving the Hong Kong Puzzle Now

“The above account […] illustrates the unparalleled significance of China’s reunification and [Chinese] leaders’ readiness to be pragmatic, so long as their unwavering position to uphold territorial integrity was not undermined.”

The above account of key developments showing how Chinese leaders solved the Hong Kong puzzle in the 1970s and early 1980s—when they were busy putting behind decades of turmoil resulting from multiple political movements to re-establish China’s economic, legal, and social systems—illustrates the unparalleled significance of China’s reunification and these leaders’ readiness to be pragmatic, so long as their unwavering position to uphold territorial integrity was not undermined.

China is now facing circumstances that call for its leaders to be pragmatic once again by extending, in unequivocal terms, the implementation of the “one country, two systems” principle in Hong Kong for a certain period of time after June 30, 2047, if not indefinitely.  Adopting this pragmatic approach now has multiple benefits, including the following:

• Ensuring, with absolute certainty, that the extended leases mentioned above and more than 300,000 similar leases that are expected to expire by June 30, 2047 are indeed subject to “the same encumbrances and interests” before and after June 30, 2047, with their governing law and the underlying constitutional system to remain the same.  This certainty will further instill more confidence in the long-term prosperity and stability of Hong Kong.

• Sending a strong, positive signal to people in Taiwan, as people on the mainland continue to aspire peaceful reunification, based on creative models allowed by Article 31 of the Chinese Constitution.

• Enhancing the prosperity and stability in Asia by maintaining the legal status of Hong Kong, which is a crucial economic hub for the region.  The need for prosperity and stability in Asia is even more critical at a time when other parts of the world are experiencing growing conflicts and tension.

In March 2022, a senior Chinese official hinted that “one country, two systems” in Hong Kong could go beyond June 30, 2047.  If Chinese leaders have been waiting for the right moment to formally announce this position, they should know that that right moment is now.

• The citation of this article is: The Editorial Board of SINOTALKS^®, Hong Kong’s Land Leases & Asia’s Prosperity and Stability, SINOTALKS.COM^®, SinoExpress™, July 17, 2024, https://sinotalks.com/sinoexpress/202407-english-hong-kong-asia. ↩︎

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