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

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

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

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

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

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

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