TNAG-1241-FCO40-1554-Future-of-Hong-Kong-1983 — Page 114

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I. BACKGROUND

Hong Kong has a population of over 5 million, 98 percent of whom are

ethnic Chinese. The colony was acquired by Britain from China in three

stages: Hongkong Island (32 sq. mi.) by the Treaty of Nanking in 1842;

Kowloon Peninsula and Stonecutters' Island (3.75 sq. mi.) by the First

Convention of Peking in 1860; and the New Territories (365 sq. mi., con-

sisting of a mainland area adjoining Kowloon and 235 adjacent islands) by

a 99-year lease under the Second Convention of Peking in 1898. Consequently,

most of the land area of Hongkong is scheduled to revert to China in 1997,

while Hongkong Island and Kowloon Peninsula theroetically are British in

perpetuity (see map). However, Beijing regards Hong Kong as part of its

territory, illegally under British administration a view it announced

formally to the United Nations in 1972.

Hong Kong began its rise to prominence as a preeminent commercial cen-

ter in East Asia after Shanghai was taken by Communist forces in 1949 and

declined as an international economic market. The large number of people

from the PRC who sought refuge in Hong Kong and the subsequent cut off of

much entrepot trade between China and the West as a result of the embargo

during the Korean War led to the development of textile and other light

manufacturing industies in Hong Kong.

At first Hong Kong purchased only limited amounts of food, building

material and fuel from the PRC for local consumption, but its growing

industries led to new needs, causing Hong Kong to become a major importer

of PRC products including such vital supplies as water, foodstuffs and fuel.

In 1982 imports from China amounted to almost one fourth of Hong Kong's

total import bill of $23.5 billion. Hong Kong exports to China have been