During the Tang and Song dynasties, Hong Kong was an important trading region. During the Qing dynasty, Europe increased its world trade, and China�s huge population offered limitless products which were in high demand. However, China had a one-way trading policy with the West. Europeans bought silk, porcelain, spices, and tea from China, but were not allowed to sell their goods in return. China would only accept silver as payment, fearing that a flood of European goods would contaminate and damage their culture.

Great Britain and France became worrisome over the depletion of their stockpiles of precious metals. They had to find a product Chinese merchants would accept other than silver, and that product was opium. Opium had been used in traditional Chinese medicine earlier in history, but was eventually banned because of its addictive qualities. Between 1821 and 1837, drug trade to China increased fivefold, with an estimated 2 million Chinese being addicted to opium. In 1838, the Qing government tried to ban the opium trade, so Great Britain declared war.

China�s longstanding policy of alienation proved detrimental against the world�s leading technological power. China�s navy of wooden junks was no match for the steam-powered ironclads of the Royal Navy, nor were its ground forces prepared for the modern rifles and artillery of the British. In 1842 the Qing surrendered, signing the Treaty of Nanking. Europe now had unrestricted access to Chinese ports and Hong Kong was ceded to Great Britain. The following year, Hong Kong became a crown colony of the United Kingdom.

This week in capitalism marks the day in 1984 when Britain and China finally agreed on a declaration to end 150 years of European rule in Hong Kong. Chinese authorities agreed to take over Hong Kong�s defense and foreign affairs in 13 years while allowing the city to maintain its local autonomy. The agreement also insisted that the mainland Chinese government would leave Hong Kong untouched for 50 years after it was handed back to its people. The UK ambassador to China, Sir Richard Evans, said the joint declaration was “the practical embodiment of the imaginative concept of one country, two systems”.

Hong Kong still has an unrestricted laissez-faire system imposed by the British. Only one quarter of the city is considered developed with around one third of its children living below the poverty level. In 1997, control of the economically lucrative colony was handed back over to the Chinese as promised. Had Great Britain continued to hold on to Hong Kong, as many suggested they should, they may not have emerged this time as successful as they did after the opium wars.

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