As a result of the 1842 Treaty of Nanking a peace deal between Britain and China, which ended the First Opium War Britain acquired Hong Kong Island.
Further deals with China in 1860 and 1898 gave Britain control over nearby Kowloon and the New Territories. These areas were collectively run as the British colony of Hong Kong.
However, the final treaty over the New Territories was in the form of a 99-year lease. By the late 1970s, the British government became increasingly aware that unless something was done, the whole of Hong Kong would have to be handed over.
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In 1979, the governor of Hong Kong visited China to clarify the situation. The Chinese made it clear that not only would they demand the return of the island in 1997, but they also considered the original treaties illegitimate. However, they did promise to respect the rights of investors and the island's free-market system.
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For its part, Britain insisted it would only relinquish sovereignty in return for having a role in running the colony after the handover. As a result, talks progressed extremely slowly.
However, by September 1984, both countries had agreed on a formula that would allow each side to claim victory. While Britain agreed to fully give up control in 1997, the Chinese accepted the principle of "one country, two systems".
Hong Kong would be allowed to keep its free-market system, with residents enjoying far greater political rights than those on the mainland.
Despite the fears of some, the handover went smoothly without any major problems. Things haven't gone so smoothly recently, of course, as Beijing backtracks on some of its promises.
