Claim: Hong Kong maintains a separate economic system.

Hong Kong , officially the Hong Kong Special Administrative Region of the People 's Republic of China , is an autonomous territory on the Pearl River Delta of China . Macau lies across the delta to the west , and the province of Guangdong borders the territory to the north . With a total land area of 1,106 km2 and a population of over 7.3 million of various nationalities , it ranks as the world 's fourth most densely populated sovereign state or territory .   After the First Opium War -LRB- 1839 -- 42 -RRB- , Hong Kong became a British colony with the perpetual cession of Hong Kong Island , followed by the Kowloon Peninsula in 1860 and a 99-year lease of the New Territories from 1898 . Hong Kong was later occupied by Japan during World War II until British control resumed in 1945 . In the early 1980s , negotiations between the United Kingdom and China resulted in the 1984 Sino-British Joint Declaration , which paved way for the transfer of sovereignty of Hong Kong in 1997 , when it became a special administrative region -LRB- SAR -RRB- of the Peoples Republic of China with a high degree of autonomy .   Under the principle of `` one country , two systems '' , Hong Kong maintains a separate political and economic system from China . Except in military defence and foreign affairs , Hong Kong maintains its independent executive , legislative and judiciary powers . In addition , Hong Kong develops relations directly with foreign states and international organisations in a broad range of `` appropriate fields '' .   Hong Kong is one of the world 's most significant financial centres , with the highest Financial Development Index score and consistently ranks as the world 's most competitive and freest economic entity . As the world 's 8th largest trading entity , its legal tender , the Hong Kong dollar , is the world 's 13th most traded currency . It 's also a member of the World Trade Organization -LRB- WTO -RRB- and the Asia-Pacific Economic Cooperation -LRB- APEC -RRB- . Hong Kong 's tertiary sector dominated economy is characterised by simple taxation with a competitive level of corporate tax and supported by its independent judiciary system . However , while Hong Kong has one of the highest per capita incomes in the world , it suffers from severe income inequality .   Hong Kong is renowned for its deep natural harbour , which enables ready access by international cargo ships , and its impressive skyline , with a very high density of skyscrapers ; the territory boasts the second largest number of high rises of any city in the world . It has a very high Human Development Index ranking and the world 's longest life expectancy . Over 90 % of the population makes use of well-developed public transportation . Seasonal air pollution with origins from neighbouring industrial areas of Mainland China , which adopts loose emissions standards , has resulted in a high level of atmospheric particulates .