Ten years have passed since the establishment of the Hong Kong Special Administrative Region, or the HKSAR, on July 1, 1997. The event, commonly referred to as the Handover, marked the end of 155 years of British colonial rule and China's resumption of full sovereignty over Hong Kong. During the last 10 years, there have been modest changes in Hong Kong's political situation and more significant changes in its economy. These political and economic changes have had an impact on Hong Kong's social and cultural identity. Despite some political and economic setbacks, the HKSAR remains a vibrant international trade hub in Asia. The actual transferral of sovereignty over Hong Kong was governed by the "Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People's Republic of China on the Question of Hong Kong" (commonly referred to simply as the "Joint Declaration") signed on December 19, 1984 in Beijing. Under the terms of the Joint Declaration, China promised that Hong Kong would "enjoy a high degree of autonomy" and "the current social and economic systems in Hong Kong will remain unchanged" for 50 years. The Joint Declaration also required China's National People's Congress (NPC) to pass "a Basic Law of the Hong Kong Special Administrative Region" (generally referred to as the "Basic Law") stipulating China's policies on Hong Kong that are consistent with the terms of the Joint Declaration. The National People's Congress passed the Basic Law on April 4, 1990. Hong Kong has long been important to the United States in several ways. First, Hong Kong is a major entrepôt in Asia, especially for trade with China. Second, Hong Kong's longstanding open trade policy has made it a major ally for U.S. efforts to liberalize international trade. Third, Hong Kong's Common Law legal system and its respect for civil liberties are a bellwether in Asia for human rights. Congressional interest in Hong Kong was demonstrated by the passage the United States-Hong Kong Policy Act of 1992 ( P.L. 102-383 ). The act commits the United States to treating the HKSAR as a separate entity from the rest of China in a variety of political, economic, trade and other areas so long as the HKSAR remains "sufficiently autonomous" to warrant special treatment. Section 202 of the United States-Hong Kong Policy Act empowers the President to make the determination of the status of Hong Kong's autonomy, specifying the factors for consideration to be "the terms, obligations, and expectations expressed in the Joint Declaration with respect to Hong Kong." The United States-Hong Kong Policy Act makes no mention of the Basic Law. In addition, the United States-Hong Kong Policy Act states that "Hong Kong plays an important role in today's regional and world economy" and that the United States has a strong interest in the continued "vitality, prosperity, and stability of Hong Kong." The act also stipulates that the "support for democratization is a fundamental principle of United States foreign policy," which "naturally applies to United States policy toward Hong Kong." Plus, the act states that "the human rights of the people of Hong Kong are of great importance to the United States" and "also serve as a basis for Hong Kong's continued economic prosperity." Title III of the United States-Hong Kong Policy Act required the Secretary of State to transmit to the Speaker of the House of Representatives and the chairman of the Committee on Foreign Relations of the Senate an annual report by March 31 (through the year 2000) on the conditions in Hong Kong "of interest to the United States." The act was amended in subsequent years to require this report each year through 2006. No report is required from 2007 onward. On Hong Kong's political front, there has been little progress in the democratization of the selection of the HKSAR's Chief Executive and Legislative Council (Legco) and towards the goal of universal suffrage in Hong Kong. In the area of civil liberties, the freedoms enjoyed under British rule have continued since the Handover virtually unchanged, with the notable exception of the controversy surrounding the proposed anti-sedition legislation in 2003. The freedoms of speech and assembly appear to have been largely respected by the Chinese and HKSAR governments, but there is concern about self-censorship by some in the Hong Kong media. After 1997, Hong Kong's economy was subject to a series of external shocks that precipitated and prolonged a recession. The Asian Financial Crisis of 1997, which began almost concurrently with the Handover, had a ripple effect on Hong Kong, resulting in a major asset value realignment, commodity price and wage deflation, and a decline in the city's gross domestic product (GDP). Hong Kong's economic recovery was then delayed by the outbreak of Severe Acute Respiratory Syndrome, or SARS, in the beginning of 2003. However, since the end of the SARS outbreak, Hong Kong's economy has rebounded, in part due to its deepening trade relations with the Chinese mainland. In addition to Hong Kong's extended recession and recent recovery, the last 10 years have witnessed a deepening and broadening of its economic and trade ties with the Chinese mainland. This has occurred in part due to global market conditions, but also due to the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Chinese mainland, and the Individual Visit Scheme, a new tourism policy for mainland visitors to Hong Kong, introduced by the Chinese government on July 28, 2003. According to some observers, Hong Kong has become the hub of a pan-Pearl River Delta economic region that is one of the major engines of China's high economic and trade growth rates. The last 10 years have also seen changes in Hong Kong society and its culture. Hong Kong has experienced a significant decline in the size of its "ex-pat" population and a concurrent rise in its "mainland" population. In addition, Hong Kong's "middle class" has endured declining incomes and a loss of economic security. Also, there is a growing interest and concern about the preservation of "Hong Kong culture," best exemplified by a popular movement to preserve "historic buildings," such as the old railroad clock tower in Tsim Sha Tsui. These social and cultural changes have raised the issue of a "Hong Kong identity" that is distinct and separable from a "Chinese identity." At present, these political, economic and cultural changes do not appear sufficient to erode Hong Kong separateness from the Chinese mainland. However, there are aspects to these changes that warrant monitoring. The economic changes appear to be blurring the existing border between Hong Kong and the Chinese mainland, while the social changes may be blurring the difference between being Chinese and being a "Hong Konger." Over time, if the separation between the Chinese mainland and Hong Kong effectively disappears for all practical purposes, then the United States and Congress may choose to revisit the decision to extend Hong Kong special treatment. The HKSAR is an executive-led government, with much of the power in the hands of the Chief Executive and his or her appointed department secretaries. The two most important department secretaries are the Chief Secretary for Administration and the Financial Secretary. Hong Kong's legislature, Legco, has comparatively limited powers; it can effectively veto legislation proposed by the Chief Executive, approves or disapproves of the annual budget, and has some oversight over the operations of the executive branch. Hong Kong's courts have the exclusive power to adjudicate HKSAR legal cases, with the exception of matters related to national defense, foreign policy and the interpretation of the Basic Law. Legal cases involving these three topics are handled by the Standing Committee of China's NPC. Since the Handover, there has been serious political debate over the details of Hong Kong's independent executive, legislative, and judicial powers. There have been controversies over the selection process for the chief executive, as well as the chief executive's term in office. Regarding the HKSAR's legislative powers, the key issues have centered about the composition of Legco and the manner by which its members are selected. As for Hong Kong's judicial powers, the main area of concern has been the scope of its powers, particularly with respect to the interpretation of the Basic Law, Hong Kong's de facto constitution. Besides these general "constitutional" issues, there also has been a notable change in Hong Kong's political parties and the level of political involvement of the Hong Kong people. Hong Kong's political parties have changed in both name and character over the last 10 years, indicating the possible development of broad-based parties. Concurrent with the change in the political parties, the people of Hong Kong appear more interested, informed and involved in politics than before the Handover. The politicization of the Hong Kong population in part can be attributed to an increase in their opportunities to be involved in political activities, such as elections. It is also in part due to a widely-held perception that the HKSAR government was somewhat dysfunctional during the first few years after the Handover, forcing people to pay more attention to political issues than they did when Hong Kong was a British colony. The Basic Law fleshes out the process by which the HKSAR's Chief Executive is to be selected. Article 45 stipulates that the Chief Executive "shall be selected by election or through consultations held locally and be appointed by the Central People's Government." The article continues by stating "the method for selecting the Chief Executive shall be specified in the light of the actual situation in the Hong Kong Special Administrative Region and in accordance with the principle of gradual and orderly progress." It also indicates that "(t)he ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures." Annex I of the Basic Law provides the specifics on how the Chief Executive, who serves a five-year term, is to be selected.