'One Country Two Systems' as Bedrock of Hong Kong's Continued Success: Fiction or Reality?

The principles of ‘One Country Two Systems’ have reaffirmed the autonomy of Hong Kong in a number of aspects, despite the handover of sovereignty over Hong Kong from the UK back to China in 1997. In accordance with the Sino-British Joint Declaration and Basic Law of Hong Kong, the city is able to enjoy a high degree of autonomy over the systems and policies practised locally, including the social and economic systems, the system for safeguarding the fundamental rights and freedoms of its residents, and the executive, legislative and judicial systems. On the one hand, with its image as a robust financial market largely thanks to the institutions inherited from its colonial era, Hong Kong is able to attract a number of financial activities from China and therefore has firmly established itself as a leading international financial centre. For example, from 2009 to 2011, for three years in a row, Hong Kong was crowned the champion of IPOs, surpassing both New York and London. Despite the establishment of two stock markets in Shanghai and Shenzhen in early 1990s, the Hong Kong Stock Exchange remains a major source of equity finance for Chinese companies. Nonetheless, after the handover, there have been concerns that the ‘Hong Kong advantages’ had started to fade after its reunification with China. This article seeks to critically analyse how Hong Kong’s capitalist system is shielded from the socialist system of China under the principles of ‘One Country Two Systems’ and that the city is able to maintain its position as a premier financial centre. To do so, this article aims to explore the ‘regulatory gap’ between Hong Kong and China in a sense that Hong Kong’s strength has largely come from the operation of a strong company and financial law regime independent of the one in China.