The Chinese and British governments had reached an agreement on the Hong Kong question on September 18, 1984. It had been initialed on September 26 and was to be formally signed by the heads of the two governments in Beijing on December 19. The agreement consisted of 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" and three annexes, entitled "Elaboration by the Government of the People's Republic of China of Its Basic Policies Regarding Hong Kong", "The Sino-British Joint Liaison Group" and "Land Leases". On May 27, 1985, the governments of the two countries exchanged the instruments of ratification in Beijing, and the Joint Declaration came into force. The Joint Declaration states that the Government of the People's Republic of China will resume the exercise of sovereignty over Hong Kong on July 1, 1997, and that the Government of the United Kingdom will restore Hong Kong to the PRC on the same date. In this document the Chinese government sets forth its basic policies regarding Hong Kong. The main points are as follows:

- A Hong Kong Special Administrative Region will be established. This region will be directly under the authority of the Central People's Government but will enjoy a high degree of autonomy, except in the areas of foreign affairs and defence, which will be the responsibilities of the Central People's Government;

- the laws currently in force in Hong Kong will remain basically unchanged;

- the government of the Region will be composed of local inhabitants;

- the current social and economic systems in Hong Kong will remain unchanged, and so will its way of life;

- the Region will retain the status of a free port, of a separate customs territory and of an international financial centre, and it will have independent finances;

- using the name of "Hong Kong, China", the Region may on its own maintain or establish economic and cultural relations with states, regions and international organizations;

- the maintenance of public order will be the responsibility of the Government of the Region; and

- these policies of the PRC regarding Hong Kong will remain unchanged for 50 years.

In the agreement there are also provisions for handling specific affairs, including the smooth transfer of government.