Before the arrival of the British, Hong Kong was a small fishing community and a haven for travelers and pirates in the South China Sea.  During the Opium Wars with China in the Nineteenth Century, Britain used the territory as a naval base. Following the end of the first Opium War, the Treaty of Nanking in 1842 ceded Hong Kong to Britain in perpetuity. Sir Henry Pottinger, whose name can be found on a street in Central district, was its first governor. Following additional conflicts with the Chinese in 1860 Britain gained Kowloon and Stonecutters Island. In 1898 Britain acquired the New Territories on a 99-year lease. 

Settlement in the territory grew slowly with the population rose from 32,983 in 1851 to 878,947 in 1931. During the teens and twenties of this century, Hong Kong served as a refuge for exiles from China following the establishment of the Chinese Republic in 1912. 

After Japan seized Manchuria in 1932, the Sino-Japanese war broke out in 1937. Throughout the late thirties, as Japan advanced into China, hundreds of thousands of Chinese took refuge in Hong Kong. It was estimated that some 100,000 refugees entered in 1937, 500,000 in 1938 and 150,000 in 1939 - bringing Hong Kong's population at the outbreak of World War II to an estimated 1.6 million. It was thought that at the height of the influx, about 500,000 people were sleeping in the streets. 

World War II again disrupted the social and economic life of Hong Kong. On Christmas Day, 1941, the British army surrendered Hong Kong to the Japanese. U.S. submarines foiled Japanese plans to use Hong Kong as a staging area for assaults further into East Asia. Following Japan's surrender on August 14, 1945 Britain reclaimed the territory. 

After the Japanese surrender, Chinese civilians returned at the rate of almost 100,000 a month. The population, which by August 1945 had been reduced to about 600,000, rose by the end of 1947 to an estimated 1.8 million. Then, in the period 1948-49, as the forces of the Chinese Nationalist Government began to face defeat in civil war at the hands of the communists, Hong Kong received an influx unparalleled in its history. Hundreds of thousands of people - mainly from Guangdong province, Shanghai and other commercial centers - entered the territory during 1949 and the spring of 1950, the population had swelled to an estimated 2.2 million. Since then, it has continued to rise and now totals six million. 

Hong Kong's economic life began to slow after the United Nations' embargo on trade with China in the 1950s. The territory was forced to develop internal industries taking advantage of local and regional resources in order to continue to grow. And Hong Kong's success in this field was due to a number of factors, namely cheap labor, capital input and the government's tax policies. 

The constant influx from China of capital and manpower led to the establishment of light manufacturing throughout the territory by the 1950s and 1960s. At the same time, Hong Kong's tax policies began to attract growing foreign investment further adding to the territories rapid growth. In the 1950s Hong Kong began in earnest a new career as a manufacturing and industrial center. Textiles, electronics, watches, and many other low-priced goods stamped "Made in Hong Kong" flowed from the territory in ever-increasing amounts. Associated with events in China, the territory was thrown into turmoil in 1967. The flow of refugees from China continued unabated throughout the late sixties and into the seventies adding to the human resources, as a work force, in Hong Kong. During the 1980s Hong Kong started to work with China on a series of joint projects that brought the two closer together. 

Today the financial service industries have taken over from manufacturing as Hong Kong's main enterprise. This small territory was the first developing economy to enter the world's top 10 economies. And while much of the manufacturing is now likely to be done across the border and beyond, Hong Kong is still one of the world's largest exporters. Social programs continue to raise the standard of living, which is comparable to that of many Western countries. 

China has always maintained that the three treaties which brought Hong Kong into existence were signed under pressure, and thus unjust. In 1984, the Joint Declaration (Summary | Complete) signed by Britain and China agreed that the sovereignty of Hong Kong would revert back to China in 1997. Hong Kong, since July 1, 1997, became a Special Administrative Region (SAR) of the People's Republic of China. The Joint Declaration also provides that for 50 years after 1997, Hong Kong's lifestyle remains unchanged. The territory enjoys a high degree of autonomy, except in foreign and defense affairs, and China's socialist system and policies are not practise in the SAR.