July 31, 1984

The "one country, two systems" concept was not formulated today. It has been in the making for several years now, ever since the Third Plenary Session of our Party's Eleventh Central Committee. The idea was first presented as a means of settling the Taiwan and Hong Kong questions. The socialist system on the mainland, with its population of one billion, will not change, ever. But in view of the history of Hong Kong and Taiwan and of their present conditions, if there is no guaranteed that they will continue under the capitalist system, prosperity and stability cannot be maintained, and peaceful reunification of the motherland will be out of the question. Therefore, with regard to Hong Kong, we propose first of all to guarantee that the current capitalist system and way of life will remain unchanged for 50 years after 1997.

To be frank, we shall be paying close attention to developments during the remaining thirteen years of the transition period in Hong Kong. So long as we make proper arrangements for this period, we are not worried about what will happen after 1997. But we hope that certain things will not occur in Hong Kong during the transition.

1. We hope that the position of the Hong Kong dollar will not be shaken. Exactly how many Hong Kong dollars should be issued? At present the currency has good credit, because it is backed by substantial reserves, reserves that exceed the amount of notes issued. This state of affairs must not change.

2. We agree that leases of land will be valid for fifty years after 1997 and that the British Hong Kong Government may use the income from the sale of land. But we hope it will use that income for capital construction and the development of land, not for administrative expenses.

3. We hope that the British Hong Kong Government will not increase the number of personnel and the amount of their pay and pensions without consultation, putting a heavy burden on the future government of the special administrative region.

4. We hope that during the transition period the British Hong Kong Government will not, without consultation, organize a group of administrators to be imposed on the Hong Kong Special Administrative Region.

5. We hope that the British Hong Kong Government will persuade people in the relevant departments not to let British capital take the lead in withdrawing from Hong Kong.

We hope no problems will crop up during the transition period, but we must be prepared for any that may arise despite our wishes. From now on the British and Chinese governments need to cooperate more closely.

The two governments have reached a basic agreement in their talks on the Hong Kong question. I am confident that the "one country, two systems" formula will work. This will produce a favourable reaction internationally and will serve as an example for other nations in settling the disputes history has bequeathed to them. When we developed the concept of "one country, two systems", we also considered what methods could be used to resolve international disputes. There are so many issues all over the globe that are tangled in knots and very difficult to solve. It is possible, I think, that some of them might be disentangled by this method. Our sole purpose has been to find mutually acceptable solutions to disputes. In the past, many have flared up and led to armed conflicts. If fair and reasonable measures are taken, they will help eliminate flash points and stabilize the world situation.

(Excerpt from a talk with the British Foreign Secretary, Sir Geoffrey Howe.)

(From Selected Works of Deng Xiaoping, Volume III <1982-1992>)