Application of the "One Country, Two Systems" Principle
Under the "One Country, Two Systems" Principle, through which China resumes the exercise of sovereignty over Hong Kong on 1 July 1997, financial and monetary systems of Hong Kong and Mainland China are kept mutually independent. The Basic Law, which sets out Hong Kong's system of government, states that the Hong Kong dollar shall continue to be a separate and freely convertible currency: it also prohibits the imposition of exchange controls and requires the Government of the Hong Kong Special Administrative Region to provide an economic and legal environment appropriate for the maintenance of Hong Kong's status as an international financial centre.
China's policies of maintaining Hong Kong's status as an international financial centre and preserving Hong Kong's autonomy in monetary and financial affairs after 1997 are clearly enshrined in the Joint Declaration (Annex I: Part V and Part VII), the Basic Law (Article 106 and Articles 109 to 116) and the Agreed Minute on the Question of the Arrangements for the Transfer of the Exchange Fund of Hong Kong.
China has backed these commitments through practical co-operation with Hong Kong. The HKMA and the PBoC (China's central bank) work closely on matters of common concern, including on-going discussions on monetary issues and the establishment of links between China's and Hong Kong's payment systems.