HIS: 1843 – Treaty of Nanking comes into effect, Hong Kong Island is ceded to the British "in perpetuity".

 HIS: 1843 – Treaty of Nanking comes into effect, Hong Kong Island is ceded to the British "in perpetuity".

In the late 18th and early 19th centuries, Britain faced a growing trade deficit with China. Britain could offer nothing to China to match the growing importation of Chinese goods to Britain, such as tea and porcelain. In British India, opium was grown on plantations and auctioned to merchants, who then sold it to Chinese who smuggled it into China, although Chinese law forbade the importation and sale of opium. When Lin Zexu seized this privately owned opium and ordered the destruction of opium at Humen, Britain first demanded reparations, then declared what became known as the First Opium War. Britain's use of recently invented military technology produced a stunning victory and allowed it to impose a one-sided treaty with generous conditions.

The first working draft for articles of a treaty was prepared at the Foreign Office in London in February 1840. The Foreign Office was aware that preparing a treaty containing Chinese and English characters would need special consideration. Given the distance separating the countries, it was realised that some flexibility and a departure from established procedure in preparing treaties might be required.

The fundamental purpose of the treaty was to change the framework of foreign trade imposed by the Canton System, which had been in force since 1760. Under Article V, the treaty abolished the former monopoly of the Cohong and their Thirteen Factories in Canton. Four additional "treaty ports" opened for foreign trade alongside Canton (Shameen Island from 1859 until 1943): Amoy (Xiamen until 1930), Foochowfoo (Fuzhou), Ningpo (Ningbo) and Shanghai (until 1943), where foreign merchants were to be allowed to trade with anyone they wished. Britain also gained the right to send consuls to the treaty ports, which were given the right to communicate directly with local Chinese officials (Article II). The treaty stipulated that trade in the treaty ports should be subject to fixed tariffs, which were to be agreed upon between the British and the Qing governments (Article X).

The Qing government was obliged to pay the British government six million silver dollars for the opium that had been confiscated by Lin Zexu in 1839 (Article IV), 3 million dollars in compensation for debts that the merchants in Canton owed British merchants (Article V), and a further 22 million dollars in war reparations for the cost of the war (Article VI). The total sum of 20 million dollars was to be paid in instalments over three years and the Qing government would be charged an annual interest rate of 4 percent for the money that was not paid in a timely manner (Article VII).

The Qing government undertook to release all British prisoners of war (Article VIII), and to give a general amnesty to all Chinese subjects who had cooperated with the British during the war (Article IX).

The British on their part, undertook to withdraw all of their troops from Nanking, the Grand Canal and the military post at Zhenhai, as well as not to interfere with China trade generally, after the emperor had given his assent to the treaty and the first instalment of money had been received (Article XII). British troops would remain in Gulangyu and Zhaobaoshan until the Qing government had paid reparations in full (Article XII).

In 1841, a rough outline for a treaty was sent for the guidance of Plenipotentiary Charles Elliot. It had a blank after the words "the cession of the islands of". Pottinger sent this old draft treaty on shore, with the letter s struck out of islands and the words Hong Kong placed after it. Robert Montgomery Martin, treasurer of Hong Kong, wrote in an official report:

The terms of peace having been read, Elepoo the senior commissioner paused, expecting something more, and at length said "is that all?" Mr. Morrison enquired of Lieutenant-colonel Malcolm [Pottinger's secretary] if there was anything else, and being answered in the negative, Elepoo immediately and with great tact closed the negotiation by saying, "all shall be granted—it is settled—it is finished."

The Qing government agreed to make Hong Kong Island a crown colony, ceding it to the Queen Victoria of Great Britain, in perpetuity (常 遠, Cháng yuǎn, in the Chinese version of the treaty), to provide British traders with a harbour where they could "careen and refit their ships and keep stores for that purpose" (Article III). Pottinger was later appointed the first Governor of Hong Kong.

In 1860, the colony was extended with the addition of the Kowloon peninsula under the Convention of Peking and in 1898, the Second Convention of Peking further expanded the colony with the 99-year lease of the New Territories. In 1984, the governments of the United Kingdom and the People's Republic of China (PRC) concluded the Sino-British Joint Declaration on the Question of Hong Kong, under which the sovereignty of the leased territories, together with Hong Kong Island and Kowloon (south of Boundary Street) ceded under the Convention of Peking (1860), was transferred to the PRC on 1 July 1997.