5. “One country, two systems.” This is the underlying principle of the HK government. Hong Kong was a British colony until 1997 which is the reason for the capitalist economy and certain amount of democratic freedom. Under this principle, HK handles all of its own internal affairs such as education, transportation, local laws etc but China governs its foreign affairs and has the ultimate decision for some things. The residents in HK elect members to a Legislative Council and an independent body appoints the judiciary.