Few will dispute that the most talked about phrase from the Basic Law, now into the eighth year of its implementation, is ''One Country, Two Systems''. That said, some aspects of it are perhaps not fully appreciated.

The phrase ''One Country, Two Systems'' accords equal importance to both parts of the formula. Under the Basic Law, the HKSAR is entitled to a high degree of autonomy with executive, legislative and independent judicial power, including that of final adjudication. The capitalist system, the rule of law and the values that define the way of life we used to have before Reunification remain intact. The laws previously in force are basically unchanged, and Hong Kong's status as an international financial centre is maintained.

It has been clearly spelt out in the Basic Law that the Central People's Government (CPG) is responsible for matters relating to national defence and foreign affairs. The National People's Congress (NPC) is also vested with the power to amend the Basic Law, and the Standing Committee of the National People's Congress (NPCSC) the authority to interpret the Basic Law, as well as other powers.

Following the smooth transition in 1997, the CPG and the HKSARG have worked together in different realms to ensure that Hong Kong is administered in accordance with the provisions and the spirit of the Basic Law. Some examples are given below.

The laws previously in force in Hong Kong, including the common law, were adopted by the NPCSC in February 1997, except for 24 ordinances (mainly relating to sovereignty, defence and foreign affairs) found to be in contravention of the Basic Law. Colonial terms were removed from the laws to bring them in line with the SAR's status. Eleven pieces of national laws (mainly relating to sovereignty, defence and foreign affairs) were introduced by way of promulgation or legislation under Article 18 of the Basic Law.

In face of the Right of Abode (ROA) controversy, the NPCSC offered its interpretation of Articles 22(4) and 24(2)(3) in the Basic Law. That was subsequently applied by the Court of Final Appeal (CFA) to handle issues arising from ROA cases, in accordance with common law principles. In the process, the CFA respected the power of legislative interpretation that had been vested in the NPCSC but the power of final adjudication of cases conferred upon it by the Basic Law remains intact. It is for NPCSC to interpret the provisions of the Basic Law, but whether the interpretation applies to any particular case, the meaning of the interpretation, etc are for the courts to decide.

With China's accession to the World Trade Organisation in December 2001, the Mainland and the HKSAR have become two independent tariff zones. It opens up the possibility of them entering into free trade agreement (FTA) with each other. The Closer Economic Partnership Arrangement (CEPA), by nature an FTA, was signed in June 2003. Under CEPA, both the Mainland and the HKSAR can eliminate trade and tariff barriers, eliminate discriminatory measures to achieve liberalisation of trade in services, and foster closer economic development and trade ties between each other.

To meet the community's aspirations over the further development of our constitutional system, the Chief Executive (CE) set up the Constitutional Development Task Force in December 2003. Led by the Chief Secretary for Administration, the Task Force went about examining the relevant principles and legislative process stipulated in the Basic Law in relation to constitutional development, consulting relevant departments of the Central Authorities whilst listening to the public's views. Three reports have since been published by the Task Force pertaining to the principles and legislative process that should be adhered to when amending the methods for selecting the CE in 2007 and for forming the Legislative Council (LegCo) in 2008, with reference to Annexes I and II of the Basic Law. The NPCSC gave its interpretation on Article 7 of Annex I and Article 3 of Annex II of the Basic Law on April 6, 2004 after the publication of the First Report. The ruling provided explanation on how the said two articles should be interpreted and the procedures for making amendments to the methods for selecting the CE and for forming the LegCo.

The NPCSC's interpretation has led to some allegations that the principle of ''One Country, Two Systems'' has been eroded. To put the matter in perspective, we should perhaps bear in mind several points. First, China as a unitary state means that only the Central Authorities may authorise regions like the HKSAR to exercise specified powers and to adopt certain systems. These regions have no residual powers to unilaterally alter the systems that have been decided by the Central Authorities. Second, the Basic Law is a piece of national legislation promulgated by the NPC in accordance with the PRC legal system, which is a civil law system. When it interfaces with the domestic laws which are of the common law system, it takes some time for teething problems to be resolved. It is only through implementation of the Basic Law that we acquire better understanding of it and its operation is to be perfected through experience gained. Third, the Sino-British Joint Declaration signed in 1984 had spelled out, among other things, that the HKSAR would be directly under the authority of the CPG and that it would enjoy a high degree of autonomy. The Declaration did not provide for universal suffrage for the formation of our legislature or the election of the CE. Partial direct election first appeared in the early 1990s and universal suffrage is set out in the Basic Law as the ultimate goal. The high degree of autonomy does not mean complete autonomy. It does not include the power to amend the Basic Law nor to act in a way that contravenes the Basic Law. The HKSARG cannot amend the electoral methods unilaterally. The NPCSC's interpretation of Annexes I and II and decision for changes in Annexes I and II are both lawful and constitutional.

Premier Wen Jiabao has emphasised that the objective of having Hong Kong elect its CE and legislature by universal suffrage has not changed. The ultimate aim set out in the Basic Law remains the same.

The task ahead is to decide how we can move towards that goal within the parameters defined by the NPCSC. We need to work together through calm and rational discussions when searching for a consensus on the arrangements for selecting the CE in 2007 and for electing members of LegCo in 2008. After public consultation, the Task Force will recommend specific reforms and prepare draft legislation.

Over these years, the CPG and the HKSARG have faithfully adhered to the provisions in the Basic Law. When necessary, the CPG has rendered generous support and assistance to the HKSAR. The ''One Country, Two Systems'' principle has been tried and tested. It works. To keep it going, we need to respect both parts of the formula and have due regard for ''One Country'' Without one country, there can be no two systems.

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