Special Administrative Region (SAR)

An autonomous region of a country with separate legal, administrative, judicial, and economic systems

What is a Special Administrative Region (SAR)?

A special administrative region (SAR) is a territory that falls under the jurisdiction of one country but with separate judicial, legal, administrative systems from the rest of the country. SAR is used to describe the two autonomous regions of Mainland China.


Special Administrative Region (SAR)


SARs exist as autonomous regions of a country with some degree of independence in their economic and political systems. SARs adhere to a different constitution that allows residents to enjoy freedoms of speech, religion, and press, separate from the rest of the regions. The constitution also allows SAR residents to legislate their own economic rules, and they may adopt their own currencies, official languages, and passports.



  • A special administrative region (SAR) is an autonomous region of a country with separate legal, administrative, judicial, and economic systems.
  • Special administrative regions operate under the “one country, two systems” doctrine, allowing SARs to adopt their own currencies, official languages, and passports.
  • Special administration region refers to the two autonomous regions of the People’s Republic of China – i.e., Hong Kong and Macau.


Understanding Special Administrative Regions

The term “special administrative region” was developed in the 1980s in Mainland China when Deng Xiaoping, a paramount leader of the People’s Republic of China, was negotiating with the United Kingdom and Portugal for the return of Hong Kong and Macau, respectively. Xiaoping maintained that there would be only one China, but Hong Kong and Macau could retain separate administrative and economic systems from the rest of China.

Under the “one country, two systems” principle, each of the two regions would adopt its own legislature, government system, and financial and economic systems independent of Mainland China. It allowed the two regions to use their currency and passports and even initiate trade relations with other regions without going through China. The arrangement was set to last for 50 years for both regions, and the status is set to expire in 2047 for Hong Kong and 2049 for Macau.


Characteristics of Special Administrative Regions


1. High degree of autonomy

Special administrative regions enjoy a high degree of independence in running their affairs, and they are responsible for all economic, financial, political, and legal affairs except national defense and diplomatic relations. The National People’s Congress (NPC) is responsible for ensuring that the two SARs run their judicial, executive, and legal functions without interference.


2. External affairs

Special administrative regions are to free pursue external affairs with other countries. Therefore, SARs are empowered to pursue agreements with other countries relating to exceptions to visa requirements, extradition of suspects, double taxation rules, mutual legal aid, and other external affairs.

SARS are not required to involve the Chinese government officials or mainland China. Similarly, in sporting events, they participate as different entities from their parent country. However, when participating in sporting and other functions, SARs include the name “China” in their identity. For example, Hong Kong identifies itself as “Hong Kong, China.”


3. Immigration and nationality

SARs issue passports to their permanent residents, who are also Chinese citizens. However, for a resident of a SAR to be recognized as a permanent resident, they must be born in the SAR, born outside the SAR, but either parent is a permanent resident of the SAR, or they must’ve been a resident in the SAR continuously and legally for at least seven years.

Permanent residents who hold the SAR passports also get consular protection from the PRC’s Ministry of Foreign Affairs. Also, the National People’s Congress delegates the role of administering the PRC’s nationality law relating to renunciation, naturalization, and restoration of nationality.

PRC recognizes residents who are of Chinese descent but living in the two SARs as Chinese citizens. However, SAR residents with non-Chinese citizenship must obtain passports from diplomatic missions representing their countries.


4. Defense and military

The defense function is the responsibility of the People’s Republic of China, with the People’s Liberation Army establishing military bases in the SARs. However, the army is now allowed to interfere in the internal affairs of the SAR, but the executive of a SAR may request for its assistance in civil-military engagements, such as during natural disasters. The People’s Liberation Army bars residents of Hong Kong and Macau from joining the army.


History of Special Administrative Regions


Hong Kong

Hong Kong is one of the SARs of Mainland China, and it is a leading financial hub in China. The region operates as an autonomous region with separate legal, administrative, and judicial systems from Mainland China.

Before it became a special administrative region, Hong Kong was a British colony that was taken over when the British Empire conquered the Chinese military during the Opium Wars. China was forced to give up control of the territory in 1862, and in 1898, the British Empire was required to lease the new territory for 98 years.

When the lease expired in the 1980s, Britain sought to renew the lease, but the request was declined. It marked the start of the Sino-British declaration where China and the United Kingdom negotiated to return Hong Kong to China. The declaration took effect in 1997 under the “one country, two systems” doctrine, where Hong Kong would maintain its independence for 50 years until 2047 when the region would revert to China.



Macau is one of the two SARs of China that was originally under the control of the Portuguese. The region remained under the control of Portugal until 1987, when negotiations for Macau to be an SAR of China started.

China assumed sovereignty of the region in 1999, paving the way for Macau to operate as an autonomous region with separate legal, administrative, and judicial powers from China. The agreement allowed Macau to operate as an independent region for 50 years until 2049, when it would revert to China.


Learn More

CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • Hong Kong Monetary Authority (HKMA)
  • Top Banks in Macau
  • Hong Kong Dollar (HKD)

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!

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