Hong Kong had been a colony of the British Empire since 1842 after the First Opium War and its territory was expanded on two occasions; first in 1860 with the addition of Kowloon Peninsula and Stonecutters Island, and again in 1898 when Britain obtained a 99-year lease for the New Territories. The date of the handover in 1997 marked the end of this lease.

The Chinese government declared in the treaty its basic policies for governing Hong Kong after the transfer. A special administrative region would be established in the territory that would be self-governing with a high degree of autonomy, except in foreign affairs and defence. Hong Kong would maintain its existing governing and economic systems separate from that of mainland China under the principle of "one country, two systems". This blueprint would be elaborated on in the Hong Kong Basic Law (the post-handover regional constitution) and the central government's policies for the territory were to remain unchanged for a period of 50 years after 1997.

China has stated since 2014 that it considers the treaty to be spent with no further legal effect, while the United Kingdom maintains that the document remains binding in operation. Following China's 2020 imposition of national security legislation on Hong Kong and a 2021 National People's Congress decision to approve a rework of local election laws that reduces the number of regional legislature seats elected by the public, the UK has declared China as being in a "state of ongoing non-compliance" with the Joint Declaration.