Special Administrative Region

What Is a Special Administrative Region (SAR)?

A Special Administrative Regions (SAR) is an area that falls under the general auspices of one country but which has maintained a separate political and economic system. The term is most often associated with Chinese autonomous regions.

Two important SARs are Hong Kong and Macau, a pair of relatively autonomous regions within the People's Republic of China that maintain separate legal, administrative, and judicial systems from the rest of the country.

Understanding Special Administrative Regions

China's Special Administrative Regions (SARs) enjoy a high degree of autonomy under the "one country, two systems" concept developed by Deng Xiaoping. There are currently two SARs, both located in the Pearl River Delta in the south of the country: Hong Kong, a former British dependency that was turned over to China in 1997; and Macau, a former Portuguese dependency that was turned over in 1999. 

Due to their history as Western colonies, the SARs had fundamentally different experiences from the rest of China during the 20th century. Hong Kong and Macau were capitalist enclaves with Western-style judicial systems and colonial administrators serving as executives; the People's Republic was an inward-looking communist state built on a revolutionary, one-party framework. While Deng's reforms opened the country up to the outside world and initiated a transition to a market-based capitalist economy, the Chinese Communist Party retains a monopoly on political power.

According to agreements struck with Britain and Portugal in the 1980s, Hong Kong and Macau will retain their separate systems until 2047 and 2049, respectively. During these 50-year stints as autonomous regions, the SARs are governed by Basic Laws, constitutions unique to each region. These give Macau and Hong Kong considerable executive, legislative, and judicial freedom. Defense and diplomatic responsibilities remain with the central government.

Special Considerations

Beijing does constrain the freedom of the SARs, however. Hong Kong is only allowed to elect its leaders, called chief executives, from a pool of pre-approved candidates. Hong Kong has seen an upsurge in anti-Beijing, pro-democracy, and even (limited) pro-independence sentiment in recent years. The pro-democracy "umbrella protests" of 2014 blocked Hong Kong's downtown streets for weeks in 2014, and the central government has responded in ways that critics see as violating the SAR's autonomy, including the 2015 arrests of five booksellers critical of the government; at least one appears to have been arrested in Hong Kong itself and clandestinely transported to mainland China.

Example: Macau

Macau, like Hong Kong, is a special administrative region (SAR) of greater China that operates under the “One Country, Two Systems” principle. Similar to Hong Kong, the One Country, Two Systems allows Macau broad but limited autonomy in most of its governing and economic activities. Its currency is called the Macanese pataca (MOP).

Macau thrives as a second gateway for international trade into mainland China particularly for Portuguese-speaking countries, located on the country's south coast next to Hong Kong. The service sector, specifically, the tourism and gaming industry, dominates Macau's economy contributing over 90% of GDP output. From a financial standpoint, a lot of investors also know Macau as a tax haven.