Mr Tung Chee Hwa took the oath of office for his second five-year term as Chief Executive at a ceremony held in the Grand Hall of the Hong Kong Convention and Exhibition Centre on July 1. The oath was administered by President Jiang Zemin. President Jiang then administered the oath of office to the newly appointed Principal Officials of the Government, after which Mr Tung presided at the oath taking by Members of the Executive Council. Prior to the inauguration ceremony, a flag-raising ceremony was held at the Golden Bauhinia Square to mark the 5th Anniversary of the Establishment of the HKSAR.

HONG KONG became a Special Administrative Region of the People's Republic of China (PRC) on July 1, 1997. The Basic Law which is the constitutional document of the Hong Kong Special Administrative Region (HKSAR) came into effect on the same day. The Basic Law sets out the basic policies of the PRC regarding Hong Kong and the way in which the HKSAR is to be administered for 50 years beyond 1997.

    Under the Basic Law, the HKSAR shall enjoy a high degree of autonomy except in defence and foreign affairs. The HKSAR shall exercise executive, legislative and independent judicial power, including that of final adjudication. The HKSAR's executive authorities and legislature shall be composed of permanent residents of Hong Kong. The HKSAR shall remain a free port, a separate customs territory and an international financial centre and may, on its own, using the name 'Hong Kong, China', maintain and develop relations and conclude and implement agreements with foreign states and regions and international organisations in the appropriate fields, including the economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports fields.