FACTBOX: How does Hong Kong's "One Country, Two Systems" work?

(Reuters) - Chinese leader Deng Xiaoping created the current "One country, two systems" formula to safeguard Hong Kong's capitalist system and lifestyle for fifty years after the territory was handed back to communist-ruled China in 1997.

Here is an overview of the system and how it works:

"ONE COUNTRY":

-- The 1,095 square kilometer territory nestled between the South China Sea and China's Guangdong Province became part of China again on July 1, 1997, after 156 years of British rule.

"TWO SYSTEMS":

-- The mainland's more than one billion people have lived under the socialist system since Mao Zedong's communists swept to power in 1949. Hong Kong's seven million people continue to operate under the laissez-faire capitalism that flourished during its time as a British colony.

DENG'S THEORY:

-- Deng theorized that letting some foreign capital into China would "supplement to the socialist economy and help promote the growth of the socialist productive forces".

-- The formula also had a political aim -- to "solve the Hong Kong and Taiwan problems by allowing two systems to coexist in one country", Deng wrote.

CHINESE CONTROLS:

-- Beijing appoints Hong Kong's chief executive and principal officials, and China takes responsibility for its defense and foreign affairs. It stations troops in the territory and has barred figures it disapproves of politically, like the Pope, from visiting the territory.

LEADERSHIP:

-- The chief executive is picked by an elite, 800 member, mostly pro-Beijing Election Committee. The Central People's Government then formally appoints them to their 5-year term.

LAW-MAKERS:

-- Half of the sixty Legislative Council, or Legco, lawmakers are democratically elected by geographical constituencies; half are elected by "functional constituencies" representing business and other sectors like law, tourism and education.

CONSTITUTIONAL RIGHTS: