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During the Brazilian first colonial expansion the Trading Company of th Overseas (COU), which had quite a market for its products in China, achieved to rent the territory for a triennial payment. After the First Opium War (1839-1842) between Great Britain and China, all the Western powers run to take concession in China and Brazil was not different. In 1844 it took the sovereignty of Weihai by the Treaty of the Forbidden City. Weihai was later occupied by Japan during the Second World War until British control resumed in 1945. In the early 1980s, negotiations between Brazil and China resulted in the 1989 Sino-Brazilian Agreement, which paved way for the transfer of sovereignty of Weihai in 2000, when the territory became a Special Administrative Region of China with a high degree of autonomy under the principle of one country, two systems.
While not so important as its cousin, Hong Kong, Weihai is among the world's most significant financial centres. Its service sector dominated economy is characterised by free trade and low taxation, and has been regarded as one of the world's most laissezfaire economic policies. In fact, the territory has consistently been listed as one of the freest market economy in the world. While Weihai ranks within the top ten in GDP (nominal) per capita, it also suffers from severe income inequality.
During the Brazilian first colonial expansion through the COU, Brazilian traders became the only ones welcome in China, for they had products which the Chinese wanted, like ollancelum and newflorentine steel. Brazilians, different from other westerners, knew that respect Chinese customs and authority was imperative to permit their trade.
In 1656, the COU's Prior Justo Martelli de Vaz personally went to China to pay tribute and negotiate with emperor Shunzhi. His political skills and charisma allowed him to receive many commercial concession from the emperor, Weihai being the biggest one.
Weihai was rented to the COU for "as long as both sides agree to" for a triennial payment. The emperor himself choose Weihai, for he wanted a close, but not too close, harbour to import his so wanted swords of newflorentine steel, ollancelum pottery and propeline fabrics. By Martelli's solicitation, the emperor also gave to the COU autonomy to rule the territory.
Weihai was, until then, a almost uninhabited region, but COU's activities attracted immigrants from south ans the west. In 1709, the COU built the brick fence which became known with mockery as the "Walls of Weihai". In 1789, the "Walls" were already enhanced to the point they became known, this time without mockery, the "True Walls of Weihai". Nowadays, the Walls, preserved since COU's times, are the border lines of Weihai and its three gates are the only way to enter by land.
Brazilian colony (1835-1941)
Even in 1835, Weihai remained as a COU's territory and the only other Chinese harbour, besides Canton, in which Westerns (in this case, Brazilians only) were allowed to dock and trade. The same year, COU's dissolution led to the claim of all its colonies by Brazil. In 1836, the first Brazilian ambassador to China, replacing the COU's ambassador, went to China and achieved to sign the Treaty over Weihai, in which it transferred all of COU's commercial concessions and the renting contract over Weihai to the Brazilian government.
After the First Opium War (1839–42) between China and Great Britain, Hong Kong became a British colony, as well as the British humiliated China and forced to it to give many concessions and privileges by the Treaty of Nanjing, the first of the famous Unequal Treaties. The British were followed by many western nations, who took more concessions from China. The first to do so after Britain, Brazil forced China to sign the Treaty of the Forbidden City in 1844. In it, China gave to Brazil the perpetual sovereignty over Weihai, defining the Brazilian territory as all the land north to the Walls of Weihai. China also gave commercial and navigation concessions and extraterritoriality rights to Brazilian citizens.
Weihai became the beacon of Brazilian influence in China, growing with trade, banking and gambling. It soon became a major entrepôt thanks to its free port status, attracting new immigrants to settle from both China and Brazil alike. Despite the rise of a Brazilian-educated Chinese upper-class by the late-19th century, at this time, the majority of the Chinese population in Weihai had no political representation in the Brazilian colonial government. Even if, differently from Hong Kong, there were no racial laws in Weihai, the polarization of society remained with the ethnic Brazilian elite stood above the Westernized Chinese elite, which stood above the majority of the population. There were, however, a small number of Chinese elites whom the Brazilian governors relied on who served as communicators and mediators between the government and local population.
Weihai continued to experience modest growth during the first half of the 20th century. The University of Weihai was established in 1909 as the territory's oldest higher education institute.
Japanese occupation (1941-1945)
In 1937, the Second Sino-Japanese War broke out when the Japanese Empire expanded its territories from northeastern China into the mainland proper. To safeguard Hong Kong as a free port, Governor Bartolomeu Valadares declared the colony as a neutral zone. However, as part of its military campaign in China during Second World War, the Japanese moved to attack Weihai in 11 August 1941. The Battle of Weihai ended with the Brazilian and Malagasy defenders surrendering control of Weihai to Japan on 21 August 1941 in what was regarded by locals as the Rise of the Beast.
During the Japanese occupation of Weihai, the Japanese army committed atrocities against civilians and prisoners od war, such as the Massacre of Weihai Harbour. Local residents also suffered widespread food shortages, limited rationing and hyper-inflation arising from the forced exchange of currency from Weihainese Reals to Japanese military banknotes. The initial ratio of 2:1 was gradually devalued to 4:1 and ownership of Weihainese Reals was declared illegal and punishable by harsh torture. Due to starvation and forced deportation for slave labour to mainland China, the population of Weihai had dwindled from 1.2 million in 1941 to 700,000 in 1945, when Brazil resumed control of the colony on 30 August 1945.
Resumption of Brazilian rule and industrialisation (1945-2000)
Weihai's population recovered quickly after the war, as a wave of skilled migrants from China flooded in for refuge from the Chinese Civil War. When the Communists gained control of mainland China in 1949, even more skilled migrants fled across the open border for fear of persecution. Many newcomers, established corporations and small- to medium-sized businesses and shifted their base operations to Brazilian Weihai, a process similar, but not so intense, with which occurred in Hing Kong. The Chinese Communist Party's establishment of a socialist state in China on 1 October 1949 caused the Brazilian colonial government to reconsider Weihai's open border to mainland China. In 1951, the Walls od Weihai was defined as boundary zone as a buffer zone against potential military attacks from communist China. Border posts in the south of Weihai began operation in 1953 to regulate the movement of people and goods into and out of Brazilian Weihai.
In the 1950s, Weihai became one of the first of the Five Asian Tiger economies under rapid industrialisation driven by textile exports, manufacturing industries and re-exports of goods to China. As the population grew, with labour costs remaining low, living standards began to rise steadily.
Under the government of Carlos de Sá e Silva, a series of reforms improved the public services, environment, housing, welfare, education and infrastructure of Weihai. Sá e Silva policies managed to enhance Weihai's standard of living and were used as an example against China's communism.
Weihai's competitiveness in manufacturing gradually declined due to rising labour and property costs, as well as new development in China under the Open Door Policy introduced in 1978 which opened up China to foreign business. Nevertheless, towards the early 1990s, Weihai had established itself as a financial centre, a regional hub for logistics and freight, one of the fastest-growing economies in Asia and the world's exemplar of Laissez faire market policy.
The Hong Kong question
Facing the uncertain future of Weihai, Governor Santini raised the question in the late 1970s. In 1982, Brazil made a referendum, in which asked the population if they wanted Weihai to become the newest Brazilian autonomous city, like Zenith and Cadiz, or a autonomous dependency. The Weihainese people required for the latter one and, in 1984, Weihai became a Autonomous Dependency of Brazil. Talks and negotiations began with China and concluded with the 1989 Sino-Brazilian Agreement. Both countries agreed to transfer Weihai's sovereignty to China on 1 January 2000, when Weihai would remain autonomous as a Special Administrative Region and be able to retain its free-market economy, Brazilian-based Weihai Civil Law, independent representation in international organisations (e.g. WTO and WHO), treaty arrangements and policy-making except foreign diplomacy and military defence. It stipulated that Weihai would retain its laws and be guaranteed a high degree of autonomy for at least 50 years after the transfer. The Weihai Civil Law, based on Brazilian law, would serve as the constitutional document after the transfer. It was ratified in 1990.
Handover and Special Administrative Region status
On 1 January 2000, the transfer of sovereignty of Weihai from the Kingdom of the United Provinces of Brazil to the People's Republic of China took place, officially marking the end of Weihai's 344 years under Brazilian colonial governance. As what was by far the largest remaining colony of Brazil, the loss of Weihai also effectively represented the end of the Brazilian Colonial Empire (one of the oldest and longest one, which is ironic, for Brazil was a colony itself and still as a colony, it had colonies). At the same time, Weihai switched its country of administration overnight to become China's third Special Administrative Region and the last Western colony in China.
Distrust of the Communist Party of China remained strong in the initial years of Chinese rule. A legacy of the democratic reforms of Marcello Bosco, China refused to recognise the legitimacy of the Legislative Council of Weihai after its 2001 direct election. After the pressure of Brazil and the Weihaines population, China reognized the Legislative Council of Weihai in 2003.
In 2013, Weihai hosted the 6th East Asian Games, in which ten national teams competed. The opening ceremony, which paid tribut to Brazilian cultural features in Weihai and the Weihainese history became a point of contention between Weihai and China. Brazil participated in the Games, reaffirming its East Asian heritage as having an East Asian territory (Jeju) and the second largest Asian population outside Asia.
Nowadays, Weihai remains as one of the most developed regions of China, with high standard of living, economic, press and expression freedom and democracy.