Chinese records of Macau date back to the establishment in
1152 of Xiangshan County under which Macau was administered,
though it remained unpopulated through most of the next
century. Members of the South Sung (Song) Dynasty and some
50,000 followers were the first recorded inhabitants of the
area, seeking refuge in Macau from invading Mongols in 1277.
They were able to defend their settlements and establish
themselves there.

The Hoklo Boat people were the first to show commercial
interest in Macau as a trading center for the southern
provinces. Macau did not develop as a major settlement until
the Portuguese arrived in the 16th century. Portuguese
traders used Macau as a staging port as early as 1516,
making it the oldest European settlement in the Far East.
In 1557, the Chinese agreed to a Portuguese settlement in
Macau but did not recognize Portuguese sovereignty.
Although a Portuguese municipal government was established,
the sovereignty question remained unresolved.

Initially, the Portuguese developed Macau's port as a
trading post for China-Japan trade and as a staging port on
the long voyage from Lisbon to Nagasaki. When Chinese
officials banned direct trade with Japan in 1547, Macau's
Portuguese traders carried goods between the two countries.

The first Portuguese governor was appointed to Macau in
1680, but the Chinese continued to assert their authority,
collecting land and customs taxes. Portugal continued to
pay rent to China until 1849, when the Portuguese abolished
the Chinese customs house and declared Macau's
"independence," a year which also saw Chinese retaliation
and finally the assassination of Governor Ferreira do
Amaral.

On March 26, 1887, the Manchu Government acknowledged the
Portuguese right of "perpetual occupation." The Manchu-
Portuguese agreement, known as the Protocol of Lisbon, was
signed with the condition that Portugal would never
surrender Macau to a third party without China's permission.

Macau enjoyed a brief period of economic prosperity during
World War II as the only neutral port in South China, after
the Japanese occupied Guangzhou (Canton) and Hong Kong. In
1943, Japan created a virtual protectorate over Macau.
Japanese domination ended in August 1945.

When the Chinese communists came to power in 1949, they
declared the Protocol of Lisbon to be invalid as an "unequal
treaty" imposed by foreigners on China. However, Beijing
was not ready to settle the treaty question, requesting a
maintenance of "the status quo" until a more appropriate
time. Beijing took a similar position on treaties relating
to the Hong Kong territories.

Riots broke out in 1966 when the pro-communist Chinese
elements and the Macau police clashed. The Portuguese
Government reached an agreement with China to end the flow
of refugees from China, and to prohibit all communist
demonstrations. This move ended the conflict, and relations
between the government and the leftist organizations have
remained peaceful.

The Portuguese tried once in 1966 after the riots in Macau,
and again in 1974, the year of a military revolution in
Portugal, to return Macau to Chinese sovereignty. China
refused to reclaim Macau however, hoping to settle the
question of Hong Kong first.

Portugal and China established diplo-matic relations in
1979. A year later, Gen. Melo Egidio became the first
Governor of Macau to visit China. The visit underscored
both parties' interest in finding a mutually agreeable
solution to Macau's status; negotiations began in 1985, a
year after the signing of the Sino-U.K. agreement returning
Hong Kong to China in 1997. The result was a 1987 agreement
returning Macau to Chinese sovereignty as a Special
Administrative Region (SAR) of China on December 20, 1999.

source: U.S. State Department Background Notes 1994