There may have been an element of not wanting to upset the PRC but there was also no desire to take in large numbers of 'Chinese' immigrants. There had already been numerous controversies over taking in refugees from the dying embers of empire, most notably the Ugandan Asians (People of Indian decent who had, for the most part been living in Uganda for generations who were kicked out by Idi Amin.)

British immigration law, especially from the empire and commonwealth was still relatively undeveloped at this time, despite the British Nationality Act 1948. That's were the British Nationality Act 1981 comes in. There are many who argue, not unreasonably, that this act was brought in with the Hong Kong situation in mind, furthermore it is often accused of being racist as the predominantly white Falkland Islanders and Gibraltarians got substantially better treatment under the changes than the predominantly Asian Hong Kongers.

See Brian Harrison Seeking A Role: The United Kingdom 1951-1970 and Finding A Role: The United Kingdom 1970-1990 and Kenneth O'Morgan The Oxford History of Britain for a better overview.

Also you can find both the British Nationality Act 1948 and 1981 on legislation.gov.uk and Hansard should be able to furnish you with primary sources on the debates on both laws should you be so inclined

This may be a bit impolitic, but I'd take Iris Chang’s books with a grain of salt. A particularly large body of her work has been subject to serious criticism from historians within the Academe for attempting to paint present-day Japanese research on the Shōwa period in an inaccurate light to suit her thesis. I’d argue that the above passage suffers from the same ramshackle scholarship. Before I can address Chang's claims, I should note that British nationality law is fraught with minor distinctions between different types of British nationals due to the British Nationality Act 1948 (11 & 12 Geo. 6 c. 56), which hoped to codify the allegiances of all British subjects in light of the dismantlement of the British Empire after the Second World War. The British Nationality Act 1948 was eventually succeeded by another act of the same name in 1981 that currently forms the core of British nationality law. These are the different types of British nationals:

• British subject (pre-1948): A British subject was any person born within the realm of the British Empire who owed their allegiance to the Sovereign. This status was conferred regardless of birth, class, race or sex. Prior to the multiple British Nationality Acts and respective nationality legislation passed in the Dominions, all British subjects were entitled to full movement within the British Empire as well as the protection of HM Government when overseas.

• British subject (post-1948): After the British Nationality Act 1981, a British subject is any person who owes their allegiance to the Sovereign and cannot qualify for any other passport. The previous definition of a British subject was therefore changed to Commonwealth citizen to better reflect the "winds of change". British subjects generally are entitled to live and work in the United Kingdom.

• Commonwealth citizen (1948-present): A Commonwealth citizen is any person who owes allegiance to the Queen as the Head of the Commonwealth. All British nationals are Commonwealth citizens.

• British Citizen (1981-present): A British citizen is any person who qualifies as a citizen of Great Britain and Northern Ireland. This is, at present, the most extensive type of British-national status available.

• British Overseas Territories Citizen (1981-present) (BOTC): A British Overseas Territory Citizen is any person who qualifies as a citizen of a British overseas territory such as Bermuda by jus sanguinis. BOTCs do not have automatic right-of-abode or to live and work in the United Kingdom.

• “British Overseas Citizen* (1981-present) (BOC): A British Overseas Citizen is any person who cannot qualify for British subject status or any other passport under law. There are no more than a few thousand BOCs at any time due to the general rarity of the status -- it is similar to that of a British subject under the 1981 law, but for life only and without the right to live and work in the United Kingdom. This type of citizenship is generally meant to prevent statelessness and to grant some sort of protection to persons with a strong connection to Britain. An interesting historical note -- anyone entitled to British citizenship through the Sophia Naturalization Act 1705 (4 & 5 Ann. c. 16.) as a descendant of the Electress Sophia qualifies as a BOC under this act.

• British National (Overseas) (1985-present) (BN(O)): A British National (Overseas) is a type of citizenship granted to the residents of Hong Kong for the duration of their life. More on this on a moment.

There is one more type of British national, a British Protected Person, but that’s rather tangential to explaining how citizenship works in the United Kingdom in respect to Hong Kong. As you can see from above, British national status is a rather precarious and complex “thing” and there is no easy way to explain all its intricacies in a concise fashion. It also, importantly, contradicts itself in many ways. For example, individuals who can claim British Overseas Citizen passports through the Sophia Naturalization Act 1705 can transmit their citizenship to their children and can pass right-of-abode to their children.

But let’s move back to Hong Kong for a moment to address Chang’s claim:

“Although Great Britain traditionally issued British passports to all those born on its territory, it refused to do so with the Chinese born on Hong Kong while it had been British.”

The question of what to do with Hong Kong was a particularly thorny issue for HM Government under Thatcher. First raised by Murray MacLehose in an accidental fashion in 1979, the discussion of the transfer of sovereignty appears to have caught the Chinese by surprise. After Deng Xaioping realized that MacLehose opened the door to discussing Hong Kong, he wasted no time in his response: Hong Kong would have to return to China in its entirety.

Thatcher loathed the idea of returning Hong Kong to China. This was less out of an oft-imagined colonial knee-jerk than repulsion at submitting a relatively free market-economy to a Communist-aligned state. At a further discussion with Zhao Ziyang in Beijing in 1982, Thatcher attempted to dangle her success in the Falklands in a discussion about the future of Hong Kong. Zhao and Thatcher left the meeting on cordial terms, but Deng would have none of Thatcher’s deft sabre-rattling. He also shot down a number of other British proposals, including ceding British sovereignty in exchange for a permanent British administration over the territory -- more proposals followed, but Deng became increasingly abrasive with every memorial sent from Whitehall to Beijing.

Thatcher’s ultimate victory came in the form of a special economic zone. While Thatcher acknowledged that the Chinese could invade and seize Hong Kong at any time, she also convinced Deng that any sort of hostile takeover would ultimately be a pyrrhic victory for the Chinese. Beijing eventually overplayed its hand to Thatcher’s advantage once a massive capital flight prompted an economic crisis, causing Deng to demand that Thatcher put a stop to the hemorrhage of cash from the territory.

While Thatcher and Deng would continue to negotiate over the transfer of sovereignty, the relationship between the Home Office and the Hong Kong Legislative Council continued to deteriorate. Several ethnic Chinese were extremely concerned over the prospect of rejoining China, prompting large protests in front of Government House. Chinese refugees who had earlier fled Mao’s regime were particularly anxious to avoid any sort of connection to Beijing, fearing that they would be singled out and persecuted by a new Communist administration. To some degree, they had reason to be concerned. In the eyes of Beijing, any ethnic Chinese person resident in Hong Kong was a Chinese citizen. More importantly, a large number of Hong Kongers were well-educated and pivotal to the local economy -- without them, Deng realized, there would be a massive brain-drain elsewhere.

“These passports would have ensured entry to England for those who chose that path.”

With the Hong Kong Act 1985, Parliament ensured that Hong Kongers would have a passport with which to escape any possible red terror whether real or imagined. It was thought that it was better to deal with any possible crisis later in order to both avoid antagonizing Beijing and to encourage confidence in the new HKSAR administration. While applications for BN(O) citizenship skyrocketed around 1997, renewals were considerably low according to Home Office records, with most residents preferring to obtain an HKSAR passport.

“Many Hong Kong residents felt profoundly betrayed, convinced that Great Britain had shirked its responsibilities to avoid ruffling the feathers of the PRC.”

There was no other option but to return Hong Kong to China.

In conclusion, the transfer of Hong Kong and the matter of its residents was a combination between Chinese pressure and the unique status of Hong Kong. While immigration policies in the early 20th century were certainly discriminatory depending on the time and place, the successive Thatcher, Major and Blair governments had their hands tied by Beijing over the thorny issue of citizenship, which would have infuriated an ascendant China seeking to exert control over its irredentist claims.

I've run out of room to further explain the Hong Kong citizenship issue and I'm sure I'll get a few questions about points I've made, so feel free to address them below in comments. My sources are as follows:

• Renwick, Robin. A Journey with Margaret Thatcher: Foreign Policy under the Iron Lady London: Biteback, 2013.

• Karatani, Rieko. Defining British citizenship: Empire, Commonwealth and Modern Britain London: Frank Cass, 2003.

• Types of British Citizenship London: Passport Office, 2017.

Did the UK issue british passports in Jamaica, Gibraltar or any of the other colonies before their independance?