This chapter examines the Anglo-Chinese negotiations over Hong Kong between October 1982 and the end of 1983. It starts with an overview of the negotiating objectives, strategies, and teams of the two countries. From the outset, Britain and China had polar-opposite approaches to the negotiations. During the preliminary talks until late June 1983, the Chinese side insisted on the British acceptance of China’s ‘premise’ on sovereignty as the prerequisite for substantive talks, which Percy Cradock resisted. When the ‘second phase’ of the talks started in July, the Chinese still refused to be drawn to detailed discussion until Cradock abandoned all claims to administrative rights or the ‘British link’. Thatcher was pulled in different directions by Cradock and the foreign secretary, who constantly warned against the breakdown of talks, on the one hand, and on the other by Hong Kong’s unofficial members, who endlessly pressed for continuing British administration. Through a close reading of the British archives, this chapter reveals how Thatcher was actively involved in policy deliberations, and why her initially tough stance gave way to pragmatism and concessions to China. Thatcher was not simply led by the nose by British diplomats, but she also convinced herself that a Chinese commitment to ‘a 50-year period of autonomy’, for example, would help secure Hong Kong’s capitalist system after the relinquishment of British sovereignty.