my understanding was that it was in administrative limbo. Britain owned Hong Kong, and China claimed authority over just to spite them. So Britain left it alone. But China didn't care enough to actually administer it. And besides, it was disconnected from the mainland and only i tiny insignificant plot of land. So why bother setting up all the infrastructure just for a tiny slum?
If Hong Kong was British under treaty then this area is not covered by British control. If the British exercise control then they are saying the treaty is invalid.
The Chinese didn't exercise control because to do so would validate a treaty that they objected to after the fact; that the original colony was seeded in perpertuity . They didn't want to fully disown it because they claimed the whole colony back, not just New Territories.
It was clear by the 1970s that since the Chinese could just cut the water supply off to Hong Kong if they wanted to, that the compromise solution was to pretend that the 99 years New Territories lease treaty had always covered the whole colony and just agree to handover with a two systems one state solution.
