Britain last night said former Governor Chris Patten would not face charges over the book, The Last Governor.
It said it did not believe relations with China would be helped by going over the ground contained in the book in a prosecution.
The book, by Mr Patten's friend Jonathan Dimbleby, caused a storm when it was published soon after the handover. It detailed Mr Patten's clashes with the Foreign Office and allegations about a cover-up on democracy plans for the territory in the late 1980s.
There were claims Mr Patten had leaked confidential documents to Dimbleby.
Last night, Attorney-General John Morris said he had discussed the matter with the Director of Public Prosecutions and ministers.
In a House of Commons written reply Mr Morris said he concluded 'intelligence and foreign relations considerations outweighed other public interest considerations'.