OVERVIEW

The Hong Kong Special Administrative Region (HKSAR) of the People's Republic of China is firmly committed to an open market policy which applies to all trade, as well as to all investments in the HKSAR. This policy remains unchanged after reunification with the People's Republic of China as a Special Administrative Region on 1 July 1997. The "One Country, Two Systems" principle provides the HKSAR with a high degree of autonomy in economic, trade, financial and monetary matters. This is guaranteed by the Basic Law, the mini-constitution of the HKSAR, under which Hong Kong continues to practise capitalist economic and trade systems, maintain its status as a free port, allow the free movement of goods and capital, and conclude international trade agreements using the name of "Hong Kong, China". Hong Kong remains a separate customs territory, with its own customs border. Tariff preferences and other similar arrangements made between Hong Kong and its trading partners continue to be applicable exclusively to the HKSAR.

In 1986, Hong Kong became a separate contracting party to the General Agreement on Tariffs and Trade (GATT). Hong Kong was one of the original members of the World Trade Organisation (WTO) when it was established on 1 January 1995. Hong Kong also became a member of the Customs Cooperation Council in 1987 (subsequently renamed as the World Customs Organisation) and the Asia Pacific Economic Cooperation in 1991. After 1 July 1997, Hong Kong's status in these and other international organisations has remained unchanged. In May 1999, Hong Kong concluded a Customs Cooperation Agreement with the European Community using the name "Hong Kong, China". The Agreement underlines the strong and growing ties between Hong Kong and the European Community.

HONG KONG'S ECONOMY IN 2006

Hong Kong's external oriented economy has continuously enjoyed strong growth in the past three years, with Gross Domestic Product (GDP) leapt by 6.9% in 2006. The value of Hong Kong's global merchandise trade amounted to £á518 billion, an increase of 10.5% over 2005 and equivalent to 343% of the value of Hong Kong's GDP. The value of imports was £á266 billion while exports valued £á252 billion. In 2006, Hong Kong was the world's 11th largest trading entity in goods - 11th largest importer and 12th largest exporter.

The services sector is important to the economy of Hong Kong. It contributed 91% to GDP in 2005 and accounted for 86% of the total employment in 2006. Hong Kong's trade in services, though still lagging behind merchandise trade in value terms, grew steadily in the past decade. In 2006, Hong Kong ranked 16th in the world league of commercial services trading entities - the 20th largest importer and the 11th largest exporter of such services according to the latest report published by the WTO. Total 2006 trade in services amounted to £á87 billion, an increase of 11% over the previous year and equivalent to 58% of Hong Kong's GDP in 2006.

Fact 1 :

• Hong Kong was the EU's 18th largest trading partner in 2006.
  
  
• The EU was Hong Kong's second largest trading partner in 2006 after the Mainland of China. 
  
  
• Total bilateral trade amounted to £á54.5 billion, representing 10.5% of Hong Kong's global trade in 2006 and registering an annual average growth rate of 11% per annum between 2002 and 2006.
  
  
• Germany, the United Kingdom and Italy were Hong Kong's top three trading partners among all the EU Member States in 2006. They represented 23%, 20% and 11% of Hong Kong's total trade with the EU respectively. Details on Hong Kong¡¦s trade with the EU are in Table One.
  

Fact 2 :

HONG KONG IS AN IMPORTANT MARKET FOR EU GOODS

• The EU was Hong Kong's fourth largest supplier in 2006 after the Mainland of China, Japan and Taiwan. Between 2002 and 2006, Hong Kong's imports from the EU grew at 8% per annum. Last year, 7.3% of Hong Kong's total imports, at £á19.4 billion, were sourced from the EU.
  
  
• Germany, the United Kingdom and Italy were Hong Kong¡¦s top three suppliers among all the EU Member States in 2006. They took up 24%, 17% and 15% share of Hong Kong's total imports from the EU respectively. Details are in Table One.
  
  
• Despite its small size, Hong Kong is a major export market for EU products. All EU exports enter Hong Kong at zero tariff, except for four groups of commodities, viz. hydrocarbon oils, liquor, methyl alcohol and tobacco, which are subject to excise duties. Hong Kong's major imports from the EU in 2006 were telecommunications equipment, pearl and precious stones, cathode valves and tubes, non-electric engines and motors, and textile yarn and fabrics. More information is available in Table Two.
  
  
• The EU was the largest supplier of goods to the HKSAR Government in 2006 and accounted for 27% (£á106 million) of all contracts awarded.
  

Fact 3 :

HONG KONG IS AN IMPORTANT ENTREPOT FOR SINO EU TRADE

• Sino EU trade through Hong Kong has increased substantially since the Mainland of China announced her modernisation programme in 1978. Re exports of EU origin goods through Hong Kong to the Mainland grew by an annual average rate of 35% since 1978 to over £á7 billion in 2006. On the other hand, re exports of Mainland origin goods to the EU through Hong Kong during the same period grew by an annual average rate of 29% and reached £á29 billion in 2006.

Fact 4 :

HONG KONG IS AN IMPORTANT LOCATION FOR EU INTERESTS

• EU companies benefit from the HKSAR Government's policy of providing an efficient business environment and supporting infrastructure, including excellent world-wide communications, efficient port and airport facilities, a stable currency free from exchange controls, a low tax regime and an established legal and judicial system.
  
  
• As at 1 June 2006, 390 EU companies based their regional headquarters in Hong Kong. In addition, 712 and 501 EU companies had regional offices and local offices in Hong Kong respectively.
  
  
• The EU is well represented in various sectors of the Hong Kong economy. Major companies with EU interests include such names as Bayer MaterialScience, Ericsson, Henkel, IKEA, LVMH, Maersk, Nokia, Philips Electronics, Schneider Electric, Shell and Siemens.
  
  
• Hong Kong is one of the world's major financial centres. As at 31 December 2006, there were 138 banks licensed in Hong Kong, of which 34 were incorporated in the EU. They included ABN AMRO Bank, Barclays Bank, Deutsche Bank, Fortis Bank and others. In addition, there were 2 restricted licence banks incorporated in the EU. Another 24 EU banks maintained representative offices in Hong Kong.
  
  
• In the insurance sector, EU companies ranked first in number amongst overseas insurers operating in Hong Kong in 2006. Of the 181 insurance companies authorised in Hong Kong, 31 were incorporated in the EU. These EU insurance companies included AXA, Assicurazioni Generali Societa Per Azioni, Lloyd's Underwriters, Prudential Assurance and others.
  
  
• A total of 73 EU companies also participated actively in Hong Kong's securities and commodities trading, as well as in investment services in 2006. Some of these companies also provided investment advice to investors.
  
  
• EU Member States also derive considerable benefits from their air traffic rights in Hong Kong. As at 31 December 2006, EU based airlines with landing rights in Hong Kong included Air France, Alitalia, British Airways, Cargolux, Finnair, KLM Royal Dutch, Lufthansa, Martinair, Ocean, Sky Express and Virgin Atlantic.
  
  
• Hong Kong welcomes EU investment and offers an environment in which there is free flow of capital and return on investment without exchange controls.
  
  
• The EU was the third largest source of external investment in Hong Kong at end¡V2005. The EU's inward direct investment in Hong Kong amounted to £á52 billion, accounting for 12% of the total. Among the Member States, the Netherlands was the largest investor (£á36 billion and 68% of the EU total), followed by the United Kingdom (£á10 billion and 18% of the EU total) and Germany (£á3 billion and 5% of the EU total).
  
  
• Hong Kong has signed Investment Promotion and Protection Agreements with ten EU Member States: Austria, Belgium, Denmark, France, Germany, Italy, Luxembourg, the Netherlands, Sweden and the United Kingdom.
  
  
• As at the end of 2006, there were about 29,720 EU citizens residing in Hong Kong.
  

Fact 5 :

THE EU IS AN IMPORTANT MARKET FOR HONG KONG GOODS

• In 2006, the EU was Hong Kong's third largest market after the Mainland of China and the USA. Hong Kong's domestic exports to the EU amounted to £á3 billion, accounting for 20% of Hong Kong's total domestic exports in 2006.
  
  
• The Netherlands, the United Kingdom and Germany were the top three markets for Hong Kong products among the EU Member States in 2006. They shared 29.1%, 28.7% and 18% respectively of Hong Kong's total domestic exports to the EU. Details are in Table One.
  
  
• Hong Kong's major domestic exports to the EU in 2006 were clothing, automatic data processing machines and units, electrical apparatus and jewellery. More information is available in Table Three.
  

Fact 6 :

HONG KONG PRACTISES FREE TRADE

• Hong Kong is a staunch supporter of the multilateral trading system and adheres to the WTO/GATT principles of non discrimination and most favoured nation treatment. Hong Kong takes seriously its rights and obligations as a Member of the WTO. Hong Kong's free trade policy applies to both merchandise trade as well as trade in services.
  
  
• Hong Kong was ranked the world's freest economy in the Economic Freedom of the World : 2006 Annual Report and the Heritage Foundation 2007 Index of Economic Freedom.
  
  
• Hong Kong does not levy any tariff. Excise duties are charged on four groups of commodities, viz. hydrocarbon oils, liquor, methyl alcohol and tobacco, irrespective of whether they are imported or manufactured locally. In 2006, they accounted for less than 2% of all imports into Hong Kong.
  
  
• Hong Kong does not maintain any barriers to trade.
  
  
• Imports from the EU are free to compete with locally made products and those from Hong Kong's other trading partners.
  
  
• Hong Kong does not subsidise its exports or any particular sector of the economy.
  
  
• Hong Kong treats foreign and locally owned companies on the same footing.
  
  

Fact 7 :

HONG KONG RESPECTS INTELLECTUAL PROPERTY RIGHTS

• Hong Kong has an established legal framework for the protection of intellectual property rights in patents, trade marks, copyright and registered designs. Hong Kong's intellectual property legal framework is fully compatible with all its obligations under the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).
  
  
• Hong Kong is determined to have a robust intellectual property regime and maintain its status as a responsible trading partner. Vigorous enforcement actions are taken against piracy and trade mark counterfeiting activities. With the strongest dedicated enforcement team of some 400 officers in the region, the piracy situation in Hong Kong has been brought under firm control. 
  
  

Fact 8 :

HONG KONG'S LABOUR FORCE IS PROTECTED BY LEGISLATION

• Hong Kong's labour force enjoys internationally recognised workers' rights, and is protected by comprehensive labour legislation reflecting the application of the International Labour Conventions.

Notes : 

1. Hong Kong refers to the Hong Kong Special Administrative Region.
   
2. Average exchange rate in 2006 : £á1 = HKD 9.77
   
3. Statistics in this fact sheet are sourced from the Government of the Hong Kong Special Administrative Region (www.gov.hk) and Eurostat.

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Table One :

(Value in Million £á)

Notes :

1. All figures in brackets represent the percentage share among all trading partners of Hong Kong.
   
2. The ranking is based on total trade value.
   
3. Due to rounding, the figures may not add up to the total.

Table Two :

Table Three :