The Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) is firmly committed to an open market policy. This policy applies to all trade, as well as to all investments in the HKSAR.

Hong Kong has become a Special Administrative Region of the People's Republic of China since 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, which ensures that the important elements making Hong Kong a regional business and financial centre will extend well beyond 1997, including continuation of capitalist economic and trade systems, free movement of goods and capital, and status as a free port and separate customs territory. Tariff preferences and other similar arrangements obtained by the HKSAR will be enjoyed exclusively by the HKSAR. The Basic Law also provides that the HKSAR may participate in relevant international organizations and international trade agreements under the name " Hong Kong, China".

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 Organization (WTO) when it was established on 1 January 1995. Hong Kong also became a member of the Customs Cooperation Council (subsequently renamed as the World Customs Organization) in 1987 and the Asia Pacific Economic Cooperation (APEC) in 1991. The status of the HKSAR in these and other international organizations remains unchanged except that our participation is now under the name "Hong Kong, China".

Trade Relations with Japan

• Hong Kong and Japan enjoy a close trading relationship. Bilateral trade between Hong Kong and Japan increased 3.6% from HK$375.1 billion in 2005 to HK$388.6 billion in 2006. In 2006, Japan was Hong Kong's 3^rd largest trading partner, 5^th largest market for domestic exports and 3^rd largest market for re-exports, and 2^nd largest source of imports.
  
  
• Hong Kong is also an important entrepot for trade between the Mainland of China and Japan. Re-export of goods of Mainland origin through Hong Kong to Japan increased by 1.0% from HK$101.7 billion in 2005 to HK$102.7 billion in 2006.
  
  
• Hong Kong's domestic export of goods to Japan totalled about HK$4.9 billion in 2006. The top four domestic export categories to Japan in 2006 were:
  
  
  • Office machines and automatic data processing machines
    
    
  • Electrical machinery, apparatus and appliances, and electrical parts thereof
    
    
  • Musical Instruments and parts and accessories thereof; records, tapes and other sound or similar recording
    
    
  • Jewellery, goldsmiths' and silversmiths' wares, and other articles of precious or semi-precious materials
    
    
• Hong Kong's re-export of goods to Japan totalled about HK$115.5 billion in 2006. The top four re-export categories to Japan in 2006 were:

• Electrical machinery, apparatus and appliances, and electrical parts thereof
  
  
• Telecommunications and sound recording and reproducing apparatus and equipment
  
  
• Office machines and automatic data processing machines
  
  
• Articles of apparel and clothing accessories

• Hong Kong's import of goods from Japan totalled about HK$268.1 billion in 2006. The top four import categories from Japan in 2006 were:
  
  
  • Electrical machinery, apparatus and appliances, and electrical parts thereof
    
    
  • Telecommunications and sound recording and reproducing apparatus and equipment
    
    
  • Office machines and automatic data processing machines
    
    
  • Baby carriages, toys, games and sporting goods

Bilateral Investment

•  As at end 2005, Japan was the 6^th largest source of inward direct investment into Hong Kong, accounting for HK$131.7 billion.
  
  
• As at end 2005, Japan was the 6^th largest destination of outward direct investment from Hong Kong, accounting for HK$29.7 billion.
  
  
• As at 1 June 2006, 212 regional headquarters and 519 regional offices were set up by Japanese companies in Hong Kong.
  
  
• The Investment Promotion and Protection Agreement with Japan was signed on 15 May 1997. The Agreement came into force on 18 June 1997.
  

RC Division
Trade and Industry Department
July 2007