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 5% from HK$388.6 billion in 2006 to HK$406.9 billion in 2007. In 2007, Japan was Hong Kong's 3^rd largest trading partner; 8^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 0.3% from HK$102.7 billion in 2006 to HK$103.0 billion in 2007.
  
  
• Hong Kong's domestic export of goods to Japan totalled about HK$2.9 billion in 2007. The top three domestic export categories to Japan in 2007 were:
  

• Musical instruments and parts and accessories thereof and records,   
  tapes and other sound or similar recordings
  
  
• Jewellery, goldsmiths' and silversmiths' wares, and other articles of 
  precious or semi-precious materials
  
  
• Metalliferous ores and metal scrap
  

• Hong Kong's re-export of goods to Japan totalled about HK$116.7 billion in 2007. The top three re-export categories to Japan in 2007 were:

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

• Hong Kong's import of goods from Japan totalled about HK$287.3 billion in 2007. The top three import categories from Japan in 2007 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
  

Bilateral Investment

• As at end 2006, Japan was the 6^th major source of inward direct investment (IDI) into Hong Kong, with an IDI stock of HK$151.4 billion.
  
  
• As at end 2006, Japan was the 5^th major destination of outward direct investment (ODI) from Hong Kong, with an ODI stock of HK$60.8 billion.
  
  
• As at June 2007, 232 regional headquarters, 516 regional offices and 431 local offices were set up by Japanese companies in Hong Kong.
  
  
• Hong Kong and Japan signed the Investment Protection and Promotion Agreement (IPPA) on 15 May 1997. The Agreement came into force on 18 June 1997. The Agreement further strengthens the excellent trade and economic relations between Japan and Hong Kong.
  

RC Division
Trade and Industry Department
August 2008