OVERVIEW

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 Sino-British Joint Declaration on Hong Kong and the Basic Law, the mini-constitution of the HKSAR, which ensure that the importance of Hong Kong as a regional centre will extend well beyond 1997. They guarantee continuation of Hong Kong's capitalist economic and trade systems, free movement of goods and capital, and its status as a free port and separate customs territory, with its own customs boundary. Tariff preferences and other similar arrangements obtained by the HKSAR will be enjoyed exclusively by the HKSAR. They also provide that the HKSAR may participate in relevant international organisations and international trade agreements under the name of Hong Kong, China.

In 1986, Hong Kong became a separate contracting party to the General Agreement on Tariffs and Trade (GATT). Accordingly, Hong Kong was an original member 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 the World Customs Organization) in 1987 and the Asia-Pacific Economic Cooperation (APEC) in 1991. After 1 July 1997, the status of the HKSAR in these and other international organisations remains unchanged except that our participation is now under the name of Hong Kong, China.

HONG KONG'S ECONOMY IN 2007

The economy of Hong Kong is externally oriented and highly dependent on trade with the rest of the world. In 2007, the value of Hong Kong's total merchandise trade amounted to US$712 billion, or 344% of its Gross Domestic Product (GDP). The value of imports was US$368 billion or 177% of GDP while exports valued at US$345 billion or 166% of GDP. Hong Kong also remained the world's 12th largest trading entity in goods - the 13th largest exporter and the 12th largest importer.

The services sector continues to be very important to the Hong Kong economy. It accounted for 87% of the total employment in 2007 and contributed to 91% of the GDP in 2006. Hong Kong's trade in services, though still lagging behind merchandise trade in value terms, grew steadily in the past decade. Hong Kong ranked 16th in the world league of commercial services trading entities in 2007 - the 12th largest services exporter and the 19th largest services importer. Total trade in services amounted to US$125 billion, or 60% of GDP in 2007.

Fact 1 :

HONG KONG IS AN IMPORTANT MARKET FOR US GOODS

• In 2007, the US was the 5th largest source for Hong Kong's imports of goods. Hong Kong imported US$18 billion worth of goods from the US, accounting for 5% of its imports.
  
  
• According to US' export figures, Hong Kong's imports per capita from the US in 2007 were about US$2,882, substantially more than other places such as Mexico (US$1,256), Australia (US$940), South Korea (US$708), Japan (US$492), Malaysia (US$470), and the European Union (US$504).
  
  
• Hong Kong is a major export market for US products, in particular : 
  

- Diodes, other than photosensitive or light emitting diodes (Hong Kong was US' No. 1 market in 2007, with value of exports of US$353 million)

- Jewellery and parts thereof, of precious metal other than silver (Hong Kong was US' No. 2 market in 2007, with value of exports of US$520 million)

- Articles of precious or semiprecious stones (natural, synthetic or reconstructed) (Hong Kong was US' No. 2 market in 2007, with value of exports of US$193 million)

- Diamonds, non-industrial, worked, including polished or drilled (Hong Kong was US' No. 3 market in 2007, with value of exports of US$1,526 million)

- Parts of telecommunications apparatus (Hong Kong was US' No. 3 market in 2007, with value of exports of US$407 million)

- Video games of a kind used with a television receiver, and parts and accessories thereof (Hong Kong was US' No. 3 market in 2007, with value of exports of US$229 million)

• Other high value US products exported to Hong Kong in 2007 included processors and controllers (US$889 million), airplanes and other aircraft, of unladen weight exceeding 15,000 kg (US$868 million), and electronic integrated circuits (US$744 million). 

Fact 2 :

HONG KONG IS AN IMPORTANT LOCATION FOR US INTERESTS

• Hong Kong is ideally located in relation to the Pacific Rim and the Mainland of China (the Mainland). 
  
  
• In 2007, there were over one million of US nationals visiting/residing in Hong Kong. They represent one of the most significant foreign presence in Hong Kong. 
  
  
• Hong Kong welcomes overseas investment and offers an environment in which there is a free flow of capital and return on investment without exchange controls.
  
  
• All foreign companies benefit from the government's policy of providing an efficient business environment and supporting infrastructure, including good communications, efficient port and airport facilities, a stable currency free from exchange controls, a simple tax structure and low tax rates, and an established legal and judicial system.
  
  
• There are over 1,280 US companies in Hong Kong. Notable US companies represented in Hong Kong include Apple, AT&T, Baker & McKenzie, CA, Caltex, Cisco, Dell, Dow Chemical, EMC, ExxonMobil, Fedex, Hewlett-Packard, IBM, Johnson & Johnson, Jones Day, Marriott International, McDonald's, Microsoft, Motorola, Newell Rubbermaid, Procter & Gamble, Sun Microsystems, Starbucks, Sybase, Time Warner, UPS, Walt Disney and Yahoo!.
  
  
• As at 1 June 2007, there were 891 regional headquarters/offices and 394 local offices in Hong Kong representing parent companies located in the US.
  
  
• States including Illinois, Nevada, North Carolina, New York, Ohio and Virginia have set up representative offices in Hong Kong. In addition, port authorities of Georgia, Long Beach, Los Angeles, New York and New Jersey, Tacoma and Virginia maintain a presence in Hong Kong. 
  
  
• The US has substantial inward direct investment in Hong Kong. As at the end of 2006, the US' total inward direct investment amounted to US$35.7 billion at market price. The US was the largest source of inward direct investment in the sectors of insurance (50% of the total inward direct investment) and financial institutions other than banks and deposit-taking companies (31% of the total inward direct investment). It was also the 3rd largest in the sectors of wholesale, retail and import/export trade (10% of the total inward direct investment). In addition to bringing in capital, these investments also enhance technological upgrading of the industries concerned.
  
  
• Hong Kong is one of the world's major financial centres. Banking is the lynchpin of financial activities and US financial institutions play an active part. This is reflected by the number of US financial institutions operating in Hong Kong. As at the end of 2007, 12 out of the 142 licensed banks were US banks. They constituted the 2nd largest foreign bank group by number. Another six restricted licence banks and one deposit-taking companies owned by US interests were engaged in money market operations, foreign exchange and securities dealings. A number of them are also active in domestic banking including mortgage lending and trade financing. In addition, three other US banks have established representative offices in Hong Kong. The total assets of and customer deposits with US banks and deposit-taking companies stood at US$116.5 billion and US$59.6 billion respectively, representing 8.8% and 7.9% of the total of Hong Kong's banking sector. 
  
  
• US banks in Hong Kong include American Express, Bank of America, Citibank and JPMorgan Chase.
  
  
• In the insurance sector, US companies ranked 1st in number among foreign insurers operating in Hong Kong. Of the 176 insurance companies authorised in Hong Kong, 16 were US companies. Another 15 (non US companies) were known to be controlled by US interests. 
  
  
• US insurers in Hong Kong include members of the American International Group, the MassMutual Financial Group and the MetLife Group. 
  
  
• US companies also participate actively in securities and futures trading, in the field of investment advice and in fund management. These companies include Citigroup, Fidelity, Franklin Templeton, Goldman Sachs, J.P. Morgan, Merrill Lynch and Morgan Stanley.
  
  
• Hong Kong is home to Walt Disney's 5th theme park since 2005. The Hong Kong Disneyland is operated by a joint venture company set up by the HKSAR Government and The Walt Disney Company. 
  
  
• The US also derives considerable benefits from its air traffic rights in Hong Kong. The 12 US-based airlines which operate scheduled services to and from Hong Kong are Atlas Air Inc., Continental Airlines, Continental Micronesia Inc., Evergreen International Airlines, Federal Express, Gemini Air Cargo, Kalitta Air, Northwest Airlines, Polar Air Cargo Worldwide, United Airlines, Southern Air Inc. and United Parcel Service Ltd.
  

Fact 3 :

THE US IS AN IMPORTANT MARKET FOR HONG KONG GOODS

• In 2007, the US was the 2nd largest market for Hong Kong's domestic exports, accounting for US$3 billion or 22% of the total value.
  
  
• Hong Kong's major domestic export items to the US in 2007 included wearing apparel, and to a lesser extent, telecommunications and sound recording and reproducing apparatus and equipment, and electrical machinery, apparatus and appliances, etc.
  
  
• In 2007, textiles and clothing products accounted for 65% of Hong Kong's domestic exports to the US. The tariffs levied by the US on imports of textiles and apparel from Hong Kong averaged 17.63%.
  

Fact 4 :

HONG KONG IS AN IMPORTANT ENTREPÔT FOR SINO-US TRADE

• Hong Kong is an important entrepôt for trade between the Mainland and the US. In 2007, around 17% or US$40 billion of the Mainland's exports of goods to the US, and around 10% or US$7 billion of the Mainland's imports of goods from the US, were routed through Hong Kong.

Fact 5 :

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. Our 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 Heritage Foundation 2008 Index of Economic Freedom and in the Cato Institute's 2007 Annual Report on Economic Freedom of the World. 
  
  
• Hong Kong does not subsidise its exports or any particular sector of the economy.
  
  
• Hong Kong does not maintain any barriers to trade.
  
  
• Hong Kong does not levy any tariffs. As an internal tax to raise revenue, excise duties are levied on cigarettes and tobacco, spirituous liquor, methyl alcohol and some hydrocarbon oils, whether imported or domestically produced. In 2007, less than two percent of all imports were subject to excise duties.
  
  
• Hong Kong treats foreign and local companies on the same footing.
  
  
• Imports from the US compete freely with local made products and imports from other countries. They have been growing in the past four years (2004-2007) at an average annual rate of 7.4% in value terms. In 2007 alone, imports from the US rose by 12.3%. 
  

Fact 6 :

HONG KONG RESPECTS INTELLECTUAL PROPERTY RIGHTS

• Hong Kong is determined to have a robust intellectual property regime and to maintain its status as a responsible trading partner. 
  
  
• Hong Kong has an established legal framework for the protection of intellectual property rights in patents, trade marks, copyright, and registered designs. Our intellectual property legal framework is fully compatible with all our obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
  
  
• The Intellectual Property Department (IPD) provides a focal point for the development of intellectual property rights protection in Hong Kong. It administers the registration systems for trade marks, patents, designs and copyright licensing bodies.
  
  
• In June 2007, the Copyright (Amendment) Ordinance 2007 was passed by the Legislative Council to enhance copyright protection; to improve our copyright exemption system; to further liberalise certain restrictions on parallel importation; and to strengthen enforcement efforts against copyright offences.
  
  
• The Customs and Excise Department (C&ED) is responsible for the enforcement of criminal sanctions against copyright and trade mark infringements. With a dedicated enforcement team of some 400 officers, one of the strongest in the region, its vigorous enforcement actions against piracy and trade mark counterfeiting activities have brought the piracy situation in Hong Kong under firm control. 
  

Fact 7 :

HONG KONG'S LABOUR FORCE IS PROTECTED BY LEGISLATION

• Hong Kong's labour force enjoys rights and benefits that are adequately protected by a comprehensive set of labour legislation and an effective labour inspection system. Comprehensive labour laws, coupled with effective administrative measures, have enabled Hong Kong to apply 41 International Labour Conventions which prescribe internationally recognised standards on various labour matters.

July 2008

Trade and Industry Department
The Government of the Hong Kong
Special Administrative Region

Note: While every effort is made to ensure the accuracy of the above information, the Department cannot guarantee this to be so and will not be held liable for any reliance placed on the same.