OVERVIEW

In 1986, Hong Kong became a separate contracting party to the General Agreement on Tariffs and Trade (GATT). Hong Kong was one of the founding 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. After 1 July 1997, Hong Kong's status in these and other international organizations has remained unchanged. In May 1999, Hong Kong concluded a Customs Cooperation Agreement with the European Union (EU) using the name of "Hong Kong, China". The Agreement underlines the strong and growing ties between Hong Kong and the EU.

Hong Kong has three Economic and Trade Offices (ETOs) in Europe, viz. Berlin, Brussels and London. The ETOs represent Hong Kong on matters relating to economic and trade in Europe, and help fostering the trade and commercial ties between Hong Kong and the EU as well as other trading partners in Europe.

HONG KONG'S ECONOMY IN 2010

The Hong Kong economy recovered in 2010 after experiencing contraction in 2009. Gross Domestic Product (GDP) increased by 6.8% in real terms in 2010. The value of Hong Kong's global merchandise trade amounted to €620 billion at current market prices, an increase of 23.9% from 2009 and equivalent to 367% of the value of Hong Kong's GDP. The value of imports was €326 billion while exports valued €294 billion. In 2010, Hong Kong was the world's 10th largest trading entity in goods - the 9th largest importer and the 11th largest exporter.

The services sector is important to the economy of Hong Kong. It contributed 93% to GDP in 2009 and accounted for 88% of the total employment in 2010. Hong Kong's trade in services, though still lagging behind merchandise trade in value terms, grew steadily in the past decade. In 2010, Hong Kong was the world's 14th largest commercial services trading entity - the 18th largest services importer and the 11th largest services exporter. Total trade in services at current market prices amounted to €119 billion, an increase of 21.9% from the previous year and equivalent to about 70% of Hong Kong's GDP in 2010.

Fact 1 :

THE EU* AND HONG KONG ARE IMPORTANT TRADING PARTNERS

Fact 2 :

HONG KONG IS AN IMPORTANT MARKET FOR EU GOODS

• The EU was Hong Kong's third largest supplier in 2010 after the Mainland of China and Japan. Between 2006 and 2010, Hong Kong's imports from the EU grew at 6.9% per annum on average. In 2010, 7.3% of Hong Kong's total imports, nearly €24 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 2010. They took up 23%, 16% and 14% share of Hong Kong's total imports from the EU respectively. Details are in Table One.
  
  

• 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 2010 were telecommunications equipment, pearls and precious stones, non-electric engines and motors, clothing and apparel, as well as travel goods and handbags. More information is available in Table Two.
  
  

• The EU was the third largest supplier of goods to the HKSAR Government in 2010 and accounted for 14% (€55 million) of all contracts awarded***.
  

Fact 3 :

HONG KONG IS AN IMPORTANT ENTREPOT FOR SINO-EU TRADE

• Hong Kong is an important entrepot for trade between the Mainland of China and the EU. Re-exports of EU origin goods through Hong Kong to the Mainland grew by an annual average rate of more than 30% since 1978. In 2010, €8.5 billion of the Mainland's import of goods from the EU were routed through Hong Kong. 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 around 25% and reached nearly €30 billion in 2010.

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 2010, 423 EU companies based their regional headquarters in Hong Kong. In addition, 654 EU companies had regional offices and 590 EU companies had local offices in Hong Kong.
  
  

• 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, Marks & Spencer, Nokia, Philips Electronics, SAP, Schneider Electric, Shell and Siemens.
  
  

• Hong Kong is one of the world's major financial centres. As at 31 December 2010, there were 146 licensed banks in Hong Kong, of which 32 were incorporated in the EU. These included ABN AMRO Bank N.V., Barclays Bank PLC, Deutsche Bank AG, Fortis Bank and others. In addition, there were 2 restricted licence banks incorporated in the EU and 19 EU banks maintaining representative offices in Hong Kong.
  
  

• In the insurance sector, EU companies ranked first in number amongst overseas insurers operating in Hong Kong in 2010. Of the 168 insurance companies authorised in Hong Kong, 29 were incorporated in the EU. These EU insurance companies included AXA, Assicurazioni Generali Società per Azioni, Lloyd's Underwriters, Prudential Assurance and others.
  
  

• As at 31 December 2010, 179 EU-based companies were licensed or registered in Hong Kong to carry on regulated activities under the Securities and Futures Ordinance.
  
  

• EU Member States also derive considerable benefits from their air traffic rights in Hong Kong. As at 31 December 2010, EU-based airlines with landing rights in Hong Kong included ACG Air Cargo Germany GmbH, Aerologic GmbH, Air France, British Airways, Cargoitalia SpA, Cargolux, Finnair, KLM Royal Dutch, Lufthansa, Martinair 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-2009. The EU's inward direct investment in Hong Kong amounted to €64 billion, accounting for 10% of the total. Among the Member States, the Netherlands was the largest investor (€44 billion and 69% of the EU total), followed by the United Kingdom (€11 billion and 18% of the EU total) and Germany (€3 billion and 5% of the EU total).
  
  

• Hong Kong has signed Investment Promotion and Protection Agreements with the following trading partners in the EU: Austria, the Belgo-Luxembourg Economic Union, Denmark, Finland, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom. 
  
  

• As at the end of 2010, there were about 31,100 EU citizens residing in Hong Kong.
  

Fact 5 :

THE EU IS AN IMPORTANT MARKET FOR HONG KONG GOODS

• In 2010, 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 more than €0.6 billion, accounting for nearly 10% of Hong Kong's total domestic exports in 2010.
  
  

• The Netherlands, the United Kingdom and Germany were the top three markets for Hong Kong products among the EU Member States in 2010. They accounted for 40%, 23% and 13% 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 2010 were telecommunications equipment, jewellery, clothing, as well as ores and concentrates of precious metals. 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 Cato Institute's Economic Freedom of the World: 2010 Annual Report, and the Heritage Foundation 2011 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 2010, they accounted for only 1.7% 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). Legislative amendments to the Copyright Ordinance are being prepared to further enhance protection of copyright works in the digital environment.
  
  

• Hong Kong is committed to maintaining a robust intellectual property regime and its status as a responsible trading partner. Hong Kong Customs has a strong and dedicated team comprising some 400 officers to enforce criminal sanctions against intellectual property right infringements. Another 3,400 officers are responsible for interception of contraband, including pirated and counterfeit goods at boundary control points, and for intelligence analysis. With the rigorous enforcement actions taken, the infringement 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 2010 : €1 = HKD10.31
3. Statistics in this fact sheet are sourced from the Government of the Hong Kong Special Administrative Region (www.gov.hk), Eurostat, and the WTO.
4. Webpages of Hong Kong Economic and Trade Offices :
Berlin : http://www.hketoberlin.gov.hk 
Brussels : http://www.hongkong-eu.org/
London : http://www.hketolondon.gov.hk/

* The EU comprises twenty-seven Member States, viz. Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Bulgaria and Romania joined the EU on 1 January 2007. Information and figures prior to 1 January 2007 refer to EU-25, whereas information from 1 January 2007 onwards refers to EU-27.

** The ranking was arrived at by taking the EU as a single entity while all the other trading partners were considered on a per country/economy basis. The EU is viewed as a single entity given it is a unique economic and political union of all the EU Member States. For example, the EU has developed into a single market with all the EU Member States implementing a common commercial policy towards economies outside the EU.

*** The figures refer to contracts awarded by the Government Logistics Department only.

* * *

Table One :

(Value in Million €)

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 :