HONG KONG AND MAINLAND OF CHINA: SOME IMPORTANT FACTS
The Hong Kong Special Administrative Region (HKSAR) of the People's Republic of China 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, which ensures that the important elements making Hong Kong an international financial centre are extended well beyond 1997. These include continuation of the capitalist economic and trade systems, free movement of goods and capital, free port and separate customs territory. Tariff preferences and other similar arrangements obtained or made by the HKSAR are enjoyed exclusively by the HKSAR. The Basic Law also provides that the HKSAR may participate in relevant international organisations and international trade agreements using the name "Hong Kong, China".
In 1986, Hong Kong became a separate contracting party to the General Agreement on Tariffs and Trade (GATT). Upon the establishment of the World Trade Organization (WTO) on 1 January 1995, Hong Kong became one of its founding members. 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 in 1991. The status of the HKSAR in these and other international organisations remains unchanged except that our participation is now under the name "Hong Kong, China".
HONG KONG'S ECONOMY
The Hong Kong economy is externally oriented and highly dependent on trade with the rest of the world. In 2017, the value of Hong Kong's total merchandise trade reached HK$8,232.9 billion (US$1,056.3 billion), or around 309% of the Gross Domestic Product (GDP) in that year. The value of imports amounted to HK$4,357.0 billion (US$559.0 billion) or around 164% of GDP. The value of exports was HK$3,875.9 billion (US$497.3 billion) or around 146% of GDP. Hong Kong was the world's 7th largest trading entity in goods in 2017 (Note 1) - 7th largest importer and 7th largest exporter.
The services sector continues to be very important to the Hong Kong economy. It contributed to 92% of the GDP in 2016 and accounted for 88% of the total employment in 2017. Hong Kong's trade in services grew steadily in the past decade. Total trade in services amounted to HK$1,412.6 billion (US$181.2 billion) or about 53% of GDP in 2017. In 2017, Hong Kong ranked 17th in the world league of commercial services trading entities - 18th largest importer and 15th largest exporter.
FACT 1 :
HONG KONG AND THE MAINLAND OF CHINA (THE MAINLAND) ARE EACH OTHER'S MAJOR TRADING PARTNER
- Since the reform and opening-up of the Mainland, its share of Hong Kong's global trade had increased significantly from 9.3% in 1978 to 50.2% (HK$4,136.0 billion or US$530.7 billion) in 2017. It has been Hong Kong's largest trading partner since 1985.
- Hong Kong and the Mainland signed the "Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA) in June 2003, providing tariff free treatment to all Hong Kong-origin goods meeting the CEPA rules of origin, thus furthering the development potential of the trade between the two places.
- Hong Kong was the Mainland's third largest trading partner (after the US and Japan) in 2017, and their total trade value accounted for 7.0% of the Mainland's total trade.
- Hong Kong was the Mainland's second largest export market, taking up 12.3% (HK$2,182.8 billion or US$280.1 billion) of its total exports in 2017.
- The Mainland has been Hong Kong's largest supplier in goods since 1982. The value of Hong Kong's total imports from the Mainland was HK$2,030.1 billion (US$260.5 billion), accounting for 46.6% of Hong Kong's total imports in 2017. Major imports were electrical machinery, apparatus and appliances, telecommunications and sound recording and reproducing apparatus and equipment, office machines and automatic data processing machines, articles of apparel and clothing accessories, and professional, scientific and controlling instruments and apparatus, etc.
- In 2017, the Mainland was Hong Kong's largest domestic export market, absorbing HK$17.3 billion (US$2.2 billion) worth of goods, or 39.7% of our total domestic exports. Major domestic exports were medicinal and pharmaceutical products, plastics in primary forms, pulp and waste paper, cereals and cerreal preparations, and electrical machinery, apparatus and appliances, etc.
- Given its strategic geographical location, well-developed infrastructure and international communication network, Hong Kong plays an important entrepot role for the trade between the Mainland and the rest of the world. In 2017, the value of goods re-exported through Hong Kong from and to the Mainland was HK$3,397.2 billion (US$435.9 billion), accounting for 88.6% of Hong Kong's total re-export trade value.
FACT 2 :
THE MAINLAND AS AN IMPORTANT LOCATION FOR OUTWARD PROCESSING ACTIVITIES
- The Guangdong Province, with its improved investment environment, infrastructure, and proximity to Hong Kong, is an important outward processing base for Hong Kong businessmen in particular in Dongguan, Shenzhen and Guangzhou cities (Note 2).
- In 2017, 27.3% of Hong Kong's total exports to the Mainland were for outward processing, reaching HK$559.0 billion (US$71.7 billion). In the same year, 40.5% of Hong Kong's imports from the Mainland were related to outward processing, amounting to HK$774.6 billion (US$99.4 billion).
FACT 3 :
HONG KONG IS AN IMPORTANT LOCATION FOR THE MAINLAND INTERESTS
- The Mainland was Hong Kong's second largest source of inward direct investment. At end-2016, investment from the Mainland accounted for about 25.7% or HK$3,241.4 billion (US$418.0 billion) of the total stock of Hong Kong's inward direct investment.
- As at June 2017, there were 154 companies from the Mainland with regional headquarters in Hong Kong. They were mainly engaged in financing and banking, import/export trade, wholesale and retail, professional, business and education services, and transportation, storage and courier services, etc. Another 196 companies had set up regional offices in Hong Kong to oversee business activities in the region.
- As at 31 December 2017, 22 of the 155 licensed banks in Hong Kong were of Mainland interests. In the deposit-taking business, two of the 19 restricted licence banks and three of the 17 deposit-taking companies were of Mainland interests.
FACT 4 :
HONG KONG AS THE LARGEST FOREIGN INVESTOR IN THE MAINLAND
- Hong Kong was the Mainland's largest source of realised foreign direct investment, accounting for about 53.1% of the national total as at end-2017, with the cumulative value reaching HK$7,886.7 billion (US$1,009.3 billion).
- Hong Kong's investments in the Mainland concentrate largely in the Guangdong Province. At end-2016 the cumulative value of Hong Kong's realised direct investment in Guangdong was estimated at HK$1,984.5 billion (US$255.9 billion), accounting for 63.8% of Guangdong's total. According to the statistics of the Guangdong Province, about 140,000 Hong Kong-invested enterprises have been approved cumulatively by the Guangdong Province at end-2016.
- Hong Kong's investments in the Mainland in the early years were mainly industrial investment, involving primarily outward processing arrangements. Over the years, Hong Kong businessmen have extended the scope of their investments in the Mainland to other sectors such as hotels, real estate, retail trade, financial services, communications and various business services.
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 freest economy in the world for the 24th consecutive year in the US Heritage Foundation's 2018 Index of Economic Freedom.
- Hong Kong does not subsidise its exports.
- There is no tariff on goods entering Hong Kong. Excise duties are charged on four groups of commodities only (Note 3). In 2017, 1.2% of all imports were subject to excise duties.
- Hong Kong maintains a level playing field for foreign and local companies.
- Hong Kong does not maintain any barriers to trade.
1. Unless otherwise specified, all rankings mentioned in this factsheet are worked out with the trade values of the individual economies being considered separately.
2. Goods which undergo outward processing and claim Hong Kong origin status are strictly governed by Hong Kong origin rules. The Trade and Industry Department of the Government of the Hong Kong Special Administrative Region operates an effective administrative arrangement whereby goods manufactured in Hong Kong, but having undergone subsidiary or minor finishing processes outside Hong Kong, can be conferred Hong Kong origin status subject to Hong Kong origin rules being fully met.
3. There is no tariff on goods entering Hong Kong but excise duties are charged on four groups of commodities, whether they are imported or manufactured locally, for domestic consumption. These commodities are certain hydrocarbon oil (motor spirit, aircraft spirit and light diesel oil), liquor with alcoholic strength more than 30 per cent by volume, methyl alcohol and tobacco (other than smokeless tobacco).
Exchange rate: According to the statistics from the Census and Statistics Department of the Government of the Hong Kong Special Administrative Region
US$1 = HK$7.794 (2017 approximate average rate)
Trade and Industry Department
The Government of the Hong Kong Special Administrative Region
Trade and Industry Tower, 3 Concorde Road, Kowloon City, Hong Kong
Telephone: (852) 2398 5676 Website: www.tid.gov.hk
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.