european union - hong kong yearbook...

European Union Officeto Hong Kong and Macao

EUROPEAN UNION - HONG KONG

Yearbook 2015

EU-Hong Kong: The Year in Pictures

EU-Hong Kong Quick Facts

The EU Has 28 Member States

1957 Belgium,France,Germany,Italy,

LuxembourgandtheNetherlands

1973 Denmark, Ireland and the United

Kingdom

1981 Greece

1986 PortugalandSpain

1995 Austria,FinlandandSweden

2004 Cyprus, theCzechRepublic,Estonia,

Hungary, Latvia, Lithuania, Malta,

Poland,SlovakiaandSlovenia

2007 BulgariaandRomania

2013 Croatia

EUROPEAN UNION - HONG KONG2015YEARBOOK

About the EU Office to Hong Kong and Macao

TheEuropeanUnionOfficetoHongKongand

Macaowasestablished in 1993.TheEUOffice

mission is to represent the EU political and

economic interests inHongKongandMacao.

TheEUOfficecontinuestoincreaseknowledge

andinformationaboutEUpoliciesthroughpublic

diplomacyefforts,dialogue

meetingsanddevelopment

ofacademicexchangesand

people-to-peoplecontacts.

TheHeadof theEuropean

UnionOffice toHongKong

andMacaoisVincentPiket.

About the EU Relations with Hong Kong

Bilateralrelationsandcooperationbetweenthe

EuropeanUnionandHongKongcontinue to

developandstrengthen.HongKongremainsan

importanteconomicplayerfortheEUandakey

conduitfortwo-waytradeandinvestmentflows

betweentheEUandmainlandChina.TheEUalso

maintainsactivepolicyexchangeswithHong

Konginareasofmutualinterests.Thishappens

intheAnnualStructuredDialogue,atthe level

ofseniorofficials.Prioritytopicsarefinancial

services, customs matters and intellectual

propertyrights,aswellasthereinforcementof

educationandresearchties.

Trade Relations

The EU retains its position as Hong Kong’s

second largesttradingpartneraftermainland

China.EUbusinesses

areactive inawide

variety of sectors,

m a i n l y f i n a n c i a l

serv ices , t rad ing ,

logistics,constructionandretailing.Bilateral

trade in goods between the EU and Hong

Kongamounted to€45.3billion in2014.The

investmentrelationsbetweentheEUandHong

Konghavegrownsignificantly inrecentyears:

HongKongFDIstockheldbytheEUrosefrom

€90 billion in 2009 to €133 billion in 2012.

Conversely, in thesameperiod,FDI stock in

theEUalmostdoubled:from€27billionto€50

billionin2012.

TheEUbusinesscommunityprizesHongKong’s

respect for theruleof law,highstandardsof

transparency, freedomof informationandof

media, preferential access to the mainland

Chinamarketandtheavailabilityofhigh-quality

serviceproviders.

Education

http://ec.europa.eu/dgs/

education_culture

TheEUandHongKongare

increasingly cooperating

in the fieldofhighereducation.Through the

ErasmusPlusprogramme,HongKongstudents

andPhDcandidatesreceivemobilityandfunding

opportunities to study in various European

universities.

Culture

The European Union F i lm

Festival is held annually to

offertheHongKongaudience

a taste of European culture

byshowcasingaward-winning

films fromdifferentEUcountries.Everyyear,

the EU Office invites local students from

primaryandsecondaryschoolstotakepart in

the“EUCalendarDrawingCompetition”.The

16winningpicturesare

published in theannual

desktopcalendarwhich

is distributed to 3,000

recipients.

November 2013: The European Union Office to

Hong Kong and Macao celebrated its 20th

anniversary

The20th anniversary of theEuropeanUnion

Office toHongKongandMacaowasmarked

bythevisitofthenPresidentoftheEuropean

CommissionJoséManuelBarrosoon22and23

November2013.Theceremonywasattendedby

theHonourableCarrieLam,ChiefSecretaryfor

Administrationof

HongKongSAR

government.

28 Member States

7 Percent of World Population

24 Percent of Global GDP

508Million

Combined Population of the EU Member States

€58billion

Combined Worldwide Official Development Assistance

Since the handover of Hong Kong to the

People’sRepublicofChinain1997,theEuropean

Union(EU)anditsMemberStateshaveclosely

followedpoliticalandeconomicdevelopments

intheHongKongSpecialAdministrativeRegion

(SAR) under the ‘one country, two systems’

principle. In linewith thecommitmentgiven

totheEuropeanParliament in 1997,anannual

reportisissuedondevelopmentsinHongKong.

Thisisthe17threport,coveringdevelopmentsin

2014.TheEUadherestoa‘oneChina’policyand

supportsthe‘onecountry,twosystems’principle

anditsimplementation.

The EU be l ieves that , notwi thstand ing

challenges, the ‘one country, two systems’

principlecontinuedtoworkwell in2014,tothe

benefitofHongKong,Chinaasawholeandthe

internationalcommunity.

The judiciary continued to demonstrate its

independenceandconsistentadherencetodue

process. During the large civil disobedience

campaign,theruleof lawremainedtheguiding

principleforthegovernment,economicactors

and thepopulationat large.Anti-corruption

action remained strong, as shown by the

convictionoftwohigh-profilepersonalitiesand

positive good governance indicators. Apart

from two incidents, police conduct during

the three-month-long pro-democracy street

protestswasprofessionalandtheuseofforce

wasproportionate.Media freedomcontinued

tobeupheld,even thoughattacksonmedia

representativeshavebeenan increasingcause

forconcern.Thefreemarketeconomicsystem

continuedtofunctionefficientlyandHongKong

remainedacompetitive internationalbusiness

centreaswellasthepremierhubforbusiness

withmainlandChina.

Summary

EUROPEAN UNION - HONG KONG2015YEARBOOK 01

HongKongisatacrucialstageinitsdemocratic

development,withunprecedentedprotestsand

morepolarisedand intensedebates,revealing

bothpoliticalandsocio-economicdivides.The

EUreiterates itscommitmenttostrengthening

democracy, including the rule of law, the

independence of the judiciary, fundamental

freedomsandrights,transparency,andfreedom

ofinformationandexpressioninHongKong.

As a stakeholder in Hong Kong’s future and

in line with the Basic Law, the EU supports

the introductionofuniversalsuffrage for the

electionoftheChiefExecutive in2017andfor

theLegislativeCouncilby2020.TheEUsupports

theHongKongpeople’sdesireforahighdegree

ofpoliticalparticipationandgenuinechoice in

the2017ChiefExecutiveelectionandthereafter.

An accountable government contributes to

stability and prosperity, helps to safeguard

basicrightsandfreedoms,andservestosustain

HongKong’sstandingandcompetitivenessas

akey internationalbusinesscentre.Universal

suffragewouldgive thegovernmentgreater

publicsupportandlegitimacyinreachingHong

Kong’seconomicobjectivesandtacklingsocial

challenges.

The EU hopes that, through constructive

discussion,HongKongwill be able to reach

timelyagreementonanelectionsystemthatis

democratic,fair,openandtransparent.Following

this, theEUalsohopes that theprocess for

introducinguniversalsuffrage forelectingall

membersoftheLegislativeCouncil in2020will

bestartedwithoutdelay.

Whilerespectingtheprincipleofsovereignty,the

EU isreadytocooperateon issuesrelatingto

electoralreform, including inter-parliamentary

exchangesandsharingpracticalexperienceon

democraticdevelopment.

Political Developments

02 EUROPEAN UNION - HONG KONG2015YEARBOOK EUROPEAN UNION - HONG KONG2015YEARBOOK 03

Theintroductionofuniversalsuffrageinelecting

the Chief Executive in 2017 remains Hong

Kong’smaindomestic issue.Under theBasic

LawoftheHongKongSAR,theChiefExecutive

andLegislativeCouncilmustfollowafive-step

constitutionalprocedure.TheSARgovernment

tookthefirststepon15July2014,whenChief

ExecutiveLeungChun-yingsubmittedareport

toChina’sStandingCommitteeoftheNational

People’sCongress(NPCSC),proposingtoreform

thesystemforelectingtheChiefExecutive.The

proposalwasbasedonafive-monthlongpublic

consultation, which had resulted in 124,700

writtenproposals.

According to the Chief Executive’s report,

thekey issue fordebatewas thenomination

of candidates. It proposed that candidates

be nominatedby a 1,200-strongnominating

committee, as stipulated in the Basic Law.

It rejected the ideaofcivicorpoliticalparty

nomination advocated by the opposition

pan-democrat parties, which claimed that

nomination by a committee fel l short of

democraticstandardsandwouldeffectivelybar

pan-democratcandidates.

Following the public consultation, the civil

societygroup ‘OccupyCentralwithLoveand

Peace’organisedanunofficial referendumon

20-29 June. Nearly 800,000 people voted,

wellaboveexpectations,witha largemajority

supportingcivicandpoliticalpartynomination

ofcandidates. InAugust, thepro-government

civil society group ‘Alliance for Peace and

Democracy’ collected 1.5 million signatures

against the ‘OccupyCentral’campaignand in

supportofthegovernmentline;thesignatories

includedChiefExecutiveLeungChun-yingand

otherseniorofficials.

Thedebatewasfurtherfuelledbythepublication

on 10June2014ofawhitepaperbyChina’s

State Council entitled ‘The Practice of the

“OneCountry,TwoSystems”PolicyintheHong

KongSAR’.ThewhitepaperstressedthatHong

Kong’shighdegreeofautonomywassubject

to the authority of the central government,

which hadcomprehensive powers to govern

theSAR,andspecifiedtheneedtosafeguard

China’ssovereignty,securityanddevelopment

interests.Thewhitepaperalsonotedthat‘loving

thecountry’wasabasicpoliticalrequirement

for Hong Kong’s administrators, including

judges and other judicial personnel. While

representatives of the central government

assertedthatthewhitepapermerelystatedthe

existingsituationanddidnotconstitutenew

policy,manyinHongKongsawthepaperasan

attempttodiminishHongKong’s‘highdegreeof

autonomy’andunderminetheindependenceof

HongKong’sjudiciary.

On31August2014, theNPCSCunanimously

decided on the framework for Hong Kong’s

first ‘oneperson,onevote’election forChief

Executive in2017.Accordingtotheframework,

onlytwoorthreecandidates,receivingat least

601votes from the 1,200-strongnominating

committee, could run for theofficeofChief

Executive. The nominating committee itself,

based on the model of the current election

committee,wouldbedivided intofoursectors

and its members would be chosen by about

250,000individualandcorporatevoters.

The NPCSC decision was widely considered

to be more restrictive than expected, and

undulysoaccordingtooppositiongroups.The

Hong Kong Bar Association described it as

‘unreasonablyrestrictive.’Thegovernmentand

theLegislativeCouncilPresidentarguedthat

theNPCSCdecisionstillcontainedmanyareas

offlexibilitythatcouldbeexploitedtoenhance

thedemocraticcharacteroftheelectionsystem.

The most significant reaction to the NPCSC

decisionwasacampaignbyvariousstudent

groupsandotherpro-democracyactiviststhat

started in September. From 27 September,

activistsblockedkey trafficarteries inHong

Kongandprotestorssurroundedthebuildingsof

thelegislatureandmaingovernmentbuildings.

Policeuseof teargason28September,ona

scalethatwaswidelyseenasdisproportionate,

galvanisedamassivedemonstrator turnout,

which reached an estimated 100,000 at its

peak.Despite isolated incidentsof violence,

the demonstrators were overwhelmingly

peacefulandpoliceuseof forceminimal.The

demonstrationsgraduallydwindled intheface

ofmountingpublicdisapproval.Followingcourt

rulings, the road blocks were successively

cleared,thelastoneon15December.

Thegovernmentwasslowinengagingwiththe

protestorsandintryingtoreachacompromise.

Duringthedemonstrations,severalinternational

leaders, including theUNSecretary-General

BanKi-moon,UKPrimeMinisterDavidCameron

andEUHighRepresentativeCatherineAshton

issuedstatementsurgingbothsidestoexercise

restraintandseektoresolvethepoliticalstand-

offpeacefully.

While political inorigin, thedemonstrations

laidbareimportantsocio-economicgrievances.

Underlying thesegrievances were livelihood

issuesandasense,especiallyamongtheyoung,

of being economically disenfranchised by a

politicalsystembelievedtofavourtheinterests

of thebusinesselite,whoseprimary interest

is topreservegoodrelationswiththecentral

government.

Academicresearch

has shown that

young people in

HongKongidentify

stronglywithHong

Kong rather than

Chinaasawhole,

andthattheyfear

thatChina isencroachingonHongKong’srule

oflaw,rightsandfreedoms.On7January2015,

theHongKongSARgovernmentpublisheda

report,outsidethe‘five-stepprocess’,reflecting

theopinionsandaspirationsofpeople in the

period 31 August to 15 December 2014. The

report was a government concession to the

studentdemonstrators,buttheycriticisedthe

government for failing toaddress their core

concerns.


Legislative Council

Relations between the executive and the

legislature became increasingly strained in

2014,withoppositionlegislatorsstaginganon-

cooperationcampaignandusing filibustering

tactics to delay government initiatives. On

several occasions, the Legislative Council

Presidentexercisedhisdiscretionarypowerto

enddebates; ina legalchallenge to this, the

courtfoundinthePresident’sfavour.Legislative

Council debates could benefit from clearer

writtenrulesonconductingdebates.

InApril,thePresidentof

theLegislativeCouncil

led a de legat ion of

legislatorstoShanghai

tomeetseniorcentral

government officials

to discuss legislative

reform. In June and

N o v e m b e r, ra d i c a l

protestorsstormedtheHongKongLegislative

Council complex, causing injuries to some

LegislativeCouncilstaffanddamagetopartsof

thecomplex.

Rule of Law and the Judiciary

Theruleoflawwasgenerallyrespectedandthe

judiciarymaintaineditshighstandardsin2014.

Onseveraloccasions,parties filed for court

rulingswithsignificantpoliticalimplications,but

thecourtscontinuedtofunctionindependently

andprofessionallyandwerenot influencedby

extraneousfactorsorpoliticalconsiderations.

High-profileexamples includedvariouscourt

injunctions requestedbyeconomicoperators

whoweresuccessful inchallengingthelegality

of the road blocks during the September-

Decemberdemonstrations.Thecourtsfollowed

thecorrectproceduralsteps—therewasequal

accesstothecourt forbothparties, legalaid

wasprovided,theproceedingswerepublic,and

thecourt’srulingwaspublishedandcomplied

with.Theconvictionsoncorruptioncharges,

ofaformergovernmentchiefsecretaryanda

realestatetycoon,bothofwhomremained in

prisonpendingtheirappeals,alsotestifytothe

impartialityofHongKong’sjudiciary.

TheWorldEconomicForum’sGlobalEconomic

CompetitivenessReport2014-2015rankedHong

Kongfifthamong144 jurisdictionsandfirst in

Asia for judicial independence. Some issues

stillneedtoberesolved,suchasdifficulty in

recruitingjudges,theshortageofsupportstaff

inthecourtsandthe lowfeespaidto lawyers

in legal aid cases, especially criminal cases.

Maintaining judicial independence and full

respectfortheruleoflawarevitaltoupholding

HongKong’sdemocraticcredentials,itsstanding

asaninternationalbusinesscentreanditsrising

roleasan internationalcentre forarbitration

andmediation.

Law Enforcement

Lawandorder inHongKong improvedoverall

in 2014 with a 7.1% decrease in the number

ofcrimescomparedto2013,accordingtothe

CommissionerofPoliceAndyTsang.Thecrime

ratecontinuedto fall— from72,911 to67,740

cases,thelowestfiguresince1997.

Duringtheperiodofcivildisobedience,police

operationscontinuedtobehighlytransparent

and, bar a few notable exceptions, police

conductwasprofessionalandtheuseofforce

proportionate.Exceptionsincludedtheexcessive

use of tear gas on 28 September, and the

beating,on15October,ofaprotestorbyseven

policeofficers,anincidentthatwasrecordedby

a localtelevisionstation.Thetrialoftheseven

policeofficersispending.

Atotalof955peopleweredetainedforvarious

offencesover theprotestperiod.Thepolice

aimed to complete all investigations within

three months. To date, 30 protest leaders

havebeenarrestedandthenreleasedpending

investigation.

The Complaints

Aga inst Po l i ce

Office received

1,972complaints,

o f w h i c h o n l y

106 were found

to be admissible

(the remainingcomplaintsmostlybeing filed

by members of the public on the basis of

media reports or footage). Members of the

IndependentPoliceComplaintsCouncilobserved

the investigations, including theone into the

beatingofaprotestor.

Anti-corruption

Corruption, including in thecivil service,was

generally deemed to be well under control.

Theanti-corruptionsystemremainedvigorous

andresilient,eventhoughHongKongslipped

twoplaces to 17thoutof 175countries in the

Transparency International ’s Corruption

PerceptionsIndex2014.

According to th is survey, conducted by

an independent survey f i rm, on ly 1 .5%

of respondents indicated that they had

encounteredcorruption inthepast 12months.

81%ofrespondentsconsideredtheIndependent

CommissionAgainstCorruption(ICAC)effective

and97%believed itdeserved their support.

In2014, the ICAC investigated222people in

114 cases. The person-based conviction rate

increased from78%to85%,while thecase-

basedconvictionrate rose from81%to87%

comparedto2013.Ofallcorruptioncomplaints

received in2014,63%concerned theprivate

sector,30%relatedtogovernmentdepartments

and7%involvedpublicbodies.

The ICAC is investigatingseveralhigh-profile

complaints.Oneofthemconcernsallegedillegal

politicaldonationsbytheownerofNextMedia,

JimmyLai toseveralpan-democracyparties

andpoliticians.Anothercomplaint concerns

theallegedreceiptbyChiefExecutiveLeung

Chun-yingofanillegalandundeclaredpayment

from a private sector firm after he took up

office as Chief Executive, even though the

serviceconcernedoccurredbeforehand.The

SecretaryforJusticedelegatedauthoritytothe

DirectorofPublicProsecutionstohandlethis

complaint,toavoidanypublicperceptionofbias


orpartialityinthehandlingofthecase.Another

investigationconcernsanallegationagainst

formerChiefExecutiveDonaldTsang,dating

backto2012.Thesecaseswilltestthecapability

oftheICACandthejudiciarytoinvestigateand

tryhigh-profilecorruptioncasesindependently,

impartiallyandfreeofpoliticalconsiderations.

Theconvictions,on23December,ofa former

governmentchiefsecretaryandarealestate

tycoonsuggestthattheICACandthejudiciary

are discharging their anti-corruption duties

withoutfearorfavour.

Equal Opportunities

On8May2014,theUnitedNationsCommittee

on Economic, Social and Cultural Rights

expressedconcernsandgaverecommendations

about:(i)theabsenceofcomprehensiveHuman

Rights institutions and legislation; (ii) an

increaseinimmigrationissuesandtheabsence

ofprotectionforrefugees,asylumseekersand

migrantworkers;and(iii)theshortageofpublic

housing, and growing social and economic

disparitiesamongHongKongpeople.

The Equal Opportunities Commission (EOC)

received 100,000 submissions in response

to a public consultation on the review of

discr iminat ion legis lat ion. The EOC wi l l

submitareportwithrecommendationstothe

governmentbythesecondhalfof2015.TheEOC

willalsomakerecommendationsonpromoting

equalopportunities for lesbian,gay,bisexual,

transgender and intersex (LGBTI) persons,

throughlegislationaswellaspracticalmeasures.

ThereviewofHongKong’slegislationonsame-

sexmarriageandmarriages involving trans-

genderpersonsisongoing.

A positive step was made when, following

long-standingdemands fromethnicminority

advocacygroups, thegovernment introduced

specialarrangementstotheschoolcurriculum

for non-native speakers of Chinese. Thus,

starting in the 2014/2015 school year, the

governmentimplementedaChineseasaSecond

Languagecurriculuminprimaryandsecondary

schoolswithsupportinglearningmaterialsand

assessmenttools.

On23October, theUnitedNationsCommittee

on theEliminationofDiscriminationagainst

WomenrecommendedthatHongKongshould

strengthentheWomen’sCommission’smandate

andboosttherepresentationofwomeninpublic

andpolitical life.TheUNcommitteealsocalled

for increasedeffortsagainst therootcauses

of trafficking inwomenandgirlsand for the

adoptionofanti-trafficking legislation. Italso

recommended that foreign female domestic

workers should be better protected against

discriminationandabusebyemployers, and

recruitmentandplacementagencies.

Co n c rete s te ps we re m a d e to i m p rove

genderequalityby requiringallgovernment

departmentstoapplythegendermainstreaming

checklistwhenformulatinggovernmentpolicies.

Thegovernmentalsocommitteditselftoraising

therepresentationofwomen inadvisoryand

statutory bodies from 30% to 35%. On 18

December, theLegislativeCounciladoptedan

amendment to theEmploymentBill,entitling

privatesectormaleemployeestopaternityleave

ofuptothreedays.

Media

Hong Kong’s first Press Freedom Index was

published on 23 April 2014. It showed that

journalistsratedpressfreedominHongKongat

42outof 100,whilethepublicrated itslightly

betterat49.4.Self-censorshipcontinuedtobeof

majorconcern.Journalistsratedself-censorship

at6.9onascaleofzeroto10(10signifying‘very

common’);thepublicrateditat5.4.Journalists

ratedpressurefromownersormanagementat

6.5,comparedwithapublicratingof6.2.

In July 2014, the Hong Kong Journalists

Association published its 21st annual report,

entitled ‘PressFreedomUnderSiege—Grave

Threats to Freedom of Expression in Hong

Kong’.Accordingtothereport,2014hadbeen

thedarkestyearforpressfreedomforseveral

decades.Journalistshadbeenattackedseveral

times, including a brutal attack in February

onKevinLau, the formerChiefEditorof the

Ming Pao Daily News, some journalists had

beensackedwhileotherswithcritical views

hadbeenmoved to lesssensitiveareas; this

placed pressure on theeditorial integrity of

publications. The Association recorded 24

attackson journalistsbetween22September

and 29 October and accused the police of

excessiveuseof forceandmediaobstruction.

On 26 October, the Chief Executive and the

HongKongGovernmentstronglycondemnedan

incident inwhichunknownassailantsattacked

journalists. Opposition media owner, Jimmy

Lai,wasthevictimofseveralattacks, including

arson,inlate2014.

Seriousconcernswerevoicedoverthefreedom

of the electronic media, following the Hong

KongGovernment’sdecisionnottoawardafree-

to-airTVlicencetooneofthemost innovative

applicants,theHongKongTelevisionNetwork.

Internationalgroupsalsoreportedadecline in

HongKong’spressfreedom.ReportersWithout

Borders rankedHongKong61stworldwideon

press freedom, compared with 58th in 2013

and18th in2002. Itnotedthat ‘China’sgrowing

economic weight is allowing it to extend its

influenceoverthemedia inHongKong,Macau

and Taiwan… Media independence is now in

jeopardyinthesethreeterritories.’

Although theHongKongmediacontinued to

operatefreelyandgivevoicetoagreatdiversity

ofviews,politicalandeconomicpressurescould

posearisktoeditorial independence.Also,the

variousactsofaggressionagainst journalists,

someofthemsevere,areacauseforconcern

andrequirecontinuedcloseattentionby the

authorities.


Economic Developments

Hong Kong cont inued to prosper as an

international finance and trade centre in

East Asia, riding on the back of the fast-

developingChineseandAsianeconomy.Hong

Kong remained among the world’s leading

markets in stock trading, private equities,

assetmanagementand foreignexchange.By

the end of 2014, Hong Kong’s stock market

wasrankedasthethird largest inAsiaandthe

seventhlargest intheworldintermsofmarket

capitalisation. Hong Kong was the second

largestprivateequitycentre inAsia,managing

about21%ofthetotalcapitalpoolintheregion

attheendofSeptember2014.Accordingtoa

triennialsurveybytheBankfor International

Settlements,HongKongwastheworld’s fifth

largest foreignexchangemarket,withthenet

daily turnoverof forex transactionsreaching

USD275billionin2013.Aflurryofdealstowards

theendoftheyearpropelledHongKong into

secondplaceafterNewYorkintermsofcapital-

raising(InitialPublicOfferings)in2014.

HongKongisalsooneofthelargestrecipients

andsourcesofforeigndirect investment(FDI)

worldwide.AccordingtotheWorld Investment

Report2014bytheUnitedNationsConference

on Trade and Development, Hong Kong was

thesecondlargestrecipientofFDIinAsiaafter

Chinaand the third largest sourceofFDI in

Asia,afterJapanandChina. Its institutions,

locationandexpertise in theservicessector,

underpinnedbytheruleof law,allcontributed

to its success. 2014 saw closer economic

integrationwiththemainland,withtheongoing

development of offshore RMB business, the

linkageof theHongKongandShanghaistock

exchangesandconsiderableinvestmentinHong

KongbymainlandChineseenterprises.Hong

Kongmaintaineditshighscoresinmanyofthe

global surveysmeasuringeconomic freedom

andcompetitiveness.

HongKong’sGDPexpandedby2.3%1 in real

termsin2014,afterincreasingby2.9%in2013.

The growth was mainly driven by domestic

consumptionandservicesexports.The labour

marketwas resilientwith theunemployment

rate remaining at 3.3% or below for most

periods during the year. Consumer price

inflationroseby4.4%in2014.Totalexportsof

goodsgrewby3.2%yearonyearin2014,after

expandingby3.6%in2013.Totalvisitorarrivals

rose 12%to60.8million in2014.Claimsthat

theOccupyCentralmovementhadaffectedthe

economywerenotborneoutbytheeconomic

1 Unlessotherwisestated,alleconomicindicatorspertainingtotheHongKongeconomyweresourcedfromtheHongKongCensusandStatisticsDepartments.

data,althoughcompanies locatedwithin the

protestzonesdidsuffer.Theretailsectorhad

sloweddownlongbeforethedemonstrations—

touristpurchasesofpopularluxuryitems(such

asjewelleryandwatches)recordeddouble-digit

contractionduetotheslowdownintheChinese

economyandtheanti-corruptiondriveonthe

mainland.

The economic relationship between Hong

KongandmainlandChinacontinuedtodeepen

throughtradeandcross-borderinvestmentand

thedevelopmentofHongKongasanoffshore

RMBcentre.TheSARhostedthe largestpool

ofRMBdepositsoutsideChina,exceedingRMB

1 trillion in2014. InNovember2014, following

consentfromthecentralgovernment,theHong

KongMonetaryAuthorityscrapped thedaily

conversioncapofRMB20,000forHongKong

residents.Thisregulatorychangepavedtheway

forafreerflow

ofRMBbetween

theonshoreand

t h e o f f s h o re

markets , and

i s e x p e c t e d

to facilitate broader growth in the offshore

RMB foreign exchange market. While Hong

Kongenjoysamajor ‘first-mover’advantage,

competit ion is increasing as the central

governmenthasgraduallybeenopeningupRMB

businessinotherfinancialcentres.

Hong Kong remained a testing ground for

China’scapitalmarketreform.TheShanghai-

HongKongStockConnectwas launchedon17

November2014.Thepilotscheme isamutual

market access programme through which

investorsinHongKongandmainlandChinacan

tradeandsettleshares listed ineachother’s

marketviaanexchangeandclearinghouse in

theirownlocalmarket.Despitetradebeingslow

intheinitialperiod, itcanbeexpectedthat,as

thepilotschemedevelopsandmatures, itwill

boostChineseinvestmentinHongKongandvice

versa. It isalsoexpectedto leadto increased

integrationofChina’scapitalmarkets intothe

globaleconomy.TheschemeconfirmedHong

Kong’sleadingroleasanoffshoreRMBcentre.

Inadditiontofinancialcooperation,HongKong

andChinasignedasubsidiaryagreementunder

theCloserEconomicPartnershipArrangement

(CEPA)on18December,toliberalisethetradein

servicesbetweenGuangdongProvinceandHong

Kong.Theagreementwaspresentedasamodel

forthebasic liberalisationoftrade inservices

forthewholeofChina.

23,079

33,664

10,585

24,00025,493

34,70035,736

10,70010,243

2012 2013 2014

Unit:€Million

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

EU-Hong Kong Bilateral Trade in Goods 2012-2014

Source:Eurostat

EUImportsfromHK

EUExportstoHK

TradeBalance

1,610

9,817

8,207

2,112

10,872

8,760

1,808

10,684

8,876

2011 2012 2013

Unit:€Million

12,000

10,000

8,000

6,000

4,000

2,000

0

EU-Hong Kong Bilateral Trade in Services 2011-2013

Source:Eurostat

EUImportsfromHK

EUExportstoHK

TradeBalance


The Central Government announced in 2011

theobjectiveofbasic liberalisationoftrade in

servicesbetweentheMainlandandHongKong

bytheendof theNational 12thFive-YearPlan

period,in2015.

Asregardsexternalrelations,HongKongplayed

anactiverole intheWorldTradeOrganisation

(WTO)andremainedcommittedto liberalising

global trade. In this connection, Hong Kong

wasthe firstWTOMember tonotify theWTO

ofthedesignationofallprovisionsinSectionI

oftheTradeFacilitationAgreementasCategory

‘A’ commitments. Hong Kong also took part

in negotiations on the expansion of the

InformationTechnologyAgreement,Trade in

Services Agreement and the Environmental

GoodsAgreement.Tocomplement itsexisting

networkofFreeTradeAgreements(FTAs),Hong

KongstartedFTAnegotiationswithASEAN in

July2014.

TheHongKongGovernmentvowedtomaintain

sustainableeconomicgrowthasaprerequisite

for tackling its housing, poverty, ageing

populationandenvironmentalproblems.After

thereleaseofitsfirstpovertylinedatain2013,

which indicatedapoverty rateof 15.2%, the

government’s policy objective was to boost

employmentand improve thesocial security

welfaresystem.Concretepovertyalleviation

measuresin2014includedaLowIncomeFamily

Allowancescheme2,andaone-offsubsidyfor

low incomegroups.TheElderlyHealthCare

VoucherPilotSchemewasdoubledtoHKD2,000

in2014,andelderlycitizensweregrantednew

discountsonpublictransport.Thegovernment

purchasedresidentialcareplaces inShenzhen,

and was discussing similar arrangements

e l s ew h e re o n t h e

mainland.

Thenotionofa‘Future

Fu n d ’ t o f i n a n c e

i n f ra s t r u c t u r e a t

timesofsustaineddeficitswasfirst raisedby

FinancialSecretary,JohnTsang, inhis2014-15

budget.Traditionally,HongKonghasenjoyeda

strongfiscalposition(withabalancedbudget)

anddeepreserves3.MrTsang,however,sounded

a cautionary note about long-term fiscal

stability.HewarnedthatHongKongmightrun

intostructuraldeficits in7-15years’timewhen

theeconomyreachedamaturestate, slowed

byanageingpopulation.Thegovernmenthas

startedtoexploreoptionstodealwithanageing

population,suchasretirementprotectionanda

voluntaryhealthinsurancescheme.

HongKong’s residentialpropertypriceshave

beenrisingrelentlessly for fiveyears,making

themamongthehighest intheworld.Demand

hasbeendrivenbyacombinationoflowinterest

ratesandcurrencystabilitywhilethesupplyof

land,whichthegovernmentcontrols,gradually

diminishes.Aseriesofadministrativemeasures,

includingstampdutyonpropertytransactions,

wereintroducedin2010-13todampendemand.

Nevertheless,in2014residentialpropertyprices

kept rising,even ifata slowerpace4.House

prices are still out of reach for most young

2 AdoptedbytheFinanceCommitteeoftheLegislativeCouncilon15January2015.

3 AsofFebruary2014, theHongKongGovernmentprojectedthatfiscalreserveswouldreachHKD755billion,or34%ofitsGDP,bytheendofMarch2015.

4 Accordingto theCreditandValuationDepartmentof theHongKongGovernment, theprice indexofprivatedomesticpropertyroseto278.2,up13.5%yearonyearinDecember2014.Theindexsurgedfrom206.2in2012to242.4in2013,up17.6%yearonyear.

people.Therapidriseofpropertypriceshasalso

helpedtowidenthewealthgap.Thegovernment

rolledoutthenewLongTermHousingStrategy

aimedathelpingall thoseneedingaccess to

affordablehousing.Overthenext10years,the

governmentaimstoprovide470,000newunits,

withpublichousingaccountingfor60%ofall

housing.

Innovationandtechnologywerehighlightedas

pillarsforpromotingeconomicdevelopment in

thefieldsoffinancialservices,tourism,trading

and logistics,professionalservicesandother

producer-related services. The government

supported them by nurturing a business-

friendlyregulatoryenvironmentand investing

in infrastructure.Therewasheavy investment

intransportnetworks,includingtheHongKong-

Zhuhai-MacaoBridge,theHongKongsectionof

theGuangzhou-Shenzhen-HongKongExpress

RailLinkandtheextensionofthemasstransit

railwaysystemwithinthecity.

WhileHongKongremainshighlycompetitive

within its core areas, it is facing increased

competition from mainland cities such as

Shanghai and Shenzhen, and from other

international financial centres. The limited

supply of land, infrastructure constraints

and rising labourcostsmean that it iseven

morevital forHongKongserviceprovidersto

competeonparameterssuchasquality,speed

and innovation.Ontheregulatoryside,Hong

Konghasmadeefforts tomaintaina fairand

competitiveenvironment for business.2014

saw a number of regulatory developments,

namelytheimplementationoftheCompetition

Ordinance,newannouncementsontaxationand

effortstocountermoneylaundering.

HongKong’s firstcomprehensivecompetition

lawwaspassedby theLegislativeCouncil in

2012. In 2013, the Hong Kong Competition

Commissionwassetupandprovisionsrelating

totheCompetitionTribunalcameintoforce. In

2014,theHongKongCompetitionCommission

andtheHongKongCommunicationsAuthority

publisheddraftguidelinesforimplementingthe

CompetitionOrdinance.

In September 2014, Hong

Kongannounceditsalignment

tothenewglobalstandardon

the automatic exchange of

informationforthepurposeof

enhancing tax transparency

andcombatingcross-border

taxevasion.TheHongKongGovernmentstated

thatthefirstexchangeoftaxinformationcould

be implementedbytheendof2018,subjectto

thepassageoftherelatedbillbythelegislature

by2016.

HongKongcontinued to review its legaland

regulatory requirements in the fieldofanti-

moneylaundering.AsamemberoftheFinancial

ActionTaskForce(FATF),HongKongisdueto

bescrutinised in2018. In the lastevaluation

in2008,HongKongwasratedasbeingpartly

compliant with the task force’s standards,

leaving room for improvement. However, in

October2012,theFATFstatedthatHongKong

‘hadmadesignificantprogress inaddressing

thedeficienciesidentified’.TheFATFconsidered

that Hong Kong’s anti-money laundering

supervisionwaseffectiveforbanking,insurance

andsecurities, butweakornon-existent for

manynon-financialsectors,suchasproperty.


European Union-Hong Kong Bilateral Relations and Cooperation

In2014, theEUandHongKongcontinued to

developandstrengthentheirbilateralrelations.

TheEUremainedHongKong’ssecond largest

tradingpartneraftermainlandChina5,while

HongKongcontinuedtoplayanimportantrole

asa tradinghubandkeyconduit for two-way

tradeandinvestmentflowsbetweentheEUand

mainlandChina.

Bilateral trade ingoodsbetween theEUand

HongKongdroppedmildlyby1%toreach€45.3

billion in2014,with theEUenjoyinga trade

surplusof€24billion6.TheEUhas remained

the largest source of foreign companies in

HongKong,witha totalof 1,937companies7.

EUbusinessesareactive inawidevarietyof

sectors,mainlyfinancialandbusinessservices,

trading, logistics, constructionand retailing.

EUcompaniesarekeyplayers inHongKong’s

banking, insuranceandsecuritiessectors.As

a result, a large number of Europeans live

andwork inHongKong,withUKandFrench

nationalsbeingthemostnumerous.

RelationsbetweentheEUandHongKonghave

continuedtoprosperontheinvestmentfront.In

2013EUFDIoutflowstoHongKongamounted

to€10billion;FDI inflowsfromHongKongto

theEUreached€3.9billion.Attheendof2013,

FDIstockheldbytheEUinHongKongwasEUR

88.5billionandFDIstockheldbyHongKongin

theEUduringthesameperiodwas€46.2billion.

Hong Kong remains a key conduit for EU-

China trade and investment, and as such

presents EU economic operators with high-

valueopportunities.Withasizablenumberof

EUcompaniesregisteredas‘HongKongservice

suppliers’undertheHongKong-MainlandChina

Closer Economic Partnership Arrangement

(CEPA),theEUisthe leadingsourceofforeign

companiesutilisingCEPA.Giventhepotential

ofCEPA,theEUandHongKongwillengagein

regularexchangesonCEPAdevelopmentsand

explorewaystomaximisetheopportunitiesfor

EUcompaniesandinvestors.

TheeighthEU-HongKongstructureddialogue

meetingtookplaceinBrusselson11November

2014 in the framework of official bilateral

relations.Themaintopicsontheagendawere

economic policy, the regulatory regime for

thefinancialsector,strengthening intellectual

propertyprotectionandHongKong’sdecision

to implement thenewglobalstandardonthe

AutomaticExchangeofFinancial Informationin

TaxMatters.Thepartiesalsohelddiscussionson

newmedium-termobjectivesinordertotakethe

relationshipforward.

2014sawanumberof

high-levelvisitsfrom

EU inst i tut ions to

HongKong.European

CommissionerMichel

B a r n i e r ( I n te r n a l

MarketandServices)

visited in January

a n d E u r o p e a n

C o m m i s s i o n e r

AlgirdasSemeta(Taxation,Customs,Statistics,

AuditandAnti-Fraud) inMay.The lattervisit

contributedtopositivedevelopments inHong

Kongon two fronts: theautomaticexchange

of financial information intaxmattersandon

customs cooperation, and IPR enforcement

issues.AdelegationofMembersoftheEuropean

ParliamentvisitedHongKonginJanuary.

The Chief Executiveof the Hong Kong SAR,

LeungChun-ying,visitedBrussels inMayand

metwithEuropeanCouncilPresidentHerman

Van Rompuy and European Commiss ion

PresidentJoséManuelBarroso.TheEducation

S e c re t a r y, M r E d d i e

N g H a k- k i m , a n d t h e

Secretary for Financial

ServicesandtheTreasury,

ProfessorKCChan,also

visited Brussels in2014

and met with their EU

counterparts.

The EU and Hong Kong agreed to work

towardsanactionplanwiththegoaloffurther

developing customs cooperation to tackle

international trade in IPR-infringing goods

throughoutthesupplychain.

EU business interests in Hong Kong are

primarilyrepresentedbytheEuropeanChamber

of Commerce (ECC). The ECC is a ‘chamber

of chambers’, itsmembershipcomprising 14

Europeanchambersbased inHongKongand

oneinMacao,alongwithfivesectoral ‘business

councils’. In cooperation with the European

UnionOfficetoHongKong,theECCcarriedout

alargenumberofactivitiestofacilitatedialogue

withthegovernmentandpromoteEUbusiness

5 TherankingisbasedontradestatisticsreleasedbytheHongKongCensusandStatisticsDepartment.

6 Source:Eurostat:Comextdatabase.

7 Source: 2014 Annual Survey of Companies in Hong KongRepresentingParentCompaniesLocatedoutsideHongKong,HongKongCensusandStatisticsDepartment.

and industry.TheECCwasalsothesuccessful

bidderforthenextphaseoftheEuropeanUnion

BusinessInformationProgramme,whichaimsto

strengtheneconomicpartnershipandbusiness

cooperationwithHongKongandMacaoand

ensure a stronger and better coordinated

representationofEUbusinessandits interests

inHongKongandMacao.

In2014, theEUandMemberStatediplomatic

missions in Hong Kong continued to work

together to raise the EU’s profile in Hong

Kong.Tothisend,theEUOfficetoHongKong

continued toorganisemeetingsbetweenEU

headsofmissions,seniormembersoftheHong

KongGovernment, theLegislativeCounciland

judiciary,andotherleadingfigures.

14 EUROPEAN UNION - HONG KONG2015YEARBOOK

The EU diplomatic missions and cultural

institutesworkedtogetherwith localpartners

onmanypeople-to-peopleactivities.Flagship

events included the EU Film Festival, the

EuropeanHigherEducationFair,theEUCooking

Competition, theEUDayofLanguagesanda

schoolscalendarcompetition. Inaddition, the

EUandMemberStatescooperatedwiththeEOC

and theChineseUniversityofHongKongon

HongKong’sfirst internationalsymposiumon

promotingLGBTIrights.TheEUhopestobuild

on thismomentumtocontinue itsworkwith

thegovernment,civil societyandbusiness in

promotingexchangesonrightsandfreedoms.

The EU Academic Programme Hong Kong

(EUAP), a consortium comprising the Hong

KongBaptistUniversity,theUniversityofHong

Kong,theChineseUniversityofHongKongand

LingnanUniversity, continued to strengthen

EU-Hong Kong relations through academic

workandnetwork-buildingwith local, regional

and European partners. In 2014, the EUAP

launchedaseriesofeventspresentingEuropean

approachestourbandevelopment.TheEUAP

successfullyhostedtheModelEU,asimulation

inwhichstudentsplay the rolesofheadsof

stateandgovernmentoftheEUMemberStates

meetingintheEuropeanCouncil.

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M E D I T E R R A N E A N S E A

E N G L I S H C H A N N E L

European Union Office to Hong Kong and Macao

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Map of the European Union 2015

European Union Office to Hong Kong and Macao19/F, St. John’s Building, 33 Garden Road, Central, Hong Kong

Tel: (852) 2537 6083 I Fax: (852) 2522 1302

Email: [email protected]

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