RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/52
11 November 1998
(98-4449)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
HONG KONG, CHINA
Report by the Government
Pursuant to the Agreement Establising the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Hong Kong, China is
attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Hong Kong, China.Hong Kong, China WT/TPR/G/52
Page 3
CONTENTS
I. OVERVIEW..................................................................................................................... ............................5
II. ESTABLISHMENT OF THE HKSAR.................................................................................................. ....6
A. T HE CONSTITUTIONAL FRAMEWORK ..........................................................................................................6
B. O BJECTIVES OF THE HKSAR' S TRADE POLICY ...........................................................................................6
1. Multilateral ................................................................................................................. ..........................7
2. Regi onal ..................................................................................................................... ...........................7
3. Bilateral .................................................................................................................... ............................7
III. TRADE AND ECONOMIC  ENVIRONM ENT ....................................................................................7
A. E CONOMIC ENVIRONMENT .........................................................................................................................7
1. Structure and Developme nt of the Economy ..................................................................................... ....7
(a) Recent Perf ormance.......................................................................................................... .................................8
(b) Linked Exchange Rate........................................................................................................ ...............................9
(c) The Asian Financial Turmoil................................................................................................. ..........................10
B. E XTERNAL TRADE RELATIONS .................................................................................................................11
1. Merchandise  Trade ............................................................................................................ .................11
(a) External Trade .............................................................................................................. ...................................11
(b) Domestic Exports ............................................................................................................ ................................12
(c) Re-exports.................................................................................................................. ......................................12
(d) Imports..................................................................................................................... ........................................13
2. Service Trade ................................................................................................................ ......................13
IV. TRADE PRACTICES : RECENT DEVELOPMENT .......................................................................13
A. I MPORT AND EXPORT MEASURES .............................................................................................................13
1. Sectoral Measures............................................................................................................ ...................14
(a) Textiles and Clothing....................................................................................................... ................................14
(b) Reserved Commodities........................................................................................................ ............................15
(c) Strategic Commodities....................................................................................................... ..............................16
(d) Other Licensing Control ..................................................................................................... .............................16
B. R ULES OF ORIGIN ............................................................................................................................... ......16
C. I NFORMATION TECHNOLOGY AGREEMENT ..............................................................................................17
V. SERV ICES ..................................................................................................................... ............................17
A. H ORIZONTAL MEASURES .........................................................................................................................17
B. S ECTORAL MEASURES ..............................................................................................................................1 7
1. Financial Services........................................................................................................... ....................17
(a) Banking ..................................................................................................................... ......................................17
(b) Securities and Futures Markets.............................................................................................. ..........................18
(c) Insurance ................................................................................................................... ......................................20
(d) Mandatory Provident Fund.................................................................................................... ..........................20
2. Telecommunications Services .................................................................................................. ...........21
3. Broadcasting Services........................................................................................................ .................21
4. Transportation Services ...................................................................................................... ................22
(a) Air Transport ............................................................................................................... ....................................22
(b) Sea Transport............................................................................................................... ....................................22
(c) Land Transport .............................................................................................................. ..................................23
5. Professional  Services ........................................................................................................ ..................23
(a) Construction and Engineering Related Services ............................................................................... ...............23
(b) Medical..................................................................................................................... .......................................23
(c) Legal....................................................................................................................... .........................................24
(d) Account ancy................................................................................................................. ...................................25
VI. INTELLECTUAL PROPERTY RIGHTS ..........................................................................................25WT/TPR/G/52 Trade Policy Review
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A. I NTELLECTUAL PROPERTY RIGHTS PROTECTION IN THE HKSAR ............................................................25
1. Copy right .................................................................................................................... ........................25
2. Patents...................................................................................................................... ...........................26
3. Designs...................................................................................................................... ..........................26
4. Trade Marks.................................................................................................................. ......................26
5. Protection of Geogr aphical Indications....................................................................................... .......26
6. Prevention of Copyright  Piracy Ordinance ..................................................................................... ...27
7. Other Intellectual  Property Rights........................................................................................... ...........27
B. E NFORCEMENT OF IPR P ROTECTION ........................................................................................................27
C. H ONG KONG, CHINA 'S COMPLIANCE WITH TRIPS A GREEMENT ..............................................................27
D. A PPLICATION OF INTERNATIONAL IPR C ONVENTIONS .............................................................................27
VII. GOVERNMENT PROCUREMENT ...................................................................................................28
A. P OLICY AND PRINCIPLES ..........................................................................................................................28
B. A CCESSION TO THE WTO A GREEMENT ON GOVERNMENT PROCUREMENT (GPA) ..................................28
C. T ENDERING PROCEDURES ........................................................................................................................28
D. H ONG KONG, CHINA 'S PARTICIPATION IN THE WTO C OMMITTEE ON GOVERNMENT PROCUREMENT .....29
E. H ONG KONG, CHINA ’S PARTICIPATION IN THE WTO WG ON TRANSPARENCY IN  GOVERNMENT 
PROCUREMENT ............................................................................................................................... ..........29
VIII. IMPLEMENTATION OF URUGUAY ROUND AG REEMEN TS ..................................................29
A. M ULTILATERAL AGREEMENTS ON TRADE IN GOODS ...............................................................................29
B. G ENERAL AGREEMENT ON TRADE IN SERVICES (GATS) .........................................................................29
C. A GREEMENT ON TRADE -RELATED ASPECTS OF THE INTELLECTUAL PROPERTY RIGHTS  (TRIPS 
AGREEMENT ) .............................................................................................................................. .............30
IX. THE HKSAR'S PARTICIPATION IN OTHER INTERNATIONAL AND REGIONAL  TRADE 
FORUMS......................................................................................................................... .......................30
A. A SIA-PACIFIC ECONOMIC COOPERATION (APEC) ...................................................................................30
B. O RGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT  (OECD) ......................................31
C. W ORLD CUSTOMS ORGANIZATION ...........................................................................................................31
D. O THERS ............................................................................................................................... .....................31
X. HONG KONG, CHINA'S OBJECTIVES FOR THE MULTILATERAL TRADING  SYSTEM 
UNDER THE WTO .................................................................................................................. .................32Hong Kong, China WT/TPR/G/52
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I. OVERVIEW
1. This Trade Policy Review (TPR) of Hong Kong, China comes at a time of unprecedented
volatility and contraction of trade and economies in Asia and around the globe.  It also comes some 18
months after the establishment of the Hong Kong Special Administrative Region (HKSAR) of  thePeople's Republic of China (PRC).  As will be fu lly evident from both our Report and that of the
Secretariat, neither of these events have changed, nor shaken Hong Kong, China's firm commitment to
the multilateral trading system, nor our belief in open and free markets, the rule of law, and sound
economic and fiscal policies.  In all these, we have had the full backing of the Central People’s
Government (CPG) of the PRC, which, in accordance with the Basic Law, has left the Government ofthe HKSAR to manage our economic and trade affairs entirely as we think fit.
2. A great deal has happened in Hong Kong since the 1994 TPR.  Momentous changes have
taken place, the most significant clearly being Hong Kong's reunion with the mainland of China.
Nevertheless, the direction of our trade policies has remained consistent and our resolve to implement
what we set out to do has been reinforced.  This can be seen from the vast array of measures that havebeen taken over the past four years to liberalize our markets, to implement agreements entered into,
and to maintain a free and level playing field.  Several areas are worth highlighting. In intellectual
property, our regime has been further improved with new laws in all key areas as well as heightened
enforcement actions.  In telecommunications, our markets, already free, are now amongst the most
competitive in the world. Our financial services have undergone many developments in order to makethem stronger, better regulated and more competitive.  We have joined the Agreement on Government
Procurement.  We are a party to the Information Technology Agreement.  Our actions speak for
themselves.
3. Any trade review at this time would be l acking if it did not cover the current economic
turbulence, which has cast a dark cloud over many economies. Hong Kong has not been immune.
Trade flows to neighbouring countries have moderated considerably.  Tourism has also dropped,
which in turn has hurt both services and retail trades.  Consumer and investment demand has beensluggish amidst the abrupt downturn of the econo my.  The HKSAR's GDP for 1998 is now forecast to
contract by around 4% in real terms.
4. No doubt, the HKSAR economy has suffered a severe setback.  But we have shown ourselves
to have the resolve to take the hard medicine and the right set of circumstances to be able to do so.
The Government of the HKSAR has zero debt: indeed we have fiscal reserves of US$57 billion as atend June 1998.  We have the world's third largest foreign currency reserves.  As at end of August
1998, they stood at US$92.1 billion.  Government expenditure has been consistently kept below 20%
of GDP.  Tax rates are low and the system is simple. The property market in the HKSAR is such that
adjustments are rapid:  painful at the time but it also means that recovery comes quickly. Property
prices have dropped by 45% since their peak in October 1997 and rentals are on a strong downwardtrend.  Wage rates are moderating as unemployment climbed in recent months.
5. These adjustments, which we have already bore the brunt of, mean that the HKSAR is
regaining its competitive edge at a fast pace and is in a very good position to spring back when the
global economic situation improves.  It has, if anything, strengthened our resolve further to liberalize
our markets and to ensure that the multilateral trading system remains key in promoting further
liberalization in the world economy.  We shall remain a very active and committed Member of the
World Trade Organization (WTO), and continue to speak forcefully in other fora where liberalization
of trade is a key aim.WT/TPR/G/52 Trade Policy Review
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II. ESTABLISHMENT OF THE HKSAR
A. THE CONSTITUTIONAL FRAMEWORK
6. The Hong Kong Special Administrative Region of the People's Republic of China was
established on 1 July 1997 in accordance with Article 31 and Article 62(13) of the Constitution of the
PRC and, as such, enjoys a high degree of autonomy.
7. The Basic Law is the constitutional document of the HKSAR.  It provides the HKSAR with
many important guarantees in accordance with the three guiding principles of "One Country, Two
Systems", "high degree of autonomy", and "Hong Kong people ruling Hong Kong".
8. Article 11 of the Basic Law provides that in accordance with Article 31 of the Constitution of
the PRC, the systems and policies practised in the HKSAR, including the social and economic
systems, the system for safeguarding the fundamental rights and freedoms of Hong Kong residents,the executive, legislative and judicial systems, and the relevant policies, shall be based on the
provisions of the Basic Law.  Article 5 specifically provides that the socialist system and policies shall
not be practised in the HKSAR, and the previous capitalist system and way of life shall remain
unchanged for 50 years.  Other key prov isions of the Basic Law are in Annex 1.
9. With the first anniversary of the HKSAR's reunification with the mainland of China behind
us, it has been clearly demonstrated that the thr ee guiding principles of "One Country, Two Systems",
"a high degree of autonomy", and "Hong Kong people ruling Hong Kong" have been put into practice.
Our legal system remains intact and separate from that in the mainland of China, and the rule of law is
preserved.  Our judiciary remains independent and professional.  We continue to maintain a
level-playing field, and good law and order.  The freedoms and lifestyles of the Hong Kong people, as
provided for in the Basic Law, remain unchanged.  The community is as open and vibrant as always.
Hong Kong remains a free port, a separate customs territory, and an international financial centre.The Government of the HKSAR on its own applies immigration controls on entry into, stay in, and
departure from Hong Kong.
10. After reunification, the HKSAR, as before, plays an active role in the international arena and
maintains close contact with her international partners.  In accordance with the relevant provisions of
the Basic Law, the Government of the HKSAR has been authorized by the CPG to conclude nearly 40bilateral agreements with other countries in the areas of air services, visa abolition and reciprocal
juridical assistance.  Since 1 July 1997, representatives of the Government of the HKSAR have
participated in more than 500 interna tional conferences on our own using the name
"Hong Kong, China".  Most of these conferences related to trade, economic and shipping matters and
were organized by international organizations such as the WTO, the Asia-Pacific EconomicCooperation (APEC), the International Maritime Or ganization (IMO) and their subsidiary bodies.
Representatives of the HKSAR have also participated as members of the PRC delegation in more than
50 international conferences limited to state parties, most of which were in the fields of
communication, civil aviation, etc.
11. Senior CPG leaders have repeatedly reaffirmed the State's commitment to implement in full
the three guiding principles enshrined in the Basi c Law and this commitment is substantiated by the
facts.
B. O
BJECTIVES OF THE HKSAR' S TRADE POLICY
12. The long-held objectives of the HKSAR's trade policy are threefold:Hong Kong, China WT/TPR/G/52
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(a) to promote a free, open and stable multilateral trading system;
(b) to safeguard the HKSAR's rights and fulfill its obligations under multilateral, regional
and bilateral trade and trade-related agreements and arrangements;  and
(c) to secure, maintain and improve access for the HKSAR's exports.
1. Multilateral
13. Hong Kong, China takes seriously its rights and obligations as a Member of the WTO, and
adheres to WTO/GATT principles of free trade, non-discrimination and most-favoured nation
treatment. We support a strong and credible multilateral trading system to sustain global trade
liberalization and economic growth.  Hong Kong was one of the WTO's founding Members upon its
establishment on 1 January 1995.  Our membership and participation in the WTO remain unchanged
after the establishment of the HKSAR on 1 July 1997. With effect from that date, Hong Kong
continues to participate in the WTO as a separate member, under the name "Hong Kong, China".
2. Regional
14. While the HKSAR is a staunch supporter of the multilateral trading system, we also attach
great importance to regional economic cooperation forums with the aim to promote free trade and
reinforce the multilateral trading system. We have participated actively and made contributions to the
work of Asia-Pacific Economic Cooperation (APEC) since assuming membership in 1991. In a
similar vein, we have also participated actively, since 1989, in the trade and investment activities of
the Organization for Economic Cooperation and De velopment (OECD) primarily in the capacity of
either a Dynamic Non-Member Economy, or an observer to its committees.
3. Bilateral
15. The HKSAR's bilateral trade policy focuses on safeguarding its rights and discharging its
obligations.  At the same time, we seek to secure and maintain maximum access for Hong Kong's
exports to international markets.  Where necessary,  the HKSAR responds to trade measures of other
trading partners through bilateral, multilateral and other appropriate channels.  To this end, we rely on
the GATT/WTO as the cornerstone of the HKSAR's external trade policy.
III. TRADE AND ECONOMIC ENVIRONMENT
A. ECONOMIC ENVIRONMENT
1. Structure and Development of the Economy
16. Hong Kong is strategically located at the doorway to the mainland of China.  It is also
situated on the international time zone that bridges the time gap between North America and Europe.Both attributes reinforce the HKSAR's position as a global centre for finance, business and
communications.  Hong Kong is ranked the eighth la rgest trading entity in the world.  It operates the
busiest container port in the world in terms of throughput, and the busiest airport in terms of the
volume of international cargo handled.  It is the world's sixth largest banking centre in terms of
external banking transactions, and the seventh largest foreign exchange market by turnover.  Its stockmarket has Asia's second largest market capitalization.
17. The HKSAR owes its strength to sound economic fundamentals, substantial fiscal reserves
and foreign exchange reserves, zero fiscal debt, business-friendly government policies, a competentWT/TPR/G/52 Trade Policy Review
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workforce complemented by a pool of shrewd entrepreneurs, an extensive and efficient network of
transport and communications infrastructure, a high degree of internationalization, and open financial
markets.  Added to these are a simple taxation system with low tax rates, free and fair market
competition, a fully convertible and stable currency, tight fiscal discipline, a well-supervised banking
sector, sound monetary system and a comprehensive legal framework.  On these virtues, the World
Economic Forum ranks Hong Kong as the world's second most competitive economy, while the U.S.Heritage Foundation and Fraser Institute of Canada rank it as the freest economy in the world.
18. Over the past two decades, the Hong Kong ec onomy has more than tripled in scale.  Hong
Kong's GDP has been growing at an average annual rate of about 7% in real terms, twice as fast as the
world economy and considerably outperforming the OECD economies.  Per capita GDP in the
HKSAR reached US$26,600 in 1997.
19. The open-door policy and economic reforms in the mainland of China implemented since the
late 1970s have not only opened up a huge production hinterland for Hong Kong's manufacturers, but
also created abundant business opportunities for a wide range of service activities in Hong Kong.  The
past two decades therefore saw a significant transformation of Hong Kong into a predominantly
service-based economy.  The growth and development in financial and business services wasparticularly rapid.  The significance of the service sectors as a whole  in terms of their contribution to
GDP thus rose steadily, from 70% in 1985 to 74% in 1990 and further to 84% in 1996.  The
contribution of the manufacturing sector to GDP concurrently declined, from 22% in 1985 to 18% in
1990 and further to 7% in 1996.  The fall in GDP contribution by the manufacturing sector should
nevertheless be viewed in conjunction with the conc urrent substantial growth in import/export firms
engaged in sub-contracting arrangements in the mainland of China.  Many of these firms are formerly
manufacturing firms which have shifted almost all of the labour-intensive manufacturing processes to
the mainland of China, leaving such high value-added functions as marketing, orders processing,
materials sourcing, design and product development, and quality control with the local firms.  So a
fair part of the HKSAR's services are generate d from traditional "manufacturing" industries whose
production base has been expanded into the mainland of China.
(a) Recent Performance
20. As an integral part of the world economy, Hong Kong cannot be immune from the profound
shocks emanating from elsewhere in the region and beyond. The economy has been in a state of
consolidation and adjustment, amidst the slump in the asset markets, higher interest cost, subdued
local sentiment and uncertain business outlook brought about by the impact of the financial turmoil.
GDP fell by 2.8% in real terms in the first quarter of 1998 and by 5% in the second quarter, bothfigures over the relevant quarters in 1997.
21. Export performance slowed considerably, hit by a dip in import demand in Japan and East
Asian economies feeling the pinch of the currency crisis, although consumer demand in the U.S. and
E.U. provided a partial offset. Exports of services continued to be curtailed by the weakness in
inbound tourism. Local consumer spending suffered a distinct setback.  Labour market conditionsslackened considerably.  The unemployment rate rose sharply to 5% in the period ending August
1998.  The HKSAR's GDP for 1998 as a whole is now forecast to contract by around 4% in real
terms.
22. Yet the HKSAR economy has been adjusting expeditiously so as to recoup competitiveness.
Property prices and rentals have fallen substantially from their peaks in 1997.  Wages and salaries are
softening.  As inflation is now dow n to its record low, the cost of living and cost of doing business in
the HKSAR have both moderated.  The local workforce is adapting promptly to the more difficultHong Kong, China WT/TPR/G/52
Page 9
employment conditions, and the corporate sector is slimming for greater operational efficiency.  These
are the necessary moves to be taken by the private sector for an efficient adjustment process to carry
through.  Thus, once the regional environment and the local sentiment improve, these will provide the
HKSAR with a strong basis for pr ompt return to positive growth.
(b) Linked Exchange Rate
(i) Operation of the Linked Exchange Rate System
23. The linked exchange rate system (the link) was introduced in October 1983.  It is a form of
currency board system, which theoretically requires the monetary base to be backed by a foreign
currency at a fixed exchange rate.  The monetary base is normally defined as the amount of banknotes issued and the balance of the banking system (the reserve balance or the clearing balance) held
with the currency board for the purpose of effecting the clearing and settlement of transactions
between the banks themselves and also between th e currency board and the banks.  The expansion or
contraction in the monetary base would lead to interest rates for the domestic currency to fall or rise
respectively, creating the monetary conditions that automatically counteract the original capitaloutflow or inflow, ensuring stability  of the exchange rate throughout the process.  It is through such
built-in autopilot mechanism that exchange rate stability is maintained under the currency board
system.
24. The issue and redemption of bank notes, through the note issuing banks, are required to be
made against U.S. dollars at the fixed exchange rate of HK$7.80 to US$1.  Specifically, Certificatesof Indebtedness, which give the authority to the note issuing banks to issue bank notes, are issued and
redeemed against U.S. dollar at that fixed rate and for the account of the Exchange Fund.  In other
words, all Hong Kong dollar banknotes are fully backed by U.S. dollar.
25. At present, all licensed banks are required to  maintain a clearing account with the Hong Kong
Monetary Authority (HKMA) for the account of the Exchange Fund.  The aggregate balance in these
accounts represents the clearing balance of the banking system.  In operating the clearing accounts,
the HKMA ensures that this crucial part of the mone tary base is also subject to the discipline of the
currency board arrangements.
26. The HKMA also provides an undertaking to licensed banks to convert Hong Kong dollars in
their clearing accounts into U.S. dollars at the fixed exchange rate of HK$7.75 to US$1 (the
Convertibility Undertaking).
(ii) Performance of the Linked Exchange Rate System
27. In the last fifteen years, the link has ridden out a number of external shocks including the
1987 World Stock Market Crash, the Gulf War in 1990, the Exchange Rate Mechanism Crisis in
1992, the brief attack on the Asian currencies includin g the Hong Kong dollar in the aftermath of the
Mexican crisis in January 1995 and the latest regional financial turmoil.  The Hong Kong dollar has
remained rock solid throughout these events.  The maximum deviation of the Hong Kong dollarexchange rate from the linked rate of 7.80 is less than 1%.
28. The robustness of the link has been underpinned by the strong foreign exchange reserves
(US$92.1bn as at end-August 1998), a consistent track record of fiscal discipline (average fiscal
surplus around 2% of GDP since 1984), a healthy banking system (capital adequacy ratio above 17%
and bad debt ratio less than 2% for 1997) and flexibility of the economy to adjust to external shocks.WT/TPR/G/52 Trade Policy Review
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(c) The Asian Financial Turmoil
29. The successful defence of the Hong Kong dollar linked exchange rate amidst the Asian
financial turmoil and heavy selling pressure on th e Hong Kong dollar in October 1997, January and
June 1998 is a clear demonstration of the effective operation of the linked exchange rate system in
exactly the same simple and robust manner as described above.  On all of these occasions, banks
collectively sold more Hong Kong dollars than the balances in their clearing accounts kept with theHKMA.  When those foreign exchange transactions were due for settlement, there was an acute
shortage of interbank liquidity which led to a rise in  interbank interest rates.  This effectively stemmed
capital outflow and restored the stability of the exchange rate.  As a result, the Hong Kong dollar
exchange rate has remained remarkably stable throughout the turmoil and only moved within a
narrow range of HK$7.725 to 7.750.  On the securities side, notwithstanding exceptional volatilitiesand heavy turnover, the market has been able to continue to operate efficiently and orderly throughout
the period, demonstrating that the market reform over the past decade has been effective.
30. From October 1997 to January 1998, the market remained very volatile and sensitive.  While
we rode through this particularly stormy period with our currency remaining stable, and the securities
and futures markets operating orderly and efficiently, we considered it prudent to conduct acomprehensive review on both the monetary side and the securities side of the market.  The Report of
the Financial Market Review was published in April 1998.  Whereas the Report refrained from
drawing conclusions while the turmoil was still very  much underway at that time, it nonetheless noted
that the defence mechanism for the currency has very effectively preserved the stability of the
exchange rate and the monetary system.  The prudential regulatory framework for both the banking
and the securities sectors, which we have carefully built up over the years, have formed effective
buffers against the recent shocks.  The Report also identifies a number of areas in the current systemswhere improvement at a technical and operational level are warranted.  Some of these measures have
already been put in place while others are under active implementation.
31. However, following a number of negative factors surfacing in July, including the political
uncertainty in Japan and the poor corporate results locally, the Hong Kong dollar came under fierce,
continuing and concerted speculative attack in end July.  At the same time, the open interests in theHang Seng Index futures market also started to build up substantially between end July and early
August, strongly suggesting a “double-play” tactic that aimed to attack the currency and money
market and sell down the stock market on the one hand, and profit from the futures markets on the
other.  The selling pressure on the Hong Kong dolla r continued into the first week of August, fuelled
by repeated and escalated rumours on Reminbi devaluation and the delinking of the Hong Kongdollar.  Open interests in the futures market rose to the unprecedented level of 100,000 contracts and
above.  It became clear that the speculators’ strategy was to undermine the stability of the linked
exchange rate of the Hong Kong dollar, which in turn would jack up the interest rate sharply and send
the already nervous stock market further down, reaping the huge profits from the accumulated short
open interests in the stock index futures market.
32. It was under such circumstances that the Government of the HKSAR launched the
counter-activities in the second half of August.  The purpose of the operation in the stock and futures
markets was to frustrate the “double play” strategy of speculators. The Government was conscious of
the possible downside of the market operations, including in particular, possible misunderstanding of
both local and international investors that the Gove rnment might be interfering with market forces
with a view to artificially jacking up the stock ma rket prices.  We believe, however, doing nothing in
such circumstances would entail even greater risks and cause damages to our economy and the societyas a whole, that would be difficult and far more expensive to repair.  The situation was exceptional
and commanded exceptional measures.  We continue to believe that should the government have notHong Kong, China WT/TPR/G/52
Page 11
acted promptly as it did, the stability and integrity of our financial markets would have been severely
undermined to such extent that public confidence would have been put under serious threat.
33. The market operations by the Government lasted for about two weeks until end August.
Since then, the Government has basically been inactive in the market.  In order to make our marketsless susceptible to cross-market manipulation and volatilities, a series of measures were introduced in
both the currency market, and the securities and futures markets.  To further strengthen the currency
board arrangements, the HKMA announced on 5 September a package of seven technical measures.
In sum, the HKMA undertakes to convert the Hong Kong dollars in the banks’ clearing accounts with
the HKMA into U.S. dollars at the fixed exchange rate of HK$7.75 to US$1.  The rate will move to
7.80 when market conditions permit.  This represents our strong commitment to the linked exchange
rate system.  We also provide banks with greater access to the Discount Window for liquidity
assistance through repurchase agreement using Exchange Fund papers, which are fully backed by
foreign reserves.  On the securities and futures side, the Government put forward a 30-point
programme with a view to strengthening the discipline and transparency of the markets.  Theproposed measures cover six specific areas including short selling activities, system improvement,
risk management, rule enforcement, inter-market surveillance and contingency power.  The
programme also proposes, as longer term measures, full participation of investors in the central
electronic clearing and settlement systems for securities transactions, and the implementation of a
completely scripless securities market in the HKSAR.
34. The Government of the HKSAR is fully committe d to the maintenance of the linked exchange
rate system which is a cornerstone of Hong Kong's monetary and financial stability.  No foreign
exchange controls will be practised in the HKSAR, as clearly provided in the Basic Law.  The
preservation of the link, which has buttressed confidence in the our monetary and financial systems, is
in the long term interest of the HKSAR.  We al so remain committed to maintaining a free, open and
transparent financial market in the HKSAR that promises a level playing field for both local and
overseas investors and market operators.
B. E
XTERNAL TRADE RELATIONS
35. External trade plays a vital role in the HKSAR’s economic development. Trade in goods and
services expanded by about 13 times and four times respectively over the past two decades. The value
of our total trade in goods and services amounted to around 265% of its GDP in 1997.
1. Merchandise Trade
(a) External Trade
36. From 1994 to 1997, the value of the HKSAR’s merchandise trade grew from HK$2,421
billion to HK$3,071 billion with an average annual growth rate of 8.3%.WT/TPR/G/52 Trade Policy Review
Page 12
Table 3.1
The HKSAR’s External Merchandise Trade Performance, 1994-1997
(HK$ billion)
Trade Year Percentage Change over
Previous Year
’94 ’95 ’96 ’97 95 96 97
Total Trade 2,420.7 2,835.2 2,933.5 3,071.0 17.1 3.5 4.7
Imports 1,250.7 1,491.1 1,535.6 1,615.1 19.2 3.0 5.2
Exports 1,170.0 1,344.1 1,397.9 1,455.9 14.9 4.0 4.1
of which Domestic
Exports222.1 231.7 212.2 211.4 4.3 -8.4 -0.4
Re-exports 947.9 1,112.5 1,185.8 1,244.5 17.4 6.6 5.0
Source: Census and Statistics Department.
37. In 1997, the HKSAR was the world’s eighth-largest trading entity in terms of value of
merchandise trade; the fifth-largest if all Member States of the European Union are counted as a
single entity.  Its largest trading partner is the mainland of China, followed by the U.S. and Japan.
38. The HKSAR’s external trade, nevertheless, slackened considerably in the first half of 1998
upon the impact of the financial turmoil.  Exports of goods were dampened by the dip in import
demand in Japan and in all the other East Asian economies.  But exports to the conventional markets
such as U.S. and E.U. performed better and provided  some offset.  As a whole, total trade fell by 6.7%
in value term in the first eight months of 1998 over  a year earlier.  Yet with imports showing an even
faster decline along with the consolidation in domestic demand, the ratio of visible trade deficit to
imports narrowed to 7.4%, from 11.4% a year earlier.
(b) Domestic Exports
39. In the first half of 1998, domestic exports declined by 5.4% in value terms over a year earlier.
Clothing continued to be the largest component of domestic exports, valued at HK$72.2 billion or34.2 per cent of the total in 1997.  This percentage has remained stable over the past decade.  At
HK$33 billion, electrical machinery, apparatus and appliances came second.  Other domestic exports
included photographic apparatus, equipment and supplies and optical goods; watches and clocks;  and
textiles.  In 1997, the mainland of China, the U.S. and the United Kingdom were Hong Kong's largest
markets, absorbing respectively 30.2%, 26.1% and 5.1% of total domestic exports.
(c) Re-exports
40. Re-exports remain the main driving force in the HKSAR’s total exports.  In the first half of
1998, however, re-exports fell by 1.6% in value terms over a year earlier.  The slow-down was mainly
attributable to the distinct slackening of intra-regiona l trade, but the further shift in the structure of the
HKSAR’s external trade to offshore trading also  tended to dampen the growth in re-exports.
41. Principal commodities re-exported included electrical machinery, apparatus and appliances,
and telecommunications and sound recording and reproducing apparatus and equipment, valued atHK$253.6 billion in 1997.  The mainland of China, Japan and Chinese Taipei were the main origins
of the re-exports; the mainland of China, the U.S. and Japan were the major destinations.Hong Kong, China WT/TPR/G/52
Page 13
(d) Imports
42. The HKSAR is heavily dependent on imported resources to meet the needs of its people and
its diverse industries.  In the first half of 1998, imports fell by 5.7% and 2% in value and real terms
respectively over a year earlier.  This decline was caused in large part by the weak domestic demand.The slow down in re-export trade also contributed, though of much less significance.
43. Consumer goods constituted the largest sh are of the HKSAR’s total imports, reaching
HK$587 billion in 1997.  This was followed by raw materials and semi-manufactured goods
(HK$562.4 billion) and capital goods, foodstuffs and fuels (HK$465.7 billion).  The mainland of
China, Japan, and the U.S. were the main supp liers of HKSAR’s imports in 1997, accounting for
respectively 37.7%, 13.7% and 7.8% of the total.
2. Service Trade
44. The HKSAR’s export and import of trade in services registered robust growth in the past
decade, with average annual growth rates reaching 6% and 8% in real terms respectively. The
HKSAR ranked 12th in the world league of commercial services trading entities in 1997 - the ninthlargest exporter and the 15th largest importer, according to the latest estimates by the WTO
Secretariat.  The major components of the HKSAR’s trade in services are shipping, civil aviation,
tourism, and various financial services.  There has also been an increasing demand for professional
and other support services.  Offshore trading, cross-border land transport services and other business
services, including exports of construction, legal, accountancy, computer and managementconsultancy services to the mainland of China and other East Asian economies, have all shown rapid
increases.
45. In the first half of 1998, exports of services suffered a setback along with the weakness in
inbound tourism and the slow-down in visible trade.   Yet inbound tourism began to show the first
signs of revival most recently.  Import of services had a modest increase, due to the continued growth
in outbound trips by the HKSAR residents.  Offshore trading should have also continued to rise on the
back of sustained growth in exports by foreign- funded enterprises in the mainland of China.  The
invisible trade surplus attained should still be siz eable, rendering a considerable offset to the visible
trade deficit.
IV. TRADE PRACTICES : RECENT DEVELOPMENT
A. I
MPORT AND EXPORT MEASURES
46. The HKSAR's import and export system is characterized by :
(a) zero tariff;
(b) minimum controls; and
(c) no subsidies or assistance to exports.
47. The HKSAR applies zero tariffs on all imports and exports of goods.  Import and export
controls are kept to the minimum, and either stem from obligations under various internationalundertakings, or are applied for health, safety or security reasons.  A list of principal statutory
provisions under the purview of the Director-Gener al of Trade and other government agencies which
provide the legal backing to the control of imports and/or exports to the HKSAR is at Annex 2.WT/TPR/G/52 Trade Policy Review
Page 14
1. Sectoral Measures
48. Only a few items are under absolute prohibition.  Such items include:  chloroflurocarbons,
1,1,1-trichloroethane, tetrachloromethane, hydrobromofluro-carbons and halons imported for local
consumption;  ozone depleting substances imported from non-parties to the Montreal Protocol on
Substances that Deplete the Ozone Layer;  smokeless tobacco products which the WHO has ruled to
be carcinogenic;  food containing non-permitted colouring matter, artificial sweeteners, aflaxtoxins,erucic acid, preservatives, anti-oxidants; and certain metals which are prohibited to protect public
health.
49. Certain items are subject to import and export licensing requirements, as set out in paragraphs
4.5 - 4.18 below.  Such requirements are administered  by the relevant government departments.  In
some cases, fees are charged to recover the operating costs of import and export licensing systems.Exports of a wide range of textiles and clothing are subject to quantitative restraints under the WTO
Agreement on Textiles and Clothing (ATC).  Imports of rice must meet, but may not exceed,
minimum levels prescribed by the Director-General of Trade.  Quantitative import restrictions apply
to certain ozone depleting substances.  The HKSAR also enforces trade sanctions against certain
countries in accordance with the Resolutions of the United Nations Security Council.
(a) Textiles and Clothing
50. Domestic exports of textiles and clothing are important to the HKSAR’s trade, accounting for
more than 40% of the HKSAR’s total domestic exports.  Among these, about 60% are for export to
the four restrained markets which have imposed quantitative restraint on Hong Kong.  They include
the U.S., the E.U., Canada and Norway.
51. Hong Kong, China takes its obligations under the WTO ATC seriously.  In order to fulfil such
obligations, the Government of the HKSAR has instituted a comprehensive control regime on theimport and export of textiles and clothing.  Legal framework of the control system is provided for
under the Import and Export Ordinance and its subsidiary legislation, which stipulate that all imports
and exports of textiles and clothing, other than a few exempted items, are required to be covered by
valid licences or notifications.
52. In order to uphold the integrity of the control system, the HKSAR maintains an effective
checking system to detect and prevent fraudulent import and export of textiles and clothing.  The
Commissioner of Customs and Excise is responsible for enforcement work of the control system.  To
further enhance the control system, a more targeted  approach in conducting checks and investigations
has been adopted.  Factory Audit Check, which was introduced in 1996, enables customs officers to
conduct more comprehensive and in depth checking on factories manufacturing textiles and clothing.
53. Furthermore, a new Production Notification (PN) arrangement was implemented with effect
from 1 July 1996 for the purpose of strengthening the textiles export controls system and for ensuring
origin compliance in respect of cut-and-sewn garments.  The PN is a notification required to be
lodged with the Trade Department before produc tion starts.  Based on the notification, customs
officers will be able to conduct real-time verification of the origin conferring production process.This mechanism proved to be very effective in en forcing the origin rule for cut-and-sewn garments
and for combating origin frauds.Hong Kong, China WT/TPR/G/52
Page 15
(b) Reserved Commodities
54. Imports of rice, frozen meat and poultry are subject to licensing control under the Reserved
Commodities Ordinance and its subsidiary regulations.  The purpose behind is to ensure a regular and
adequate supply, and to provide a reserve stock for emergency situations.
(i) Rice
55. Rice is the most important staple foodstuff in the HKSAR. Yet, there is no commercial
production of rice, and we rely entirely on imports for local consumption.  Importers are free to
import rice from any source.  Major sources of imports in 1997 were Thailand (73.8% of total
imports), Australia (19.5%) and the mainland of China (3.2%).  Importers are registered with theTrade Department as stockholders to ensure that they share the responsibility of maintaining a reserve
stock of rice in the HKSAR.  Imports of rice require licences.  Imports for local consumption are
governed by quotas.  However, applications for imports for subsequent re-export are freely approved.
56. The amount of import quotas is determined on a half-yearly basis taking into account the
demand and supply of rice in the coming import period to ensure that at any given time there isreserve stock equivalent to the amount required fo r 45 days’ consumption.  Unlike most other import
quota regimes which aim at curbing imports, under the rice control scheme, importers are required to
import in excess of the amount required for consump tion to a level which would ensure that at any
given time there is an adequate reserve stock of 45 days.  In essence, the establishment of import
quotas is a regulatory measure to ensure that rice is imported in each import period not only to matchconsumption but to maintain a steady reserve stock to cushion any sudden disruption of supply in
coming months.
57. With a view to introducing more competition in the rice trade, the Trade Department has
operated an Optional Quota System since October 1997.  Under this system stockholders can choose
to import slightly more or slightly less rice than the amount allocated according to their basic quota
units held.
58. The Reserved Commodities Ordinance (Cap. 296) and its subsidiary regulations provide the
legal framework for the control of rice.  The law confers extensive powers on the Director-General of
Trade to control not just import and stock keeping of  rice, but also on storage, movement, distribution,
sale and pricing of rice.  In practice the Director-General of Trade exercises his powers in relation to
only import and stockholding (including storage), but has never taken any measures to regulate the
price of rice.  This is because the scheme has been developed for internal security rather than foreconomic purposes.
(ii) Frozen Meat and Poultry
59. Frozen meat and poultry refer to frozen or ch illed meat (including beef, mutton, pork, lamb
and all offals) and frozen poultry (including fowl, duck, goose or turkey and parts thereof).  The
control on frozen meat and poultry enables the Trade Department to monitor the imports and stocklevels of frozen meat and poultry in the HKSAR, and helps maintain a reserve stock for emergency
purposes.  The licensing of frozen meat and poultry is under review to see whether they should
continue to be controlled as reserved commodities.WT/TPR/G/52 Trade Policy Review
Page 16
(c) Strategic Commodities
60. Strategic commodities are subject to both import and export controls so as to prevent the
HKSAR from being used as a conduit for proliferation, and to secure Hong Kong’s continued access
to high-tech goods and technology essential for its economic developments.
61. Under the strategic trade control system, the Trade Department is the licensing authority, and
the Customs and Excise Department is the enforcement agency.  The system is provided for in theImport and Export Ordinance.  Items subject to control are listed out in the Import and Export
(Strategic Commodities) Regulations to the Ordinance.  The overall control list follows those adopted
by the various international non-proliferation regimes.
62. The Weapons of Mass Destruction (Control of Provision of Services) Ordinance was enacted
in June 1997 to prohibit the provision of services which assist the development of such weapons.
(d) Other Licensing Control
63. Other products subject to licensing control and the purposes for imposing the control are set
out at Annex 3.
B. R
ULES OF ORIGIN
64. Imports into Hong Kong are not required to be accompanied by certificates of origin (COs)
issued by the exporting countries concerned.  With regard to exports, the Government of the HKSAR
provides an origin certification system to facilitate exporters to meet the requirements of importing
countries.  COs are required as a customs clearance document for the export of restrained textiles to
the E.U. and Norway.
65. The Trade Department is the government agency responsible for administering the origin
certification system and issuing COs.  Apart from  the Trade Department, five other organizations
have been designated by the Government as competent to issue COs under Article 11 of theInternational Convention for the Simplification of Customs Formalities 1923.  These Government
Approved Certification Organizations are:
the Hong Kong General Chamber of Commerce;
Federation of Hong Kong Industries;
the Indian Chamber of Commerce, Hong Kong;the Chinese Manufacturers’ Association of Hong Kong;  and
the Chinese General Chamber of Commerce.
66. To uphold the integrity of the certification system, only registered manufacturers verified to
have the manufacturing capability to perform the origin-conferring processes of their registered
products may apply for certificates of origin.  The Trade Department also ensures that all issuingorganizations adopt the same practices and procedures in the issue of certificates of origin, and that
the rules of origin are followed.
67. Hong Kong rules of origin are established in accordance with internationally accepted
practice, and conform with the standards and practices set out in the Kyoto Convention.Hong Kong, China WT/TPR/G/52
Page 17
C. INFORMATION TECHNOLOGY AGREEMENT
68. Hong Kong, China is a party to the Ministerial Declaration on Trade in Information
Technology Products (the "Information Technology Agreement" or "ITA") concluded at the WTO
Singapore Ministerial Conference in December 1996.  To demonstrate our commitment to tradeliberalization, we bound our tariff on all products covered by the ITA at zero in one go, instead of in
four stages, on 1 July 1997.
69. Hong Kong, China has also been participating actively and constructively in the work of the
Committee of Participants on the Expansion of Tr ade in Information Technology Products, including
the negotiation on expansion of product coverage of the ITA.  Hong Kong, China takes a liberalapproach in the negotiation and looks forward to its successful conclusion.
V. SERVICES
A. H
ORIZONTAL MEASURES
70. The policy of the HKSAR is to maintain a liberal services regime.  Most service sectors are
free and open.  For the vast majority, no nationality and residency requirements, or other staffingrequirements are maintained for foreign firms.  No r is there preferential treatment given to service
suppliers from any particular country.
71. Regulations, standards, licensing or registration requirements have been put in place for
certain sectors, primarily for the purpose of promoting a fair and competitive environment, quality of
services and the integrity of the profession.  Such requirements, where they apply, are imposed in anobjective, fair and transparent manner.  They are either promulgated by the Government through
Ordinances and public orders, or issued by related publ ic bodies or market bodies in the form of codes
of practices and rules.
B. S
ECTORAL MEASURES
1. Financial Services
72. Notwithstanding the HKSAR’s already very liberal financial services regime, we have
continued to update our regulatory framework and introduce various trade facilitating measures toensure the HKSAR keeps pace with market developments and international standards, and maintains
its role as a premier international financial centre.  The major improvements since the last TPR in
1994 are set out in the following paragraphs.
(a) Banking
(i) Interest Rates Rules
73. The major deregulation measure in the banking sector of Hong Kong since 1994 is the
liberalization of the Interest Rate Rules (IRR) of the Hong Kong Association of Banks (HKAB)
established since 1964, which used to govern the maximum rate of interest payable by member banks
on Hong Kong dollar deposits of up to $500,000 and 15 months.
74. On 1 October 1994, HKAB removed the interest rate cap on Hong Kong dollar time deposits
fixed for more than one month as a first step of a phased liberalization programme. Further
deregulation of time deposit rules was subsequently implemented.  As a result, 99% of the time
deposits which used to be subject to the IRR have been deregulated, leaving depositors with widerWT/TPR/G/52 Trade Policy Review
Page 18
access to market rates.  The IRR now only apply to current accounts, savings accounts and time
deposits with a maturity or call period below seven days.  These, too, will be reviewed in a
consultancy study being conducted by the Hong Kong Monetary Authority (HKMA) in 1998 on the
outlook of the banking sector for the next five years.
(ii) One-building Condition
75. Overseas incorporated banks intending to set up an operation in the HKSAR must fulfil the
standard prudential requirements, which are in line with the international standards recommended by
the Basle Committee on Banking Supervision.  Once an overseas bank is authorized, it can conduct
the full range of banking business in the same way as  locally incorporated banks, except that overseas
banks granted full banking licences after May 1978 and restricted banking licences after April 1990
may maintain offices in only one building.  This was imposed on prudential grounds to avoidexcessive overcrowding in the retail banking sector.  On average, there is roughly one branch per
2,000 working population.  This ratio is extremely high by all standards.  The existence of an
excessive number of retail bank outlets in a small place like Hong Kong would affect the viability of
small banks, especially those which rely on retail business and have a relatively small deposit base.
The knock-on effect of instability on the banking system cannot be underestimated.
76. In September 1994, this “one-building condition” was relaxed to permit foreign banks to set
up a regional office and a back office operation in buildings separate from the branch office.  Since
1978, the number of foreign banks have grown from 67 to 144.  In terms of market share, foreign
banks take up almost 60% of the total loans used in the HKSAR.  These illustrate that foreign banks,
which are totally free to enter the Hong Kong market through acquisition, play a major part in the
banking system in the HKSAR, and the one-branch condition has not caused any market access
difficulty for foreign banks wishing to do business here.
(b) Securities and Futures Markets
77. As an open economy and an international financial centre, the HKSAR's policies and
regulations governing the securities and futures mark ets are applied indiscriminately to participants,
regardless of their nationality.  It has always been ou r policy to maintain a level playing field for all to
compete in the same arena.  Indeed, foreign participation has been playing an increasingly importantrole in our financial markets.  From 1994 to March 1998, the number grew by 48% from 230 to 341.
Moreover, according to Stock Exchange’s Members Transaction Survey 1997, overseas investors
contributed to 22% of the total market turnover va lue, with the U.K. being the largest trader (34%),
followed by the U.S. (26%), Non-Japan Asia (19%), non-UK Europe (7%), Japan (6%) and the
mainland of China and others (both 4%).  Simila rly in the Hong Kong Futures Exchange, foreign
participants accounted for 32% of the total market turnover value in 1997/98.
78. The HKSAR operates a three-tier regulatory system comprising the Government, the
Securities and Futures Commission (SFC) and the front-line market bodies.  At the policy level, the
Government aims to provide a favourable business environment, a level playing field as well as a
sound legal and regulatory framework in which all market participants operate.  The SFC, which wasestablished in 1989, exercises prudential supervision over the securities, financial investment and
futures industries in Hong Kong.  It supervises the management and operations of the Stock Exchange
of Hong Kong (SEHK) and the Hong Kong Futures Exchanges (HKFE) and their clearing houses, and
is also responsible for investor protection and education.  The two Exchanges are responsible for
providing efficient, fair and open market places for the trading of securities and futures contracts,
whereas their respectively clearing houses perform the clearing and settlement functions for theHong Kong, China WT/TPR/G/52
Page 19
different transactions.  These market bodies fulfil their regulatory functions through the promulgation
and enforcement of rules, which are required to be registered and approved by the SFC.
79. Since 1994, we have taken various measures to improve the operations and management of
our securities and futures markets.  These measures were largely driven by the evolution of therelevant markets and aimed to keep Hong Kong in pace with the development of other major financial
centres world-wide.  More importantly, they have also greatly reduced the adverse impact of the
Asian financial turmoil that started in mid-1997, rendering us one of the least affected areas in the
region.  The major ones are:-
80. Enhancing the regulatory regime - In the early 1990s, the leveraged foreign exchange trading
became popular in Hong Kong and attracted large amount of retail investors into the market.  The
SFC took prompt actions to set policy of regulating the market and to safeguard investors’ interest.
The Leveraged Foreign Exchange Trading Ordinance was enacted in September 1994 which imposes
financial and prudential requirements for all forex traders, both local or foreign.
81. Strengthening cross-border cooperations - Globalization has highlighted the need for
regulators world-wide to strengthen cooperation in regulating cross-border transactions.  The SFC has
paid much emphasis in this regard since its inception in 1989.  Since 1994, it has signed Memoranda
Of Understanding with regulators in the PRC, th e U.S., France, Indonesia, Chinese Taipei, Brazil,
Italy, Germany and British Colombia to enhance mutual cooperation and assistance in the provision of
information and investigation.
82. Reducing transaction costs  - To enhance the competitiveness of our markets, various
measures have been taken to lower transaction costs. Our transaction levy for securities and for
futures contracts are now among the lowest in the world.  The Government has waived the stamp duty
requirements for a number of newly introduced products, e.g. stock options, regional derivative
warrants, and for stock borrowing and lending transactions, and has implemented tax reduction in
relation to certain categories of Hong Kong dollar denominated debt securities.
83. Developing new products  - Hong Kong is a mature financial centre characterized by a great
variety of securities and futures products and services.  Since 1994, the Stock and Futures Exchanges
in Hong Kong have launched a variety of new products with an aim to serving the needs for different
types of investors.
84. Facilitating trading  - We are mindful of the need to cut red-tape to facilitate market
participants in joining and maintaining their business in the HKSAR.  The SFC has made a number ofimprovements to streamline the registration requirem ent for the intermediaries in the industry, and
intends to initiate electronic filing in the near future.
85. Enhancing investor protection - With a view to improving investors’ control of their own
property, the Hong Kong Securities Clearing Company (HKSCC) launched the “Investor Participation
Scheme” for Central Clearing and Settlement System (CCASS) in May 1998.  The CCASS services,
which used to be limited to HKSCC’s brokers members and financial institutions such as custodians,
are now available to general investing public as well.  The Investor Participation Scheme enables
general investors to direct the transaction of stocks in and out of their own CCASS accounts
electronically.  This scheme also lays the fundamentals for our ultimate goal for developing a
straight-through movements system in our securities market.
86. Improving settlement efficiency - In May 1998, an electronic message link was established
between the securities settlement system (the “CCASS”) and the inter-bank money payment system,
known as the Real Time Gross Settlement (or RTGS) system.  The linkage enables the delivery ofWT/TPR/G/52 Trade Policy Review
Page 20
stocks and the money payment of a stock transaction to be effected spontaneously and in real time
(also known as real-time delivery-vs-payment, RDvP).   RDvP is now available for trades covered by
settlement instructions and will later be expanded to cover all SEHK-based transactions and other
HKSCC operations.
(c) Insurance
87. The insurance industry in the HKSAR is an international and competitive one.  We have an
open, sound and reliable regulatory regime which measures up to international standards.  Any
insurer, whether incorporated in or outside Hong Kong, which is able to meet the requirements of the
Insurance Companies Ordinance (ICO), can apply for authorization to carry on insurance business in
or from Hong Kong.  As of 30 June 1998, there were 212 authorised insurers in Hong Kong, with
over 50% (112) incorporated outside the HKSAR.
88. The ICO, the primary objectives of which are to protect the interests of policy holders and
promote the general stability of the insurance i ndustry, has been subject to continuous review to
ensure its effectiveness in the light of developments, both locally and overseas.  Amendments were
made to the ICO in 1994 to introduce a regulatory system for insurance intermediaries, i.e. insurance
agents and brokers.  Two Regulations were made to lay down detailed requirements for a margin ofsolvency for long term business, and to codify sound actuarial principles in the determination of long
term business liabilities.  The new solvency marg in is calculated according to the level of the
mathematical reserves and the capital at risk in respect of the long term business.  The regulations
came into operation in October 1995.  Another regulation was also introduced in 1995 to provide a
basis for valuation of the assets and liabilities of general insurers.
89. The ICO was further amended in 1996 and 1997 to enhance effective monitoring of the
solvency position of insurers, and to provide regulatory concessions for captive insurers. Morerecently in 1998, the Authorization Guidelines were revised to clarify that professional reinsurers are
allowed to apply for authorization to carry on both general and long term insurance businesses.
(d) Mandatory Provident Fund
90. In August 1995, Hong Kong took a major step forward in enacting the Mandatory Provident
Fund Schemes Ordinance, which provides the framework for the establishment of anemployment-related, privately managed, Mandatory Provident Fund (MPF) System for the
workforce’s retirement protection.  On-going, wide  consultation continued and amendments to the
Ordinance and two sets of Regulations were subsequently enacted in March and April 1998
respectively to provide comprehensive legislative provisions for the implementation of the MPF
System in the year 2000.
91. Under the prudential regulation and supervision of the Mandatory Provident Fund Schemes
Authority, the MPF System operates under a free market competition environment.  Prudent
investment standards and restrictions are set, having regard to best international standards and market
practices to safeguard scheme member interests, and allow service providers sufficient flexibility in
the management of schemes for best results.  Foreign trust companies may apply for approval astrustees and are subject to the same requirements on capital and management resources. There is no
fixed quota on the number of approved trustees and all applicants meeting the minimum requirements
will be approved as MPF trustees.Hong Kong, China WT/TPR/G/52
Page 21
2. Telecommunications Services
92. There has been significant liberalization in the telecommunications sector in recent years.  We
have conducted reviews of various market segments of the telecommunications industry with a view
to opening up these segments as far as possible.  For example, competition for the local fixedtelecommunication network services (FTNS) market was introduced in mid-1995, following the
expiry of the former monopoly, with the licensing of three new operators in addition to the incumbent.
After a review of the mobile telecommunications sector in 1994, a total of six Personal
Communications Services licences were issued in 1996, to broaden competition to the existing five
cellular mobile services licences.
93. Hong Kong imposed a moratorium on the further issue of FTNS licences for three years from
the issue of the additional licences in June 1995, in order to provide a known competitive environment
for the new licensees to roll out their networks.  This moratorium has expired and we are undertaking
a review on whether applications for additional FTNS licences should be invited.  A decision is
expected by the end of 1998.
94. A recent major achievement in liberalization is the surrender on 31 March 1998 of the
exclusive licence on certain external services and circuits held by Hong Kong Telecom International
Limited more than eight years before its scheduled expiry in 2006.  We have announced our intention
to introduce competition in external service-based telecommunications from 1 January 1999 and
competition in external facilities-based telecommunications fr om 1 January 2000.  The precise way of
opening up these markets is currently subject to a review, with decisions expected by the end of 1998.
This is a liberalization beyond our GATS commitment.
95. There are no limits on the number of operators for other telecommunications services, such as
radio paging services, Internet access services, international calling card (call-back) service and
international value-added network services.  In accordance with Hong Kong, China's commitment
made during the WTO negotiations on basic telecommunications, we have issued licences for virtual
private network (VPN) services, and international simp le resale (ISR) service for fax and data.  There
are no foreign ownership restrictions on operating telecommunications services or facilities in the
HKSAR.
3. Broadcasting Services
96. The HKSAR's broadcasting policy seeks to promote diversity and choice, and to provide a
fair and sound regulatory framework for the broadcas ting industry.  To ensure that local tastes and
culture are adequately reflected in the programmes broadcast, residency requirement for voting
control applies to broadcasting licensees.  Satellite television uplink and downlink licensees, on the
other hand, are not subject to any ownership restrictions.  Indeed, the Government has revamped the
satellite television broadcasting policy since January 1998, and put in place a more flexible and
pro-competition regulatory regime conducive to new investments in satellite broadcasting.  Twolicences have been granted under the new regime.  To increase viewers’ choice, the Government has
also awarded the world’s first commercial scale video-on-demand programme service licence.
97. As a long term policy objective and in line with the global trend of de-regulation, the
Government of the HKSAR is committed to further liberalizing the television industry and opening up
the market for more competition.  A comprehensive review of the television policy is beingconducted.WT/TPR/G/52 Trade Policy Review
Page 22
4. Transportation Services
(a) Air Transport
98. Hong Kong has air links with over 120 destin ations world-wide.  The Government of the
HKSAR is committed to maintaining Hong Kong’s status as a centre of international and regional
aviation, and to ensuring that air transportation services are sufficient to meet the needs of the
travelling public and shippers.  The opening of the new Hong Kong International Airport (HKIA) inJuly 1998 ensures that there will be sufficient airp ort capacity to cater for the long term growth in
demand.
99. The provision of scheduled air services is regulated by a network of bilateral air services
agreements and arrangements between Hong Kong, China and its aviation partners.  The Government
does not maintain any discriminatory measures against foreign airlines.  Competition on scheduled airservices is keen, with over sixty Hong Kong based and foreign airlines providing about 3,000 flights
per week.
100. Applications to operate non-scheduled internati onal air services to and from Hong Kong will
normally be approved if the applicant has reasonably demonstrated that the corresponding scheduled
services cannot satisfy a genuine demand by providing the service or capacity required, and in thecase of applications made by airlines based outsid e Hong Kong, that the government of the country in
which the airline is based would afford no less favourable treatment to a Hong Kong based airline
making a similar application.
101. The HKIA is managed by the Airport Authority (AA) which is a statutory body wholly owned
by the Government of the HKSAR  The AA conducts its business according to prudent commercial
principles.  There is no restriction on foreign privat e investment in supporting services at the airport
such as aviation fuel supply, ramp handling, air cargo handling and aircraft catering.  These servicesare provided by private companies which have obtained franchises from the AA through a
competitive open bidding process.  The AA’s general policy is to allow specialists/experts in the field
to provide the service so as to reduce the need fo r self-handling.  However, subject to operational
considerations such as space constraint and efficiency, airlines could also apply for permission to self-
handle in some areas, and such applications would be considered under objective andnon-discriminatory criteria.
102. There is generally no specific government regulation on air transport-related supporting
services, except aircraft maintenance and repair.  For the latter, the prime objectives of government
regulation are to ensure flight safety and Hong Kong’s compliance with the relevant standards and
recommended practices of the International Civil Aviation Organization.
(b) Sea Transport
103. On marine and port facilities, there are no restrictions or regulatory measures as such on
market access because Hong Kong is a free port.  Virtually all our cargo handling facilities have been
built and are operated by the private sector.  We intend that all our new facilities should be developed
in a similar way.  The Government encourages private investment and support that with a policy ofpositive non-intervention.  Anyone interested in entering the transport business may do so freely.
Almost all port services industry in Hong Kong are provided by private sector, e.g. agency services,
tugs, lighters and towage, bunkers, etc.  There are no restrictions on participation in these services.
104. Within the waters of Hong Kong, there is also the operation of ferry service under franchise
which is provided as a means of public transport.  Please refer to para. 5.36 below.Hong Kong, China WT/TPR/G/52
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(c) Land Transport
105. Our policy is to maintain a public transport system which operates in a competitive
environment and which encourages improvement in services.  We aim at providing a level playing
field for all firms/operators, regardless of their country of origin.  Franchise/licences are required forthe provision of bus, taxi and public light bus services (and ferry service in the case of sea transport).
In general, there is no restriction for the establishment and operation of foreign firms in the public
transport sector.  For bus and ferry franchisee, there is a requirement that majority of the directors of
the grantees of the franchises shall be ordinarily resident in Hong Kong irrespective of their
nationality.  For railway service, except for the two privately owned tramway systems, the railways inHong Kong are built and operated by  two railway  corporations wholly owned by the Government.
Both corporations award design, consultancy and construction contracts on competitive tender.  There
is no restriction whatsoever on the participation of foreign companies in these contracts.
106. A number of tunnels in Hong Kong are constructed by the private sector under “Build,
Operate and Transfer (BOT)” franchises.  Day-to -day management of Government owned-tunnels is
contracted out to the private sector.  These BOT franchises and management contracts of tunnels are
all awarded based on open tender with no restriction against international participation.
5. Professional Services
(a) Construction and Engineering Related Services
107. Qualifications for registration as architects, engineers, landscape architects, planners and
surveyors include possession of an ordinary residence in the HKSAR, attainment of one year’s
relevant professional experience in the HKSAR and possession of an academic qualification of a
standard not less than that of a member of the corresponding professional institute in the HKSAR or a
full membership of a recognized professional institute or registration body.
108. Architects, engineers (structural and civil) and surveyors have to be registered as Authorized
Persons (AP) before they may perform their duties under the Buildings Ordinance, viz. coordinating
building works in the private sector in the HKSAR.  In addition, engineers (structural and civil) have
to be registered as Registered Structural Engineers (RSE) before they may perform their duties under
the Buildings Ordinance, viz. providing consultancy service to the AP on the structural elements of
the building works.  To qualify as AP or RSE, the prerequisite is to be registered with the
corresponding professional registration board in the HKSAR.
109. Electrical and mechanical engineering firms, whet her local or overseas, must register with the
Company Registry before they can operate in the HKSAR.  Technically, there is no entry barrier to
engineering consultancy and contracting firms and they are free to operate within the private sector in
whatever specialization they are competent to work with.
110. For services in the public sector, anyone who has an interest in offering professional services
may apply for inclusion in the Approved List or Directory.  Qualification for admission to the Listusually relates to the strength of the professional staff and relevant experience.  There are no
restrictions on the establishment and operation of foreign firms nor discrimination against foreigners.
(b) Medical
111. Most health care professionals (including medical practitioners, dentists, pharmacists, nurses,
midwives, medical laboratory technicians, radiographers, optometrists, occupational therapists,physiotherapists) are required to register with the relevant statutory Board or Council before they canWT/TPR/G/52 Trade Policy Review
Page 24
practise in the HKSAR.  Registration requirement for chiropractors will be in force soon , pending
enactment of the relevant regulations .
112. The purpose of registration is to ensure that these persons have acquired a professional
standard that can be recommended to the public.  Requirements and standards laid down by the
relevant statutory regulatory authorities are formulated in the interest of public health and safety and
based on objective criteria, such as the level of professional qualification obtained.  Opportunity isprovided for those who wish to register to demonstrate their professional competence through
examinations conducted by the relevant statutory bodies, irrespective of where the person receives
training.
113. All registered health care professionals are treated in the same way regardless of their
nationality.  Locals do not enjoy any preferential treatment.  There are no  limitations on the numberand the total quantity and value of service provided by foreign professionals.
(c) Legal
114. Practising lawyers in the HKSAR are admitted either as solicitors or barristers, and there are
different admission requirements for the two branches of the profession.
(i) Solicitor
115. Following enactment of the Legal Practitioners Amendment Ordinance which came into
operation in July 1994, a new regulatory scheme was introduced for admission of foreign lawyers as
solicitors in Hong Kong after passing the prescribed examinations.  The admission criteria are
objective, standards-based and non-discriminatory.  The main features of the scheme is at Annex 4.
116. The removal of automatic recognition of Commonwealth qualifications and the provision of a
competency-based scheme, under which all foreign lawyers can gain admission as Hong Kong
solicitors through specified examinations, have brought us into line with the general obligations underthe GATS.
117. In addition, the new regulatory scheme has made it possible for many lawyers from other
jurisdictions to practise in Hong Kong, subject to professional codes of practice and discipline, to the
great benefit of the HKSAR's community.  As at the end of July 1998, 406 foreign lawyers, 47 foreign
law firms and 6 associations between foreign law firms and local law firms were registered with theLaw Society.
(ii) Barrister
118. Under current legislation, a person may be admitted as a barrister if he or she satisfies one or
more of the five criteria stipulated in the Legal Practitioners Ordinance (a list of the five criteria is at
Annex 5).  The effect is that apart from qualifications and experience obtained locally, only thoseobtained in selected commonwealth territories are recognised.
119. While the GATS allows selective recognition of qualifications or experience obtained in other
territories, the Government of the HKSAR is disc ussing with the Hong Kong Bar Association on the
necessary steps to be taken to enable lawyers from non-commonwealth jurisdictions who possess the
necessary qualifications and training to gain admission in the HKSAR to practice as a barrister.
120. The Hong Kong Bar Association recognizes the need to change the criteria in order to allow
foreign lawyers who possess the necessary qualifications and training to practise at the Hong KongHong Kong, China WT/TPR/G/52
Page 25
Bar, and has undertaken to propose appropriate amendments in consultation with the Government of
the HKSAR and other relevant parties.  One way woul d be to provide for an examination to be taken
by foreign lawyers who wish to practise as barristers.
(d) Accountancy
121. The accountancy profession of Hong Kong is self-regulated through the operation of the
Hong Kong Society of Accountants (HKSA).  The HKSA - incorporated by the Professional
Accountants Ordinance - is responsible for registering professional accountants, maintaining
accounting, auditing and ethical standards for the profession and conducting professional
examinations.  There is no discriminatory or undue barrier to foreign accountancy practitioners orfirms who intend to practise in Hong Kong.  All practising require ments are equally applied to both
locals and foreigners/foreign firms.  Besides, licensing requirements are pre-established, transparent,
publicly available and objective.
122. There is basically no discriminatory restriction on market access to foreign practitioners in
Hong Kong.  In the case of foreign firms, they may be established in Hong Kong as long as at least
one of their partners or the sole practitioner of the practice is in possession of a Practising Certificate
gained in Hong Kong, be him/her a local or foreigner.  There is no restriction on either the number or
quota of foreign firms/practitioners, nor their nati onality, so long as they meet the professional
qualification/exemption requirements eligible for the issuance of a Practising Certificate.
VI. INTELLECTUAL PROPERTY RIGHTS
A. I
NTELLECTUAL PROPERTY RIGHTS PROTECTION IN THE HKSAR
123. The Government of the HKSAR is fully comm itted to maintaining a robust regime for the
protection of intellectual property rights (IPR).
124. In addition to a sound legal framework that is compatible with the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), we also complement our
intellectual property legislation with sustained and vigorous enforcement efforts, public education of
the importance of protecting IPR, and enhanced cooperation and liaison with rights owners and otherenforcement authorities in the region.
1. Copyright
125. The Copyright Ordinance is fully compatible with the copyright provisions in the TRIPS
Agreement and includes a greater part of the developing international copyright norms evidenced in
the twin World Intellectual Property Organization (WIPO) copyright treaties concluded in Geneva on20 December 1996.
126. The HKSAR operates an "open system" whereby it affords copyright protection to any
original work created or published by anyone anywhere in the world, without requiring registration or
reciprocity.  It is also provided that making copyright works and performances available to the public
via the Internet (or similar digital environment)  needs the consent of the copyright owner and
performer.  Both civil and criminal remedies are available for all kinds of copyright infringement.
Border measures are provided for, protection instigated by way of civil suits.
127. Legislation for parallel importation of copyright articles has also been put in place in such a
way that a balance of interests among copyright owners, exclusive licensees, distributors and
consumers is maintained.  Under the Copyright Ordinance, a person commits an offence if he importsWT/TPR/G/52 Trade Policy Review
Page 26
into the HKSAR an infringing copy of a copyrigh t work without the licence of the copyright owner
(other than for his private and domestic use).  An unauthorized parallel importer commits a criminal
offence if he imports an infringing copy in br each of an exclusive licence agreement before the
expiration of 18 months beginning on the first day of publication of the work anywhere in the world.
However, to guard against potential abuse of power by exclusive licensees in the market that could
affect the availability of goods to retailers and c onsumers, the same Ordinance also stipulates that,
under certain circumstances, it shall be a defence to  a civil actions for infringement for a person who
imports a work without the licence of the copyright owner or exclusive licensee if the latter has acted
unconscionably, e.g. by withholding supply on unreas onable grounds, or by agreeing to supply but on
unreasonable terms.
2. Patents
128. The Patents Ordinance provides for the grant of two types of patent, namely standard patents
and short-term patents.  The grant of a standard patent is based on the registration of a patent granted
by the Chinese Patent Office of the PRC, the United Kingdom Patent Office, or the European Patent
Office, in respect of a patent designating the United Kingdom ("UK").
129. Short term patents are granted in the HKSAR on the basis of a search report from an
international search authority appointed under Article 16 of the Patent Cooperation Treaty (including,
for example, the United States Patent Office and the Japanese Patent Office) and the U.K. Patent
Office.  Applications for short-term patents are ma de directly to the Patents Registry in the HKSAR.
The Registrar examines only the formalities of the standard and short-term patent applications.  The
validity of the standard and short-term patents is open to challenge in the courts.
3. Designs
130. The HKSAR also provides specific protection for designs under the Registered Designs
Ordinance.  A design owner can claim priority from a registered design application in a Paris
Convention country or WTO member territory if he applies in the HKSAR within six months of the
application in the Paris Convention country or WTO member territory.
4. Trade Marks
131. The HKSAR has had its own independent trade marks law since 1873.  The current law is
based on the Trade Marks Ordinance.  However, the HKSAR intends to modernize its trade marks
law and is now preparing a Trade Marks Bill.  The new Trade Marks Bill will facilitate the
registration of trade marks and simplify the registration procedure.  It will also offer enhanced
protection to trade marks proprietors in accordance with prevailing international trends.  The Trade
Descriptions Ordinance provides criminal sanctions for forgery of trade marks registered under theTrade Marks Ordinance in relation of goods.
5. Protection of Geographical Indications
132. Geographical indications are protected in the HKSAR by way of registration as certification
marks under the Trade Marks Ordinance.  A certification trade mark may be registered for goods or
services.  A certification trade mark in relation to any goods is defined as a mark which distinguishesin the course of trade goods certified by any person in respect of origin, material, mode of
manufacture, quality, accuracy or other characteristic, from goods not so certified.  A similar
provision exists for services.  The fact that a mark consists of signs or indications which may serve, in
trade, to designate the geographical origin of goods or services shall not preclude it from being
registered as a certification trade mark in respect of those goods or services.Hong Kong, China WT/TPR/G/52
Page 27
6. Prevention of Copyright Piracy Ordinance
133. The Prevention of Copyright Piracy Ordinance is designed to ensure that the Customs and
Excise Department are better equipped to prevent copyright piracy at the manufacturing level.  It
stipulates that all optical disc manufacturers must  hold a valid licence granted by the Commissioner of
Customs and Excise.  It is also mandatory that each optical disc manufactured in Hong Kong must
bear a specific identification code.  There are stringent criminal sanctions for breaching these
obligations.
7. Other Intellectual Property Rights
134. The HKSAR also provides legal protection to other forms of intellectual property rights such
as original layout-design for incorporation into an integrated circuit and new plant varieties.
B. ENFORCEMENT OF IPR P ROTECTION
135. The Customs and Excise Department is responsible for enforcing the criminal sanctions for
the protection of copyright and trade marks.  The Department investigates complaints and takes action
against the manufacturing, sale, and the import and export of goods infringing copyright ortrademarks.
136. In addition to acting on complaints, the Department also takes self-initiated enforcement
efforts by developing intelligence, intercepting IPR infringing goods at entry and exit points, and
raiding storage and retail outlets.  Dedicated telephone hotlines are available to facilitate the collection
of intelligence given by IPR owners and the public.  It also maintains close liaison with other overseasenforcement agencies for mutual assistance and exch ange of intelligence on piracy and counterfeiting
activities.  There are dedicated contacts to facilitate intelligence exchange with other members of the
World Customs Organization and Asia-Pacific Economic Cooperation.  As a result of determined and
sustained enforcement efforts, record seizures were made in 1997 and in the first half of 1998.
Detailed figures are at Annex 6.
C. H
ONG KONG, CHINA 'S COMPLIANCE WITH TRIPS A GREEMENT
137. When the TRIPS Agreement was signed, Hong Kong's intellectual property laws were already
largely in  line with the TRIPS Agreement.  To ensure full compliance, the Intellectual Property
(World Trade Organization Amendments) Ordinance was passed in 1996.  Hong Kong, China has
since December 1996 complied fully with the TRIPS Agreement, some three years ahead of the target
deadline of the year 2000.
D. APPLICATION OF INTERNATIONAL IPR C ONVENTIONS
138. The following intellectual property treaties are applied to Hong Kong, China:-
the Paris Convention for the Protection of Industrial Property 1883;
the Patent Cooperation Treaty 1970;
the Berne Convention for the Protection of Literary and Artistic Works 1886-1971 as
amended on 28 September 1979;
the Universal Copyright Convention & Protocols 1952-1971;WT/TPR/G/52 Trade Policy Review
Page 28
the Convention for the Protection of Producers of Phonograms Against Unauthorized
Duplication of Their Phonograms of October 29, 1971;
the Convention Establishing the World Intellectual Property Organization 1967;
the International Convention Relating to International Exhibitions 1928 and its
Protocols.
VII. GOVERNMENT PROCUREMENT
A. POLICY AND PRINCIPLES
139. The Government of the HKSAR adopts an open, fair, competitive and transparent tendering
system in the procurement of goods and services.  All local and overseas suppliers/contractors are
treated on an equal footing with no favour or discrimination. Our purchasing activities are guided by
the four principles of public accountability, value-for-money, transparency, and open and faircompetition.
B. A
CCESSION TO THE WTO A GREEMENT ON GOVERNMENT PROCUREMENT (GPA)
140. On 20 May 1997, Hong Kong acceded to WTO GPA.  The principles underlying the
procurement system of the Government of the HKSAR are consistent with the spirit and objectives of
the WTO GPA.  All government departments, sub-cen tral government entities (i.e. the two municipal
councils) and several other non-government public bodies (i.e. the  Housing Authority, the Hospital
Authority, the Airport Authority, the Mass Transit Railway Corporation and the Kowloon-Canton
Railway Corporation) are covered by the Agreement in the procurement of goods and services above
the specified thresholds.  The accession to the WTO GPA reflects our firm and continual commitment
to adopt open, fair and non-discriminatory procurement practices.
C. TENDERING PROCEDURES
141. Our tendering procedures are open, fair and transparent.  Government procurement exceeding
HK$500,000 (for goods and general services) and HK$1 million (for construction and engineering
services) in value is normally done by the use of open and competitive tendering procedures.  Limited
or restricted tendering procedures are only permissible under specified exceptional circumstances, and
with prior approval.  Where the nature of the contract dictates that tenders have to be invited from
qualified suppliers/contractors, selective tendering or prequalified tendering may be used.
142. Procedures and practices are made clear and transparent to facilitate better understanding
amongst suppliers and contractors.  Tender notices are published in the government Gazette, and
where necessary, in the local press, overseas journals, and on the internet where a forecast of major
purchases is also available.  Contracts are generally awarded on the basis of the tenders’ compliance
with tender specifications and the tendered sum.  In cases where pre-determined assessment criteriaand marking schemes are used in the evaluation of tenders, such information is provided in the tender
document to ensure that suppliers/contractors ar e fully aware of the conditions relating to the
assessment of tenders and to the award of contract.  Notices of the contracts are also published for
general information in the government Gazette and on the internet.  Unsuccessful tenderers are
informed with reasons given.  Information such as tender documents and particulars of a contract areavailable to members of the public upon request.
143. Suppliers/contractors may lodge complaints about the process or result of a tender exercise to
the procuring entity direct or to the relevant tender board which approved the tenderHong Kong, China WT/TPR/G/52
Page 29
recommendations, Independent Commission Against Corruption (ICAC), or the Office of the
Ombudsman.  In accordance with the provisions of the WTO GPA, a bid challenge system has also
been set up to enable suppliers/contractors to challenge alleged breaches of the WTO GPA arising in
the context of procurements in which they have, or have had, an interest.
D. HONG KONG, CHINA 'S PARTICIPATION IN THE WTO C OMMITTEE ON GOVERNMENT
PROCUREMENT
144. Hong Kong, China plays an active role in the Committee on Government Procurement in
particular the review of the Agreement on Government Procurement.  In this regard, we submitted a
paper to the Committee in June 1998 proposing an approach to deal with the work to remove thediscriminatory provisions in the Agreement and the approach was subsequently adopted.  We have
also submitted two non-papers to the October meeting proposing a timetable and a work programme
for the elimination of discriminatory measures as well as ways to simplify and improve the
Agreement.
E. H
ONG KONG, CHINA ’S PARTICIPATION IN THE WTO WG ON TRANSPARENCY IN 
GOVERNMENT PROCUREMENT
145. Hong Kong, China has been actively and constructively participating in the work of the WTO
Working Group on Transparency in Government Procurement since its establishment.  As a
contribution to the work in the study phase, Hong Kong, China submitted a paper to the Working
Group on 16 December 1997 regarding transparency in the procurement procedures and practices ofthe Government of the HKSAR.  In addition, in the capacity of the Chair of the APEC Government
Procurement Experts Group, Hong Kong, China forwarded to the Working Group in December 1997
a set of elements of transparency in government procurement and a list of practices illustrating how
they could be implemented for reference at the study phase.
VIII.  IMPLEMENTATION OF URUGUAY ROUND AGREEMENTS
146. Hong Kong, China has fully implemented all its Uruguay Round (UR) obligations.  In the
course of implementation, legislative amendment was not necessary except that the legislation relatedto the TRIPS Agreement was amended in 1996.
A. M
ULTILATERAL AGREEMENTS ON TRADE IN GOODS
147. We implemented our UR tariff commitments of binding 1,952 tariff lines at zero in one go
with effect from 1 January 1995, instead of in five consecutive stages as agreed under the UR. The
applied rates of all our tariff lines remain to be zero.
148. All our textiles and clothing products were integrated on 1 January 1995 instead of in four
successive stages permitted under the Agreement on Textiles and Clothing.
149. As we do not take any safeguard, anti-dumping and countervailing measures and have no
such legislation, the question of amending legislation in compliance with the UR obligations does not
arise.
B. GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)
150. Of the 11 specific services sectors in the GATS Services Sectoral Classification List, we have
made specific commitments in all or part of the sub-sectors of eight of them, and have implemented
them fully.  The commitments we made are comm ensurate with the status of the HKSAR as anWT/TPR/G/52 Trade Policy Review
Page 30
international services centre and consistent with our well-established free trade policy.  The
commitments cover both market access and national treatment, with selective bindings on the four
modes.  Most of the commitments in Modes 2 and 3 of market access and Mode 3 of national
treatment are full binding ("none").  We maintain no MFN exemptions.
151. Hong Kong, China participated fully and active ly in the post-UR work of the WTO including
the extended tracks of sectoral services negotiations.  On Basic Telecommunications, we have madecomprehensive market access and national treatment commitments in most of the sub-sectors within
the scope of the negotiations, covering local telecom services and a range of international telecom
services which have been ruled to be outside the exclusive licence of Hong Kong Telecom
International.  We played an active and influential role throughout the negotiations particularly in
developing the common set of regulatory principles  and in working towards resolving the outstanding
technical issues.
152. On Financial Services, we have made comprehensive financial services commitments
covering all the major sectors within the scope of  the negotiations.  Our commitments are consistent
with our free and open market situation.
C. A
GREEMENT ON TRADE -RELATED ASPECTS OF THE INTELLECTUAL PROPERTY RIGHTS 
(TRIPS A GREEMENT )
153. We amended our legislation to ensure compliance with the TRIPS Agreement in December
1996, which was three years ahead of the 2000 deadline stipulated in the Agreement for developing
countries.
IX. THE HKSAR'S PARTICIPATION IN OTHER INTERNATIONAL AND REGIONAL 
TRADE FORUMS
A. ASIA-PACIFIC ECONOMIC COOPERATION (APEC)
154. The HKSAR attaches great importance to the APEC and has participated actively in its
activities since joining in 1991.  In line with the Basic Law of the HKSAR, we have continued to
participate in APEC as a separate and full me mber using the name “Hong Kong, China” after
30 June 1997.  Guided by the principles of voluntarism and consensus building, APEC represents a
unique forum for pursuing economic cooperation in the region, complementing  and contributing tothe liberalization efforts in the WTO.
155. In Bogor, Indonesia in 1994, APEC Economic Leaders set  a goal of free and open trade and
investment in the Asia-Pacific Region to be achieved by 2010 for industrialized member economies,
and 2020, for developing member economies.  A blueprint of measures to achieve the Bogor goal,
called the Osaka Action Agenda (OAA), was adopted in 1995.  Under the OAA, member economieswould undertake individual and collective actions to liberalize and facilitate trade and investment, as
well as economic and technical cooperation activities.
156. Hong Kong submitted in 1996 its first Individual Action Plan (IAP) to liberalize and facilitate
trade and investment.  The IAP contained comprehensive and substantive commitments going beyond
the commitments made by Hong Kong during the Uruguay Round of multilateral trade negotiations.Implementation of the IAP began in 1997. The HKSAR is committed to reviewing implementation
and making improvement to the IAP on an annual basis, until the Bogor goal is reached.Hong Kong, China WT/TPR/G/52
Page 31
157. In addition to individual actions, the HKSAR has also been participating actively in APEC's
collective actions to liberalize and facilitate trade and investment, as well as economic and technical
cooperation activities, which help to attain sustainable growth and development in the region.
158. Furthermore, the HKSAR has been playing a leading role in taking forward Economic
Leaders’ instruction in 1996 to pursue early voluntary sectoral liberalization.  The toys sector
proposed by the HKSAR was selected by Economic Leaders and Ministers in November 1997 as one
of the nine fast track sectors for early voluntary liberalization.  Liberalization arrangements for this
sector as well as the other sectors selected by Economic Leaders and Ministers are now being
finalized by member economies.
B. ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT  (OECD)
159. Our participation in OECD activities started in 1989.  As one of the Dynamic Non-Member
Economies (DNMEs), we participated actively in the informal dialogue between OECD and DNMEs
in the form of workshops.
160. Starting from 1994, we have been an observer in the OECD Trade Committee including its
subsidiary Working Parties.  We have also been an observer in the OECD Committee on Financial
Markets since 1995.  Moreover, we are an observer in the Joint Group on Trade and Competition as
well as the Joint Session of Trade and Environment Experts.  After 30 June 1997, we have continued
to participate actively in these OECD activities under the name “Hong Kong, China”.  The HKSAR
was also admitted as an observer to the Negotiating Group on the OECD Multilateral Agreement onInvestment in July 1997.
C. W
ORLD CUSTOMS ORGANIZATION
161. Hong Kong has been a full member of the WCO since 1987 and continues to participate in the
WCO as a separate and full member using the name 'Hong Kong, China' after 30 June 1997.  Hong
Kong, China is also a contracting party to the Istanbul Convention since 1995.
162. We have been participating actively in the WCO and attended many of its meetings, including
the annual Council Sessions, the Permanent Technical Committee and the Enforcement Committee.In February 1992, Hong Kong chaired a Symposium on the Protection of Intellectual Property Rights
in Brussels.  In June 1996, Hong Kong hosted th e 35th Session of the Policy Commission and the
87th/88th Council Sessions.
163. Hong Kong has been host to the WCO Regional Intelligence Liaison Office (RILO) for the
Asia and Pacific Region since 1987.  The RILO fulfills the main function of enhancingintelligence/information exchanges between member  administrations and promoting international
cooperation in the fight against drug trafficking and other Customs Offences.
164. With the support of the regional members, Hong Kong, China was elected for the first time as
one of the members of the Policy Commission in the 91st/92nd Council Sessions held in Morocco.
D. O
THERS
165. Hong Kong, China also participates in a number of international organizations as part of the
PRC delegation.  These organizations include, am ongst others, the World Intellectual Property
Organization, International Monetary Fund, and United Nations Development Programme.  As
associate member, Hong Kong, China also participates in the Asian and Pacific Development Centre,
Economic and Social Commission for Asia and the P acific and International Maritime Organization.WT/TPR/G/52 Trade Policy Review
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X. HONG KONG, CHINA'S OBJECTIVES FOR THE MULTILATERAL TRADING 
SYSTEM UNDER THE WTO
166. Hong Kong, China is committed to trade liberalization and will continue to be a driving force
in world trade liberalization efforts.  For the new millennium, Hong Kong, China supports the
launching of further broad-based multilateral trade negotiations in the WTO.  The current WTO work
on trade liberalization and rule-making, comprising mainly the reviews and negotiations mandated bythe UR Agreements (the Built-in Agenda, BIA), amounts to a sizeable work programme.  However, in
view of the needs and challenges arising from an increasingly globalized and technology-driven world
economy, Hong Kong, China considers that the agenda of the WTO for the 21 st century should be
sufficiently broad-based to meet the divergent interests of WTO Members.
167. We believe what the WTO needs is a balanced and comprehensive package of multilateral
trade negotiations to sustain the momentum carried over from the UR.  To this end, Hong Kong,
China will participate actively and constructively in the preparatory process leading up to the third
WTO Ministerial Conference with the aim of setting a substantive and forward-looking agenda for the
WTO for the new millennium, which should address the interests of all Members, least-developed,
developing and developed.Hong Kong, China WT/TPR/G/52
Page 33
ANNEX 1
Other Key Provisions of the Basic Law
1. The HKSAR comes directly under the Central People’s Government (BL 12).
2. The HKSAR exercises a high degree of autonomy except in defence and foreign affairs and
enjoys executive, legislative and independent judicial power, including that of final adjudication
(BL 2, 13 & 14).
3. The laws previously in force in Hong Kong, that is, the common law, rules of equity,
ordinances, subordinate legislation and customary law shall be maintained, except for any thatcontravene the Basic Law, and subject to any amendment by the legislature of the HKSAR (BL 8).
4. The HKSAR may on its own, using the name "H ong Kong, China", maintain and develop
relations and conclude and implement agreements with foreign states and regions and relevantinternational organizations in the appropriate fields, including the economic, trade, financial and
monetary, shipping, communications, tourism, cultural and sports fields (BL 151).
5. The HKSAR remains a free port, a separate customs territory and an international financial
centre.  There shall be free flow of capital.  The HKSAR issues and manages its own currency
(BL 109, 111, 112, 114 & 116).
6. The HKSAR shall, on its own, formulate monetary and financial policies, safeguard the free
operation of financial business and financial markets, and regulate and supervise them in accordance
with law (BL 110).
7. The HKSAR shall pursue the policy of free trade and safeguard the free movement of goods,
intangible assets and capital (BL 115).
8. The HKSAR shall on its own formulate policies on the development of education, science,
culture, sports,  labour and social welfare (BL 136-149).
9. Hong Kong residents enjoy a wide range of  freedoms and rights, including freedom of
speech, of procession, of demonstration, of communication, of religious freedom, and of
marriage, and the right and freedom to form a nd join trade unions, and to strike (BL 25-41).WT/TPR/G/52 Trade Policy Review
Page 34
ANNEX 2
Principal Statutory Provision s for Import/Export Control
Legal Authority Item Rationale
Import and Export
Ordinance & itssubsidiary regulations(a) Textiles To enable HKSAR to exercise its rights and
meet its obligations under WTO ATC
Import and ExportOrdinance & Import andExport (General)Regulations(b) Pharmaceutical
products andmedicinesTo help control the sale and distribution of
such goods to safeguard public health and tofight against counterfeit or sub-standardmedicines.
(c) Pesticides To protect human life and public health.
Import and ExportOrdinance & Import(Radiation) (Prohibition)Regulations(d) Radioactive
substances andirradiating apparatusTo protect human life and public health.
Import and Export
Ordinance & Import andExport (StrategicCommodities)Regulations(e) Strategic commodities To monitor and control the flow of strategic
commodities into and out of HKSAR so as toprevent HKSAR from being used as aconduit for proliferation and to ensure ourcontinued access to high-tech goods andadvanced technology.
Reserved CommoditiesOrdinance and itssubsidiary regulations(f) Rice, frozen meat and
frozen poultryTo ensure the availability of certain essential
foodstuffs for emergency situations.Hong Kong, China WT/TPR/G/52
Page 35
ANNEX 3
Other Import and Export Controls Implemented in the HKSAR
Products Under Control Purpose
I. Import and Export Control
(i) Ozone depleting substances To ensure that the amount retained for
local consumption does not exceed thelevels agreed under the 1987 MontrealProtocol on Substances that Deplete theOzone Layer and its subsequentamendments.
(ii) Pesticides; pharmaceutical products and
medicines; dangerous drugs; acetylatingsubstances.To protect human life and public health.
(iii) Endangered species of animals and plants
including their parts or derivatives such asworked ivory; rhinoceros horn; tiger boneor other parts; bear gall bladders, bile andbile power; medicine containing orclaiming to contain rhinoceros or tigersingredients; and manufactured products ofcertain speciesTo protect animals and plants of
endangered species, in conformity withthe requirements of the Convention onInternational Trade in EndangeredSpecies of Wild Fauna and Flora(CITES).
(iv) Radio transmitting equipment To control the use of such equipment so
as to avoid radio interference toauthorized radio equipment users.
(v) Left-hand drive vehicles and outboard
engines exceeding 111.9 kilowatts(150 horsepowers).To curb smuggling activities.
(vi) Waste To ensure environmentally sound
management of waste in HKSAR and tomeet the requirements of the BaselConvention.
(vii) Optical disc mastering and replication
equipment.To curb against copyright infringement
activities.
II. Import Control Only
(i) Mammals including dogs and cats. To prevent the spread of rabies.
(ii) Mammals, birds, reptiles and carcasses. To prevent the introduction of infectious
diseases
(iii) Plant, plant pests and soil. To prevent the introduction and spread of
plant pests.
(iv) Sand To provide a mechanism to enable the
protection of beaches and the seabedwithin Hong Kong.
(v) Radioactive substances and irradiating
apparatus.To protect human life and public health.
III. Export Control only
(i) Poultry carcasses or poultry products. To protect human life and public health.
(ii) Television sets, video cassette recorders,
video cassette players exported by a vesselof less than 250 gross tons.To curb smuggling of such products.WT/TPR/G/52 Trade Policy Review
Page 36
ANNEX 4
Principal Features of the New Regulatory Scheme
for the Admission of Foreign Lawyers as Solicitors in the HKSAR
1. There are seven principal features of the new regulatory scheme.
2. Foreign lawyers and foreign law firms must register with the Law Society before they may
practise foreign law in Hong Kong.
3. In order to qualify for registration, a foreign lawyer must be a person of good standing in the
foreign jurisdiction in which he is qualified to practise law, and must be a fit and proper person to be
so registered; and for a foreign law firm to qualify for registration it must be carrying on the practice
of law in its foreign jurisdiction, of good standing and have at least one of the partners satisfying the
conditions specified in the Legal Practitioners Ordinance.
4. Foreign lawyers and foreign law firms can practise the law of their home jurisdictions or that
of a third country, and are subject to the Foreign Lawyers Practice Rules.
5. Foreign lawyers cannot employ or enter into partnership with a Hong Kong solicitor to
practise Hong Kong law.
6. A registered foreign firm can enter into an a ssociation with a local firm, provided that the
ratio of foreign lawyers to local lawyers in the association does not normally exceed 1:1; the
association can share premises, facilities and personnel.
7. Existing restrictions on the admission of non-Commonwealth qualified foreign lawyers have
been removed and replaced with objective, reasonable, non-discriminatory and competency-basedcriteria as set out in the Overseas Lawyers (Qualifications for Admission) Rules.
8. Through an accreditation scheme under the Overseas Lawyers (Qualification for Admission)
Rules, all foreign lawyers can gain admission as Hong Kong solicitors by passing the specified
examinations.Hong Kong, China WT/TPR/G/52
Page 37
ANNEX 5
Criteria for Admission as a Barrister
as stipulated in the Legal  Practitioners Ordinance
1. He has been called to the Bar in England, Northern Ireland or Scotland and has practised as a
barrister or advocate in the United Kingdom for at least three years, or is a Hong Kong permanent
resident, or has been ordinarily resident in Hong Kong for at least seven years.
2. He has obtained a degree in law in the University of Hong Kong or the City University of
Hong Kong and has obtained a Postgraduate Certificate in Law ('PCLL').
3. He has obtained a PCLL and is a permanent Hong Kong resident, or is a Commonwealth
citizen or citizen of the Republic of Ireland who has been ordinarily resident in Hong Kong for at least
seven years.
4. He has been admitted as a solicitor in Hong Kong for at least three years before his
application for admission and during that time she was in practice as a solicitor in Hong Kong or
employed by the Hong Kong Government as a legal officer.
5. He has been admitted as a barrister or legal practitioner in Australia, Canada (except Quebec),
New Zealand, Republic of Ireland, Zimbabwe or Singapore; and has experience in advocacy; and has
been employed in the Department of Justice as a legal officer for at least seven years and was so
employed for at least three years on work similar to that usually undertaken by a barrister of ten yearsseniority;  and intends, if admitted, to practise as a barrister in Hong Kong within twelve months after
his admission.WT/TPR/G/52 Trade Policy Review
Page 38
ANNEX 6
Enforcement Results on IPR Offences
1995 1996 1997 1998
(up to July)
Copyright
No. of Arrests 1,508 1,425 1,568 944
Quantity of Optical Discs Seized 581,658 944,056 4,475,685 30,516,400
Value of Seizure (HK$M) 37.53 47.26 143.70 831.26
No. of Optical Disc Production
Lines Seized-- 5 5 3
Total Value of Seizure (HK$M) 39.54 48.09 187.38 1,302.21
Trade Mark
No. of Arrests 494 691 850 431
Quantity of Seizures
Clothing (pcs) 3,122,588 218,175 439,933 411,276
Leather goods (pcs) 23,207 42,448 24,362 21,047
Watch (nos.) 68,390 60,424 300,192 42,887
Pharmaceutical Products
(nos.)19,747,747 85,756 680,743 23,568
Miscellaneous 4,656,000 14,139,032 10,269,050 436,835
Total 27,617,932 14,545,835 11,714,280 935,613
Total Value of Seizure (HK$M) 60.92 78.58 66.10 30.93
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