RESTRICTED  
  
WT/TPR/S/380  
1 October  2018 
(18-6019) Page: 1/115 
Trade Policy Review Body   
 
TRADE POLICY REVIEW  
REPORT BY THE SECRET ARIAT  
HONG KONG, CHINA 
This report, prepared for the eighth Trade Policy Review of Hong Kong, China, has been drawn up 
by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the 
Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from Hong Kong, China on its trade  
policies and practices.  
 
Any technical questions arising from this report may be addressed to Masahiro Hayafuji 
(022 739 5873) and Martha Lara Fernandez (022 739 6033).  
 
Document WT/TPR/G/ 380 contains the policy statement submitted by Hong Kong, China.  
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Hong Kong, China. This report was 
drafted in English.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 2 - 
 
  CONTENTS  
SUMMARY  ................................ ................................ ................................ ........................  6 
1   ECONOMIC ENVIRON MENT  ................................ ................................ ..........................  9 
1.1   Main Features of the Economy  ................................ ................................ ......................  9 
1.2   Recent Economic Developments  ................................ ................................ ................... 12 
1.3   Developments in trade and investment  ................................ ................................ ......... 16 
1.3.1    Trends and patterns in merchandise and services trade  ................................ ................ 16 
1.3.1.1    Merchandise trade  ................................ ................................ ................................ .16 
1.3.1.2    Services trade  ................................ ................................ ................................ ......19 
1.3.2    Trends and patterns in direct investment  ................................ ................................ ....21 
2   TRADE AND INVEST MENT REGIMES ................................ ................................ ...........  22 
2.1   General Framework  ................................ ................................ ................................ ....22 
2.2   Trade Policy Formulation and Objectives  ................................ ................................ ........ 22 
2.3   Trade Agreements and Arrangements  ................................ ................................ ........... 23 
2.3.1    WTO ................................ ................................ ................................ ...................... 23 
2.3.2    Regional  and preferential trade agreements  ................................ ................................ 24 
2.3.2.1    Overview  ................................ ................................ ................................ ............. 24 
2.3.2.2    Closer Economic Partnership (CEP) Agreement with New Zealand  ............................... 24 
2.3.2.3    FTA with EFTA  ................................ ................................ ................................ ......24 
2.3.2.4   FTA with Chile  ................................ ................................ ................................ ......25 
2.3.2.5    CEPA with Mainland China  ................................ ................................ ...................... 25 
2.3.2.6    HK-Macao CEPA  ................................ ................................ ................................ ....27 
2.3.2.7    The FTA between HKC and ASEAN  ................................ ................................ ........... 27 
2.3.3    Other agreements and arrangements  ................................ ................................ ......... 28 
2.4   Investment Regime  ................................ ................................ ................................ ....29 
3   TRADE POLICIES A ND PRACTICES BY MEAS URE ................................ ........................  31 
3.1   Measures Directly Affecting Imports  ................................ ................................ .............. 31 
3.1.1    Customs procedures, valuation, and requirements  ................................ ....................... 31 
3.1.1.1    Customs procedures and trade facilitation  ................................ ................................ 31 
3.1.1.2    Customs valuation  ................................ ................................ ................................ 33 
3.1.2    Rules of origin  ................................ ................................ ................................ ......... 34 
3.1.3    Tariffs  ................................ ................................ ................................ .................... 34 
3.1.4    Other charges affecting imports  ................................ ................................ ................. 35 
3.1.5    Import prohibitions, restrictions, and licensing  ................................ ............................ 37 
3.1.5.1    Import prohibitions and restrictions  ................................ ................................ ......... 37 
3.1.5.2    Import licensing  ................................ ................................ ................................ ....37 
3.1.6   Anti-dumping, countervailing, and safeguard measures  ................................ ................ 40 
3.1.7    Other measures affecting imports  ................................ ................................ .............. 40 
3.2   Measures Directly Affecting Exports  ................................ ................................ .............. 40 
3.2.1    Customs procedures and requirements  ................................ ................................ .......40 WT/TPR/S/380 • Hong Kong, China  
 
- 3 - 
 
  3.2.2    Taxes, charges, and levies  ................................ ................................ ........................ 41 
3.2.3    Export prohibitions, restrictions, and licensing  ................................ ............................. 41 
3.2.4    Export support and promotion  ................................ ................................ ................... 43 
3.2.5    Export finance, insurance, and guarantees  ................................ ................................ ..43 
3.3   Measures Affecting Production and Trade  ................................ ................................ .......44 
3.3.1    Incentives  ................................ ................................ ................................ ............... 44 
3.3.1.1    Taxation  ................................ ................................ ................................ .............. 44 
3.3.1.2    Tax incentives  ................................ ................................ ................................ ......45 
3.3.1.3    Non-tax incentives  ................................ ................................ ................................ 46 
3.3.2    Standards and other technical requirements  ................................ ............................... 48 
3.3.3    Sanitary and phytosanitary requirements (SPS)  ................................ ........................... 50 
3.3.4    Competition policy and price controls  ................................ ................................ ......... 52 
3.3.4.1    Competition policy  ................................ ................................ ................................ 52 
3.3.4.2    Price controls ................................ ................................ ................................ ........ 57 
3.3.5    State trading, state -owned enterprises, and privatization  ................................ ............. 57 
3.3.6    Government procurement  ................................ ................................ ......................... 58 
3.3.7    Intellectual property rights (IPRs)  ................................ ................................ .............. 63 
3.3.7.1    Legal and institutional frameworks  ................................ ................................ .......... 63 
3.3.7.2    Copyright  ................................ ................................ ................................ ............. 65 
3.3.7.3    Patents ................................ ................................ ................................ ................ 66 
3.3.7.4    Trademarks  ................................ ................................ ................................ .......... 67 
3.3.7.5    Parallel imports  ................................ ................................ ................................ .....67 
3.3.7.6    IP trading ................................ ................................ ................................ ............. 68 
3.3.7.7    Enforcement  ................................ ................................ ................................ ......... 68 
4   TRADE POLICIES B Y SECTOR  ................................ ................................ .....................  71 
4.1   Agriculture, Forestry, and Fisheries  ................................ ................................ ............... 71 
4.1.1    Agriculture  ................................ ................................ ................................ .............. 71 
4.1.2    Farm support measures  ................................ ................................ ............................ 71 
4.1.3    Rice ................................ ................................ ................................ ....................... 72 
4.1.4    Fisheries  ................................ ................................ ................................ ................. 72 
4.2   Mining and Energy  ................................ ................................ ................................ ......73 
4.3   Manufacturing  ................................ ................................ ................................ ............ 75 
4.4   Services  ................................ ................................ ................................ .................... 75 
4.4.1    Telecommunication services  ................................ ................................ ...................... 75 
4.4.1.1    Statistical overview  ................................ ................................ ............................... 75 
4.4.1.2    Trade regulatory regimes  ................................ ................................ ....................... 76 
4.4.2    Financial services  ................................ ................................ ................................ .....80 
4.4.2.1    Statistical overview  ................................ ................................ ............................... 80 
4.4.2.2    Trade and regulatory regimes for financial services  ................................ ................... 83 
4.4.2.2.1    Trade and regulatory regimes for insurance service s ................................ .............. 83 WT/TPR/S/380 • Hong Kong, China  
 
- 4 - 
 
  4.4.2.2.2    Trade and regulatory regimes for banking and other financial services  ...................... 86 
4.4.3    Legal services  ................................ ................................ ................................ ......... 91 
4.4.3.1    Statistics overview  ................................ ................................ ................................ 91 
4.4.3.2    Regulatory regime  ................................ ................................ ................................ 92 
4.4.3.3    Trade regime  ................................ ................................ ................................ ........ 93 
5   APPENDIX TABLES  ................................ ................................ ................................ .... 95 
 
CHARTS  
 
Chart 1.1 Product composition of merchandise trade by HS section, 2014 and 2017  ................... 18 
Chart 1.2 Direction of merchandise trade, 2014 and 2017  ................................ ....................... 19 
 
TABLES  
 
Table 1.1 Selected macroeconomic indicators, 2014 -17 ................................ ...........................  9 
Table 1.2 GD P and employment by economic activity, 2014 -17 ................................ ............... 10 
Table 1.3 Balance of payments, 2014 -17 ................................ ................................ .............. 15 
Table 1.4 Composition of trade in services, 2014 -17 ................................ .............................. 20 
Table 2.1 CEPA subsidiary agreements, 2014 -18................................ ................................ ....25 
Table 2.2 CEPA preference utilization rates, 2014 -17 ................................ .............................. 26 
Table 2.3 Schedule of Tariff Commitments of ASEAN Member  States (AMS)  .............................. 28 
Table 3.1 Bound tariff structure by WTO definitions, 2018  ................................ ....................... 34 
Table 3.2 Excise duty rates, 2013 and 2018  ................................ ................................ .......... 35 
Table 3.3 Internal tax collection, 2013/14 —2017/18  ................................ .............................. 35 
Table 3.4 FRT rates for motor vehicles, 2017/18  ................................ ................................ ....36 
Table 3.5 Import and export declaration charges, 2018  ................................ .......................... 37 
Table 3.6 Import licensing schemes, 2017 ................................ ................................ ............. 38 
Table 3.7 Export licensing schemes, 2017  ................................ ................................ ............. 42 
Table 3.8 Government revenues, 2013 -17 ................................ ................................ ............ 44 
Table 3.9 Support under the SME Loan Guarantee Scheme, 2014 -17 ................................ .......47 
Table 3.10 HKC's legislation and relevant instruments on competition policy  ............................. 53 
Table 3.11 Exclusions and exemptions from the Conduct Rules  ................................ ................ 55 
Table 3.12 Enforcement contacts by type of alleged conduct, December 2015 -March  2017 ......... 57 
Table 3.13  Enterprises in which the Government has financial stakes, 2018  .............................. 57 
Table 3.14 Government procurement, 2014 -17 ................................ ................................ ......59 
Table 3.15 Government procurement contracts awarded by type of procedure, 2014 -17 ............. 61 
Table 3.16 Framework protecting IPRs, 2018  ................................ ................................ ......... 64 
Table 3.17 C&ED: cases, seizures, and arrests, 2014 -17 ................................ ......................... 70 
Table 4.1 Loan programmes by the AFCD, April 2014 – March 2018  ................................ ......... 73 
Table 4.2 Average telecom prices in HKC, 2016  ................................ ................................ .....76 
 WT/TPR/S/380 • Hong Kong, China  
 
- 5 - 
 
  BOXES  
 
Box 4.1 Main economic indicators of the telecommunications sector, 2012 -17 ........................... 75 
Box 4.2 Bound trade regimes of the telecommunications sector  ................................ ............... 77 
Box 4.3 Applied regulatory regime for regulatory supervision, competition and 
interconnection  ................................ ................................ ................................ .................. 78 
Box 4.4 Other regulatory aspects  ................................ ................................ ......................... 79 
Box 4.5 Main economic indicators of the financial services sector  ................................ ............. 81 
Box 4.6 Banking subsector  ................................ ................................ ................................ ..81 
Box 4.7 Insurance subsector  ................................ ................................ ............................... 82 
Box 4.8 Stock exchange and securities subsectors  ................................ ................................ .82 
Box 4.9 Mandatory provident fund schemes subsector  ................................ ............................ 83 
Box 4.10 Bound trade regimes for insurance services  ................................ ............................. 83 
Box 4.11 Applied trade regime and general regulatory framework for insurance services  ............ 84 
Box 4.12 Bound regimes for banking services and other financial services ................................ .86 
Box 4.13 Regulatory framework for banking services  ................................ .............................. 87 
Box 4.14 Regulatory framework for securities  ................................ ................................ ........ 89 
Box 4.15 Regulatory framework for mutual funds and asset man agement  ................................ .90 
Box 4.16 Main economic indicators of the legal services  ................................ .......................... 92 
 
APPENDIX TABLES  
 
Table A1.1 Merchandise re -exports by HS sections and major HS chapters, 2014 -17 .................. 95 
Table A1.2 Merchandise domestic exports by HS sections and major HS chapters, 201 4-17 ........ 96 
Table A1.3 Merchandise imports by HS sections and major HS chapters, 201 4-17 ...................... 97 
Table A1.4 Merchandise re -exports by destination, 201 4-17 ................................ .................... 98 
Table A1.5 Merchandise domestic exports by destination, 201 4-17 ................................ .......... 99 
Table A1.6 Merchandise imports b y supplier, 201 4-17 ................................ ..........................  100 
Table A1.7 Stock of direct investment by selected major country/territory, 20 14-17 ................  101 
Table A1.8 Stock of direct investment by major economic activity of HKEGs, 2014 -17 ..............  102 
 
 
Table A2.1 Selected notifications from HKC, 30 April 2018  ................................ ....................  103 
 
 
Table A3.1 HKECIC: Insured business by major markets and products, 2015/16 –2016/17  ........  104 
Table A3.2: Selected  incentives and assistance measures, 2014 -17 ................................ ....... 105 
Table A3.3 Regime of standards and technical requirements, 2017 ................................ .........  108 
Table A3.4 Intellectual Property laws and regulations, 2018  ................................ ..................  112 
Table A3.5 Enforcement of intellectual property rights, 2014 -17 ................................ ............  115 
  WT/TPR/S/380 • Hong Kong, China  
 
- 6 - 
 
  SUMMARY  
1. Between 2014 and 2017, the economy of Hong Kong, China (HKC) grew at an average 
annual rate of 2.8%, driven mainly by domestic demand and exports, mainly to the People's 
Republic of China (Main land China). This growth rate is slightly lower than at the time of the 
previous Review. Services, in particular trade and finance, continued to be the mainstay of the 
economy, contributing 92% to GDP and 88% to total employment, and reflecting HKC's position as 
a global trade and financial centre. HKC remains one of the most open  economies in the world, 
with a trade/GDP ratio of 375%. Its investment regime remains open.  
2. The HKC economy has strong fiscal and financial fundamentals. During the review period, 
HKC recorded substantial fiscal surpluses, which allowed for increased publ ic spending, mainly on 
infrastructure and social welfare; while under strengthened supervision and regulation, the 
banking sector has built up large capital and liquidity reserves. Monetary policy focuses on 
currency stability, which is achieved through a pegged exchange rate to the US dollar. Inflation 
(CPI) has been on a declining trend during the review period, dropping to 1.5% in 2017  from 4.4% 
in 2014 . Despite higher policy rates (in the aftermath of increases in the US rates), low financing 
costs and the measures implemented by the authorities to restore balance in the property market 
have helped maintain financial stability. HKC's current account surplus increased during the review 
period, owing largely to a net inflow of primary income and a positive  services trade balance. 
Foreign exchange reserves amounted to the  equivalent of 36.7 months of retained imports of 
goods in 2017. Mainland China is HKC's main trading partner, receiving 55.3% of HKC's re -exports 
and supplying 44.6% of its imports in 2017,  largely unchanged since the previous Review.  
3. Notwithstanding its strong macroeconomic fundamentals and good performance, HKC's 
sustained economic growth faces some external and domestic challenges, including heightened 
volatility in international markets,  rising trade protectionism, persistently high housing prices, the 
need to preserve fiscal sustainability in the face of an ag eing population, and income disparities .   
4. HKC was the first Member to accept the Trade Facilitation Agreement in December 2014, 
and designated all its provisions under Category A for immediate implementation. HKC  is a 
signatory of the revised WTO plurilateral Agreement on Government Procurement (GPA), and the 
Information Technology Agreement (ITA), including its expansion agreement (ITA Expansion). It 
has an excellent record of providing notifications to the WTO. Since its previous Review, HKC has 
signed FTAs with ASEAN ; Georgia ; and Macao, China. It has also continued to strengthen its 
economic and financial ties with Mainland China , in particular by concluding four subsidiary 
agreements to the CEPA.  
5. HKC's open trade regime  has remained broadly the same since the last Review . All applied 
tariff rates are zero. However , more than half of the schedule remains unbound. Excise duties 
apply on four commodity groups (liquor, tobacco, hydrocarbon oil , and methyl alcohol), whether 
locally -produced or imported. HKC runs an efficient custom s system, with procedures that are 
faster and less costly than in most other economies . During the review  period, HKC adopted 
measures to further streamline customs procedures and strengthen its role as a transit hub, 
including the introduction of a Free Trade Agreement Transhipment Facilitation Scheme; the 
enhancement of an IT -based tracking system for road cargo; the full implementation of the 
Authorized Economic Operator (AEO) Programme and the conclusion of several AEO mutual 
recognition arrangements; and the introduction of a cap on import/export declaration fees. 
Currently, HKC is in the process of estab lishing a full -fledged Trade Single Window to allow traders 
to lodge electronically 50 -plus documents to meet the regulatory requirements for the 
import/export of goods.  
6. Few trade restrictions/prohibitions apply on imports, and they are mainly on safety, health 
and environmental grounds, or to comply with international conventions. The import control 
regime has remained largely unchanged since the previous Review. Licensing and notification 
requirements for textile imports were removed on  21 November 2014. There is no legislation 
pertaining to anti -dumping, countervailing, and safeguard measures. HKC's TBT and SPS systems 
remain transparent and relatively simple. No specific trade concerns have been raised in the TBT 
or SPS Committees rega rding measures applied by HKC during the review period. The authorities 
actively support the development of the testing and certification industry, as they consider it to 
have a clear competitive advantage.   WT/TPR/S/380 • Hong Kong, China  
 
- 7 - 
 
  7. HKC does not apply any duties or taxes on expor ts. Excise duties are refunded if the goods 
on which they were paid are exported. Export controls essentially mirror those applied to imports, 
with the exception of powder formula, frozen and chilled meat and poultry, and live animals and 
plants. Textile e xports are no longer subject to licensing requirements or notifications. The 
authorities support HKC exporters mainly through export credit insurance schemes and funding for 
export promotion and marketing activities. A number of tax incentives are offered,  including a first 
registra tion tax concession for electrical vehicles and environment -friendly commercial vehicles, 
profit tax deductions for capital expenditure incurred in the purchase of intellectual property  rights  
(IPRs) , and several other profit tax  exemptions. Non -tax incentives, essentially in the form of 
loans and cash grants, are provided to support SMEs, R&D activities and professional services. In 
the past few years, some new schemes were introduced , mainly to support innovation and 
technology -related  activities.   
8. In December 2015, the Competition Ordinance came into full effect, after a series of 
implementation guidelines, guidance notes and enforcement policy documents were issued by the 
Competition Commission. The Ordinance applies to all ec onomic sectors and regulates different 
kinds of anti -competitive conduct. However, merger control remains limited to the 
telecommunications sector , and most statutory bodies are exempted from its provisions. In the 
near future, a review of the scope of app lication of the Ordinance is expected to take place.  
9. During the review period, HKC introduced some changes to its government procurement 
regime in order to bring regulations in line with the revised GPA, which came into force on 
6 April 2014. Changes were also made to simplify tender procedures; foster participation of 
suppliers, especially SMEs, by streamlining financial vetting requirements; and promote green 
procurement.  
10. HKC's intellectual property regime has remained largely unchanged since the last Re view, 
except that the authorities enacted the Patents (Amendment) Ordinance 2016, which provides the 
legal foundation for introducing an "original grant" patent (OGP) system into HKC; the Ordinance 
has not yet entered into force. The authorities  also plan to introduce a bill to amend the Copyright 
Ordinance so as to align the relevant provisions with the Marrakesh Treaty  concerning blind and 
visually impaired persons . During the period  under review, HKC stepped up efforts to address 
IPR-infringin g activities in the digital environment, including through the launching of the Big Data 
Analytical System in 2017, which analyses mass information on Internet platforms to screen 
infringing activities.  
11. The agriculture and fisheries sector is very small, r epresenting less than 0.1% of both GDP 
and total employment. In 2016, the authorities  announced a New Agriculture Policy with a view to 
promoting the modernization and sustainable development of local agriculture. HKC is a net 
energy importer. It imports, and to a lesser extent exports , electricity through a grid connected 
with Mainland China . HKC also imports natural gas through pipelines connected  to Mainland China . 
The manufacturing sector is also small, account ing for around 1.1% of GDP and 2.5% of 
employment. HKC has adopted no new policy initiatives concerning manufacturing since its 
previous Review.  
12. Services continue to be the mainstay of the economy, accounting for 92% of GDP and 88% 
of total employment in 2016 . In the telecommunications sector, pol icy developments during the 
review period included: the signing of three new free  trade agreements containing commitments 
on telecommunication services; the reassignment of the frequency spectrum for existing mobile 
services; and the review of licen sing co nditions in carrier licences. The authorities  plan to provide 
financial incentives to telecommunication companies with a view to encouraging the extension of 
the fibre-based network to villages in remote areas.  
13. In financial services, there have been a few  changes in the regulatory regime , including the 
establishment of a new Insurance Authority in charge of supervision and licensing on 
26 June 2017. Otherwise, the market access regime for financial services has not changed 
substantially , and most of the me asures taken since the last Review are of a domestic regulatory 
and prudential nature.  
14. HKC has made no commitments regarding  legal services in its GATS Schedule  or in FTA s 
with its trading partners , except in the CEPA with Mainland China, where  HKC has committed  not WT/TPR/S/380 • Hong Kong, China  
 
- 8 - 
 
  to impose any new discriminatory measures on Mainland  China 's legal services and service 
suppliers. Foreign lawyers may work as foreign legal consultants in corporations or companies  if 
they provide legal services only to their employer corpo rations or companies. Legal professionals 
from overseas may also qualify as HKC solicitors or barristers after specified requirements are 
satisfied , as provided by the Overseas Lawyers (Qualification for Admission) Rules and the 
Barristers (Qualification f or Admission and Pupillage) Rules . 
 WT/TPR/S/380 • Hong Kong, China  
 
- 9 - 
 
  1  ECONOMIC ENVIRONMENT  
1.1  Main Features of the Economy  
1.1.  Between 2014 and 2017, the economy of Hong Kong, China (HKC) grew at an average 
annual rate of 2.8%  (Table 1.1) . In 2017, GDP grew faster, by 3.8%, largely owing  to the recovery 
of the global  economy , robust  growth in Mainland China (HKC's main trading partner), and strong 
domestic demand  due mainly to favourable labour market conditions.  The renewed dynamism in 
economic activity is expected to continue in the short term, supported by the global economic 
upturn and continuing growth in Mainland China. There are, however, some external and domestic 
risks to HKC's sustain ed growth, including  potentially sharp increases in interest rates and 
heightened volatility in international financial markets, rising trade protectionism , persistently high 
housing price s, and income  disparities . 
1.2.  Services, in particular trade and finance, continue to be the  mainstay of the economy, 
accounting for 92% of GDP and 88% of total employment in 2016 , and reflecting HKC's position as 
a global trade and financial centre  (Table 1.2). The contribution to GDP of the agriculture, fishing, 
mining and quarrying  sector, and  that of the manufacturing sector, remains very small (0.1% and 
1.1%, respectively in 2016), while the contribution of the construction sector (5.2%) increased 
during the review period due to expanded public construction projects and a buoyant real estate 
market.  
Table 1.1 Selected macroeconomic indicators, 2014 -17 
 2014  2015  2016  2017  
Real GDP (HK$ billion, 201 6 prices)  2,381.2   2,438.0   2,490.8  2,585.2   
Real GDP (US$ billion, 201 6 prices)  307.1  314.5  320.9  331.7  
Current GDP (HK$ billion)  2,260.0  2,398.3  2,490.8  2,661.0  
Current GDP (US$ billion)  291.5  309.4  320.9  341.4  
GDP per capita at current market price (HK$)  312,609  328,924  339,500  359,996  
GDP per capita at current market price (US$)  40,316  42,431  43,739  46,189  
National accounts  (% change, unless otherwise indicated)  
Real GDP  2.8  2.4  2.2  3.8  
 Consumption  3.3  4.6  2.2  5.3  
 Private consumption  3.3  4.8  2.0  5.5  
 Government consumption  3.1  3.4  3.3  3.4  
 Gross domestic fixed capital formation  -0.1  -3.2  -0.1  3.5  
 Building and construction  9.3  2.2  5.9  1.7 
 Machinery, equipment and IP products  -8.7  -7.7  -6.3  1.8 
 Exports of goods and servicesa 1.0  -1.4  0.7  5.5  
 Goods  0.8  -1.7  1.6  5.9  
 Services  1.6  0.3  -3.5  3.2  
 Imports of goods and servicesa 1.0  -1.8  0.9  6.3  
 Goods  1.5  -2.7  0.7  7.0  
 Services  -2.2  5.0  2.0  1.9  
 XGS/GDP (%) (at current market price)a 213.1  195.9  187.0  188.0  
 MGS/GDP (%) (at current market price)a 212.9  193.5  184.7  187.1  
Unemployment rate (%)  3.3  3.3  3.4  3.1  
Labour force participation rate (%)  61.1  61.1  61.1  61.1  
Prices and interest rates   
Inflation ( CPI, % change)  4.4  3.0  2.4  1.5  
Best lending rateb (period average)  5.00  5.00  5.00  5.00  
Deposits  rate (period average)  0.01  0.01  0.01  0.01  
Exchange rate      
HK$/US$ (period average)  7.754  7.752  7.762  7.794  
Nominal effective exchange rate (% change)c 1.5  9.4  -0.7  -1.1  
Real effective exchange rate (% change)c 3.2  10.0  0.2  -2.4  
 (% of GDP, unless otherwise indicated)  
Fiscal balanced     
Government opening reserve balance  33.4 34.5 33.8 35.8 
Total revenue  21.2 18.8 23.0 23.3 
 Current revenue  17.4 15.9 16.5 16.6 
 Tax revenue  15.7 14.4 14.0 14.3 
Total expenditure  17.5 18.2 18.6 17.7 
 Current expenditure  14.0 14.5 14.2 13.9 
Government consolidated balance  3.2 0.6 4.5 5.6 WT/TPR/S/380 • Hong Kong, China  
 
- 10 - 
 
   2014  2015  2016  2017  
Fiscal reserve balance  36.7 35.1 38.3 41.4 
Public sector debte (end-fiscal year)  0.07 0.06 0.06 0.06 
Saving and investment      
Gross national savings  25.2  24.9  25.5  26.6 
Gross domestic investment  23.8  21.5  21.5 22.3 
Savings -investment gap  1.4  3.3  4.0 4.3 
External sector      
Current account balance  1.4  3.3  4.0  4.3  
Goods balance  -11.1  -7.4  -5.2  -7.0  
 Exports  176.4  162.2  156.3  157.5  
 Imports  187.5  169.6  161.5  164.5  
Services balance  11.3  9.8  7.5  7.9  
Capital account  -0.0  -0.0  -0.0  -0.0  
Financial account  -3.2  -5.4  -4.0  -5.8  
 Direct investment  -3.8  33.1  18.0  6.3  
Balance of payments  6.2  11.8  0.4  9.4  
Terms of trade (201 6=100)  99.5  100.0  100.0   99.9  
Goods exports (% change)f 1.6  -2.4  -0.0  7.2  
Goods imports (% change)f 2.3  -4.0  -1.2  8.4  
Service s exports (% change)f 2.0  -2.4  -5.6  5.7  
Service s imports (% change)f -1.6  0.2  0.5  3.4  
Foreign exchange reserves (US$ billion, end -period)  328.5  358.8  386.3  431.4  
 in months of imports of goodsg 26.4  32.1  36.0  36.7  
Total external debt (HK$ billion)  10,089.8  10,078.3  10,521.9  12,220.5  
 % of GDP  446.4  420.2  422.4  459.2  
a Figures are compiled based on the change of ownership principle  in recording goods sent abroad for 
processing and merchanting under the standards stipulated in the System of National Accounts 
2008. 
b Best lending rate refers to the average of the rates ove r the period quoted by the Hong Kong and  
Shanghai Banking Corporation Limited.  
c Figures are based on 2010 index numbers (Unit Labour Costs) taken from the IMF.  
d Figures are based on the fiscal year beginning 1 April. Figures for 2017 are provisional fina ncial 
results.  
e Excluding bonds issued under the Government Bond Programme.  
f Growth rates based on trade figures taken from the Balance of Payments in US$.  
g Figures are calculated based on past 12 -month average of retained imports of goods.  
Source : Census and Statistics Department ( C&SD ) online information. Viewed at: 
http://www.censtatd.gov.hk ; and IMF online information.  
Table 1.2 GDP and employment by economi c activity, 2014 -17 
 2014  2015  2016  2017  
GDP by economic activity in real terms (annual % change)      
Agriculture, fishing, mining and quarrying  -6.0 -6.8 -2.0 -0.5 
Manufacturing  -0.4 -1.5 -0.4 0.4 
Electricity, gas and water supply , and waste management  0.8 -2.6 -0.8 0.6 
Construction  13.0 5.4 5.1 2.3 
Services  2.5 1.7 2.3 3.5 
 Import/export, wholesale and retail trade s 1.2 -1.1 0.6 3.6 
 Import and export trade  1.3 -0.9 2.2 3.9 
 Wholesale and retail trade s 1.2 -1.6 -5.9 2.3 
 Accom modation and food services  2.2 -1.9 0.5 2.3 
 Transportation, storage, postal and courier services  2.9 3.3 3.0 4.9 
 Transportation and storage  3.0 4.0 3.1 4.6 
 Postal and courier services  1.2 -8.2 1.6 9.4 
 Information and communication s 3.9 4.0 4.1 3.9 
 Financ ing and insurance  5.3 6.1 4.2 5.6 
 Real estate, professional and business services  1.9 0.7 2.8 2.5 
 Real estate  1.2 -2.3 3.5 3.7 
 Professional and business services  2.6 3.2 2.2 1.4 
 Public administration, social and personal services  2.4 2.5 2.9 3.2 
 Ownership of premises  0.8 0.6 0.5 0.9 
Share of GDP at current basic prices (%)      
Agriculture, fishing, mining and quarrying  0.1 0.1 0.1 .. 
Manufacturing  1.3 1.1 1.1 .. 
Electricity, gas and water supply , and waste management  1.6 1.5 1.4 .. 
Construction  4.4 4.6 5.2 .. WT/TPR/S/380 • Hong Kong, China  
 
- 11 - 
 
   2014  2015  2016  2017  
Services  92.7 92.7 92.2 .. 
 Import/export, wholesale and retail trade s 24.1 22.7 21.7 .. 
 Import and export trade  19.1 18.1 17.7 .. 
 Wholesale and retail trade s 5.0 4.6 4.1 .. 
 Accommodation and food services  3.6 3.4 3.3 .. 
 Transportation, storage, postal and courier services  6.2 6.5 6.2 .. 
 Transportation and storage  5.9 6.1 5.9 .. 
 Postal and courier services  0.3 0.3 0.3 .. 
 Information and communication s 3.5 3.5 3.5 .. 
 Financ ing and insurance  16.7 17.6 17.7 .. 
 Financ ing 13.6 14.4 14.1 .. 
 Insurance  3.0 3.2 3.7 .. 
 Real estate, professional and business services  10.9 10.9 11.0 .. 
 Real estate  5.0 5.0 5.1 .. 
 Professional and business services  5.9 5.9 5.9 .. 
 Public administration, social and personal services  17.2 17.5 18.1 .. 
 Ownership of premises  10.5 10.6 10.7 .. 
Share of sector in total employment (%)      
Manufacturing  2.8 2.7 2.6 2.5 
Electricity, gas and water supply , and waste management  0.4 0.4 0.4 0.4 
Construction  8.3 8.4 8.6 8.8 
Services  88.4 88.4 88.3 88.2 
 Import and export trade  13.8 13.4 13.1 12.8 
 Wholesale  1.6 1.6 1.6 1.6 
 Retail trade  8.8 8.6 8.5 8.3 
 Accommodation and food services  7.4 7.3 7.2 7.2 
 Transportation, storage, postal  and courier services  8.5 8.4 8.1 8.2 
 Information and communication s 2.9 2.9 2.9 2.9 
 Finance and insurance  6.3 6.5 6.7 6.7 
 Real estate  3.5 3.5 3.5 3.5 
 Professional and business services  9.9 10.1 10.2 10.2 
 Social and personal services  22.8 23.2 23.5 23.8 
 Public administration  2.9 2.9 2.9 2.9 
Othera 0.1 0.1 0.1 0.1 
.. Not available.  
a Including agriculture, forestry and fishing, and mining and quarrying.  
Source:  C&SD online information, viewed at: http://www.censtatd.gov.hk ; and data provided by the 
authorities.  
1.3.  The HKC economy has strong fiscal and financial fundamentals. The fiscal balance has 
recorded substantial surpluses over the past years, giving the authorities leeway to increase public 
expenditure, in particular on infrastructure and social welfare; while , under strengthened 
supervision and regulation, the banking sector has built large capital and liquidity reserves. The 
Consumer Price Index (CPI) has been on a declining trend during the review period, coming down 
to 1.5% in 2017. Despite higher policy ra tes (in the aftermath of increases in the US rates), low 
financing costs and the measures applied by the authorities to restore balance in the housing 
market have helped maintain financial stability. As regards the external sector, HKC's current 
account su rplus increased during the review period, owing largely to a net inflow of primary 
income and a positive services trade balance, while foreign exchange reserves were equivalent to 
36.7 months of retained imports of goods in 2017.  
1.4.  The economy of HKC remain s very open, with exports and imports of goods and services 
representing 375% of GDP. Its openness and attractive business climate have earned HKC some of 
the highest rankings in relevant world economic indicators. For example, i n 2017, HKC  ranked 
5th in the Ease of Doing Business ranking of the World Bank.1 
                                                
1 World Bank online information, Doing Business Rankings. Viewed at: 
http://www.doingbusiness.org/rankings . In 2017, HKC was also considered the freest economy in the world by 
the Heritage Foundation , Heritage Foundation (2017), The 2017 Index of Economic Freedom . Viewed at: 
https://www.heritage.org/index/pdf/2017/book/index_2017.pdf . In the same year, HKC ranked 6th in the 
Global Competitiveness Index of the World Economic Forum , World Economic Forum on line information, Global 
Competitiveness Index. Viewed at: http://reports.weforum.org/global -competitiveness -index -2017-
2018/competitiveness -ranking s/. WT/TPR/S/380 • Hong Kong, China  
 
- 12 - 
 
  1.5.  HKC has continued to foster economic and financial integration with Mainland China. Under 
the Closer Economic Partnership Arrangement  (CEPA), four subsidiary agreements were signed 
and came  into effect  over the review period , broadening and deepening CEPA's coverage in the 
areas of trade in services, investment, and economic and technical cooperation  (Section 2). Also , 
three mutual capital market access  schemes between HKC and Mainland China  were launched, 
allowing overseas institutional investors greater access to M ainland China's capital  market s via 
HKC, while at the same time facilitating Mainland China's access to HKC's  capital  markets (see also 
Section 4, Box 4.14 ).2  
1.6.  In July 2017, HKC entered into a cooperation agreement with the National Development and 
Reform Commission , the People 's Government of Guangdong Province of Mainland China, and  
Macao, China, for the development of the Guangdong -Hong Kong -Macao Bay Area (the Bay Area) . 
The ag reement seeks to foster the synergies between the economies of th e Bay Area, setting out 
key cooperation areas, inter alia , promoting  infrastructure connectivity, enhancing the level of  
market integration, and building a global  technology and innovation  hub.3 In December  2017, HKC 
signed an arrangement for advancing its participation in and contribution to Mainland China's Belt 
and Road Initiative4, under which six action areas are envisaged: finance and investment; 
infrastructure and maritime services; economic and trade facilitation; people -to-people bonds; 
taking forward the Bay Area development; and enhancing collaboration in project interfacing and 
dispute r esolution services.5 The authorities consider that the Initiative could  bring about many 
opportunities for HKC's businesses , especially in the professional services sector (including 
international legal and dispute resolution services), and further consoli date its position as an 
international finance, trading and logistics platform in the region.  
1.2  Recent Economic Developments   
1.7.  HKC's economic activity accelerated i n 2017, with GDP growing by 3.8% (Table  1.1), above 
the 2.9% average annual growth  recorded over the period 2007-16.6 Growth was driven by strong 
domestic demand and increasing exports of goods and services amid a recovering global economy. 
Domestic demand was , in turn, sustained by strong private consumption, reflecting favourable 
emplo yment conditions and rising real incomes, and by the resumption of growth in fixed capital 
formation owing to a rebound in investment in machinery and equipment.  
1.8.  The labour market has gradually tightened since 2017, after being generally stable during 
2014 to 2016.  The unemployment rate dropped from 3.3% in 2014 to 3.1% in 2017; and in the 
first quarter of 2018 t he seasonally adjusted unemployment rate fell to 2.9%, the lowest in more 
than 20 years. Amid full employment and a strong labour demand, wages an d earnings sustained 
solid gains across the occupational segments.  Moreover, u pward adjustments to the Statutory 
Minimum Wage (SMW) , made in 2015 and 2017 , provided additional support to the income of low -
paid workers . The overall labour force participatio n rate remained  steady  at 61.1% on an annual 
basis during  the period under review.  
1.9.  Inflation continued its multi -year downward trend. The CPI  dropped from 4.4%  in 2014 to 
1.5% in 2017 , reflecting moderate local cost pressure s and mild imported inflation throughout 
most of the review period , while recent labour productivity gains have helped contain  labour cost  
pressures .  
1.10.   HKC is one of the wealthiest economies in East Asia, with a GDP per capita reaching 
HK$359,996  (US$46,189 ) in 2017. Nevertheless, incom e disparity remains significant: the Gini 
coefficient was at 0.539 in 2016 based on original monthly household income , and at 0.473 based 
on monthly household income  after tax and social transfers.7 Another challenge to growth over the 
                                                
2 These schemes are the Shanghai -Hong Kong Stock Connect , the Shenzhen -Hong Kong Stock Connect 
and Bond Connect . 
3 The Government of the Hong Kong Special Administrative Region online information. Press release. 
Viewed at: http://www.info.gov.hk/gia/general/201707/01/P2017070100409.htm?fontSize=1 .  
4 Also known as "One Belt and One Road" initiative.  
5 2017 Chief Executive's Policy Address, paragraph 58 . Viewed at:  
https://www.policyaddress.gov.hk/2017/eng/pdf/PA2017.pdf . 
6 Government of the Hong Kong Special Administrative Region ( 2018), 2017 Economic Background and 
2018 Prospects . Viewed at: https://www.hkeconomy.gov.hk/en/pdf/er_17q4.pdf .  
7 C&SD. Viewed at: 
http://www.censta td.gov.hk/press_release/pressReleaseDetail.jsp?charsetID=1&pressRID=4180 .  WT/TPR/S/380 • Hong Kong, China  
 
- 13 - 
 
  medium  term is the r apid pace of population ag eing, which , apart from the projected decline in the 
size of the labour force, is likely to put pressure on public finances , as spending on social welfare  
and healthcare is poised to increase. In order to reduce the income gap and  cater for the needs of 
an ag eing population, the Government has, inter alia , increased public expenditure on welfare and 
healthcare, provided social benefits and relief measures for lower -income groups (see below), 
improved the retirement protection system, and enhance d the living allowance for the elderly.  
1.11.   The housing market continues to be characterized by a structural supply -demand 
imbalance, with persistent housing shortages and surging property prices. In the event of sudden 
increases in interest  rates, this situation could lead to a significant market correction. With the aim 
of addressing imbalances in the property market and safeguarding financial stability, the 
authorities have implemented a combination of measures, including tighter macro -prudential 
measures for property mortgage loans (such as maximum loan -to-value ratios), demand -side 
management measures (higher and new property stamp duties8), increased land supply for 
building houses, and increased provision of subsidized housing for rent and for sale. These 
measures have created buffers against sudden asset price adjustments and contributed to limit 
demand. Nevertheless, house prices have continued to rise amid a buoyant property market.9 
Looking ahead, the authorities have indicated that they will closely monitor the movement of the 
property market and the changing external environment with reference to a series of indicators 
(such as property prices, home purchase affordability ratio, transaction volume, supply of private 
flats, changes i n local and external economic factors, etc.) and introduce appropriate measures as 
and when necessary.  
1.12.   Currency stability is the monetary policy objective of HKC. This is implemented through the 
Linked Exchange Rate System (LERS) , under which the external  exchange value of the Hong Kong 
dollar is pegged to the US dollar , at around HK$7.80 to US$1.00.  The LERS is essentially a 
Currency Board system, which requires the Hong Kong dollar monetary base, and any changes in 
it, to be fully backed by US dollar res erves held by the Exchange Fund at the fixed exchange rate 
of HK$7.80 to US$1.00. To this end, t he Hong Kong Monetary Authority ( HKMA ) undertakes to buy 
Hong Kong dollars from licensed banks at HK$7.85 to US$1.00 and sell Hong Kong dollars to them 
at HK$7. 75 to US$1.00, i.e. the Convertibility Undertakings (CUs). The CUs maintain the stability 
of the Hong Kong dollar exchange rate within  the trading band (Convertibility Zone) at between 
HK$7.75 and HK$7.85  against the US dollar .  
1.13.   During the review period, t he Hong Kong dollar exchange rate stayed within the 
Convertibility Zone. Between 2014 and 2016, it traded mostly close to the HK$7.75 to 
US$1.00  limit, and the HKMA sold Hong Kong dollars under CU operations upon banks' requests in 
order to maintain the st ability of the currency. From early 2017, the Hong Kong dollar started to 
weaken, driven by carry trade activities amid widening interest rate spreads between the Hong 
Kong dollar and the US dollar. By mid -April 2018, the Hong Kong dollar reached the HK$7. 85 to 
US$1.00 level, and the HKMA bought Hong Kong dollars under CU operations upon banks' requests 
to keep the currency stable.10 Between 15 and 18 May 2018, the HKMA bought more Hong Kong 
dollars under CU operations, bringing the total amount purchased si nce mid -April to about 
HK$70  billion. Against other currencies, the Hong Kong dollar real effective exchange rate 
appreciated during the first years covered by this Review, notably in 2015 (Table 1.1), but 
depreciated in 2017 following the weakening of the  US dollar vis-à-vis other major currencies.  
                                                
8 Introduced in November 2010 and enhanced in October 2012, a  Special Stamp Duty  of 10-20% is 
chargeable if the property owner 's holding period is shorter than 36 months from the date of acquisition. A 
Buyer's Stamp Duty of 15% applies on residential properties acquired by any person except a HKC permanent 
resident from October 2012 onwards. The Double Ad-Valorem  Stamp Duty, which  was introduced in 
February  2013 for both residential and non -residential properties, was increased to a flat rate of 15% for 
residential property transactions in November  2016, and is now called the New Residential Stamp Duty. The 
Double Ad-Valorem  Stamp Duty at the original stamp duty scale remains valid for non -residential properties.  
The New Residential Stamp Duty exception for HKC permanent residents who have acquired several residential 
properties under one instrument was scrapped in April 2017.  
9 IMF (2018), People's Republic of China –Hong Kong Special Administrative Region. 2017 Article IV 
Consultation, Staff Report, IMF Country Report No. 18/16, January. Viewed at: 
http://www.imf.org/en/Publications/CR/Issues/2018/01/22/People -s-Republic -of-China -Hong-Kong-Special -
Administrative -Region -Staff-Report -for-the-2017-45572 . 
10 This was the  first time that the CU of buying Hong Kong dollars at HK$7.85 to US$1.00 was triggered 
after the Hong Kong dollar buying CU rate was moved to that level from HK$7.80 to US$1.00 in 2005.  WT/TPR/S/380 • Hong Kong, China  
 
- 14 - 
 
  1.14.   Under the LERS, the HKMA does not have any target on the level of interest rates. The 
HKMA's Base Rate (i.e. the interest rate forming the foundation upon which the Discount Rates for 
the HKMA's Discount Window  are computed) closely responds to changes to the US policy rate 
made by the US Federal Reserve.11 On 17 December 2015, the HKMA raised the Base Rate by 
25 basis points, following an identical upward shift in the US federal funds target rate. This was 
the first time the HKMA adjusted its Base Rate in seven years; since then, it has been adjusted 
upwards six more times, tracking the increases in the US federal funds rate.12 On 14  June 2018, 
after the latest increase took place, the Base Rate stood at 2.25%. Me anwhile, owing to the ample 
liquidity in the interbank market, the HKC's Hibor13 remained below its US  dollar counterpart. The 
interest rate differential, as indicated above, has given rise to arbitrage (carry trade) and has 
partly contributed to the easing  of the Hong Kong dollar since early 2017.  
1.15.   HKC has a simple tax regime, with low rates and a narrow base depending mainly on profits 
tax, land premium s, salaries tax, and stamp duties  as sources of revenue . Keeping healthy public 
finances is a pillar of HKC's macroeconomic policy, as it is considered to be essential to attract 
local and overseas investors. Under the Basic Law, the Government must follow the principle of 
keeping expenditure within the limits o f revenues when drawing up its budget. This principle has 
been consistently upheld, as HKC has run a fiscal surplus  for more than a decade, building up large 
fiscal reserves  that amount ed to 41.4% of GDP in 2017,  while keeping very low levels of public 
debt (0.06% of GDP in 2017) (Table 1.1) . 
1.16.   At the same time, the Government is committed to using tax policy strategically to enhance 
HKC's competitiveness (by fostering diversification and the development of pillar industries) and to 
improve people's livelihoo ds.14 During the review  period , a number of measures were adopted to 
promote economic development , create job opportunities , and provide tax relief to the public . With 
the aim of fostering a diversified and knowledge -based economy, the  Government allocated 
HK$18  billion to establish the  Innovation and Technology Bureau (ITB) under the Financial 
Secretary in 2015 to  promote R&D, provide technological infrastructure, nurture technology 
talents , and  support start -ups. In order to cater for development needs, public investment in 
infrastructure projects was increased by nearly 40% between 2012 and 2017.  In addition, several 
tax concessions and expenditure measures (such as one-off reductions of the salaries tax and the 
profits tax, rates concessions , extra soci al welfare allowances , and one -off subsidies to low income 
groups) were taken to provide financial relief and enhance people 's livelihoods. Recurrent 
expenditure on social welfare was increased by 71% between 2012 and 2017.15 According to the 
authorities, these relief measures , together with other spending initiatives , were estimated to have 
boosted GDP by around one percentage point on average each year from 2014 to 2017.  
1.17.   In the same vein, the G overnment has implemented a two-tiered profits tax rate regime , 
which is applicable to the years of assessment commencing on or after 1 April 2018. The objective 
is to reduce the burden on enterprises, especially SMEs, and foster a favourable business 
environment . Under the regime, the tax rate for the first HK$2 million of profits of corporations is 
lowered from 16.5% to 8.25%. Profits above that amount continue to be subject to the tax rate of 
16.5%. For unincorporated businesses, the two -tiered tax rates are correspondingly set at 7.5% 
and 15%.  In addition, in order to encourage enterprises to conduct more R&D activities in H KC, in 
May 2018, the Government introduced a bill that provide s enhanced tax deduction for expenditure 
incurred by enterprises on qualifying R&D activities. According to the bill, t he first HK$2 million 
spent on qualifying R&D will enjoy a 300% tax deduction , and expenditure beyond that will enjoy a 
200% deduction. There is no cap on the amount of enhanced tax deduction.  The enhanced R&D 
tax incentive will commence from the year of assessment 2018/19.  
1.18.   Overall, HKC's fiscal policy is forward looking and based on strategic financial management 
principles. The authorities firmly believe that using their existing fiscal surpluses to invest for the 
future (such as in infrastructure and improving ser vices), to promote economic and social 
development and to boost HKC's competitiveness are the best way to address possible future 
                                                
11 HKMA online information. Viewed at: http://www.hkma.gov.hk/gdbook/eng/b/base_rate.shtml . 
12 HKMA online information. Viewed at: http://www.hkma.gov.hk/eng/key -information/press -release -
category/monetary -policy.shtml . 
13 Hibor is the estimated offer rate at which deposits in Hong Kong dollars are quoted to prime banks in 
HKC's interbank market. The Hibor has tenors from overnight up to 12 months.  
14 Chief Executive's 2017 Policy Address. Viewed at: 
https://www.policyaddress.gov.hk/2017/eng/pdf/PA2017.pdf . 
15 Financial Secretary, 2017-18 Budget  speech . Viewed at: https://www.budget.gov.hk/2017/eng/ .  WT/TPR/S/380 • Hong Kong, China  
 
- 15 - 
 
  pressures on public finances, resulting  from, inter alia , an ageing population. They are confident 
that participation in the B elt and Road Initiative will accelerate economic growth, provide new 
business opportunities and, hence, generate more tax revenues.   
1.19.   The external position of the HKC economy is sound, with a nnual reserves gains that have 
resulted in the accumulation of large foreign reserves , amounting to US$431.4  billion in 201 7, and 
equivalent to 36 .7 months of retained imports of goods (Table 1.1).  
1.20.   Reflecting its savings and investment balance, HKC's current account surplus increased 
throughout the review period , owing to persistent positive results in both the primary income and 
the services balances , which have more than offset the deficit in the goods trade and secondary 
income accounts  (Table 1.3). The current account surplus represented 4.3% of GDP in 2017 . The 
trade in goods balance was in deficit throughout the period  under review  and, despite a n increase 
in export growth in 2017, merchandise imports grew faster than exports , resulting in a deficit 
equivalent to 7.0% of GDP in that year . The surplus in the s ervice s balance showed a declining 
trend in the first three years of the review ( especially in 2016) , but increased in 2017 as exports of 
services reverted to moderate growth with improvements acro ss all major subsectors. T he primary 
income balance recorded a surplus during the period, in particular in 2017 due to increased 
earnings from overseas investments made by local firms and residents.  
1.21.   The capital and financial account s recorded net outflows  during the period under review . A 
net inflow of f inancial non -reserve assets  was recorded over the same period, except in 2016 . Both 
direct investment and portfolio investment continue d to show strong activity during the review 
period , showing the attract iveness of HKC as an investment destination and also its position as a 
main financial hub. A net inflow of direct investment was countered during most of the period by a 
net outflow of portfolio investment and/or other investment.  
Table 1.3 Balance of payments, 2014 -17 
(HK$ million)  
 2014  2015  2016  2017  
Current account  31,453  79,553  98,664  114,946  
Goods and services balance  4,632  57,301  57,040  24,217  
 Goods balance  -250,931  -177,302  -129,693  -186,673  
  Exports  3,986,769  3,889,225  3,892,886  4,191,267  
  Imports  4,237,700  4,066,527  4,022,579  4,377,940  
 Services balance  255,563  234,603  186,733  210,890  
  Credit  829,085  808,948  764,839  811,396  
  Debit  573,522  574,345  578,106  600,506  
Primary income  46,607  44,376  62,593  110,734  
 Credit  1,254,733  1,274,457  1,273,534  1,400,657  
  Investment income  1,251,844  1,271,459  1,270,432  1,397,251  
  Compensation of employees  2,888  2,998  3,102  3,406  
 Debit  1,208,126  1,230,080  1,210,941  1,289,923  
  Investment income  1,202,608  1,224,200  1,204,603  1,283,106  
  Compensation of employees  5,518  5,880  6,338  6,817  
Secondary income  -19,786  -22,124  -20,969  -20,005  
 Credit  8,802  9,650  10,442  12,843  
  General Government  0 0 0 0 
  Other sectors  8,802  9,650  10,442  12,843  
 Debit  28,588  31,775  31,411  32,848  
  General Government  2,225  2,250  1,772  1,906  
  Other sectors  26,363  29,525  29,639  30,943  
Capital account  -748 -216 -374 -646 
Financial account  -73,037  -128,426  -100,730  -154,397  
Financial non -reserve assets  66,052  153,570  -91,874  96,111  
Direct investment  -85,718  794,800  447,758  167,473  
 Assets  -1,092,502  -608,769  -586,386  -786,084  
 Liabilities  1,006,784  1,403,568  1,034,144  953,557  
Portfolio investment  -64,384  -970,938  -469,591  305,014  
 Assets  -276,143  -661,239  -530,219  23,160  
  Equity and investment fund shares  -318,227  -420,217  -354,693  -103,489  
  Debt securities  42,085  -241,022  -175,526  126,649  
 Liabilities  211,759  -309,700  60,628  281,854  
  Equity and investment fund shares  136,745  -329,678  19,335  88,814  
  Debt securities  75,013  19,978  41,293  193,041  WT/TPR/S/380 • Hong Kong, China  
 
- 16 - 
 
   2014  2015  2016  2017  
Financial derivatives  118,359  99,178  36,327  39,646  
 Assets  449,093  564,185  738,192  635,854  
 Liabilities  -330,734  -465,006  -701,866  -596,208  
Other investment  97,795  230,531  -106,368  -416,022  
 Assets  -925,077  285,040  -322,076  -1,462,979  
 Liabilities  1,022,872  -54,510  215,708  1,046,957  
Reserve assets  -139,089  -281,996  -8,856  -250,509  
Net errors and omission s 42,332  49,089  2,440  40,098  
Balance of payments  139,089  281,996  8,856  250,509  
Memorandum:      
Current account as % of GDP  1.4 3.3 4.0 4.3 
Source:  C&SD online information.  
1.3  Developments in trade and investment  
1.3.1   Trends and patterns in merchandise and services trade   
1.22.   HKC remains highly dependent on international trade , as shown by the fact that its exports 
and imports o f goods and services represent 375% of GDP  (Table 1.1) . In 201 7, HKC ranked as 
the world's 6th largest exporter and the 5th largest importer of goods, and the 8th largest exporter 
and the 1 2th largest importer of services.16  
1.3.1.1   Merchandise trade17  
1.23.   By virtue of  its high specialization in the services sector and the small size of its production 
base, the economy of HKC depends heavily on merchandise imports to meet its domestic 
consumption needs. This situation, together with HKC's role as a major trading entrepô t, has 
resulted in a persistent deficit in the goods trade balance, which, in turn, has been offset by 
sustained surpluses in the services trade balance. In 2017, HKC's total merchandise imports 
amounted to US$589.8 billion, while total exports were US$550 .2 billion.  
1.24.   Between 2014 and 2017, total exports (re -exports and domestic exports) grew at an 
average annual rate of 1.6% in value terms (Tables A1.1 and A1.2). Export performance was 
uneven during this period, showing a contraction in 2015, followed by a  modest recovery in 2016, 
and an increase (6.5%) in 2017 owing to the global economic upswing and, in particular, vibrant 
demand from Asian markets. HKC's merchandise imports recorded a similar trend during the 
review period (Table A1.3): after subdued gro wth in 2014 and declines in 2015 and 2016, imports 
picked up by 7.8% in 2017, lifted by buoyant re -export trade activity and robust domestic 
demand. Nonetheless, during the entire period, imports contracted by an average annual rate of 
0.6% in value terms.  
1.25.   Re-exports are the driving force of HKC's overall merchandise exports, accounting for 97% 
of total exports of goods in 2017.18 Mainland China is the origin of about 55% of HKC's re -exports . 
Imports related to re -exports represented 75% of total merchandise  imports in 2017, whereas 
"retained imports" (i.e. for domestic use) made up the rest.19  
1.26.   In 2017, re -exports of goods grew by a remarkable 8.3% on the back of a broad -based 
upswing in global demand, hence reversing three years of consecutive decreases. The product 
composition of re -exports continues to be dominated by machinery and electrical equipment (in 
particular, telecommunications equipment, semiconductors and computer items) .20 This product 
                                                
16 Counting the EU -28 as one. WTO, Strong trade growth in 2018 rests on policy choice , Press release, 
12 April 2018 . Viewed at: https://www.wto.org/english/news_e/pres18_e/pr820_e.htm . 
17 Merchandise trade figures are based on UNSD Comtrade data.  
18 Re-exports are goods that have previously been imported into HKC and are subsequently exported 
without having undergone any manufacturing processes that permanently change the shape, nature, form or 
utility of the goods.  
19 The value of retained imports is  derived by subtracting the estimated import value of re -exports from 
the value of imports. The estimated import value of re -exports is obtained by removing the re -export marg in 
from the value of re -exports.  
20 According to the Hong Kong Trade Development Council (HKTDC), HKC  was the world 's largest 
exporter of electronic integrated circuits; the second largest exporter of computer parts  and accessories; and WT/TPR/S/380 • Hong Kong, China  
 
- 17 - 
 
  category increased its share in total re -exports to 65.6% in 2017 (up from 60.6% in 2014), mainly 
due to a surge in sales of electronic integrated cir cuits and other computer components to 
Mainland China .21 Other re -exported products are precious stones and metals and pearls; precision 
instruments; textiles and textile articles; and plastics and rubber (Table A1.1 and Chart 1.1).  
1.27.   Domestic exports also s howed an uneven performance during the period under review 
(Table A1.2), with an upsurge in 2016 that can be attributed to a sharp increase in exports of 
non-monetary gold. Domestic exports are concentrated in precious stones and metals, and pearls, 
which accounted for 76.5% of all domestic exports in 2017. Other domestic products exported are 
prepared food, beverages and tobacco; chemicals; base metals and articles thereof; and plastic 
and rubber (Table A1.2 and Chart 1.1). The share of machinery and elect rical equipment 
decreased to 2.6% in 2017, down from 6.8% in 2014, which can be explained by the fact that 
most local manufacturers have continued to shift their production facilities to Mainland China in 
order to reduce costs.22 
1.28.   Imports of goods (including  retained imports) increased in 2017, supported by vibrant 
re-export trade amid improvements in regional trading activities and robust domestic demand. 
Machinery and electrical equipment remains the largest import item and has increased its share in 
total imports to 62.1% (from 54.7% in 2014), with electrical machinery alone accounting for 
51.5% of the total. Other major import items are precious stones and metals, and pearls; and 
precision instruments (Table A1.3 and Chart 1.1).  
1.29.   Mainland China is HKC's ma in trading partner, receiving 55.3% of HKC's re -exports and 
supplying 44.6% of its imports (Tables A1.4 and A1.6 and Chart 1.2). This is a reflection of HKC's 
key entrepôt  role for trade between Mainland China and the rest of the world, as well as its 
deepening economic ties with Mainland China. Total two -way trade between HKC and Mainland 
China amounted to US$561 billion in  2017.  
1.30.   Other Asian markets are also important for HKC's trade, having gained in significance in 
recent years. In 2017, nearly 21% of H KC's re -exports and 40% of its domestic exports were 
destined for other Asian economies (including Japan), compared to 18.8% and 21.4%, 
respectively, in 2014 (Tables  A1.4 and A1.5, and Chart 1.2). With a few exceptions (e.g. Japan), 
the shares of other Asi an economies in HKC's re -exports and domestic exports have increased in 
the past years, mirroring vibrant intra -regional trade flows sustained by strong manufacturing and 
trading activities in the region. Notably, the shares of some ASEAN economies and Ind ia have seen 
an increase. The European Union (EU -28) and the United States are also import destination 
markets for HKC, but their respective shares in re -exports have decreased. By contrast, the shares 
of the EU -28 and Switzerland in HKC's domestic exports  grew significantly in the last couple of 
years, which appears to be linked to a surge in exports of non -monetary gold.  
1.31.   With regard to imports, besides Mainland China, other major HKC suppliers of goods in Asia 
are Chinese Taipei, Singapore, Japan and the  Republic of Korea; Asian economies (excluding 
Mainland China) accounted for 37.6% of HKC's imports in 2017. While the European Union and the 
United States are also important HKC suppliers, their relative shares have decreased slightly 
(Table A1.6 and Char t 1.2).  
                                                                                                                                                  
the third largest exporter of telephones/mobile phones, sound recording apparatus, video recording ap paratus 
and electric micro motors in value terms in 2015.  HKTDC online information. Viewed at: http://hong -kong-
economy -research.hktdc.com/business -news/article/Hong -Kong-Industry -Profiles/Electronics -Industry -in-
Hong-Kong/hkip/en/1/1X47J8XF/1X00401Z.htm .  
21 HKTDC  online information.  
22 HKTDC online information.  WT/TPR/S/380 • Hong Kong, China  
 
- 18 - 
 
  Chart 1.1 Product composition of merchandise trade by HS section, 2014 and 2017  
 
Note:  Data in brackets refer to the HS Section number.  
Source:  WTO cal culations based on the UNSD Comtrade database.  
 
Chart 1.1
Product composition of merchandise trade by HS section, 2014 and 2017
2014 2017
Imports
Source:  WTO calucations based on UNSD Comtrade database.Other 
13.2%
Plastics & rubber (VII)
2.4%
Textiles & textile
articles (XI) 4.1%
Precious stones & 
metals & pearls (XIV) 
16.4%
Domestic exports
Re-exportsPrecision instruments (XVIII)
4.5%
Machinery; electrical 
equipment (XVI)
54.7%
Chemicals (VI)
5.0%Other  5.6%Other 
10.0%
Other
9.9%Total:  US$600.6 billion Total:  US$589.8 billion
Total:  US$15.6 billion Total: US$18.4 billion
Total:  US$508.5 billion Total:  US$531.8 billionChemicals (VI) 1.9%Other
12.1%
Other
11.6%Prepared foodstuff
beverages & 
tobacco (IV)  5.6%Precision instruments (XVIII)
4.3%
Machinery; electrical 
equipment (XVI)
62.1%
Precious stones & 
metals & pearls (XIV) 
12.1%Textiles & textile
articles (XI) 3.2%Plastics & rubber
(VII) 1.9%Chemcials (VI) 2.1%
Prepared foodstuff
beverages & tobacco
(IV) 5.3%
Chemicals (VI) 
4.1%
Plastics & rubber (VII)
5.0%Plastics & rubber (VII)  
2.7%Precious 
stones & metals
& pearls (XIV)
76.5%*Precious stones & 
metals & pearls (XIV) 
63.3%*Machinery; electrical 
equipment (XVI)
6.8%
Machinery; electrical 
equip. (XVI) 2.6% 
Precision instruments
(XVIII) 4.8%Precision instruments
(XVIII) 5.1%
Machinery; electrical 
equipment (XVI)
60.6%Machinery; electrical 
equipment (XVI)
65.6%
Precious stones & 
metals & pearls (XIV) 
14.3%Precious stones & 
metals & pearls (XIV) 
13.7%Textiles & 
textile articles (XI) 
4.0%Textiles & 
textile articles (XI) 
5.7%Plastics & rubber (VII)
2.7%Plastics & rubber 
(VII) 2.0%
Note:  Data in brackets refer to the HS Section number.*Out of which 'gold, unwrought or in semi -manufactured forms, or in powder form' 53.5% and 69.5%, respectively, in 2014 and 2017Mineral products (V)  2.7%Mineral products 
(V)  2.2%
Base metals & articles 
thereof (XV)  3.3%Base metals & articles 
thereof (XV)
4.4%WT/TPR/S/380 • Hong Kong, China  
 
- 19 - 
 
  Chart 1.2 Direction of merchandise trade, 201 4 and 201 7 
 
Source:  WTO calculations based on figures from the UNSD Comtrade database.  
1.3.1.2   Services trade   
1.32.   Amid a sluggish global economic environment, services export s decreased at an annual 
average rate of 0.7% between 2014 and 2017, according to balance -of-payments (BOP) data. 
Exports of services slackened in particular in 2015 and 2016, due partly to slow global growth and 
Chart 1.2
Direction of merchandise trade, 2014 and 2017
2014 2017
Imports
Source:  WTO calculations based on figures from UNSD Comtrade database.Other 
4.7%
EU-28
7.3%
China
44.7% Japan
6.5%
Domestic exports
Re-exportsSingapore
5.8%
Chinese
Taipei 
6.6%Korea, Rep. of
5.5%United
States
5.2%
Switzerland
2.6%
Chinese Taipei
7.2%
Japan
6.1%EU-28
6.5%
China
44.6%
United 
States
3.8%EU-28
2.6%
China
65.0%Chinese Taipei 
5.1%Other
3.1%United
States
2.5%
EU-28
17.5%Other 
1.7%
Korea, Rep. of  2.4%
China
20.5%
United States
8.6%
EU-28
8.7%
India  2.5%
China
57.1%United States
7.9%
EU-28
8.4%
China
55.3%Other
7.4%
Japan   3.3%India 3.8%Total:  US$600.6 billion Total:  US$589.8 billion
Total:  US$15.6 billion Total: US$18.4 billion
Total:  US$508.5 billion Total:  US$531.8 billionKorea, Rep. of
3.9%United 
States
5.8%Other
3.6%
Chinese Taipei  
5.1%Singapore 
2.3%
Other
6.9%
Japan 3.1%Other Asia
10.8%Other Asia
12.5%
Switzerland
16.1%Thailand  
10.4%Other Asia 
7.1%Other Asia
14.0%
Other Asia
11.0%Other Asia
9.7%Switzerland
4.0%
Switzerland
2.7%United 
Arab 
Emirates
2.8%Singapore
6.4%
Singapore 
11.4%India  3.8%
Thailand  2.0% Thailand  2.1%
Chinese Taipei  2.2%WT/TPR/S/380 • Hong Kong, China  
 
- 20 - 
 
  the appreciation of the US dollar, with exp orts of travel services and transport services being the 
most affected.23 However, as the external environment improved in  2017, HKC's exports of 
services reverted to growth across all major subsectors: exports of transport services showed fast 
growth, owing to dynamic regional trade and cargo flows; financial services exports picked up 
amid buoyant global financial markets and cross -border financing activities; exports of travel 
services resumed growth after years of decline, thanks to the recovery of inbound tourism, 
especially from Mainland China; and exports of business serv ices also improved.24 
1.33.   Imports of services grew at an average annual rate of 1.5% between 2014 and 2017, based 
on BOP figures. In 2017, they grew by 3.9% (in value terms), bolstered by imports of travel 
services, reflecting strong interest from HKC residents  in overseas travel, and supported by 
improved job and income conditions. Imports of transport services resumed growth, owing to 
increased intra -regional trade activity. Likewise, imports of business services grew, underpinned 
by the more favourable global  economic environment. On the other hand, imports of 
manufacturing services fell by 1.3% in value terms between 2014 and 2017, reflecting subdue d 
outward processing activities.  
1.34.   HKC has continued to maintain a substantial surplus in the trade in services ba lance over 
the review period. In terms of contribution to exports, the main services subsectors were travel, 
transport and financial services. On the import side, the main categories were travel, transport and 
manufacturing services (Table 1.4). "Other bus iness services" have traditionally been an important 
component in both exports and imports of services.  
Table 1.4 Composition of trade in services, 2014 -17  
(HK$ million and %)  
  2014  2015  2016  2017  
Total credit (HK$ billion)  829.1  808.9  764.8  811.4   
 (% of total credit ) 
 Manufacturing services  0.0a 0.0a 0.0a .. 
 Maintenance and repair services  0.3  0.3  0.3 .. 
 Transport  29.9  28.5  28.6  29.1  
 Travel  35.9  34.6  33.3  32.0  
 Construction  0.3  0.2  0.1 .. 
 Insurance and pension services  1.1  1.3  1.5  1.4  
 Financial services  16.5  18.4  18.1  19.3  
 Charges for the use of intellectual property  0.6  0.6  0.7 .. 
 Telecommunications, computer and information services  2.6  2.7  2.9 .. 
 Other business services  12.4  13.0  14.0 .. 
 Personal, cultural and recreational services  0.2  0.2  0.3 .. 
 Government goods and services  0.1  0.1  0.1 .. 
Total debit (HK$ billion)  573.5  574.3  578.1  600.5  
                                                
23 Exports of travel se rvices were also affected by the effect of the "One trip per week" Individual Visit 
Endorsement, implemented in April 2015, which replaced the "Multiple -entry" visit endorsement and resulted in 
a decrease in the number of visitors from Shenzhen  in Mainland  China. Government online information. Viewed 
at: http://www.info.gov.hk/gia/general/201504/13/P201504130887.htm . 
24 Government of the Hong Kong Special Administrative Region (2018), 2017 Economic Background and 
2018 Prospects. V iewed at: https://www.hkeconomy.gov.hk/en/pdf/er_17q4.pdf .  WT/TPR/S/380 • Hong Kong, China  
 
- 21 - 
 
    2014  2015  2016  2017  
 (% of total debit ) 
 Manufacturing services  16.1  15.7  15.3  14.8  
 Maintenance and repair services  0.2  0.2  0.2 .. 
 Transport  24.9  23.4  22.7  22.6  
 Travel  29.8  31.1  32.4  33.0  
 Construction  0.5  0.2  0.2 .. 
 Insurance and pension services  2.0  2.0  1.9  1.9  
 Financial services  6.0  6.5  6.3  6.5  
 Charges for the use of intellectual property  2.6  2.5  2.5 .. 
 Telecommunications, computer and information services  2.6  2.6  2.6 .. 
 Other business services  15.1  15.5  15.5 .. 
 Personal, cultural and recreational services  0.1  0.1  0.2 .. 
 Government goods and services  0.2  0.2  0.2 .. 
.. Not available  
a Denotes a % share of less than 0.05%.  
Source:  C&SD online information, viewed at: http://www.censtatd.gov.hk ; and IMF online information.  
1.3.2   Trends and patterns in direct investment  
1.35.   HKC is one of the largest destinations and sources of direct investment in the world. In 
2016, it ranked as the fourth -largest recipient of direct investment inflows worldwide (the second -
largest in Asia after Mainland China), and the sixth -largest source of direct investment outflows.25 
This reflects HKC's position as an important business hub for foreign and Mainla nd Chinese 
companies, as well as the absence of foreign exchange controls and restrictions on overseas 
investment.  
1.36.   The stock of HKC's direct investment liabilities26 continued to increas e during the period 
under  review. At end -2017, it stood at HK$17,190 b illion, equivalent to 646% of GDP (Table A1.7). 
At end -2016, HKC ranked as having the second -largest stock of inward direct investment in the 
world, after the United States.27 Mainland China remains a major source of HKC's inward direct 
investment, accounti ng for 25.7% of the total stock at end -2016. The British Virgin Islands, with a 
share of 34.2% at end -2016, has become the largest source since 2014. This can be explained by 
the practice of some HKC businesses setting up non -operating companies overseas a nd then re -
channelling funds back to HKC. Other major sources of HKC's inward direct investment are the 
Cayman Islands , the Netherlands, Bermuda, and the United States.  
1.37.   The stock of HKC's direct investment assets28 also saw an increase over the review perio d, 
reaching HK$15,906 billion at end -2017, or 598% of GDP. Mainland China is the largest recipient, 
with a share of 40.2% of the total stock of HKC's outward direct investment at end -2016, followed 
closely by the British Virgin Islands, with 38.8% (Table A 1.7). The Cayman Islands, Bermuda and 
the United Kingdom are other major recipients.  
1.38.   Analysed by major economic activity of Hong Kong enterprise groups (HKEGs)29, the 
composition of HKC's inward and outward direct investment has remained stable (Table A1.8) . 
Both inward and outward stocks are mostly located in the services sector. Notably, those engaged 
in "Investment and holding, real estate, professional and business services " made up 67.5% and 
78.7% of the total stocks of inward and outward direct investm ent, respectively,  at end -2016. 
Other major economic sectors of HKEGs  having receiv ed inward direct investment  were banking; 
import/export, wholesale and retail trades; and financing (except banking , investment and holding 
companies ); whereas other major economic sectors of HKEGs  having made outward direct 
investment were import/export, wholesale and retail trades;  banking; and manufacturing.  
                                                
25 Rankings are based on Figures I.11 and I.14, UNCTAD  (2017),  World Investment  Report 2017 . 
Viewed at:  http://unctad.org/en/PublicationsLibrary/wir2017_en.pdf . 
26 The stock of direct investment liabilities is compiled based on the "asset/liability principle ", in 
accordance with international statistical standards.  
27 Rankings on FDI inward and outward stocks are based on Annex Table 2, UNCTAD (2017) .  
28 The stock of direct investment a ssets is compiled based on the " asset/liability principle ", in 
accordance with international statistical standards.  
29 A HKEG consists of a HKC parent company, and its HKC branches, subsidiaries and associates. It also 
includes any HKC subsidiaries and associates of the HKC subsidiaries, and any HKC subsidiaries of  the HKC 
associates.  WT/TPR/S/380 • Hong Kong, China  
 
- 22 - 
 
  2  TRADE AND INVESTMENT  REGIMES  
2.1  General Framework  
2.1.  There have been no significant changes in the constitutional and legal framework of 
Hong Kong, China ( HKC) since its previous  Review in 2014. The Constitution of China and the 
Basic Law together form the constitutional framework of HKC. Under the  Basic Law, HKC is 
guaranteed a high degree of autonomy, with executive, legislative and independent judicial power , 
including that of final adjudication ; it maintains an independent taxation system and retains its 
status as a free port and a separate cust oms territory.  Under the Basic Law, the HKC Government 
is required to provide an appropriate economic and legal environment for the maintenance of the 
status of HKC as an international financial centre.1  
2.2.  The Chief Executive is the head of the Government, and has policy -making and executive 
powers.2 The Government , as the executive authority of HKC, is responsible for policy formulation 
and implementation, as well as carrying out other administrative affairs and conducting  external 
affairs as authorized und er the Basic Law. The  Legislative Council , as the legislat ure, is responsible 
for enacting, amending and repealing laws . Laws adopted by the Legislative Council take effect 
after the Chief Executive signs and promulgates them.3  
2.3.  Judicial power in HKC is exercised independently  by the courts. The Chief Executive appoints 
judges upon the recommendation of an independent commission. When adjudicating cases that 
require the interpretation of those Basic Law provisions concerning affai rs that are the 
responsibility of the Central Government of China,  or concerning the relationship between the 
central authorities and HKC , and if such interpretations could affect the judgement, the courts 
must seek, through the Court of Final Appeal, inte rpretation of the relevant provisions of the Basic 
Law from the Standing Committee of the National People's Congress of China before making their 
final judgements ; these latter  are no n-appealable. The Court of Final Appeal has sought 
interpretation of Basi c Law provisions once  so far,  in relation to the immunity of foreign states.4  
2.4.  In descending order of importance, t he Basic Law is followed by ordinances, and their 
subsidiary regulations. The Import and Export Ordina nce (Cap. 60 ) remains the main legislat ion 
governing  international trade. The Department of Justice maintains a database ("Hong Kong 
e-Legislation"), which provides the public with free online access to all HKC's legislation.5  
2.5.  Free-trade agreement s (FTAs) between HKC and its trading partners are not required to be 
ratified by the Legislative Council before enter ing into force. However , when legislative means are 
required in order to implement provisions in the FTA (e.g. the introduction of new legislation, or 
the amendment of existing legislati on), the usual legislative procedures must be followed.  
2.2  Trade Policy Formulation and Objectives  
2.6.  Since its previous Review , HKC's overall trade policy objectives have remained unchanged. 
They include: promot ing a free, open, and stable multilateral trading system; safeguard ing its 
rights and fulfil ling its obligations under multilateral, regional, and bilateral trade and trade -related 
agreements and arrangements; and secur ing, maintain ing, and improv ing access f or its exports to 
foreign markets.  
2.7.  Under the Basic Law, HKC is a separate customs territory and is authorized to  maintain and 
develop relations and conclude and implement agreements with foreign states and regions in the 
                                                
1 Article 109 of the Basic Law.  
2 Except for the appointment, removal, or disciplining of officials and the adoption of measures in 
emergencies, the Chief Executive consults the Executive Council before making important policy decision s, 
introducing bills to the Legislative Council, making subordinate legislation, or dissolving the Legislative Council. 
At present, the membership of the Executive Council comprises 1 6 appointed Principal Officials and 
16 non-officials.  Members of the Exec utive Council are appointed by the Chief Executive.   
3 Articles 49 to 51 of the Basic Law stipulate provisions for situations whe re disagreements occur 
between the Chief Executive and the Legislative Council.  
4 In 2012.  
5 Department of Justice online infor mation, "Hong Kong e -Legislation". Viewed at: 
https://www.elegislation.gov.hk . WT/TPR/S/380 • Hong Kong, China  
 
- 23 - 
 
  fields of, inter alia,  economics an d trade.6 As at 31 December 2017, HKC was a member of 
54 international intergovernmental organizations which are not restricted to States, under the 
name  Hong Kong, China . HKC participates in other multilateral agreements to which China is a 
party and whos e application has been extended to HKC; it also participates in agreements that 
HKC had implemented before 1 July 1997 but to which China is not a party.7 Currently, about 
260 multilateral agreements are applicable to HKC, covering, inter alia , customs, ci vil aviation, 
shipping, health, and intellectual property.8  
2.8.  The Secretary for Commerce and Economic Development  formulates trade and investment 
policies.9 The Secretary is assisted by a number of bodies and funds, including the Trade and 
Industry Departme nt (TID) , the Intellectual Property Department, the Office of the 
Communications Authorit y, and Invest Hong Kong , as well as HKC  Economic and Trade Offices, 
which has a worldwide network. The Government must launch a public consultation exercise w hen 
formu lating major trade policies/measures .10 
2.9.  The main agency responsible for maintaining HKC's external commercial relations is the TID, 
whose functions include: implementing trade policies and agreements; issuing certificates of 
origin, export and import licences and Hong Kong Service Supplier (HKSS ) certificates; and 
providing general support services for the industrial sector and small and medium -sized 
enterprises  (SMEs). A number of statutory bodies, including the Hong Kong Trade Development 
Council (HKTDC), the Hong Kong Export Credit Insurance C orporation (HKECIC), the Hong Kong 
Productivity Council, and the Hong Kong Science and Technology Parks Corporation (HKSTPC), are 
also involved in promoting trade and industry.  
2.3  Trade Agreements and Arrangements  
2.3.1   WTO  
2.10.   HKC is an original Member of the WTO and a firm supporter of the multilateral trading 
system.11 The authorities state that HKC's WTO membership is the cornerstone of its external 
trade policy; its participation in the WTO is guided by the following objectives: to sustain the 
momentum of progressiv e global trade liberalization; and to strengthen and update the rules -
based multilateral trading system so that it continuously provides an effective framework to 
promote trade expansion and liberalization, and protects HKC against arbitrary and discrimina tory 
actions.  
2.11.   During the review period, HKC participated actively in th e WTO; the authorities state that it 
has done so in the pursuit of progressive trade liberalization.  HKC is a signatory of the revised 
WTO plurilateral Agreement on Government Procurem ent (GPA), and the Information Technology 
Agreement (ITA) , including its expansion agreement (ITA Expansion).12 The authorities state that 
HKC supports all constructive efforts to achieve the liberalization of tariffs on environmental goods.   
2.12.   The authoritie s state that HKC attaches great importance to trade facilitation; it  was the 
first Member to notify the WTO that it would implement all provisions contained in Articles 1 to 12 
of the Trade Facilitation Agreement (TFA) upon its entry into force, without us ing any of the 
flexibilities provided for in the Agreement. HKC was also the first Member to deposit its 
instruments of acceptance for the TFA (on 8 December 2014).13  
2.13.   HKC has an excellent record of providing notifications to the WTO. At the end of 
January  2018, there were no outstanding requirement s for regular notifications (Table  A2.1).  
                                                
6 Articles 116 and 151 of the Basic Law.  
7 Article 153 of the Basic Law.  
8 For details, see Department of Justice online informat ion, "List of Treaties in Force and Applicable to 
the Hong Kong Special Administrative Region". Viewed at: http://www.doj.gov.hk/eng/laws/interlaw.html . 
9 The Secretary is nominated by the Chief Executive and appointed by the Central People's Government 
of China.  
10 Government online information, "Government Information and Publication". Viewed at: 
http://www.gov.hk/en/residents/government/publication/?/consultation . 
11 WTO document WT/MIN(17)/ST/3, 13 December 2017.  
12 HKC has bound the tariffs of all IT items covered under the ITA Expansion since 1 July 2016.  
13 WTO document WT/LET/1025, 11 December 2 014. WT/TPR/S/380 • Hong Kong, China  
 
- 24 - 
 
  2.14.   During the period under review, HKC was not involved in any WTO dispute settlement cases 
either as a complainant or a respondent; HKC did not participate as a third party in any cases.  
2.3.2   Regional and preferential trade  agreements  
2.3.2.1   Overview  
2.15.   Since its previous Review , HKC has been active in forging FTAs with its trading partners, 
with a view to securing more favourable market access for its goods and services.14 To date, it has 
signed seven FTAs, three of which were signed during the review period. The Closer Economic 
Partnership Arrangement with Macao, China (HK -Macao CEPA) was signed on 27 October 2017 and 
entered into force on the same day, with the liberalization measures on trade in goods and 
services implemented on 1 January 2018.15 HKC also signed a n FTA and an associated Investment 
Agreement with ASEAN  on 12 November 2017, and an FTA with Georgia was signed on 
28 June 2018; they are to enter into force once the relevant parties complete the necessary 
procedures.16 Furthermore, u nder the CEPA  with Mainland China , four subsidiary agreements were 
signed and entered into force over the review period, broadening and deepening CEPA's coverage 
in the areas of trade in services, i nvestment, and economic and technical cooperation . According to 
the authorities, HKC's applied trade regime is in line with the commitments under the FTAs HKC is 
party to , and is applied erga omnes . 
2.16.   HKC has bound its tariff -free regime and agreed to substa ntial sectoral coverage and 
liberalization in services  in the FTAs to which it is  party. The FTAs also cover other areas , including  
trade facilitation, government procurement, intellectual property, and recognition  of qualification s.  
2.17.   HKC launched FTA negotiations with Maldives in September 2016, and Australia in 
May 2017.17  
2.3.2.2   Closer  Economic Partnership (CEP) Agreement  with New Zealand   
2.18.   The CEP Agreement has eliminated tariffs on exports of all goods from HKC to New Zealand 
since 1 January 2016 pursuant to the schedule of phased tariff reduction.18 Other aspects of the 
CEP Agreement have remained unchanged since the previous Review.19 The CEP Agreement was 
considered by the Committee on Regional Trade Agreements on 20 March 201 2.20 
2.3.2.3   FTA with EFTA  
2.19.   The first meeting of the Joint Committee (JC) established under the FTA between HKC and 
the EFTA States was held in October 2017. The JC adopte d rules of procedures necessary for the 
effective implementation of the FTA, and an Annex  of comprehensive disciplines governing 
domestic regulation , which seeks to ensure that measures affecting trade in services are 
transparent, administered in a reasonable and objective manner, and do not constitute 
unnecessary barriers to trade.  The Annex is to first take effect between HKC and Switzerland, and 
                                                
14 Commerce and Economic Development Bureau online information, " 2017 Policy Address at the 
Legislative Council Panel on Commerce and Industry". Viewed at: https://www.legco.gov.hk/yr16 -
17/english/panels/ci/papers/ci20170125cb1 -464-3-e.pdf. 
15 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/fta/hkmacao/index.htm l. 
16 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/fta/hkasean/index.html . 
17 TID online information. Viewed at: 
https://www.tid.gov.hk/english/aboutus/presspeech/press/2016/20160506.html , and 
http://www.info.gov.hk/gia/general/20170 5/16/P2017051600348.htm?fontSize=1 . 
18 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/fta/hknzcep/index.html , and 
http://www.tid.gov.hk/english/trade_relations/hknzcep/index.html . 
19 See WTO document WT/TPR/S/306/Rev.1, 28 January 2015, and TID online information: 
https://www.tid.gov.hk/english/ita/fta/hknzcep/index.html  for the details of the Agreement.  
20 WTO document WT/REG291/M/1, 17 April 2012.  WT/TPR/S/380 • Hong Kong, China  
 
- 25 - 
 
  is to apply to other EFTA States pursuant to a decision of the JC.21 Other aspects of the Agreement 
have remained unchanged since the previous Review.22  
2.3.2.4   FTA with Chile  
2.20.   On 9 October 2014, an FTA with Chile,  which was signed in 2012, entered into force.23 Since 
1 January 2016, it has provided duty -free treatment for 98% of Chilean tariff lines on HKC-origin 
products.  The FTA was considered by the Committee on Regional Trade Agreements on 
25 September 2015.24 Commitments by both parties are beyond those under GATS.  
2.21.   In addition to the FTA, HKC and Chile signed an Investment Agreement on 
18 November  2016, which is to enter into force after the  completion of the necessary procedures 
by both parties.25 The Investm ent Agreement complements the FTA and provide s non-
discriminatory treatment and protection of investment s. 
2.3.2.5   CEPA with Mainland China  
2.22.   During the review period, HKC has continued to deepen integration with Mainland China 
under  the framework of their CEPA : four subsidiary agreements concerning service liberalization in 
Guangdong , trade in services, investment, and economic and technical cooperation  were signed 
during the review period (Table 2.1) .26  
Table 2.1 CEPA subsidiary agreements, 2014 -18 
Title Date of 
signature/  
implementation  Main content  
Agreement between the 
Mainland and Hong Kong on 
Achieving Basic Liberali zation of 
Trade in Services in Guangdong 
(Guangdong Agreement)  18 December 2014/  
1 March 2015  The Guangdong Agreement introduced pilot measures 
regarding  service liberalization in Guangdong, as the 
first step to wards  liberaliz ing trade in service s 
between Mainland China and HKC. 
Agreement on Trade in Services  
(Services Agreement)  27 November 2015/  
1 June 2016  The Services Agreement consolidated  and expanded 
the services libera lization measures provided in the 
CEPA since its signature in 2003 , including those in 
the Guangdong Agreement.  
Investment Agreement  28 June 2017/  
1 January 2018  The Investment Agreement provided for market 
access commitments to non -services sectors, and 
measures for investment protection and promotion.  
Agreement on Economic and 
Technical Cooperation  (Ecotech 
Agreement)  28 June 2017 / 
28 June 2017  The Ecotech Agreemen t consolidated and updated the 
economic and technical cooperation activities 
provided in the CEPA since 2003.  
Source:  WTO documents WT/REG162/N/1/Add.8, WT/REG162/N/1/Add.9, and WT/REG162/N/1/Add.10,  and 
TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/legaltext/cepa_legaltext.html . 
2.23.   Under CEPA provisions for trade in goods, products originating in HKC may enter the 
Mainland China market wit h a zero -tariff preference.27 The rules  of origin to determine whether a 
product originates in HKC are decided by consultations between the relevant authorities of 
                                                
21 TID online information . Viewed at : 
https://www.tid.gov.hk/english/aboutus/presspeech/press/2017/20171031.html . 
22 See WTO document WT/TPR/S/306/Rev.1, 28 January 2015, and TID online information: 
http://www.tid.gov.hk/english/ita/fta/hkefta/index.html , for the details of the Agreement.  
23 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/fta/hkclfta/index.html . 
24 WTO document WT/REG356/M/1, 12 October 2015.  
25 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/f ta/hkclfta/index.html , and 
http://www.tid.gov.hk/english/ita/ippa/index.html . 
26 TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/legaltext/cepa12.html , 
https://www.tid.gov.hk/english/cepa/legaltext/cepa13.html , 
https://www.tid.gov.hk/english/cepa/legaltext/cepa14.html , and 
https://www.tid.gov.hk/english/cepa/legaltext/cepa15.html . 
27 CEPA rules of origin basically include changes o f HS headings, value -added thresholds, and major 
processing operations. Products covered by the rules are contained in a consolidated list, which is amended 
every six months, after consultations with the stakeholders of both parties.  WT/TPR/S/380 • Hong Kong, China  
 
- 26 - 
 
  Mainland China and HKC.  As at 1  June 2018, the parties have developed rules of origin coverin g 
about 22% of Mainland China's tariff lines (1,901 lines).28 In 2017, the tariff lines with agreed 
CEPA rules of origin accounted for about 6 4% of HKC's domestic export to Mainland China 
(Table  2.2).  
Table 2.2 CEPA preference utilization rates, 2014 -17 
 Export value of Certificate of Hong 
Kong Origin for CEPA  (CO-CEPA ) 
products (HK$  million)  Export value of CO -CEPA products 
as a %age of total domestic 
exports to China  CEPA preference 
utilization ratea 
2014 10,161  43.8 61.3 
2015 7,878 38.6 55.6 
2016 7,004  37.7 57.1 
2017 7,611  44.1 64.1 
a The e xport value of CO-CEPA products as a percenta ge of total domestic exports to Mainland China 
with agreed rules of origin.  
Source:  Information provided by the HKC authorities.  
2.24.   Between 201 4 and 201 7, pharmaceutical products accounted for the largest share of CEPA 
preferential exports to Mainland China in terms of export value (3 1.8%), followed by plastics and 
plastic articles (28.7%), and food and beverages (16.4%).  
2.25.   The Guangdong Agreement introduced measures to liberalize trade in services between 
Guangdong and HKC. It forms the basis for the Services Agreement , which cover s relevant  
measures under the CEPA since 2003 , including pilot measures in the Guangdong Agreement. 
Under the Services Agreement, HKSS s enjoy preferential access to the Mainland China market. To 
be qualified as an HKSS, any business that provides services in the form of a juridical person must 
have "substantive business operations" in HKC.29 The Services Agreement specifie s "substantive 
business operations" in terms of the nature and scope of businesses, years of operation, payment 
of profit tax, scale of business premises, and employment of staff.30 The HKSS certificate is issued 
by the T ID, and is a pre -requisite for applying to the authorities of Mainland China for CEPA 
preferential treatment. As of 31 January 2018, 3,192 HKSS certificates had been issued, up from 
2,800 in May 2014. Transport and logistics accounted for the largest number of ce rtificates issued 
(44%), followed by distribution services (11%), air transport services (9%), and placement and 
supply services of personnel (5%).31 The CEPA is "nationality neutral " as it allows HKC-based 
companies of any nationality to use preferential a ccess opportunities to Mainland China.  
2.26.   Liberalization in services trade under the Services Agreement is based on a negative -list 
approach for mode 3, while a positive -list approach is provided for services in modes 1, 2, and 4, 
as well as in telecommunica tions and cultural services.32 Overall, there are 153 services trade 
sectors that Mainland China has fully or partially opened up to HKC's services industry, accounting 
for 65.6% of all the 160 services trade sectors.33 In respect of mode 3, national treatme nt is 
applied to HKC in 62 sectors.34  
2.27.   Government procurement and competition policy are not covered under the CEPA.  
                                                
28 TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/tradegoods/rules_origin.html . In order to benefit from the preference, a 
CO-CEPA must accompany the shi pment.  
29 The definition of, and criteria for qualifying as , "substantive business operation s" are provided in 
Annex 3 to the CEPA Agreement on Trade in Services . The criteria  include: having engaged in  business for at 
least three years ( except for specific  sectors, the minimum number of years of operation is five, including 
construction, banking, insurance, air transport ground services and third -party international shipping agency 
services ); liable for profit tax in HKC; rental or ownership of business pre mises; and employment of 50% of 
the staff locally. TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/legaltext/cepa13.html . 
30 TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/legaltext/files/sa26 -6-
2017_annex3_e.pdf . 
31 TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/statistics/hkss_statistics.html . 
32 TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/lega ltext/cepa13.html . 
33 The 160 sectors are specified in WTO document S/L/92, 28 March 2001.  
34 TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/legaltext/cepa 13_note.html . WT/TPR/S/380 • Hong Kong, China  
 
- 27 - 
 
  2.28.   As a new sub sidiary agreement under the framework of the CEPA, the Investment 
Agreement provides measures to liberalize  or facilitate investment , as well as measures to protect 
investment. A negative -list approach is adopted  with respect to investment  liberalization . With the 
except ion of the  26 measures listed, investors from H KC (HKIs) may enjoy preferential treatment 
accorded by Mainland China in all non -services sectors.35 HKIs may be either natural persons or 
enterprises. HKI s as enterprises must be established pursuant to the law of HKC, and must be  
engaged in substantial business operations.36 
2.29.   The Investment Agreement also provides mecha nisms for the settlement of investment 
disputes between investors and the host governments, as well as investment facilitation measures, 
inter alia , optimization of  investment procedures, facilitation of obtaining investment information, 
coordination among  regulatory institutions, and t ransparency of laws and regulations.37 
2.30.   The Agreement on Economic and Technical Cooperation  incorporates and updates th e 
measures concerning  economic cooperation and trade facilitation which have been included in the 
CEPA since 2003. The Agreement provides for deeper cooperation in 22 key areas, among which 
cooperation activities have been  newly added  under 12 areas; these include legal and dispute 
resolution services , financial, accounting, i nnovation and technology , electronic  commerce , 
intellectual  property , and the participation of HKC in the "Belt and Road" Initiative and in 
subregional cooperation .38  
2.3.2.6   HK-Macao CEPA  
2.31.   The HK -Macao CEPA  was signed and entered into force on 27 Oct ober 2017 (the 
liberalization measures of trade in  goods and services have been implemented since 
1 January 2018). It binds tariffs at zero for all imported  goods originating from each side. Each 
party  committed  to not apply ing non-tariff measures inconsistent with the WTO rules or tariff 
quota s on goods from the other party .39 
2.32.   Under the provisions for trade in services  in the HK-Macao CEPA , a positive -list approach is 
adopted. Macao , China  agreed to  WTO-plus commitment s regarding  HKC in certain services 
sectors, including business, communication,  education, environmental, recreational, cultural and 
sporting, and transport services. HKC also agreed to WTO-plus commitments  in certain services 
sectors, including environmental, health related and social, and certain business services.  
2.33.   Government procu rement and competition policy are not covered under the HK-Macao 
CEPA.  
2.3.2.7   The FTA  between HKC and ASEAN  
2.34.   According to the authorities, the FTA and the Investment Agreement are to enter into force 
on 1 January 2019 at the earliest for the parties (which must include HKC and a t least four ASEAN 
Member States (AMS s)) that have completed their required procedures.40 HKC is to bind its tariffs 
at zero  for all imported goods originating from AMSs upon the entry into force  of the FTA . 
Meanwhile , the AMSs have made individual tariff reduction commitments for goods of HKC origin  
(Table 2. 3).  
2.35.   The FTA covers trade in services with a positive -list approach. HKC has obtained AMS 
commitments regarding HKC's market access to AMS services, inter alia , professional, business, 
telecommunications, construction and related engineering, educational, financial, tourism and 
                                                
35 TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/investment/investment.html . 
36 The criteria for qualifying as "substanti ve business operations" are similar to those  of HKSS s, 
including a minimum of three years in operation; having paid profit tax in HKC; rent ing or own ing business 
premises ; and employ ing at least 50% of the staff locally . Viewed at: 
https://www.tid.gov.hk/english/cepa/legaltext/cepa_legaltext.html . 
37 TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/legaltext/files/cepa14_main.pdf . 
38 TID online information. Viewed at: 
https://www.tid.gov.hk/english/cepa/files/further_liberal_2017.pdf . 
39 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/fta/hkmacao/index.html . 
40 TID online information. Viewed at: 
https://www.tid.gov.hk/english/ita/fta/hkasean/files/AHKFTA_Chapter_14.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 28 - 
 
  travel -related, transport and arbitration services, with specific commitments varying among 
individual members; while HKC made commitments in sectors that address the interests of 
individual AMSs, such as architectural, engineering, urban planning and landscape architectural, 
audio -visual, distribution , education al, environmental, tourism and travel related, recreational , 
cultural and sporting, and tran sport services . 
Table 2.3 Schedule of Tariff Commitments of ASEAN Member States (AMS)  
AMS Schedule of Tariff Commitments  
Singapore  Elimination of all tariffs for goods of HKC origin , with effect from the date 
on which the FTA enters into force for Singapore  
Brunei Darussalam, Malaysia, 
the Philippines and Thailand  Elimination of tariffs for about 85% of their tariff lines within 10 years , 
with a reduction of tariffs for about another 10% within 14 years  
Indonesia and Viet Nam  Elimination of tariffs for about 75% of their tariff lines within 10 years , 
with a reduction of tariffs for about another 10% within 14 years  
Cambodia, Laos and Myanmar  Elimination of tariffs for about 65% of their tariff lines within 15 years , 
with a reduction of tariffs for about another 20% within 20 years  
Source:  TID online information , "Key Outcomes of Free Trade Agreement between Hong Kong, China and the 
Association of Southeast Asian Nations ". Viewed at: 
https://www.tid.gov.hk/english/ita/fta/hkasean/index.html . 
2.36.   The Investment Agreement  complements the FTA. It provides non -discriminatory treatment  
of investments in non-service sectors , as well as protection and facilitation  of investments in all 
sectors . It is comprised of one main text and two side agreements. Apart from general principles  
and provisions on the treatment and protection of investment s, the main text provide s a work 
programme for further discussion  on certain issues, including the investor -Party dispute settlement 
mechanism and the schedule s of reservations.  The side agreement between HKC, Brunei 
Darussalam, Malaysia and Singapore sets out the four Parties' agreed definit ion of "natural person  
of a Party " for the application of the Agreement among themselves, notwithstanding the discussion 
of the definition to be held in the work programme.41 The side agreement between HKC and 
Singapore  sets out the two Parties' agreed unde rstanding regarding the valuation criteria  for "real 
value" of compensation for the expropriated investment under Article 10  of the main text.42 
2.37.   Government procurement and competition policy are not covered under the FTA.  
2.3.3   Other agreements  and arrangements  
2.38.   HKC is a member of the Asia -Pacific Economic Cooperation (APEC) forum. In 201 7, 
86.8% of merchandise imports into HKC were from APEC members, and 78.9% of its domestic 
exports of merchandise  went to them. In the 2 4th Meeting of APEC Ministers Responsible f or Trade 
(MRTs) in May  2018, MRTs  reaffirmed the ir support for the rules -based multilateral trading 
system, and the ir commitment to resisting all forms of protectionism.43 
2.39.   During the review period, HKC was involved in the negotiation of the plurilateral Tra de in 
Services Agreement (TISA). TISA negotiation s have been suspended since December 2016.  
2.40.   HKC is a beneficiary of the Generalized System of Preferences (GSP) operated by the 
Russian Federation. HKC's entitlement to the benefits under Canada's General Pre ferential Tariff 
scheme was discontinued as from 1  January  2015. It would appear that HKC's trade covered under 
these schemes is very small. In 2017, no relevant Certificate of Origin was issued to cover goods 
under the Russian Federation's GSP.  
                                                
41 TID online information. Viewed at: 
https://www.tid.gov.hk/english/ita/fta/hkasean/files/IPPAASEAN_SideAgreement_HK_Brunei_Malaysia_Singap
ore.pdf . 
42 TID online informat ion. Viewed at: 
https://www.tid.gov.hk/english/ita/fta/hkasean/files/IPPAASEAN_SideAgreement_HK_Singapore.pdf .  
43 APEC online information. Viewed at: https://www.apec.org/Meeting -Papers/Sectoral -Ministerial -
Meetings/Trade/2018_trade/chair . WT/TPR/S/380 • Hong Kong, China  
 
- 29 - 
 
  2.4  Investmen t Regime  
2.41.   In accordance with the Basic Law, HKC does not impose any restrictions on investment, 
capital flows, or foreign exchange. Foreign services providers and foreign investors generally 
receive national treatment, except for regulatory requirements on investment in the banking44 and 
broadcasting45 sectors. There are no minimum capital requirements for investments.   
2.42.   The Companies Ordinance (Cap. 622) was amended in 2015 to reflect changes to the 
terminology.46 It was further amended in 2018 to introduce a requirement for companies to 
maintain a register of significant controllers.47 Separately, the Companies (Winding Up and 
Miscellaneous Provisions) Ordinance was amended in 2016 to improve the regime on winding up 
(liquidation).48  
2.43.   Foreign investors may set up a new company in HKC by incorporat ing a company locally . A 
foreign investor establishing a place of business in  HKC for a company incorporated outside HKC 
may operate the company in HKC by registering the company as a non -Hong Kong  company .49 
When incorporating a local company or registering a non -Hong Kong company, it is also necessary 
to apply for business registr ation, which may be done at the same time through a one-stop 
registration mechanism .50 The one-stop service is jointly implemented by the Companies Registry 
(CR) and the Inland Revenue Department , with a view to facilitating the registration procedure.51 
In 2017, procedures for the incorporation of local companies took 4 working days if using  hard 
copies; or one hour if using  e-submission ; and registration for non -Hong Kong  companies took 
11 working days.52 For public information, t he CR maintains an Index of Company Names  and a 
Companies Register, which contains extensive information relating to companies . Businesses in 
sectors requiring specific licences must acquire these from the relevant authorities before 
commencing business operations.53 These sectors include restaurants, karaokes,  travel agencies, 
employment agencies, banks, fund managers, and insurance brokers.  
2.44.   Invest Hong Kong , a government agency , aims to attract and retain foreign direct 
investment  (FDI). It offers facilitation services and sector -specific advice to support companies 
throughout the investment process, and provides aftercare support services to companies already 
established in HKC.54  
2.45.   In 2015, the Arbitration Ordinance (C ap. 609) was amended with a view to removing some 
legal uncertainties relating to the opt -in mechanism provided for domestic arbitration under 
Part 11; under the amend ed Ordinance , parties to an arbitration agreement can opt for domestic  
arbitration and agree on the number of arbitrators and still retain their right to seek the court's 
assistance on the consolidation of arbitrators, decisions on preliminary issues, and challenges to 
                                                
44 All authorized institutions (local or overseas) must ap point a chief executive and not less than one 
alternative chief executive, who must normally reside in HKC. See Hong Kong Monetary Authority's Guide to 
Authorization. Viewed at: http://www.hkma.gov.hk/eng/key -functions/banking -stability/guide -
authorization.shtml . 
45 The regulatory requirements restrict persons and companies from exercising control of licensed 
broadcasters on the basis of residency requirement s. See Hong Kong Communications Authority online 
information . Viewed  at: https://www.coms -auth.hk/en/licensing/broadcasting/matters/restrictions/index.html . 
46 The amendments reflect ed the change of the short ti tle of the Insurance Companies Ordinance to the 
Insurance Ordinance. Department of Justice online information. Viewed at: 
https://www.elegisl ation.gov.hk/hk/2015/12!en . 
47 Department of Justice online information. Viewed at: https://www.elegislation.gov.hk/hk/2018/3!en . 
48 Department of Justice online information. Viewed at: https://www.elegislation.gov.hk/hk/2016/14!en . 
49 According to the Companies Ordinance (Cap. 622) , non-Hong Kong companies refer to companies 
incorporated outside HK C but that have established a place of bu siness in HKC. Viewed at: 
https://www.cr.gov.hk/en/companies_ordinance/docs/briefingnotes_part16 -e.pdf. 
50 Inland Revenue Department online information, "Applicatio n procedures: general". Viewed at:  
https://www.ird.gov.hk/eng/faq/osbrq.htm  and https://www.investhk.gov.hk/en/setting -hong-
kong/incorporate -company.html . 
51 Inland Revenue Department online information, "Date of implementation". Viewed at: 
https://www.ird.gov.hk/eng/faq/osbrq.ht m. 
52 CR online information, "Performance Pledges". Viewed at: 
https://www.cr.gov.hk/en/about/performance.htm . 
53 Busines s Licence Information Services.  Viewed at: 
https://www.success.tid.gov.hk/tid/eng/blics/index.jsp# .  
54 For details, see Invest Hong Kong  online information, "How we can help". Viewed at: 
https://www.investhk.gov.hk/en/setting -hong-kong/how -we-can-help.html . WT/TPR/S/380 • Hong Kong, China  
 
- 30 - 
 
  and appeals against arbitral awards under Cap. 609.55 In 2017, Cap. 609 and the Mediation 
Ordinance (Cap. 620) were amended with a v iew to allowing for t hird-party funding of arbitration 
and mediation .56 The 2017 amendments clarified the legal position in relation to the arbitration of 
disputes involving intellectual property rights  (IPRs) .57  
2.46.   During the period under review, HKC's  taxati on regime remained largely unchanged ; it is 
based on territoriality, i.e. only income/profit derived  locally is subject to tax . Income derived from 
a source outside HKC by a local resident is not taxed in most cases. HKC has continued to pursue 
comprehensi ve double taxation agreements/arrangement s (DTAs) with it s trading partners, with 
the aim of providing certainty to investors. As of end -May 2018, HKC had signed DTAs with 
40 jurisdictions, among which 11 were signed during the review period. All these DTA s have 
entered into force, with the except ion of  those  with Saudi Arabia, India, and Finland, w hich were 
signed on 24  August  2017, 19 March 2018, and 24 May 2018, respectively .58 In addition, HKC has 
entered into seven Tax Information Exchange Agreements since 2014, with a view to enhancing 
tax transparency .59  
2.47.   HKC has opted for investment promotion and protection agreements ( IPPAs ) as a means of 
attracting foreign investment and enhancing protection of HKC's outbound investments.  As at 
end-May 2018, HKC ha d signed 20 IPPAs with ASEAN;  Australia;  Austria;  the Belgo -Luxembourg 
Economic Union ; Canada;  Chile;  Denmark;  Finland;  France;  Germany;  Italy;  Japan;  Korea, 
Republic of ; Kuwait;  the Netherlands;  New Zealand ; Sweden;  Switzerland;  Thailand;  and the 
United K ingdom.60 All of these  agreements ha ve entered into force, except those  with Chile and 
ASEAN. In addition, HKC  has concluded IPPA negotiations with the Kingdom of Bahrain, Myanmar, 
Mexico, and United Arab Emirates. Sig ning of these IPPAs is subject to the completion of necessary 
procedures by the parties.  HKC is negotiating IPPAs with Iran and the Russian Federation.  
 
 
 
                                                
55 Department of Justice online information. Viewed at: https://www.elegislation.gov.hk/hk/2015/11!en , 
and Legislative Council online information. Viewed at: http://www.legco.gov.hk/yr14 -
15/english/bills/brief/b201501231_brf.pdf . 
56 Department of Justice online informati on. Viewed at: https://www.elegislation.gov.hk/hk/2017/6!en . 
57 Department of Justice online information. Viewed at:  https://www.elegis lation.gov.hk/hk/2017/5!en . 
58 Inland Revenue Department online information. Viewed at: 
https://www.ird.gov.hk/eng/tax/dta_inc.htm . 
59 Inland Revenue Department online information. Viewed at: 
https://www.ird.gov.hk/eng/tax/dta_tiea_agreement.htm . 
60 TID online information. Viewed at: https://www.tid.gov.hk/english/ita/ippa/index.html . WT/TPR/S/380 • Hong Kong, China  
 
- 31 - 
 
  3  TRADE POLICIES AND P RACTICES BY MEASURE  
3.1  Measures Directly Affecting Imports  
3.1.1   Customs procedures, valuation, and requirements  
3.1.1.1   Customs procedures and trade facilitation  
3.1.  Under the Basic Law, HKC maintains its status as a free port and a se parate customs territory 
that implements its own customs procedures. The main legal instrument re gulating external trade 
is the Import and Export Ordinance (Cap. 60) and its subsidiary regulations. These include, among 
others, the Import and Export (General) Regulations (Cap. 60A), the Import and Export (Strategic 
Commodities) Regulations (Cap. 60G), and the Import and Export (Registration) Regulations 
(Cap.  60E).1 
3.2.  The Customs and Excise Department (C&ED) is in charge of the implementation of 
border/boundary measures, including with respect to the enforcement of IPRs, the suppression of 
smuggling activ ities, the interdiction of narcotics, and the collection of revenue.2 The C&ED is also 
responsible for administering trade facilitation programmes. Other agencies engaged in 
border/boundary controls include the Agriculture, Fisheries and Conservation Depar tment (AFCD) 
and the Food and Environmental Hygiene Department (FEHD), which are responsible for the 
enforcement of sanitary and phytosanitary (SPS) measures.  
3.3.  HKC runs an efficient customs system by global standards. In 2017, it ranked as the 
third most co mpetitive economy (among 137) in terms of "burden of customs procedures" in the 
World Economic Forum's Global Competitiveness Index.3 It also ranked 31st among 190  economies 
in the World Bank Doing Business 2018 index for ease of trading across borders.4 This means that 
HKC's procedures for documentary and border/boundary  compliance for both imports and exports 
are faster and less costly tha n in most other constituencies, including high -income OECD countries 
and East Asia and Pacific economies.  
3.4.  Any person or firm may engage in import and export activities in HKC. However, traders of 
controlled chemicals and dutiable goods (liquors, tobacco, hydrocarbon oils and methyl alcohol) 
must be licenced by the C&ED before commencing operations; traders of food produc ts must 
register with the FEHD as prescribed by the Food Safety Ordinance (Cap. 612); and persons 
importing cars for commercial purposes must register as importers/distributors with the C&ED 
within 30 days of the commencement of their business.5 
3.5.  According to the Import and Export (Registration) Regulations (Cap. 60E), importers must 
submit a declaration to the C&ED within 14 days after the goods have been imported, except for 
exempted articles (including transhipped or transit goods, and goods imported by t he 
Government).6 The declaration must be filed electronically via service providers appointed by the 
Government. To verify particulars given in the declaration, the C&ED may require the production of 
documents supporting the declaration, including the carg o manifest, the bill of lading, the airway 
bill or similar document, the invoice, the packing list and, if required, import licences, removal 
permits or other authorizations.  
                                                
1 HKC customs legislation can be viewed at: http://www.customs.gov.hk . 
2 C&ED online information. Viewed at http://www.customs.gov.hk/en/enforcement/index.html . 
3 World Economic Forum (2017), Global Competitiveness Index 2017 -2018. Viewed at: 
http://reports.weforum.org/global -competitiveness -index -2017-2018/competitiveness -
rankings/#series=EOSQ050 . 
4 The World Bank Group (2017), Doing Business 2018. Viewed at: 
http://www.doingbusiness.org/data/exploreeconomies/hong -kong-china#trading -across -borders .   
5 In addition, under two new producer responsibility schemes  that will come into effect in the second 
half of 2018, importers and local manufacturers of regulated electrical and electronic equipment, and glass 
beverage containers , to the local market will need to register with the Environmental Protection Department  
(EPD) and pay  a recycling levy  for each product . 
 6 Exempted articles are stipulated in Regulation 3 of the Import and Export (Registration) Regulations 
(Cap. 60E). Viewed at: https://www.elegislation.gov.hk/hk/cap60E?xpid=ID_ 1438403523489_003 . WT/TPR/S/380 • Hong Kong, China  
 
- 32 - 
 
  3.6.  In conducting cargo clearance, the C&ED screens cargo information including elec tronic cargo 
data, cargo manifests and related shipping documents , and selects cargo for physical examination 
based on a risk -based and intelligence -led approach.   
3.7.  The C&ED implements several electronic clearance schemes for the submission of advance 
cargo  information by shippers and cargo agents. For sea cargo, there are three voluntary 
schemes: the Electronic Submission of Cargo Manifest Statement One (EMAN 1 Scheme), the 
Advance Cargo Information –River Trade Vessel Scheme (ACI -RTV Scheme), and the e -Sea 
Customs Clearance Scheme (e -SCC). Through the EMAN 1 Scheme and the ACI -RTV Scheme, 
carriers can submit advance cargo manifests of consignments transported by ocean and river 
vessels; while the e -SCC allows freight forwarders to submit bills of lading in e lectronic form to the 
C&ED for pre -arrival verification and clearance. Through these schemes, cargos may be discharged 
immediately upon arrival of the vessels, unless selected for inspection by the C&ED.  
3.8.  For cargo transported by air, the Air Cargo Clearan ce System (ACCS) enables carriers to 
submit advance cargo information electronically to the C&ED at least one hour before the arrival of 
the aircraft; in normal circumstances, clearance can be completed before the arrival of the aircraft. 
For cargo transpo rted by truck, the use of the Road Cargo System (ROCARS) is mandatory since 
November 2011. Carriers are required to submit cargo information to the C&ED through ROCARS 
at least 30 minutes and at most 14 days before the arrival or departure of the truck car go 
consignment .7  
3.9.  During the period under review, HKC adopted measures to further streamline customs 
procedures and facilitate trade, including the enhancement of an IT -based tracking system for 
road cargo; the introduction of the Free Trade Agreement Tran shipment Facilitation Scheme (FTA 
Scheme) ; the full implementation of the Authorized Economic Operator Programme (AEO), and the 
conclusion of several AEO mutual recognition arrangements. HKC was the first Member to accept 
the WTO Trade Facilitation Agreeme nt on 8 December 2014, and has designated all the provisions 
of the Agreement under Category A, which means that HKC is committed to implementing all TFA 
provisions since the entry into force of the Agreement in February 2017.8  
3.10.   With the aim of enhancing its role as a logistics hub, HKC operates a number of schemes to 
promote transhipment trade. The Intermodal Transhipment Facilitation Scheme (ITFS) facilitates 
the movement of air–land and sea –land transhipment cargoes through simplified clearance 
proce dures . The application of electronic lock and GPS technolog ies enables the C&ED to track 
transhipment cargoes and trucks , and subject them to only one inspection at either the entry or 
exit point. Carriers and forwarders of transhipm ent cargoes may participate in the ITFS on a 
voluntary basis. In March 2016, the C&ED launched the Single E -lock Scheme (the Scheme) in 
co-operation with  Mainland China's Customs. Under the Scheme, the ITFS is interconnected with 
the Speedy Customs Clearan ce (SCC) system of Guangdong Province to provide a seamless 
clearance service. With the application of one single e -lock and GPS technology accredited by both 
Customs authorities, duplicate inspections at the boundary  are to be reduced, hence contributing 
to expedite the clearance process of transhipment cargoes. Carriers or shippers willing to 
participate in the Scheme must register with the ITFS (HKC) and the SCC (Guangdong Province) , 
and install the e -lock and GPS equipment accredited by both Customs authorities on their vehicles.  
3.11.   In December 2015, the C&ED put in place a voluntary FTA Scheme  to facilitate certain 
qualified cargo transhipped through HKC to enjoy preferential tariff  treatment under FTAs signed 
by Mainland China with other economies. The  FTA Scheme provides for C&ED supervision services 
and issuance of non -manipulation certificates to certify transhipment cargoes that have not 
undergone any processing during their stay in HKC. The FTA Scheme covers transhipment cargo in 
HKC heading for Ma inland China from Chinese Taipei  under  their Economic Cooperation Framework 
Agreement (ECFA), and from 22 countries under their respective FTAs  with Mainland China9, as 
well as transhipment cargo heading for Australia,  Korea, Republic of ; and Chinese Taipe i from 
Mainland China.10 The C&ED has indicated that , as at 31  March 2018, a total of 10,490 applications 
                                                
7 For more information, see the C&ED web page. Viewed at: 
http://www.customs.gov.hk/en/trade_facilitation/ecargo/index.html . 
8 WTO document WT/PCTF/W/20 , 28 April 2014 . 
9 These are the FTAs with: Australia; Korea, Republic of; New Zealand; Singapore; Pakistan; Iceland; 
Switzerland; Chile; Costa Rica; Peru ; ASEAN; and the Asia Pacific Trade Agreement.  
10 C&ED online information. Viewed at: http://www.customs.gov.hk/en/trade_facilitation/fta/index.html .  WT/TPR/S/380 • Hong Kong, China  
 
- 33 - 
 
  under the FTA Scheme were received, involving a trade value of US$837 million  and preferential 
tariffs of US$56 million . In addition, the C&ED issues c ertificates for non -US frozen chicken 
products transhipped to Mainland China through HKC. It also maintains a customs cooperation 
arrangement for Mainland China -bound wine consignments passing through HKC to receive 
immediate customs clearance on Mainland China. In 2015, this arrangement was extended from 
designated ports in Guangzhou and Shenzhen to all ports in the Beijing, Shanghai, Tianjin, 
Guangzhou and Shenzhen customs districts . In November 2017, this was further extended to all 
ports in all 42 customs districts in Mainland  China.11 
3.12.   HKC has been implement ing an AEO programme since 2012, based on the SAFE Framework 
of the World Customs Organization. Under the programme, local companies of all sizes that meet 
pre-established security and compliance crite ria are granted AEO status, and benefit from trade 
facilitation measures. There are two tiers of accredited companies: Tier 1 AEOs and Tier 2 AEOs, 
with the latter having to comply with additional criteria.12 The two -tier system is designed to 
facilitate th e participation of SMEs. The advantages enjoyed by AEOs include fewer customs 
inspections and priority customs clearance. Participation in the AEO programme is voluntary, free 
of charge and open only to companies established in HKC. As of April  2018, 44 co mpanies were 
accredited as AEOs. In recent years, HKC has actively engaged in signing AEO Mutual Recognition 
Arrangements (MRAs) with its trading partners: Mainland China (2013); India (2013); Korea, 
Republic of (2014); Singapore (2014); Thailand (2015); M alaysia (2016); Japan (2016); 
Australia  (2017); and New Zealand (2018). HKC is currently holding MRA discussions with Canada, 
the European Union, Israel and Mexico.  
3.13.   The Government is  working on the development of  a full -fledged Trade Single Window 
(TSW) to further facilitate trade in goods and to maintain HKC 's competitiveness as a trading and 
logistics hub.  A consultation paper on this matter was issued for public consultation in 2016.13 The 
TSW w ill provide a one-stop electronic platform for the trading  community  to lodge 50-plus 
business -to-government documents  for meeting regulatory requirements in relation to importing 
and exporting goods . Upon full implementation of the TSW, t he trading community will no longer 
need to approach different government a gencies individually , and will be able to lodge  all the 
50-plus documents electronically round the clock through a centrali zed platform.  The TSW is also 
expected to have the technical capability to interface with business platforms and with the TSWs of 
other economies. The TSW will be rolled out in phases  until 2023. Phase 1 is scheduled to be 
launched  2018, and will cover 13 types of trade documents for which applications can be made 
through the TSW on a voluntary basis.  
3.14.   HKC does not require the use of cu stoms brokers or pre -shipment inspections.   
3.1.1.2   Customs valuation  
3.15.   Since HKC applies zero rates to all tariff lines, customs valuation is used essentially for the 
purpose of calculating internal taxes (e.g. excise duties) collected at the border/boundary. The 
valuation method to assess excise duties  and the first registration tax in HKC has remained largely 
unchanged since the previous Review.  
3.16.   Under Section 26A of the Dutiable Commodities Ordinance (Cap. 109), for the purpose of  
assessing excise duties, the value of goods is the normal price which the goods would fetch, at the 
relevant time, on their sale in the open market between a buyer and seller independent of each 
other. The "normal price" does not include the cost of trans port or insurance and other charges 
incidental to the delivery of the goods. The "relevant time" means , in the case of imported goods, 
the time when such goods are removed from the seller's premises for the purpose of export, and , 
in the case of goods manu factured in HKC, the time when such goods are removed from the 
premises on which they were manufactured. Where a "normal price" cannot be determined, 
                                                
11 TID online information. Viewed at: 
https://www.tid.gov.hk/english/import_export/nontextiles/wine/index.html . 
12 The criteria for the two tiers of AEOs are listed on the C&ED website. Viewed at: 
http://www.custo ms.gov.hk/en/trade_facilitation/aeo/status/index.html . 
13 Commerce and Economic Development Bureau. Development of a Trade Single Window. Consultation 
Paper. April 2016. Viewed at: 
http://www.cedb.gov.hk/citb/doc/en/trade_single_window_consultation_paper_e.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 34 - 
 
  Customs may fix a value to assess and calculate the excise duty. For imported and domestically 
produced li quor, the excise duty is assessed on the basis of the ex -factory price.  
3.1.2   Rules of origin  
3.17.   Given  its status as a free port, HKC does not require certificates of origin for imported 
goods. Nevertheless, traders must indicate the origin of goods on their import /export declarations 
for statistical purposes.  
3.18.   HKC administers an origin certification system to facilitate HKC exports to foreign markets 
(Section 3.2). In the case of re -exports, the origin initially conferred by the place where goods 
originated is main tained. There has been no change to the regulations relating to rules of origin 
during the period under review.  
3.19.   Preferential rules of origin are implemented under HKC's FTA s with Mainland China, New 
Zealand, the EFTA member states and Chile, and will also be implemented once the HK-ASEAN 
FTA enters into force  in 2019.14 Exports of HKC origin are eligible for tariff preferences under these 
agreements if they meet the specified origin criteria.  
3.1.3   Tariffs  
3.20.   HKC maintains all applied MFN tariffs at zero and does no t apply any tariff -rate quotas.  
3.21.   HKC applies the Convention on the Harmonized Commodity Description and Coding System. 
In 2018, HKC had a total of 7,577 tariff lines (based on the HS 2017 nomenclature), of which 
47.5% were bound, all at zero rate (Table 3. 1). The small increase in the percentage of bound 
lines (from 45.6% in 2014) is mainly explained by the implementation of HKC's tariff elimination 
commitment under the Information Technology Agreement (ITA) Expansion on 1  July 2016, and by 
the shift from t he HS2012 to the HS2017 nomenclature.  
3.22.   Of the 3,602 bound tariff lines, 1,041 lines correspond to agricultural products (WTO 
definition). All agricultural tariff lines are bound, as well as all tariff lines on fish and fishery 
products. On the other hand, only 39.2% of non -agricultural tariff lines are bound, and all 
petroleum products remain unbound.  
Table 3.1 Bound tariff structure by WTO definitions, 201 8 
  Total no. of 
lines  No. of bound 
linesa Percentage of 
totala 
Total lines  7,577 3,602 47.5 
WTO agriculture  1,041  1,041  100.0  
Animals and products thereof  173 173 100.0  
Dairy products  27 27 100.0  
Fruit, vegetables and plants  317 317 100.0  
Coffee and tea  28 28 100.0  
Cereals and preparations  125 125 100.0  
Oil seeds, fats and oils and their products  90 90 100.0  
Sugars and confectionary  26 26 100.0  
Beverages, spirits and tobacco  77 77 100.0  
Cotton  5 5 100.0  
Other agricultural products n.e.s.  173 173 100.0  
WTO non -agriculture (incl. petroleum)  6,536 2,561 39.2 
Fish and fishery products  385 385 100.0  
Minerals and metals  1,027  672 65.4 
Chemicals and photographic supplies  1,491  164 11.0 
Wood, pulp, paper and furniture  326 311 95.4 
Textiles  705 100 14.2 
Clothing  528 8 1.5 
Leather, rubber, footwear and travel goods  214 90 42.1 
Non-electric machinery  681 251 36.9 
                                                
14 The preferential rules of origin are available at the TID website. Viewed at: 
https://www.tid.gov.hk/english/import_export/cert/cert_coverage.html  and 
https://www.tid.gov.hk/english/ita/fta/hkasean/index.html#fta -tabs-nav01 . WT/TPR/S/380 • Hong Kong, China  
 
- 35 - 
 
    Total no. of 
lines  No. of bound 
linesa Percentage of 
totala 
Electric machinery  359 197 54.9 
Transport equipment  216 25 11.6 
Non-agriculture articles n.e.s.  555 358 64.5 
Petroleum  49 0 0.0 
a Including 110 tariff lines that are partially bound only.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.1.4   Other charges affecting imports  
3.23.   Excise duties apply on the consumption of four commodity groups, whether locally produced 
or imported. These commodities are liquor (with an alcohol content of more than 30% by volume), 
tobacco, hydrocarbon oil, and methyl alcohol.15 Duties on tobacco products have been gradually 
increased on public health grounds over the past years. The latest increase, in February 2014, 
raised the duty rate by almost 12% to HK$1,906 per 1,000 cigarettes (Table 3.2). In fiscal 
year 2017/18, excise duties collected amounted to HK$10,701 million (Table 3. 3).  
Table 3.2 Excise duty rates, 2013 and 2018  
Commodity  2013  2018  
 (%) 
Liquora 
Liquor with an alcohol strength of more than 30% by volume , measured at a temperature 
of 20°C  100 100 
Liquor, other than wine, with an alcohol strength of not more than 30% by volume , 
measured at a temperature of 20°C  0 0 
Wine  0 0 
 (HK$)  
Tobacco  
Cigarettes (p er 1,000 cigarettes)  1,706 1,906 
Cigars (per kg ) 2,197 2,455 
Chinese -prepared tobacco (per kg ) 419 468 
All other manufactured tobacco except tobacco intended for the manufact ure of cigarettes 
(per kg ) 2,067 2,309 
Hydrocarbon oil (per lit re) 
Aircraft spirit  6.51 6.51 
Light diesel oil  2.89 2.89 
Motor spirit (unleaded petrol)  6.06 6.06 
Motor spirit (leaded petrol)  6.82 6.82 
Ultra-low sulphur diesel  2.89 2.89 
Euro V  diesel 0.00 0.00 
Methyl alcohol    
Methyl alcohol and any mixture thereof with an alcohol strength of up to 30% by volume, 
measured at a temperature of 20°C (per hectolitre)  840.00  840.00  
For every 1% of alcohol strength exceeding 30% by volume  28.10  28.10  
a Where there is no or insufficient information available to determine the value of imported liquor of 
less than 12 litres, the Commissioner of Customs and Excise (or an authorized officer) may assess 
the duty payable at a rate of HK$160 per litre. For the purpose of assessing and calculating duty, 
the transaction value of the goods will be used as the primary basis for determining value.  
Source:  C&ED online information. Viewed at: 
http://www.customs.gov.hk/en/trade_facilitation/dutiable/types/index.html . 
Table 3.3 Internal tax collection, 2013/14 —2017/18  
(HK$ million ) 
Fiscal year    2013/14  2014/15  2015/16  2016/17  2017/18  
Excise duties   9,720  10,010  10,712  10,254  10,701  
Liquor  Local 0.2 0.2 0.5 0.1 0.1 
 Import ed 415 406 431 449 523 
Tobacco  Local 191 190 206 200 201 
 Import ed 5,658  5,879  6,327  5,781  6,225  
                                                
15 These are stipulated in the Dutiable Commodities Ordinance (Cap. 109). Viewed at: 
https://www.elegislation.gov.hk/hk/cap109!en@2014 -12-05T00:00:00 . WT/TPR/S/380 • Hong Kong, China  
 
- 36 - 
 
  Fiscal year    2013/14  2014/15  2015/16  2016/17  2017/18  
Hydrocarbon oil  Local n.a. n.a. n.a. n.a. n.a. 
 Import ed 3,451  3,529  3,744  3,820  3,747  
Methyl alcohol  Local n.a. n.a. n.a. n.a. n.a. 
 Import ed 5 6 4 4 5 
First registration tax   8,338  9,549  9,311  7,814  8,583 
n.a. Not applicable.  
Source:  Information provided by the authorities.  
3.24.   HKC does not impose any value -added tax or goods and services tax.  
3.25.   HKC applies a progressive "first registration tax" (FRT) on the taxable value of new motor 
vehicles, which is applied exclusively on imports as no  vehicles are manufactured in HKC. The tax 
rates remained the same during the review period, ranging from 40% to 115% for private cars 
(Table 3.4). For environmental reasons, electric vehicles and environment -friendly commercial 
vehicles (goods vehicles, b uses, light buses, taxis and special purpose vehicles) have been granted 
concessions on this tax (see also Section 3.3.1). For fiscal years 2017/18 to 2020/21, the FRT 
concession on private electric cars has been capped at HK$97,500, while the tax continue s to be 
fully waived for commercial electric vehicles. In fiscal year 2018/19, the FRT concession on electric 
vehicles was continued, and a new "One-for-One Replacement " Scheme was introduced and will be 
implemented until 31 March 2021. Under th is Scheme, private car  owners who buy a new private 
electric car  and scrap an eligible private car  they own will enjoy a higher FRT concession of up to 
HK$250,000 when fulfilling certain conditions.  In fiscal year 2017/18, the revenue collected from 
the FRT amounted to HK$8, 583 million, or 1.4% of the estimated total revenue.16  
Table 3.4 FRT rates for motor vehicles, 2017/18  
(%) 
Commodity  2017/18  
1. Private cars   
- on the first HK$150,000  40 
- on the next HK$150,000  75 
- on the next HK$200,000  100 
- on the remainder  115 
2. Taxis  3.7 
3. Public and private light buses  3.7 
4. Public buses, except buses that are to be used solely in connection with  operating a public bus 
service under the Public Bus Services Ordinance ( Cap. 230) or under the Kowloon -Canton Railway 
Corporation Ordinance ( Cap. 372) within the North -West Transit Service Area as defined in the 
Ordinance  3.7 
5. Private buses, except buses that are to be used solely in connection with the training of drivers 
for the purposes of operating a public bus service under the Public Bus Service Ordinance 
(Cap. 230) or under the Kowloon -Canton Railway Corporation Ordina nce (Cap. 372) within the 
North -West Transit Service Area  3.7 
6. Motor cycles  35 
7. Motor tricycles  35 
8. a. Goods vehicles, other than van -type light goods vehicles  15 
b. Van-type light goods vehicle s not exceeding 1.9 tonnes , the permitted gross weight  for 
vehicle s  
- on the first HK$150,000  35 
- on the next HK$150,000  65 
- on the remainder  85 
c. Van-type light goods vehicle s exceeding 1.9 tonnes , the permitted gross  weight  for vehicle s 17 
9. Special purpose vehicles  3.7 
Source:  Information provided by the authorities.  
3.26.   In addition to the above internal taxes, the only other charges applying to imports (and 
exports) are the trade declaration fee (Table 3.5)  and the licensing administrative charges, where 
required, for spec ific goods; the latter vary according to the type of licence. In fiscal year  2017/18, 
trade declaration fees collected (for both imports and exports) amounted to HK$970 million.17 In 
February 2018, t he Government proposed to cap the charge for each import a nd export 
                                                
16 The percentage is calculated based on the estimated revenue in the 2018/19 Budget. Information 
provided by the authorities.  
17 Information provided by the C&ED.  WT/TPR/S/380 • Hong Kong, China  
 
- 37 - 
 
  declaration at HK$200, so as to lower the cost of importing and exporting high-value  goods to and 
from HKC. The proposed amendment was approved on 20 June 2018 and implemented as of 
1 August 2018.  
Table 3.5 Import and export declaration charges, 2018   
(HK$) 
 Declaration charges  
Import  
Non-food items  HK$0.2 in respect of the first HK$46,000 of the value of the goods  
HK$0.125 in respect of each additional HK$1,000 or part thereof , and 
rounded up to the nearest 10 cents  
Food items  HK$0.2 per declaration irrespective of the value  
Export  
Goods , whether of HKC origin or nota HK$0.2 in respect of the first HK$46,000 of the value of the goods  
HK$0.125 in respect of each additional HK$1,000 or part thereof , and 
rounded up to the nearest 10 cents  
a A clothing industry training levy of HK$0.30 in respect of each HK$1,000 value or part thereof  is 
charged on exports of H KC manufactured clothing and footwear  items specified in the Industri al 
Training (Clothing Industry) Ordinance (Cap. 318) , in addition to the export declaration charge.   
Source:  C&ED. Viewed at: http://www.customs.gov.hk/en/cargo_cle arance/declaration/charges/index.html . 
3.1.5   Import prohibitions, restrictions, and licensing  
3.1.5.1   Import prohibitions  and restrictions   
3.27.   HKC prohibits or restricts the importation of certain items for reasons of public health, 
animal health, safety, security and environmental protection, or to comply with obligations under 
international treaties and agreements. The import control regime has remained largely unchanged 
since the previous Review, apart from some amendments to the lists of control led items, mainly to 
reflect requirements arising from international conventions  to which HKC is party .  
3.28.   Prohibited items include ozone -depleting substances (unless covered under the Montreal 
Protocol), rough diamonds from countries not participating in th e Kimberly Process, elephant ivory 
and elephant ivory products  (unless exempted) , hazardous waste18, certain radio -communications 
apparatus19, certain chemical products , asbestos or asbestos containing materials , fighting  dogs 
and all species of the family Desmodontinae  (vampire bats) . Transit through HKC is prohibited for 
nuclear materials, and chemicals or biological weapons. Restricted imports include rough diamonds 
from countries participating in the Kimberly Process , controlled chemicals , pharmaceutical products 
including dangerous drugs, proprietary Chinese medicines and 36 Chinese herbal medicine s, 
psychotropic substances and antibiotics, arms, ammunition, weapons, fireworks, sand, pesticides, 
strategic commodities, rice, animals, animal carcasses20, animal products21, plants, endangered 
species, game, meat , poultry , eggs, milk and frozen confections , radioactive substances and 
irradiating apparatus , and biological materials . Restrictions are generally administered through 
licensing schemes.  
3.1.5.2   Import licensing  
3.29.   HKC applies import licensing schemes essentially for public health, animal health , safety, 
security and environmental purposes, as well as to comply with international obligations and to 
facilitate the collection of excise duties (Table 3 .6). Some of the products subject to licensing are 
listed in Schedule 1 of the Import and Export (General) Regulations  (Cap. 60A)22, while others are 
                                                
18 Imports of hazardous waste from countries listed in Schedule 9 of the Waste Disposal Ordinance  
(Cap. 354), mostly EU and OECD countries, are prohibited.  
19 Imports of radio jammers , and DECT 6.0 radio -communications apparatus operating outside 1880 -
1900 MHz,  that cause interference to existing services and PHS radio -communications apparatus operati ng 
within 1895 -1906.1 MHz are banned unless they are for re -export.  
20 This refers to the carcass of a dog/cat , or of any mammal, that has died on the journey to HKC, and 
the undressed carcass of any animal .  
21 This refers to a part or a derivative of a do g/cat or any mammal that has been infected with rabies . 
22 Department of Justice online information. Viewed at: 
https://www.elegislation.gov.hk/hk/cap60A?xpid=ID_14384035229 58_001 . WT/TPR/S/380 • Hong Kong, China  
 
- 38 - 
 
  stipulated in respective ordinances. HKC has submitted to the WTO its replies to the questionnaire 
on impor t licensing procedures, and has provided information on the different licensing schemes it 
currently applies, the procedural requirements involved, and the government departments that 
administer them.23 
Table 3.6 Import licensing schemes, 2017  
Goods  Licensing authority  Rationale  
Strategic commoditiesa TID To prevent HKC from being used as a conduit 
for the proliferation of weapons of mass 
destruction , and to ensure HKC's continuous 
access to technology and hig h-tech products  
Rice TID To maintain a stable supply and a reserve 
stock for emergencies  
Pesticides  TID (for pesticides 
containing methyl bromide);  
AFCD  (for pesticides other 
than methyl bromide)  Public health concerns  
Rough diamonds  TID International obligation under the Kimberley 
Process  
Ozone -depleting substances  TID International obligation under the Montreal 
Protocol  
Pharmaceutical products and 
medicines; proprietary Chinese  
medicines and 36 Chinese 
herbal medicines; radioactive 
substances and irradiating 
apparatus ; and biological 
materials  Department of Health  Public health, safety, and security;  and 
international obligation s 
Tobacco, liquors, methyl 
alcohol and hydrocarbon oilb C&ED  Excise duties collection and administration  
Controlled chemicalsb C&ED  To prevent diversion of controlled chemicals 
into the illicit manufacture of narcotic drugs 
and psychotropic substances  
Optical disc mastering and 
replication equipment  C&ED  To enforce the IPR regime and to prevent the 
use of optical disc mastering and replication 
equipment for copyright infringing activities  
Sand Civil Engineering and 
Development Department  To protect beaches and sea beds 
Frozen or chilled meat and 
poultry  Food and Environmental 
Hygiene Department  (FEHD)  Public health and food safety  
Genetically modified organism s 
(intended for release into the 
environment)   AFCD  Biosafety; conse rvation of local biodiversity; 
international obligation s under the Cartagena 
Protocol on Biosafety to the Convention on 
Biologic al Diversity  
Live animals , animal carcasses, 
and animal products  AFCD  Sanitary consideration s 
Plants, plant pests , and soil  AFCD  Phytosanitary consideration s 
Endangered species of animals 
and plants  AFCD  International obligation s under CITES  
Non-pesticide hazardous 
chemicalsc Environmental Protection 
Department  To protect human health and the 
environment in accordance with , inter alia , 
the principles of the Stockholm Convention 
and the Rotterdam Convention  
Waste  Environmental Protection 
Depar tment  To fulfil international obligations under the 
Basel Convention and to ensure the 
environmentally sound management of 
waste  
a Radio -transmitting equipment, arms, ammunition, and explosives are subject to additional controls 
by other relevant authorit ies. 
b Importers must apply to the C&ED to become a licensed importer.  
c The licensing system does not apply if the chemical is a constituent element of a product.  
Source:  WTO document G/LIC/N/3/HKG/21, 28 September 2017; and information provided by the 
authorities.  
                                                
23 WTO document G/LIC/N/3/HKG/21, 28 September 2017.  WT/TPR/S/380 • Hong Kong, China  
 
- 39 - 
 
  3.30.   Under the Import and Export Ordinance (Cap. 60), HKC controls the import, export, 
transhipment and certain transit24 of strategic commodities, through a licensing system operated 
by the TID. The commodities subject to licensing control are listed in the Schedules to the Import 
and Export (Strategic Commodities) Regulations (Cap. 60G), which include arms, ammunition, 
chemical and biological weapons and their precursors, nuclear material and equipment, and 
industrial dual -use goods.25 End-use control is also imposed on products that are used in 
connection with the development of weapons of mass destruction. The Schedules ar e updated as 
appropriate to keep them aligned with international control regimes, with any change requiring 
legislative approval. The latest amendment took effect in July 2017.  
3.31.   The TID is also responsible for issuing import licences for rice, rough diamon ds, pesticides 
(containing methyl bromide) and ozone -depleting substances. Imports of rice are subject to 
licensing under the Reserved Commodities Ordinance (Cap. 296) for the purpose of maintaining a 
stable supply of rice and a reserve stock for emergenci es. Imports of rough diamonds are only 
allowed if covered by a valid Kimberly Process Import Certificate. Only ozone -depleting substances 
under the Montreal Protocol may be imported under licence, and quotas apply to imports of 
hydrochlorofluorocarbons (HC FCs).26 Import licences for pesticides (other than methyl bromide) 
intended for the protection of public health, are issued by the AFCD under delegation from the TID. 
In 2014, 2015 and 2018, amendments were made to the Pesticides Ordinance (Cap. 133) to 
include nine more pesticides in order to reflect changes in relevant international conventions.27 
3.32.   The C&ED administers import licences for dutiable commodities, controlled chemicals and 
optical disc mastering and replicating equipment. Importers of dutiable commodities (liquor, 
tobacco, hydrocarbon oil, and methyl alcohol ) and controlled chemicals28 must be licenced by the 
C&ED before they can apply for removal permits (for dutiable goods) or for import authorization 
(for controlled chemicals), which are required for each consignment. Since 27 July 2017, traders 
must submit licence applications for dutia ble commodities electronically through the Dutiable 
Commodities System.29 Import licensing for optical disc mastering and replicating equipment is 
mandated under the Import and Export Ordinance (Cap. 60), and its purpose is to prevent the use 
of this equipm ent for copyright infringing activities.  
3.33.   Imports of pharmaceutical products and medicines, proprietary Chinese medicines and 
36 Chinese herbal medicines, radioactive substances, irradiating apparatus and biological materials  
are controlled through import l icences issued by the Department of Health. Only pharmaceutical 
products and medicines that have been registered with the Pharmacy and Poisons Board, and 
proprietary Chinese medicines that have been registered with the Chinese Medicine Board, are 
allowed t o be imported for local sale and distribution. Companies must hold an appropriate dealer's 
licence issued by the respective Board before they can apply for an import licence  for each 
consignment of goods . Since July  2016, HKC has fully implemented an elect ronic Pharmaceutical 
Licence Application and Movement Monitoring System (PLAMMS) for the application of import 
licences for the purpose of re -exporting pharmaceutical products and medicines which are not 
required to be registered under the Pharmacy and Poi sons Board.30  
3.34.   Under the Plant (Importation and Pest Control) Ordinance (Cap. 207) administered by the 
AFCD, imports of plants are subject to import licences (supported by phytosanitary certificates) 
and imports of plant pests or soil require a prior author ization. The AFCD also issues licences for 
the import of animals and plants under the Convention on International Trade in Endangered 
Species of Wild Fauna and Flora (CITES), and the special permits required for all live animals and 
                                                
24 "Article in transit" refers to an article brought into HKC solely for the purpose of  taking it out of HKC, 
and which remains at all times in or on the vessel or aircraft in or on which it is brought into HKC. Transit 
articles are usually not subject to control unless they are the more sensitive strategic commodities (e.g., some 
munitions,  items of nuclear concern, and articles for a use relating to nuclear, chemical or biological weapons, 
etc.).  
25 Department of Justice online information. Viewed at: https://www.elegislation.gov.hk/hk/cap60G . 
26 HCFC quotas are allocated on a yearly basis in accordance with the requirements of the Montreal 
Protocol. For details, see WTO document G/LIC/N/3/HKG/21, 28 September 2017.  
27 The Stockholm Convention on Persiste nt Organic Pollutants and the Rotterdam Convention on the 
Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade.  
28 Listed in Schedules 1 and 2 of the Control of Chemicals Ordinance (Cap. 145). Department of Justice 
online information. Viewed at: https://www.elegislation.gov.hk/hk/cap145!en?xpid=ID_1438402721479_001 . 
29 WTO document G/LIC/N/2/HKG/8, 26 September 2017.  
30 WTO d ocument G/LIC/N/2/HKG/6, 6 February 2015.  WT/TPR/S/380 • Hong Kong, China  
 
- 40 - 
 
  birds imported into HKC . In 2014, amendments were made to the Protection of Endangered 
Species of Animals and Plants Ordinance (Cap. 586) to take into account changes made to the 
CITES Convention. In January 2018, further amendments were made to ban, by phases, trade (i.e. 
impor t, re -export and domestic sale) in elephant ivory (unless exempted) in view of a 
recommendation by CITES.31 
3.35.   An import licence is required to import frozen or chilled meat or poultry. A company must be 
registered as a food importer with the Food and Environm ental Hygiene Department  (FEHD) before 
applying for an import licence. As of December 2015, advance written permission from the FEHD 
and a health certificate from the place of origin are required for the import of poultry eggs. The 
Environmental Protection  Department is responsible for administering the import permit/licensing 
scheme for non -pesticide hazardous chemicals, as well as the permits required for the import of 
waste. Between 2014 and 2018, amendments were made to the Hazardous Chemicals Control 
Ordinance (Cap. 595) to include eight more non-pesticide  hazardous chemicals , in order to reflect  
changes in the Rotterdam Convention and the Stockholm Convention . These amendments have all 
come into effect. In 2016, amendments were also made to the Waste Disposal Ordinance 
(Cap.  354) to cover e -waste and container waste; these amendments are expected to come into 
effect in December 2018. In order to protect beaches and the seabed, the import of sand is 
subject to a permit issued by the Civil Engineering an d Development Department.  
3.36.   Except for the import of frozen or chilled meat and poultry, an administrative fee is usually 
charged for the application and processing of an import licence. The authorities have indicated 
that, where fees are charged, such fees are commensurate with the cost of the service rendered. 
The validity of an import licence depends on the type of product involved, and can range from 
28 days to one year. Import licences are not transferable.  
3.37.   Licensing and notification requirements for t extile products imported into HKC were 
removed on 21 November 2014. Traders registered under the Textiles Trader Registration Scheme 
(TTRS) are no longer required to lodge import notifications. Registration in the TTRS is voluntary.32  
3.1.6   Anti-dumping, counter vailing, and safeguard measures  
3.38.   As indicated in relevant notifications to the WTO, HKC has not set up an authority 
responsible for conducting investigations on anti -dumping and countervailing measures, and thus 
has taken no anti -dumping or countervailing a ctions to date.33 Similarly, HKC has no legal or 
institutional framework on safeguard measures, nor has it ever applied such measures.  
3.1.7   Other measures affecting imports  
3.39.   HKC does not apply local content requirements.  
3.2  Measures Directly Affecting Exports  
3.2.1   Custo ms procedures and requirements  
3.40.   Any person exporting or re -exporting goods must submit a declaration to the C&ED  within 
14 days after the goods have been exported or re -exported , except for exempted articles .34 To 
verify any particulars given in the declarat ion, the C&ED may require the production of documents 
supporting the declaration, including the cargo manifest, the bill of lading, the airway bill or similar 
document, the invoice, the packing list and other documents such as removal permits, certificates  
or authorizations as required by the relevant laws for controlled goods. The C&ED adopts a risk -
based and intelligence -led approach in selecting cargo for physical inspection. The authorities have 
indicated that air cargo is released within 80 minutes, an d sea cargo within five working days.  
                                                
31 The ban will be implemented in three phases, culminating with the prohibition on the possession for 
commercial purposes of all ivory, including pre -Convention and post -Convention ivory (except for antique 
ivory),  from 31 December 2021.  
32 TID online information. Viewed at: 
https://www.tid.gov.hk/english/import_export/textiles/ts_maincontent.html . 
33 WTO documents G/ADP/N/193/H KG and G/SCM/N/202/HKG, 14 July 2010.  
34 Exempted articles are established in Regulation 3 of the Import and Export (Registration) Regulations 
(Cap. 60E).  WT/TPR/S/380 • Hong Kong, China  
 
- 41 - 
 
  3.41.   The TID administers a n origin certification system to facilitate exports of HKC products. The 
system helps exporters comply with import regulatory requirements in overseas markets and 
benefit from trade preferences in accordance with the preferential rules of origin stipulated in the 
respective FTAs between HKC and its trading partners.35 Under such A greements , the TID 
currently issues preferential "Certificates of Hong Kong Origin" for goods exported to Mainland 
China and New Zealand36, and will also issue them under the HK -ASEAN FTA  once it enters into 
force. In order to apply for a "Certificate of Hong Kong O rigin" , manufacturers must first obtain a 
Factory Registration from the TID to demonstrate their capability to produce the goods concerned. 
The Factory Registration is valid for one year and can be renewed . Besides the TID, the 
Government has authorized five other organizations to issue "Certificates of Hong Kong Origin", 
namely, the Hong Kong General Chamber of Com merce; the Federation of Hong Kong Industries; 
the Chinese Manufacturers' Association of Hong Kong; the Indian Chamber of Commerce, 
Hong Kong; and the Chinese General Chamber of Commerce.  
3.42.   Under the  Customs Facilitation A rrangement between HKC and Mainland  China, as of 
November 2017, wine consignments passing through HKC  and imported through any port in all 
42 customs districts of Mainland China enjoy immediate customs clearance. HKC companies 
wishing to benefit from this scheme must apply to the TID for re gistration as Registered Wine 
Exporters . 
3.2.2   Taxes, charges, and levies  
3.43.   HKC does not apply any duties or taxes on exports. Excise duties may be refunded (up to 
the amount paid) if the commodities subject to the duties are exported, and a written consent 
from t he Commissioner of Customs and Excise is obtained.37 
3.44.   A fee is charged on each export (and import) declaration lodged with Customs (Table 3.5 
above). Further details are set out in paragraph 3.26 above. As of 1 August 2018, the charge for 
each export declara tion is capped at HK$200 . 
3.45.   In addition, a Clothing Industry Training Levy of HK$0.30 per HK $1,000 of export value , or 
part thereof , is charged on e xports of locally manufactured clothing and footwear .38 The Levy is 
used to support the operation of the Clothing Industry Training Authority . 
3.2.3   Export prohibitions, restrictions, and licensing  
3.46.   HKC prohibits exports of rough diamonds to non -participants of the Kimberly Process, and 
exports of ozone -depleting substances to countries outside the Montreal Protocol . In accordance 
with the United Nations Sanctions Ordinance (Cap. 537), HKC implements trade sanctions imposed 
by the UN Security Council.39  
3.47.   Certain goods are subject to export controls, such as export licences/permits, removal 
permits or certificates for reasons of public health, safety, security and environmental p rotection , 
as well as to comply with international obligations and collect  excise duties. Export controls 
essentially mirror those applied to imports, with the exception of powdered formula, fro zen and 
chilled meat and poultry, live animals and plants (Table 3.7). During the review period, the export 
control regime remained largely unchanged , except for a few amendments made to the lists of 
controlled items  in order to reflect changes in internat ional export control regimes.40 
                                                
35 For the purpose of obtaining preferential tariff treatment for exports to New Zealand (for products 
excluding HS Caps.  61 and 62), EFTA States and Chile, HKC exporters may complete a declaration of origin. A 
certificate of origin is not required.  
36 The " Certificate of Hong Kong Origin ( New Zealand) " is applicable to goods falling within Caps. 61 and 
62 of the Harmonized System.  
37 Dutiable Commodities Ordinance (Cap. 109). C&ED online information. Viewed at: 
http://www.customs.gov.hk/en/trade_facilitation/dutiable/payment/index.html . 
38 The items are listed in Schedule 1 to the Industrial Training (Clothing Industry) Ordinance (Cap. 318). 
39 UN Security Council Resolutions adopted by China extend to HKC.  
40 The list of strategic commodities was amended in 2017; amendments were made to local legislation 
to bring it in line with CITES in 2014 and 2018; and the list of waste materials requiring export licensing was 
updated to add e -waste and container waste in 2016.  WT/TPR/S/380 • Hong Kong, China  
 
- 42 - 
 
  Table 3.7 Export licensing schemes, 2017  
Goods  Licensing authority  Rationale  
Powdered formula for infants and 
young children aged under 36 
months  TID To tackle the shortage of powdered formula in 
the local market caused by parallel traders, and 
to safeguard the health of local infant s and 
young children aged under 36  months  
Strategic commoditiesa TID To prevent HKC from being used as a conduit for 
the proliferation of weapons o f mass destruction , 
and to ensure HKC's continuous access to 
technology and high -tech products  
Radio -communications 
transmitting apparatus  Office of the 
Communication s 
Authority  To comply with the relevant legislation 
requirement  
Rough diamonds  TID International obligation s 
Ozone -depleting substances  TID International obligation s 
Rice TID To maintain a stable supply and a reserve stock 
for emergencies  
Pesticides  TID (for pesticide 
containing methyl 
bromide);  
AFCD  (pesticide s other 
than methyl bro mide)  International obligation s 
Pharmaceutical products and 
medicines; proprietary Chinese  
medicines and 36 Chinese herbal 
medicines  Department of Health  Public health, safety, and security;  and 
international obligation s 
Tobacco, liquors, methyl alcohol 
and hydrocarbon oil  C&ED  Excise dut y collection and administration  
Controlled chemicals  C&ED  To prevent diversion of controlled chemicals into 
the illicit manufacture of narcotic drugs and 
psychotropic substances  
Optical disc mastering and 
replication eq uipment  C&ED  To enforce the IPR regime , and to prevent the 
use of optical disc mastering and replication 
equipment for copyright infringing activities  
Sand Civil Engineering and 
Development 
Department  To protect beaches and seabeds  
Genetically modified organisms 
(intended for release into 
environment)  AFCD  Biosafety; i nternational obligation s under the 
Cartagena Protocol on Biosafety to the 
Convention on Biological Diversity  
Endangered species of animals 
and plants  AFCD  International obligation s 
Non-pesticide hazardous 
chemical sb Environmental 
Protection Department  To protect human health and the environment in 
accordance with , inter alia , the principles of the 
Stockholm Convention and the Rotterdam 
Convention  
Waste  Environmental 
Protection Depar tment  To fulfil international obligations under the Basel 
Convention and to ensure the environmentally 
sound management of waste  
a Arms, ammunition, and explosives, munitions items, chemical and biological weapons and their 
precursors, nuclear materials a nd equipment, and industrial dual -use goods.  
b The licensing system does not apply if the chemical is a constituent element of a product.  
Source:  WTO document G/LIC/N/3/HKG/21, 28 September 2017; and information provided by the 
authorities.  
3.48.   HKC maintains the export licensing scheme i ntroduced in March 2013 on exports of 
powder ed formula for infants and children aged under 36  months.41 The rationale of the licensing 
requirement is to safeguard the health of those children by ensuring an adequat e and stable 
supply of powdered formula. Specifically, the objective is to address the shortage caused by the 
diversion of the product from the local market by parallel traders, as the demand for powdered 
formula is met exclusively by imports. The TID  generally issues export licen ces only to importers 
of powdered formula regist ered with the FEHD, and the licen ces may only be used for re -export.  
                                                
41 Transit and transhipment cargos of powdered formula are exempted from the licensing requirement.  WT/TPR/S/380 • Hong Kong, China  
 
- 43 - 
 
  3.49.   The textiles control arrangements were removed as of 21 November 2014, so textile 
exports are no longer subject to licensing requirements or notifications.42 Traders are, 
nevertheless, encouraged to join the TTRS (Section 3.1.5.2 above).  
3.2.4   Export support and promotion  
3.50.   HKC does  not apply any export subsidies, as can be seen from its notifications to the WTO 
Committee on  Subsidies and Countervailing Measures.43 By virtue of its status as a free port, HKC 
does not maintain any export processing zones or special economic zones.  
3.51.   Export assistance in HKC consists mainly of the provision of credit insurance, marketing and 
brand ing support, as well as trade promotion activities.  
3.52.   The Hong Kong Trade Development Council (HKTDC) is a statutory body dedicated to 
promot ing HKC as a platform for doing business with Mainland China, Asia and the rest of the 
world, supported by a network of more than 40 offices  around the world , including 13 offices in 
Mainland  China . The HKTDC helps HKC companies, especially SMEs, to explore and capitalize on 
export business opportunities , through organizing promotion activities , such as trade fairs, 
exhibitions, conferences, overseas missions and networking events, and providing market 
intelligence and research studies across a broad range of industries and services. In addition, the 
HKTDC's website features a business -matching platform with more than 1.8  million registered 
international buyers and 130,000 products and services suppliers. The HKTDC organizes some of 
the world's largest annual exhibitions for products such as electronics, jewelry, watches  and 
clocks , gifts, and lighting; and showcases HKC's  advantages in the services sector (e.g. ICT, 
finance, design and marketing, logistics, IP trade, etc.). In 2016/17, the HKTDC organized more 
than 320 trade fairs and promotion activities.44 
3.2.5   Export finance, insurance, and guarantees  
3.53.   With the aim of encourag ing export trade, the Hong Kong Export Credit Insurance 
Corporation ( HKECIC) provides HKC exporters with insurance protection against non -payment 
risks arising from commercial and political events.45 Its contingent liability under contracts of 
insurance is guaranteed by the Government. Through a resolution of the Legislative Council in 
May 2017, the statutory maximum liability of the HKECIC under contracts of insurance was 
increased from  HK$40 billion to HK$55 billion , with a view to strengthening its underwriting 
capacity .46 The HKECIC offers a range of insurance policies at competitive prices covering exports 
and re -exports, as well as goods shipped offshore from Mainland China or other countries without 
passing through HKC. In most cases, the percenta ge of indemnity in the event of loss is 90%.  
3.54.   Under  the Small Business Policy, the HKECIC provides small exporters (with an annual 
turnover of less than HK$50 million) flexible arrangements and advantages in contracting 
insurance (e.g ., an annual policy fe e waiver and a 20% discount on the premium). In fiscal year 
2016/17, the value of HK ECIC's insured business reached HK$131.2 billion,  an increase of 18.8% 
over the previous year ( Table A3.1 ). Mainland China, with a share of 31.2%, replaced the United 
State s (27.8%) as the largest insured market , while the U nited Kingdom  ranked third, followed by 
Germany and Switzerland. In terms of the goods insured, electronics (27.1%) and electrical 
appliances (18.8%) were the two largest product groups, followed by texti les and clothing (which , 
in fiscal year 2015/16 , had ranked second), and toys and metallic products.  
3.55.   Through the Export Marketing Fund (EMF), the TID helps SMEs registered in HKC to expand 
their markets overseas through participation in export promotion a ctivities, including trade 
fairs/exhibitions (at home and abroad), trade missions, and placing advertisements in printed 
                                                
42 Trade and Industry Department Circular TID CL 10 -3/2 (C), 23 October 2014. Viewed at: 
https://www.tid.gov.hk/english/aboutus/tradecircular/all_in_one/2014/as072014.html . 
43 WTO documents G/SCM/N/315/HKG, 30 June 2017; and G/SCM/N/284/HKG, 2 July 2015.  
44 HKTDC online information. Viewed at: 
http://info.hktdc.com/Mediaroom/media_resources/en/background.html . 
45 The HKECIC was set up in 1966 under the Hong Kong Export Credit Insurance Corporation Ordinance  
(Cap. 1115).  
46 Legislative Council online information. Viewed at: https://www.legco.gov.hk/yr16 -
17/english/fc/fc/papers/fi17 -01e.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 44 - 
 
  trade publications or on eligible website s targeting export markets. In 2015, the scope was 
expanded to cover promotion activities thro ugh electronic media and setting up or enhancing 
corporate websites. Applications are activity -specific; successful applicants receive a grant 
covering 50% of the approved expenditures or HK$50,000, whichever is less.47 While the number 
of applications by e nterprise is not limited, there is a cumulative ceiling of HK$200,000 per SME, 
subject to conditions. At end -December 2017, the total amount committed through the EMF fund 
stood at almost US$419 million ( Table A3.2 ).  
3.56.    The Dedicated Fund on Branding, Upgra ding and Domestic Sales (BUD Fund)  of 
HK$1  billion was  set up in 2012 . It comprises the Enterprise Support Programme (ESP) and the 
Organi zation Support Programme (OSP). The ESP provides funding to HKC enterprises to improve 
their competitiveness and further their business development in Mainland China, while the OSP 
provides funding to  non-profit -distributing organiz ations (such as trade and industrial 
organi zations, professional bodies and research institutes) to imp lement projects aim ed at 
enhancing the overall competitiveness of HKC enterprises in Mainland China's  market  
(Section  3.3.1.3 ).  
3.3  Measures Affecting Production and Trade  
3.3.1   Incentives  
3.3.1.1   Taxation  
3.57.   HKC maintains a simple tax system, with low rates by regional stand ards. Direct taxes (i.e. 
profits, salaries and property taxes) are the main contributors to total tax revenue, accounting for 
almost 60% in fiscal year 2016/17 (Table 3.8).  
3.58.   All businesses are subject to a tax on profits arising in or deriving from HKC. Du ring most of 
the review period, the profits tax rate was set at 16.5% for corporations and 15% for 
unincorporated businesses. Starting from the year of assessment 2018/19 , a two-tiered profits tax 
rates regime  has been introduced , under which t he tax rate for the first HK$2 million of profits of 
corporations is lowered from 16.5% to 8.25%. Profits above that amount will continue to be 
subject to the tax rate of 16.5%. For unincorporated businesses, the two -tiered tax rates are 
correspondingly set at 7.5% an d 15%.   
Table 3.8 Government revenues, 2013 -17  
  2013/14  2014/15  2015/16  2016/17  
Government revenue (HK$ million)  455,346  478,668  450,007  573,124  
of which      
Tax revenue (HK$ million)  288,065  354,026  344,59 8  347,936   
 (% of tax revenue)  
Direct taxes  63.70 57.89 59.75 59.47  
 Profits tax  41.96 38.94 40.69 40.02  
 Salaries tax and p ersonal assessment  20.84  18.12 18.18 18.48  
 Property tax  0.90 0.83 0.87 0.97 
Indirect taxes  36.30 42.11 40.25  40.53  
 Bets and sweeps tax  6.27 5.50 5.84 6.07 
 Stamp dut y 14.41 22.14 18.19 17.79  
 Air passenger departure tax  0.78 0.66 0.73 0.75 
 Duties  3.37 2.83 3.11 2.95 
 General rates  5.18 6.29 6.60 6.11 
 First registration tax (m otor vehicle s) 2.89 2.70 2.70 2.25 
 Royalties and concessions  1.54 0.82 0.86 3.03 
 Fees and charges (tax loaded fees)  1.72 2.11 2.22 1.55 
Estate duty  0.13 0.05 0.01 0.01 
Taxi concessions  -- -- -- 0.04 
Non-tax revenue (HK$ million)  167,281  124,642  105,4 09  225,188   
Source:  WTO calculations based on Census and Statistics Department  (C&SD)  online information.  
                                                
47 For details on expenditures covered, see EMF online information at: 
https://www.smefund.tid.gov.hk/english/emf/emf_expends.html . WT/TPR/S/380 • Hong Kong, China  
 
- 45 - 
 
  3.59.   Depreciation in respect of certain capital  expenditures is allowed. For capital expenditure on 
the construction of industrial buildings or structures, depreciation is allowed  up to 24% in the first 
year, and at an additional 4% annually thereafter, until the total expenditure is written off. For  
commercial buildings or structures , depreciation  is allowed at 4% each year until the total 
expenditure is written off. Capital expenditure on machinery and plant that are used specifically 
and directly for any manufacturing processing is entitled to a 100% deduction in the first year.  
3.60.    For residents an d non -residents, a salaries tax is imposed on all income arising in or 
derived from HKC, from an office, employment or any pension. Under certain circumstances, 
exemption or relief from this tax can be claimed on a year -by-year basis. This tax is calculate d at 
progressive rates, ranging from 2% to 17%, with a ceiling rate of 15% applying to the overall tax 
liability. With effect from the year of assessment 2018/19, the Government proposed to increase 
the number of tax bands from four to five , with marginal rates at 2% , 6%, 10%, 14%, and 17%, 
respectively , and to widen each tax band from HK$45,000 to HK$50,000 . In addition, the 
Government proposed to increase the child allowance, the dependent parent/grandparent 
allowance , and to introduce a new personal disa bility allowance. Both proposals were approved by 
the Legislative Council.  
3.61.   Since 2012/13, a one -off reduction of profits tax and salaries tax for each taxpayer has 
been proposed by the Government every year in the annual Budget and has been approved by the  
Legislative Council. For the year of assessment 2017/18, the Government proposed a one -off 
reduction of the profits tax and salaries tax of 75%, subject to a ceiling of HK$30,000. The 
authorities have indicated that one-off reduction s were part of the Gov ernment 's measures to 
share the fruits of economic success with the community . 
3.62.   Ad valorem  stamp duties (AVD) are imposed on the lease, sale or transfer of immovable 
property, as well as on the sale of HKC stocks. AVD rates were raised for all immovable pro perty 
transactions carried out on or after 23 February 2013 . For residential property transactions carried 
out on or after 5 November 2016 , AVD rates were further increased with the introduction of a flat 
rate of 15% on the " consideration " or value of the residential property, whichever is higher .48 In 
addition to AVD, a buyer's stamp duty (BSD) of 15% is levied on residential property acquired by 
non-HKC permanent residents. These measures are aimed at improving demand management and 
ensuri ng that local buyers are accorded priority in the residential property market. On top of AVD 
and BSD (if applicable), a special stamp duty  (SSD)  is also payable if the residential property is 
disposed of by the seller or transferor within 24 months (if the  property was acquired between 
20 November 2010 and 26 October 2012) or 36 months (if the property was acquired on or after 
27 October 2012) from the date of acquisition.   
3.3.1.2   Tax incentives  
3.63.   A number of tax exemptions and concessions are granted to businesses and individuals. 
Exemptions from profits tax apply to dividends and capital gains,  and on interest and profits 
arising from sovereign bonds issued in HK C by the Central People 's Government .49 A concessionary 
rate of 50% of the profits tax rate is granted on  trading profits and interest income derived from 
qualifying debt instruments issued in HKC and on the offshore businesses of professional 
reinsurance companies. Exemptions also apply under certain conditions to profits derived from 
transactions in securit ies in HKC offshore funds . Deductions are allowed for certain expenses 
incurred in the process of earning income, such as the purchase of registered trademarks, 
copyrights and registered designs; fees to register trademarks and patents; scientific research ; 
and repairs to plant and business premises, among others. There is also a 100% profits tax 
deduction for the first year of the purchase of environmentally -friendly commercial vehicles, 
machinery and equipment.  
3.64.   Some new profits tax incentives were introd uced in the last few years. In 2015, the 
exemption on offshore funds was extended to private equity funds, subject to conditions. In 2016, 
                                                
48 The term "consideration " is used under the Stamp Duty Ordinance ( Cap. 117) but it is not defined. It 
generally refers to the total amount that the buyer agrees to pay to the vendor for the acquisition of a 
property . 
49 Originally, the exemption was applicable to Renminbi  (CNY) sovereign bonds only , but it  was 
extended to cover all other non -Renminbi  denominated sovereign bonds in March 2018 . WT/TPR/S/380 • Hong Kong, China  
 
- 46 - 
 
  interest deductions from profits tax were granted for corporate treasury centres (CTCs)50 and the 
profits tax for spec ified treasury activities was reduced by 50%. Furthermore, to attract open -
ended fund companies (OFCs) to domicile in HKC, the legislature passed a bill in March 2018 , 
under which all types of OFCs (irrespective of whether they are onshore or offshore, pub licly or 
privately offered) can enjoy profits tax exemption in HKC. The tax exemption was implemented on 
30 July 2018.  
3.65.   Other tax incentives include a stamp duty waiver for the trading of all exchange traded 
funds (ETFs), and a first registration tax (FRT)  concession for electrical vehicles and 
environmentally -friendly commercial vehicles.51 Since 20 07/08 , a one-off " general  rates" 
concession has also been proposed by the Government every year  in the annual Budget , and has 
been approved by the Legislative Council.  General r ates are one of H KC's indirect taxes levied on 
properties , and  are charged at a percentage of the rateable value , which is the estimated annual 
rental value of a property at a designated valuation reference date, assuming that the propert y 
was then vacant and to let.  For 201 8/19, the Government proposed a rates concession , subject to 
a ceiling of HK $2,500 per quarter for each rateable property , as part of the measures to share the 
fruits of economic success with the community .  
3.3.1.3   Non-tax inc entives   
3.66.   HKC maintains several non -tax incentives programmes, essentially in the form of financial 
support, which are provided to assist SMEs, research and development (R&D) activities, and some 
services sectors (Table A3.2). Most of these programmes were already in place at the time of the 
last Review, although, in some cases, their scope has been expanded  since then . A few additional 
schemes have been introduced, mainly to support innovation and technology (I&T) activities. 
Some of the major programmes an d new schemes are described below.52  
3.67.   The TID provides several funding schemes and other support services to foster the 
development and competitiveness of SMEs.53 In general, to be eligible for assistance, businesses 
must qualify as SMEs54, be registered under the Business Registration Ordinance (Cap. 310), and 
have substantial operations in HKC.  
3.68.   The SME Loan  Guarantee Scheme (SGS) offers loan guarantee s to SMEs to help them 
secure loans from participating lending institutions (PLIs)55 for acquiring business installations and 
equipment or meet ing working capital needs  (Table 3.9) . The SGS guarantees up to 50% of the 
non-revolving loans granted by the PLIs, subject to a cap of HK$6 million per SME; the guarantee 
period is up to five year s. In order t o help SMEs overcome liquidity problems in the wake of the 
2008 global financial crisis, the Government launched a Special Loan Guarantee Scheme with more 
flexible terms to guarantee loans for general business uses. Applications under this spe cial scheme 
were closed in December  2010. As of end -2017, the cumulative approved loans of this special 
scheme totalled HK$94.4  billion and the cumulative amount of guarantee committed was 
HK$74  billion.56  
                                                
50 A CTC is effectively an in -house bank within a m ultinational corporation, focusing  on the optimal 
procurement and usage of capital f or the operations of the group.  
51 Until fiscal year 2016/17, the FRT was waived altogether for electric vehicles, and the concession on 
environmental -friendly vehicles applied to both private and commercial vehicles.  
52 For details on the assistance programmes for fisheries and agriculture , see WTO documents 
G/SCM/N/315/HKG, 30 June 2017, and G/SCM/N/284/HKG, 2 July 2015.  
53 SMEs are considered crucial for the HKC economy, as they constitute over 98% of the local business 
establishments and employ over 45% of the workforce in the private sec tor (as at December 2017).  
54 SMEs are defined as any manufacturing business which employ s fewer than 100 individuals in H KC, or 
any non -manufacturing business which employ s fewer than 50 individuals in H KC. 
55 Currently, there are 38 PLIs providing loans under the SGS. Viewed at: 
http://www.smefund.tid.gov.hk/english/sgs/sgs_procedures.html .  
56 TID online information, "Special Loan Gu arantee Scheme". Viewed at: 
http://www.smefund.tid.gov.hk/english/spgs/spgs_statistics.html . WT/TPR/S/380 • Hong Kong, China  
 
- 47 - 
 
  Table 3.9 Support under the SME Loan Guarantee Scheme, 2014 -17  
(HK$ million)  
 2014  2015  2016  2017  
Business installation and equipment loans  
No. of applications  127 75 57 42 
No. of approvals  117 71 50 44 
Total amount of guarantee committed  69.68  39.24  30.71  16.56  
Total amount of loans approved  139.36  79.29  61.42  33.12  
Working capital loans  
No. of applications  997 903 730 728 
No. of approvals  915 835 687 700 
Total amount of guarantee committed  1,064  1,165  935 1,018  
Total amount of loans approved  2,125  2,350  1,871  2,036  
Source:  Information provided by the authorities.  
3.69.   Through the SME Development Fund (SDF), financial support is provided to non -profit -
distributing organizations, such as trade and industrial organizations, professional bodies or 
research institutions, to undertake projects that help enhance SMEs' competitiveness. Funding 
covers up to 90% of the total project expenditure, with a cap of HK$5 million per project 
(increased from HK$2 million in 2015). As mentioned earlier, funding is also available under the 
EMF to help SMEs expand their businesses through participation in a range of export promotion 
activities (Section 3.2.5 ). In 2015, the total commitment of the EMF and SDF funds together was 
increased from HK$3.75  billion (about US$ 0.5 billion) to HK$5.25 billion (US$0.7 billion).57 
3.70.   The Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund ) comprises 
two schemes: the Enterprise Support Programme (ESP ) and the Organization Support Programme 
(OSP).58 The ESP, implemented by the Hong Kong Productivity Council, provides financial support 
to HKC enterprises to enhance their competitiveness in Mainland China, by developing their 
brands, upgrading and restructuring their operations, and promoting sales to the Mainland China 
market . SMEs may apply for funds under the ESP. Funding is provided in the form of cash grants 
covering up to 50% of the total approved project cost, with the enterprise contributing the rest in 
cash. There is a cumulative funding cap of HK$500,000 , and a maximu m of three approved 
projects per enterprise; each project must be completed within 24 months. Between January 2014 
and December 2017, the total amount of funding approved under the ESP was HK$324.13 million 
(US$41.6 million). The OSP, administered by the T ID, provides funding for non -profit -distributing 
organizations to carry out projects aimed at assisting non -listed enterprises in HKC to develop the 
Mainland China market . From January 2014 to December 2017, total funding approved under the 
OSP was HK$108. 60 million (US$13.9 million).59  
3.71.   HKC maintains a number of incentive schemes for R&D projects, mostly administered by the 
Innovation and Technology Commission (ITC)  under the Innovation and Technology Fund (ITF).  
Support is provided mainly through grants an d cash rebates (Table A3.2). The largest schemes in 
terms of value are: the Innovation and Technology Support Programme (ITSP), under which 
US$113.45 million of grants were approved in 2017; the Internship Programme 
(US$20.85  million); and the R&D Cash Reb ate Scheme (US$12.22 million). The ITSP provides 
grants for midstream/downstream R&D projects undertaken mainly by universities, research 
centres, industry support organizations, professional bodies, and trade and industry associations. 
The Internship Prog ramme supports the recruitment of interns to assist in R&D projects under the 
ITF, or carried out by incubate es or I&T tenants of the Hong Kong Science and Technology Parks 
Corporation or Cyberport . Under the R&D Cash Rebate Scheme, enterprises receive a cash rebate, 
which is currently equivalent to 40% of their R&D expenditure (30% in 2014).  
3.72.   In 2015, the Small Entrepreneur Research Assistance Programme (SERAP) was replaced by 
the Enterprise Suppor t Scheme (ESS) , which provides financial support to enterprises to conduct 
in-house R&D activities. Funding is provided on a dollar -for-dollar matching basis, with a ceiling of 
HK$10 million for each project.60 Two other new schemes were launched by the ITC  during the 
review period: the Technology Voucher Programme (2016), which provides funding for the use of 
                                                
57 Information provided by the authorities.  
58 BUD Fund online information. Viewed at : https://www.bud.hkpc.org/en . 
59 Information provided by the authorities.  
60 For further details, see: http://www.itf.gov.hk/l -eng/ESS.asp . WT/TPR/S/380 • Hong Kong, China  
 
- 48 - 
 
  technological services and solutions by local enterprises to improve productivity or upgrade their 
business processes; and the Innovation and Technolo gy Venture Fund (ITVF) (2017), with funds of 
HK$2billion , which seeks to stimulate venture capital (VC) fund investment in local innovation and 
technology start -ups. The Government will co -invest with partner VC funds at an overall matching 
investment rati o of approximately 1 to 2. Selection of partner VC funds is in progress , and it is 
expected that co -investments will be made in the second half of 2018 .61  
3.73.   There are also several incentive/funding schemes targeting services , such as the film 
industry (Film Development Fund), the creative industries (CreateSmart Initiative)62, and other 
professional services. The Professional Services Advancement Support Scheme, launched in 
November 2016, provides funding support to trade and industry organizations, profession al bodies , 
and research institutes to increase exchanges of professional services with their external 
counterparts , promote the relevant publicity activities, and enhance their standards and external 
competitiveness .  
3.3.2   Standards and other technical requirem ents 
3.74.   HKC has no central  body for the development of standards or comprehensive legal 
framework regulating this area. Instead, different regulatory agencies issue their own standards 
and technical requirements, using international or overseas standards as a reference or aligning 
domestic standards with international standards where appropriate. The authorities state that their 
policy is to avoid situations where the setting of standards would dictate market development or 
become a means of protecting certain  sectors of the industry.63 The Product Standards Information 
Bureau (PSIB) of the ITC is HKC's enquiry and notification point for the purposes of the WTO 
Technical Barriers to Trade (TBT) Agreement.64 
3.75.   Since its last Review, HKC has submitted seven notifications to the TBT Committee.65 Two 
concerned technical regulations (formula products and food for infants; and edible fats and oils 
and "waste cooking oils"); four referred to conformity assessment procedures (voluntary water -
efficiency labelling on flow controllers and water closets, and energy labelling on various types of 
electrical appliances); and one was an addendum about the promulgation of a voluntary marketing 
and quality code (formula milk and food products for infants), whose draft had been  notified in 
2012. A comment period of at least 60  days was generally provided in the notifications, with 
proposed dates for adoption and entry into force set well after the expiry of the comment period. 
No specific trade concerns have been raised in the W TO TBT Committee concerning standards or 
technical regulations applied by HKC during the period under review.  
3.76.   Technical regulations (i.e. mandatory standards) currently in force include products such as 
motor vehicles, ocean -going vessels, household electr ical appliances, portable air compressors, 
boilers and pressure vessels, building materials, toys and children's products, consumer goods, 
food, firefighting equipment, lifts and escalators, and telecommunications apparatus and 
equipment, among others. The se technical regulations are applied on environmental, safety and 
health grounds (Table A3.3).  
3.77.   The competent regulatory agencies are in charge of setting their respective conformity 
assessment procedures in accordance with relevant legislation. Importers a re responsible for 
ensuring that products meet applicable technical regulations and standards; generally, mandatory 
product certification is not required. The C&ED is responsible for ensuring that consumer goods 
comply with safety requirements at the borde r/boundary.  
3.78.   The Hong Kong Accreditation Service (HKAS), under the ITC, provides accreditation services 
to laboratories, certification bodies, and inspection bodies. The HKAS system comprises three 
accreditation schemes: the Hong Kong Laboratory Accreditat ion Scheme (HOKLAS), the Hong Kong 
Certification Body Accreditation Scheme (HKCAS), and the Hong Kong Inspection Body 
                                                
61 Innovation and Tec hnology Fund online information. Viewed at: http://www.itf.gov.hk/ . 
62 The "creative industries" are: advertising, architecture, design, digital entertainment, film, music, 
printing and publishing, and television.  
63 ITC online information. Viewed at: http://www.itc.gov.hk/en/quality/psis/srca/policy.htm . 
64 WTO document G/TBT/ENQ/38/Rev.1, 8 July 2011.  
65 WTO documents G/TBT/N/HKG/45 -50 (different date s), and G/TBT/N/HKG/43/Add.1, 21 June 2017.  WT/TPR/S/380 • Hong Kong, China  
 
- 49 - 
 
  Accreditation Scheme (HKIAS). In April 2018 , there were 27 3 organiz ations accredited under these 
schemes : 227 laboratories; 25 certificati on bodies; and 21 inspection bodies.66  
3.79.   The HKAS is a member of the International Accreditation Forum (IAF), the International 
Laboratory Accreditation Cooperation (ILAC), the Pacific Accreditation Cooperation (PAC), and the 
Asia Pacific Laboratory Accreditation Cooperation (APLAC). It is also a sig natory to the multilateral 
mutually recognition agreement ( MRAs ) administered by these organizations. Since January  2014, 
the HKAS has expanded the scope of its MRAs to cover energy management system certification, 
food safety management system certificati on, greenhouse gas validation and verification, and 
proficiency testing providers. As of April 2018 , the HKAS had concluded MRAs with over 
90 economies worldwide.67 
3.80.   With the aim of turning HKC into a regional testing and certification hub, the Government 
and the Hong Kong Council for Testing and Certification (HKCTC) have put in place a number of 
measures to foster the development of this industry, which the authorities consider has a clear 
competitive advantage and growth potential.68 For example, in Februar y 2016, the "nil waiver fee" 
was introduced to facilitate the operation of testing and calibration laboratories in industrial 
buildings. This means that owners of industrial premises can apply to the Lands Department for a 
waiver of lease conditions in ord er to accommodate testing and calibration laboratories, and 
successful applicants are exempted from the payment of the corresponding waiver fee.69 Testing 
and certification bodies and services are also eligible to apply under the recently established 
fundin g schemes: the Technology Voucher Programme and the Professional Services Advancement 
Support Scheme (Table A3.2).  
3.81.   HKC's labelling requirements concern mainly food products, certain household electrical 
appliances, Chinese herbal medicines, proprietary Ch inese medicines  and pharmaceutical products. 
Pharmaceutical products are, for example, required to have indications of the name of the 
pharmaceutical product, the name and quantity of each active ingredient, the name and address of 
the manufacturer, the product registration number, the batch number, the expiry date, the 
dosage , and the route and frequency of administration on the label.  
3.82.   Food labelling requirements are administered by the Centre for Food Safety (CFS) under the 
FEHD, and are stipulated in Schedule 3 of the Food and Drugs (Composition and Labelling) 
Regulations (Cap. 132W). Pre -packaged food labels must contain the following information in 
either Chinese or English or in both: the name of the food; the list of ingredients, including any 
allergens and additives70; an indication of the "use by" or "best before" date; a statement of special 
conditions for storage or instructions for use; the name and address of the manufacturer or 
packer; and the count, weight or volume of food. Regular inspectio ns are conducted and random 
food samples tested to verify the labelled content. O ffender s are liable to a maximum fine of 
HK$50,000  and six months ' imprisonment.71 Genetically -modified (GM) food is not subject to 
labelling requirements, rather a voluntary " positive labelling" approach is used, whereby any food 
product containing 5% or more of an individual GM ingredient should be labelled as GM food. The 
authorities do not recommend negative labelling (i.e. "GM free"), as they consider this might 
mislead con sumers.  
3.83.   The Mandatory Energy Efficiency Labelling Scheme is administered by the Electrical and 
Mechanical Services Department , and requires local manufacturers or importers of the prescribed 
products to submit specified information and document s for the assignment of reference numbers. 
Local manufacturers  or importers are required to attach energy labels in the prescribed format 
specified in the Energy Efficiency (Labelling of Products) Ordinance (Cap. 598) before supplying 
                                                
66 ITC online information. Viewed at: http://www.itc.gov.hk/en/quality/hkas/accrorg.htm . 
67 The list of agreements can be found at: http://www.itc.gov.hk/en/quality/hkas/agreement.htm .  
68 In 2016, there were about 670 private establishments in the testing and certification industry, with 
total business receipts of HK$14.1 billion and a direct economic contribution of HK$7.3 billion to GDP. The 
largest testing subsectors are: medical testing; toys and games; textiles, clothing and footwear; construction 
materials; and electrical products. Viewed at : 
https://www.hkctc.gov.hk/en/doc/AdministrationPaper_ci20180227cb1 -604-3-e.pdf.  
69 HKCTC Report for 2016 -17. Viewed at: http://www.hkctc.gov.hk/en/doc/HKCTCAnnualReport_2016 -
17_Eng.pdf . 
70 For additives, the label must specify the functional class and specific name or identification number 
under the International Numbering System for Food Additives adopted by the Codex Alimentarius Commission.  
71 Centre for Food Safety online information. Viewed at http://www.cfs.gov.hk/english/faq/faq_03.html . WT/TPR/S/380 • Hong Kong, China  
 
- 50 - 
 
  these products in HKC . Local su ppliers (including wholesalers and retailers) are not allowed to 
supply any specified product which has not been assigned a reference number and does not bear 
energy labels.  Some types of household electrical appliances are subject to energy -efficiency 
labelling in order to inform consumers' choice.  
3.3.3   Sanitary and phytosanitary requirements (SPS)  
3.84.   The Food and Environmental Hygiene Department (FEHD), through the Centre for Food 
Safety (CFS), and the Food and Health Bureau (FHB) are the authorities responsible for food safety 
and related issues. The Agriculture, Fisheries and Conservation Department (AFCD) is the 
competent authority for animal health and plant protection. The TID is HKC's enquiry point under 
the WTO Agreement on SPS.72 This institutional set -up has remained basically unchanged since 
HKC's last TPR.  
3.85.   From January 2014 to December 2017, HKC submitted six SPS notifications to the WTO: 
four referred to new measures (including an emergency measure) and two were addenda to 
previously notified measures. The notifications covered food for human consumption, edible fats 
and oils of animal origin, and horses from specified countries.73 All four new measures were based 
on international standards, and the authorities considered them to be in conformity with tho se 
standards. A comment period of at least 60  days was generally provided in the notifications. No 
specific trade concerns have been raised in the WTO SPS Committee regarding SPS measures 
applied by HKC during the review period.  
3.86.   HKC participates in meetin gs of the Codex Alimentarius Commission, the World Organization 
for Animal Health (OIE) and the Commission on Phytosanitary Measures of the International Plant 
Protection Convention (IPPC) under the auspices of Mainland China.  
3.87.   The Public Health and Municip al Services Ordinance (Cap. 132, Part V) and its subsidiary 
regulations, and the Food Safety Ordinance (Cap. 612) are the main laws governing food safety.74 
The Public Health and Municipal Services Ordinance regulates the protection of food purchasers, 
offences in connection with the sale of unfit and adulterated food, composition and labelling of 
food, food hygiene, and seizure and destruction of unfit food.  The Food Safety Ordinance, passed 
in 2012, introduced new safety control measures, including a requi rement for food importers and 
distributors to register with the FEHD and to keep  transaction records in order to enhance food 
traceability. The Food Safety Ordinance  also empowers the Director of the FEHD to issue Food 
Safety Orders to control, prohibit or  recall import s or the supply of any food on public health 
grounds.  
3.88.   Food importers are responsible for ensuring that food products comply with all applicable 
laws and requirements. A prior import licence and/or a written permission from the FEHD is 
require d for the importation of high -risk items such as frozen confections, milk and milk 
beverages, game, meat, poultry and eggs. Imports of these products are allowed only if they come 
from sources duly recognized by the FEHD: sources for frozen confections, mi lk and milk 
beverages are recognized on a manufacturing plant basis, while game, meat and poultry sources 
are country -specific. Under the Imported Game, Meat, Poultry and Eggs Regulations ( Cap. 132AK) , 
imports of these products require a health certificate  issued by a competent body  in the exporting 
country. Failure to submit the health certificate or the prior written permission upon entry into HKC 
is considered an offence liable, on conviction, to a fine of HK$50,000 and to imprisonment for 
six months.75 Imports of meat and poultry transhipped through HKC in sealed refrigerated 
containers do not require a transhipment certificate, provided the seals remain intact during 
transport.  
3.89.   Following OIE guidelines and notifications, the C entre for Food Safety may t emporarily 
suspend imports of poultry meat and poultry products (including eggs) for human consumption 
from areas where avian influenza in poultry is reported.  In such cases, HKC will inform the 
                                                
72 WTO document G/SPS/ENQ/26, 11 Marc h 2011.  
73 WTO documents G/ SPS/N/HKG/39 , 16 April 2014; G/ SPS/N/HKG/39 /Add.1, 25 June 2014; 
G/SPS/N/HKG/40 , 15 October 2014; G/SPS/N/HKG/4 1, 10 August 2015; G/SPS/N/HKG/4 2, 8 June 2017; and 
G/SPS/N/HKG/35/Add.1 , 6 July 2017.  
74 CFS online information. Viewed  at: http://www.cfs.gov.hk/english/food_leg/food_leg.html . 
75 CFS online information. Viewed at: http://www.cfs.gov.hk/ english/import/import_ifc.html . WT/TPR/S/380 • Hong Kong, China  
 
- 51 - 
 
  Consulate -General and the competent authorities of the export ing countries/places concerned , and 
issue press releases.  As at June 2018, 22 areas were subject to temporary import suspension, in 
most cases of a limited scope and duration.76  
3.90.   Import controls and requirements on food products are imposed for public health reasons, 
and are based on risk assessment. The CFS conducts reviews and analysis of food -related hazards 
to public health, using the risk analysis framework established by inte rnational food safety 
authorities and best available scientific evidence. The CFS also runs a food surveillance 
programme, under which the Centre's inspectors take samples of food at import, wholesale and 
retail levels for microbiological, chemical and rad iation testing . The results are published 
monthly.77 
3.91.   During the review period, amendments were made to the Food and Drugs (Composition and 
Labelling) Regulations (Cap. 132W) . The amendments, based on Codex standards, became 
effective in March 2014, December  2015 and June 2016, and provided for, respectively: (i) the 
reduction of fees on small volume exemption applications submitted by electronic means; 
(ii) changes to the nutritional composition and labelling of infant formulae78; and (iii) changes to 
the nut ritional labelling of follow -up formulae and pre -packaged food for infants and young 
children.79  
3.92.   Also during the period under review, HKC started implementation of the Pesticides Residues 
in Food Regulation (Cap. 132CM), which came into effect in August 20 14.80 The Regulation sets 
out a list of pesticide maximum residue limits in food products, mostly based on the standards of 
the Codex Alimentarius Commission and the standards of some major food exporting economies. 
Imports or sales of food containing a pes ticide not included on the list are not permitted unless it is 
demonstrated that consumption of such food is not dangerous or prejudicial to health, on the basis 
of a risk assessment conducted by the CFS.  
3.93.   In June 2017, the authorities proposed amendments to the Food Adulteration (Metallic 
Contamination) Regulations  in order to update them and better prevent t he adverse health effects 
posed by metallic contaminants  in food. Basically, the proposed amendments would provide for the 
establishment of specific maximum levels targeting individual food s or food groups  in accordance 
with t he Codex principle s and modern international regulatory trends in this area.81 
3.94.   The AFCD  is responsible for enforcing SPS controls on imports of live animals and plants. 
Under the Public Health (Animals and Birds) Ordinance (Cap. 139 ), a special permit from the AFCD 
is required for imports (including transhipment) of live animals and poultry, except for imports of 
non-CITES animals and poultry from Mainland China, which are regulated in separate legislation.82 
On arrival, animals must be accompanied by a valid  animal health certificate issued by the 
competent veterinary authority of the exporting country.  Inspection procedures at the 
border/boundary,  and quarantine restrictions, apply, in order to prevent the introduction of animal 
diseases into HKC.  
3.95.   The Plant (Importation and Pest Control) Ordinance (Cap. 207), also enforced by the AFCD, 
regulates the importation of plants and parts thereof.83 The Ordinance draws on the principles and 
                                                
76 The authorities have indicated that in such cases they inform the Consulate -General and the 
competent authorities of the exporting countries/places concerned , and issue press releases.  
77 CFS online information. Viewed at: 
http://www.cfs.gov.hk/english/programme/programme_fs/programme_fs.html .  
78 The Amendment Regulation mandates that infant formula must contain energy and 33 nutrients in 
accordance with the standards from Codex Alimentarius.  It also contains labelling prescriptions.  
79 The amended Regulation requires the labelling of energy value and contents of nutrients for follow -up 
formula  and pre-packaged food for infants and young chi ldren. CFS online information. Viewed at: 
http://www.cfs.gov.hk/english/food_leg/food_leg_Formula_Products_for_Infants.html . 
80 The Pesticides Regulation, reported in the 2014 TPR, can be found at the CFS website at: 
http://www.cfs.gov.hk/english/whatsnew/whatsnew_fstr/whatsnew_fst r_21_Pesticide.html . 
81 WTO document G/SPS/N/HKG/42, 8 June 2017.  
82 The authorities note that the exemption from special permit is a trade facilitation measure, given that 
Mainland China is the largest supplier of poultry and live animals for human consumpt ion in HKC.  
83 Department of Justice online information. Viewed at: https://www.elegislation.gov.hk/hk/cap207!en . WT/TPR/S/380 • Hong Kong, China  
 
- 52 - 
 
  procedures of the IPPC and the Plant Protection Agreement for the Asia Pacific Region.84 Imports of 
plants are subject to a Plant Import Licence (PIL) and must be accompanied by a valid 
phytosanitary certificate issued by the competent authority in the count ry/place of origin. Imports 
of cut flowers; fruit and vegetables for consumption; grains, pulses, seeds and spices for 
consumption or industrial use; timber and timber products; dried tobacco; and plants  and soil from 
Mainland China are exempted from these  requirements. Certain plants (specified in the First 
Schedule of the Ordinance) are subject to fumigation requirements and/or quarantine conditions.  
3.96.   The Genetically Modified Organisms (Control of Release) Ordinance  (Cap. 607) regulates the 
release into t he environment and the transboundary movement of genetically modified organisms 
(GMOs).85 No one is allowed to release a GMO into the environment or import a GMO intended to 
be released into the environment unless the GMO has been approved by the AFCD or is  exempted 
from approval.86 This requirement does not apply to GMOs in transit or transhipment, or if the 
GMO is a pharmaceutical product for human use. Exports of GMOs intended for release into the 
environment are not permitted, unless an export notificatio n is submitted to the competent 
authority, and/or approval of the competent authority of the place of destination is obtained 
according to the legal or regulatory requirements of that place, and copies thereof are sent to the 
Director of the AFCD.87  
3.97.   Any pe rson wishing to release a GMO into the environment or import a GMO for the same 
purpose must submit an approval application in a specified form and a risk assessment report on 
the po ssible adverse biosafety effect of the GMO . In addition, importers must provide information, 
inter alia,  on the regulatory status of the GMO in th e place from which it is to be imported.88 The 
authorities have indicated that no applications for either release or import for release have been 
submitt ed since the Ordinance (Cap. 607) came into effect.  
3.98.   Imports of GMOs (whether for release into the environment; contained use; direct 
consumption as food or feed; or processing) must be accompanied by the documents prescribed in 
the Regulations, containing  information such as the GMO's common and scientific names, its new 
or modified traits and characteristics , and the contact details of the exporter and importer.89 The 
documentation requirements do not apply to import shipments of GMOs for contained use or for 
processing that are unintentionally mixed with other living organisms, where the quantity of the 
GMOs in the total quantity of living organisms in the lot does not exceed the prescribed 
percentage, which is currently set at 5%.90 The AFCD carries out ra ndom sampling on shipments 
to verify compliance with the restrictions on the import and export of GMOs intended for release 
into the environment and the documentation requirements.  
3.3.4   Competition policy and price controls  
3.3.4.1   Competition policy  
3.99.   The fundamental l aw governing HKC's competition regime is the Competition Ordinance  
(Cap.  619), passed by the Legislative Council on 14 June 2012 . The Competition Commission is 
the princip al competition authority.91 During the period under review, the main development in 
                                                
84 AFCD  online information. Viewed at:  
http://www.afcd.gov.hk/english/quarantine/qua_plants/qua_plants_pq/qua_plants_pq_imp/qua_plants_pq_im
p.html . 
85 Department of Justice online information. Viewed at: 
https://www.elegislation.gov.hk/hk/cap607!en@2011 -03-2T00:00:00?xpid=ID_1438403519183_003.govern . 
86 Sections 6 and 7 of the Genetically Modified Organisms (Control of Release) Ordinance . Two varieties 
of GM papaya and any GMO that is contained in a veterinary vaccine are exempted from AFCD approval.  
87 Sections 23 and 24 of the Genetically Modified Organisms (Control of Release) Ordinance . 
88 Section  8 of the Genetically Modified Organisms (Control of Release) Ordinance . 
89 The Genetically Modified Organisms (Documentation for Import and Export) Regulation, Cap. 607A.  
90 Section 26 of Genetically Modified Organisms (Control of Release) Ordinance . 
91 The Competition Commission was established in 201 3 under the Competition Ordinance as an 
independent statutory body to create and safeguard a competitive environment. The Commission's powers and 
responsibilities include: (i) enforcing the Competition Ordinanc e and investigating conduct that may contravene 
competition rules; (ii) promoting public understanding of the value of competition and the Ordinance's role in 
this regard; (iii) promoting undertakings' adoption of appropriate internal controls and risk man agement 
systems which ensure their compliance with the Ordinance; (iv)  advising the Government on competition 
matters in and outside HKC; (v) studying matters affecting competition in markets; and (vi) promoting 
research in the area of competition law and policy.  WT/TPR/S/380 • Hong Kong, China  
 
- 53 - 
 
  this area was the issuance of a series of guidelines, guidance notes and policy documents by the 
Competition Commission, and the full entry into force of the Competition Ordinance on 
14 December 2015 . Among the above instruments, the most important are the f ollowing : the 
Guideline on the First Conduct Rule (cartels) ; the Guideline on the Second Conduct Rule (abuse of 
substantial market po wer); the Guideline on the Merger Rule ; the Guideline on Complaints ; the 
Guideline on Investigations ; and the Guideline on Applications for a Decision under Sections 9 and 
24 (Exclusions and Exemptions ) and Section 15 ( Block Exemption  Orders) . The Competition 
Ordinance, including its subsidiary legislation, constitutes HKC's comprehensive legal framework 
on compet ition.92 Table 3.10 presents an overview of these instruments.  
3.100.   The Competition Ordinance applies to anti -competitive agreements and concerted 
practices, abuse of substantial market power and certain mergers,  whether the anti -competitive 
conduct takes place  in HKC or abroad. As regards anti -competitive agreements, the Competition 
Ordinance (First Conduct Rule) prohibits any type of agreements or concerted practices if their 
object or effect is to prevent, restrict or distort competition in HKC. A distinction  is made between 
serious anti -competitive conduct (namely, price fixing, market sharing, output limitation and bid -
rigging) and other forms of anti -competitive conduct, which may harm competition in certain 
contexts (e.g., selective distribution arrangemen ts, franchising agreements and resale price 
maintenance). Different enforcement options are available to the Commission in each case. The 
Ordinance provides a "safe harbour" for smaller undertakings: the First Conduct Rule will not apply 
if the combined an nual turnover of the relevant undertakings does not exceed HK$200 million, 
except where serious anti -competitive conduct is involved. A leniency policy was established in 
November 2015, whereby the Competition Commission will agree not to commence proceedi ngs 
for a pecuniary penalty against the first cartel member that reports cartel conduct to the 
Competition Commission and meets all the requirements for receiving leniency.93  
Table 3.10 HKC's legislation and r elevant instruments on competition policy  
Instruments  Main contents  
Legislation  
Competition Ordinance 
(Cap. 619), including its 
subsidiary legislation  The Ordinance serves as the overarching legislation on competition policy. It consists of 
three competition rules, respectively on: the prohibition of anti -competitive agreements 
and concerted practices (First Conduct Rule), abuse of substantial market power 
(Second Conduct Rule) and anti -competitive mergers and acquisitions (Merger Rule). It 
spells out rules on how complaints and investigations should be conducted in this 
regard, and sets up the institutional arrangement on competition law enforcement: the 
respective roles of the Competition Commission and the Competition Tribunal.  
Guidelinesa and guidance notes  
Guideline on the First 
Conduct Rule  Provides an overview of key concepts used by the Competition Commission in relation 
to the First Conduct Rule. It also explains the Commission's approach to various types 
of business conduct, such as pric e fixing, market sharing, bid -rigging, output limitation 
and resale price maintenance.  
Guideline on the Second 
Conduct Rule  Spells out the Competition Commission's approach to defining the relevant market 
(which also applies to the First Conduct Rule and the Merger Rule) and assessing 
market power. It explains the Commission's approach to certain types of business 
conduct, incl uding predatory pricing, tying and bundling, margin squeeze, refusals to 
deal and exclusive dealing.  
Guideline on the Merger 
Rule Provides an overview of key concepts used by the Competition Commission in relation 
to the Merger Rule , and the Commission's approach and analytical tools for assessing 
mergers. It also addresses relevant enforcement procedures.  
Guideline on Complaints  Explains the procedures to submit complaints, the use of information in a complaint, 
and the role of comp lainants in the process.  
Guideline on Investigations  Sets out the main steps, relevant procedures and possible outcomes of a Commission 
investigation.  
Guideline on Applications for 
a Decision under Sections 9 
and 24 (Exclusions and 
Exemptions) and Sectio n 15 
(Block Exemption Orders)  Outlines the main steps and possible outcomes of an application for exclusions, 
exemptions or block exemptions, and provides procedural protections for those 
involved in an application.  
Guidance Note on How to 
Assess "Turnove r" for 
Exclusions from the 
Competition Ordinance 
Conduct Rules  Summarizes and explains the rules about the calculation of turnover to assist 
undertakings in determining whether they are entitled to use the "safe harbour".  
                                                
92 The Competition Ordinance and its subsidiary legislation are available at: 
http://www.compcomm.hk/en/legislation_guidance/legislatio n/legislation/comp_ordinance_cap619.html .  
93 The Leniency Policy is available at: 
https://www.compcomm.hk/en/legislation_guidance/policy_doc/files/Leniency_Policy_Eng.pdf .  WT/TPR/S/380 • Hong Kong, China  
 
- 54 - 
 
  Instruments  Main contents  
Guidance Note on Fees 
Payable for  Making an 
Application to the 
Competition Commission  Establishes the fees charged by the Competition Commission for applications for 
available exclusions and exemptions. It also provides information about how the 
Competition Commission proposes to consider  requests to waive or reduce fees , and 
the circumstances in which a fee will be refunded.  
Guidance Note on 
Investigation Powers of the 
Competition Commission 
and Legal Professional 
Privilege  Explains how legal professional privilege is reserved against the investigations by the 
Competition Commission.  
Policy documents  
Enforcement Policy  Supplements the Competition Ordinance and the guidelines, spelling out how the 
Competition Commission intends to exercise its enforcement function in investigating 
possible contraventions of the First and Second Conduct Rules.  
Leniency Policy for 
Undertakings Engaged in 
Cartel Conduct  Outlines the Competition Commission's approach to leniency applications , and provides 
a template agreement. It also sets out confidential ity issues regarding  leniency . 
a The six Guidelines are jointly issued by the Competition Commission and the Communications 
Authority. They are not substitutes for the Competition Ordinance and do not have a binding legal 
effect. The Competition Tribunal and other courts are  ultimately responsible for interpreting the 
Ordinance. The Competition Commission  and the C ommunications Authority  are not bound by their 
own interpretation of the Ordinance .  
Source:  Information provided on the official website of the  Competition Commission.  
3.101.   Regarding abuses of substantial market power, the Second Conduct Rule prohibits 
undertakings with a substantial degree of market power from abusing that power by engaging in 
conduct that has the object or effect of preventing, rest ricting or distorting competition in HKC. 
Examples of such conduct in the relevant guidelines include: (i) predatory pricing to prevent 
potential competitors from entering into the market; (ii) tying and bundling; (iii)  margin 
squeeze94; (iv) refusal to deal; and (v) exclusive dealing. Factors such as the market share of the 
undertaking; its power to make pricing and other decisions; and barriers for competitors to enter 
into the relevant markets  are taken into account when  assess ing market power . A "safe harbour" 
is also established under the Second Conduct Rule for smaller undertakings with an annual 
turnover not exceeding HK$40 million.  
3.102.   Apart from the "safe harbours", the Competition Ordinance allows for a number of 
exclusions and exem ptions from the first two conduct rules (Table 3.11).These include agreements 
enhancing overall economic efficiency; agreements or conduct undertaken in order to comply with 
a legal requirement; undertakings entrusted by the Government with a service of ge neral 
economic interest; and agreements or conduct resulting in a merger.95 Exemptions may also be 
granted on public policy grounds, or to avoid conflicts with HKC's international obligations. 
Moreover, most statutory bodies are exempted from the applicatio n of the substantive competition 
rules.96 In 2018, the authorities will review the exemptions for statutory bodies.  
3.103.   With regard to mergers and acquisitions, the Competition Ordinance (Merger Rule) 
prohibits mergers that have, or are likely to have, the eff ect of substantially lessening competition 
in HKC. However, this Rule is currently applicable only to mergers involving undertakings that hold 
a carrier licence97, or that directly or indirectly control an undertaking that holds such a licence. 
The authorit ies have indicated that, as part of the review of the Competition Ordinance, an area to 
be looked into may include the scope of the Merger Rule. No merger notification is required under 
                                                
94 Margin squeeze may occur in a market where an undertaking has a dominant market position in 
supplying downstream clients with goods or services, while this underta king also has its own operations in the 
downstream. Under such scenario, the concerned undertaking may harm competition by reducing the margin 
between the price it charges for the input to its competitors in the downstream market and the price its 
downstre am operations charge to its own customers.  
95 Schedule 1 of the Competition Ordinance. Viewed at: 
https://www.elegislation.gov.hk/hk/cap619!en@2016 -10-20T00:00:00 .  
96 Six statu tory bodies (Ocean Park, Matilda and War Memorial Hospital, the Federation of Hong Kong 
Industries, the General Committee of the Federation of Hong Kong Industries, Helena May, and Kadoorie Farm ) 
are subject to provisions of the Competition Ordinance by vi rtue of the Competition (Application of Provisions) 
Regulation (Cap . 619A).  On the other hand, s even entities (the Stock Exchange and other financial entities) 
are excluded from the application of the First and Second Conduct Rules by virtue of the Competi tion 
(Disapplication of Provisions) Regulation (Cap . 619B) .  
97 As defined under the Telecommunications Ordinance (Cap. 106).  WT/TPR/S/380 • Hong Kong, China  
 
- 55 - 
 
  the Competition Ordinance.  The Merger Rule does not apply if the econo mic efficiencies from the 
merger outweigh the harm caused to competition.  
Table 3.11 Exclusions and exemptions from the Conduct Rules  
Relevant exclusion or exemption  Exclusion or 
exemption from the 
First Conduct Rule  Exclusion or 
exemption from  the 
Second Conduct Rule  
General exclusions    
Agreements enhancing overall economic efficiency  Yes No 
Compliance with legal requirements  Yes Yes 
Services of general economic interest  Yes Yes 
Mergers  Yes Yes 
Agreements of lesser significance  Yes No 
Conduct of lesser significance  No Yes 
Block exemption orders Yes No 
Public policy exemption  Yes Yes 
International obligations exemption  Yes Yes 
Statutory body and specified person or activities exclusions  Yes Yes 
Source:  Guideline on Applications for a Decision under Sections 9 and 24 (Exclusions and Exemptions) and 
Section 15 Block Exemption Orders.  
3.104.   Regarding any anti -competitive conduct by undertakings operating in the 
telecommunications and broadcasting sec tors, the Competition Ordinance stipulates that the 
Communications Authority  has concurrent jurisdiction with the Competition Commission in carrying 
out relevant  investigation s and enforcement proceedings. In December  2015, both authorities 
signed a M emora ndum of Understanding (MoU) on  mutual coordination and cooperation in this 
regard.98 Given the Communications Authority's  specific function of regulating the broadcasting 
and telecommunications sectors, and the restricted application of the Merger Rule unde r the 
Competition Ordinance to mergers involving carrier licensees concerned, the Communications 
Authority will ordinarily take the role of lead authority on matters which fall within the concurrent 
jurisdiction of both authorities. Where a matter involves  issues that are partly within the 
concurrent jurisdiction and issues that are partly outside the concurrent jurisdiction, the 
two authorities will discuss and agree on how best to progress the matter on a case -by-case basis.  
3.105.   The Competition Ordinance authorizes the Competition Commission to issue a block 
exemption order in respect of a category of agreements which enhance overall economic 
efficiency. The order may be issued either on the Competition Commission's own volition o r upon 
request by an undertaking or an association of undertakings. Detailed information on the 
application and issuance of exemptions is contained in the Guideline on Applications for a Decision 
under Sections 9 and 24 (Exclusions and Exemptions) and Sect ion 15 (Block Exemption Orders ).99 
On 8 August 2017, the Competition Commission issued its first block exemption order since the full 
commencement of the Competition Ordinance. The order provides a block exemption for vessel 
sharing agreements between liner  shipping companies.100  
3.106.   In order to enforce the Competition Ordinance, the Competition Commission has several 
options available. Where they have reasonable cause to believe that a contravention of the First or 
Second Rule has occurred which, in the case of the First Rule, involves serious anti -competitive 
conduct, the Competition Commission may bring proceedings directly before  the Competition 
Tribunal, or issue an "infringement notice" offering not to bring proceedings if the undertaking 
concerned makes a c ommitment to comply with the requirements of the  notice. In cases where 
the contravention does not involve serious anti -competitive conduct under the First Conduct Rule, 
the Competition Commission must , before bringing proceedings, i ssue a "warning notice"  requiring 
                                                
98 The MOU is available at: 
https://www.c ompcomm.hk/en/about/inter_agency/files/MoU_e_final_signed.pdf .  
99 The Guideline is available at: 
https://www.compcomm.hk/en/legislati on_guidance/guidance/applications/files/Guideline_Applications_Eng.pd
f. 
100 The Block Exemption Order is available at: 
https://www.compcomm.hk/en/enforcement/registers/block_exemption/files/Block_Exemption_Order_and_Gui
dance_Note_final.pdf . The Competition Commission's Statement of Reasons for this exemption is available at: 
https://www.compcomm.hk/en/enforcement/registers/block_exemption/files/Statement_of_Reasons_Non_conf
idential_version.pdf .  WT/TPR/S/380 • Hong Kong, China  
 
- 56 - 
 
  the undertaking to put an end to the relevant conduct ; if the undertaking fails to do so, the 
Competition Commission may bring proceedings before  the Competition Tribunal.  
3.107.   The power to adjudicate proceedings and impose penalties  lies with the C ompetition 
Tribunal, a speciali zed superior court established under the Competition Ordinance, which 
commenced operations in December 2015. Where a violation of the Competition Ordinance is 
determined, the Competition Tribunal can impose pecuniary penaltie s of up to 10% of an 
undertaking's annual turnover in HKC, for each year of contravention up to a maximum of 
three  years.  The Competition Tribunal may impose other remedies,  such as ordering an 
undertaking to refrain from engaging in the infringing conduct ; declaring an agreement to be void 
or voidable, or requiring the parties to modify or terminate an agreement . It may also require the 
payment of compensation for damages, and disqualify an individual from serving as a director of 
an undertaking. Persons that have suffered loss or damage as a result of an act determined to be 
a contravention of the Ordinance may also bring lawsuits before the Competition Tribunal to seek 
compensation. The time-limit for follow -on actions is three years. The proceedings of the 
Competition Tribunal are regulated by the Competition Tribunal Rules ( Cap. 619D)  and relevant 
Practice Directions.101  
3.108.   On 23 March 2017 , the Competition Commission filed enforcement proceedings in the 
Competition Tribunal for the first time. The proceedi ngs were against five IT companies over an 
allegation of bid -rigging in a tender in mid -2016 for the supply and installation of an IT server 
system. On 14 August 2017, t he Commission filed a second case before the Competition Tribunal 
alleging that 10 engi neering and construction companies had contravened the First Conduct Rule 
by engaging in market sharing and price fixing in relation to the provision of renovation services at 
a public rental housing estate. At the time of writing this report , none of the cases had yet been 
heard.  
3.109.   In accordance with the Competition Commission's Enforcement Policy, when considering 
whether to initiate an investigation, the Commission give s priority to cases concerning: cartel 
conduct ; agreements that infringe the First Cond uct Rule causing significant harm to competition; 
and abuses of substantial market power.102 Advocacy is another major focus of the work of the 
Competition Commission and, as a result of its efforts in this area , public awareness of the 
Competition Ordinance  has grown,  and a compliance culture is taking shape in HKC . In mid -2015, 
the Competition Commission launched a compliance project of trade and professional associations 
to review the published practices of over 350  trade associations . Associations with high-risk 
practices , such as price restrictions or setting fee scales, were identified and asked to change their 
practices.103  
3.110.   Moreover, a growing number of complaints, queries and referrals ("enforcement contacts") 
about potentially anti -competitive conduc t or other aspects of competition policy have been 
received by the Competition Commission since the Competition Ordinance came into full effect. 
Between 14 December 2015 and 31 March 2017, the Competition Commission received a total of 
2,105 enforcement co ntacts.104 The majority of these were related to the First Conduct Rule, with 
cartel conduct and resale price maintenance being the major concern s. As regards the Second 
Conduct Rule, tying and bundling and exc lusive dealing were the main issues raised  (Table 3.12). 
In 2016 and 2017, around 100  enforcement contacts were assessed further, of which about 18% 
proceeded to in -depth investigation.  
3.111.   The Competition Policy Advisory Group (COMPAG) , which previously handled complaints 
related to competition , now deals with competition -related complaints concern ing only the entities 
that fall outside the scope of the Competition Ordinance. Th is include s complaints against most of 
the statutory bodies, and any other entities , agreement s and conduct which have been exempt ed 
from the application of the competition rules.  
                                                
101 The Competition Tribunal Rules are available at: https://www.elegislation.gov.hk/hk/cap619D!en . 
The Practice Directions are available at: http://legalref.judi ciary.hk/doc/npd/eng/CTPD1.htm  and 
http://legalref.judiciary.hk/doc/npd/eng/CTPD2.htm .  
102 Enforcement Policy paragraph 3.5. See also the Competition Commission's Annual Reports. Available 
at: https://www.compcomm.hk/en/media/reports_publications/annual_reports.html .  
103 Competition Commission Annual Report 2015 -2016, pages 40 and 53.  
104 During the same pe riod, the Communications Authority  received a total of 119 complaints or 
enquiries under the Competition Ordinance, some of which were referred by the Competition Commission.  WT/TPR/S/380 • Hong Kong, China  
 
- 57 - 
 
  Table 3.12 Enforcement contacts by type of alleged conduct, December 2015 -
March  2017  
First Conduct Rule  No. Second Conduct Rule  No. Others  No. 
Cartel conduct  583 Tying and bundling  103 Not related to a Conduct Rulea 806 
Resale price maintenance  323 Exclusive dealing  83   
Exchange of information  96 Refusal to deal  52   
Exclusive dealing  112 Predation  34   
Other  263 Other  175   
a The contact was unrelated to the Competition Ordinance or was about the general state of 
competition, rather than a n allegation of specific anti -competitive conduct by an undertaking.  
Note:  Each case may involve allegations of multiple types of anti -competiti ve conduct.  
Source:  Competition Commission Annual Reports 2015 -2016 and 2016 -2017.  
3.112.   The Competition Commission is an active member of the International Competition 
Network (ICN) , and has participated in the work of various ICN Working Groups , including by 
hosting webinars and co -chairing the Advocacy Working Group. The Competition Commission also 
liaises closely with competition agencies around the world on both a bilateral and a multilateral 
basis. In December 2016, the Competition Commission signed its fi rst international M oU with the 
Canadian Competition Bureau, under which the two agencies agreed to share competition law 
knowledge and enforcement experience, and engage in other forms of technical cooperation 
including staff exchanges.  These international  exchanges have benefitted the Competition 
Commission during its formative years  
3.3.4.2   Price controls  
3.113.   As a general rule, HKC does not apply price controls on goods or services. Nevertheless, 
the fees for pilotage services in ports are set by the Director of the  Marine Department, after 
consultation with the relevant stakeholders.105 In 2016, pilotage dues were revised upwards to 
adjust them to inflation and the market situation.106 The authorities monitor the prices of public 
transport and some energy products.  
3.3.5   State trading, state -owned enterprises, and privatization  
3.114.   HKC has notified the WTO that it does not maintain state -trading enterprises in accordance 
with the working definition of such enterprises in Paragraph 1 of the Understanding on the 
Interpretation of Ar ticle XVII.107  
3.115.   While economic activity in HKC is virtually free from government intervention, the 
authorities play a significant role in fostering certain key economic sectors, in particular transport 
services and infrastructure, through financial participa tion in several corporations (Table 3. 13).108 
Table 3.13 Enterprises in which the Government has financial stakes, 2018  
Company  Government shareholding (%)  
Airport Authority (AA)  100.0  
Hong Kong Cyberport  Development Holdings Limited  100.0  
Hong Kong Science and Technology Parks Corporation (HKSTPC)  100.0  
Kowloon -Canton Railway Corporation (KCRC)  100.0  
IEC Holdings Ltd.  88.2 
MTR Corporation L imited (MTRCL)  75.2 
Hong Kong International Theme Parks L imited (HKITP)  52.9 
West Rail Property Development Limited (WRPDL)  49.0 
New Hong Kong Tunnel Company Ltd.  7.5 
Hong Kong Exchanges and Clearing Ltd. (HKEx)  6.0 
Source:  Information provided by the authorities  as at 4 April 2018 . 
                                                
105 Section 22 of the Pilotage Ordinance (Chapter 84).  
106 Pilotage (Dues) (Amendment ) Order 2016. Viewed at: https://www.legco.gov.hk/yr15 -
16/english/subleg/brief/2016ln088_brf.pdf .  
107 WTO document G/STR/N/17/HKG, 19 January 2018.  
108 The Treasury online information. Viewed at: 
http://www.try.gov.hk/internet/eharch_annu_statend17.html#p . WT/TPR/S/380 • Hong Kong, China  
 
- 58 - 
 
  3.3.6   Government procurement  
3.116.   According to the policy statement in the Financial Services and the Treasury Bureau (FSTB) 
website, HKC maintains an open and non -discriminatory government procurement regime. The 
authorities are committed to providing equal opportunities for domestic and foreign suppliers and 
service providers to participate or compete in HKC's government procurement.109 The basic 
principles underpinning government procurement are public accountability, value for money, 
transparency, and open and fair competition.  
3.117.   HKC is a party to the WTO Agreement on Government Procurement (GPA) and ratified the 
Protocol amending the Agreement in 2012. Under the revised GPA, HKC is committed to allowing 
suppliers from other GPA parties to participate in procurements above specified thresho lds by its 
62 government agencies and five other entities, with a small number of exclusions.110 HKC has 
also undertaken commitments to open its procurement market to suppliers and service providers 
from New Zealand and Chile  under its respective trade agree ments with these countries.111 HKC 
has endorsed APEC's Transparency Standards on Government Procurement.  
3.118.   The share of government procurement in the HKC economy is small. During the 
period  2014-17, the average annual value of government procurement contracts  (including goods, 
services and construction works) above specified thresholds was HK$113.87 billion, representing 
on average 4.62 % of GDP (Table 3. 14). In 2017, over 80 % of the goods purchased was 
imported.112  
3.119.   During the review period, HKC introduced some changes to its government  procurement 
regime, in order to bring regulations in line with the revised GPA, which came into force on 
6 April 2014, as well as to simplify tender procedures and documentation, foster the participation 
of SMEs, and promote green  procurement. HKC has regularly submitted notifications under the 
revised GPA .113 
3.120.   The procurement process continues to be  generally governed by the Stores and 
Procurement Regulations  (SPRs)114, supplemented by relevant financial c irculars  and memoranda 
from the FSTB . The SPRs apply  to all procurement of goods (except land and buildings) and 
services (including construction and engineering) by most government agencies.115  
3.121.   For commonly used goods, HKC uses a centralized procurement approach. The 
Government Logistics Department (GLD) serves as the central procurement office in this regard . It 
purchases a wide variety of goods in bulk used by most government entities, and provides them 
with expertise and services throughout the different phases of the procurement process, including 
contract administration. It also acts as the procurement agent for specific products and equipment 
required by government departments and some non-government organi zations.  
                                                
109 FSTB online information. Viewed at: https://www.fstb.gov.hk/tb/en/guide -to-
procurement.htm#topic -2.  
110 The 62 government agencies represent essentially the structure of the Government. The five entities 
include the Airport Authority, the H ospital Authority, the Housing Authority and Housing Department, the 
Kowloon Canton Railway Corporation and the MTR Corporation Limited. For procurements of goods and general 
services, the threshold is SDR 130,000 for government agencies and SDR 400,000  for other entities. For 
construction works , the threshold is SDR 5 million for  all types of procuring entities . Details of HKC's market 
access coverage and exclusions are contained in WTO document GPA/113, 2 April 2012, pp. 255 -264. 
Subsequent modificatio ns to HKC's schedule are contained in WTO documents WT/Let/946, 18 June 2014; and 
WT/Let/1137, 17 March 2016.  
111 HK-New Zealand Closer Economic Partnership Agreement (HK -NZ CEPA). Viewed at: 
https://www.tid.gov.hk/english/trade_relations/hknzcep/files/HKNZCEP121_HKEntities.pdf ; and HK -Chile FTA. 
Viewed at: https://www. tid.gov.hk/english/trade_relations/hkclfta/files/Annex9.1.pdf .  
112 Data provided by the authorities.  
113 HKC's notifications under the revised GPA include: local currency equivalent of thresholds 
(GPA/W/336, 9 December 2015;  and GPA/THR/HKG/1, 20  December 201 7) and procurement statistics 
(GPA/130/Add.2, 8  October 2015; GPA/137/Add.3, 26 August 2016;  GPA/142/Add.6, 31  August 2017; and 
GPA/142/Add.6/Corr.1, 4  September 2017 ). 
114 The SPRs are available at: http://www.fstb.gov.hk/tb/en/docs/espr_chapter3.pdf .  
115 A few government agencies ( namely, the HKMA, the Independent Police Complaints Council ( IPCC) 
and the Ombudsman 's Office) in Annex 1 of HKC's schedule, and all five entities in Annex 3, have their own 
procurement rules . WT/TPR/S/380 • Hong Kong, China  
 
- 59 - 
 
  Table 3.14 Government procurement, 2014 -17  
(HK$ million and %)  
 Central government 
entitiesa Other 
entitiesb Totalc Ratio to 
GDP 
Total 2014  37,443.46  44,912.04  82,355.50  3.67 
Goods  2,852.52  11,468.48  14,321.00   
Services (other than construction)  4,052.13  2,966.78  7,018.91   
Construction services  30,538.81  30,476.78  61,015.59   
Total 2015  63,973.51  58,717.81  122,691.32  5.11 
Goods  4,127.12  14,979.98  19,107.10   
Services (other than construction)  6,866.13  5,061.19  11,927.32   
Construction services  52,980.26  38,676.64  91,656.90   
Total 2016  35,976.58  81,349.93  117,326.51  4.71 
Goods  2,544.02  9,004.41  11,548.43   
Services (other than construction)  6,253.44  7,035.05  13,288.49   
Construction services  27,179.12  65,310.47  92,489.59   
Total 2017  80,627.52  52, 486.05  133,113.57  5.00 
Goods  4,069.78  12,581.52  16,651.30   
Services (other than construction)  6,054.90  6,441.06  12,495.96   
Construction services  70,502.84  33,463.47  103,966.31   
a For central government entities, s tatistics include only procurement of goods and services of a value 
exceeding HK$1.43 million, and construction services of a value exceeding HK$4 million for 2014 -16 
and HK$7 million for 2017 .  
b For other entities, statistics include only procurement of goods and services of a value excee ding 
SDR 0.4 million ( approx imately HK$4. 74 million in 20 14-15, and HK$4. 565 million in 20 16-17), and 
construction services of a value exceeding SDR  5 million ( approx imately  HK$59.26  million in 
2014-15, and HK$ 57.06 million in 20 16-17).  
c There may be a slight discrepancy between the sum of individual items and the totals due to 
rounding.  
Source:  Information provided by the authorities.  
3.122.   Construction services are procured by individual work departments that operate under the 
supervision of the Development Bureau  (DEVB) . The D EVB provides them with general guidance 
and technical advice on tendering procedures and contract administration, and keeps a register of 
approved works contractors and a performance reporting system.  
3.123.   Under the SPRs, four types of proc uring methods are allowed, namely: open tendering; 
selective tendering; single and restricted tendering; and pre -qualified tendering. Procurement 
contracts of a value above HK$1.43 million for goods and general services, and above HK$7 million 
for construc tion and engineering services, are normally subject to open tendering, whereby all 
interested suppliers are invited to participate.116 Tender notices must be published in the 
Government Gazette  and, where the procurement is covered by the GPA, this must be s pecified in 
the tender notice. In addition, the p rocuring entities may publish tender notices on the Internet, or 
in local and/or international press and journals, if necessary. For works contracts not exceeding 
HK$55 million and procurements not covered b y the GPA, it suffice s to publish tender notices on 
the Internet. Tender notices must include a brief description of the conditions of participation , and 
the requirements for specific documents or certifications.  Tenderers are normally given a minimum 
of three weeks to prepare and submit their bids . For procurements covered by the GPA, at least 
40 days must be allowed for receipt of tenders.  
3.124.   Selective tendering takes place when suppliers on a relevant approved list are invited to 
submit tenders. This method  may be used where there is a frequent need to invite tenders for 
certain goods or services, but not all suppliers in the market are capable of providing the required 
goods or services. Hence, the procuring entities may establish lists of qualified supplie rs, which 
must be approved by the Permanent Secretary for Financial Services and the Treasury (Treasury)  
(for goods and general services) or by the Permanent Secretary for Development (for works and 
related materials). The qualification criteria and assess ment method must not discriminate among 
overseas suppliers, or between domestic and overseas suppliers. For procurements covered by the 
GPA, tenders from non -qualified suppliers will be considered unless there are exceptional 
                                                
116 The value for procuring goods and services (other than construction and engineering services)  that is 
subject to open tendering is within the GPA threshold (i.e. SDR 130,000 = HK$1.48 million approximately by 
end-2017) , while the value for procuring construction and engineering services is far below the GPA threshold 
(i.e. SDR 5,000,000 = HK$57.06 million approximately by end -2017) . WT/TPR/S/380 • Hong Kong, China  
 
- 60 - 
 
  circumstances; and the qualifi cation criteria should be limited to those essential to ensuring that 
the suppliers have the legal and financial capacities and the commercial and technical abilities to 
undertake the relevant procurements.117 A supplier may not be denied qualification for the reason 
that it has not previously been awarded contracts by a GPA -covered  entity .118 Notices of tender 
invitations must be published in the Government Gazette, on the Internet, and/or sent by letter to 
all qualified suppliers. F or procurements covered by the GPA, procuring entities  shall notify and 
invite the suppliers  on the approved lists of qualified suppliers to submit tenders.119 Notices 
inviting interested suppliers to apply for admission to the lists are  published continuously on the 
websites of the relevant procuring entities.  New applications for admission to the pre -qualification 
lists are allowed at any time . A supplier shall not be excluded from participation in a tender 
exercise simply on the ground s that there is no sufficient time to examine its request for admission 
to the approved list.120  
3.125.   Single or restricted tendering is only allowed under exceptional circumstances where open 
and competitive tendering would not be an effective means of obtaining  the required goods or 
services. For example, in cases of extreme urgency; in order to protect IPRs; where the required 
procurement is a work of art; where there is an absence of competition for technical reasons; or 
where services are to be provided by ut ility companies. When this method is used, tenders are 
invited from only one or a limited number of suppliers, prior approval of the Permanent Secretary 
for Financial Services and the Treasury (Treasury)  of the FSTB or the Director of the GLD. Notices 
of tender invitation are to be sent by letter to the tenderers, without stating that they are invited 
on a single or restricted basis.  
3.126.   Pre-qualified tendering is used when it is necessary to pre -qualify a list of tenderers that 
are financially and technically capable of undertaking a particular project or supplying a particular 
product. These include : projects that require pre -testing of equipment to determine its suitability; 
projects of an extremely complex nature, high value or subject to very rigid completi on 
programmes; projects that call for a high level of co -ordination, technical expertise, or a non -
standard form of contract; and products which are critical to the procuring entities. Pre -
qualification is conducted on a project/product basis and must be a pproved by Permanent 
Secretary for Financial Services and the Treasury (Treasury)  of the FSTB, with the advice of the 
Central Tender Board. Invitations for pre -qualification are published in the Government Gazette. If 
necessary, the invitation may also be published on the Internet, in the local press, and selected 
overseas journals for the particular trade or product.  Notices of tender invitation are sent by letter 
to the pre -qualified tenderers. For GPA -covered procurement, no less than 25 days must be 
allowed for submitting applications to be pre -qualified.  
3.127.   Under the SPRs, procuring entities must normally use pre -established contract forms when 
inviting tenders. The tender documents must contain a complete description of essential 
information , including the delivery  dates , any limitation on the means by which tenders may be 
submitted , and the authentication and encryption requirements where the tenders may be 
submitted by electronic means .121 Tender specifications must be drawn up in a manner tha t meets 
the principles of maintaining open and fair competition, and shall not be prepared or  applied with 
the purpose or the effect of creating unnecessary obstacles to trade or competition amongst 
potential tenderers . Specifications must be based on func tional and performance requirements, 
and, where practicable, on international standards. They shall not refer to a particular trademark 
or trade name, patent, copyright, design, type, specific origin, producer or supplier.  
3.128.   HKC uses Standing Offer Agreemen ts (SOAs), in which the terms governing contracts to be 
awarded during a given period are established. SOAs are used mainly in the procurement of IT -
related products and services, as well as those stores which are commonly required by many 
procuring entiti es. When the provision of such products/services is required, the procuring entities 
invite the selected SOA contractors to provide the requisite quantities of products/services based 
on the selection criteria set out in the terms of the SOA contracts. SOA  contracts are normally 
invited through open tender , and the award of contracts to selected contractors is basically on a 
competitive basis.  
                                                
117 SPR 320 (c); included to ensure compliance with the revised GPA.  
118 SPR 320 (c); included to ensure compliance with the revised GPA.  
119 SPR 320 (a); included to ensure compliance with the revised GPA.  
120 SPR 320 (a); included to ensure compliance with the revised GPA.  
121 SPR 345 (c) (i); included to ensure compliance with th e revised GPA.  WT/TPR/S/380 • Hong Kong, China  
 
- 61 - 
 
  3.129.   During 2014 -17, a total of 4,115 government procurement contracts (above the thresholds 
specified in the SPR s) were awarded, of which 62.8% were through open tender procedures, 
11.3% through selective tendering, 20.5% through restricted or single tendering, and 5.4% 
through pre -qualified tendering (Table 3.15 ).  
Table 3.15 Government procurement contracts awarded by type of procedure, 2014 -17  
 2014  2015  2016  2017  
Central government entitiesa     
Contracts awarded  475 559 502 493 
Open tender  349 424 414 397 
Selective tender  
Of which pre -qualified tender  95 
4 101 
3 65 
0 71 
2 
Restricted tender (including single tender)  31 34 23 25 
Other entitiesb     
Contracts awarded  520 485 512 569 
Open tender  241 204 273 281 
Selective tender  
Of which pre -qualified tender  103 
57 106 
75 72 
37 77 
46 
Restricted tender (including single tender)  176 175 167 211 
Complaints by suppliers, contractors or consulting firmsc 5 4 5 3 
a The statistics cover only procurement of goods and services of a value exceeding HK$1.43  million, 
and construction services of a value exceeding  HK$4 million in 2014 -16 and HK$7 million in 2017 . 
b The statistics cover only procurement of goods and services of a value exceeding SDR 0.4 million 
(approximately HK$4.74 million in 2014 -15, and H K$4.57 million in 2016 -17), and construction 
services of a value exceeding SDR 5 million ( approximately HK$59.26 million in 2014 -2015, and 
HK$57.06 million in 2016 -17). 
c Complaints submitted against Annex 1 and Annex 3 entities to the Central Tender Board, the GLD 
Tender Board or the Independent Review Body on Bid Challenges.  
Source:  Information provided by the authorities.  
3.130.   Under the SPRs, procuring entities must normally use pre -established contract forms when 
inviting tenders. The tender documents must contain  a complete description of essential 
information , including the delivery dates, any limitation on the means by which tenders may be 
submitted, and the authentication and encryption requirements where the tenders may be 
submitted by electronic means.122 Tende r specifications must be drawn up in a manner that meets 
the principles of maintaining open and fair competition, and shall not be prepared or  applied with 
the purpose or the effect of creating unnecessary obstacles to trade or competition amongst 
potentia l tenderers . Specifications must be based on functional and performance requirements, 
and, where practicable, on international standards. They shall not refer to a particular trademark 
or trade name, patent, copyright, design, type, specific origin, produc er or supplier.  
3.131.   Tender evaluation is done against the technical specifications, essential requirements, and 
terms and conditions laid down in the tender notices/documents. Two methods are eligible in 
tender evaluation: the lowest -price method, and the ove rall marking method. Under  normal 
circumstances, the lowest -price method is used, whereby tenders are ranked according to their 
price and the contract is awarded to the tenderer that is fully capable of undertaking the contract 
at the lowest price. The ove rall marking method is used where the quality of the goods or services 
is of such importance that there is a need for a separate assessment of the technical aspects of 
the tender. Under this method, the contract is awarded to the tenderer that meets all th e essential 
requirements, attains the passing marks (if any), and obtains the highest overall score (i.e. the 
sum of the price and technical scores). The criteria for marking and the calculation formula are 
contained in the Guidelines for Adopting a Markin g Scheme for Tender Evaluation (Appendix III (G) 
of the SPR). The procuring entity submits its recommendation regarding the most advantageous 
tender to the relevant tender board or committee for approval.  
3.132.   Several t ender boards/committees are established for considering and making decisions on 
tenders. The Central Tender Board considers high value tenders, i.e. above HK$30 million for 
goods and general services, and above HK$100 million for construction services. The GLD Tender 
Board is in char ge of tenders (except for construction works) with a value not exceeding 
HK$30 million.123 The Public Works Tender Board is responsible for construction and related 
                                                
122 SPR 345 (c) (i); included to ensure compliance with the revised GPA.  
123 Increased from HK$15 million as from 1 July 2017.  WT/TPR/S/380 • Hong Kong, China  
 
- 62 - 
 
  contracts not exceeding HK$ 100 million.124 The tender committees of government departments 
and bureau x are responsible for their own tenders  (other than construction and engineering 
services), with a value not exceeding HK$5 million.  
3.133.   The result of the tender, including the name of the successful bidder, the accepted tender 
sum and the month  of the award of the contract, is published on the GLD website or that of the 
relevant procuring entity. Unsuccessful bidders are informed of the outcome of the bid evaluation 
and the reasons why their tenders were unsuccessful.  
3.134.   HKC maintains several review mecha nisms to ensure fairness and due process in 
government procurement. The procedures to handle general procurement complaints are 
established in the SPRs. An aggrieved supplier or contractor may, at any time, lodge a complaint 
about the process or outcome of  a tender, directly with the procurement entity or the relevant 
tender board. The resolution of a complaint may lead to a change in the procurement policy and/or 
the application of sanctions on the procurement officer.  
3.135.   For procurements covered by the GPA, HKC has set up a dedicated, Independent Review 
Body on Bid Challenges . The procedures for handling bid challenges are set out in the Rules of 
Operation of the Review Body.125 A tenderer may lodge a challenge to the Review Body within 
10 working days after he/she knew , or reasonably should have known , the basis of the challenge.  
A challenge shall not be considered if such a period exceeds 30 working days . All complaints must 
be handled in an impartial and timely manner, and an early and substantial reply must be given to 
the complainant.  The Review Body is also in a position to receive and review procurement 
challenges arising from HKC's FTAs with New Zealand and Chile. Where a breach is found, the 
Review Body may recommend a remedy in the form of corrective measures or compensation, 
which is limited to the cost s for tender preparation or the costs for the challenge, or both.  Other  
control mechanisms includ e the Audit Commission, the Office of the Ombudsman, the Legislative 
Council, and the Independent Commiss ion against Corruption , which deals with complaints 
regarding alleged corruption.   
3.136.   Between 2014 and 2017, 17 procurement -related complaints were submitted to the 
relevant tender boards or the Review Body on Bid Challenges ( Table 3.15 above ). The authoritie s 
have indicated that all complaints had been withdrawn or had not been successful.  
3.137.   During the review period, in order to facilitate the participation of suppliers, especially 
SMEs, in government procurement, HKC has put in place measures to streamline th e financial 
vetting requirements in tendering. The measures include: (1) for non-works procurement, financial 
vetting is conducted only for the successful tenderer, unless there is a need to do so during the 
tender evaluation process; (2) t he threshold for conducting financial vetting for procurements of 
goods and services has b een increased from HK$5 million  to HK$15 million ; and (3) t he amount of 
contract deposit required for goods  and service s varies depending on the financial strength of  the 
successful tenderer and the risk  associated with the contract.126 In addition, in order to facilitate 
and speed up procurement procedures, the approval process has been streamlined, and procuring 
entities have been empowered to approve procurements with  a value not exceeding HK$5 million. 
Also, the ceilings of procurement values that require approval by the relevant tender boards have 
been increased127, as well as the ceilings for allowing the use of quotation procedures in the case 
of low -value procuremen ts of works and engineering services.128  
3.138.   The GLD manages the e -Tender Box (ETB) system, which is an electronic platform for the 
procurement of goods and services (excluding works) that go through tendering procedures and 
are processed by the GLD. GLD suppli ers, GLD subscribers and applicants for inclusion in the GLD 
Suppliers Lists can make use of the ETB to view tender notices, download tender documents, 
submit tender offers and make enquires by logging into the Procurement and Contract 
                                                
124 Increased from HK$30 million as from 27 May 2016.  
125 The Rules are available at: 
https://www.tid.gov.hk/english/aboutus/advcommittee/files/reviewbody_rules.pdf .  
126 SPR 362.  
127 From HK$15 million to HK$30 million for the GLD Tender Board, and from HK$30 million to 
HK$100  million for the Public Works Tender Board. SPR 116.  
128 From HK$4 million to HK$7 million.  WT/TPR/S/380 • Hong Kong, China  
 
- 63 - 
 
  Management System (P CMS).129 In 2016, the GLD awarded 149 contracts, accounting for 35% of 
the total number of goods and general services contracts awarded by government entities.130  
3.139.   Since 2000, HKC has introduced green procurement rules in the SPRs that require 
departments and bureaux to take environmental considerations into account in setting out the 
tender specifications , and to purchase green products  and services  as far as possible and where 
economically rational . These considerations include recyclability, energy efficienc y, clean 
technology and/or clean fuels, water consumption, emissions of irritating or toxic substances, and 
production of toxic substances upon disposal. The Environmental Protection Department (EPD) has 
further developed green specifications and guideline s for 150 items of goods and services 
commonly used by departments and bureaux with reference to the standards and practices 
generally adopted in the market to practise green procurement. The g reen specifications are 
mandatory when there are adequate model s and sufficient supplies of such goods in the market. 
For supplies with uncertain market availability, the green specifications are deemed as desirable. 
For tenders with  identical offers in all respects, the one which meet s the desirable green 
specifications will be given preference.  Since July 2015, procuring entities are required to take the 
following measures to foster green procurement: adopt as far as practicable the green 
specifications issued by the EPD in their purch ases; make an annual report on green 
procurements; and incorporate green guidelines  into new cleansing contracts  and minimum 
emission standards  into tender requirements for new vehi cle hiring services contracts.131  
3.3.7   Intellectual property rights (IPRs)  
3.3.7.1   Legal and institutional frameworks  
3.140.   Under the Basic Law, the Government is responsible for developing its own intellectual 
property (IP) policy. Accordingly, HKC has set up a sound legal framework for the protection of 
IPRs, covering trademarks, copyright, patent s, industrial designs, layout -designs of integrated 
circuits, trade secrets and undisclosed information, plant varieties, and geographical indications 
(Table 3.16). The Government also recognizes the major international IP conventions132, and is a 
signatory of the WTO Agreement on Trade -Related Intellectual Property Rights (TRIPS).  
3.141.   During the period under review, the Government enacted the Patents (Amendment) 
Ordinance 2016 , which provides the legal foundation for introducing an "original grant " patent 
(OGP)  system into HKC , which  will become effective in due course ( Section 3.3.7.3 ). Apart from 
this, HKC's IP legislation remained largely unchanged since 2014; an attempt to update the 
copyright law through a bill introduced in 2014 did not bear fruit.  The lat est HKC notifications to 
the WTO regarding IP legislation mainly refer to amendments to update the membership coverage 
of international conventions.133 
3.142.   At the institutional level, the main bodies in charge of the protection and enforcement of 
IPRs are the In tellectual Property Department (IPD) , the C&ED  and the Agriculture, Fisheries and 
Conservation Department  (AFCD) . The IPD is responsible for advising the Secretary for Commerce 
and Economic Development on IP policy and legislation; operating HKC registries  for patents, 
designs, trademarks  (including GIs as certification or collective trademarks) , and copyright 
licensing bodies134; and promoting public awareness of the importance of IPR protection, mainly 
through educational programmes and publicity campaigns.  The IPD is also HKC's contact point for 
                                                
129 For further details, see: http://www.gldetb.gov.hk . 
130 Information provided by the authorities.  
131 Environment Bureau Circular Memoran dum No. 6/2015.  
132 The main international IP conventions applied to HKC by the People's Republic of China are the Paris 
Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and 
Artistic Works, the Univers al Copyright Convention, the Nice Agreement concerning the International 
Classification of Goods and Services for the purposes of the Registration of Marks, the Geneva Convention for 
the Protection of Producers of Phonograms Against Unauthorized Duplicatio n of Their Phonograms, the Patent 
Cooperation Treaty, the Convention establishing the World Intellectual Property Organization (WIPO), the 
WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.  
133 The latest notifications are contained in WTO documents IP/N/1/HKG/29; IP/N/1/HKG/P/9; 
IP/N/1/HKG/30; IP/N/1/HKG/D/4; IP/N/1/HKG/31; IP/N/1/HKG/T/7; IP/N/1/HKG/32; and IP/N/1/HKG/L/5, all 
dated 18 April 2017 . 
134 Trademarks, patents, designs, and domain names must be registered, whereas copyright and layout -
designs (topography) of integrated circuits do not require registration  in order to be protected .  WT/TPR/S/380 • Hong Kong, China  
 
- 64 - 
 
  the purposes of the TRIPs Agreement . The AFCD is the competent authority in matters pertaining 
to the granting of plant variety rights . 
Table 3.16 Framework protecting IPRs, 2018  
IPRs  Eligibility of protection  Length of protection  
Patents  
Standard patent  Inventions that are new, involve an 
inventive step , and are susceptible to 
industrial application. Grant of a standard 
patent is based on the reregistration of the 
corresponding patent already granted by 
any of the following 3 designated patent 
offices outside HKC: the State Intellectual 
Property Office of Mainland China; the 
European Patent Office (designating the 
United Kingdom ); or the United  Kingdom 
Patent Office  Renewable up to a 
maximum of 20 years from 
the filing date  of the 
corresponding patent 
application filed with the 
designated patent office   
Short -term patent  Inventions that are new, involve an 
inventive step and  are susceptible to 
industrial application  Renewable up to a 
maximum of 8 years from 
the filing date  
Trademarks  
Registered trademarks  Marks that are capable of distinguishing  the 
goods or services of one undertaking from 
those of other undertakings; there are 
absolute and relative grounds for the 
refusal of  a registration  10 years from the filing 
date of the application for 
registration; may be 
renewed indefinitely for 
period s of 10 years  
Industrial designs  
Registered industrial designs  Designs that are new and applied to an 
article by any industrial process and the 
appearance of the article is material  Renewable for periods of 
5 years up to a maximum 
of 25 years  from th e filing 
date  
Copyright  
Unregistered industrial designs  Protected under the Copyright Ordinance, 
for articles produced from the original 
design drawing. Protection is automatic  15 years from the end of 
the year in which the article 
was first market ed  
Copyright in original literary 
(including computer programs), 
dramatic, musical, and artistic 
works; sound recordings, films, 
broadcasts, cable programmes; 
typographical arrangement s of 
published editions of literary, 
dramatic or musical works; 
performe rs, and persons that 
have exclusive recording contracts 
with performers  No formalities are required for copyright 
protection for a work in HKC. Works of 
authors from anywhere in the world, or 
works first published anywhere in the world 
(including those ma de available to the 
public on the Internet), also qualify  Protection usually extends 
for 50 years from the end 
of the year after the 
creator dies or in which the 
work was made or 
published. Exceptions:  
(1) Protection for the 
typographical arrangement 
of published editions of 
literary, dramatic or 
musical works is for 25 
years from the end of the 
year in which the edition 
was first published ; and   
(2) government  copyright 
is protected for 125 years 
from the end of the year in 
which the work was made  
Other  IPRs   
Geographical indications (GIs)  Same as for registered trademarks but only 
registrable as collective or certification 
trademarks. The use of a false GI applied 
to goods in a fashion calculated to mislead 
consumers may be a criminal offence under 
the Trade Descriptions Ordinance  
 
GIs may also be protected by the common 
law passing -off action (whether or not they 
are registered) if the owner can prove:  
(1) the goodwill or reputation attached to 
the relevant goods in the mind of the 
purchasing public by association with the 
GI; 
(2) misrepresentation by the defendant Same as for registered 
trademarks  
 
 
 
 
 
Protected by passing -off 
action as long as the 
relevant conditions are 
fulfilled  WT/TPR/S/380 • Hong Kong, China  
 
- 65 - 
 
  IPRs  Eligibility of protection  Length of protection  
that is likely to lead the public into 
believing that the goods offered by him are 
those o f the GI owner; and  
(3) the owner suffers damage by reason of 
the erroneous belief engendered by the 
defendant 's misrepresentation  
Plant varieties  Proprietary rights of plant breeders, or the 
owners of the variety, over cultivated plant 
varieties they have bred or discovered and 
developed  25 years for trees and 
vines, and 20  years in 
other cases  
Layout -designs (topographies) 
of integrated circuits  Layout -designs (topographies) that are 
original  Where the layout -design 
has been commercially 
exploited with the owner's 
consent, 10 years after the 
end of the year in which it 
was first exploited. 
Otherwise, 15 years after 
the end of the year in 
which it was created  
Trade secrets and undisclosed 
information  Information disclosed to a person that is 
under a duty to keep it confidential, 
including confidential information in a 
commercial setting, such as formulae, 
methods, technologies, designs, product 
specifications, business plans , and client 
lists  Until the information 
becomes public knowledge  
Source:  Information provided by the authorities . 
3.143.   The C&ED is responsible for enforcing the criminal aspects of IPR infringement, by 
investigating and prosecuting copyright and trademark offences, and false trade descriptions. The 
C&ED has investigative and seizure powers, and cooperates with overseas enforcement authorities 
as well as the private sector  (Section 3.3.7. 7).  
3.3.7.2   Copyright  
3.144.   The protection of copyright is regulated by the Copyright Ordinance (Cap. 528), which was 
substantially amended in 2007 and 2009 (Table A3.4). Two bills submitted by the Government in 
2011 and 2014 to amend the Copyright Ordi nance , with the aim of enhancing copyright protection 
in the digital environment, lapsed without being approved by the Legislative Council. Among the 
main proposed amendments were the recognition of technology -neutral exclusive rights for 
copyright owners to communicate their works through any mode of electronic transmission, the 
introduction of criminal liability for unauthorized electronic communication of copyright works, a 
safe harbour for online service providers, and the expansion of the list of excep tions or "permitted 
acts" (i.e., parody, satire, commentary or quotation).  
3.145.   The authorities have indicated that they remain committed to reviewing their copyright 
regime, with the purpose of meeting HKC's economic and social development needs and catching 
up with technological advances and international trends. The Government conducted a public 
consultation in 2017 to review the provisions of the Copyright Ordinance , which might require 
amendments in order to be aligned with the Marrakesh Treaty to Facilita te Access to Published 
Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled .135 Taking into 
account the results of the consultation, the Government plans to introduce a bill into the 
Legislative Council in the 2018-19 Legislative Se ssion to amend the Copyright Ordinance so as to 
align the relevant provisions with the Marrakesh Treaty.136 
                                                
135 For details, see: Consultation Paper on Review of Copyright Exceptions for Persons with a Print 
Disability . Viewed at: http://www.ipd.gov.hk/eng/pub_press/press_releases/Consultation_Paper_e.pdf . 
136 See: Outcome of the Consultation and the Government 's proposed way forward. Viewed at: 
https://www.ipd.gov.hk/eng/intellectual_property/copyright/Legislative_Council_Panel_on_Commerce_and_In
dustry_e.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 66 - 
 
  3.3.7.3   Patents  
3.146.   The patent regime is principally governed by the Patents Ordinance (Cap. 514). Certain 
technical amendments to the Ordinance were brought int o force during the review period (in 2014, 
2015 and 2017)  (Table A3.4).  One of the main change s since 2014 is the enactment of the Patents 
(Amendment) Ordinance  2016 (see below ). 
3.147.   HKC grants  two types of patents: standards patents and short -term patents  (unchanged 
since its previous Review) . Standard patents are based on a re -registration system, which means 
that, for a patent to be granted in HKC , a corresponding patent must have been registered and 
granted by any of the three "designated patent offices", i.e. the State Intellectual Property Office 
(SIPO) of Mainland China, the United Kingdom Patent Office, or the European Patent Office (EPO) 
(designating the U nited Kingdom ).137 Short -term patents are granted to protect inventions with a 
relatively short commercial life.138 Both standard and short -term patents are enforceable in HKC 
courts. Patent owners may take civil action to prevent infringement of their rights and seek 
remedies such as injunctions, orders for delivery, damages, or an account of profits made by the 
infringing party.  
3.148.   In 2011, the Government launched a review of the local patent system, with the aim of 
modernizing it and fostering the  development of HKC as a regional innovation and technology hub. 
Following its review, the Government announced in February 2013 its decision to reform the 
patent regime by, inter alia , introducing an original grant patent (OGP) system – whereby 
standard p atent applicants will be able to file their applications directly in HKC without having to 
first apply for a corresponding patent overseas -, and refining the existing short -term patent 
system. To take the reform forward, the Government introduced a bill i nto the Legislative Council, 
which was subsequently enacted as the Patents (Amendment)  Ordinance 2016 in June 2016 . The 
Ordinance lays out the basic legal framework of the future patent regime.139 The statutory 
amendments , which are expected to enter into fo rce in 2019 at the earliest, are the following : 
• Introducing an OGP system as a n alternative filing route for seeking standard patent 
protection in HKC, to be run in parallel with the existing "re-registration " system .140 
• Refining the existing short -term pate nt system by, inter alia , introducing post -grant 
substantive examination in relation to enforcement proceedings, refining the provisions 
on groundless threats of infringement proceedings, and allowing a second independent 
claim in a short -term patent application .  
• Introducing an interim regulat ion of  local patent practitioners pending the establishment 
of a full -fledged regulatory regime , by prohibiting the use of certain titles or descriptions  
that the authorities consider misleading .141 
                                                
137 An ap plication for a standard patent may also be based on an international application under the 
Patent Cooperation Treaty , which  has been published and entered its national phase in one of the 
three  designated patent offices. Standard patents are granted subje ct to formality examination; no substantive 
examination is needed . 
138 Applications may be filed directly with HKC's Patents Registry , based on a search report from an 
international searching authority or one of the three designated patent offices. They may also be based on an 
international patent application for a utility model, designating Mainland China under the PCT, which has 
entered its national phase in Mainland  China . Short -term patent applications are also only subject to formality 
examination.   
139 The text of the Patents (Amendment) Ordinance 2016 is available at : 
http://www.gld.gov.hk/egazette/pdf/20162023/es12016202317.pdf .  
140 Standard patent applications filed under the  OGP system will be subject to substantive examination 
in addition to formality examination. Pending the creation of an indigenous capacity of HKC 's Patents Registry 
to conduct  substantive examination, HKC will enlist the technical assistance of SIPO in co nducting substantive 
examination of OGP applications in the early years of the OGP system.  
141 These prohibited titles and descriptions include "registered patent attorney ", "registered patent 
agent ", "certified patent attorney " and "certified patent agent ", as well as those that would reasonably cause 
anyone to believe that a person using such titles or descriptions holds a qualification specifically granted for 
approving the person to provide patent agency services in HKC , and that such qualification is end orsed by the 
Government or recognized by law. At the same time, the amendments provide for appropriate exemptions to 
cater for the use of certain legitimate and reasonable titles or descriptions in HKC, notably relating to a 
person 's qualification for the lawful provision of patent agency services outside HKC.  WT/TPR/S/380 • Hong Kong, China  
 
- 67 - 
 
  3.149.   As part of the preparatory measures to establish the OGP system, HKC signed 
two co-operation arrangements with Mainland China's SIPO in 2013 and 2017 , respectively . Under 
these arrangements, SIPO will provide technical assistance to HKC's Patent Registry in conducting 
the substantive examination of patent applications , and staff training.  
3.150.   Under the Patents Ordinance, any person may apply for a compulsory licen ce for a 
standard patent . Licences ma y be allowed on limited grounds, including where the patented 
invention is capable of being commercially worked in HKC  but is either not being so worked or is 
not being worked to the fullest extent that is reasonably practicable, or  where the demand for a 
patented product is not being met on reasonable terms. Government use of a p atented invention is 
allowed during period s of extreme urgency declared by the Chief Executive, and the proprietor 
must be compensated  for loss of profit . Effective in 2008, HKC amended its legislation to 
implement the WTO "Paragraph 6 system" , enabling it  to grant compulsory licences for exports of 
pharmaceutical products to WTO Members with no or insufficient capacity to manufacture the 
patented products.  Compulsory licen ces to import pharmaceutical products may only be granted 
during a period of extreme urgency. These provisions will remain after the OGP system is put in 
place. No compulsory licen ces have ever been issued.  
3.151.   The Pharmacy and Poisons Board, established under the Pharmacy and Poisons Ord inance 
(Cap. 138), is responsible for the registration of pharmaceutical products. A newly registered 
pharmaceutical product , whose application for registration relies on undisclosed test data or other 
data submitted to the Pharmacy and Poisons Board , will be granted an eight-year data exclusivity  
protection . This means that, if the originator product has been registered in HKC by the first 
applicant for less than eight years, other applicants will not be allowed to rely on, or refer to, the 
undisclosed tes t data or other data submitted  in relation to that product . As from March 2016, the 
Pharmacy and Poisons Board includes a condition on the pharmaceutical product registration 
certificate , stipulating that the registered pharmaceutical product shall not inf ringe the patent 
rights of other registered pharmaceutical products in HKC. Otherwise, the Board may consider 
de-registering the product  in question . As regards agricultural chemical products, undisclosed test 
or other data submitted to the AFCD for the pu rpose of applying for the registration of a pesticide 
is kept confidential , and is not permitted to be used in other registration applications unless with 
the written authorization of the supplier of the original data.142 
3.3.7.4   Trademarks  
3.152.   Trademark protection is r egulated by the Trade Marks Ordinance (Cap. 559), which came 
into effect in 2003. For a trademark to receive statutory protection in HKC , it must be registered 
with the IPD. Nevertheless, a foreign trademark not registered in HKC can be protected by the to rt 
of passing -off, or under the provision implementing the Paris Convention, if the trademark is well 
known.  
3.153.   In 2014, the Government launched a public consultation on the proposed application of the 
Protocol Relating to the Madrid Agreement Concerning the  International Registration of Marks 
(Madrid Protocol) to HKC, so as to enable trademark owners to apply for registration in one or 
more member countries by filing a single application . The results of the consultation were largely 
favourable and, in early 2017, the Government decided to proceed with the implementation of the 
international registration system under the Madrid Protocol. To this effect, amendments to the 
trademark law are being prepared, and other tasks are being undertaken, including the 
development of a dedicated information technology system. Once the legislative amendments are 
enacted and the preparatory work is completed, the Government will seek the application of the 
Madrid Protocol in the territory. The authorities expect to implement i t in 2022.  
3.3.7.5   Parallel imports  
3.154.    Since the previous Review, there has been no change regarding the parallel imports 
regime. The Copyright Ordinance prohibits parallel imports of a copyright work or the use of 
parallel imported copies for the purpose of dealing in (selling, letting for hiring, offering for sale or 
hire, or distributing for profit), and playing or showing the works to the public, if the copies 
                                                
142 AFCD online information,  Guide to Application for Pesticide Registration . Viewed at: 
https://www.afcd.gov.hk/english/publications/publications_qua/pub_qua_pes/files/PPRD12G04E_112017.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 68 - 
 
  concerned are movies, TV dramas or musical (so und or visual) recordings.143 All of these acts are 
liable to both civil and criminal sanctions within 15 months following the work's first publication 
anywhere in the world, and to civil sanctions where the work has been published for more than 
15 months. N o restrictions apply on parallel imports of computer software products, including for 
commercial dealings, except if the principal attraction of the product involves musical sound or 
visual recordings, movies, TV dramas, e -books, or a combination of the se. As for other types of 
copyright works, there are generally no restrictions for end -users to import or possess parallel 
imported copies, whether for personal or business use. Under the Trade Marks Ordinance, parallel 
imports of trademarked goods are allowe d, unless the goods have been impaired or changed , and 
the distinctive character or reputation of the mark is adversely affected. The Patents Ordinance 
expressly provides that the proprietor of a patent for a product or process has the exclusive right 
to import a patented product or a product made with a patented process.  
3.3.7.6   IP trading  
3.155.   During the period under review, HKC continued its efforts to consolidate itself as a regional 
IP trading centre . In line with this, in March  2015, the Working Group on IP Trading, led by the 
Secretary for Commerce and Economic Development, released a report  that contains 
recommend ations in four strategic areas : (i) enhancing the IP protection regime; (ii) supporting IP 
creation and exploitation; (ii i) fostering IP intermediary s ervices and manpower capacity; and 
(iv) pursuing promotion, education, and external collaboration efforts.144 
3.156.   The Government has accepted the recommendations , and has since been working with 
stakeholders on their implementation. Key items of the progress mad e so far include the launch of 
a free IP consultation service for SMEs , and of the website "Hong Kong  – The IP Trading Hub" to 
provide a one -stop shop for the dissemination of IP trading information145, as well as the setting 
up of an IP Manager Scheme and training programmes to help enterprises build up their 
manpower capacity in IP management and trading. Also, in a bid to developing IP dispute 
resolution services, an amendment to the Arbitration Ordi nance (Cap. 609) , effective on 
1 January  2018, made it explicit that all IPR disputes, including the validity of IPRs, may be settled 
by arbitration. Moreover, in order to promote IP commercialization, the Government introduced a 
bill into the Legislative Council in April 2018, proposing to expand the scope of profits tax 
deductions for capital expenditure incurred for the purchase of IPRs from the existing five types 
(i.e. patents, copyright, registered designs, registered trademarks and rights to know -how) to 
eight (layout -designs (topography) of integrated circuits, plant varieties and performances).  The 
bill was passed on 20  June 2018 and took effect on 29 June 2018.  
3.3.7.7   Enforcement  
3.157.   The C&ED is responsible for enforcing criminal sanctions against copyright a nd trademark 
infringements. Right owners and any other member of the public may report suspected 
infringements of copyright or trademarks to the C&ED for further action. The C&ED has the power 
to take actions, such as  the investigation of infringements, th e arrest of offenders, the seizure of 
counterfeit and pirated goods, and the prosecution of trademark and copyright offences. 
Prosecution of the most serious criminal cases is undertaken by the Department of Justice. The 
C&ED's enforcement strategy is dire cted against both the supply and retail of pirated and 
counterfeited goods. On the supply side, efforts target illegal activities at the import, export, 
manufacturing, wholesale and distribution levels. On the retail side, the C&ED carries out sustained 
enforcement actions to clamp down on street -level piracy and counterfeiting activities.146 
3.158.   In addition to fighting against pirated optical disc activities at the manufacturing, storage, 
retail and import/export levels, the C&ED strives to combat the use of pir ated software and 
copyright works for commercial purposes. Under the Prevention of Copyright Piracy Ordinance  
(Cap. 544), local optical disc and stamper manufacturers are required to obtain a licence from the 
                                                
143 Except when the playing or showing in public is by an educational establishment for the educational 
purposes of the establishment , or by a specifi ed library for use of the library.  
144 The Report of the Working Group on Intellectual Property Trading is available at 
http://www.ip.gov.hk/materials/news/20150320162103.19.pdf . 
145 The website can be accessed at: http://www.ip.gov.hk/en/index.html . 
146 C&ED website. Viewed at: 
http://www.customs.gov.hk/en/enforcement/ipr_protection/strategy/index.html?print=1 . WT/TPR/S/380 • Hong Kong, China  
 
- 69 - 
 
  C&ED , and to mark identification codes on all t heir products ; these are also subject to 
import/export licensing.   
3.159.   The C&ED helps rights -owners to enforce their rights in relation to copyright and 
trademark goods through the adoption of border/boundary  measures. It  has the power to take 
enforcement acti on ex officio , without the report ing of infringements by right-owners.  
3.160.   HKC police officers have the power of arrest and seizure when they come across suspected 
copies of infringing goods while performing their duties. The cases are then passed on to the C &ED 
for further investigation and prosecution.  
3.161.   The C&ED promotes the public awareness of IPRs through several schemes , such as the 
Youth Ambassador against Internet Piracy, the E -auctioning with Integrity (to prevent online 
auctioning of counterfeit goods), and reward schemes for information leading to the seizure of 
pirated or counterfeit goods. In addition, t he C&ED manages the Intellectual Property Rights 
Protection Alliance , a platform  to strengthen strategic partnership with IPR owners , and 
co-operates with overseas enforcement authorities to combat infringement of IPRs.  
3.162.   In recent years, HKC has stepped up efforts to address the challenges of IPR i nfringement 
activities in the digital environment, such as the operations of cyberlockers147 and the use of 
set-top boxes for the illegal transmission of copyright works.148 In order to enhance enforcement 
capacity, the C&ED has established anti -Internet -piracy teams specially dedicated to combating 
online piracy. The Electronic Crime Investigation Centre (ECIC), set up in 2013, formulates online 
investigation procedures and conducts training courses for enforcement officers; it was accredited 
ISO 9001:2015 in early 2017. The Computer Forensic Laboratory and the Computer Analysis and 
Response Team provide specialized support in collecting and analyzing digital evidence  to be 
presented to courts in piracy cases . The C&ED has also developed several electronic syst ems to 
monitor and trace infringement activities on the Internet. For example, t he "SocNet " monitoring 
system, launched in 2015, combats the s ale of IPR infringing goods through social media 
platforms. With a view to stepping up enforcement action, in end -2017, the C&ED launched the 
new Big Data Analytics System, which is an automatic round -the-clock system to analyze mass 
information on different Internet platforms for effective screening and updates on IP infringing 
activities.  
3.163.   The Electronic Recordation  and Triage Centre, established in 2014, helps right holders, 
especially those based outside HKC, to complete recordation of their copyright and trademarks , 
and conduct preliminary examination of offending goods without having to visit the C&ED  in 
person.  
3.164.   By using new technologies to combat IPR infringement online, maintaining close 
co-operation with stakeholders and other customs authorities, and deploying IPR awareness 
campaigns, the C&ED has aimed to strengthen its enforcement capacity in recent years. I t 
regularly conducts special operations, seizes IPR infringing goods, and arrests and prosecutes 
offenders. In  2017, for example, the C&ED intervened in 916 infringement cases149, of which 
115 relating to copyrights and 866 to forged trademarks (not including trade descriptions), seized 
goods worth HK$118 million , and arrested 718 persons. Major seizures include electrical and 
electronic products, optical discs, pharmaceutical products, and clothing and accessories 
(Table  3.17).  
                                                
147 A type of Internet hosting service that allows users to upload one or more files from their hard drives 
(or from a remote location) onto the one -click host's server, whi ch others can then download. File hosting 
services can be used to distribute or share files without the consent of the copyright owner.  
148 For example, i n June 2014 , in cooperation with a copyright owner, the C&ED detected and smashed 
a syndicate circumvent ing paid channels by uploading the channels to overseas servers for transmission to set -
top boxes through the Internet. In May 2015, in cooperation with the Macao Customs, the C&ED cracked down 
on a discussion forum on the Internet involved in the distribu tion of pirated TV programmes through 
cyberlockers.  
149 A single infringement case may involve both copyright infringement and counterfeit trademarks, so 
the total number of actual cases cannot be aggregated according to the number of infringing categories.  WT/TPR/S/380 • Hong Kong, China  
 
- 70 - 
 
  Table 3.17 C&ED: cases, seizures, and arrests, 2014 -17  
 2014  2015  2016  2017  
Copyright      
No. of cases  60 118 124 115 
Persons arrested  87 159 158 145 
Value of seizure (HK$ million)  3 4 3 11 
Trademarks and trade descriptions      
No. of cases  1,076  1,098  975 989 
- Online infringement cases  179 192 199 195 
Persons arrested  752 905 749 750 
Value of seizure (HK$ million)  93 112 161 117 
Source:  C&ED. Viewed at:  
http://www.customs.gov.hk/filemanager/common/pdf/statistics/enforcement_cases_en.pdf . 
3.165.   The actions deployed by the C&ED are supported by a judicial system tha t imposes fines 
and criminal sentences aimed at deterring illegal IPR activities. The details of the types of penalties 
imposed  are described in Table A3.5. Any person may sue another for the infringement of any IPR 
by commencing a civil action in a court.  The courts dealing with civil action include the Small 
Claims Tribunal, the District Court and the High Court. Criminal cases of IPR related offences are 
also adjudicated in the courts; those dealing with criminal cases include the Magistrates' Courts, 
the Juvenile Court, the District Court and the High Court.150 
3.166.   The C&ED has indicated that, in order to guard against the transshipment of IPR infringing 
goods, it has implemented the following measures over the past years: (i) exchanged intelligence 
and experi ences with law enforcement agencies outside HKC; (ii) maintained close cooperation 
with its Mainland China counterparts to combat cross -boundary IPR infringing activities (e.g. 
establishing designated liaison channels with Mainland China Customs and the IP R 
administrative/enforcement authorities in Mainland China to expedite intelligence and information 
sharing; and mounting parallel operations from time to time); (iii) developed partnership 
arrangements and signed MoUs with major express courier service pr oviders, and collaborating 
closely with the Hong Kong Post to facilitate enforcement actions on suspicious parcels containing 
IPR infringing goods; (iv) worked with the logistics industry to enhance collaboration; (v) signed 
customs cooperation agreements with major trading partners to enhance exchanges and 
enforcement coordination; and (vi) coordinated closely with international organizations, notably 
the WCO, INTERPOL, the WTO and APEC in IPR protection. The C&ED has also stated that it will 
remain vigila nt and closely liaise with other jurisdictions in the area of intelligence exchange to 
facilitate IPR enforcement at both the source and destination jurisdictions . 
 
 
                                                
150 For more information on the courts, see the website of the Judiciary at http://www.judiciary.gov.hk . WT/TPR/S/380 • Hong Kong, China  
 
- 71 - 
 
  4  TRADE POLICIES BY SE CTOR  
4.1  Agriculture, Forestry, and Fisheries  
4.1.1   Agriculture  
4.1.  HKC's agriculture and fisheries sector s remain very small, accounting for less than 0.1%  of 
GDP in 2016 and less than 0.1% of total employment  in 2017 . In 201 7, there were around 
2,400  farms,  cultivating around 710  hectares of agricultural land, and employing some 
4,100 people. The main agricultural products are leafy vegetables and high -value cut flowers.  
4.2.  The Agriculture, Fisheries and Conservation Department (AFCD) is responsible for overse eing 
the production and marketing of agricultural produce, enforcing regulations, and preserving 
ecological integrity. The Food and Environmental Hygiene Department (FEHD) is in charge of the 
administration of food safety programmes  (including for imported  agricultural food) . 
4.1.2   Farm support measures  
4.3.  The focus of HKC's agricultural policy  remains unchanged since the previous Review; it 
includes providing basic infrastructure, extension, and advisory services, and credit facilities to 
farmers. The AFCD's suppor t measures include carrying out research in , inter alia, pest control, 
crop husbandry, soil management, new product varieties, and production techniques to help 
farmers improve productivity.  The Government also provides infrastructure support, such as the 
rehabilitation of fallow land  and the improvement of irrigation and drainage facilities, as well as 
loans on concessional terms and emergency relief in times of  natural disasters. The total 
accumulated deposit under loan funds administered by the AFCD was HK$47.5 million as at 
end-2017.1  
4.4.  Under the Accredited Farm Scheme, which remains unchanged since the previous Review, 
farms are monitored and supervised for pest control and for the proper use of pesticides. Certified 
farms may sell their produce at accre dited retail outlets with the help of the Vegetable Marketing 
Organization.2 At end -2017, a total of 316 farms were accredited under the scheme, supplying 
some 36.5 tonnes of accredited produce daily.  
4.5.  The AFCD provides technical support to local farmers p roducing organic agricultural products , 
through the introduction of organic production standards and requirements, and help s farmers 
resolve problems concerning pest management, horticultural practices and soil management. At 
end-2017, there were 309 farms  producing about six tonnes of organic vegetables a day.3 
4.6.  In 2016, the Government announced a New Agriculture Policy , with a view to promoting the 
modernization and sustainable development of local agriculture .4 The main initiatives under the 
Policy include: (1) establishing a HK$500 million Sustainable Agricultural Development Fund 
(SADF), with a view to providing financial support for the modernization and sustainable 
development of local agriculture; (2) establ ishing an agricultural park, with a view to helping 
nurture agro -technology and agro -business management; (3) commissioning a consultancy study 
on agricultural priority areas, with a view to identifying large areas of agricultural land and 
exploring ways t o provide incentives for their revitalization; and (4)  facilitating the development 
and modernization of local agriculture and the wider adoption of hydroponics and agro -technology. 
The SADF, launched in December 2016, provides financial support to project s that are deemed 
productivity -enhancing to benefit the whole agriculture sector in HKC; a Farm Improvement 
                                                
1 Government online information, "Hong Kong: The Facts. Agriculture and Fisheries". Viewed at: 
https://www.gov.hk/en/about/abouthk/factsheets/docs/agriculture.pdf . 
2 The Vegetable Marketing Organization is a statutory authority that control s the movement and sale of 
vegetables in Kowloon and the New Territories. It was first established on 3 September 1946.  
3 Government online information, "Hong Kong: The Facts. Agriculture and Fisheries". Viewed at: 
https://www.gov.hk/en/about/abouthk/factsheets/docs/agriculture.pdf . 
4 Government online information. Viewed at: 
http://www.info.gov.hk/gia/general/201601/14/P201601140558.htm . Food and Health Bureau online 
information. Viewed at: 
http://www.fhb.gov.hk/download/press_and_publications/otherinfo/160128_nap/e_paper_on_nap. pdf. 
Legislative Council online information. Viewed at: 
http://www.fhb.gov.hk/download/press_and_publications/otherinfo/160128_nap/e_paper_on_nap. pdf. WT/TPR/S/380 • Hong Kong, China  
 
- 72 - 
 
  Scheme (FIS) provides direct grants to farmers up to a maximum of HK$30,000, with a view to 
encouraging the mechanization of farms.  
4.7.  During the revi ew period, HKC notified the WTO Committee on Agriculture that, up to the 
financial year ending March 2017 , all its domestic support measures  were under the " green box" 
(i.e. exempt from the reduction commitment).5 Total monetary outlays for these measures 
increased over the review period, amounting to HK$123.1 million in 2016 -17 (HK$103.7 million in 
2013-14). Pest and disease control measures accounted for over 50% of total annual outlays. HKC 
also notified that no export subsidies were provided to agricult ure during the period  under review.6  
4.1.3   Rice 
4.8.  Under the Rice Control Scheme, rice is designated as a reserved commodity in accordance 
with the Reserved Commodities Ordinance  (Cap. 296).  Imports and exports of rice are subject to 
licences, and the Government e nforces a reserve  stock to ensure sufficient supply for local 
consumption ; in general, only  businesses registered as stockholders with the TID may import rice .7 
Upon registration, they are required to make an undertaking to import specific quantities on a 
quarterly basis , and to import such quantities within the relevant period. By end -March 2018, 
there were 213 registered stockholders of rice.8 Since the previous Review, the Rice Control 
Scheme has remained largely unchanged.  
4.9.  The reserve  stock is maintaine d at all times to meet sudden surges in demand or needs 
during short-term supply shortages or other emergencies ; all registered stockholders are required 
to contribute to it by holding a quantity of rice proportionate to their import volumes. During  the 
review period , the reserve stock was maintained at a level "sufficient for consumption by the local 
population for 15 days", which was between 13,100 tonnes and 14,100 tonnes a year. In the 
event of an emergency or a supply shortage, the Government has the p ower to ask rice 
stockholders to release stocks to the market or  to import rice in excess of their undertakings, and 
to set maximum wholesale prices. The stocks ha ve not been released since 1989.  
4.10.   In order to allow for the implementation of Mainland China' s export quotas for rice and 
other grain products (rice flour and wheat flour), imports of rice from Mainland China are subject 
to registration requirements. Registered HKC importers may import rice from authorized exporters 
in Mainland China, provided tha t supplies are entirely used for local consumption and not 
re-exported.  There has been no change in the registration requirements since the previous 
Review.  
4.1.4   Fisheries  
4.11.   Although their contribution to GDP and employment is minimal, the fishing and aquacultur e 
supply about 20% of HKC's seafood consumption. In 2017, the estimated production of the 
fisheries industry was 128,000  tonnes, valued at HK$ 2.6 billion. The fishing fleet consists of about 
5,100  vessels. In 2017, fish ponds produced 2,500  tonnes of freshwater fish, valued at 
HK$56 million, while marine fish culture production was 1,000 tonnes, worth HK$ 78 million.  
4.12.   The AFCD provides basic infrastructure, technical advice, liaison services, marketing, and 
training to assist fishermen and to encourage conversion to sustainable fisheries. Fishermen and 
fish farmers may also benefit fro low -interest loans under funds administered by the AFCD : the 
Fisheries Development Loan Fund (FDLF)9, the Fish Marketing Organization Loan Fund10, and the 
                                                
5 WTO documents G/AG/N/HKG/36, 28 April 2014; G/AG/N/HKG/38, 28 April 2015; G/AG/N/HKG/40, 
22 April 2016; and G/AG/N/HKG/42, 5 May 2017.  
6 WTO documents G/AG/N/HKG/35, 15 January 2014; G/AG/N/HKG/37, 23 January 2015; 
G/AG/N/HKG/39, 29 January 2016; G/ AG/N/HKG/41, 17 January 2017; and G/AG/N/HKG/43, 
12 January  2018.  
7 Exceptions to the licensing requirements include rice brought into HKC in any vessel in a reasonable 
amount for consumption by the crew ; carried in personal luggage in an amount of not exc eeding 15kg for 
personal use or as a gift; or as a transhipment cargo.  
8 TID online information. Viewed at: http://www.tid.gov.hk/english/import_export/nontextiles/nt_rice . 
9 AFCD online information. Viewed at: 
https://www.afcd.gov.hk/english/fisheries/fish_cap/fish_cap_techsup/fish_cap_fdlf.html . 
10 AFCD online information. Vie wed at: 
http://www.afcd.gov.hk/english/fisheries/fish_cap/fish_cap_techsup/fish_cap_fmolf.html . WT/TPR/S/380 • Hong Kong, China  
 
- 73 - 
 
  Kadoor ie Agriculture Aid Loan Fund11 (Table 4.1) . Between April 2014 and March 2018 , 
1,164  loans totalling around HK$1,035  million were granted to the fisheries industry.  During the 
review period, HKC notified its loan schemes for the fisheries sector to the WTO Committee on 
Subsidies and Countervailing Measures.12 The AFCD also operates a voluntary Accredited Fish 
Farm Scheme to monitor the hygiene standards of fish farms and the quality of cultured fish, a fish 
health management programme, and a good aquaculture practices programme.  
Table 4.1 Loan programmes by the AFCD, April 2014 – March 2018  
Loan fund Loans issued  
Number of cases  Amount  
(HK$ million)  
FDLF 110 845.2  
Fish Marketing Organization Loan Fund (normal  loan) 14 1.4 
Fish Marketing Organization Loan Fund (fishing moratorium loan)  986 181.2  
Kadoorie Agricultur e Aid Loan Fund  54 6.8 
Total 1,164  1,034.6  
Source:  Information provided by the HKC authorities.  
4.13.   To assist owners of fishing vessels affected by a ban on trawling in HKC waters introduced in 
December 2012, the FDLF had provided one -off loans for upgrading vessels to operate outside 
HKC waters or for switching to more sustainable fishing operations; th e deadline for applying for 
these loans was 31 December 2015. Currently, loans are provided under the FDLF to encourage 
fishermen and fish farmers to switch to sustainable fisheries operations or environmentally friendly 
operations. In February 2015, the t otal approved commitment of the FDLF was raised to 
HK$1,100  million (compared with HK$290  million previously).13 Furthermore, a HK$500 million 
Sustainable Fisheries Development Fund (SFDF) was established in 2014 to provide financial 
assistance (grants) for  carrying out research and development programmes that would help 
improve the operating environment and competitiveness of the fishing industry. Between 
April 2014 and March 2018 , eight applications, comprising  six projects on aquaculture and two on 
fisheries -related eco -tourism , were approved, involving a total commitment of about 
HK$41 million .  
4.2  Mining and Energy  
4.14.   Mining and quarrying accounted for less than 0.1% of GDP in 2016; electricity, gas and 
water supply, a nd waste manageme nt accounted for around 1.4% of GDP in the same year. HKC is 
a net energy importer ; according to the authorities, it has only a small amount of indigenous 
energy resources  (e.g. solar energy) . There is no legislation regulating market cond itions per se  in 
the energy sector ; this is unchanged from the previous Review.14 The Environment Bureau's policy 
monitors prices and the strategic reserves  of energy , and sets the fuel mix for electricity 
generation regard ing, inter alia, environmental tar gets (e.g. those related to carbon emission s and 
energy intensity) .15  
                                                
11 AFCD online information. Viewed at: 
https://www.afcd.gov.hk/english/agriculture/agr_loan/agr_loan_kaalf/agr_loan_kaalf.html . 
12 WTO documents G/SCM/N/284/HKG, 2 July 2015; and G/SCM/N/315/HKG, 30 June 2017.  
13 WTO document G/SCM/N/315/HKG, 30 June 2017.  
14 The Electricity Ordinance (Cap. 406) and the Gas Safety Ordinance (Cap. 51) regulate the safe supply 
of electricity and gas and the safety of household electrical products and gas appliances . Among other things, 
they cover the registration of generating facilities, contractors and workers for electrical and gas installations, 
wiring and gas installation standards , and the safe distribution and use of electricity and gas.  
15 The Government has set the emissi on targets for 2020 specifically to reduce sulphur dioxide by 
35-75%, nitrogen oxides by 20 -30%, and respirable suspended particulates by 15 -40% (from 2010). It has 
also set a target to reduce HKC's carbon intensity by 50 -60% by 2020 (from 2005). Consideri ng, inter alia , 
these targets, HKC has set the fuel mix for electricity generation in 2020, under which: (a) the percentage of 
local gas generation will increase to around 50% of the total fuel mix; (b) nuclear imports will account for 
around 25%; (c) the development of renewable energy and energy saving will be further promoted in HKC; 
and (d) the remaining demand for electricity will be met by coal -fired generation.  WT/TPR/S/380 • Hong Kong, China  
 
- 74 - 
 
  4.15.   HKC imports and , to a lesser extent, exports electricity through a grid connected with 
Mainland China .16 It also imports all its natural gas through pipelines connected  to Mainland 
China .17  
4.16.   In HKC, t here are no restrictions on the import and distribution of refined oil products (e.g. 
petroleum, diesel, and liquefied petroleum gas  (LPG) ).18  
4.17.   There are two de facto  monopolies in electricity generation, transmission and distribution ; 
both are privately owned. One company supplies electricity to Kowloon and the New Territories, 
including several outlying islands ; the other supplies  electricity to Hong Kong Island and the 
neighbouring islands. Electricity is also imported from the Guangdong  province of Mainland 
China .19 There have been no new policy initiatives on electricity since the previous Review.  
4.18.   Town gas is supplied solely by one company (a de facto  monopoly); some areas/estates in 
HKC are supplied with cylinder/piped LPG. Under a voluntary code of practice entered into with the 
HKC Government, the oil and gas companies maintain strategic reserves of gas oil and naphtha , 
respectively , with a view to mitigat ing the consequences of a ny temporary disruption in the  oil 
supply  and ensuring that sufficient reserves of oil products are available over a period of 
shortage .20  
4.19.   The price  of electricity and town gas  is monitored by the Environment Bureau . Monitoring is 
based on mutual agreements (Scheme of Control Agreements  (SCAs) with electricity companies, 
and an Information and Consultation Agreement (ICA) with a gas company) . The SCAs involve, 
inter alia , the regulation of tariffs and permitted rates of return. According to the authorities, 
electricity companies do not have any exclusive rights.  The town gas company operates in a 
market where consumers may choose to use gas or electricity for cooking and/or water -heating. 
While it is currently not subject to any price or profit regulation, the company has entered 
voluntarily int o an ICA with the Government since 1997 , with a view to increas ing transparency in 
its tariff setting mechanism. Pursuant to the ICA, the company must consult with the Government 
three months in advance of any tariff adjustment and , upon request, brief the  Legislative Council 
Panel on Economic Development and the Energy Advisory Committee on such adjustment s. Like 
the electricity companies, the town gas company does not have any exclusive rights.  The Bureau  
also monitors retail prices of auto -fuels.   
4.20.   During  2014-15, the Government conducted a review of the overall development of th e 
electricity market and the regulatory framework. The review also covered the feasibility of 
introducing more competition in the sector. Following this, a three -month public consu ltation was 
conducted between March and June 2015. Considering the outcome of the public consultation in 
respect of the regulation of the electricity market, the Government held discussions with the 
electricity companies and entered into the post -2018 SCAs , which were signed in April 2017. The 
authorities consider that, while the requisite market conditions are not yet present for introducing 
competition, under the post -2018 SCAs, the electricity companies will cooperate with the 
Government to undertake the  necessary preparatory work to pave the way for introducing 
potential new suppliers in the future.  
                                                
16 One of the power companies in HKC supplies electricity to Mainland China. In 2017, the a mount of 
electricity exported was 1,341 million kWh. CLP group online information. Viewed at: 
https://www.clpgroup.com/en/investors -information/financ ial-reports/our -reports?year=2017 . 
17 For one of the power companies, natural gas is imported from two sources in Mainland China to its 
power stations for electricity generation. One source is the gas fields in the South China Sea via a 780 km 
submarine pip eline, and the other is the Second West -East Natural Gas Pipeline through Shenzhen Daichan 
Island. For the other power company, the LNG terminal in Shenzhen Dapeng Bay supplies natural gas through 
a 93 km submarine pipeline for electricity generation. The LNG terminal also supplies natural gas through a 
34 km pipeline to the Towngas production plant.  
18 In addition to being used as fuel gas for household, commercial and industrial purposes, LPG is used 
as fuel by nearly all taxis and over 60% of public light  buses in HKC. 
19 Government online information, "Hong Kong Factsheets – Water, Power, and Gas Supplies". Viewed 
at: http://www.gov.hk/en/about/abouthk/factsheets/docs/wp&g _supplies.pdf . 
20 In general, situations of temporary oil supply disruption  may include international events causing a 
shortage in the world 's oil supply (e.g. embargo es of oil supply) or local events causing physical dam age to the 
storage or distribution f acilities of oil  (e.g. industrial accidents).  WT/TPR/S/380 • Hong Kong, China  
 
- 75 - 
 
  4.21.   The Government signed a memorandum of understanding (MoU) on energy cooperation 
with the National Energy Administration of Mainland China in August 2008, to ensure a continuous 
supply of natural gas and nuclear -generated electricity to HKC for the subsequent two decades.21 
Under the MoU, the Central People's Government provides a guarantee on the supply of natural 
gas, and the HKC branch line of Mainland China' s Second West -East Natural Gas Pipeline, which 
provides HKC with natural gas from Turkmenistan via Mainland China, has been constructed. In 
addition, energy suppliers of HKC and Mainland China also renewed an agreement on the supply of 
nuclear electricity from the Daya Bay Nuclear Power Station for a further term of 20 years 
from 2014.   
4.3  Manufacturing  
4.22.   Manufacturing accounted for a round  1.1% of GDP in 2016 and 2.5% of total employment  in 
2017. In 2016 , most (a round 98.7% ) enterprises in the manufacturing sect or were SMEs, 
employing less than 100 persons each. The average number of persons employed per 
establishment in the manufacturing sector was 11.7 persons in the same year.  
4.23.   HKC has adopted no new policy initiatives concerning manufacturing since its previou s 
Review. The Government provides support in the form of loans and non -tax incentives to SMEs  
(Sections 3.2.5 and 3.3.1) .  
4.4  Services  
4.4.1   Telecommunication services   
4.4.1.1   Statistical overview  
4.24.   HKC is a significant and mature telecommunications market , as evidenced by the high 
penetration rates of mobile and broadband. HKC's policy objective of becom ing a major telecom 
regional hub, notably as a nod e for submarine telecom cables , has remained unchanged since its 
previous Review .  
4.25.   Box 4.1 below describes  the main economic indicators of the telecommunications sector.  
Box 4.1 Main economic indicators of the telecommunications sector, 2012 -17  
Gross output of the telecom industry (billion HK$ )  
2012: 69; 2016: 93 
 
Employment  
2017: 20,300  
 
Exports (million HK$) 
2014: 13,776; 2015: 14,169; 2016: 14,283  
 
Imports  (million HK$) 
2014: 8,643; 2015: 8,626; 2016 8,894  
 
Penetration rates (as of December 2017)  
 
Total telephone subscribers  (per 100 inhab.): 303.5  
Total mobile customers : 18.3 milliona  
Total telephone lines : 4.2 millionb 
Fixed telephone subscribers  (per 100 inhab.): 56.0 
Mobile phone subscribers  (per 100 inhab.): 2 47.5 
Fixed (wired) -broadband subscriptions  (per 100 inhab.): 35.7 
Mobile broadband subscriptions  (per 100 inhab .): 230 
Internet users  (per 100 inhab.): 89.4% of all persons aged 10 and over  had used the Internet during the 
previous 12 months in a survey carried out from June to September 2017 by the Census and Statistics 
                                                
21 Government online information. Viewed at: 
http://www.info.gov.hk/gia/general/200808/28/P200808280188.htm . WT/TPR/S/380 • Hong Kong, China  
 
- 76 - 
 
  Department (C&SD)  
Broadband Internet subscribers  (per 100 inhab.): 265.8c 
 
Main actors  
 
Number of companies providing value -added telecom services  
As of 31 December 201 7, 598 companies  were authori zed to provide value -added telecom services . 
 
Names and market shares of the leading companies for fixed telecom services  
As of 31 December 201 7, 27 carrier licens ees were authorized to provide local -fixed telecommunications 
services , and 42 carrier licensees were autho rized to provide external fixed -telecommun ications services . No 
information regarding the market share of the main suppliers is available.  
 
Broadband Internet service  providers  
As of 1 May 2 018, 235 facility -based and service -based telecommunications service providers were 
authori zed to provide I nternet service s (including narrowband and broadband) . 
 
Foreign ownership participation in telecom companies  
Not available. HKC authorities do not maintain a list or overall statistics regarding foreign ownership in 
telecommunications licences, and are not  in a position to give information on individual firms.  
 
State ownership  
There is no direct g overnment ownership . 
 
Establishment of new companies, mergers or closures since the last Review  
 
No information is available, according to the authorities.  
a Refers to the sum of post -paid and pre -paid SIM cards . 
b Refers to the sum of exchange lines and non -exchange lines . 
c "Fixed (wired) -broadband subscriptions" refers to the sum of cable modem, digital subscriber line 
(DSL) and fibre -to-the-home/building bro adband I nternet subscr iptions to the public Internet, and 
"wireless -broadband subscriptions" refers to the sum of terrestrial fixed wireless -broadband and 
active mobile -broadband subscriptions to the publ ic Internet.  
Source:  Information provided by the HKC authorities ; ITU, Measuring the Information Society Report, 201 7 
edition .  
4.26.   Table 4.2 below indicates the average telecommunication prices in HKC, which are among 
the lowest in the world.  
Table 4.2 Average  telecom prices in HKC, 2016  
Type of telecom service  % of gross national 
income  per capita  Comparable statistics 
for world average  
Mobile broadband prices (500 MB)  0.3 3.7 
Mobile broadband prices (1  GB) 0.7 6.8 
Mobile -cellular prices  0.2 5.2 
Fixed -broadband prices  0.6 13.9 
Source:  ITU, Measuring the Information Society Report , 2017 edition.  
4.4.1.2   Trade regulatory regimes  
4.27.   The trade regulatory regime of HKC's telecommunication services  has remained largely 
unchanged since its previous Review .22  
4.28.   Policy developments during the review period included: the signing of three new FTAs 
containing commitments on telecommunication services; the reassignment of the frequency 
spectrum for existing mobile services upon the expiry of the existing assignment te rms; the 
reallocation  and reassignment of the frequency spectrum for the preparation of 5G services ; the 
making available of the 5 GHz Shared Band for the provision of public mobile services; the review 
of licenc ing conditions  in carrier licences ; the rear rangement of the eight-digit numbering plan; the 
                                                
22 WTO document WT/TPR/S /306/Rev.1, 28 January 2015.  WT/TPR/S/380 • Hong Kong, China  
 
- 77 - 
 
  further enhancement of transparency ; and the facilitation of the development of wireless Internet 
of Things (IoT) services (see below for details) . 
4.29.   The Government plans to provide financial incentives to tel ecommunication companies with 
a view to encouraging the extension of fibre -based network to villages in remote areas. It plans to 
commence the tender process and award the tenders in 2019, and expects that the fibre -based 
networks will be extended to the v illages concerned in phases from 2021 onwards.  
4.30.   Box 4.2 below recapitulates the GATS and the FTA commitments of HKC, while Box 4.3 
describes the applied regulatory regime for regulatory supervision, competition and 
interconnection issues , and Box 4.4 , the applied regulatory regime for other regulatory aspects of 
telecommunication services.  
Box 4.2 Bound trade regimes of the telecommunications sector  
GATS c ommitments  
Unchanged since the previous Review.  
 
FTA c ommitments  
 
HKC-EFTA States FTA (entered into force on 1 October 2012  for the part between H KC, Iceland, Liechtenstein 
and Switzerland; on 1 November 2012 for the part between HKC and Norway ). 
 
Unchanged since the previous Review.  
 
However, to date, no such measures exist (II -HKC-11).  
 
HKC–New Zealand CEP Agreement  (entered into force on 1 January 2011)  
Unchanged since the previous Review.  
 
CEPA with Mainland China  (entered into force on 29 June 2003 ; its sub sidiary agreement , the Agreement on 
Trade in Services , entered into force on 27 November 2015 )a 
 
Paragraph 2 of Article 3 of the Agreement on Trade in Services stipulates that HKC will not impose any new 
discriminatory measures on Mainland  China 's services or service suppliers in the areas where Mainland China 
has undertaken specific commitments on  the liberalization of trade in services for HKC. The two sides will 
formulate further liberali zation of trade in services of HKC for Mainland  China' s services and service suppliers.  
 
HKC-Chile FTA  (entered into force on 9 Oct ober 2014) 
 
Local services : in addition to GATS commitments, two more subsectors were liberali zed: d) telex services; and 
e) telegraph services  
Market access: Modes 1 and 2: same regime as GATS; Mode 3: none; Mode 4: commitment on business 
visitors, in addition to GATS commitments  
National treatment: same regime as GATS  
 
International services : Modes 1, 2, and 3: same regime as GATS;  Mode 4: commitment on business visitors, in 
addition to GATS commitments  
 
Value -added services  
Market access:  Mode 2: same regime as GATS; Mode 1: none; Mode 3: none; Mode 4: commitment on 
business visitors, in addition to GATS commitments  
National treatment: Mode s 3 and 4: same regime as GATS; Mode 1: none; Mode 2: none 
 
HKC-Macao CEPA  (entered into force on 27 Oct 2017 )  
 
Local services : In addition to GATS commitments, two more subsectors were liberali zed: d) telex services; and 
e) telegraph services  
Market access: Modes 1 and 2: same regime as GATS; Mode 3: none; Mode 4: commitment on  business 
visitors, in addition to GATS commitments  
National treatment: same regime as GATS  
 
International services : Modes 1, 2 and 3: same regime as GATS;  Mode 4: commitment on business visitors, in 
addition to GATS commitments  
 
Value -added services  
Market access:  Mode 2: same regime as GATS; Mode 1: none; Mode 3: none; Mode 4: commitment on WT/TPR/S/380 • Hong Kong, China  
 
- 78 - 
 
  business visitors, in addition to GATS commitments  
National treatment: Mode s 3 and 4: same regime as GATS; Mode 1: none; Mode 2: none 
 
HKC-ASEAN FT A (signed  on 12  November 2017 ; and is to enter into force after the relevant  parties complete 
the necessary procedures ) 
 
Local services : In addition to GATS commitments, two more subsectors were liberali zed: d) telex services; and 
e) telegraph services  
Market access: Modes 1 and 2: same regime as GATS; Mode 3: none; Mode 4: commitment on business 
visitors, in addition to GATS commitments  
National treatment: same regime as GATS  
 
International services : Modes 1, 2 and 3: same regime as GATS;  Mode 4: commitment on business  visitors, in 
addition to GATS commitments  
 
Value -added services:  
Market access:  Mode s 2 and 3 : same regime as GATS; Mode 1: none; Mode 3: commitment on business 
visitors, in addition to GATS commitments  
National treatment: Mode s 3 and 4: same regime as GA TS; Mode 1: none; Mode 2: none 
a TID online information. Viewed at: https://www.tid.gov.hk/english/cepa/legaltext/cepa13.html . 
Source:  HKC GATS Schedule and WTO RTA -IS database.  
Box 4.3 Applied regulatory regime for regulatory supervision, competition and 
interconnection  
Regulatory  supervision  
 
Unchanged since the previous Review.  
 
The Communications Authority  (CA), the independent reg ulator stricto sensu , and the Office of the 
Communications Authority  (OFCA) , the C A's executive arm, oversee both the broadcasting sector and the 
telecommunications sector , with the aim of meeting the regulatory challenges arising from the new era of 
conve rgence.  
 
The Competition Ordinance ( Cap. 619 ) (the Ordinance)  prohibits t hree types of anti -competitive conduct in the 
market : (i) anti-competitive agreements, concerted practices and decisions  of an association of undertakings  
(known as the First Conduct Rule); (ii) abuse of market power (Second Conduct Rule); and (iii) mergers that 
are likely to substantially lessen competition, which  is applicable only to the telecommunication s sector 
(the Merger Rule ) (Section 3.4.2.1).  
 
The Ordinance  provides that the CA has concurrent jurisdiction with the Competition Commission (Commission) 
with respect to investigation s and the bringing of enforcement proceedings regarding  competition cases in the 
broadcasting and telecommunications secto rs. On the handling of complaints against anti -competitive 
practices, t he Commission and the CA conduct enforce ment actions in accordance with the requirements on 
concurrent jurisdiction  in the Ordinance , which entered into force fully on 14 December 2015.  From this date to 
31 March 2017, the CA received 119 complaints or enquiries under the Ordinance, some of which were referred 
by the Commission. The cases entailed claims of anti -competitive unilateral and/or coordinated conduct. After 
due consideration, the cases were closed with no investigation opened. The CA also considered three cases 
under the Merger Rule during the period , and concluded that no issue was raised that required the 
commencement of an investigation.  
 
The Commission and the CA have s igned an MoU under the O rdinance. The MoU seeks to coordinate the 
performance of the functions of the Commission and the CA under the Ordinance, and set out detailed 
arrangements for the two bodies  in respect of dispute resolution,  provision of  assistance, allocation of 
responsibilit y, supply of information , authorship of  educational materials or guidelines , etc. 
 
The Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 (amended TDO) criminali zes 
unfair trade practices in the consumer trans actions  of goods and services, including "false trade descriptions", 
"misleading omissions", "aggressive commercial practices", "bait advertising", "bait -and-switch" and "wrongly 
accepting payment". While the Customs and Excise Department is the main enfor cement agency of the 
amended TDO, concurrent j urisdiction is conferred on the CA to enforce the relevant sections in relation to 
commercial practices of licensees under the Telecommunications Ordinance  (Cap. 106) and the Broadcasting 
Ordinance (Cap. 562) that are directly connected with the provision of a telecommunications service or 
broadcasting service  under the two Ordinances . From the commencement of the amended TDO on 
19 July 2013 and up to 31 March 2017, the CA received 2 ,557 complaints  thereunder . The alleged unfair trade 
practices mainly involved false trade descriptions of services , and misleading omissions.  WT/TPR/S/380 • Hong Kong, China  
 
- 79 - 
 
  Interconnection and competition issues  
 
Fixed -interconnection regime   
There is no regulatory guidance by the CA regarding carrier -to-carrier local interconnection charges, including 
those between fixed carriers, between fixed and mobile carriers, and between mobile carriers.  
 
All carriers are encouraged to conduct negotiations and reach agreements with each other on intercon nection 
matters on a commercial basis.  If the interconnecting carriers cannot reach agreement on the terms and 
conditions of interconnection, either party m ay seek determination from the CA under Section 36A of the 
Telecommunications Ordinance  (Cap. 106) . 
 
Number of complaints filed or resolutions issued of interconnection disputes among operators : zero in 201 7  
Source:  Information provided by the HKC authorities.  
Box 4.4 Other regulatory aspects  
There have been  no regulatory changes since the previous Review in the following areas : facility -sharing, local 
loop unbundling; mobile interconnection ( not subject to any regulation) ; mobile roaming rates; accounting 
rates; price caps and regulations; universal service ; and autonomous liberalization.  
 
Number portability  
 
Following the implementation of  the Unified Carrier License (UCL)  regime in 2008, the then 
Telecommunications Authority (now the CA) decided that all prior determinations concerning the 
responsibilities of charges in relation to  fixed number portability (ONP ) and mobile number portability (MNP ) 
activities were to be sunset on 29 June 2010 . All operators assign ing telephone numbers are required to 
facilitate number portability at their own expense.  
 
Transp arency  
 
With a view to enhanc ing transparency and better protect ing consumers in the process of contract conclusion, 
the Communications Association of Hong Kong (CAHK), an association for HKC 's communications industries, 
promulgated a self -regulatory Indus try Code in December 2010, which was implemented by all major fixed and 
mobile network operators starting from July 2011. Regard ing the implementation experience and consumer 
feedback, the CAHK revised the Code in October 2014 on the advice of the OFCA and following discussions with 
participating operators. The revised Code took effect on 1 May 2015.  
 
With a view to enhanc ing service information transparency and better inform ing consumers, the OFCA has , 
since November 2016 , published on its website details of the arrangements adopted by major residential 
broadband service providers to handle service termination requests from consumers. The published information 
is intended to enable consumers to better understand existing practices of different servi ce providers, which 
would help reduce disputes over service termination matters.  
 
On 31 March 2017, the CAHK amended the Code for the Provision of Chargeable Mobile Content Services, with 
a view to streamlin ing the arrangements for the telecommunications i ndustry's self -regulation of chargeable 
Mobile Content Services  (MCSs) to safeguard consumer interests . The C ode requires all third -party content 
service providers , before initiating delivery of MCS s to customers, to indicate clearly to them the chargeable  
nature of the services, provide them with clear information on all charges, obtain clear consent from them for 
the provision of MCS s, and clearly set out the unsubscribing mechanisms, which should be simple and 
convenient . 
 
Spectrum management  
 
Reassignment of the 3G spectrum  
After two rounds of public consultation s launched in March and December 2012 , respectively, the CA and the 
Secretary for Commerce and Economic Development (SCED) announced in November 2013 their respective 
decision s to adopt  a hybrid administratively -assigned cum market -based approach for the reassignment of the 
118.4 MHz of paired spectrum in the 1.9 -2.2 GHz band (3G spectrum) upon expiry in October 2016 of the 
existing assignments , and on the methods for determining the related spectrum utilization fee . Each of the four 
incumbent 3G mobile network operators (MNOs) was offered the right of first refusal (RFR) to be reassigned 
two thirds of the 3G spectrum they held at that time. The remaining one  third of the paired spectrum,  together 
with any spectrum in respect of which the incumbent 3G operators did not exercise the ir RFR, was to be 
reassigned by way of auction.  
 
Further to the above and a subsequent market consolidation, the auction was held in December 2014 , with a 
total of 49.2 MHz of spectrum being acquired by two incumbent 3G MNOs and one existing MNO which did not 
hold any 3G spectrum. The concerned spectrum is assigned for a term of 15 years, from 22 October 2016 until 
21 October 2031.  WT/TPR/S/380 • Hong Kong, China  
 
- 80 - 
 
  Reassignment of the spectrum in the 900 M Hz and  1800 M Hz bands 
In February 2016 and February 2017, the CA and the SCED  jointly conducted two  round s of consultation s on 
the reassignment  arrangements  of 49.8 MHz of spectrum in the 900 MHz band and 148.8 MHz of spectrum in 
the 1800 MHz band , the existing assignments of which would expire within the period between November 2020 
and September  2021.  Coupled with 1.4 MHz of currently unused spectrum in the two frequency bands, a total 
of 200 MHz of spectrum was available for reassignment/assignm ent for public mobile services. The CA and the 
SCED promulgated their respective decisions in December 2017 on the arrangements for spectrum 
reassignment and the related spectrum utili zation fee. Under the hybrid administratively -assigned cum market -
based approach adopted by the CA for spectrum reassignment, each of the four incumbent MNOs is to be 
offered a n RFR to be reassigned 20 MHz of spectrum in the 1800 MHz band. The remaining 70 MHz of spectrum 
in the 1800 MHz band and the 50 MHz of spectrum in the 900 MHz band, together with any spectrum in 
respect of which the incumbent MNOs do not exercise the ir RFR, are to be assigned by way of auction. 
Preparation is underway for the offer of  the RFR to the incumbent MNOs in the third quarter of 2018 and for 
the auction to be conducted around the end of 2018. The new 15-year assignment term of the spectrum in  the 
900 MHz and 1800 MHz band s is to commenc e in January and September 2021 , respecti vely. 
 
Preparation for the launch of 5G services  
With a view to meeting the rising aspirations of mobile service users towards 2020 and beyond, the CA has 
been preparing spectrum allocation and assignment for the launch of 5G services around 2020. In March  2017, 
a work plan was released for providing additional radio spectrum  for mobile services , which include making 
available spectrum in the 26 GHz and 28 GHz bands , as the first batch of spectrum for 5G services in late 
2018/ early 2019. The CA is also to assign 200 MHz of spectrum in the 3.4 -3.6 GHz band for the provision of 
public mobile services when this frequency block is reallocated from the fixed satellite service to the mobile 
service with effect from 1 April 2020.  
 
Making available the 5 GHz Shared Band for the provision of public mobile service s 
On 1 June 2018, the CA announced its decision to make available 580 MHz of spectrum in the 5 GHz band (the 
5 GHz Shared Band) for the provision of public mobile services on a shared basis, as well as the ass ociated 
regulatory and licensing regime. The move is intended to enable HKC to become one of the first in the world to 
adopt advanced mobile technologies such as Licensed Assisted Access for the provision of higher speed public 
mobile services. With a tota l bandwidth of 580 MHz, this adds to the existing total spectrum capacity of 
552 MHz in the sub -3 GHz bands already assigned to MNOs .  
 
More efficient utilization  of the eight -digit numbering plan 
Considering that the  number s available for allocation  in the eight-digit numbering plan in HKC are expected to 
be exhausted soon, the CA adopted several measures to efficiently utilize eight-digit numbering  for 
implementation in phases. Measures include the reallocation of numbers in different levels, i.e. 7(0-3)X, 4X, 
8(1-3)X and the release of the majority of numbers in the Special Number Blocks  (number blocks in a special 
or easily recognizable pattern),  and the increas e of the threshold of the utilization rate from 70% to 80%, for 
the allocation of additiona l numbers to operators . These measures have been implemented since 1 July 2017.  
 
Licensing  
 
Licence conditions  in the carrier licences  
To avoid  inconsistenc ies in licence  regulations provided in sector -specific provisions and cross -sectoral 
regulatory controls , the CA  and the SCED  jointly reviewed the licence conditions under the Telecommunication s 
Ordinance  (Cap.  106). On 5 September 201 4, the CA proposed to remove one of the General Conditions ( GCs), 
which restricted attachment to public buildings and  trees, and five Special Conditions (SCs) concerning network 
location, requirements of the installation of lines or cables, works in public streets, interference with works of 
others, and the licensee of the  network . The removal of the SCs and the GC took effect on 10 March 2015  and 
1 July 2016 , respectively . 
 
Facilitating the development of Wireless Internet of Things (WIoT) services  
The CA approved the creation of the new WIoT Licence on 1 December 2017 for the provision of WIoT  
platforms and services using the shared frequency band of 920 –925 MHz , with a view to laying down the 
foundation for embracing the IoT, 5G mobile services , and future smart city applications in HKC. WIoT Licences 
are subject to less stringent regulatory c ontrol and lower licence fee s as compared with the current UCL. 
Existing MNOs  can deploy  their assigned mobile spectrum for the provision of WIoT services , making use of 
mobile technologies (e.g. Narrowband -IoT) in accordance with the conditions of their U CLs. 
Source:  Information provided by the HKC authorities.  
4.4.2   Financial services  
4.4.2.1   Statistical overview  
4.31.   Financial services contributed to 17.7% of HKC's GDP in 2016, and provided 6.7% of 
employment in 201 7. Box 4.5 describes the main economic indicators of the financial services WT/TPR/S/380 • Hong Kong, China  
 
- 81 - 
 
  sector in general, while Boxes 4.6 to 4.9 describe in more detail the economic indicators of the 
banking subsector (Box 4.6), of the insurance subsector (Box 4.7), of the stock exchan ge and 
securities subsectors (Box 4.8) , and of the mandatory provident fund schemes subsector 
(Box 4.9). 
Box 4.5 Main economic indicators of the financial services sector  
General  
 
Share of financial services in  the GDP  
2012 (of which insurance) : 15.9% (2.9%) 
2016 (of which insurance) : 17.7% (3.7%)  
 
Share of financial services in total employment  
2012 (of which insurance) : 6.3% (1.3%) 
2016 (of which insurance) : 6.7% (1.6%) 
 
Net financial services export s 
2013: HK$95, 378 million (net financial services exports exclud ing insurance and pension services)  
HK$2,493  million (net insurance and pension services exports)  
2016: HK$ 101,932  million (net financial services exports exclud ing insurance and pension services)   
HK$171 million (net insurance and pension services exports)  
 
Capital stock of HK C financial services providers abroad  
Insurance service s providers:  
2012: HK$201.7  billion (2.2% of the total stock of outward direct investment ( DI))a  
2016: HK$255.2 billion ( 2.1% of the total stock of outward DI)a 
 
Banking and securities services providers: not available  
 
Significance of the financial services arm of Hong Kong Post  
The only financial services provided by Hong Kong Post are remittance services. The t otal remittance amount 
in 201 6/17 was HK$201 million (comprising i nbound HK$91 million (i.e. e -remittance HK$90.75 million and 
postal r emittance HK$0.25 million) and o utbound HK$110 million (i.e. e -remittance HK$109 million and 
postal r emittance HK$1 million )). The market share is insignificant . 
a Caution should be exercis ed in the interpretati on of the outward DI statistics . The stock of  outward 
DI (i) includes only claims by HKC residents that have a lasting interest and a significant degree of 
influence or an effective voice in the management (for statistical purposes, an effective voice is 
taken as being equivalent to a holding of 10% or more of the  voting power) of the non -resident 
enterprises; and (ii) comprises both equity and investment fund shares (including equity, shares and 
reinvestment of earnings) and debt instruments (inter -company debt). Thus, the definition of 
outward DI statistics does not exactly match with the definition of "Capital Stock Abroad".  
Source:  Information provided by the HKC authorities.  
Box 4.6 Banking subsector  
Banking services  
 
Number of banks and recent consolidation s 
2014a: 203 banksb (of which, foreign -controlled banksc: 47; branches of foreign banksd: 145) 
2017a: 191 banksb (of which, foreign -controlled banksc: 44; branches of foreign banksd: 138)  
Number of banks by type  (end-April 2018 ): 154 licensed banks; 19 restricte d licensed banks ; 17 deposit - 
taking companies; and 48  local representative offices of overseas bank ing institutions. These institutions 
(except for the latter) operate a network of 1,307  local branches .  
 
The top three banks ' assets as a share of  the total  assets of all commercial banks  at end -2014 and end -2017 
2014: 31%;  2017: 32% 
 
Authorized institutions' (AIs) total assets at end -2014 and end -2017 
2014: HK$1 8,442 billion (of which, foreign -controlled banks: HK$ 5,503  billion; branches of foreign  banks: 
HK$8,085  billion) 
2017: HK$ 22,697  billion (of which, foreign -controlled banks: HK$ 6,761  billion; branches of foreign banks: 
HK$ 10,057 billion) 
 WT/TPR/S/380 • Hong Kong, China  
 
- 82 - 
 
  Lending activities  (AI loan s outstanding at end -2014 and end -2017) 
2014: HK$ 7,276 billion (of which domestic lending: 70%; foreign lending: 30%)  
2017: HK$ 9,314  billion (of which domestic lending: 70%; foreign lending: 30%) 
 
AI investment in listed and unlisted shares at end -2014 and end -2017 
2014: HK$ 210 billion 
2017: HK$ 213 billion 
a Figures as at 31 December.  
b HKC maintains a three -tier system of deposit -taking institutions, namely, licensed banks (LB s), 
restricted -licence banks (RLB s) and deposit -taking companies (DTC s). They are collectively known 
as AIs. The figure includes LB s, RLB s and DTC s. Only LBs may operate current and savings accounts, 
accept deposits of any size and maturity from the public , and pay or collect cheques drawn by or 
paid in by customers. RLBs are principally engaged in merchant banking and capital markets 
activities , and may take deposits of a maturity of HK$500,000 and above. DTCs are mostly owned 
by, or otherwise associated with, banks; they are engaged in a range of activities, in particular 
consumer finance. The y are restricted to taking deposits of HK$100,000 or above with an original 
term to maturity of at least three months.  
c Foreign -controlled banks refer to banks, including LB s, RLBs and DTC s, incorporated in HKC with 
non-HKC-beneficial ownership.  
d Branche s of foreign banks refer to banks, including LB s, RLBs and DTC s, incorporated outside HKC.  
Source:  Information provided by the HKC authorities.  
Box 4.7 Insurance subsector  
Insurance  
 
Number of insurance companies and recent consolidation s 
2012: 155 companies , of which life: 44 (29 of which were incorporated outside H KC); non -life: 92 (34 of which 
were incorporated outside HKC ); composite: 19 (9 of which were incorporated outside HKC ). 
2017: 159 companies , of which life: 47 (28 of which were incorporated outside HKC); non -life: 93 (35 of which 
were incorporated outside HKC); composite: 19 (8 of which were incorporated outside HKC) .  
 
Life insurance premium volume to GDP  
2013: 12.1; 2017: 16.6%  
 
Non-life in surance premium volume to GDP  
2013: 2.0%; 2017: 1.8%  
 
Insurance density (US$/inhab .)  
2013: 5,343; 2016: 7,894  
 
Insurance penetration (% of GDP )  
2013: 14.0%; 2016: 18.1%  
 
Concentration  
Cumulative market share of the top five companies  as at end -December 2016 : life insurance 66.4%; non -life 
insurance 29.9 %; health  insurance:  not available ; reinsurance : not available.  
Source:  Information provided by the HKC authorities.  
Box 4.8 Stock exchange  and securities subsectors  
Stock exchange and securities  
 
Capitalization of the companies listed   
2013: Total market cap. HK$24,042.8 billion (i.e. 11.3 times the GDP of that  year)  
2017: Total market cap. HK$ 33,998.8  billion (i.e. 12.8 times the GDP of that year)  
 
Stock market total turnover to GDP (% ) 
2013: 713.9; 2017: 815.8  
 
Private bond market capitalization to GDP (% )  
No information is available, according to the authorities.  
 
 WT/TPR/S/380 • Hong Kong, China  
 
- 83 - 
 
  Public bond market capitalization to GDP (% ) 
No information is availabl e, according to the authorities.  
 
Securities turnover on the stock exchange (secondary market, 201 7) 
68.1% of equities; 16.6% of derivative warrants; 8.4% of Callable Bull/Bear Contracts (CBBCs) and 6.7% of 
Unit Trusts  
Source:  Information provided by the HKC authorities.  
Box 4.9 Mandatory provident fund schemes subsector  
Constituent funds of m andatory provident fund schemes  
Number of funds : March 2014: 477; December 2017: 469  
 
Total assets : March 2014: HK$516,1 92 million; December 2017: HK$843,515 million  
Source:  Information provided by the HKC authorities.  
4.4.2.2   Trade and regulatory regimes for financial services  
4.4.2.2.1   Trade and regulatory regimes for insurance services  
4.32.   Since its previous Review in 2014, t here have been a few changes in the regime , including : 
(1) the conclusion of the HKC -Macao CEPA and the HKC -ASEAN FTA, and the entering into force of 
the HKC -Chile FTA, which contain extensive commitments on insurance services; (2) the 
establishment , on 26  June 2017,  of a new Insurance Authority (IA) in charge of supervision and 
licensing; and ( 3) the adoption of new measures aimed at, inter alia,  ensuring that customers are 
informed about insurance products, and introducing a group and cross -sector supervision 
resolution regime over insurers.  
4.33.   Box 4.10 recapitulates the GATS and FTA commitments of HKC, while Box 4.11 describes 
the applied regulatory regime and the main recent regulatory evolutions in the sector.  
Box 4.10 Bound trade regimes for insurance services  
GATS commitments  
 
Unchanged since the previous TPR.  
 
 
FTA c ommitments  
 
HKC-EFTA- States FTA  (entered into force on 1 October 2012 for the part between HKC, Iceland, Liechtenstein 
and Switzerland; and on 1 November 2012 for the part between HKC and Norway)  
 
Unchanged since the previous TPR.  
 
HKC–New Zealand CEP Agreement  (entered into force on 1 January 2011)  
Unchanged since the previous TPR.  
 
 
CEPA with Mainland China  (entered into force on 29 June 2003 ; its subsidiary agreement, the Agreement on 
Trade in Services , entered into force  on 27 November 2015 ) 
 
Paragraph 2 of Article 3  of the Agreement on Trade in Services stipulates that HKC will not impose any new 
discriminatory measures on Mainland  China 's services or service suppliers in the areas where Mainland China 
has undertaken specific commitments on the liberalization of trade in services for HKC.  The two sides will 
formulate further liberali zation of trade in services of HKC for Mainland  China' s services and service suppliers.  
 
HKC-Chile FTA (entered into force on 9 Oct ober 2014) 
The c ommitments of HKC on insurance and insurance -related services for Modes 1 -3 essentially reflect its 
GATS  commitments as defined in Section 2 of Annex 12.5 to the HKC-Chile FTA. Mode 4: commitment on 
business visitors, in addition to GATS commitments.  
 
 WT/TPR/S/380 • Hong Kong, China  
 
- 84 - 
 
  HKC-Macao CEPA  (entered into force on 27 Oct ober 2017) 
 
The c ommitments of HKC on insurance and insurance -related services for Modes 1 -3 essentially reflect its 
GATS  commitments as defined in Annex 1 to the HKC-Macao CEPA.  Mode 4: commitment on business visitors, 
in addition to GATS commitments.  
 
HKC-ASEAN FTA  (signed on 12 November 201 7; and is to enter into force after the relevant parties complete 
the necessary procedures ) 
The c ommitments of HKC on insurance and insurance -related services for Modes 1 -3 essentially reflect its 
GATS  commitments as defined in Annex 8 -1 to the HKC-ASEAN FTA. Mode 4: commitment on business visitors, 
in addition to GATS commitments.  
Source:  HKC GATS Schedule, and information provided by the HKC authorities . 
Box 4.11 Applied trade regime and general regulatory framework for insurance services  
Applied trade regime  
 
Consistent with the commitments under HKC 's FTAs, and applied  erga omnes .  
 
No changes in the following areas  
Preferential arrangements, bilateral agreemen ts and MOUs, licensing criteria and procedures , and the following 
aspects of prudential regulations: differences of treatment between domestically owned firms, foreign -owned 
branches, and foreign -owned subsidiaries ; recognition of home country supervision of foreign insurance 
companies ; minimum capital requirements to obtain a licence ; administrative allocation of insurance services ; 
and the approval process for life and non -life premiums and products.  
 
General regulatory framework  
During the period under r eview, some regulations were amended, including an amendment in 2015 to the 
previous Insurance Companies Ordinance to replace it with the new Insurance Ordinance (Cap. 41) and its 
subsidiary legislation , which regulate t he provision of insurance services in HKC.  
 
Supervisory authorities  
On 26 June 2017, the IA took over the statutory functions of the Office of the Commissioner of Insurance 
(OCI). The OCI was disbanded on the same day.  
 
Prudential regulations  
 
IA 
 
On 10 July 2015, the Insurance Ordinance (Cap. 41) was enacted to provide for, inter alia,  the establishment 
of an IA , with a view to modernizing the regulatory framework of insurance  in HKC , and ensuring the financial 
and operational independence of the IA from the G overnment and the relevant industry. The primary 
regulatory functions of the IA are to ensure the financial soundness of insurers and the protection of policy 
holders. Currently, insurance intermediaries are still governed by three self -regulatory organizations (i.e. the 
Insurance A gents' Registration Board, the Hong Kong Confederation of Insurance Brokers, and the Professional 
Insurance Brokers' Association). According to the authorities, the IA is to take over the duties of the three self -
regulatory organizations and administer a n ew statutory licensing regime of directly regulating insurance 
intermediaries in mid -2019.   
 
To achieve long -run financial independence, the Insurance Ordinance (Cap. 41) empowers the IA to collect a 
premium levy from policy holders, authorization fees fro m insurance companies , and fees from users for 
specific services from 1 January 2018. Regulatory details are provided in the Insurance (Levy) Regulation  
(Cap.  411), which entered into force on the same day.  
Policy -holders Protection Fund  
 
Following the 20 10 initiative for establishing a Policy -holders ' Protection Fund (PPF) to serve as a safety net for 
policy  holders in the event of an insurer becoming insolvent, HKC authorities conducted a three -month public 
consultation on the establishment of the PPF, its coverage, the level of compensation, the funding mechanism 
and governance arrangements. The final proposals were announced in January 2012. The PPF proposal 
comprises two independently operated schemes (i.e. the Life Scheme and the Non -Life Scheme) and covers 
individual policy  holders and SMEs. The compensation limit for the PPF would be 100% for the first 
HK$100,000 of any claim, plus 80% of the balance up to a  total of HK$1  million. The compensation limit would 
be on a per -policy basis  for life insurance , and on a per -claim basis for non -life insurance. It would be funded 
by the L evy. The initial levy rate for both the Life Scheme and the Non-Life Scheme would be 0.07% of the 
applicable premiums collected from insurers. The PPF would  be administered by a statutory body, and would be 
overseen by  an independent governing body , i.e. the PPF Board , which would be  compris ed of  professionals WT/TPR/S/380 • Hong Kong, China  
 
- 85 - 
 
  experienced in insurance, finance, accounting, law and consumer affairs , and ex-officio  representatives from 
the Government.  The Government is preparing the enabling legislation for its establishment.  
 
The related legislation is being drafted and is expected to be put before the  Legislative Council in the 2018 -
19 legislative year .  
 
Consumer protection measures for the purchase of Investment Linked Assurance Schemes (ILAS s) 
 
These measures have been r einforced to ensure that policy holders are aware of the risks , and that products 
are appropriately aligned with the risk profile of the investors. These include extending the cooling -off period to 
21 days, prohibiting insurers from offering gifts, requiring customers to complete a consolidated important fact 
statemen t and applicant's declaration , and extending the post -sales confirmation calls to all customers.  
 
During the review period, a number of measures were adopted  with a view to ensuring that customers are 
informed about insurance products.  
 
Standard Benefit Il lustrations for Participating Policies and Standard Illustration for Universal Life (Non -Linked) 
Policies were issued in October 2015 , with the aim of enhanc ing the transparency of life insurance policies and 
enabl ing customers to make informed decisions. For participating policies, insurance companies must include 
projections under pessimistic and optimistic scenarios to show the variations in  non-guaranteed benefits. For 
Universal Life (Non-Linked) Policies, insurers must explain changing interest rates when indicating crediting 
interest rates.  
 
In addition, to fully inform Mainland China visitors of the risks of buying insurance in HKC, insurers must 
include an "Important Facts Statement for Mainland China P olicy Holders" in new applications of individual 
long-term insurance policies made by Mainland China visitors , with effect from 1 September 2016.  
 
Group and cross -sector supervision  
In order to work closely with regulators in other jurisdictions in regulating majo r insurance gr oups, the IA  
participates in and convenes supervisory colleges. In  2016, the IA held two supervisory colleges in HKC for two 
insurance groups based in HKC , respectively, and participated in other supervisory colleges .a 
 
Development of a risk -based capital  (RBC) framework   
To be aligned with international regulatory practices, the IA is reviewing the solvency and capital regime , with 
a view to developing an appropriate RBC framework for HKC, taking into account experiences in other 
jurisdiction s and the latest international regulatory requirements . 
 
The RBC regime is to be developed in four phases. Phase one included the development of the framework, the 
consultation of which was concluded on 30 September 2015. According to the authorities, the RBC framework 
comprises requirements for quantitative aspects (including the assessment of capital adequacy and valuation); 
qualitative aspects (consist ing of corporate governance, Enterprise Risk Management , and an  Own Risk and 
Solvency Assessment); transparency disclosure ; and group -wide supervision.  
 
Phase two involve s the develo pment of  detailed rules  of the RBC framework; p hase three will focus on 
legislation; and phase four on implementation.  
 
Currently, the RBC regime is in phase two , and the IA is carrying out Quantitative Impact Study (QIS) 
exercises in respect of quantitat ive aspects for data collection and impact analysis. The IA completed the first 
QIS in late 2017 and will launch the second and third QIS s around mid -2018 and mid -2019, respectively.  
 
Regarding the qualitative aspects, the IA aims to issue a g uideline on enterprise risk management by late 
2018.  
 
Resolution r egime  
The Financial Stability Board  (FSB) 's Key Attributes of Effective Resolution Regimes for Financial Institutions 
(Key Attributes) set 12 standards , with a view to ensur ing that systemically impo rtant financial institutions are 
allowed to fail safely without posing a threat to the stability of the financial system.  
 
In line with the FSB's standards, the Financial Institutions (Resolution) Ordinance (Cap. 628) (FIRO) came into 
operation on 7 July 2017. Under the Ordinance, a cross -sector resolution regime was established , where the 
Monetary Authority , the IA and the Securities and Futures Commission ( SFC) are the respective resolution 
authorities for the banking, insurance, and securities and futures sectors. They are vested with a range of 
powers to effect the resolution of what they consider "non -viable systemically important" financial institutions 
in HKC, with a view to mitigating risks posed by non -viability to the stability and effective working of the HKC 
financial system, while imposing losses on the institutions' shareholders and creditors (thereby minimizing risks 
posed to public funds).b  
 
Insurtech developmentc 
On 29 September 2017, the IA introduc ed two "Insurtech " initiatives , i.e. Insurtech Sandbox and Fast Track . WT/TPR/S/380 • Hong Kong, China  
 
- 86 - 
 
  Sandbox allows insurers to conduct pilot trials of Insur tech in a controlled environment, which is intended to 
enable insurers to collect market data on the one hand, and for  the IA to keep up to date with Insu rtech trends  
so as to be able to better regulate insurance innovations  on the other.  Fast Track  introduced a queue for new 
authorization applications from insurers , through digital distribution channels.  
a IA online information (pp.  107-108). Viewed at 
https://www.ia.org.hk/en/infocenter/files/AR2016.pdf . 
b Legislative Council online information. Viewed at: http://www.legco.gov.hk/yr15 -
16/english/bills/brief/b201511201_brf.pdf , and Hong Kong Monetary Authority (HKMA) online 
information. Viewed at: http://www.hkma.gov.hk/eng/ key-functions/banking -stability/resolution . 
c  IA online information. Viewed at: https://www.ia.org.hk/en/aboutus/insurtech_corner.html . 
Source:  Information provided by the HKC authorit ies.  
4.4.2.2.2   Trade and regulatory regimes for banking and other financial services  
4.34.   Since its previous Review, the main changes for banking services in HKC concern the 
following areas: (1) the conclusion of a HKC -Macao CEPA and a HKC -ASEAN FTA as well as the 
enter ing into force of the HKC -Chile FTA, which contain extensive commitments  on banking 
services; (2) the extension of the supervision of the Hong Kong Monetary Authority (HKMA) to 
Stored Value Facilities (SVF) and Retail Payment Systems (RPS) ; (3) measures to  bring the 
financial regulatory regime of HKC in line with international standards as set out in Basel III reform 
package and FSB's Key Attributes ; and (4) the enhancement of regulatory regime for anti -money -
laundering.  
4.35.   Regarding "other financial services" (mainly securities, Mandatory Provident Fund Scheme, 
mutual funds) the main changes since the previous review include: a further disclosure 
requirement for Independent Non -Executive Directors  (INEDs ) in listed companies , and a 
mandatory diversity policy for the ir board s; the expansion of the scope of the short position 
reporting regime ; stock and bond connect initiatives with Mainland China;  the establishment of a 
regulatory regime for over -the-counter (OTC) derivatives ; the introduction of a regulatory 
framework for a n ew open-ended fund company structure ; the enhancement of the Code on Unit 
Trusts  and Mutual Funds and the Code on Real Estate Investment Trusts;  the launch of the mutual 
recognition of funds scheme s with France, Mainland China, and Switzerland ; and the stamp duty 
waiver for E xchange Traded Funds (ETFs) . In the MPF sector, a Mandatory Provident Fund 
Schemes (Amendment) Ordinance 2016 was adopted in June 2016 to, inter alia,  require trustees 
operating MPF sch emes to provide in each scheme a Default Investment Strategy (DIS) with 
standardized features set out in the legislation.23 
4.36.   Box 4. 12 recapitulates the GATS and FTA commitments of HKC, while Boxes 4.1 3 to 4.1 5 
describe the regulatory regime and the recent re gulatory evolutions for banking services 
(Box 4.13), securities (Box 4.14) and mutual funds and asset management (Box 4.15) , 
respectively.  
Box 4.12 Bound regimes for banking services and other financial services  
GATS c ommitments  
Unchanged since the previous Review.  
 
FTA commitments  
 
HKC-EFTA States FTA   
Unchanged since the previous Review.  
 
HKC–New Zealand CEP Agreement  (entered into force on 1 January 2011)  
Unchanged since the previous Review.  
 
CEPA with Mainland China  (entered into force on 29 June 2003 ; its subsidiary agreement, the Agreement on 
Trade in Services , entered into force  on 27 November 2015 ) 
Paragraph 2 of Article 3 of the CEPA Agreement on Trade in Services stipulates that HKC will not impose any 
                                                
23 The DIS, launched on 1 April 2017, is designed mainly for scheme members that do not give their 
trustees any investment instructions for their MPF benefits, to be consistent with the objective of building up 
long-term retire ment savings. Financial Services and Treasury Bureau online information. Viewed at: 
https://www.fstb.gov.hk/fsb/topical/doc/dis_amendment_ordinance_e.pdf . WT/TPR/S/380 • Hong Kong, China  
 
- 87 - 
 
  new discriminatory measures on Mainland  China 's services or service suppliers in the areas where Mainland 
China has undertaken specific commitments on the liberalization of trade in ser vices for HKC. The two sides 
will formulate further liberali zation of trade in services of HKC for Mainland  China' s services and service 
suppliers.  
 
HKC-Chile FTA (entered into force on 9 Oct ober 2014) 
Acceptance of deposits and other repayable funds from the public  
 
Market access:  
Mode s 1 and 2: same regime as GATS.  
Mode 3: all authorized institutions (i.e. RLBs a nd DTCs) shall maintain a physical presence in HKC.  
Mode 4: commitment on business visitors, in addition to GATS commitments  
Nation al treatment: same regime as GATS.  
 
Other commitments of HKC on banking and other financial services essentially reflect its GATS  commitments 
as defined in Section 2 of Annex 12.5 to the HKC-Chile Agreement.  
 
HKC-Macao CEPA  (entered into force on 27 Oct ober 2017) 
Acceptance of deposits and other repayable funds from the public  
In line with the commitments under the HKC -Chile FTA  
 
All payment and money transmission services  
Market access: Modes 1 -3: same regime as GATS ; Mode 4: commitment on business visitors,  in addition to 
GATS commitments  
 
National treatment:  
Mode s 1, 2 and 4: same regime as GATS.  
Mode 3: none, other than that all licensees operat ing SVFs must appoint a chief executive and not less than 
one alternative chief executive , each of whom shall be  an individual who is ordinarily resident in HKC.  
 
Other commitments of HKC on banking and other financial services essentially reflect its GATS  commitments 
as defined in Annex 1 to the HKC-Macao CEPA.  
 
HKC-ASEAN FTA  (signed  on 12 November 2017; and is to enter into force after the relevant parties complete 
the necessary procedures ) 
In line with the commitments under the HKC -Macao FTA, which are applied erga omnes . 
 
Applied trade regime  
 
In line with the commitments under the HKC -Macao FTA and the HKC -ASEAN FTA, and is applied erga 
omnes .  
Source:  Information provided by the HKC authorities.  
Box 4.13 Regulatory framework for banking services  
No changes since the last Review  in the following areas  
 
Preferential arrangements affecting banking services, recognition of prudential measures of other countries 
through international agreements or unilaterally, licensing, and the deposit insurance scheme .  
 
Regulatory framework for b anking services  
The framework for the prudential regulation of the banking sector in HKC is based on international standards 
set by the Basel Committee and the FSB. In this regard, t he regulatory basis is provided in the Banking 
Ordinance  (Cap. 155) (BO) and its subsidiary legislation. During the period under review, the BO was 
amended, and several pieces of subsidiary legislation were drafted to implement recent Basel FSB  standards  
(see below).  
 
Supervisory authorities  
The HKMA is the regulatory authori ty for banking sectors in HKC.  
 
It is empowered to implement the regulatory regime for SVF s, RPSs and the Clearing and Settlement System 
(CSS) under the Payment Systems and Stored Value Facilities Ordinance ( Cap. 584),  with a view to promot ing 
the safety a nd efficiency of the operations of SVF s, RPSs and the CSS in HKC.  
 WT/TPR/S/380 • Hong Kong, China  
 
- 88 - 
 
  Licensing  
The HKMA is the licensing authorization authority. During the review period, there was no change in the 
licensing  requirements . 
 
The b anking industry in HKC has adopted a three -tier system of deposit -taking institutions, including LBs, RLBs 
and DTCs, which are collectively known as AIs. Only LBs  are allowed to operate current and savings accounts, 
and take deposits of any size and maturi ty. RLBs  are allowed to take deposits of any maturity of HK$500,000 
and above , and their main operations are in merchant banking and capital market activities. DTCs  may accept 
deposits of HK$100,000 or above with an original term of maturity of at least th ree months.  
 
Prudential regulations  
Measures to ensure compliance with the Basel Committee's Core Principles for Effective Banking Supervision :  
Basel III  
 
The authorities indicated that the HKMA implemented Basel III in accordance  with the internationally agreed 
timeline.  
The Monetary Authority periodically proposes amendments to the BO and to the rules made under it ( viz. 
Banking (Capital) Rules  (Cap. 155L) (BCR) , Banking (Disclosure) Rules (Cap. 155M) (BDR)  and Banking 
(Liquidity ) Rules (Cap. 155Q) (BLR) ), with a view to aligning the regulatory regime in the light of  relevant 
international standards and evolving practices. The BO and the BCR were amended in 2012 to provide the legal 
framework for the introduction of Basel III.  
During the review period , the BO and several pieces of subsidiary legislation were amended to implement the 
Basel III capital and liquidity requirements  and other related Basel standards . This covered amendments to : 
(1) the BCR for implementing the Basel III  capital buffer requirements, the Basel revised securiti zation 
framework, the minimum leverage ratio requirement , and the capital treatment of expected loss provisions 
under International Financial Reporting Standard 9; (2) the BDR for implementing revised  disclosure 
requirements ; and (3) the BLR  for implementing the net stable funding ratio . In addition, the BO was amended 
in 2018 to mandate recovery planning by banks, and provided for new rule -making power s to facilitate the 
implementation of the revised Basel Committee 's exposure standards locally in 2019.  
Financial Sector Assessment Programme (FSAP ) 
In May 2014, the IMF concluded its examination of HKC under the FSAP , and concluded that banks in HKC 
were w ell positioned to absorb a significant realization of risks.a 
 
The F SB's Key Attributes set 12 standards to ensure that systemically important financial institutions can be 
allowed to fail safely without posing a threat to the stability of the financial sy stem.  
 
In line with the FSB's standards, the F IRO came into operation on 7 July 2017. Under the FIRO, a cross -sector 
resolution regime was established where the Monetary Authority , the IA and the SFC are respective resolution 
authorities for banking, insu rance , and securities and futures sectors. To operationali ze the resolution regime, 
three Codes of Practice chapters under the Ordinance have been published to date by the HKMA, namely : 
(1) Core Information Requirements for Resolution Planning ; (2) The HKMA 's Approach to Resolution Planning ; 
and (3) Operational Independence of the Monetary Authority as Resolution Authority. Furthermore, the HKMA 
issued a public consultation on the policy proposals in relation to LAC requirement rules for authorized 
institutions under the FIRO in January 2018. The provisions in the Banking (Amendment) Ordinance 2018 
relating to recovery planning, which implement relevant Key Attributes of the FSB, came into effect on 
2 February 2018 . 
 
Specific provisions against money -laundering  
During the period under review, the Anti -Money Laundering and Counter -Terrorist Financing (Financial 
Institutions) Ordinance (Cap. 615), applicable to financial institutions, was amended to extend the customer 
due diligence and record -keeping requi rement to designated non -financial business and professions . The 
amended Ordinance (the Anti -Money Laundering and Counter -Terrorist Financing Ordinance) came into 
operation on 1 March 2018.  
 
Bank deposit insurance scheme  
No changes in the scope and level of protection  since the previous Review. With a view to implement ing a fast 
compensation regime, the amended Deposit Protection Scheme Ordinance (Cap. 581) entered into force on 
24 March 2016.  
a For further elements, see the IMF report at: 
http://www.imf.org/external/pubs/ft/scr/2014/cr14130.pdf . 
Source:  Information provided by the HKC authorities.  WT/TPR/S/380 • Hong Kong, China  
 
- 89 - 
 
  Box 4.14 Regulatory framework for securiti es 
The SFC is the regulatory agency responsible for the securities and futures  markets . The Securities and Future s 
Ordinance (Cap. 571) (SFO) and a number of other provisions provide the legal basis for the SFC to regulate 
the securities and futures market s. 
 
Provisions on shareholders' rights in companies listed on the stock exchange and on companies' obligations to 
disclose information  
The statutory disclosure regime : no changes since the previous Review.  
 
On 3 November 2017, consultation s to review  the Corporate Governance Code (the Code) of the Stock 
Exchange of Hong Kong (SEHK) and its Listing Rules (the Rules) w ere launched , with a view  to, inter alia,  
enhancing the overall independence of INEDs . Key proposed amendments included the disclosure re quirement 
of the nomination and selection process for INEDs .  
 
The Companies Ordinance (Cap. 622) , amended in July 2012, entered into force on 3 March 2014. The 
Companies Ordinance was further amended in 2013 and 2015 . The 2013 Amendment modified Schedule s 7 
and 10 of the Ordinance ; and two items describing  conditions under which offences would not be subject to 
proceedings  were added to Schedule 7 . The 2015 Amendment mainly involved adjustments of terminology.  
 
A company is a separate legal entity, that is, it is a legal person in its own right and separate from its owners. 
The benefit of limited liability through operating as a limited company als o brings with it obligations insofar  as 
the company must co mply wi th the various provisions  of the Companies Ordinance ( Cap. 622). These 
obligations include the timely disclosure and reporting of specified information about the company, its officers 
and shareholders , and any changes in such information , to the Registrar of Companies , so that members of the 
public have ready access to the latest information of the company kept by the Registrar of Companies .a 
 
Securities and Futures Short Position Reporting Rules   
The Securities and Futures (Short Position Reporting) Rules  (Cap. 571A) stipulate a short position reporting 
regime, under which those who hold short positions in specific shares are required to report to the SFC. In 
March 2017, the SFC expanded the scope of the short position reporting regime to cover all 889 Desi gnated 
Securities (compared with 127 previously) that can be short sold, with a view to enhancing the transparency 
and monitoring of short selling activities .b Designated Securities refer to securities with sufficient liquidity, 
including constituent stock s of equity indices, ETFs, underlying stocks of options and futures contracts , as well 
as other stocks with a relatively large market capitalization and turnover volume.  The list of Designated 
Securities is reviewed regularly.  
Position limit regime  
On 1 June 2017, the SFC expanded the categories of persons that may be authorized to hold or control a 
position in certain futures contract s in excess of the prescribed limits, and increased the prescribed limits for 
stock options contracts with a view to facilitating market  development.c 
 
Regulatory regime for credit rating a gencies  
Unchanged since the previous Review.  
 
Stock and Bond Connect Initiatives with Mainland China  
In November 2014, the Shanghai -Hong Kong Stock Connectd was launched . This has allowed investors from 
Mainland China  to trade securities listed in Hong Kong Exchanges and Clearing Limited ( HKEX ); and investors 
in HKC have been allowed to purchase selected A shares listed in the Shanghai Stock Exchange (SSE) . This 
scheme was extended to Shenzhen through the Shenzhen -Hong Kong Stock Connect  in December 2016. On 
1 May 2018, the daily quotas were increased to renminbi ( RMB) 52 billion for each of the northbound trading 
links and RMB 42 billion for each of the southbound trading links.  In July 2017, "Bond Connecte" was launched; 
in the first phase, it allows overseas investors to invest in Mainland China's  bond market through  HKC.  
 
Regulatory regime  for OTC derivatives  
In 2014, the Securities and Futures (Amendment) Ordinance 2014  was enacted , with a view to complying with 
the G20 commitments on regulating the OTC derivatives  markets.f The Amendments provided a regulatory 
framework  for the OTC derivatives market in HKC , including introducing the mandatory report ing, clearing, and 
platform -trading obligations, which are being implemented in phases. Phase one, which came into effect  on 
10 July 2015, introduced the mandatory reporting of transactions in certain interest rate swaps (IRS s) and 
non-deliverable forwards ; and the developmen t of a framework for the OTC regulatory regime. Phase two 
required the mandatory clearing of dealer -to-dealer trades in certain interest rate derivatives and the 
designation of central counterparties (CCPs)  for the purposes of mandatory clearing ; and expan ded mandatory 
reporting  to cover all interest rate derivatives, foreign exchange derivatives, equity derivatives, credit 
derivatives and commodity derivatives . Such mandatory clearing took effect on 1 September 2016, and the 
expanded mandatory reporting took effect on 1 July 2017 .  
 
The SFC and the HKMA issued a joint consultation in April 2017 and published consultation conclusions in 
June 2017 on proposals to exclude certain exchange -traded derivatives and Delta One Warrants from the WT/TPR/S/380 • Hong Kong, China  
 
- 90 - 
 
  definition of "OTC derivative products ". Furthermore, the SFC issued a two -month consultation in 
December  2017 on proposals to refine the scope of regulated ac tivities under the OTC derivatives regime. The 
consultation also included proposals related to risk mitigation, client clearing, record keeping and other conduct 
requirements for OTC derivatives transactions, licensing fees, insurance, and competence and t raining 
requirements under the new OTC derivative licensing regime; and proposals to require licensed corporations to 
properly manage financial exposures to group affiliates and other connected persons. The c onsultation closed 
in February 2018.  
 
In March 2 018, the SFC and the HKMA issued a joint consultation on enhancements to the OTC derivatives 
regulatory regime to mandate the use of Legal Entity Identifiers for the reporting obligation, expand the 
clearing obligation , and adopt a trading determination pr ocess for introducing a platform trading obligation.  
 
For non -centrally cleared OTC derivatives (NCCDs)  transactions of HKC banks, the HKMA promulgated the Non-
Centrally Cleared OTC Derivatives Transactions  - Margin and Other Risk Mitigation Standards  under the 
Supervisory Policy Manual  in January 2017, which set the margining requirements and risk mitigation 
requirements for NCCDs. Those requirements started to be phase d in from 1 March 2017, subject to a six -
month transition period.  
 
Resolution regime  
The FSB's Key Attributes set 12 standards to ensure that systemically important financial institutions can be 
allowed to fail safely without posing a threat to the stability of the financial system.  
 
In line with the FSB 's standards, the FIRO came into op eration on 7 July 2017 . Under the FIRO, a cross -sector 
resolution regime was established where the Monetary Authority, the IA and the SFC are respective resolution 
authorities for the banking, insurance and securities and futures sectors.  
 
Supervision Collaboration  
On 13 November 2015, the Securities and Futures (Amendment) Ordinance 2015g entered into force, which 
allowed the SFC to provide supervisory assistance to regulators in other jurisdictions, with the aim of 
enhanc ing the stability and development of the HKC financial market.  
 
Manager -in-Charge regime  
In October 2017, the SFC implemented the Manager -In-Charge ( MIC) regime , with a view to enhanc ing the 
accountability of senior management of licensed corporations and to promote awareness of senior 
management obligations under the existing regulatory framework. Under the regime, firms are required to 
identify their MICs responsible for managing core functions , and to notify the SFC of their management 
structures in a standardized format. In addition, M ICs of overall management oversight and key business line 
functions are expected to be licensed by the SFC as responsible officers.  
 
Enhanced conduct regulations  
In 2017, the SFC enhanced conduct regulations governing intermediaries distributing investment  products and 
fund managers in light of international regulatory developments. The SFC also issued a new set of guidelines 
on online distribution and advisory platforms in 2018 , with a view to facilitating the growth of online platforms.  
a For further elements, see: http://www.cr.gov.hk/en/compliance/obligations.htm . 
b For further elements, see: http://www.legco.gov.hk/yr15 -
16/english/subleg/brief/2016ln039_brf.pdf . 
c For further elements, see: http://www.legco.gov.hk/yr16 -
17/english/subleg/brief/2017ln044_br f.pdf. 
d For further elements, see : http://www.hkex.com.hk/mutual -market/stock -connect/reference -
materials/announcement?sc_lang=en . 
e For further  elements, see: http://www.chinabondconnect.com/en/index.htm , and 
http://www.hkma.gov.hk/eng/key -information/press -releases/2017/20170516 -5.shtml . 
f For further elements, see: https://www.elegislation.gov.hk/hk/2014/6!en , 
http://www.legco.gov.hk/yr14 -15/english/subleg/brief/95 -97_brf.pdf , and 
https://www.fstb.gov.hk/fsb/ppr/legco/doc/b030216_e.pdf . 
g For furth er elements, see: http://www.legco.gov.hk/yr14 -15/english/bills/b201506121.pdf , and 
http://www.info. gov.hk/gia/general/201511/13/P201511120824.htm . 
Source:  Information provided by the HKC authorities.  
Box 4.15 Regulatory framework for mutual funds and asset management  
New open -ended fund company (OFC) structure  
The Securities and Futures (Amendment) Ordinance 2016, which enables the introduc tion of a new OFC 
structure in HKC , came into force in June 2016 .a The new OFC regime is to allow funds to be set up in the form 
of a company, with the flexibility t o create or cancel shares when investors subscribe or redeem the funds. 
Previously, an open -ended investment fund could be established under the laws of HKC in the form of a unit 
trust but not in a corporate form , due to various restrictions on capital red uction under the Companies WT/TPR/S/380 • Hong Kong, China  
 
- 91 - 
 
  Ordinance  (Cap. 622) . Following the passage of the Bill, the SFC launched a consultation on the Securities and 
Futures (Open -ended Fund Companies) Rules (Cap. 571AQ) (QFC Rules) and Code on Open -ended Fund 
Companies  in mid -2017, which set out the proposed detailed regulation s concerning OFC s. The consultation 
conclusions were published in May 2018. The new OFC regulatory regime and the associated tax treatment 
were expected to commence in July 2018 following the completion of the legislative process of the OFC -related 
subsidiary legislation (including the OFC Rules) , which were gazetted in May 2018 . 
 
Code on Unit Trusts and Mutual Funds (UT Code ) 
On 30 January 2015, the SFC amended the UT Code , with a view to providing public funds with greater 
flexibility in determining the means of making public their offer and  redemption prices , net asset values (NAVs)  
and notices of dealing suspension . To update the regulatory regime for public funds to align  it with 
international standards and address the risks posed by financial innovation and fast moving market 
development s, the SFC launched a three-month consultation on the proposed amendment s to the UT Code  on 
18 December  2017. Key proposals include d strengthening  the requirements for key operators  (management 
companies, trustees and custodians), providing  greater flexibility and enhanced safeguards for fund activities 
(particularly in relation to derivatives, securities lending, and repo and reverse repo transactions) , and 
introduc ing new types of funds  (including active exchange -traded funds ( ETFs)). The SFC is currently 
considering the consultation responses . 
 
Real Estate Investment Trust (REIT)  market development  
The SFC amended the Code on REITs in August  2014, with the aim of providing greater flexibility to investment 
in properties under development or engagement in property  development activities , and investment in financial 
instruments . 
 
Mutual recognition of funds (MRF)  
Under a n MRF arrangement, eligible public funds can be distributed in another  country 's market through a 
streamlined vetting process.  The SFC signed MoUs with Switzerland and France  on 2 December 2016  and 
10 July 2017 , respectively,  with the aim of provid ing MRF in both markets .b The MoU with France was HKC's 
first agreement of funds recognition with an EU member. Four HKC funds have been approved to date by the 
Swiss Financial Market Supervisory Authority (FINMA) for public offering in Switzerland.  
 
On 22 May 2015, the Mainland  China -HKC MRF initiative  was jointly launched by the SFC and the China 
Securities Regulatory Commission (CSRC) , with a view to strengthening  financial cooperation between HKC and 
Mainland China. The initiative was  implemented o n 1 July 2015 , with an initial investment quota  of 
RMB300  billion for in and out fund flows each way .c To date, 64 fundsd have been approved by the 
two regulators. As of 30 April 2018, the cumulative net sales of Mainland China funds and HKC funds amounted 
to about RMB420 million and RMB11.5 billion , respectively, representing a year -on-year increase of 278% and 
56%, respectively . 
 
Stamp Duty Waiver for ETF s 
Stamp duty for ETF s has been waived since 13 February 2015, pursuant to the Stamp  Duty (Amendment) 
Ordinance 2015e, which aimed to enhance the development of ETF trading and to increase the competi tiveness 
of HKC as an international financial hub.  
a For further elements, see : https://www.gld.gov.hk/egazette/pdf/20162023/es12016202316.pdf . 
b SFC online information. Viewed at: https://www.sfc.hk/edistributionWeb/gateway/EN/news -and-
announcements/news/doc?refNo=16PR132 , and 
https://www.sfc.hk/edistributionWeb/gateway/EN/news -and-
announcements/news/doc?refNo=17PR95 . 
c SFC online information. Viewed at: http://www.sfc.hk/edistributionWeb/gateway/EN/news -and-
announcements/news/doc?refNo=15PR52 . 
d The CSRC and the SFC ha ve authorized 14 HKC funds and 50 Mainland China funds for distribution 
to the public in the Mainland  China and HKC , respectively.  
e For further elements, see: https://www.fstb.gov.hk/fsb/ppr/legco/doc/b051214_e.pdf . 
Source:  Information provided by the HKC authorities.   
4.4.3   Legal services   
4.4.3.1   Statistics overview  
4.37.   HKC's trade in legal services is in surplus, with exports increasing at an average annual rate 
of 10.3% between 2006 and 2016.24 As at 16 March  2018, there were 12,313 practising lawyers, 
of which 9,398 were solicitors , 1,422 barristers  and 1,493  foreign lawyers  (Box 4. 16). There were 
891 HKC law firms, 85 foreign law firms , and 37 associations.  
                                                
24 Calculation based on data from Hong Kong Trade in Services Statistics  in 2007, 2010, 2013, and 
2016.  WT/TPR/S/380 • Hong Kong, China  
 
- 92 - 
 
  Box 4.16 Main economic indicators of the legal services  
Share of value added  of legal, accounting and auditing services in GDPa  
2007: 1.1%  
2016: 1.4%  
 
Share of legal, accounting and auditing services in total employment   
2007: 1.2%  
2016: 1.4%  
 
Net legal services export s (HK$ million)  
2007: 624  
2016: 1,307   
 
Employment  
 
Number of practising lawyers   
2007: 8,008  (of which solicitors: 5,925 ; barristers:  1,042 ; foreign lawyersb: 1,041 ) (as of December  2007) 
(number of foreign legal professional s admitted via (a) the Barristers Qualification Examination : none; (b) the 
Overseas Lawyers Qualification Examination : data not available) (as of 31 December 2007) 
2018: 12,313 (of which solicitors: 9,398;  barristers:  1,422; foreign lawyers : 1,493) (as of 16 March  2018) 
(number of foreign legal professional admitted via (a) the Barristers Qualifi cation Examination : data not 
available yet; (b) the Overseas Lawyers Qualification Examination : data not available) (as of 30 April 2018)  
 
Number of registered law firms  
2007: 765 (of which HKC law firms: 709; foreign law firms: 56) (as of 31 December 2007)  
2018: 976 (of which HK C law firms: 891; foreign law firms: 85) ( as of 16 March  2018) 
 
Number of r egistered  associations (foreign law firm s associated  with HK C law firm s) 
2007: 18 (as of 31 December 2007)  
2018: 37  (as of 16 March  2018) 
a Share of value added of the  legal, accounting and auditing services  in GDP.  Share of value added of 
only legal services in GDP is not available.  
b Foreign lawyers  refers to those who offer services to the public as a practitioner of foreign law , other 
than a solicitor or  barrister . 
Source:  Information provided by the authorities; the Law Society of Hong Kong  (LawSoc) ; the Census and 
Statistics  Department ; and the Hong Kong Bar Association . 
4.4.3.2   Regulatory regime  
4.38.   The legal profession in HKC is made up of two branche s, namely, solicitors and barristers; 
they are self -regulated by LawSoc  and the Hong Kong Bar Association,  respectively. The legal 
framework is provided in the Legal Practitioner Ordinance (Cap.  159) and its subsidiary 
legislation.25  
4.39.   A solicitor is not allowed to practise as a barrister at the same time, and vice versa . In 
addition, s olicitors have limited rights of audience . They are only allowed to appear in specific 
courts , such as the Lands Tribunal, the Magistrate s' Courts, and the District Court , whereas 
barristers have unlimited rights of audience in all courts . In the Legal Practitioners (Amendment) 
Ordinance 2010 , eligible solicitors are allowed to apply for higher rights of audience and thus to 
appear as solicitor  advocates  before higher courts .26 As at 1 May 2018 , there were 54 solicitor s 
advocates.27 
4.40.   Barristers may operate as self-employed independent legal practitioners  or practi se in 
chambers; while solicitors may operate as sole practitioners, or in general partnerships or i n group 
practices.28 Under the Legal Practitioners (Amendment) Ordinance 2012 , which entered into force 
                                                
25 Subsidiary legislation include s, inter alia , the Overseas Lawyers (Qualification for Admission) Rules 
(Cap. 159Q) ; the Foreign Lawyers Practice Rules  (Cap. 159 R); the Foreign Lawyers Registration Rules 
(Cap. 159S) ; and the Barristers (Qualification for Admission and Pupillage) Rules (Cap. 159AC) . 
26 Higher courts include  the Competition Tribunal, the High Court and the Court of Final Appeal .  
27 LawSoc  online information. Viewed at: http://www.hklawsoc.org.hk/pub_e/HRA/default.asp . 
28 International Bar Association (IBA) , pp. 211-217, Report on Regulation and Trade in Legal Services, 
an Extract for Trade in Services Agreement Negotiations , June 2014. Viewed at: WT/TPR/S/380 • Hong Kong, China  
 
- 93 - 
 
  on 1 March 2016, the forms of solicitor operation s were expanded to  include  limited liability  
partnership s (LLPs). To operate an LLP, an additional top -up insurance  coverage  of HK$10 million 
in respect of any one claim is required .29 As at 11 May 2018, there were 21 local and 1 4 foreign 
LLP law firms in HKC.30 According to the authorities, t he introduction of LLP s may encourage small 
and medium -sized firms to merge with bigger practices so that a wider range of legal services 
would be available , and also to attract more foreign law firms to practise in HKC.31  
4.41.   Foreign lawyers may work as foreign legal consultants in corporations or companies  if they 
provide l egal services only to their employer corporations or companies. Their practice s are not 
regulated  by LawSoc .32 Foreign lawyers work ing only  as foreign legal consultant s in corporations or 
companies (i.e. as in -house lawyers) do not need to be registered wit h LawSoc because they are  
not offering their services "to the public as a practitioner of foreign law ".  
4.42.   Under the Foreign Lawyers Practice (Amendment) Rules 2007, if a foreign firm shares a 
building or common areas with another business, the principal of the foreign firm must ensure that 
signs are displayed conspicuously at the main entrance of the foreign firm to distinguish the 
premises of th at firm from those  occupied by the others.  
4.4.3.3   Trade regime  
4.43.   HKC has made no commitments regarding  legal services in it s GATS Schedule  or in FTA s 
with its trading partners , except in the CEPA with Mainland China, where  HKC has committed  to 
not impos ing any new discriminatory measures on Mainland  China' s legal services or service 
suppliers .33 CEPA commitments are not applicable to other external services or service suppliers.  
4.44.   Legal practitioners from overseas may work in HKC as foreign lawyers or as local lawyers 
(solicitors/barristers). Foreign lawyers are those who offer services in foreign law in HKC. They 
must be registered with LawSoc  before practising . A firm to which Section  39B(1) of the Legal 
Practitioner Ordinance (Cap. 159) applies may be registered as a foreign law firm if it satisfies the 
qualifications set out under Section 7 of t he Foreign Lawyers Registration Rules (Cap. 159S).34 For 
example, if  a branch of an overseas firm  is seeking to register, at least one of the partners 
intend ing to practise in HKC must have been a partner in the overseas firm on a full -time basis for  
a period of 12 months  immediately preceding  the request for registration ; and must have  at least 
five years' practis ing experience. In other cases , inter alia,  each of the partners intending to 
practise shall have practising experience of not less than three years.  The Council of LawSoc may 
waive any of the requirements under Section 7(1) of the Foreign Lawyers Registration Rules 
(Cap.  159S) if it considers it appropriate in particular cases. The registration criteria set no 
quantitative r estrictions.  
4.45.   Foreign lawyers are prohibited  from practis ing HK C law; they can be employed by a HKC law 
firm provided  that the number of foreign lawyers is not greater than that of  HKC solicitors.35 Legal 
professionals from overseas may also qualify as HKC solicitors or barristers after specified 
requirements are satisfied.36 To be admitted as a solicitor, an overseas lawyer with a minimum of 
                                                                                                                                                  
http://www.google.ch/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0ahUKEwjznZ77_sPPAhXEUBQKHV
FbBmYQFggrMAI&url=http%3A%2F%2Fwww.ibanet.org%2FDocument%2FDefault.aspx%3FDocu mentUid%3D
1D3D3E81 -472A-40E5-9D9D -68EB5F71A702&usg=AFQjCNEdNW5Pk4rQIaSlNmhRO1Y8u2QgiA . 
29 An LLP refers to a form of partnership in which the personal assets of innocent partners, other than 
their interests in partnership property, are protected from liabil ities caused by the negligence, wrongful act or 
omission, or misconduct of any other partner(s) in the provision of professional services by the firm.   
30 LawSoc  online  information. Viewed at: 
http://www.hklawsoc.org.hk/pub_e/memberlawlist/mem_llp.asp . 
31 Government online information. Viewed at: 
http://www.info.gov.hk/gia/general/201512/11/P201512110550.htm .  
32 WTO document WT/TPR/M/173/Add.1 , 16 February 2007. 
33 Information provided by the authorities.  See also Paragraph  2 of Article 3  of the Agreement on Trade 
in Services . Viewed at:  https://www.tid.gov.hk/english/cepa/legaltext/cepa13.html . 
34 Department of Justice online information. Viewed at: 
https://www.elegislation.gov.hk/hk/cap159S!en?xpid=ID _1438402757141_002 . 
35 See the Foreign Lawyers Registration Rules (Cap. 159S) , Section 13(1). Viewed at: 
https://www.elegislation.gov.hk/hk/cap159S!en?INDEX_C S=N&xpid=ID_1438402757031_001 . 
36 More details can be found in the Overseas Lawyers (Qualification for Admission) Rules (Cap. 159Q)  
and the Barristers (Qualification for Admission and Pupillage) Rules (Cap. 159AC)  for solicitors and barristers , 
respectively . WT/TPR/S/380 • Hong Kong, China  
 
- 94 - 
 
  two years of post -admission experience in the practice of law in any common law jurisdiction ( at 
least five years of experience for non -common law regions)37 must pass the required examinations  
under the Overseas Lawyers Qualification Examination .38 To qualify  as a barrister, an overseas 
legal professional with at least three  years of practice must pass the Barristers Qualification 
Examination  and c omplete not less than six months of pupillage .39 In addition, there are residency 
requirements for overseas lawyers seeking admission as solicitors or barristers.40 As at 
end-March  2018, HKC ha d not entered into any MRAs  on qualifications in legal services .  
4.46.   Foreign law firms  are prohibited from practi sing HK C law and employing or taking into 
partner ship HKC solicitors who hold a practising  certificate. According to Section 7 of the Legal 
Practitioner Ordinance (Cap. 159), no person shall be qualified to act as a solicitor unless, among 
other conditions, they hold a current practising certificate.41 One or more foreign law firms  may 
enter into association with a HKC law firm, to share fees, profits , premises,  management  and non -
lawyer employees , but only the HK C law firm may practise HKC law.42 The number of foreign 
lawyers in such an association must not  exceed that of local solicitors43; this, according to the 
authoritie s, is to ensure a balanced mix of foreign lawyers and HKC lawyers in the association so 
as to provide a comprehensive service to the public .44 Foreign law firms can adopt the same 
corporate forms as local law firms, including sole proprietorship  and general partnership. Since  
1 March 2016 , when  the Legal Practitioners (Amendment) Ordinance 2012  entered into force, law 
firms may also operate in the form of LLP s. According to Section 2 of Cap. 159, a HKC law firm 
means a law firm in which : (1) all of the partners are solicitors; or ( 2) the sole practitioner of 
which is a solicitor. According to LawSoc information, all the partners in a HKC firm must hold 
unconditional practising certificates.  
 
                                                
37 According to the 2014 amendment to the Overseas Lawyers ( Qualification for Admission) Rules 
(Cap. 159Q), experience in the practice of law in all the common law jurisdictions or non -common law 
jurisdictions (as the case may be) in which the applicant w as qualified to practi ce will be counted  for the 
purpose of Section 4 or 5 of the Overseas Lawyers (Qualification for Admission) Rules ; and practical legal 
training  can be recogni zed as practising experience for the purpose s of the qualifying examination.  Viewed at:  
https://www.elegislation.gov.hk/hk/2014/ln57!en , and https://www.elegislation.gov.hk/hk/cap159Q . 
38 Admission as a Solicitor in Hong Kong for O verseas Lawyers 201 8 Information Package . Viewed at: 
http://www.hklawsoc.org.hk/pub_e/admission/OLQE2018/OLQE%20INFO%20PACK.pdf , and 
http://www.hklawsoc.org.hk/pub_e/admission/oversea.asp . 
39 Hong Kong Bar Association  online information. Viewed at: http://www.hkba.org/overseas -lawyer .  
40 Residency requirements for solicitors are that the person: (1) has resided in HKC for at least three 
months immediately before the date on which the person applied for the certificate ; (2) intends to reside in 
HKC for at least three months immediately after his admission; (3) has been ordinarily resident in HKC for at 
least seven years; or ( 4) has been present in HKC for at least 180 days of each of at least seven years (see 
Section 4(1A) of the Legal Practitioner Ordinance (Cap. 159)) . Residency requirements for barristers  are that 
he or she has:  (1) resided in HKC for at least three consecutive months immediately before the date of his/her  
application for admission; (2) been ordinarily resident in H KC for at least  seven years; (3) been physically 
present in HKC for at least 180 days of each of at least seven years within the 10 years immediately preceding 
the date of his/her application for admission (Section 27(2)(b) of the Legal Practitioner Ordinance (Cap. 159)) .  
41 By virtue of Section 45(1) of Cap. 159, a person that is not qualified to act as a solicitor shall not act 
as a solicitor, or as such sue out any writ or process, or commence, carry on or defend any action, suit or other 
proceedings, in the name of any other person or in his own name, in any court  of civil or criminal jurisdiction , 
or act as a solicitor in any cause or matter, civil or criminal, to be heard or determined before any court or 
magistrate.  
42 The Legal Practitioner Ordinance (Cap 159 ), Section 39C . Viewed at: 
https://www.elegislation.gov.hk/hk/cap159!en?xpid=ID_1438402747905_003&INDEX_CS=N . 
43 The Foreign Lawyers Registration Rules (Cap. 159S) , Section 13(3). Viewed at: 
https://www.elegislation.gov.hk/hk/cap159S!en?INDEX_CS=N&xpid=ID_1438402757031_001 . 
44 WTO document  WT/TPR/M/109/Add.1 , 17 February  2003.  WT/TPR/S/380 • Hong Kong, China  
 
- 95 - 
 
  5  APPENDIX TABLES  
Table A1. 1 Merchandise re -exports by HS sections and major HS chapters, 2014 -17 HS 
section  
HS chapter/subheadings  2014  2015  2016  2017  
Total (US$ billion)  508.5  497.5  491.1  531.8  
  (% of total)  
01 Live animals and products  0.6 0.7 0.8 0.9 
02 Vegetable products  0.4 0.4 0.6 0.5 
03 Fats and oils  0.0 0.0 0.0 0.0 
04 Prepared food, beverages and tobacco  0.5 0.6 0.7 0.6 
05 Mineral products  0.1 0.1 0.1 0.1 
06 Chemicals and products thereof  1.3 1.3 1.3 1.3 
07 Plastics and rubber  2.7 2.5 2.3 2.0 
 39 Plastics and articles thereof  2.6 2.4 2.1 1.9 
08 Raw hides and skins; leather, fur  skins and articles thereof  1.9 1.7 1.3 1.2 
09 Wood, cork, straw  0.1 0.1 0.0 0.0 
10 Pulp of wood; paper and paperboard  0.7 0.7 0.6 0.5 
11 Textiles and textile articles  5.7 5.3 4.6 4.0 
 61 Clothing, knitted or crocheted  2.0 1.8 1.6 1.3 
 62 Clothing, not knitted or crocheted  1.7 1.7 1.4 1.2 
12 Footwear, headgear, etc.  1.0 0.9 0.7 0.6 
13 Articles of stone, plaster, cement  0.6 0.5 0.6 0.5 
14 Precious stones and metals, pearls  14.3 13.3 12.9 13.7 
 7108 Gold, unwrought or in semi -manuf. forms, or in powder form  8.2 7.6 6.9 7.4 
 7102 Diamonds, not mounted or set  3.2 3.0 3.1 3.2 
15 Base metals and articles thereof  1.5 1.4 1.2 1.1 
16 Machinery, electrical equipment  60.6 62.9 65.1 65.6 
 84 Machinery and mechanical appliances  13.5 12.9 12.4 12.7 
  8471 Automatic data processing machines ( --) 3.5 3.7 3.9 3.9 
  8473 Parts of typewriters, word processing machines, etc.  5.2 4.8 4.2 4.5 
 85 Electrical machinery  47.1 50.0 52.8 52.9 
  8542 Electronic integrated circuits  15.2 17.2 20.2 21.2 
  8517 Telephone sets  13.7 15.1 15.3 14.3 
17 Transport equipment  0.5 0.4 0.4 0.4 
18 Precision instruments  5.1 4.9 4.9 4.8 
 90 Optical, measuring, and other precision instruments  3.1 2.9 3.1 3.2 
 91 Clocks, watches and parts thereof  2.0 2.0 1.8 1.6 
19 Arms and ammunition  0.0 0.0 0.0 0.0 
20 Miscellaneous manufactured articles  2.1 2.0 1.6 1.8 
21 Works of art, collectors' pieces and antiques  0.1 0.1 0.1 0.1 
Not classified  0.1 0.1 0.1 0.1 
Source:  WTO calculations based on the UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 96 - 
 
  Table A1. 2 Merchandise domestic exports by HS sections and major HS chapters, 
2014-17 HS 
section  
HS chapter/heading s 2014  2015  2016  2017  
Total (US$ billion)  15.6 13.1 25.5 18.4 
  (% of total)  
01 Live animals and products  0.1 0.1 0.1 0.1 
02 Vegetable products  0.0 0.0 0.0 0.0 
03 Fats and oils  0.1 0.2 0.1 0.1 
04 Prepared food, beverages and tobacco  5.6 7.1 3.6 5.3 
 24 Tobacco and manufacture d tobacco substitutes  2.7 3.4 1.7 2.2 
05 Mineral products  1.5 1.8 0.9 1.3 
06 Chemicals and products thereof  5.0 5.5 2.8 4.1 
 30 Pharmaceutical products  2.9 2.9 1.5 2.3 
07 Plastics and rubber  5.0 4.3 2.0 2.7 
 39 Plastics and articles thereof  4.9 4.3 1.9 2.6 
08 Raw hides and skins; leather, fur skins and articles thereof  0.3 0.3 0.0 0.0 
09 Wood, cork, straw  0.0 0.0 0.0 0.0 
10 Pulp of wood; paper and paperboard  2.5 2.9 1.3 1.9 
11 Textiles and textile articles  1.8 1.3 0.4 0.5 
12 Footwear, headgear, etc.  0.0 0.0 0.0 0.0 
13 Articles of stone, plaster, cement  0.1 0.2 0.1 0.2 
14 Precious stones and metals, pearls  63.3 61.6 82.2 76.5 
 7108 Gold, unwrought or in semi -manuf. forms, or in powder form  53.5 53.7 78.3 69.5 
 7113 Articles of jewellery and parts thereof of precious metal  6.1 6.7 3.0 4.7 
 7106 Silver, unwrought or in semi -manuf. forms, or in powder form  2.1 0.5 0.5 1.7 
15 Base metals and articles thereof  4.4 4.4 1.9 3.3 
 72 Iron and steel  2.1 2.1 1.0 1.7 
16 Machinery, electrical equipment  6.8 7.3 3.4 2.6 
 85 Electrical machinery  2.6 3.2 1.5 1.8 
17 Transport equipment  0.0 0.1 0.1 0.1 
18 Precision instruments  2.2 1.7 0.6 0.8 
19 Arms and ammunition  0.0 0.0 0.0 0.0 
20 Miscellaneous manufactured articles  0.7 0.7 0.3 0.3 
21 Works of art, collectors' pieces and antiques  0.3 0.1 0.1 0.0 
Not classified  0.3 0.3 0.2 0.2 
Source:  WTO calculations based on the UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 97 - 
 
  Table A1. 3 Merchandise imports by HS sections and major HS chapters, 201 4-17 HS 
section  
HS chapters/subheadings  2014  2015  2016  2017  
Total (US$ billion)  600.6  559.3  547.1  589.8  
  (% of total)  
01 Live animals and products  2.2 2.1 2.2 2.1 
02 Vegetable products  1.0 1.0 1.1 1.1 
03 Fats and oils  0.0 0.0 0.0 0.0 
04 Prepared food, beverages and tobacco  1.4 1.5 1.7 1.6 
05 Mineral products  2.7 2.3 1.8 2.2 
 27 Mineral fuels and oils  2.6 2.2 1.8 2.1 
06 Chemicals and products thereof  1.9 2.0 2.1 2.1 
07 Plastics and rubber  2.4 2.3 2.0 1.9 
 39 Plastics and articles thereof  2.3 2.1 1.9 1.8 
08 Raw hides and skins; leather, fur skins and articles thereof  1.9 1.8 1.3 1.2 
09 Wood, cork, straw  0.1 0.1 0.1 0.1 
10 Pulp of wood; paper and paperboard  0.6 0.6 0.6 0.5 
11 Textiles and textile articles  4.1 4.0 3.6 3.2 
12 Footwear, headgear, etc.  0.8 0.8 0.7 0.6 
13 Articles of stone, plaster, cement  0.6 0.5 0.6 0.5 
14 Precious stones and metals, pearls  16.4 13.1 12.3 12.1 
 7102 Diamonds, not mounted or set  3.7 3.4 3.4 3.5 
 7108 Gold, unwrought or in semi -manuf. forms, or in powder form  9.2 6.5 5.4 5.0 
 7113 Articles of jewellery and parts thereof of precious metal  2.4 1.9 2.1 2.1 
15 Base metals and articles thereof  1.6 1.5 1.3 1.3 
16 Machinery, electrical equipment  54.7 58.7 61.1 62.1 
 84 Machinery and mechanical appliances  11.2 11.1 10.5 10.6 
  8471 Automatic data processing machines ( --) 3.8 4.0 3.9 3.6 
  8473 Parts of typewriters, word processing machines, etc.  3.2 3.1 2.7 3.3 
 85 Electrical machinery  43.6 47.6 50.6 51.5 
  8542 Electronic integrated circuits  16.3 18.1 21.6 23.8 
  8517 Telephone sets  11.5 13.9 13.9 12.9 
  8541 Diodes, transistors and similar semiconductor devices  2.6 2.5 2.5 2.5 
17 Transport equipment  1.2 1.3 1.2 1.2 
18 Precision instruments  4.5 4.4 4.4 4.3 
 90 Optical, measuring, and other precision instruments  2.7 2.7 2.9 2.8 
19 Arms and ammunition  0.0 0.0 0.0 0.0 
20 Miscellaneous manufactured articles  1.6 1.5 1.3 1.4 
21 Works of art, collectors' pieces and antiques  0.3 0.4 0.4 0.3 
Not classified  0.0 0.0 0.0 0.1 
Source:  WTO calculations based on the UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 98 - 
 
  Table A1. 4 Merchandise re -exports by destination, 201 4-17 
  2014  2015  2016  2017  
Re-exports (US$ billion)  508.5  497.5  491.1  531.8  
 (% of re -exports)  
Americas  11.0 11.3 10.6 9.9 
 United States  8.6 8.8 8.4 7.9 
 Other America  2.4 2.5 2.2 2.1 
 Mexico  0.7 0.8 0.7 0.7 
Europe  9.8 9.6 10.7 10.2 
 EU-28 8.7 8.6 8.9 8.4 
 Germany  1.8 1.8 1.7 1.8 
 United Kingdom  1.2 1.3 1.5 1.5 
 Netherlands  1.4 1.4 1.6 1.2 
 France  1.0 0.9 0.9 0.9 
 Italy 0.6 0.6 0.7 0.6 
 Belgium  0.9 0.7 1.6 1.6 
 EFTA 0.8 0.7 1.5 1.6 
 Switzerland  0.2 0.2 0.2 0.2 
 Other Europe  0.6 0.4 0.5 0.6 
Commonwealth of independent states (CIS)  0.5 0.3 0.4 0.5 
Africa  0.8 0.9 0.9 0.9 
Middle East  2.0 2.1 2.2 2.1 
 United Arab Emirates  1.2 1.2 1.4 1.4 
Asia 75.9 75.7 75.0 76.2 
Mainland  China  57.1 56.3 55.2 55.3 
 Japan  3.3 3.2 3.0 3.1 
 Other Asia  15.5 16.2 16.8 17.8 
 India 2.5 2.7 3.1 3.8 
 Chinese Taipei  1.5 1.7 1.9 2.2 
 Thailand  2.0 1.7 1.9 2.1 
 Viet Nam  1.6 1.9 1.8 1.9 
 Singapore  1.5 1.9 1.8 1.7 
 Korea, Republic of  1.6 1.4 1.4 1.4 
 Macao, China  1.2 1.2 1.0 1.0 
 Australia  0.8 0.9 0.9 0.8 
 Malaysia  0.6 0.7 0.7 0.7 
 Philippines  0.7 0.7 0.7 0.7 
 Indonesia  0.5 0.6 0.6 0.6 
Source:  UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 99 - 
 
  Table A1. 5 Merchandise domestic exports by destination, 201 4-17 
  2014  2015  2016  2017  
Domestic exports (US$ billion)  15.6  13.1  25.5  18.4  
 (% of domestic exports)  
Americas  4.4 4.8 3.1 3.2 
 United States  3.8 3.9 2.7 2.5 
 Other America  0.6 0.9 0.4 0.7 
 Canada  0.3 0.5 0.2 0.4 
Europe  5.5 9.5 21.2 33.8 
 EU-28 2.6 3.0 13.9 17.5 
 United Kingdom  1.0 1.4 13.0 16.6 
 France  0.4 0.6 0.2 0.2 
 Italy 0.3 0.3 0.1 0.2 
 Germany  0.3 0.2 0.3 0.2 
 Netherlands  0.3 0.2 0.1 0.1 
 EFTA 2.7 6.4 7.3 16.1 
 Switzerland  2.7 6.3 7.3 16.1 
 Other Europe  0.2 0.1 0.0 0.2 
 Turkey  0.1 0.1 0.0 0.1 
Commonwealth of independent states (CIS)  0.1 0.0 0.0 0.0 
Africa  0.3 0.4 0.1 0.2 
Middle East  3.1 4.4 0.9 2.0 
 United Arab Emirates  2.8 4.2 0.8 1.8 
Asia 86.4 80.7 74.5 60.7 
Mainland  China  65.0 57.0 57.4 20.5 
 Japan  1.2 1.0 0.6 0.7 
 Other Asia  20.2 22.6 16.5 39.4 
 Singapore  2.3 4.1 2.3 11.4 
 Thailand  1.5 2.6 2.7 10.4 
 Chinese Taipei  5.1 5.0 3.0 5.1 
 India 1.5 0.6 1.1 3.8 
 Korea, Republic of  1.8 1.7 2.7 2.4 
 Viet Nam  1.8 2.1 1.1 1.8 
 Macao, China  1.6 1.7 0.8 1.4 
 Indonesia  0.5 1.4 0.8 1.1 
 Malaysia  1.2 1.1 0.6 0.7 
 Australia  1.6 1.0 0.7 0.5 
 Philippines  0.6 0.6 0.2 0.3 
Other  0.2 0.2 0.1 0.1 
Source:  UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 100 - 
 
  Table A1. 6 Merchandise imports by supplier, 201 4-17 
  2014  2015  2016  2017  
Total imports (US$ billion)  600.6  559.3  547.1  589.8  
 (% of total imports)  
Americas  7.7 6.9 6.4 6.4 
 United States  5.8 5.5 4.8 5.2 
 Other America  1.8 1.3 1.7 1.2 
 Brazil  0.5 0.4 0.4 0.4 
Europe  11.5 10.5 10.2 9.2 
 EU-28 7.3 7.1 6.7 6.5 
 United Kingdom  1.8 1.7 1.1 1.4 
 Germany  1.3 1.2 1.2 1.2 
 France  0.9 0.9 1.3 1.1 
 Italy 1.2 1.1 1.4 1.0 
 Belgium  0.6 0.6 0.4 0.5 
 Netherlands  0.6 0.5 0.3 0.4 
 EFTA 4.0 3.4 3.4 2.6 
 Switzerland  4.0 3.4 3.3 2.6 
 Other Europe  0.1 0.1 0.1 0.1 
Commonwealth of independent states (CIS)  0.2 0.2 0.3 0.2 
Africa  1.0 0.8 1.0 0.7 
 South Africa  0.8 0.6 0.8 0.5 
Middle East  1.6 1.5 1.0 1.3 
 United Arab Emirates  0.7 0.8 0.2 0.7 
Asia 78.1 80.2 81.0 82.2 
Mainland  China  44.7 46.7 44.7 44.6 
 Japan  6.5 6.3 6.3 6.1 
 Other Asia 27.0 27.2 30.1 31.6 
 Chinese Taipei  6.6 6.5 8.9 7.2 
 Singapore  5.8 6.2 2.2 6.4 
 Korea, Republic of  3.9 4.0 5.5 5.5 
 Malaysia  2.2 2.2 3.0 2.5 
 India 2.1 2.0 3.0 2.3 
 Thailand  2.1 2.0 2.1 2.0 
 Philippines  1.2 1.4 1.6 1.9 
 Australia  1.4 0.9 1.3 1.5 
 Viet Nam  0.9 1.2 1.4 1.3 
 Indonesia  0.5 0.4 0.5 0.5 
Other  0.0 0.0 0.0 0.0 
Source:  UN Comtrade database.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 101 - 
 
  Table A1. 7 Stock of direct investment by selected major country/territory, 20 14-17  
  2014  2015  2016 2017  
Direct investment liabilitiesa (HK$ billion)  12,714.5   13,697.3   14,142.2   17,190.1  
 Ratio to  GDP (%)  562.6    571.1   567.8  646.0  
Total of inward direct investment of all countries/territoriesa 
(HK$ billion)  11,602.9  12,335.9  12,608.1  .. 
 (% of total)  
British Virgin Islands  35.5  35.1  34.2  .. 
Mainland China  30.1  26.5  25.7  .. 
Cayman Islands  3.4  7.0  7.7  .. 
Netherlands  6.4  6.3  6.3  .. 
Bermuda  5.3  4.6  4.7  .. 
United States  3.3  2.6  2.5  .. 
Singapore  2.7  2.8  2.3  .. 
United Kingdom  1.1  2.1  2.2  .. 
Japan  2.0  1.8  1.8  .. 
Chinese Taipei  0.6  0.6  0.9  .. 
Other countries/territories  9.5  10.6  11.8  .. 
Direct investment assetsa (HK$ billion)  12,358.5   13,230.8   13,526.9   15,905.6  
 Ratio to  GDP (%)  546.8    551.7    543.1    597.7  
Total of outward direct investment of all 
countries/territoriesa (HK$ billion)  11,246.9  11,869.4  11,992.8  .. 
 (% of total)  
Mainland China  40.5  39.6  40.2  .. 
British Virgin Islands  40.9  40.8  38.8  .. 
Cayman Islands  2.2  3.8  4.1  .. 
Bermuda  2.5  1.9  1.9  .. 
United Kingdom  2.2  2.1  1.3  .. 
Australia  1.2  1.1  1.1  .. 
Singapore  0.8  0.6  0.8  .. 
United States  0.7  0.7  0.7  .. 
Luxembourg  0.7  0.6  0.6  .. 
Canada  0.7  0.6  0.6  .. 
Other countries/territories  7.8  8.1  9.7  .. 
.. Not available.  
a The total of inward (outward) direct investment of all countries/territories is different from the 
aggregate direct investment liabilities (assets) due to the adoption of different presentation 
principles, with the former compiled based on the "directional pr inciple " and the latter based on the 
"asset/liability principle " in accordance with the international statistical standards. The total of 
inward (outward) direct investment of all countries/territories should be referred to in calculating the 
shares of ind ividual investor (recipient) countries/territories, while the direct investment liabilities 
(assets) should be referred to in the analyses on aggregate statistics.  
Source:  Data received from the authorities, and C&SD online information.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 102 - 
 
  Table A1. 8 Stock of direct investment by major economic activity  of HKEGs , 2014-17 
  2014  2015  2016  2017  
Direct investment liabilitiesa (HK$ billion)  12,714.5   13,697.3   14,142.2   17,190.1  
 Ratio to  GDP (%)  562.6    571.1    567.8   646.0  
Total of inward direct investment of all economic activitiesa 
(HK$ billion)  11,602.9  12,335.9  12,608.1  .. 
 (% of total)  
Investment and holding, real estate, professional and 
business services  67.0  67.5  67.5  .. 
Banking  11.3  11.1  11.9  .. 
Import/export, wholesale and retail trades  11.3  10.6  9.9  .. 
Financing (except banking, investment and holding 
companies)  2.8  2.7  2.8  .. 
Construction  1.7  2.5  2.1  .. 
Transportation, storage, postal and courier services  1.7  1.4  1.5  .. 
Insurance  1.3  1.3  1.4  .. 
Information and communications  0.8  0.7  0.7  .. 
Manufacturing  0.7  0.8  0.6  .. 
Accommodation and food services  0.3  0.3  0.3  .. 
Other activities  1.3  1.3  1.4  .. 
Direct investment assetsa (HK$ billion)  12,358.5  13,230.8  13,526.9  15,905.6  
 Ratio to GDP (%)   546.8   551.7   543.1   597.7  
Total of outward direct investment of all economic 
activitiesa (HK$ billion)  11,246.9  11,869.4  11,992.8  .. 
 (% of total)  
Investment and holding, real estate, professional and 
business services  78.2  77.7  78.7  .. 
Import/export, wholesale and retail trades  7.1  8.4  7.6  .. 
Banking  3.9  3.1  2.5  .. 
Manufacturing  2.0  2.4  2.4  .. 
Insurance  2.1  1.8  2.1  .. 
Transportation, storage, postal and courier services  1.7  1.5  1.6  .. 
Information and communications  1.0  0.9  0.9  .. 
Construction  0.3  0.4  0.7  .. 
Accommodation and food services  0.6  0.6  0.6  .. 
Financing (except banking, investment and holding 
companies)  0.8  0.7  0.6  .. 
Other activities  2.4  2.3  2.2  .. 
.. Not available.  
a The total of inward (outward) direct investment of all economic activities is different from the 
aggregate direct investment liabilities (assets) due to the adoption of different presentation 
principles, with the former compiled based on the "directional prin ciple" and the latter based on the 
"asset/liability principle " in accordance with the international statistical standards. The total of 
inward (outward) direct investment of all economic activities should be referred to in calculating the 
shares of individ ual economic activities, while the direct investment liabilities (assets) should be 
referred to in the analyses on aggregate statistics.  
Source:  Data received from the authorities, and C&SD  online information.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 103 - 
 
  Table A2. 1 Selec ted notifications from HKC, 30 April 2018  
Agreement  Requirement/contents  Document reference of most 
recent notification  
Agriculture  
Articles 10 and 18.2  Export subsidies (outlays and 
quantities)  G/AG/N/HKG/ 43, 12 January 2018  
Article 18.2  Domestic support  G/AG/N/HKG/ 42, 5 May 2017  
Application of Sanitary and 
Phytosanitary Measures  
Article 7  and Annex B  Changes in sanitary and 
phytosanitary measures and 
information on measures applied, 
including emergency measures   G/SPS/N/HKG/ 42, 8 June 2017  
G/SPS/N/HKG/35/Add.1, 6 July 
2017 
Government Procurement  
Article XI V:4 of the revised GPA  Government procurement 
statistics  GPA/142/Add.6, 31 August 2017  
GPA/142/Add.6/Corr.1, 
4 September 2017  
Annex 3  to GPA/1  Threshold values in national 
currencies  GPA/THR/HKG/1, 20 December 
2017 
Implementation of Article  VI of 
the GATT 1994 (Anti -Dumping)  
Article s 16.4 and 16.5  Anti-dumping actions taken , and 
competent authorities  G/ADP/N/193/HKG, 14 July 2010  
Import Licencing Procedures  
Article 7.3  Questionnaire;  rules and 
information concerning import 
licensing procedures  G/LIC/N/3/HKG/21, 28 September 
2017 
Articles 1.4(a) and 8.2(b)  Changes to laws and regulations 
and related information on 
procedures  G/LIC/N/1/HKG/6, 6 January 2015  
Market Access  Quantitative  restrictions  G/MA/QR/N/HKG/3, 29 September 
2016 
Rules of Origin  
Article 5.2  Non-preferential rules of origin  G/RO/N/86, 1 October 2012  
Paragraph 4 of Annex II  Preferential rules of origin  G/RO/N/1 70, 24 May 2018  
State Trading  
GATT 1994 Art. XVII: 4(a) and 
Par. 1 of the Understanding on the 
Interpretation of Art. XVII.  Activities of state  trading 
enterprises.  G/STR/N/17/HKG, 19 January 
2018 
 
Subsidies and Countervailing 
Measures  
Article 25.1  
GATT 1994 Article XVI:1  Subsidies programmes  G/SCM/N/315/HKG, 30 June 2017  
Articles 25.11  and 25.12  Countervailing actions taken , and 
competent authorities  G/SCM/N/202/HKG, 14 July 2010  
Safeguards  
Article 12.6  Safeguard legislation  G/SG/N/1/HKG/1, 20 March 1995  
Technical Barriers to Trade  
Article  5.6.2 Technical regulations, standards, 
and conformity assessment 
procedures  G/TBT/N/HKG/50, 8 February 
2018 
Article 15.2  Administrative arrangements; 
laws/regulation s G/TBT/2/Add.1, 29 January 1996  
Trade in Services  
Article III:3  Changes in laws, regulations and 
administrative guidelines  S/C/N/874, 3 February 2017  
S/C/N/875, 3 February 2017  
Article V:7(a)  Notification of regional trade 
agreement s S/C/N/898, 19 December 2017  
TRIPS  
Article  63.2 Laws and regulations  IP/N/1/HKG/32, 18 April 2017  
Article 69  Contact points  IP/N/3/HKG/1, 20 December 2012  
Free Trade Area 
GATT 1994 Article XXIV:7(a)  
GATS Article V:7(a)  Regional trade agreement s WT/REG390/N/1, 19 December 
2017 
Trade Facilitation  Notification based on Articles 1:4, 
10:4:3, 10:6:2 and 12:2:2 of the 
Agreement  G/TFA/N/HKG/1, 12 May 2017  
Source:  WTO Secretariat.  
 
  WT/TPR/S/380 • Hong Kong, China  
 
- 104 - 
 
  Table A3. 1 HKECIC: Insured business by major markets and products, 2015/16 –
2016/17  
(HK$ million)  
 Insured business 
in 2016-17 % of total value 
in 2016-17 Insured business 
in 2015-16  % of total value 
in 2015-16 
Markets   
Mainland China  41,001  31.2 20,896  18.9 
United States  36,421  27.8 38,486  34.8 
United Kingdom  9,252  7.0 9,746  8.8 
Germany  4,024  3.1 3,920  3.6 
Switzerland  2,319  1.8 3,074  2.8 
Top five markets  93,017  70.9 76,122  68.9 
Other markets  38,194  29.1 34,362  31.1 
Total  131,211  100.0  110,484  100.0  
Products   
Electronics  35,571  27.1 23,129  20.9 
Electrical appliances  24,667  18.8 14,898  13.5 
Textiles/clothing  22,175  16.9 21,434  19.4 
Toys 8,339  6.4 8,622  7.8 
Metallic products  2,620  2.0 .. .. 
Chemicals  .. .. 2,986  2.7 
Top five products  93,372  71.2 71,069  64.3 
Other products  37,839  28.8 39,415  35.7 
Total  131,211  100.0  110,484  100.0  
.. Not available.  
Source:  HKECIC  online information, "Annual Reports" . Viewed at: 
http://www.hkecic.com/en/information_annual_reports.aspx . 
  
  WT/TPR/S/380 • Hong Kong, China  
 
- 105 - Table A3. 2: Selected incentives and assistance measures, 2014 -17  
Sector  Objective  Agency in 
charge  Form of support  Total amount 2014 -17 
(US$ million)  
SMEs  
SME Loan 
Guarantee Scheme 
(SGS)  To help SMEs secure loans from 
participating lending institutions (PLIs) 
for acquiring business installations and 
equipment and for general business use 
in meeting working capital needs  Trade and 
Industry 
Department 
(TID)  Government provides up to 50% guarantee to loans granted by 
PLIs to SMEs, subject to a maximum guarantee amount of 
HK$6 m illion (about US$770,000) per SME . 
Each SME is allowed to recycle the guarantee once after it has 
fully paid up the loan backed up by the guarantee, subject to a 
maximum guarantee amount of another HK$6 million  At end -2014: US$2,774  
At end -2015: US$2,929  
At end -2016: US$3,053  
At end -2017: US$ 3,185  
Special Loan 
Guarantee Scheme 
(SpGS)  
(Application period 
closed)  To help HKC 's enterprises secure loans 
from PLIs to tackle the liquidity problem 
arising from the global financial crisis  TID Government provides up to 80% guarantee for loans granted 
by PLIs to HKC enterprises, subject to a maximum loan amount 
of HK$12 million (about US$1.54 million) for each enterprise, of 
which up to HK$6 million (about US$770,000) could be used as 
a revolving credit line  At end -2014: US$9,488  
At end -2015: US$9,488  
At end -2016: US$9,489  
At end -2017: US$9,489  
SME Export 
Marketing Fund 
(EMF)  To help SMEs expand their businesses 
through participation in promotion 
activities targeting export markets, e.g., 
exhibitions, trade missions, advertising in 
printed trade publications, export 
promotion activities conducted on 
electronic platforms/media , and setting 
up/enhancing corporate websites  TID Government provides a maximum of 50% of the approved 
expenses, subject to a ceiling of HK$50,000 (about US$6,410) 
per application.  
The cumulative grant ceiling for each SME under the EMF is 
HK$200,000 (about  US$25,641), subject to conditions  At end -2014: US$ 354.86  
At end -2015: US$ 381.12  
At end -2016: US$ 401.43  
At end -2017:  US$418.80  
SME Development 
Fund (SDF)  To provide financial support to non -profit -
distributing organizations , such as trade 
and industria l organizations, professional 
bodies, research institutes, etc. , to carry 
out projects that could enhance SMEs' 
competitiveness  TID Government provides funding support of 90% of the total 
expenditure for each approved project, capped at HK$5 million 
(about  US$641,000)  At end -2014: US$34.98  
At end -2015: US$37.63  
At end -2016: US$41.30  
At end -2017: US$ 44.30  
Dedicated Fund on 
Branding, 
Upgrading and 
Domestic Sales 
(the BUD Fund)  To support enterprises to enhance their 
competitiveness and further their 
business development in Mainland 
China's market , through developing 
brands, upgrading and restructuring their 
operations , and promoting domestic sales 
in Mainland China  Enterprise 
Support 
Programme:
Hong Kong 
Productivity 
Council  
 
Organization 
Support 
Programme:  
TID Enterprise Support Programme:  
Government provides funding support of 50% of the total 
approved project cost , capped at HK$500,000 (about 
US$64,100) per enterprise for a maximum of 3 projects  
 
 
 
Organization Support Programme:  
Government provides funding support of 90% of the total 
expenditure for each approved project, capped at HK$5 million 
(about US$641,000)  Enterprise Support 
Programme:  
At end -2014: US$16. 08 
At end -2015: US$ 23.04  
At end -2016: US$ 36.34  
At end -2017: US$ 52.37  
 
Organization Support 
Programme:  
At end -2014: US$17.80  
At end -2015: US$20.15  
At end -2016: US$24.30  
At end -2017: US$ 28.68   
  WT/TPR/S/380 • Hong Kon g, China  
 
- 106 - Sector  Objective  Agency in 
charge  Form of support  Total amount 2014 -17 
(US$ million)  
Innovation and technology  
Innovation and 
Technology 
Support 
Programme (ITSP)  To support midstream/downstream R&D 
projects undertaken mainly by 
universities, and R&D centres  in 
collaboration with private companies , 
industry support organizations, 
professional bodies, and  trade and 
industry associations  Innovation 
and 
Technology 
Commission 
(ITC)  Funding support is normally given as a grant, which may be 
used for meeting manpower costs, costs for the procurement of 
equipment, and other direct costs specifically required for  the 
conduct of the project  In 2014: US$76.55  
In 2015: US$92.41  
In 2016: US$79.69  
In 2017: US$ 113.45  
University -
Industry 
Collaboration 
Programme  To stimulate private -sector interest in 
R&D through leveraging the knowledge 
and resources of universities  ITC The support is given as a grant, subject to a cash contribution 
by the company amounting to no less than 50% of the project 
cost In 2011: US$1.81  
In 2012: US$3.42  
In 2013: US$3.08  
In 2014: US$3.10  
In 2015: US$3.55  
In 2016: US$3.53  
In 2017: US$ 5.36  
General Support 
Programme  To support projects that contribute to 
fostering an I&T culture in HKC, and 
those beneficial to the upgrading and 
future development of its industries  ITC Support is given as a grant, with at least 10% of the project 
cost contribu ted by the applicant 's sponsor  In 2014: US$3.65  
In 2015: US$3.33  
In 2016: US$3.71  
In 2017: US$ 3.69 
Patent Application 
Grant  To assist local companies and individuals 
who have never owned any patents in 
any countries or territories to apply for 
patents for their own inventions  Hong Kong 
Productivity 
Council 
(HKPC)  A grant of up to HK$250,000 or 90% of the total direct cost of 
the patent application, whichever is the lower  In 2014: US$4.90  
In 2015: US$5.16  
In 2016: US$5.32  
In 2017: US$ 5.67 
New Technology  
Training Scheme  To assist companies wishing to have their 
staff trained in a new technology that 
would be useful to their business  Vocational 
Training 
Council 
(VTC)  Funding support of up to 50% of training cost to employers  In 2013/14:  US$0.21  
In 20 14/15: US$0.20  
In 2015/16: US$0.28  
In 2016/17: US$0.29  
R&D Cash Rebate 
Scheme  To reinforce the research culture among 
business enterprises and encourage them 
to establish stronger partnerships with 
designated local public research 
institutions  ITC Cash rebate equivalent to 40% of the expenditure in: projects 
under the  Innovation and Technology Fund  (ITF), and projects 
funded entirely by the companies and conducted by 
the designated local research institutions  In 2014: US$5.50  
In 2015: US$ 6.24 
In 2016: US$8.38 
In 2017: US$ 12.22  
Public Sector Trial 
Scheme  To support the production of 
prototypes/samples and the conducting 
of trial schemes in the public sector to 
promote the reali zation and 
commerciali zation of R&D results under 
ITF projects and arising fr om 
incubatees /graduate tenants  of the Hong 
Kong Science and Technology Parks 
Corporation (HKSTPC) and Cyberport  ITC A grant not exceeding 50% of the actual cost of the original 
R&D project (and up to 100% for projects initiated by R&D 
centres)  
 
For incubatees /graduate tenants  of the HKSTPC and Cyberport, 
a maximum grant of HK$1 million per application applies  In 2014: US$6.73  
In 2015: US$10.12  
In 2016: US$3.63  
In 2017: US$ 8.17  
  WT/TPR/S/380 • Hong Kong, China  
 
- 107 - Sector  Objective  Agency in 
charge  Form of support  Total amount 2014 -17 
(US$ million)  
Internship 
Programme  To support the recruitment of interns to 
assist in R&D projects funded by the ITF 
or undertaken by incubatees or I&T 
tenants of HKSTPC and Cyberport  ITC A maximum monthly internship allowance of HK$16,000 for 
graduates with a Bachelor's degree and HK$19,00 0 for 
graduates with a Master's or higher degree from a local 
university . 
Each ITF project and eligible company can engage 2 interns for 
24 months  In 2014: US$8.79  
In 2015: US$8.73  
In 2016: US$11.73  
In 2017: US$ 20.85  
Technology 
Voucher 
Programme  To support  local non -listed enterprises in 
using technological services and solutions 
to improve productivity , or upgrade or 
transform their business processes  ITC Funding of no more than two  thirds of the total approved 
project cost. Subject to a cumulative funding ceiling of 
HK$200,000, up to three projects from each eligible enterprise 
may be approved  In 2017 : US$ 4.0 
Innovation and 
Technology 
Venture Fund 
(ITVF)  To encourage investment from venture 
capital (VC) funds in innovation and 
technology start -ups ITC The Government co -invests with selected VC funds at an overall 
matching investment ratio of approximately 1:2. Selection of 
partner VC funds is in progress and co -investment with the m is 
expected to be made in the second half of 2018  Nil 
Enterprise Support 
Scheme (ESS)  To support companies undertaking 
applied R&D projects with a view to 
encouraging more private sector R&D 
investment in HKC ITC Funding is provided on a dollar -for-dollar matching basis, with a 
ceiling of HK$10 million (about US$1.28 million) for each 
approved  project . It may be used for meeting manpower costs, 
the procurement of equipment, and other direct costs 
specifically required for conduct ing the project . In 2014: N/A  
In 2015: US$5.82  
In 2016: US$3.27  
In 2017: US$6.32  
Services  
Professional 
Services 
Advancement 
Support Scheme 
(PASS)a To support non -profit -distributing 
organizations (i.e. trade and industry 
organizations, professional bodies or 
research institutes ) to carry out projects 
aimed at increasing the exchanges and 
co-operation of HKC 's professional 
services with their overseas counterparts , 
promoting publicity activities, and 
improving the competitiveness and 
standards of HKC's professional services  Commerce 
and 
Economic 
Development 
Bureau  For each approved project, the Government provides a grant to 
cover a maximum of 90% of the total project cost, or HK$3 
million (about US$0. 38 million), whichever is lower  At end -October 2017: US$0.9  
Film Development 
Fund (FDF)  To support projects and activities which 
contribute towards the development of 
HKC's film industry  Create Hong 
Kong  
(CreateHK)  The FDF provides grants to: (a) cover  20% of the production 
budget or HK$2 million  (US$256,000) (whichever is lower) of 
small-budget film productions ; (b) cover the full production 
costs ( from HK$3.25 million (US$417,000) to HK$5.5 million 
(US$705,000) ) for new filmmakers to produce their first  
commercial feature film ; and (c)  support other film -related 
projects conducive to the development of the film industry.  The 
FDF provides financing to contribute  40% to the production 
budget or HK$6 million (US$769,000) (whichever is lower) of 
small-to-medium budget film productions  In 2014: US$ 4.52 
In 2015: US$ 5.27 
In 2016: US$ 3.65 
In 2017 : US$7.90 
CreateSmart 
Initiative (CSI)  To support  initiatives that contribute 
towards  the development of creative 
industries (except the film industry)  Create  HK The CSI provides funding in the form of grants, which may be 
used for meeting manpower costs, the costs for the 
procurement of equipment, and other direct costs specifically 
required for the conduct of the project   In 2014: US$ 12.06  
In 2015: US$ 15.84  
In 2016: US$ 30.23  
In 2017 : US$17.66  
a Launched in November 2016, PASS is modelled on the former Professional Services Development Assistance Scheme (PSDAS), which was completed in 2015 . 
Source:  Information provided by the authorities.  WT/TPR/S/380 • Hong Kong, China  
 
- 108 - 
 
  Table A3. 3 Regime of standards and technical requirements, 2017  
Ordinance/Regulation  Summary of the legislation  Changes since 
1 January 2014  
Environmental protection  
Air Pollution Control 
Ordinance ( Cap. 311) To provide for the control of air pollution from 
stationary sources and motor vehicles.  
The import,  transhipment, supply , and use of all 
forms of asbestos and asbestos -containing materials 
is now banned.  The Ordinance was 
amended in April 2014 to 
further protect public 
health by tightening  the 
asbestos control , starting 
from 4 April 2014  
Air Pollution Control (Fuel 
Restriction) Regulations 
(Cap. 311I)  To prohibit the us e of high sulphur content solid and 
liquid fuel (sulphur content shall not exceed 1% by 
weight for conventional solid fuels and 0.005% by 
weight for liquid fuels) for commercial and industrial 
appliances , and require the use of gaseous fuel in 
certain area s of the territory.  Nil 
Air Pollution Control 
(Vehicle Design 
Standards) (Emissions)  
Regulations ( Cap. 311J)  To set out the emission s standards for vehicles. 
Newly registered vehicles shall comply with the latest 
EU or the equivalent U.S. or Japanese emission s 
standards.  The Regulation s were 
amended in 2017 to 
progressively tighten the 
emission s standards for 
specified classes of 
newly registered 
vehicles , in phases 
starting from 1  July 2017  
Air Pollution Control 
(Motor Vehicle Fuel) 
Regulation ( Cap. 311L)  To set out the specifications of motor vehicle fuel to 
be used in motor vehicles , and prohibit the sale of 
leaded petrol. The statutory specifications of motor 
vehicle diesel and unleaded petrol are pitched at Euro 
V standards.  Nil  
Air Pollution Control 
(Emission Reduction 
Devices for Vehicles) 
Regulation ( Cap. 311U)  To require scheduled vehicles to be installed with 
approved emission s reduction devices . 
Under the Regulation, the Director of Environmental 
Protection shall maintain a  register of all approved 
emission s reduction devices. The Director of 
Environmental Protection may include in the register 
an emission s reduction device only if he is satisfied 
that the device can reduce the emission s of air 
pollutants from a motor vehicl e in a manner and to 
an extent satisfactory to him , and it is suitable for 
installation on a motor vehicle.  Nil 
Air Pollution Control (Dry -
Cleaning Machines) 
(Vapour Recovery) 
Regulation ( Cap. 311T)  To control the emission of perchloroethylene (PCE) 
from the dry -cleaning industry through the imposition 
of PCE emission standard s on dry -cleaning machines 
in use . 
Specifically, the concentration of PCE inside the drum 
of dry -cleaning machines must not exceed 300  ppmv 
at the end of the drying cycle.  Nil 
Air Pollution Control 
(Petrol Filling Stations) 
(Vapour Recovery) 
Regulation ( Cap. 311S)  Petrol storage tanks and petrol dispensers of petrol 
filling stations and petrol delivery vehicles are 
required to be installed with vapour recovery 
systems.  Nil 
Air Pollution Control 
(Volatile Organic 
Compounds) Regulation 
(Cap. 311W)  Import and local manufacture of regulated VOC -
containing products for local sale and use is allowed 
only if their VOC contents meet the prescribed 
standards.  Nil  
Air Pollution Control (Air 
Pollutant Emission) 
(Controlled Vehicles) 
Regulation ( Cap. 311X)  To phase out pre -Euro IV diesel commercial vehicles , 
including goods vehicles, light buses and non -
franchised buses , by 2020 , and to limit the service 
life of diesel commercial vehicles first registered on or 
after 1 February 2014 to 15 years.  Nil 
Air Pollution Control 
(Marine Light Diesel) 
Regulation ( Cap. 311Y)  To provide for the specifications for marine light 
diesel supplied in HKC. Specifically, the sulphur 
content shall not exceed 0.05% by weight.  Nil WT/TPR/S/380 • Hong Kong, China  
 
- 109 - 
 
  Ordinance/Regulation  Summary of the legislation  Changes since 
1 January 2014  
Air Pollution Control 
(Non-road Mobile 
Machinery) (Emission) 
Regulation ( Cap. 311Z)  To control the emission s of non -road mobile 
machinery (NRMMs) through regulating the sale, 
lease and use of NRMMs.  The Regulation came into 
effect on 1 June 2015  
Air Pollution Control 
(Ocean -Going Vessels) 
(Fuel at berth) Regulation 
(Cap. 311AA)  To mandate ocean -going vessels (OGVs) to switch to 
low sulphur fuel (with a sulphur content not 
exceeding 0.5%) while at berth in HKC.  The Regulation came into  
effect on 1 July 2015  
Ozone Layer Protection 
Ordinance ( Cap. 403) To comply with the requirements of the Montreal 
Protocol on substances that deplete the ozone layer.  Nil 
Ozone Layer Protection 
(Controlled Refrigerants) 
Regulation ( Cap. 403B)  To prohibit any intended release of controlled 
refrigerants from motor vehicle air -conditioners or 
refrigeration equipment containing more than 50 kg 
of refrigerant to charge into the atmosphere , and to 
conserve the controlled refrigerants through the use 
of approved recycling and recovery equipment.  Nil 
Ozone Layer Protection 
(Products Containing 
Scheduled Substances) 
(Import Banning) 
Regulation ( Cap. 403C)  To prohibit the import from all countries of products 
containing ozone -depleting substances listed in the 
Schedule to the Ordinance.  Nil 
Noise Control (Air 
Compressors) Regulations 
(Cap. 400C)  To stipulate noise emission standards for certain 
portable air compressors.  Nil 
Noise Control (Hand Held 
Percussive Breakers) 
Regulations ( Cap. 400D)  To stipulate prescribed noise emission standards for 
certain hand -held percussive breakers .  Nil 
Noise Control (Motor 
Vehicles) Regulation 
(Cap. 400I)  To stipulate noise emission standards, as prescribed 
in the Schedule, for motor vehicles , including 
motorcycles , to comply with their first registration.  Nil 
Motor vehicles  
Road Traffic (Construction 
and Maintenance of 
Vehicles) Regulations 
(Cap. 374A)  To set out the control of vehicle construction and 
maintenance.  A new Regulation R39A 
on Reversing Video 
Device came into effect 
on 1 October 2014. In 
connection  with this , new 
clauses were added to the 
interpretations  under 
Regulation 2.  
Schedule 3 was amended , 
and came into effect on 7  
July 2017 to increase the 
passenger seating 
capacity of  light buses 
from 16 to 19.  
Road Traffic (Safety 
Equipment) Regulations 
(Cap. 374F)  To permit or require the provision or use of specified 
safety equipment (including seat belts, anchorage 
points, seats with integral seat belt anchorage, and 
protection he lmets , in compliance with specified 
overseas standards/design rules) by persons driving, 
riding in or on, or using, any class of vehicle , and 
controlling the sale, hire or possession of such 
equipment.  Nil 
Construction  
Buildings Ordinance 
(Cap. 123) and its 
subsidiary legislation  To provide for the planning, design, and construction 
of buildings and associated works; to make 
provision s for the rendering safe of dangerous 
buildings and land; and to make provision s for the 
regular inspection of buildings and the associated 
repairs to prevent the buildings from becoming 
unsafe.  
The drafting of codes of practice and design manuals 
has made reference to available international 
requirements.  Nil 
Product safety  
Toys and Children's 
Products Safety 
Ordinance ( Cap. 424) To prescribe the requirement for toys and children's 
products to comply with the applicable safety 
standards.  Nil  WT/TPR/S/380 • Hong Kong, China  
 
- 110 - 
 
  Ordinance/Regulation  Summary of the legislation  Changes since 
1 January 2014  
Toys and Children's 
Products Safety 
(Additional Safety 
Standards or 
Requirements) 
Regulations ( Cap. 424C)  To stipulate the concentration limits of six types of 
phthalates in toys and children's products intended to 
facilitate the feeding, hygiene, relaxation, sleep, 
sucking or teething of a child under 4 years of age 
and containing any plasticized material.  Nil  
Consumer Goods Safety 
Ordinance ( Cap. 456) To stipulate that consumer goods shall comply with 
general safety requirement s. Nil 
Fire Service (Installation 
& Equipment) Regulations 
(Cap. 95B) To regulate the local sale and supply of portable 
firefighting equipment , e.g. fire extinguisher s and  fire 
blanket s, to ensure that the ir design and make 
conform with a set of recognized international or 
overseas standards by requiring testing and 
subsequent approval by the Fire Services Department 
before  use in HKC.  Nil 
Electricity Ordinance 
(Cap. 406) and its 
subsidiary legislations  To prescribe safety requirements of all electrical 
products designed for household use , and issue 
certificates of safety compliance.  
Under the Electrical Products (Safety) Regulation 
(Cap. 406G) , enacted in May 1998 to replace a 
previous regulation, all electrical products designed 
for household use and supplied in HKC shall comply 
with both essential and specific safety requirements , 
and shall be issued with certificates of  safety 
compliance. The safety requirements are based on 
the relevant international or overseas standards 
relevant for the purpose of the regulation.  
Concerning the safety standards, IEC standards as 
well as relevant international/national standards that 
comply with the prescribed safety requirements of 
the EPSR , are acceptable.  Nil 
Lifts and Escalators 
Ordinance ( Cap. 618) To ensure the safety of new brands/models of lift s or 
escalator s, written approval of the Director of 
Electrical and Mechanical Services is required before 
installation.  Nil  
Builders' Lifts and Tower 
Working Platforms 
(Safety) Ordinance 
(Cap. 470) To ensure the safety of builders' lift s or tower 
working platform s, the authority is the Director of 
Electrical and Mechanical Services.  Nil 
Gas Safety Ordinance 
(Cap. 51) To control, in the interests of safety, the importation, 
manufacture, storage, transport, supply and use of 
gas, in accordance with the directive of the Gas 
Authority (Director of Electrical and Mechanical 
Services) for the purposes of the Ordinance.  Nil 
Telecommunications  
Telecommunications 
Ordinance ( Cap. 106) and 
its subsidiary regulations  To make better provision s for the licensing and 
control of telecommunications, telecommunications 
services, and telecommunications apparatus and 
equipment.  
Regulations in the form of licences, exemption 
orders/class licences and  Hong Kong Communications 
Authority (HKCA) specifications have been stipulated 
for such purpose. The specifications are identical to , 
or essentially in line with , international standard s. Nil  
Dangerous goods  
Dangerous Goods 
Ordinance ( Cap. 295) and 
its subsidiary legislation  To prescribe rules on classification, labelling, packing, 
and storage of dangerous goods.  Nil 
Air transport  
Air Transport (Licensing 
of Air Services) 
Regulations ( Cap. 448 
sub. leg. A)  To provide for the general policy on the application, 
approval, issue, revocation and suspension of: 
(i) licences and operating permits for scheduled 
journeys; and (ii) permits for journeys other than 
scheduled journeys, and related general provisions.  Nil  WT/TPR/S/380 • Hong Kong, China  
 
- 111 - 
 
  Ordinance/Regulation  Summary of the legislation  Changes since 
1 January 2014  
Energy Efficiency  
Energy Efficiency 
(Labelling of Products) 
Ordinance (Cap . 598)  To require local manufacturers or importers of the 
prescribed products to submit specified information 
and document ation for the assignment of reference 
numbers , and to attach energy labels before 
supplying these products in HKC. The scope was expanded 
to cover televisions, 
storage type electric 
water heaters and 
induction cookers; and 
the coverage of room air 
conditioners , and of 
washing machines of a 
washing capacity from 
not exceeding 7 kg to 
not exceeding 10 kg , 
was extend ed to include 
the heating function.  
Source:  Information provided by the authorities.  
  WT/TPR/S/380 • Hong Kong, China  
 
- 112 - 
 
  Table A3. 4 Intellectual Property laws and regulations, 2018  
Title Brief description  
Patents   
Patents Ordinance (Cap. 514)  Makes provisions for patents and related matters. Amended in 2008 to 
implement the compulsory licensing scheme under Paragraph 6 of the 
Doha Declaration on the TRIPS Agreement and Public Health and the 
Protocol amending the WTO TRIPS Agreement (WTO documen t 
IP/N/1/HKG/17, 7 April 2008).  
Amended in 2009 to extend its application to the 3 offices set up by the 
Central People's Government in HKC (WTO document IP/N/1/HKG/20, 
17 March 2010).  
Amended on several occasions, most recently in 2017 to reflect the latest 
membership position of the Paris Convention for the Protection of Industrial 
Property, and the WTO (WTO document IP/N/1/HKG/29; IP/N/1/HKG/P/9, 
18 April 2017).  
Patents (Amendment) Ordinance 
2016 (not yet in force)  Provides for the basic legal framework of the new patent system , and 
make s provisions for:  (i) introducing an OGP system for the grant ing of 
standard patents to be run in parallel with the existing re -registration 
system; (ii) refin ing the existing short-term patent system; and (iii) 
implementing an interim regulatory measure for local patent practitioners.  
Patents (Transitional 
Arrangements) Rules  Provides transitional arrangements for the registration of patents in the 
Register o f HKC for patents registered under the old Registration of Patents 
Ordinance, which was repealed in 1997, and certain patents registered 
under the United Kingdom Patents Acts 1949 and 1977.  
Patents (General) Rules  Prescribes provisions and procedures un der the Patents Ordinance 
(Cap.  514).  
Patents (Designation of Patent 
Offices) Notice  Makes designations under Section 8 of the Patents Ordinance (Cap. 514).  
Plant varieties   
Plant Varieties Protection 
Ordinance (Cap. 490)  Provides, inter alia , a sui generis  regime for the granting and protection of 
proprietary rights to persons who breed or discover and develop plant 
varieties.  
Amended in 2009 to extend its application to the 3 offices set up by the 
Central People's Government in HKC (WTO document  IP/N/1/HKG/20, 
17 March 2010).  
Plant Varieties Protection 
Regulation (Cap. 490A)  Prescribes provisions and procedures under the Plant Varieties Protection 
Ordinance (Cap. 490).  
Trademarks (including trade 
descriptions)   
Trade Marks Ordinance 
(Cap.  559) Makes provisions for the registration of trademarks, thereby simplifying 
application and examination procedures, reducing the fee for  the 
registration of a trademark; broadening the range of marks that can be 
registered (e.g. by allowing distinctive s ound and smell marks to be 
registered); simplifying procedures for recording assignments and licences; 
and allowing multiclass applications.  
Amended on several occasions, most recently in 2017 to reflect the latest 
membership position of the Paris Convent ion, and the WTO (WTO 
document IP/N/1/HKG/31, 18 April 2017).  
Trade Marks Rules  Prescribes provisions and procedures under the Trade Marks Ordinance 
(Cap. 559).  
Amended in 2006 to facilitate enhanced electronic services (WTO document 
IP/N/1/HKG/13, 22 May 2006).  
Trade Descriptions Ordinance 
(Cap. 362) (as amended by 
Intellectual Property (World 
Trade Organization 
Amendments) Ordinance)  Contains provisions prohi biting the use of false trade descriptions and the 
forgery of trademarks in relation to goods.  
Geographical indications 
(GIs)   
Trade Marks Ordinance 
(Cap.  559) 
Trade Descriptions Ordinance 
(Cap. 362)  Enables GIs to be registered as certification or col lective trademarks. The 
use of a false GI applied to goods in a fashion calculated to mislead 
consumers may be classed as a criminal offence under the Trade 
Descriptions Ordinance.  WT/TPR/S/380 • Hong Kong, China  
 
- 113 - 
 
  Title Brief description  
Copyright and related rights  
Copyright Ordinance (Cap. 528)  Makes provisions in respect of copyright and related rights and for related  
purposes.  
Amended in 2007 to (i) maintain the scope of existing business end -user 
criminal liability in relation to the possession of infringing copies of four 
categories of works , i.e. software, movies, television dramas, and musical 
recordings (the possession offence); (ii) refine the copyright exemption 
regime (including the introduction of a fair dealing provision for 
instructional purposes); (iii) introduce new permitted acts (including 
exceptions for producing specially adapted copies of copyright works for 
persons with a print disability, and for the efficient transaction of public 
business in urgent circumstances); (iv) relax the legal prohibitions against 
the use of paralle l imported copies of copyright works by business end -
users , and shorten the period during which dealing in parallel imports 
would cause criminal liability; (v) introduce measures to strengthen 
enforcement; (vi) introduce new rights and liabilities, i.e. re ntal rights for 
films and underlying works in sound recordings, moral and rental rights for 
performers, civil liabilities against persons that tamper with rights 
management information attached to copyright works, against persons that 
deal in circumvention tools or provide circumvention services, and against 
persons that circumvent a technological measure used for copyright 
protection; and (vii) criminal liabilities against persons engaging in the 
commercial dealing of circumvention to ols or provi sion of  circumvention 
services on a commercial basis for the circumvention of technological 
measures, against persons that either make with a view to distributing , or 
distribute , infringing copies of newspapers, magazines, periodicals and 
books  on a regular or frequent basis (the "copying and distribution offence" 
targeting business end -users); and against directors, partners, or other 
persons responsible for the internal management of organizations that 
have committed the possession offence or the copying and distribution 
offence.  
Amended in 2009 to (i) prescribe the numeric limits within which the 
copying and distribution offence will not apply; and (ii) exclude Intranet 
distribution (except email and fax transmissions) from the scope of the 
offence in the interim, pending formulation of the numeric limit applicable 
to such type of distribution in consultation with stakeholders.  
Prevention of Copyright Piracy 
Ordinance  (Cap. 544)  Makes provisions for the prevention of copyright piracy using the medium 
of optical discs (including stampers). Sets out a statutory licensing scheme 
for manufacturers of optical discs in HKC , and requires optical discs 
manufactured in HKC to be marked with an assigned manufacturer 
identification code. Also , combats bootlegging of copyright work by 
stipulating that the unauthorized possession of video recording equipment 
in certain places of public entertainment is an offence.  
Industrial designs  
Registered Designs Ordinance 
(Cap. 522)  Establishes a system for the registration of new designs.  
Amended in 2009 to extend its application to the 3 offices set up by the 
Central People's Government in HKC (WTO document IP/N/1/HKG/20, 
17 March 2010).  
Amended on several occasions, most recently  in 2017 to reflect the latest 
membership position of the Paris Convention, and the WTO (WTO 
document IP/N/1/HKG/30; IP/N/1/HKG/D/4, 18 April 2017).  
Registered Designs Rules  Prescribes provisions and procedures under the Registered Designs 
Ordinance (Cap . 522).  
Amended in 2015 to adjust the level of certain prescribed fees.  
Copyright Ordinance  (Cap. 528)   Provides protection for commercially exploited artistic works.  
Layout -designs (topographies) of integrated circuits  
Layout -design (Topography) of 
Integrated Circuits Ordinance 
(Cap. 445)  Provides a sui generis  IP regime for the protection of layout -designs 
(topographies) of integrated circuits and for legal remedies against 
infringement.  
Amended on several occasions, most recently in 2017 to reflect the latest 
membership position of the Paris Convention, and the WTO (WTO 
document IP/N/1/HKG/32; IP/N/1/HKG/L/5, 18 April 2017).  
Layout -design (Topography) of 
Integrated Circuits (Designation 
of Qualifying Countries, 
Territories or Areas) Regulation  Designates countries, territories or areas as qualifying countries, territories 
or areas under Section 24 of the Layout -design (Topography) of Integrated 
Circuits Ordinance (Cap. 445).  WT/TPR/S/380 • Hong Kong, China  
 
- 114 - 
 
  Title Brief description  
Protection of undisclosed information  
Non-statutory protection of 
undisclosed information  Protection under the common law on confidentiality.  
Personal Data (Privacy) 
Ordinance  Requires data users to use information only for the purposes for which it 
was collected, to inform people of the pu rposes for which data is collected , 
and to protect such information against unauthorized or accidental 
disclosure.  
Source:  WTO notifications and information provided by the authorities . 
  WT/TPR/S/380 • Hong Kong, China  
 
- 115 - 
 
  Table A3. 5 Enforcement of intellectual property rights, 2014 -17 
 2014  2015  2016  2017  
Prosecution and sentencing under the Copyright Ordinance and  
the Prevention of Copyright Piracy Ordinance     
Persons given a prison sentencea 28 19 23 62 
% of sentences of:      
<6 months  71.4 68.4 73.9 69.3 
6-12 months  28.6 31.6 21.7 21.0 
>12 months  0 0 4.3 9.7 
Maximum sentence passed (months)  10 7 16 27 
% of cases with fines of:  69.7 74.2 75.7 44.8 
<HK$50,000  92.4 93.9 94.9 96.8 
HK$50,000 -100,000  7.6 6.1 5.1 3.2 
>HK$100,000  0 0 0 0 
Maximum fine (HK$)  80,000  50,000  80,000  100,000  
Total fines (HK$)  859,500  719,940  1,157,870  437,700  
Prosecution and sentencing under the Trade 
Descriptions Ordinanceb     
Persons given a prison sentencea 206 131 100 99 
% of sentences of:      
<6 months  94.2 90.8 88 77.8 
6-12 months  5.8 9.2 12 14.1 
>12 months  0 0 0 8.1 
Maximum sentence passed (months)  8 8 10 18 
% of cases with fines of:  81.3 78.7 80.9 73.3 
<HK$50,000  95.6 97.7 95.3 97.4 
HK$50,000 -100,000  3.2 2.3 3.9 2.0 
>HK$100,000  1.2 0 0.8 0.6 
Maximum fine (HK$)  200,000  60,000  100,000  140,000  
Total fines (HK$)  5,765,090  4,143,485  5,104,610  2,963,913  
Seizure of illegal merchandise goods      
Pirated optical discs      
Quantity ('000)  45 11.1 70 387 
Value (HK$ million)  1 2.73 1.75 11 
Counterfeit goods      
Quantity ('000)  1,600  1,200  1,500  1,200  
Value (HK$ million)  84 104 158 107 
a Including immediate imprisonment and suspended imprisonment sentence.  
b Including all charges under the Trade Descriptions Ordinance (i.e. not limited to forged trademarks 
charges) . 
Source:  Information provided by the authorities.  
 
 
__________