Hong Kong, China WT/TPR/S/241 
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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW  
1. Hong Kong, China's small agricultural sector has continued to decline, mainly reflecting the 
effect of government measures to buy-out livestoc k producers for health and environmental reasons.  
Rice imports and exports remain subject to licensi ng requirements, and a compulsory reserve-stock 
scheme remains in place.  A new fisheries regulat ory framework is under consideration.  In the 
electricity sector, the HKSAR Government has concluded new long-term  Scheme of Control 
agreements with two local (territorial) monopolies,  and has thereby deferred liberalization of the 
electricity market at least until 2018.   
2. Hong Kong, China's structural transformation towards an increasingly services-oriented 
economy has continued since its last TPR.  The services sectors' contribution to GDP increased marginally, to about 92% in 2007-08, while the ma nufacturing sector's declined to 2.5% in 2008.  
Hong Kong, China remains a major importer and expor ter of services (with net-exports amounting to 
about 20% of GDP), which underscores the importa nce of free and open trade for the economy.   
3. Financial services remain the most important p illar of the economy, with a contribution to 
GDP of about 16% in 2008.  The banking industry has overcome the turmoil in the international 
financial markets without the need for governme nt bailouts, reflecting prudent regulation and 
supervision and a cautious a pproach to lending by Hong Kong, China's banks.  Faced with 
competition from financial centres, such as Shangha i, the HKSAR Government has been promoting 
the development of offshore renmimbi business in H ong Kong, China.  In line with international 
practice, the HKSAR Government has proposed the est ablishment of an independent regulator for the 
insurance industry.   
4. Hong Kong, China's highly contested telecoms market has been further deregulated.  
Regulation of fixed-to-mobile interconnection charg es (FMIC), based on the Mobile Party's Network 
Pays (MPNP) approach, was terminated, as it was cons idered to restrain innovation in an environment 
of fixed-mobile convergence.  A new Unified Carri er Licence (UCL) was introduced for the licensing 
of facility-based operators provi ding fixed or mobile services. 
5. In the transport sector, a number of infrastructure projects are under way, aimed at 
strengthening the competitiveness of Hong Kong, Ch ina's airport and seaport and to exploit new 
market opportunities.  The cargo handling capacity of th e airport, the largest in the world in terms of 
cargo throughput, is to be expanded significantly by 2013.  Hong Kong, China has also invested in its 
transport links to Mainland China to expand the port's and airport's catchment areas, particularly in the 
Pearl River Delta region.  Statutory port fees and charges, and licensing fees for vessels and seafarers were reduced in 2009, to prevent cargo diversi on towards competing ports.  The HKSAR has also 
concluded a number of new or more liberal agreem ents with aviation partne rs to open new business 
opportunities for Hong Kong, China's airlines.  A ne w cruise ship terminal is aimed at developing 
Hong Kong, China's position as a regional cruise hub, while the tourism industry has benefited greatly 
from facilitated visitor arrangements from China. 
6. A major new development is the HKSAR Governme nt's decision in the wake of the global 
financial crisis to promote six industries (testing and certification;  medical services;  innovation and technology;  cultural and creative industries;  envi ronmental services;  and education services), where 
it believes Hong Kong, China enjoys "competitive advantages". WT/TPR/S/241 Trade Policy Review 
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(2) AGRICULTURE AND FISHERIES  
(i) Overview 
7. The HKSAR's agriculture and fisheries sector is very small, representing a mere 0.1% of GDP 
and 0.57% of employment.  Virtually all food is imported.  Agriculture is dominated by intensive 
vegetable and livestock farms, which have replaced traditional rice farming over the past decades, and 
produce mainly for the local market.  The most common crops are cut flowers and fresh vegetables (which accounted for about 2.4% of local vegetable consumption in 2009).
1   
8. The development of the agriculture sector is c onstrained by a limited supply of farm land and 
labour, coupled with challenges from import competition,  the high cost of maintaining environmental 
standards, and public calls for impr oved farm hygiene and safe produce.   
9. Since the last TPR of Hong Kong, China, th e Government has introduced voluntary surrender 
schemes to encourage pig and poultry farmers to  cease livestock production permanently in the 
interest of public health and environmental protec tion (Table IV.1).  Both incentive schemes, which 
involved substantial government ou tlays, have had a significant impact on restructuring the livestock 
industry towards fewer but bigger farms.  Self-sufficiency declined from 23% in 2006 to 6.2 % in 
2009 for live pigs;  and from 55% to 53.7 % for live poultry.2  Conversion to other agricultural 
activities by  the farmers concerned is permitted. 
10. The one-year Surrender Scheme for pig farmers was launched on 1 June 2006 to encourage 
pig farmers to cease farm operations in return for one -off (ex-gratia) payments and loans.  Application 
was closed on 31 May 2007 and all pig farmers granted payments had vacated the farms.  
11. As a result of the detection of the H5N1 avia n influenza virus in environmental swabs taken 
from local retail markets in June 2008, overnight  stocking of live poultry at retail outlets was 
prohibited with effect from 2 July 2008.  It appears that many retailers wanted the Government to buy 
out their business as they envisaged great difficulties in  operating under the constraint of no overnight 
stocking.  The Buyout Scheme for the live poultr y trade offered one-off payments to farmers, 
wholesalers, transporters, and retailers who cho se to cease their business permanently, and workers 
were provided with one-off grants.  The app lication deadline ended on 24 September 2008.  
12. Since the last TPR of Hong Kong, China, the va lue of agricultural production has declined by 
more than half (from HK$1.2 billion in 2006 to  HK$558 million in 2009), largely reflecting the 
impact of the incentive schemes to abandon livestock production.3  These schemes aside, government 
intervention to support agriculture has been minima list:  it has provided the basic infrastructure and 
technical support necessary for the development of modern, efficient, and environmentally safe farming methods.  These measures have been notified as "general services" under the Green Box.
4  
The Government has also made available con cessional loans and emergency relief to farmers 
(Table AIV.1).  Hong Kong, China does not provid e export subsidies to agriculture or fisheries 
(Chapter III(3)(v)). 
                                                      
1 AFCD online information. Viewed at:  http ://www.afcd.gov.hk/english/agriculture/agr_hk/ 
agr_hk.html. 
2 AFCD online information. Viewed at:  http ://www.afcd.gov.hk/english/agriculture/agr_hk/ 
agr_hk.html. 
3 AFCD online information. Viewed at:  http ://www.afcd.gov.hk/english/agriculture/agr_hk/ 
agr_hk.html. 
4 WTO documents G/AG/N/HKG/22, 11 June 20 07;  G/AG/N/HKG/24, 6 June 2008;  and 
G/AG/N/HKG/26, 6 May 2009. Hong Kong, China WT/TPR/S/241 
 Page 57 
 
 
Table IV.1 
Voluntary surrender schemes in livestock production, 2010 
Assistance  Expenditures 
(HK$ million) 
Voluntary Surrender Scheme for pig farmers (2006-07)  
EGPs (ex-gratia payments) to farmers 783.3 
One-off grants to workers 3.8 
Total 787.1 
Effects: 
Reduction of number of farms  
222 out of 265 licensed pig farms ceased business  
Reduction of production capacity 
licensed rearing capacity decreased from 426,000 to 75,000 head (down 82%)  
Voluntary Buyout Scheme for th e live poultry trade (2008-09)  
EGPs for farmers 69.2 
EGPs for wholesalers 98.3 
EGPs for transporters 21.5 
EGPs for retailers 380.2 
One-off grants to workers 37.8 
Total 607.0 
Effects: 
Reduction of number of operators 
48 of the original 71 wholesalers have ceased business under the scheme;   
124  of the 250 transporters;  and 328 of  the 461 retailers have ceased business. 
A total of 1,083 workers from farms, wholes alers, transporters, and retailers left 
the industries  
Reduction of production capacity 
total licensed rearing capacity at farm s has decreased from 1,710,928 to 1,300,500 
(down by about 24%)  
Source:  Information provided by the authorities of Hong Kong, China. 
(ii) Rice  
13. With the liberalization of the Rice Control Scheme in 2003, the HKSAR Government no 
longer maintains quantitative restrictions on rice im ports.  However, imports and exports remain 
subject to licensing requirements, and there is a compulsory reserve-stock requirement for rice imports for local consumption.  Any business may register as a stockholder to import rice for the 
Hong Kong, China market.  While import transac tions are based on comme rcial considerations, 
stockholders are required to make undertakings re garding import volumes on a quarterly basis, and 
are required to import those quantities within the period concerned (import undertaking arrangement).   
14. Under the Reserved Commodities Ordinance (C ap 296), the Government continues to 
maintain a reserve-stock requirement of about  13,500 tonnes, adequate for about 15 days' 
consumption, with the objective of ensuring a stable supply of rice and mitigating public concerns in 
case of unexpected shortages.  The reserve stocks are shared among all registered importers 
proportionate to their import volumes.  Violations  of the law are liable to penalties of HK$100,000 
and imprisonment of two years.  Under the subsid iary legislation, the HKSAR Government has the 
authority in case of an emergency or  a short-term shortage of supply, inter alia , to direct stockholders 
to release reserve stocks to the market or import mo re rice (on top of the import undertakings), and to 
fix maximum wholesale prices. 
15. The last authorization for the release of reserve  stocks was in June 1989.  According to the 
authorities, the local population still has a psychological  attachment to rice as a staple diet and a brief WT/TPR/S/241 Trade Policy Review 
Page 58 
 
 
"rice rush" in 2008 illustrated the importance of st able supplies and reserve stocks to reassure the 
public. 
16. Imports of rice from China are subject to registration requirements under an administrative 
arrangement between the governments of China a nd the HKSAR.  To facilitate implementation of 
China's export quotas, in place since early 2008 on certain cereals and grain flour (rice, rice flour, and wheat flour), Hong Kong, China has implemented a voluntary registration arrangement for local 
importers.  Importers registered under the arra ngement may import cereals and grain flour from 
authorized exporters in China.  The objective of th is measure is to ensure  that rice imported from 
China is not re-exported from Hong Kong, China. 
17. Total domestic rice consumption is in th e range of 300,000-330,000 tonnes per year.  
Thailand is the main origin of imports, accounting for about 86% of  total rice imports by value in 
2008, followed by China (10%).  The mark-up on the c.i.f. import price of Thai fragrant rice has 
declined since the market was liberalized in 2003, suggesting that the liberalization measures 
enhanced competition in the rice trade to the benef it of consumers (Chart IV.1).  The number of 
registered importers/stockholders increased from 52 in  2002 (before liberalization) to 121 in 2009.  
0.01.02.03.04.05.06.07.08.09.010.011.012.0
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-090102030405060708090Chart IV.1
Mark-up on Thai fragrant rice, January 2006 - December 2009
Source :   Information provided by the authorities of Hong Kong, China.Supermarket selling price
(left-hand scale)
C.i.f. import price
(left-hand scale)Mark-up
(right-hand scale)HK$/kg.Per cent
 
(iii) Fisheries 
18. Hong Kong, China depends mainly on imports to satisfy local demand for seafood.  Its fishing 
industry produced an estimated 159,000 tonnes of produce, valued at about HK$2 billion, in 2009.5  
                                                      
5 AFCD online information.  Viewed at:  h ttp://www.afcd.gov.hk/englis h/fisheries/fish_cap/ 
fish_cap_latest/fish_cap_latest.html. Hong Kong, China WT/TPR/S/241 
 Page 59 
 
 
About of 78% of the catch was harvested in wate rs outside the HKSAR.  The local fishing fleet 
consists of some 3,700 fishi ng vessels and 7,600 fishermen. 
19. Government intervention to protect fisheries has been minimal:  it h as provided the basic 
infrastructure and technical support for the sustai nable development of fisheries, and has made 
available concessional loans and emergency relief to  fishermen (Table AIV.1).  Most loans were 
granted under the Fish Marketing Organization Loan Fund, of which HK$76.5 million in 2008-09 
were provided to fishermen affected by the two-mo nth annual fishing moratorium in the South China 
Sea imposed by Mainland China.6    
20. To alleviate the pressure on fisheries resources and promote the sustainable development of 
the fisheries industry, the Government has impl emented a variety of fisheries management and 
conservation measures, including enforcement agains t destructive fishing practices and illegal entry of 
non-local fishing vessels into Hong Kong, China waters, deployment of artificial reefs, designation of marine parks, and assisting fishermen to switch to sustainable fisheries operations through training, 
technical advice, and credit facilities.  
21. In 2006, the Government established the Committ ee on Sustainable Fisheries to study and 
recommend options for achieving the sustainable de velopment of the marine ecosystem and the 
fisheries industry.  The major recommendations made by the Committee include the introduction of a mechanism to limit new entrants into the fishing industry, banning trawling in HKSAR waters, 
designating fisheries protection areas to protect important fisheries nursery and spawning grounds, 
and prohibiting commercial fishing in  marine parks.  The HKSAR Government is in the process of 
considering the Committee's recommendations. 
(3) E
NERGY  
(i) Overview 
22. Hong Kong, China has no indigenous energy resources.  All coal and natural gas for 
electricity generation in the HKSA R is imported from China and other countries.  China also supplies 
natural gas for the production of town gas in the HKSAR.  The agreement with China on the supply of 
nuclear power was renewed in August 2008 until 2034.   
23. The HKSAR Government's energy policy objectives are:  to ensure  that the energy needs of 
the community are met safely, efficiently, and at re asonable prices;  to use and promote the efficient 
use and conservation of energy;  and to minimize the environmental impact of energy production.  
The local electricity plants are primarily coal-fi red, contributing to the smog and carbon dioxide 
emissions that plague the Pearl River Delta region.   Since 1997, the two electricity companies in the 
HKSAR are no longer permitted to build new coal-fire d electricity plants;  new generation units are 
required to use natural gas as fuel.  The Governme nt has set a target of having 1-2% of HKSAR's 
electricity needs met by renewable energies in 2012.   Electricity, gas, and water have contributed 
about 2-3% to GDP in recent years (Table I.2).    
24. All refined oil products are imported.  There have been allegations of anti-competitive 
conduct in the auto-fuel market but a study ini tiated by the Competition Policy Advisory Group in 
2006 found no clear evidence of collusion by oil companies in the Hong Kong, China auto-fuel retail market.
7  The Government has been monitoring whether changes in local retail prices are in line with 
the trend movements of international oil prices.  It has also taken steps to enhance competition by 
                                                      
6 See also WTO document G/SCM/N/186/HKG, 5 October 2009. 
7 Competition Policy Review Committee (2006). WT/TPR/S/241 Trade Policy Review 
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removing entry barriers for operators of petrol filli ng stations, which are tendered by the Government.  
Strategic reserves of gas oil and naphtha are main tained by the oil and gas companies based on a 
voluntary arrangement with the HKSAR Government, while the local electricity companies maintain 
their own fuel reserves for electricity generation.   
(ii) Electricity 
25. Electricity is supplied by two territorial de facto  monopolies.  CLP Power Hong Kong Ltd 
(CLP Power) supplies electricity to Kowloon and th e New Territories, including Lantau and several 
other outlying islands (representing about 80% of the territory's population), while the Hongkong 
Electric Company Ltd (HEC) supplies electricity to Hong Kong Island and th e neighbouring islands 
of Ap Lei Chau and Lamma.  CLP Power and HEC are private-sector-owned companies that have 
their own generation, transmission, and distribution systems.  CLP Power's transmission system is connected to the electricity grid in Guangdong Province of China, for import and export to the 
province.
8  About 20% of electricity consumption in  Hong Kong, China is imported from nuclear 
plants in Guangdong Province.   
26. Since 1964, the electricity companies have been regulated through mutually agreed scheme of 
control agreements (SCAs), which involve, inter alia , the regulation of tariffs and permitted nominal 
rates of return.  The SCAs also require the companies to seek the Government's approval for their 
corporate development plans relating to the provision and future expansion of their electricity supply 
system.  The financial matters of the power companies are monitored by the Environment Bureau.    
27. The current agreements for CLP Power and HEC took effect on 1 October 2008 and 
1 January 2009, respectively.9  These SCAs seek to address some of the criticisms made against 
previous agreements, notably that the permitted rate s of return (13.5-15%) are high;  returns based on 
fixed assets encourage over-investment;  fixing the permitted rate of return  over a 15-year period 
(1993-2008) is inflexible;  and annual tari ff and auditing reviews lack transparency.10    
28. The term of the new SCAs has be en shortened to ten years, endi ng in 2018, with an option for 
the Government to extend it for five years, after review of the prevailing market conditions.  The 
Government may open the electricity market to compe tition after the expiry of the current SCAs.  It is 
currently undertaking preparatory wo rk with a view to the possible re placement of the SCAs by a new 
regulatory framework for electricity supply.   
29. Under the current SCAs, the permitted rate of return on the average net fixed assets (ANFAs) 
of the power companies has been reduced to 9.99%, bringing a material reduction in basic tariffs.  
Fixed assets for renewable energies will attract a highe r permitted rate of return at 11%.  To guard 
against over-investment, half of the net asset value of machinery and electrical equipment of a new 
generating facility whose capacity is found to be excessive, upon commissioning, to meet the latest 
electricity demand, is excluded from the company' s ANFA for calculating the return.  The penalty 
does not apply to renewable ener gy assets, and is removed when de mand catches up with generation 
capacity.  There are also financial incentives and di sincentives in respect of emissions performance, 
supply reliability, operational efficiency, customer services, energy efficiency and renewable energy. 
                                                      
8 CLP Power imports about 70% of the power generated at units 1 and 2 of the Guangdong Nuclear 
Power Station at Daya Bay in China.  CLP Power also has the right to use up to 50% of the 1,200MW capacity 
of the Guangzhou Pumped Storage Power Station (Phase I) at Conghua in China. 
9 Legislative Council (2008). 
10 Legislative Council (2005). Hong Kong, China WT/TPR/S/241 
 Page 61 
 
 
30. The electricity tariffs charged by the power co mpanies cover operating costs and fuel charges 
and include the permitted return for providing th e service.  Their basic tariffs, which include a 
"standard fuel cost" as agreed between the Gove rnment and the two power companies, require 
approval from the Government.  Differences between th e standard fuel cost and actual fuel prices are 
captured in a Fuel Clause Account , with surpluses being returned to consumers or deficits being 
recovered from consumers by means of a rebate or  a surcharge (Fuel Clause Charge).  A Tariff 
Stabilisation Fund accumulates funds to mitigate the im pact of tariff increases for consumers.  In 
order to avoid over-accumulation of funds, the Fund is  capped at 8% of annual local sales, equivalent 
to about one-month's local sales revenue.11 
31. Hong Kong's residential electricity tariffs, acco rding to information provided by CLP Power 
and HEC, are lower than those in other major cities, including Singapore, Sydney, and Tokyo;  more favourable tariffs are offered in Seoul, Shanghai, Chinese Taipei, and Vancouver.
12  CLP Power and 
HEC maintain different tariff structures.13  CLP's average net tariff (basic tariff plus fuel clause 
charge) was increased by 2.6%, to HK$0.915 per kWh , effective January 2010.  The increase was 
justified with new capital investment to ensure  supply reliability and minimize the environmental 
impact of electricity generation,  and higher operating costs.  HEC's average net 2010 tariff remains 
unchanged, at HK$1.199 pe r kWh.  According to the authoritie s, Hong Kong, China's commercial 
electricity tariffs are lower than those in othe r major cities, including Sydney and San Francisco.    
32. In 2008, the Government introduced electricity subsidies to help ease inflationary pressures 
faced by households.  Each domestic -tariff electricity account was credited with a monthly subsidy of 
HK$300 from September 2008 to August 2009.  The total cost of the subsidy amounted to about 
HK$8.8 billion. 
(4) MANUFACTURING  
33. In the late 1980s, HKSAR manufacturers began relocating and expanding lower-value-added, 
assembly-type manufacturing operations to areas with lo wer labour costs, notably China.  Over time, 
the region of the Pearl River Delta evolved into  Hong Kong, China's industrial hinterland.  At 
end 2008, Guangdong province account ed for about 30.4% of Hong Kong, China's stock of outward 
FDI in China, or 14.5% of Hong Kong, China's total stock of outward FDI.14  As a result of 
manufacturing investments and arrangements in th e Mainland and elsewhere, the productive capacity 
of the Hong Kong, China economy has effectively been  expanded.  This process was accompanied by 
HKSAR parent companies retaining strategic c ontrol over an increasingly globalized production 
network, and assuming the role of services provider to their foreign interests.  Many of these services 
are complementary to manufacturing, and include product design and brand development, sourcing of 
materials, marketing of products, transport and communications, banking and finance, and other 
professional services.   
34. As a consequence of Hong Kong, China's econo mic transformation, within two decades the 
manufacturing sector's contribution to GDP declin ed from about 20% (in 1988) to 2.5% in 2008 
(Table I.2).  While the Closer Economic Partnershi p Arrangement with China is unlikely to stop the 
declining trend of Hong Kong, China's manufactur ing sector, it has nonetheless had a positive impact 
                                                      
11 The Tariff Stabilisation Fund replaced the Devel opment Fund under the previous SCAs, which was 
operated in the same manner with a higher accumulation cap (12.5%). 
12 Legislative Council (2009). 
13 HEC online information.  Viewed at:  h ttp://www.heh.com/hehWeb/DomesticServices/Billing 
PaymentAndElectricityTariff/ TariffTable/Index_en.htm. 
14 Federation of Hong Kong Industries (2007). WT/TPR/S/241 Trade Policy Review 
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on some local manufacturing activities in terms of additional investment and employment, in 
particular in the pharmaceutical industry.15    
35. The local manufacturing industry is geared to pr oduction with higher value-added content.  It 
employed 162,500 people in 2008 (4.6% of overall em ployment), implying that labour productivity in 
2008 was roughly only half the level in the rest of the economy.  The paper products and printing 
industry is the largest employer in the sector and contributed about 33% to manufacturing GDP in 
2008, followed by textiles and weari ng apparels with 11%.  Other ma jor industries include electrical 
and electronic products, machinery, pr ofessional equipment and optical goods.  
36. The textiles and clothing industry has continue d to contract in terms of employment and 
output, with 2,036 enterprises remaining in the HKSAR as of March 2010.  Even so, textiles and 
clothing products remain one of the major expor t products of Hong Kong, China, accounting for 
11.6% of domestic merchandise expor ts and 10.3% of re-exports (in va lue terms) in 2009 (Chart I.1).  
Lower-value production has been relocated, mainly in to China, while local enterprises have moved up 
the value chain towards original brand manufacturing (OBM) production.16  The authorities expect 
that brand-name products and pr oducts with high value-added cont ent will remain competitive on the 
world market.  They also see potential for Hong K ong, China developing into a logistics and sourcing 
hub for textiles and clothing.  Some of Hong Kong, China's textiles products are currently subject to 
anti-dumping measures imposed by India and Mexico (Chapter III(2)(vi)). 
37. The HKSAR Government has been supporting the development of small and medium-size 
enterprises (SMEs), which account for over 60% of the employment in the manufacturing sector.  A 
number of funding schemes have been introduced to  help enterprises expand markets and enhance 
competitiveness, and to ease liquidity problems in the aftermath of the global financial crisis 
(Chapter III(4)(ii)).    
(5) SERVICES  
(i) Main features  
38. The structural transformation of the HKSAR towards an increasingly services-oriented 
economy continued during the review period.  Th e contribution of services to GDP rose to 92% in 
2008, compared with 73% two decades earlier (Table I.2).  The growth of Hong Kong, China's services sector has been driven primarily by th e fast growth and liberalization of the Mainland 
economy.  Since 2004, the services sector has bene fited from incremental, preferential services 
liberalization under CEPA, which a llows Hong Kong, China-based services providers to capitalize on 
the market potential arising from China's shift of  development priorities from manufacturing towards 
services (currently accounting for about 40 % of GDP).   
39. The HKSAR is a net-services exporter, with imports (payments) of non-factor services 
equivalent to about half of exports of services in 2009 (Table IV.2 and Charts IV.2 and IV.3).  
Net-exports contributed about 20% to GDP in 2009 ( 18.8% in 2006).   The services subsectors with 
the highest growth rates in recent years are fina ncing and insurance, followed by import and export 
trade, and transport and storage services, refl ecting Hong Kong, China's position as a financial and 
trading centre.  
                                                     
 
15 Legislative Council Panel on Commerce and Industry (2007). 
16 Manufacturers engage in OBM to develop and produce products under their own brand name, 
involving higher value-added activities such as design, brand building, and brand marketing.  OBM requires a 
greater range of expertise since companies are involved in  the entire process, from initial design, to production, 
sales, and marketing. Hong Kong, China WT/TPR/S/241 
 Page 63 
 
 
Table IV.2 
Trade in services, 2005-09 
(US$ million and %)  
  2005 2006 2007 2008 2009 
Exports (US$ million) 63,700 72,741 84,698 92,109 86,302 
 (% of total) 
Transportation 31.9 30.8 30.2 31.4 29.0 
    By sea 16.3  16.0  16.6 17.2  .. 
    By air 11.3  10.9  10.3 10.6  .. 
    By other transport 4.2  3.9  3.2 3.5  .. 
Travel 16.2 16.0 16.2 16.6 19.1 
Insurance 0.6 0.6 0.6 0.6 0.6 
Financial 9.8 12.7 14.7 12.8 12.6 
Merchanting and other trade- related 32.7 31.5 30.1 30.1 30.2 
Other 8.7 8.3 8.2 8.5 8.5 
Imports (US$ million) 33,977 37,062 42,589 47,064 44,377 
 (% of total) 
Transportation 30.8 31.3 32.7 33.6 30.8 
    By sea 15.2  15.6  17.8 16.8  .. 
    By air 13.9  14.1  13.4 15.6  .. 
    By other transport 1.7  1.6  1.5 1.2  .. 
Travel 39.2 37.9 35.3 34.2 36.0 
Insurance 1.8 1.7 1.7 1.5 1.5 
Financial 4.1 5.4 6.6 6.7 7.7 
Merchanting and other trade-related 7.0 7.3 7.3 7.3 7.2 
Other 17.1 16.4 16.4 16.6 16.8 
.. Not available. 
Source : Census and Statistics Depart ment online information.  Viewed at:  http://www.censtatd.gov.hk;  and information 
provided by the authorities. 
40. The HKSAR has made specific commitments under the GATS that cover financial services;  
business services;  communication services (including te lecommunications);  construction and related 
engineering services;  distribution services;  tourism and travel-related services;  recreational, cultural 
and sporting services;  and maritime transport services.17  The Hong Kong, China schedule contains 
no horizontal limitations, nor MFN exemptions.   
(ii) Financial services 
(a) Banking and finance  
41. Hong Kong, China was the world's 12th largest banking centre in 2009 in terms of assets.18  
The city has one of the highest concentrations of ba nks in the world, with 70 of the largest 100 banks 
having a commercial presence (Table IV.3).  Th e banking sector's contribution to GDP was 10.2% 
and its share in total employment was 2.7% in  2008, which implies labour productivity at almost 
four times higher than in the rest of the economy.  The banking sector is highly outward-oriented, 
with China being the major export market for banking services.19  Exports of investment banking 
services amounted to HK$965 million in 2008, up from HK$531 million in 2006.    
                                                      
17 WTO documents GATS/SC/39, 15 April 1994;  GATS/SC/39/Suppl.2, 11 April 1997;  
GATS/SC/39/Suppl.3, 26 February 1998;  and S/L/30, 12 September 1996. 
18 HKMA (2010). 
19 HKTDC online information.  Viewed at:  h ttp://www.hktdc.com/info/mi/a/hkip/en/1X003ULX/1/ 
Hong-Kong-Industry-Profiles/Banking.htm. WT/TPR/S/241 Trade Policy Review 
Page 64 
 
 
Chart IV.2
Trade in services by major subsectors, 2009
Travel
19.1%
Finance
12.6%Imports Exports
Total:  HK$ 669.0 billion Total:  HK$ 344.0 billionMerchanting &
 trade-related
30.2%Transportation
29.0%
Finance
7.7%Transportation
30.8%
Travel
36.0%Other
18.3%
Merchanting & 
trade-related
7.2%
Source :   Census and Statistics Department online information.  Viewed at: http://www.censtatd.gov.hk [14 May 2010].Other
9.1%
 
 
42. The Government attaches great importance to the development of offshore renmimbi (RMB) 
business in the HKSAR, as a step towards better integr ation of its financial system with China.  The 
city has positioned itself as a testing ground for Chin a's measures relating to the liberalization of its 
capital account and the inte rnational use of the RMB.20  Use of the RMB in Hong Kong, China has 
expanded steadily since RMB business for individua ls was first allowed in 2004 (deposits, 
remittances, etc.).21  Since June 2007, Mainland financial institutions (and their branches in the 
HKSAR), after obtaining regulatory approval, have  been permitted to issue RMB bonds in the 
HKSAR.  Eligibility for bond issuers was broadened to include Mainland subsidiaries of Hong Kong 
banks in 2009, when the Government of China also issued RMB sovereign bonds in Hong Kong, 
China.  The amount of RMB bonds issued in Hong Kong, China reached RMB 16 billion in 2009, 
with cumulative RMB bond issuance amounting to some RMB 40 billion by July 2010.  
43. China's RMB trade-settlement pilo t scheme was introduced in 2009  and expanded in 2010;  it 
now covers trade and current account transactions between 20 cities and provinces in China and the 
rest of the world.  The wider use of the RMB outsi de Mainland China for trade settlement is expected 
to increase RMB liquidity available outside Chin a and, given its established RMB financial 
infrastructure, Hong Kong, China is well-positione d to benefit from the greater scope of RMB 
financial intermediation activities.   
 
                                                      
20 Financial Secretary (2010). 
21 WTO (2002). Hong Kong, China WT/TPR/S/241 
 Page 65 
 
 
Chart IV.3
Trade in services by de stination and origin, 2008
United Kingdom
7.6%
Japan
6.5%Imports Exports
Total:  HK$ 703.4 billion Total:  HK$ 364.2 billionOther
34.4%United States
21.4%
Japan
8.4%United States
14.8%
United Kingdom
7.2%China
25.6%
Other
38.1%
Source :   Census and Statistics Department online information.  Viewed at: http://www.censtatd.gov.hk  [10 May 2010].China
25.0%
Singapore
5.8%
Chinese Taipei
5.2%
 
Table IV.3 
Structure and performance ratios  of the banking sector, 2005-09 
(a) Structure  
      2005 2006 2007 2008 2009 
Number of authorized institutions 285 286 279 271 270 
 Licensed banks 133 138 142 145 145 
  Incorporated in the HKSAR 24 24 23 23 23 
  Incorporated outside the HKSAR 109 114 119 122 122 
 Restricted licence banks 33 31 29 27 26 
  Incorporated in the HKSAR 20 18 16 15 14 
  Incorporated outside the HKSAR 13 13 13 12 12 
 Deposit-taking companies 33 33 29 28 28 
  Incorporated in the HKSAR 33 33 29 28 28 
  Incorporated outside the HKSAR 0 0 0 0 0 
Number of local representative offices 86 84 79 71 71 
Note: As at end period.  
(b) Performance ratios 
(%) 
   All authorized institutions  Retail banksa 
      2005 2006 2007 2008 2009   2005 2006 2007 2008 2009 
Asset quality            
 Bad debt charge to total assets 0.01 0.03 0.04 0.18 0.13  -0.01 0.01 0.04 0.18 0.10 
 Non-performing loansb 1.34 1.05 0.75 1.23 1.58  1.37 1.11 0.85 1.24 1.35 
a  Retail banks include all local ba nks plus some foreign retail banks. 
b Refers to total gross classified:  "substantial", "doubtful", and "loss". 
Source: Hong Kong Monetary Authorities online information.  Vi ewed at:  http://www.info .gov.hk/hkma/eng/public/ar09/ 
pdf/ar2009.pdf [20 May 2010]. WT/TPR/S/241 Trade Policy Review 
Page 66 
 
 
44. The Closer Economic Partnership Arrangeme nt with China has offered substantial 
improvements in market-access conditions in th e Mainland for the HKSAR banking sector.  The 
minimum total asset requirement for Hong Kong ba nks to set up branches or corporate enterprises on 
the Mainland is US$6 billion, compared with US$20 billion with non-CEPA fo reign banks.  As from 
January 2009 (CEPA Supplement V),  Mainland-inco rporated banking institutions established by a 
Hong Kong, China bank may apply to locate their data centres in Hong Kong, China.  As from October 2009, branches of HKSAR banks in any municipality in Guangdong Province may apply to establish sub-branches in other municipalities within the province (CEPA Supplement VI).
22  T h e  
HKSAR Government has issued ten certificates of Hong Kong Service Supplier to Hong Kong-based 
banking and financial services providers (e xcluding insurance and securities).   
45. The Hong Kong Monetary Authority (HKMA) is  responsible for regulation and prudential 
supervision of the banking sector under the Banking Ordinance.  Its licensing regime has remained 
unchanged since the last TPR of Hong Kong, China.  Institutions that wish to carry on banking 
business or the business of taking deposits in Hong Kong, China must be authorized by the HKMA 
under the Banking Ordinance.  Hong Kong, China ma intains a three-tier structure:  licensed banks, 
restricted licence banks (RLBs), and deposit-taking companies (DTCs).  These are collectively called 
"authorized institutions" (AIs).  Only licensed ba nks are allowed to carry on banking business, i.e. 
provide current and savings accounts and demand depos its, without restriction on size or maturity, 
and pay or collect cheques.  RLBs are restricted to taking call, notice or time deposits from the public 
in amounts of HK$500,000 and above.  DTCs are r estricted to taking deposits of HK$100,000 and 
above and with a maturity of at least three months .  In addition to AIs, subject to approval of the 
HKMA, overseas banks may maintain local repr esentative offices, which are confined to 
representational and liaison activitie s and are not allowed to conduc t banking business or take 
deposits.  AIs may engage in securities business if th ey have obtained registration from the Securities 
and Futures Commission.  They may also engage in  insurance business (banca ssurance) if authorized 
by the Office of the Commissioner of Insurance.   A foreign bank may enter HKSAR's market by 
establishing a branch and operate under a banking licen ce or restricted banking licence.  Furthermore, 
it may acquire a locally incorporated authorized in stitution, or establish a local representative office. 
46. According to the IMF, the banking sector in H ong Kong, China has weathered the turmoil in 
the international financial market s, reflecting prudent regulation an d supervision by the HKMA and a 
cautious approach to lending by Hong Kong banks.23  It notes that the banks were generally not 
exposed to securitized products that were at the co re of the global financial crisis following the 
collapse of Lehman Brothers.  Overall, the banking sector is healthy, highly liquid, and 
well-capitalized (Table IV.3).  There was no need in 2008 for the HKSAR Government to provide any 
financial support (bail-out) to financial institutions  as a result of the global financial crisis.24  
Nonetheless, the HKMA implemented a series of measures to help maintain the stability and 
confidence in the monetary and banking sectors. 
47. Under the deposit insurance scheme in for ce since September 2006 (Deposit Protection 
Scheme (DPS)) eligible deposits held with licensed  banks were protected up to a limit of HK$100,000 
per depositor per bank.  In October 2008, the Financial Secretary announced, as a pre-emptive 
measure, provision of a full guarantee for deposits held  with all authorized institutions in Hong Kong, 
                                                      
22 Under the latest CEPA Supplement VII, effective 1 January 2011, a Hong Kong bank must have 
maintained a representative office in the Mainland for one year prior to its application to set up a subsidiary or a 
branch, lowered from two years (two years for non-CEPA foreign banks);  and time a Hong Kong bank's operating institution in the Mainland must have been profitable for one year prior to an application to conduct 
RMB business, lowered from two years (two years for non-CEPA foreign banks). 
23 IMF (2009). 
24 WTO document WT/TPR/OV/12, 18 November 2009. Hong Kong, China WT/TPR/S/241 
 Page 67 
 
 
China (in force until end 2010).  To facilitate a sm ooth exit from the full deposit guarantee, legislative 
amendments have been made to enhance the DPS, including the raising of the DPS protection limit 
from HK$100,000 to HK$500,000.  The enhancements will take effect  at the beginning of 2011. 
48. Furthermore, a Contingent Bank Capital Facility  was established as a temporary measure until 
the end of 2010 to provide locally incorporated li censed banks with access to additional capital.  The 
HKMA also adopted a flexible approach towards the buffer above the statutory minimum capital 
adequacy ratio of 8% imposed on i ndividual locally incorporated aut horized institutions (AIs), to ease 
the constraints on their capital for continuing to prov ide credit.  AIs have remained well capitalized 
without the need for the HKMA to lower their mi nimum capital requirements.  The HKMA is in the 
process of implementing measures to strengthen the Basel II capital framework issued by the Basel 
Committee on Banking Supervision in July 2009.25  Implementation of enhancements on capital and 
disclosure requirements (i.e. Pillars 1 and 3) will be  effected through the legislative process, which is 
currently under way, and those on the supervisory re view process (SPR) to strengthen AIs' risk and 
capital management practices (i.e. Pilla r 2) took effect in June 2010. 
49. In October 2008, HKMA issued a circular urgi ng banks to be more accommodating in lending 
to SMEs within the bounds of prudent credit asse ssment.  In November 2008, it issued a further 
circular, "Hong Kong Approach to Corporate Difficu lties", to remind banks that when dealing with 
corporate borrowers in financial difficulties, th ey should remain supportive and not hastily put 
companies into receivership or issue writs demanding repayment if they have a reasonable chance of survival.  There are no government-owned banks and there is no directed lending in the HKSAR. 
50. Lending by Hong Kong banks is skewed towa rds the local property market.  Loans for 
building, construction, and propert y development, and investment and purchase of private residential 
properties accounted for about 40% of total customer loans in Hong Kong, China at the end of 2009.  The Government is vigilant about an excessive expa nsion in mortgage lending, so as to avert the 
threat of asset-price bubbles, which could destabilize the economy.
26  In October 2009, the HKMA 
issued guidelines to banks for tightening their cr edit underwriting standards (i.e. by lowering the 
loan-to-value ratio for mortgages on properties valued at HK$20 million or above, and reminding 
banks to process mortgage loan  applications prudently).  
(b) Insurance 
51. Hong Kong, China's insurance industry has gone th rough a crisis of confidence triggered by 
the financial difficulties of the American Inte rnational Group, Inc. (AIG) in 2008.  AIG has 
two composite insurance subsidiaries and four w holly owned general insurance subsidiaries in 
Hong Kong, China.27  In response to the AIG crisis, the Office of the Commissioner of Insurance 
(OCI) exercised its statutory power to safeguard th e interests of policyholders by requiring insurance 
subsidiaries of AIG operating in Hong Kong, China to seek his prior approval on all transactions involving movement of assets or f unds to related entities within the same group.  In addition, the OCI 
stepped up monitoring of the financial and solvency  position of all other authorized insurers in 
Hong Kong, China.  
                                                     
 
25 BIS online information.  Viewed a t:  http://www.bis.org/press/p091217.htm. 
26 HKMA (2010). 
27 The six subsidiaries include:  (i) American In ternational Assurance Comp any (Bermuda) Limited, 
(ii) American International Assurance Company Limite d, (iii) American Home Assurance Company, (iv) 
National Union Fire Insurance Company of Pittsburg h, Pa., (v) New Hampshire Insurance Company, and 
(vi) AIG United Guaranty Insurance (Asia) Limited. WT/TPR/S/241 Trade Policy Review 
Page 68 
 
 
52. To bolster public confidence in the insurance i ndustry and promote the general stability of the 
insurance market, the HKSAR Govern ment has been working with th e insurance industry to establish 
a policyholders' protection fund (PPF) in the event of insolvency of an insurer.  The Government has 
commissioned a consultancy study to examine the scope  of coverage, levy rates, target fund size, and 
other detailed arrangements for the proposed PPF, w ith a view to consulting the Legislative Council 
before the end of 2010.  The regulatory arra ngements for selling Investment-Linked Assurance 
Schemes (ILAS) products have also been improved to ensure that policyholders are aware of the risks 
and that products are appropriately aligned with  the risk profile of individual investors.  
53. Hong Kong, China's insurance market is open to foreign insurers, whether incorporated 
locally or outside Hong Kong, China.  Commercial presence in Hong Kong must be in the form of a 
subsidiary, branch or representative office, a lthough insurance business (i.e. writing an insurance 
contract or soliciting insurance business) may not  be carried out through a representative office.28  The 
same rules apply to domestic and foreign insurers.  
54. As of March 2010, there were 170 insurers registered in HKSAR, of which 81 were 
incorporated outside Hong Kong, China.  Th ese insurers come from 21 countries, led by 
Bermuda (14), the United States (13), and the United Kingdom (13).29  Insurance policies are 
primarily sold by agents but ban cassurance is growing in importance.  The insurance penetration ratio 
for long-term business (mainly life insuran ce) has been increasing, which reflects, inter alia , rising 
personal wealth and a growing preoccupation with retirement pl anning among Hong Kong, China's 
ageing population (Table IV.4).  There were 19 re insurers with commercial presence in Hong Kong, 
China in June 2010.  In 2008, gross premiums gene rated by the reinsurers totalled HK$1.4 billion for 
general insurance.   
55. The provision of insurance services is govern ed by the Insurance Companies Ordinance 
(Cap. 41) and subsidiary legislation.30  The Office of the Commissioner of Insurance (OCI), an arm of 
the Financial Services and Treasury Bureau, is responsible for the regulation and prudential 
supervision of insurers, insurance agents, and br okers, and has statutory powers to seize assets and 
property of an insurer, and control mergers and ac quisitions.  The terms and conditions of insurance 
policies and premium rates are market-determined.  The licensing regime for insurers and re-insurers remained unchanged during the review period. 
56. The Insurance Companies Ordinance provides for a self-regulatory system of insurance 
intermediaries (insurance agents and brokers).
31  Persons cannot act both as insurance agent and 
broker.  Insurance agents must be registered/licen sed with the Insurance Ag ents Registration Board 
(IARB) of the Hong Kong Federation of Insurers, whic h also handles complaints against agents, and 
monitors compliance with the Code of Practice for the Administration of Insurance Agents.  Insurance 
brokers must either be authorized by OCI or be a member of the Hong Kong Confederation of 
                                                      
28 WTO document GATS/SC/39/Suppl.3, 26 February 1998. 
29 The leading non-life insurers include HSBC Insuran ce;  American Home Assurance;  Bank of China 
Group Insurance;  Ming An Insurance (Hong Kong);  QBE Hongkong & Shanghai Insurance;  and AXA 
General Insurance (Hong Kong).  The major life insure rs include AIA (Bermuda);  HSBC Life;  Manulife;  
Prudential UK;  Hang Seng Life;  and AXA China (Ber muda).  See Hong Kong Trade Development Council 
(HKTDC) online information.  Viewed at:  http://w ww.hktdc.com/info/mi/a/hkip/en/1X003UWM/1/Hong-
Kong-Industry-Profiles/Insurance.htm. 
30 This includes:  the Insurance Companies (Determination of Long Term Liabilities) Regulation;  the 
Insurance Companies (Margin of Solvency) Regulation;   and the Insurance Comp anies (General Business) 
(Valuation) Regulation. 
31 An insurance agent generally means a person who ad vises or arranges insurance contracts on behalf 
of an insurer;  an insurance broker means a person who negotiates or arranges insurance contracts on behalf of the (potential) policy holders. Hong Kong, China WT/TPR/S/241 
 Page 69 
 
 
Insurance Brokers or the Professional Insurance Broker s Association.  OCI's Insurance Intermediaries 
Quality Assurance Scheme (Insurance Interm ediaries Qualifying Examination, Continuing 
Professional Development Programme) seeks to ensure  a high professional standard and qualification 
of insurance agents and brokers.  
Table IV.4 
Insurance data, 2005-09  
    2005 2006 2007 2008 2009 
GDP (at current market prices, HK$ million) 1,382,590  1,475,357  1,615,455  1,675,315  1,632,284  
Population (mid-year) 6,813,200  6,857,100  6,925,900  6,977,700  7,003,700  
Per capita GDP (at current market prices, HK$) 202,928  215,158  233,248  240,096  233,060  
Number of authorized insurers 175  181  178  175  171  
 Long term 46  47  47  46  46  
 General 110  116  112  110  106  
 Composite 19  18  19  19  19  
Number of authorized insurance brokers 471  486  508  538  562  
Number of registered insurance agents 29,163  29,715  31,042  33,159  34,429  
Premium income (HK$ million)      
 Long-term business (office premiums) 114,756  133,087  173,016  161,946   157,123a  
 General business (gross premiums) 22,546  22,958  24,271  26,716   28,550a  
Insurance penetration (premium, % of GDP)      
 Long-term business 8.3  9.0  10.7  9.7   9.6 
 General business 1.6  1.6  1.5  1.6   1.7 
a Figures are provisional. 
Source :  Census and Statistics Department (2010), Statistical Digest of the Services Sector (2010 edition);  Office of the 
Commissioner of Insurance (2009), Annual Report 2008;  Office of the Commissioner of Insurance (2009),  Annual 
Statistics for General Business 2008;  Office of the Commissioner of Insurance,  Annual Statistics for Long Term 
Business 2008;  and Office of the Commissioner of Insurance (2010),  Provisional Sta tistics on Hong Kong 
Insurance Business 2009  (ILens Newsletter No. 32).  
57. The Government commenced a three-month public  consultation in July 2010 on the proposed 
establishment of an independent Insurance Authority (IA).  In line with international practices, the 
proposed independent IA would be financially and operationally inde pendent of the Government, with 
a range of supervisory powers that  would facilitate effective regulati on of insurers.  The proposed IA 
would also regulate insurance intermediaries directly through a licensing system. 
58. Statutory insurance, which includes third-party lia bility insurance in respect of motor vehicles 
and vessels, and employer's liability insurance in respect of employees, must be purchased from an insurer authorized in the HKSAR.
32  
59. Under the CEPA, HKSAR insurers  have preferential access to Mainland China's insurance 
market, subject to specified access conditions, incl uding a maximum equity share in a Mainland 
insurance company of 24.9% (compared to 10% under China's GATS commitments).  Since 
January 2008, HKSAR insurance agencies have been  permitted to set up wholly owned enterprises on 
the Mainland to provide insurance agency services.   To date, nine HKSS certificates for carrying out 
insurance business on the Main land have been issued. 
                                                      
32 WTO document GATS/SC/39/Suppl.3, 26 February 1998. WT/TPR/S/241 Trade Policy Review 
Page 70 
 
 
(iii) Telecommunications 
60. Hong Kong, China's telecommunications market ha s been liberalized and there are no foreign 
ownership restrictions.  The regulatory regime is  pro-competition and pro-consumer.  The situation 
has generally not changed from that in 2006.  The HKSAR Government pursues the objective of 
establishing Hong Kong, China as the pre-eminent communications hub in the region.  The 
telecommunications sector's contribution to GDP was 1.3% in 2008.    
61. As the result of facility-based competition am ong operators, consumers benefit from a choice 
between multiple fixed and wireless city-wide broadb and networks.  As at March 2009, over 85% of 
households have the choice between at least two networks for fixed wireline services, which may 
include broadband services, telephony services, and in ternet protocol television services (IPTV).  
Tariffs for telecom services are market-determined.  The regulator pursues an ex-post regulatory approach with regard to telecom prices
33, inter alia , to allow operators greater flexibility in price 
setting in order to respond to ma rket conditions.  The prices of mobile services, as well as fixed 
services, are among the lowest in the world when measured by affordability.34 
62. Telecom services (and broadcasting services) are the only sectors of the economy that are 
currently subject to sectoral competition rules (see also Box III.1).  The competition framework 
described in the last TPR of Hong Kong, Chin a remains unchanged.  Since 2006, the Office of 
Telecommunications Authority (OFTA) has inves tigated 17 cases of alleged anti-competitive conduct 
but no breach of law was found. 
63. OFTA received 4,051 consumer complaints ag ainst telecommunication operators in 2009.  
The majority were related to disputes on billing, cont racts, and service termination.  In general, OFTA 
investigates a complaint if there is sufficient evidence to establish a prima facie  case on possible 
breach of the relevant provisions under the laws, regulations or licence conditions.  Other consumer 
complaints are referred to the ope rators concerned for direct settleme nt with the complainants.   The 
Consumer Council received 9,165 complaints c oncerning telecommunications services in 2009.35  
OFTA is in the process of consulting the public on the implementation of a Consumer Complaint 
Settlement Scheme, which is aimed at establishing an  alternative mechanism for resolving disputes 
between consumers and operato rs operated by independent adjudicators or mediators. 
64. There are no restrictions on foreign ownershi p of fixed telecommunications services, no 
limitations on the number of licences issued, a nd no requirements regardi ng network rollout or 
investment.  There are currently six main fixed network operators.36  PCCW is no longer presumed to 
have a dominant position in the fixed telecommunica tions market in Hong Kong, China (since 2005).  
65. As of June 2010, 5 licensees for satellite-b ased facilities and 29 licensees for cable-based 
facilities were authorized to provide external fixe d services only (i.e. fixed services to connect to 
                                                      
33 Under the ex post  regulatory approach on tariffs, telecomm unications licensees are not required to 
seek prior approval from the regulator, but only to put in place proper mechan isms to inform their customers and 
notify the regulator in respect of any new tariffs or proposed changes in their service tariffs.  However, the 
regulator is empowered under the Telecommunications Ordinance to intervene in case of any anti-competitive conduct of the licensees. 
34 ITU (2009), Tables 6.2 and 6.4. 
35 Consumer Council online information.  Vi ewed at:  http://www.c onsumer.org.hk/website/ 
ws_en/news/press_releases/2010020401.html. 
36 They include Hong Kong Broadband Network Limited, Hong Kong Cable Television Limited, 
Hutchison Global Communications Limited, New World Telecommunications Limited, PCCW-HKT Telephone Limited & Hong Kong Telecommunications (HKT) Limited, and Wharf T&T Limited. Hong Kong, China WT/TPR/S/241 
 Page 71 
 
 
places outside Hong Kong, China).  Hong Kong, Chin a has adopted an open sky policy in regulating 
the provision of satellite services.   
66. For mobile communications, 5 operators are currently operating 14 networks.37  The mobile 
services penetration rate in Hong Kong of over 170% is  among the highest in the world (Table IV.5).   
Table IV.5 
Telecommunications services, 2005-09  
  2005 2006 2007 2008 2009 
Population '000 (end year) 6,837.8 6,909.5 6,952.8 6,988.9 7,026.4 
Number of domestic households ('000) 2,197.1 2,220.9 2,247.1 2,277.4 2,311.6 
Number of residential main telephone lines, at 
end year ('000) 2,116.2 2,135.0 2,282.0 2,274.0 2,360.0 
Penetration rate (as % of domes tic households) 96.3 96.1 101.6 99.9 102.1 
Public mobile customers, at end year ('000) 8,544.3 9,444.1 10,588.5 11,374.2 12,206.9 
Penetration rate (as % of total population) 125.0 136.7 152.3 162.7 173.7 
Registered broadband internet access accounts       
in domestic households, at end year ('000) 1,507.2 1,594.7 1,718.1 1,782.6 1,887.4 
Penetration rate for domestic hous eholds (%) 68.6 71.8 76.5 78.3 81.7 
Telecom service revenue (HK$ million) 51,094.0 52,811.0 56,323.0 60,550.0 .. 
Telecom investment (HK$ milli on) 9,346.0 6,047.0 7,098. 0 7,397.0 .. 
.. Not available. 
Source : Office of the Telecommunications Author ity online information.  Viewed at:  http://www.ofta.gov.hk;  and Census 
and Statistics Department on line information.  Viewed at :  http://www.censtatd.gov.hk. 
67. To promote competition among operators, fixed nu mber portability was introduced in 1997 
and mobile number portability in 199 9.  This allows consumers to switch to another local network 
operator (fixed or mobile) without ha ving to change telephone numbers.   Starting July 2009, operators 
may implement fixed mobile number portability (F MNP) on a voluntary basis.  No operators are 
currently implementing FMNP. 
68. In addition to facility-based operators providing local fixed services, 190 internet service 
providers are licensed to provide broadband ser vices (as of April 2010).  The household broadband 
penetration rate is in excess of 80%.  The density of WiFi broadband internet access services in public 
places has increased significantly:  more than 9,000  public Wi-Fi hotspots have been commercially 
established by about 30 service providers in the te rritory.  Under the Government WiFi programme, 
free wireless internet access services are provided at  around 380 designated go vernment premises.   
69. In 2009, the regulator auctioned radio spectru m for the provision of broadband wireless 
access services.  The thre e successful bidders/licensees are in th e process of establishing network 
infrastructures to provide mobile broadband services based on fourth-generation mobile technology.   
70. Under the CEPA HKSAR service suppliers may establish joint ventures in China (with a 
maximum shareholding of 50%) to provide five ty pes of value-added telecommunications services 
without geographic restriction.  These services include  internet data centre services, store and forward 
services, call centre services, inte rnet access services, and content services.  Since January 2008, 
HKSAR service suppliers have been allowed to pr ovide Mainland-IP-based virtual private network 
                                                      
37 They include China Mobile Hong Kong Company Limited, CSL Limited, PCCW-HKT Telephone 
Limited & Hong Kong Telecommunications (HKT) Limited, Hutchison Telephone Company Limited, and SmarTone Mobile Communications Limited. WT/TPR/S/241 Trade Policy Review 
Page 72 
 
 
(VPN) services in the form of joint ventures, w ith a maximum shareholding of 50% and without 
geographic restriction.  From 1 October 2009, H ong Kong service suppliers have been permitted to 
distribute in the Guangdong province fixed and m obile telephone service cards, which can only be 
used in Hong Kong, China.  
Regulatory framework 
71. The Telecommunications Authority (TA) is a st atutory body responsible for regulating the 
telecommunications industry, including enforcing fa ir competition rules.  The OFTA is its executive 
arm.  Its regulatory principles are based on a  mark et-driven approach;  regul ation should not impede 
market developments, should be technology-neutr al and should not discriminate between classes of 
operators;  intervention should be proportional and minimal.  The main changes of the regulatory 
regime during the review period were in licensing and the interconnection policy.  
72. A new Unified Carrier Licence (UCL) was in troduced on 1 August 2008 for the licensing of 
facility-based operators for the provision of fixed or  mobile services (to replace fixed carrier, mobile 
carrier and public radio-communications system lic ences upon their expiry).  Facility-based operators 
are those who establish their own networks for the provision of public telecommunications services.  
A harmonized licence fee structure and licence conditi ons applies for fixed and mobile services.  As 
of June 2010, there were 24 UCL holders.   
73. An updated services-based operator (SBO) licen ce was implemented in October 2009 as a 
single, harmonized licensing regime for service-based operators of public telecommunications services.  Service-based operators are telecoms services providers who rely on fixed or mobile 
networks established by facility-based operators.
38 
74. The provision of internet protocol telephony services (VoIP services) has been authorized 
under the SBO licensing regime since January 2006.39  This has enhanced market competition in voice 
and data communications services, and consum ers now benefit from an increased range of 
communications choices.  
75. In July 2008, the mandatory "Type II" inte rconnection policy was withdrawn.  Type II 
(facilities-based) interconnection requires the in cumbent fixed network operator to open its 
copper-based customer access network to new entrants so that they can provide competing services in 
the start-up phase, while building their own networks.  In 2003, the Government carried out a review 
of the policy, considering that its continuation was ju stified only if the benefits of facilitating effective 
competition and enhancing consumer choice outwe ighed any potential dampening of incentives for 
investment in network infrastructure.  The Gove rnment decided in July 2004 that the regulatory 
intervention under the Type II interconnection polic y should be withdrawn gradually with full 
withdrawal on 30 June 2008 (except for buildings meeting the "essential fa cilities criterion" that 
justifies mandatory Type II interconnection in the consumer interest). 
                                                      
38 Service-based operators were previously licensed under two types of licences:  the Public 
Non-Exclusive Telecommunications Services (PNETS) licence (for the provision of value-added services and 
external telecommunications services provided over th e facilities of other licensed fixed network operators, or 
Mobile Virtual Network Operator (MVNO) services over the facilities of mobile netw ork operators);  and the 
Services-Based Operator (SBO) licen ce (for the provision of local voice telephony services and non-mobile 
PNETS-type services).   
39 VoIP services refer to telecoms services that integrate voice with other types of communications 
such as data, text, image, video or multimedia conveyed partially or wholly over the Internet.  These services 
may include real-time voice and data communications in three different configurations, i.e. computer-to-computer, computer-to-phone and vice versa, and phone-to-phone.   Hong Kong, China WT/TPR/S/241 
 Page 73 
 
 
76. In the wake of "fixed mobile convergence"  (FMC), recent technological and market 
developments have increasingly blurred the dis tinction between fixed a nd mobile networks and 
services.  The prevailing asymmetric regulatory gui dance on interconnection charges between fixed 
and mobile operators, i.e. fixed-to-mobile inte rconnection charges (FMIC) , which was based on the 
mobile party's network pays (MPNP) approach40, was considered no longer conducive to investment 
in an FMC environment.  In line with Govern ment's market-driven regulatory approach, the 
regulatory guidance on FMIC was withdrawn on 27 Ap ril 2009 after a two-year transitional period for 
operators to adapt to the change.  With the de regulation of FMIC, interconnection charges between 
fixed and mobile network operators  are now subject to commercial ne gotiations.  However, failing an 
agreement, the parties may request a determination of the terms and conditions of interconnection by 
the TA (pursuant to Section 36A of the Telecommuni cations Ordinance).  The TA also reserved the 
right to use its regulatory powers as a last resort, should the new policy prove unsuccessful. 
77. Fixed-to-fixed interconnection remains regulated  while mobile-to-mobile interconnections 
have never been regulated.  The interconnecti on agreements between the incumbent operator 
(PCCW-HKT Telephone Limited & Hong Kong Tel ecommunications (HKT) Limited) and other 
operators are published.   
78. The current universal service obligation (USO) regime was established by the TA in 1998 
(and last amended in June 2007) to ensure non- discriminatory access to affordable basic telephone 
services for consumers anywhere in the territory.  The scope of the universal basic telecommunications services consists essentially of fixed telephone line service and public payphone 
service.  PCCW-HKT is the sole  designated universal services provider in the territory and is 
compensated for the net cost of providing the basic service to customers under a universal service contribution (USC) arrangement.  The USC is paid  by all providers of local fixed and mobile 
telecommunications services, including facility-based  and service-based operators, who are required 
to share the cost of the USO based on the quan tity of telephone numbers allocated to them.   
79. As a result of increasing convergence between telecommunications and broadcasting services 
the Government of Hong Kong, China decided to revi ew the associated regulatory regimes.  As the 
first step, in line with the practices of other a dvanced economies, it has proposed establishment of a 
unified regulator for the two sectors, the Communications Authority (CA), by merging the Telecommunications Authority (TA) and the Br oadcasting Authority (BA).  The Government 
introduced the relevant enabling legislation, the CA  Bill, into the Legislative Council in June 2010. 
80. The Unsolicited Electronic Messages Ordi nance, which entered into force on 
22 December 2007, allows consumers to register if they do not wish to receive SMSs, faxes, and pre-recorded telephone messages.  Violations are liable to fines ranging from HK$100,000 to 
HK$500,000 for repeat offences. 
(iv) Transport 
(a) Maritime transport 
81. Hong Kong, China continues to be one of the leading hub ports in the Pearl River Delta and 
the Asia Pacific region, owing to (amongst other things) its strategic location, free port status, 
transparent and efficient customs clearance, we ll-developed infrastructure, and full intermodal 
connectivity.  It is strategically located on the Far East trade routes within the Asia Pacific basin, and 
                                                     
 
40 Under MPNP, each mobile network operator is respon sible for paying the FMIC  for traffic conveyed 
between other fixed networks and itself, for both outgoi ng calls from its network to the fixed networks and 
incoming calls from fixed networks to its network. WT/TPR/S/241 Trade Policy Review 
Page 74 
 
 
is served by some 90 international shipping lines with about 400 liner services per week, connecting 
to over 500 destinations worldwide.  Of these, about  210 are intra-Asia shipping services.  About 70% 
of the freight handled by Hong Kong port is transh ipment cargo to or from South China, mainly the 
Pearl River Delta region (Table IV.6).  There is no significant cabotage trade. 
Table IV.6 
Port traffic in Hong Kong, China, 2005-09  
  2005 2006 2007 2008 2009 
Arrival of vessels (number)      
 Ocean vessels 39, 135 39,016 37,152 35,853 33,157 
 River cargo vessels 117,490 116,137 108,945 100,613 89,750 
 River passenger ferry 75,187 75,807 79,894 80,896 82,598 
Arrival of vessels (annual % change)      
 Ocean vessels 9.0 -0 .3 -4.8 -3 .5 -7.5 
 River cargo vessels 0.0 -1.2 -6.2 -7.6 -10.8 
 River passenger ferry 4.5 0.8 5.4 1.3 2.1 
Total freight movement ('000 tonnes) 230,139 238,238 245,433 259,402 242,967 
 of which:      
 Seaborne (%) 70.2 69.8 72.3 69.4 66.5 
 River (%) 29.8 30.2 27.7 30.6 33.5 
Total freight movement (annual % change) 4.2 3.5 3.0 5.7 -6.3 
 Seaborne 1.8 2.9 6.7 1.5 -10.2 
 River 10.3 4.9 -5.5 16.7 2.5 
Total container throughput ('000 TEUsa) 22,602 23,539 23,998 24,494 21,040 
 (annual % change) 2.8 4.1 2.0 2.1 -14.1 
Percentage of containeri zation for seaborne cargob 75.5 77.7 78.9 80.7 76.9 
 Direct shipment 31.0 28.8 26.5 24.7 23.2 
 Transhipment 44.5 48.9 52.4 56.0 53.7 
a TEU = Twenty-foot-Equivalent Unit (based on a standardized  container size of 20 feet (length) * 8 feet (width)).  
b Percentage of containerization = contai nerized cargo divided by total cargo. 
Source : HKSAR Marine Depa rtment, Port and Mariti me Statistics online in formation.  Viewed at:  http://www.mardep. 
gov.hk/en/publication/ports tat.html#2 [20/05/2010]. 
82. Since 2007, Hong Kong, China's container port has been ranked third in the world after 
Singapore and Shanghai in  terms of throughput.41  Container throughput at the port has generally 
followed an increasing trend in the past few years, although in 2009 it was affected by the global 
financial crisis (Table IV.6).  Hong Kong Port h as a reputation for efficient cargo handling operations 
with an average turnaround time of about 14 hours for container vessels. 
83. The port is vital for the HKSAR economy.  It handled 25% of Hong Kong, China's total 
freight in value terms and 89% in tonnage terms in 2009 (Chart IV.4).  The port and the related 
sectors directly contributed 1.7% to GDP in  2008 and 3.1% of tota l employment (about 
110 000 jobs)42, reflecting its relatively more labour-inten sive nature (in particular haulage of 
containers, other inland transport of water-bor ne cargo, and other supporting services to water 
transport).   The port also supports the operation of the tr ading and logistics sector (one of the 
                                                      
41 Hong Kong Port Development Council (2010). 
42 This includes ship agents;  owners and opera tors of sea-going vessels /Hong Kong, China-Macao, 
China vessels;  operators of harbour ferries and miscella neous inland water transport services;  companies in the 
container business;  and companies providing sea cargo forwarding services and other supporting services to water transport. Hong Kong, China WT/TPR/S/241 
 Page 75 
 
 
four pillar industries of the economy), which accounted for 26% of GDP and 24% of total 
employment (about 830 000 jobs) in 2008. 
84. The HKSAR Government is committed to stre ngthening Hong Kong's position as a hub port 
in the region, and enhancing its competitiveness as an  international maritime centre in the face of  
intense competition from neighbouring ports, such  as Singapore, Shanghai, and Shenzhen.  The 
feasibility of developing an additi onal container terminal is being studied, and the container terminal 
area and its approach channels are to be dredged to meet the draught requirements of the new 
generation of ultra-large container ships.  The Govern ment also continues to invest in infrastructure to 
improve the intermodal connection of Hong Kong port.  One example is the construction of the 
Hong Kong–Zhuhai–Macao Bridge, wh ich began in December 2009.  The bridge will significantly 
shorten the travelling distance and time between the western part of the Pearl River Delta and the 
container terminals. 
Chart IV.4
External trade by mode of transport, 2009
Source :   Census and Statistics Department online information.  Viewed at: http://www.censtatd.gov.hk [10 May 2010].Other
0.8%Air
35.3%
Land
35.3%Sea
24.9%
Note:       Other includes trade by hand-carried and parcel post.River
3.8%(Per cent of total import/export value)
 
85. All maritime policy and administrative decisi ons are made in the HKSAR.  The Hong Kong 
Port Development Council (PDC) and the H ong Kong Maritime Industry Council (MIC) are 
high-level advisory bodies to the Government.  They  are chaired by the Secretary for Transport and 
Housing and comprise key players from the private sector and government officials.   
86. There are no restrictions on foreign direct inv estment in port facilities or maritime services, 
nor exceptions to national treatment.  Nor are th ere any market access restrictions for multimodal 
transport operators, general and bul k shipping lines, shippers, and in termediaries, to rent or lease 
trucks, railway carriages, or barges and relate d equipment for inland forwarding of cargo.  
87. Under the CEPA, HKSAR service suppliers (HKSS)  are benefiting from preferential access to 
the market for maritime transport services in China.   During the review period, further liberalizing WT/TPR/S/241 Trade Policy Review 
Page 76 
 
 
measures were introduced under CEPA.  These al low HKSS to set up joint ventures to provide 
third-party international shipping agency servi ces in China, of which the shareholding of HKSS 
should not exceed 51% (effective January 2008 under CEPA Supplement IV);  allow HKSS wholly 
owned companies and their branches to provide sh ipping agency services to vessel operators for 
routes between Guangdong Province and Hong Kong,  China/Macao, China (effective January 2009 
under CEPA Supplement V);  allow HKSS to set up wholly owned shipping companies in China to provide regular business services such as shipping und ertaking, issuance of bills of lading, settlement 
of freight rates and signing of service contracts,  for shipping transport between Hong Kong, China 
and Class B ports in Guangdong operated by HK SS using chartered Mainland vessels (effective 
October 2009 under CEPA Supplement VI).  At end-June 2010, 190 HKSS certificates had been 
granted for maritime transport services.  Hong Kong registered ships benefit from preferential dues in 
Mainland ports under a memorandum signe d with the Mainland authorities.  
88. Hong Kong, China has implemented the U.S. Cont ainer Security Initiative (launched in 2003) 
for the pre-screening of high-risk U.S.-bound contai ners.  Hong Kong, China also participated in the 
U.S. Secure Freight Initiative between November  2007 and April 2009, under which U.S.-bound 
containers were scanned on a voluntary basis in a designated container termin al, to detect any illicit 
trafficking of nuclear or radioactive materials.   The Import and Export Ordinance (Cap. 60) was 
amended with effect from 24 December 2009 to  close regulatory loopholes and strengthen 
enforcement related to combating maritime smuggling.   
Port administration and port services 
89. The Marine Department of the HKSAR Government is responsible for port administration.  It 
provides public services and facilities, including m ooring buoys, anchorage, and two cross-boundary 
ferry terminals, and is responsible for ensuring co mpliance with safety and environmental standards.  
Pilotage service is compulsory for ships in excess of 3,000 gross tonnes, and gas carriers of any 
tonnage (Chapter III(4)(iii)).
43   
90. Hong Kong, China's port facilities are financed, owned, and operated by the private sector, 
while the role of the Government has been to unde rtake long-term strategic planning for port facilities 
and to provide the necessary supporting infrastructure.   There are currently nine container terminals, 
which are privately owned and operated by five operators (Hongkong International Terminal Ltd. 
(HIT), Modern Terminals Ltd., COSCO-HIT Term inals Ltd, DP World, and Asia Container 
Terminals Ltd.).  
91. The frequency of shipping calls is  a critical factor affecting the efficiency of port operations.  
To strengthen the port's attractiveness and avert cargo diversion to competing ports, in 2009 the 
Government reduced the statutory fees and char ges for port services, and licensing fees for vessels 
and seafarers.  According to the authorities, Hong Kong, China's port costs are among the lowest in 
the world.  In late 2009, the pilotage dues were  reduced from HK$1,900 to HK$1,820 for a period of 
18 months. Operators of local (non-ocean going) passenger and cargo vessels have benefited from a 
licence fee waiver scheme implemented by the HKSAR Government in response to the global 
economic downturn.44  
                                                      
43 For an inventory of Hong Kong, China's shipping ordinances and legislation, see Marine Department 
online information.  Viewed at:  http://w ww.mardep.gov.hk/en/publication/home.html. 
44 A new Merchant Shipping (Local Vessels) Ordinance entered into force in January 2007, regulating 
the licensing and management of local vessels. Hong Kong, China WT/TPR/S/241 
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Shipping services 
92. Hong Kong, China is the world's eighth largest maritime centre in terms of the fleets owned, 
accounting for 3% of the global merchant fleet.  Moreover, the members of the Hong Kong Shipowners Association own, ma nage or operate about 1,750 v essels of 109.9 million deadweight 
tonnes, accounting for about 8% of the world's merchant fleet.  About 77% of sea cargo are handled 
by liner services (i.e. containerized sea-borne cargo). 
93. The Marine Department maintains the Hong Kong Shipping Register (HKSR), which is 
independent from the Mainland (Article 125 of th e Basic Law).  At end 2009, 1,496 vessels of 
44.9 million gross tonnage were registered with  the HKSR, representing an increase of 13% over 
end 2008.  A ship must be registered in Hong K ong, China to fly the Hong Kong, China flag.  The 
requirements for registration are:  that a majority in terest in the ship is owned by a HKSAR citizen, or 
a Hong Kong incorporated company, or a non-Hong Kong company registered in the HKSAR, or the ship is on charter to such a company;  a re presentative person, either the owner or a locally 
incorporated ship management company, is appointed in relation to the ship;  and the ship's safety and 
pollution levels are satisfactory.   
94. In addition, about 14,100 vessels are licensed to carry passengers and cargo in Hong Kong, 
China waters or in the Pearl River Delta region (referred to as local or river trade vessels).  As river trade is more cost-effective transport than by truck, there has been a rise in river trade for 
cross-boundary transport (Table IV.6).   
95. About 700 shipping-related companies are ope rating in Hong Kong, China, providing a 
variety of maritime services, including shipping agency and management, and local representative 
offices of overseas shipping companies;  ship owning and operation;  maritime insurance;  ship broking, and inland water transport.  Other related se rvices, such as legal services, arbitration, ship 
financing, ship registration, and sh ip surveying are also available. 
96. Hong Kong, China is a major centre in Asia for solving disputes by arbitration.  The 
New York Convention applies to Hong Kong, China and its arbitration awards by the Hong Kong 
International Arbitration Centre are enforceable in  all signatory states.  The Government has also 
signed an agreement with China for the reci procal enforcement of arbitration awards. 
(b) Air transport 
97. Hong Kong International Airport (HKIA) is the world's third busiest airport in terms of 
international passenger throughput after London's Heathr ow Airport and Charles de Gaulle Airport in 
Paris.  It has been the world's leading airport in  terms of international cargo throughput since 1996.  
Over 90 airlines operate about 5,700 flights weekly, linking HKIA to more than 150 destinations worldwide, including about 40 cities on the Mainland.  The air transport sector accounted for 1.7% of 
GDP and 1.3% of employment in 2008.  The global fi nancial crisis had an adverse effect on air traffic 
in 2008-09 (Table IV.7).
45    
                                                      
45 Airports Council International online informati on.  Viewed at:  http://www.airports.org/cda/ 
aci_common/display/main/aci_content07_c.jsp?zn=aci&cp=1-5-212-218-222_666_2__;  and HKTDC online 
information.  Viewed at:  http://www.hktdc.com/info /mi/a/hkip/en/1X0018JT/1/Hong-Kong-Industry-Profiles/ 
Air-Transport.htm. WT/TPR/S/241 Trade Policy Review 
Page 78 
 
 
98. Air transport continues to play an important role in Hong Kong, China's merchandise trade.  
Although air freight accounts for only about 1% of to tal cargo by weight, in value terms, 31% of total 
exports and 39% of imports were ca rried by air in 2009 (Chart IV.4).46  
Table IV.7 
Air transport, 2006-09  
    2006 2007 2008 2009 
Air cargo throughput (million tonnes) 3.58 3.74 3.63 3.35 
No. of passenger handled (million) 43.27 46.30 47.14 45.00 
  (Annual %age change) 
Total freight movement 5.2 4.5 -3.1 -7.7 
 Inward  4.4 4.0 -1.9 -4.8 
 Outward  5.7 4.8 -3.7 -9.4 
Source : Census and Statistics Department online information.  Vi ewed at:  http://www.censtatd.gov.hk.  
Air services 
99. Hong Kong, China's air transport system is re gulated and monitored by the Civil Aviation 
Department (CAD) of the HKSAR Government. The CAD also provides air navigation services and 
air traffic control services at HKIA. 
100. To provide air services (to and from Hong Kong, China) as a designated HKSAR airline, an 
airline must be incorporated and have its principal place of business in HKSAR (Article 133 of the Basic Law), and hold an Air Operator's Certificate i ssued by the CAD.  In 2010, nine airlines held an 
Air Operator's Certificate:  Cathay Pacific Airways
47, Hong Kong Dragon Airlines48, Hong Kong 
Airlines, Hong Kong Express Airways, Air Hong Kong, Metrojet, Tag Aviation, and helicopter operators Sky Shuttle and Heliservices.  Designa ted HKSAR airlines do not have exclusive access to 
routes, nor do they receive subsidies or any other form of assistance.   
101. The provision of scheduled air services is re gulated by bilateral air services agreements 
(ASAs) and arrangements between th e HKSAR and its aviation partners.
49  The HKSAR Government 
has signed 61 bilateral ASAs.50   
                                                      
46 HKTDC online information.  Viewed at:  http://www.hktdc.com/info/mi/a/hkip/en/ 
1X0018JT/1/Hong-Kong-Industry-Profiles/Air-Transport.htm.  Major items exported by air include electronics 
and their parts and components, tel ecommunications equipment, apparel and clothing accessories, jewellery 
(finished and unfinished), timepieces and eyewear;  majo r import goods include electro nics and their parts and 
components, telecommunications equipm ent, jewellery (finished and unfini shed), timepieces, toys, and sporting 
goods. 
47 The Government owns a small percentage of Cathay Pacific Airways' stocks, but has no management 
rights in the airline.  
48 Hong Kong Dragon Airlines is a 100% subsidiary of  the Cathay Pacific Airways;  the airline is a 
regional carrier. 
49 Under the Basic Law of the HKSAR (Article 133) , acting under specific authorization from the 
Central People's Government, the Government of the HKSAR may negotiate and conclude new air services agreements providing routes for ai rlines incorporated and having th eir principal place of business in 
Hong Kong, China.  Such agreements cover scheduled air services to, from or through Hong Kong, China, 
which do not operate to, from or through the Mainland of China.  According to Article 132 of the Basic Law, all 
air service agreements providing air services between other parts of China and other states and regions with 
stops at the HKSAR, and air services between the HKSAR and other states and regions with stops at other parts 
of China shall be concluded by the Central People's Government. 
50 Department of Justice online information.  Viewed at:  http://www.legislation.gov.hk/table1ti.htm.   Hong Kong, China WT/TPR/S/241 
 Page 79 
 
 
102. The HKSAR Government has adopted a progressive  liberalization policy on air services.  It 
has secured unlimited capacity for third and fourth  freedom rights with 21 aviation partners, and is 
prepared to exchange fifth freedom rights with avia tion partners when it serves the overall interests of 
Hong Kong, China.  Since the air traffic regime of the HKSAR has been significantly liberalized, 
many major routes are operated by more than one local  airline, as well as competing foreign airlines.  
As a result, air routes out of the HKSAR are, in ge neral, competitive.  Multiple designation applies to 
59 of the 61 ASAs.  Hong Kong, China also mainta ins a liberal approach to commercial cooperation 
between airlines, including code-sharing.   
103. Tariffs for scheduled air services (including passenger and cargo fares, and commissions rates 
paid to agents for air tickets on scheduled air ser vices) are subject to approval by the aeronautical 
authorities of both parties.  In response to tight ened competition legislation in the EU and the 
United States, airlines have changed their practic e of making joint applications for cargo fuel 
surcharges;  since 2007, applications are filed separately. 
104. Since 2006, more liberal air services arrangements have been reached with Belgium, Brazil, 
Brunei, China, Germany, India, Japan, Jordan, Repub lic of Korea, Luxembourg, Mauritius, Nepal, the 
Netherlands, Qatar, Russia, Sri Lanka, and the UAE.51 Among these, the more significant 
liberalization includes unlimited capacity with Brunei,  Jordan, the UAE, Sri Lanka, and Japan (except 
Tokyo52), and unlimited all-cargo capacity with Germany,  Belgium, Nepal, and China.  New ASAs 
were signed with Ethiopia, Kazakhstan, the Maldiv es, Laos, Mexico, and Fiji (the last two with 
unlimited passenger and all-cargo capacities). 
105. The current air services arrangements with Chin a provide a framework for scheduled services 
between Hong Kong, China and 57 airports on th e Mainland.  Since 2006, the arrangements were 
expanded to provide unlimited all-cargo capacity to  all airports and unlimited capacity for passenger 
services to 50 airports, while the capacity for 7 bu sy airports were increased substantially.  Air 
services between Hong Kong, China and Chinese Taip ei are governed by a commercial arrangement 
between airlines of both parties.   
106. An HKSAR airline seeking to operate scheduled  services must obtain a route-specific licence 
from the Air Transport Licensing Authority (ATLA), an independent statutory body established under the Air Transport (Licensing of Air Services) Regula tions.  Once licensed, it is eligible for designation 
by the Government of the HKSAR under the relevant ASA, and for allocation of traffic rights.  When 
processing licence applications, ATLA is required to have regard to the coor dination and development 
of air services generally with the object of ensuri ng the most effective service to the public while 
avoiding uneconomic overlapping of air services.
53  Among other factors, ATLA is required to take 
into account the financial resources of the applicant. 
107. Airlines, other than designated HKSAR airlines, wishing to operate scheduled air services 
between the HKSAR and a foreign country must satisfy  all requirements in the country of registration 
and obtain an operating permit from the Government's Director-General of Civil Aviation.  Airlines 
seeking to operate non-scheduled services to and from the HKSAR must apply for a permit from the Director-General of Civil Aviation.  Hong Kong, Ch ina has adopted a liberal approach to allow and 
facilitate operation of both passenger and freight ch arter services, which supplement or complement 
                                                     
 
51 These include increased capacities, liberal routings , provision for code-sharing and other commercial 
arrangements, etc. 
52 The capacity between  Hong Kong, China and Tokyo is subject to restrictions. 
53 ATLA is proposing to remove the elements of "co-ordination of air services" and "the avoidance of 
uneconomical overlapping of air services" from its general policy, as these matters should be addressed through market competition.   WT/TPR/S/241 Trade Policy Review 
Page 80 
 
 
scheduled services, on the basis of reciprocity.  Th ere are no restrictions on providers of Computer 
Reservation Systems. 
Airport management and ground-handling services  
108. The HKIA is operated by the Airport Authority (AA) under an aerodrome licence issued by 
the CAD.  The AA is a statutory corporation whol ly owned by the Government and is required under 
the Airport Authority Ordinance (Cap. 483) to co nduct its business accordi ng to prudent commercial 
principles.  An initiative to partially privatize the AA has been put on hold.  Since 2001, the AA has 
launched the New Destination Incentive Arrangement, offering a rebate on landing charges to airlines 
operating scheduled flights to new destinations.  Hong Kong, China has also invested in transport 
links to strengthen its gateway position to the Ma inland.  The airport has established cross-boundary 
ferry services between the SkyPier at HKIA and eight ports in the Pearl River Delta region, including 
Macao, China.  This allows passengers to connect w ith international flights at HKIA.  The airport also 
offers 460 daily round-trip coach service s to 115 Mainland cities and towns.   
109. The AA is authorized to conduct airport-rela ted activities on the artificial island where the 
airport is located, while outside activities are subject to  restrictions in the Airport Authority (Permitted 
Airport-related Activities) Order (Cap. 483).54  Airport support services, such as ground handling, 
maintenance and repair of aircraft, or air cargo at  the HKIA, are provided by third parties granted 
franchises by the AA through a competitive open bidding  process.  There are currently ten airfield-
related licensees and franchisees.  The AA periodically assesses the demand for services, and allows entry of additional operators if necessary.  Subject to operational considerations, such as space and 
efficiency, airlines may also apply for permission to provide these services themselves.  Governments 
other than the Government of the HKSAR may not hold majority shares or control franchisees that 
provide certain categories of ground-handling services at HKIA.   
110. Aircraft base maintenance and repair ser vices are provided by Hong Kong Aircraft 
Engineering Co. Ltd (HAECO), China Aircraft Serv ices Ltd. (CASL), and Pan Asia Pacific Aviation 
Services Ltd. (PAPAS).  Self-handling by ai rlines on technical line maintenance and passenger 
handling services are allowed. 
111. HKIA currently has three cargo terminals, opera ted by Asia Airfreight Terminal Limited 
(AAT) and Hong Kong Air Cargo Terminals Limited (HACTL), as well as a dedicated express cargo 
terminal operated by DHL Central Asia Hub.  Cath ay Pacific Services Limited is currently building a 
new cargo terminal, which will increase annual handli ng capacity from currently 4.8 million tonnes to 
about 7.4 million tonnes by 2013.   
112. Under the CEPA, HKSSs have been allowed to establish wholly owned operations on the 
Mainland to provide:  contract management services  for small and medium-sized airports;  airport 
management training and consultation services, a nd seven types of air transport ground services.
55  
Since 2006, air transport services-related business has been further liberalized under CEPA.  As from 
January 2008 (CEPA Supplement IV), HKSSs are permitted to establish, subject to an economic 
needs test, joint ventures in China with Main land Computer Reservation System (CRS) service 
suppliers.  They may also set up wholly owned companies to provide air transport sales agency services on international routes, and with effect  from 1 January 2011 for domestic routes on the 
Mainland (CEPA Supplement VII).  The latest C EPA Supplement also allows HKSSs to operate 
                                                     
 
54 Permitted activities include alliance or cooperation with other airports;  acquisition of interests in 
other airports in China;  provision of advisory or consultancy services to another airport;  and operation of 
carriage and logistics services. 
55 WTO (2007). Hong Kong, China WT/TPR/S/241 
 Page 81 
 
 
aircraft repair and maintenance services on th e Mainland.  As of end-May 2010, 131 HKSS 
certificates had been granted for air transport services;  109 were issued between June 2007 and May 2010. 
(v) Tourism 
113. Tourism is one of Hong Kong, China's four pilla r industries and one of its largest earners of 
foreign exchange (Table IV.8).  The direct  economic contribution of inbound and outbound tourism in 
2008 (i.e. the value-added of  tourism-related services
56) is estimated at HK$43.8 billion (2.8% of 
GDP).  Over 200,000 people (5.7% of total employment) are employed directly in the tourism industry
57, which shows that tourism is a labour-inten sive industry that generates employment 
opportunities.  Mainland China accounts for most visito r arrivals, with an average annual growth rate 
of about 14% since 2004.    
Table IV.8 
Tourism and hotel statistics, 2005-09 
 2005 2006 2007 2008 2009 
Total visitor arrivals ('000) 23,359  25,251  28,169  29,507  29,591  
By origin (%)      
China 53.7 53.8 55.0 57.1 60.7 
Chinese Taipei 9.1 8.6 7.9 7.6 6.8 
Japan 5.2 5.2 4.7 4.5 4.1 
United States 4.9 4.6 4.4 3.9 3.6 
Macao, China 2.2 2.3 2.2 2.4 2.3 
Korea, Rep. of 2.8 2.8 3.1 3.1 2.1 
Singapore 2.5 2.3 2.2 2.1 2.1 
Australia 2.2 2.2 2.2 2.2 2.0 
Philippines 1.7 1.8 2.0 1.9 1.9 
United Kingdom 2.0 2.0 2.1 1.9 1.7 
Malaysia 1.7 1.8 1.8 1.7 1.5 
Other 12.0 12.6 12.3 11.6 11.2 
By mode of transport (%)      
Land 54.7 53.7 53.8 55.6 59.6 
Air 33.4 34.1 32.7 30.9 29.1 
Sea 11.9 12.2 13.5 13.5 11.3 
Average length of stay (nights) 3.7 3.5 3.3 3.3 3.2 
Overnight visitor spending (HK$ million) 68,888  75,926  87,868  94,206  97,664  
By use (%)      
Shopping 52.9  53.2  56.7  57.3  63.6  
Hotel bills 22.2  23. 6  22.5 21.7  16.7  
Meals outside hotels 14.1  13.2  11.9  11.8  10.9  
Other 10.8  10.0  8.9  9.2  8.8  
Overnight visitor per capita spending (HK$) 4,663  4,799  5,122  5,439  5,770  
Table IV.8 (cont'd) 
                                                      
56 Tourism covers inbound tourism and outbound tourism. Inbound tourism covers retail trade, hotels 
and boarding houses, restaurants, other personal services, travel and airline ticket agents, and passenger transport services for visitors.  Outbound tourism cove rs travel and airline ticket agents as well as cross-
boundary passenger transport services for Hong Kong residents travelling abroad. 
57 Census and Statistics Department online information.  Viewed at:  http://www.censtatd.gov.hk/hong_ 
kong_statistics/four_key_industries/index.jsp. WT/TPR/S/241 Trade Policy Review 
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 2005 2006 2007 2008 2009 
Purpose of overnight visit (%)      
Vacation 50.0 52.0 55.0 55.0 56.0 
Visting friends/relatives 19.0 18.0 19.0 19.0 20.0 
Business 24.0 24.0 20.0 21.0 18.0 
Other 6.0 6.0 5.0 5.0 6.0 
Same-day in-town visitor spending (HK$ million) 6,935  9,547  13,615  18,217  22,691  
By use (%)      
Shopping 82.6  85.5  86.2  88.1  88.4  
Meals outside hotels 7.3  5.9  6.2  5.6  3.7  
Hotel bills 1.2  1.1  0.8  0.7  0.5  
Other 8.9  7.5  6.7  5.6  7.4  
Same-day in-town visitor per capita spending (HK$) 810  1,015  1,239  1,498  1,798  
Total expenditure associated to inbound tourism 
(HK$ billion) 106.0 120.7  142.2  157.8  162.9  
High tariff A hotels      
Number of hotels 21 21 21 24 27 
Number of rooms 10,808  10,809  10,855  13,570  15,116  
Room occupancy rate (%) 84  85  84  79  72  
High tariff B hotels      
Number of hotels 39  41  43  48  55  
Number of rooms 18,616  18,478  18,951  18,468  21,638  
Room occupancy rate (%) 86  88  88  87  81  
Medium tariff hotels      
Number of hotels 49  53  60  66  71  
Number of rooms 11,475  14,435  15,496  16,735  17,342  
Room occupancy rate (%) 87  87  86  86  80  
Unclassified      
Number of hotels 9  11  16  11  14  
Number of rooms 2,967  3,406  6,279  6,031  5,531  
Tourist guest houses       
Number of tourist guest houses 468 486  511  546  591  
Number of rooms 5,025  5,384  5,068  5,469  5,759  
Room occupancy rate (%) 79  79  73  78  70  
All categories      
Number of hotels and tourist guest houses 586 612  651  695  758  
Number of rooms 48,891  52,512  56,649  60,273  65,386  
Room occupancy rate (%) 86  87  86  85  78  
Source:   Hong Kong Tourism Board and Tourism Commission online information. 
114. The Government attaches particular importanc e to the development of tourism.  A key 
element of its strategy is to further facilitate tourism from the Mainland.  In July 2003, China 
introduced the Individual Visit Scheme (IVS) within  the framework of CEPA, allowing residents of 
designated cities to visit HKSAR as independent trav ellers (instead of travelling as part of tour 
groups).  This scheme has been extended gradually  and now covers 49 Main land cities, including all 
cities in Guangdong Province, as well as major citi es including Shanghai or Beijing.  Overall, IVS 
arrivals have increased from 35% of all Mainland arri vals in 2004 to 62.8% in the first three months 
of 2010.  The IVS has generated additional tourist spending estimated at HK $84.8 billion in 2004-09.  
115. Travel arrangements have also been further lib eralized for residents of nearby Shenzhen on 
Mainland China.  The new measures permit, inter alia , Mainland-approved tour operators to organize 
group visits to HKSAR for eligible non-permanent Shenzhen residents.  Mainland residents normally Hong Kong, China WT/TPR/S/241 
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need to apply for exit endorsements for outbound travel  (including to Hong Kong, China) in the city 
where their residential status is  registered and may only join outbound tours from their home city.  
Under this measure, non-permanent residents living in Shenzhen may join tours directly, without 
having to go back to their home city, therefore facilit ating their travel to the HKSAR.  This measure, 
implemented on 15 December 2008, was extended in Febr uary 2009 to cover eligible residents' close 
relatives.   
116. The Mainland also introduced a one-year mu ltiple-entry IVS endorsement for eligible 
permanent Shenzhen residents.  Normal IVS e ndorsements for Guangdong residents (including those 
in Shenzhen) are valid either fo r three months or one year, during which the holder may undertake a 
maximum of eight visits to Hong Kong, China in a one-year period.  Under the new multiple-entry 
IVS endorsement visits to Hong Kong, China by Shen zhen permanent residents are not limited during 
that one-year period.  This facilitates frequent vi sits and, since its implementation on 1 April 2009, 
more than 3.2 million Shenzhen permanent reside nts have visited Hong Kong, China with this 
endorsement.  Another measure allows non-Guangdong residents ordinarily residing in Shenzhen to 
apply for IVS endorsements in Shenzhen to vis it Hong Kong, China, without going back to their 
home cities for the application. 
117. As from 1 January 2011 (CEPA Supplement VII), Hong Kong, China travel agents 
established in Beijing and Shanghai may operate, on a pilot basis, group tours to Hong Kong, China, 
as well as Macao, China for registered permanent residents of Beijing and Shanghai.  This is in addition to the existing arrangement under which th e Hong Kong, China travel agents operate group 
tours for residents in the nine provinces of the Pan-Pearl River Delta region.
58  
118. The HKSAR Government aims to develop Hong Kong, China into a regional cruise hub.  A 
new cruise terminal at Kai Tak, capable of berthing the largest cruise vessel in the world, is expected 
to be opened in mid-2013.  
119. The Government has made available additiona l resources to attract more MICE events 
(meetings, incentive travel, conventions, and exhibitions) to Hong Kong, China.59  T h e  H o t e l  
Accommodation Tax was waived with effect from 1 July 2008 to promote tourism and enhance the 
competitiveness of the hotel industry.  In 2009, the Government also set up the HK$100 million Mega 
Events Fund to sponsor local non-profit organizations  in staging large-scale arts, cultural, and sports 
events in Hong Kong, China.  In addition, the Go vernment is seeking to strengthen the city's position 
as a premier destination for fine food and wine, and reinforce Hong Kong, China as a wine trading 
and distribution hub in the region (Chapter III(2)(iii)(a)).  
120. Since its last Review, Hong Kong, China has dive rsified its range of t ourist attractions.  The 
Hong Kong Wetland Park, Ngong Ping 360, and the Hong Kong National Geopark have been added 
to the tourism map, and the Ocean Park has been  implementing a redevelopment project, which will 
double the number of its attractions (to 70 in phases from 2007 to 2012). 
121. The Tourism Commission of the HKSAR Government is responsible for formulating tourism 
development policy and strategy.  The HKTB, a statutory body established under the Hong Kong 
                                                      
58 The provinces of Fujian, Jiangxi, Hunan, Guangdong, Hainan, Sichuan, Guizhou, Yunnan, and the 
Guangxi Zhuang Autonomous Region. 
59 In the 2008-09 Budget, the Government earmarked an additional HK$150 million over the following 
five years to enhance the appeal of Hong Kong, China as an international MICE capital and to seek to host more 
mega international conventions and exhibitions.  For 2008-11, a total of HK$90 million has been allocated to the Hong Kong Tourist Board to carry out the above tasks.   WT/TPR/S/241 Trade Policy Review 
Page 84 
 
 
Tourism Board Ordinance, and fully funded by th e Government, is responsible for marketing and 
promoting Hong Kong, China as a tourist destination.  
122. The HKTB maintains a hotel classification system , which gives a composite score to a hotel 
based on five key indicators:  achieved room rates;  staff-to-room ratio;  location;  facilities;  and the 
business mix.  Based on the composite scores, hotels are classified into three categories.  While the 
HKTB does not make public the listings of hotels by category, individual hotels are informed of their category so that they can compare their performance against their category averages. 
123. A licensing and regulatory regime (mainly codes of conduct and directives) applies to travel 
agents (persons/companies) operating inbound or outbound travel business under the Travel Agents 
Ordinance (Cap. 218), which is implemented by the Travel Agents Registry (TAR) and the Travel 
Industry Council of Hong Kong (TIC).  Tourist guides must obtain accreditation from the TIC and a 
Tourist Guide Pass (valid for three years).   
(vi) Development of new industries 
124. In October 2008, the HKSAR Government established the Task Force on Economic 
Challenges (TFEC) to assess the impact of the globa l financial crisis on Hong Kong, China's economy 
and major industries.  It was also invited to pr opose specific options for the HKSAR Government and 
business community to address the challenges arising fro m the crisis, with a view to enhancing Hong 
Kong, China's competitiveness and exploiting new business opportunities . 
125. The TFEC examined, among other things, the economic areas where Hong Kong, China 
would have a development poten tial and enjoys "competitive a dvantages", and recommended the 
further development of six industries (testing a nd certification;  medical services;  innovation and 
technology (covered in Chapter I(1) and Chapter III(4)(ii));  cultural and creative industries;  
environmental services;  and education services).  The TFEC considered a number of factors, 
including:  (i) the economic area concerned should be  able to benefit Hong Kong, China's economy in 
the medium to long term, be built on the existing ec onomic pillars and related industries, and fill or 
create niche markets best served by Hong Kong, China given its competitive advantages;  (ii) the 
economic area should be able to thrive and sust ain in a free and open market without relying on 
continued support from government;  and (iii) the potential of the economic area should be assessed 
by its viability and readiness for development.   
126. The TFEC made reference to relevant resear ch studies conducted by the Government and 
other research institutes, the Commission on Stra tegic Development (CSD), academic literature, 
statistical data, as well as the views of the public, the industries, and other stakeholders.  The TFEC 
recommendations were discussed in forums and mee tings held by the Government and the CSD.  
They were published in June 2009 an d accepted by the HKSAR Government.   
127. In line with the principle of "Big Market, Small Government", the Government's strategy is to 
remove barriers to the selected indus tries and help them tap into new markets.  The Government has 
also been examining whether the existing resour ces can support the further development of these 
industries, and factors of production are tied up by  outdated policies and economic structures.  The 
relevant policy bureaus of the HKSAR Government  have developed and ar e implementing specific 
measures, some of which may also benefit Hong Ko ng, China's economic development in general.  
(a) Testing and certification services  
128. The HKSAR Government has identified the testing and certification services industry as one 
of six industries where it believes Hong Kong, China has "competitive advantages".  Its objective is to Hong Kong, China WT/TPR/S/241 
 Page 85 
 
 
promote Hong Kong, China as a leading testing and certification centre in the region by, inter alia,  
attracting foreign conformity assessment bodies to es tablish branches in Hong Kong, China.  While 
Hong Kong, China has not made any specific comm itments under the GATS with respect to testing 
services (CPC 8676), in practice, testing and cer tification services sectors are open to foreign 
investment.  
129. The testing and certification industry is a high- tech growth industry.  The majority of the 
testing and certification services are provided by the private sector.  There are currently about 570 private independent establishm ents engaged in testing and certification services (as their major 
economic activities in the HKSAR ), employing over 12,000 people.
60  The private sector contributed 
about HK$4-5 billion to GDP in 2008 (accounting for roughly 0.24-0.30% of GDP).  About 60% of 
the revenues are generated outside the territory, mainly in the region of the Pearl River Delta. 
Receipts from testing services are primarily from testing textiles, garments, and footwear;  toys and games;  medical testing;  and testing of electrical products.   
130. In September 2009, the Government establis hed the Hong Kong Council for Testing and 
Certification to spearhead the development of testing and certification services in HKSAR.  The 
Government is supporting the work of the Counc il, as well as the Hong Kong Accreditation Service 
(HKAS), with grants of HK$20 million and HK$21 million, respectively, for the financial years 2010/11 and 2011/12. 
131. In March 2010, the Hong Kong Council for Testi ng and Certification submitted a three-year 
development plan for the industry.
61  The advantages of the HKSAR for third-party testing and 
certification are seen as:  proximity to the Mainla nd and to tap into its growing market for such 
services;  the high level of integrity and intellectua l property protection;  the good logistics support;  
port facilities and transportation;  and the operation of the Hong K ong Accreditation Service (HKAS) 
as an independent and internationally rec ognized accreditation body.  Challenges lie in, inter alia , the 
limited pool of assessors and services offered, as well as competition from global players in the 
conformity assessment business already operating in China (such as the Société Générale de 
Surveillance of Switzerland, or TÜV  of Germany). 
132. The Government expects that new regulatory requirements, such as the introduction of the 
registration for proprietary Chinese medicine, w ill create additional demand for various types of 
testing (e.g. testing for heavy metals and toxic elements, pesticide residues, microbial contaminations).  Food testing is  performed mainly by government laboratories, but the Government 
has started to outsource some of these services and plans to outsource up to 70% of routine 
food-testing work in financial year 2010/11.  With  the new requirements for nutritional labelling and 
claims introduced in July 2010, and with th e new Food Bill (pending), business opportunities for 
testing services are likely to  increase (Chapter III(2)(x)).
62  In October 2009, the Telecommunications 
Authority accredited four local certification bodies to perform the full range of testing and certification services previously provided by OFTA.  
133. For the first time since the entry into force of  the CEPA, technical testing, analysis, and 
product testing services are the subject of libera lization measures (effective 1 January 2011 under 
CEPA Supplement VII).  Testing organizations accre dited by the HKAS will be allowed, on a pilot 
basis, to cooperate with designated Mainland orga nizations to undertake testing of selected products 
under China's Compulsory Certification (CCC) Syst em.  The tests are for products listed in the CCC 
                                                     
 
60 Hong Kong Council for Testing and Certification (2010). 
61 Hong Kong Council for Testing and Certification (2010). 
62 The Food and Drugs (Composition and Labelling) (Amendment: Requirements for Nutrition 
Labelling and Nutrition Claim) Regulation 2008 (the Amendment Regulation) enters into force on 1 July 2010. WT/TPR/S/241 Trade Policy Review 
Page 86 
 
 
Catalogue, which are processed in fa cilities located in Hong Kong, China.63  The Mainland and 
Hong Kong, China have undertaken to promote cooperation between Hong Kong, China's testing 
laboratories and the Mainland's certification bodies, which are members of international multilateral 
systems on mutual recognition of testing and certi fication, so that Hong Kong, China's testing 
laboratories can be recognized under these multilatera l systems.  This provides an opportunity for 
Hong Kong, China laboratories to participate in mu ltilateral mutual recognition arrangements, which 
are open only to national bodies from sovereign countries (e.g. the IEC System for Conformity Testing and Certification of Electro technical Equipment and Components). 
(b) Cultural and creative industries  
134. Hong Kong, China's creative industries include motion pictures, sound recording, television, 
design, architecture, animation and comics, adve rtising, publishing and printing, and digital 
entertainment.  There are around 32,000 creative indu stry-related establishments in the territory, with 
over 176,000 practitioners, contributing around 4% of GDP (over HK$60 billion annually).  
Hong Kong, China's creative industries have pr eferential access to the Mainland under the CEPA. 
135. Creative industries have been targeted for financial assistance by the HKSAR Government 
because of their expected benefits in terms of st imulating innovation, to help underpin long-term 
economic growth.  Create Hong Kong (CreateH K) is a government agency established on 
1 June 2009, inter alia , to better coordinate government po licy and implement dedicated incentive 
schemes to support the development of the creative industries.  In consultation with the creative 
industries, CreateHK has identified seven strategic areas for further development:  (i) nurturing a pool 
of creative human capital that will form the back bone of the creative economy;  (ii) facilitating 
start-ups and development of creative establishmen ts;  (iii) generating de mand for innovation and 
creativity and expanding local market size for creativ e industries;  (iv) promoting creative industries 
on the Mainland and overseas to help explore outside  markets; (v) fostering a creative atmosphere 
within the Hong Kong, China community;  (vi) developi ng creative clusters in the territory to generate 
synergy and facilitate exchanges;  and (vii) prom oting Hong Kong, China as Asia's creative capital. 
136. The CreateSmart Initiative (CSI) was launched in  June 2009 to provide financial support to 
initiatives for the development and promotion of crea tive industries that are not covered by existing 
funding schemes (i.e. Film Development Fund, Film  Guarantee Fund, and D esignSmart Initiative).   
The CSI is funded with HK$300 million. The fund  supports, amongst other things, marketing and 
trade promotion activities, research, training, a nd international creative competitions.  The Film 
Development Fund (FDF) was first established in  1999 to support projects for the long-term 
development of the local film industry (Table III. 8).  An injection of HK$300 million was made in 
2007 and its scope was expanded to finance the pr oduction of small-to-medium budget films.  The 
Film Guarantee Fund (FGF) was established in 200 3 to help local film production companies to 
obtain loans from lending institutions for producing film s, and to stimulate the development of a film 
financing infrastructure in Hong Kong, China.  The DesignSmart Initiative (DSI) was launched in 
2004 with funding of HK$250 million to support design a nd innovation, and to promote the wider use 
of design and innovation in industries to help them move up the value chain.  In 2007, funding of HK$100 million was committed to support the opera tion of the Hong Kong D esign Centre (HKDC) 
over five years, to promote the importance of design and innovation. 
                                                     
 
63 Trade and Industry Department online information.   Viewed at:  http://www.tid.gov.hk/english/cepa/ 
legaltext/files/summary2010_note.doc. Hong Kong, China WT/TPR/S/241 
 Page 87 
 
 
(c) Medical services   
137. The selection of medical services for promotion by the Government appears to be linked to 
the need for healthcare reform in Hong Kong, Chin a to meet the challenges arising from an ageing 
population and rising medical costs.64  Public healthcare in Hong Kong, China is an integral part of 
public services and is heavily subsidized.  The HKSAR Government has earmarked HK$50 billion for 
reform measures, including possible subsidies for the public to join a supplementary healthcare 
financing scheme on a voluntary basis. 
138. Hong Kong, China's private healthcare sector is small, accounting for about 12% of the total 
hospital beds in the territory.  The supporting role  of the HKSAR Government for the development of 
private-sector medical services lies primarily in ensu ring that the professional standards are improved.  
It is also making available land for the development of private hospitals.65  According to the 
authorities, there are no barriers to forei gn investment in medical services, except for 
(non-discriminatory) licensing requirements.  The re gulatory regime for the healthcare profession was 
described in the previous TPR of Hong Kong, China and remains unchanged.66 
139. With the promotion of a private-sector healthcare industry, the HKSAR Government is also 
trying to emulate the economic success of other As ian countries, which have tapped into a growing 
international market of medical tourism.  Opportuniti es arise in particular because of facilitated tourist 
entry from the Mainland.  
(d) Environmental services  
140. Hong Kong, China's environmental infrastructur e has been developed largely with imported 
technology and services.  The local environmental industry is small.  In 2008, the private sector 
component of environmental industries contributed around 0.2% of the GDP.  About 400 enterprises, 
mainly SMEs, are involved in waste recycling with low value-added.  In addition, about 160 environmental consultancy firms established in Hong Kong, China provide services for local and 
Mainland projects.
67   
141. The Government's rationale for promoting envi ronmental services is mainly twofold:  to 
respond to increasing public concer ns over pollution in the PRD re gion, and demands for greater 
environmental protection;  and to capitalize on business and investment opportunities that arise from China's shift towards more stringent environmental legislation and greater public-sector spending on 
environmental projects.  The CEPA provides the b asis for closer environmental cooperation through 
preferential access to China and, in particular, Guangdong Province (CEPA Supplements IV and V).  
The long-standing environmental collaboration be tween the HKSAR Government and the Guangdong 
Provincial Government led to the launch of a fi ve-year Cleaner Production Partnership Programme in 
April 2008, for which the HKSAR Government allo cated HK$93 million to encourage the adoption of 
cleaner production technologies and practices. 
(e) Education services   
142. Educational services have been identified as one of the industries for development and 
promotion by the HKSAR Government.  The Gove rnment's objective is to enhance Hong Kong, 
                                                     
 
64 Chief Executive (2009). 
65 The HKSAR Government has reserved four areas of land for the development of private hospitals. 
66 WTO (2007). 
67 In 2008, the private-sector component of environmental industries contributed around 0.2% of the 
GDP (Home Affairs Bureau, 2009). WT/TPR/S/241 Trade Policy Review 
Page 88 
 
 
China's status as a regional education hub a nd nurture talents to enhance its long-term 
competitiveness.68  It recognizes that investments in human  capital are indispensable for a modern 
knowledge-based economy, and are necessary to a ddress Hong Kong, China's shortage of skilled 
labour.  The measures taken by the HKSAR Govern ment have been focused mainly on promoting 
private-sector educational institutions, and incr eased entry quotas for non-local students, in 
conjunction with relaxed conditions  for non-local graduates to seek employment in the HKSAR.   
143. The HKSAR Government considers that the sel f-financing higher education sector has room 
for further expansion.  Current total capacity (at de gree level) is about 9,000 students, compared with 
56,000 in public sector institutions.  Measures to facilitate the development of self-financing 
post-secondary institutions (non-profit-making) in clude providing land at nominal premiums and 
interest-free loans.  The Government has allocated  four vacant school premises and four greenfield 
sites for international school development since 2007.  It expects that the private sector will provide 
an additional 5,800 school places on a progressive basis starting from the 2009/10 school year.  
144. Since 2008, the Government has relaxed the immi gration control so that non-local graduates 
might take up employment in Hong Kong, China af ter graduation.  The "skills" and "availability" 
requirement was relaxed, and non-local student s may stay in HKSAR without limitation for 
12 months after graduation.  
145. Foreign investors may offer courses and set up branches of foreign academic institutions in 
Hong Kong, China under the Non-local Higher and Professional Education (Regulation) Ordinance 
(Cap. 493).  Since the beginning of implementation of the Ordinance in 1997, about 1,200 courses 
have been registered under the Ordinance. 
   
                                                     
 
68 Chief Executive (2009). Hong Kong, China WT/TPR/S/241 
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