RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/173 
8 November  2006  
 
(06-5263) 
Trade Policy Review Body Original: English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by 
 
HONG KONG, CHINA 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by Hong Kong, China is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Polic y Review Body on Hong Kong, China. Hong Kong, China WT/TPR/G/173 
 Page 3 
 
 
CONTENTS 
  Page 
I. OVERVIEW   5 
 A. C ONTINUANCE OF THE SUCCESSFUL OPERATION OF THE HKSAR 5 
 B. P URSUING EXCELLENCE IN GOVERNANCE  5 
 C. T RADE POLICY OBJECTIVES  5 
 II. ECONOMIC AND TRADE ENVIRONMENT  6 
 A. M
ACROECONOMIC SITUATION  6 
 B. F ISCAL SITUATION  7 
 C. M ONETARY POLICY  8 
 D. E XTERNAL TRADE & FOREIGN DIRECT INVESTMENT  8 
 (a)  Merchandise Trade 8  (b)  HKSAR’s Major Trading Partners 8 
 (c)  Trade in Services 9 
 (d)  Foreign Direct Investment 9 
 
III. TRADE POLICY DEVELOPMENT  9 
 A. P
ARTICIPATION IN THE WORLD TRADE ORGANIZATION (WTO) 9 
 B. P ARTICIPATION IN ASIA-PACIFIC ECONOMIC CO-OPERATION (APEC)  AND  
 THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) 10 
 C. R EGIONAL TRADE AGREEMENTS  10 
 (a) Hong Kong/New Zealand Closer Economic Partnership Agreement   
  (HK/NZ CEP)  10  (b) Closer Economic Partnership Arrangement (CEPA) 10 
 
IV. SECTORAL DEVELOPMENTS  11 
 A. D
EVELOPMENTS IN TRADE IN GOODS  11 
 (a) Textiles and Clothing 11 
 (b) Reserved Commodities 12  (c) Strategic Commodities 13 
 (d) Other Licensing Control and Trade Facilitation 13 
 B. D
EVELOPMENTS IN SERVICES  15 
 (a) Financial Services 15 
 (b) Telecommunications 17 
 (c) Broadcasting 18  (d) Professional Services – Legal Services 18 
 C. P
ROTECTION OF INTELLECTUAL PROPERTY RIGHTS IN HONG KONG 18 
 (a) Comprehensive Legislation 18 
 (b) Vigorous Enforcement Action 19 
 (c) Sustained Public Education 20  (d) Close Co-operation with Rights Owners and Other Law Enforcement   
  Agencies  20 
 D. E
LECTRONIC COMMERCE  20 
 E. G OVERNMENT PROCUREMENT  21 
 F. C OMPETITION POLICY  21 
 WT/TPR/G/173 Trade Policy Review 
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  Page 
V. DOHA DEVELOPMENT AGENDA  22 
 A. H ONG KONG, CHINA ’S OVERALL POSITION IN THE DOHA DEVELOPMENT AGENDA  22 
 B. H ONG KONG, CHINA ’S PRIORITY AREAS IN THE NEW ROUND  22 
 (a) Services 22 
 (b) Non-agricultural Market Access 23 
 (c) Trade Rules 23 
 C. O THER AREAS IN THE DOHA DEVELOPMENT AGENDA  24 
 (a) Intellectual Property Rights 24 
 (b) Trade Facilitation 24  (c) Trade and Environment 24 
 (d) Dispute Settlement Understanding Review 24 
 
 Hong Kong, China WT/TPR/G/173 
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I. OVERVIEW 
A. C ONTINUANCE OF THE SUCCESSFUL OPERATION OF THE HKSAR   
1. This is the third Trade Policy Review of H ong Kong, China since the establishment of the 
Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of China (PRC).  
Looking back, in the past four years since the last Trade Policy Review in 2002, the HKSAR has risen 
to the challenges posed by the repercussions of th e Asian Financial crisis and the outbreak of SARS, 
and recovered to register the strongest economic ex pansion in its recent history.  The second quarter 
of 2006 marked the eleventh consecutive quarter that  economic growth was notably above-trend.  The 
principle of “One Country, Two Systems” has c ontinued to be effectively implemented.  The 
institutions and policies that served Hong Kong well in  the past, such as the rule of law, the free and 
open trade policy, a low and simple tax regime, a nd a level playing field for business, remain the 
bedrock of Hong Kong’s success. 
2. The Basic Law, the constitutional document of  the HKSAR, sets out the way in which the 
HKSAR is to be administered.  Under its provisions, the HKSAR shall remain a free port, a separate 
customs territory and may, on its own, using th e name “Hong Kong, China”, maintain and develop 
relations and conclude and implem ent agreements with foreign stat es and regions and international 
organisations in the appropriate fields including the economic and trade fields, and participate in 
international organisations and conferences not limited  to states.  This provides the very foundation 
for our separate membership in the World Trade Organisation (WTO). 
B. P URSUING EXCELLENCE IN GOVERNANCE   
3. The Government implemented a new political  appointment system in 2002 to create a 
political tier at the top echelon of the Governme nt, comprising individuals from academia, business 
and professional sectors, as well as the civil service.  It has brought about a new system of governance 
whereby there would be a political tier at the top underpinned by the civil service. 
4. There are a total of 14 principal officials under the political appointment system, comprising 
three Secretaries of Department (the Chief Secret ary for Administration, the Financial Secretary and 
the Secretary for Justice) and 11 Di rectors of Bureau.  Principal offi cials are accountable to the Chief 
Executive for matters falling within their respective po rtfolios.  Having reviewed the new system after 
four years of practical experience, the Government  is conducting a public cons ultation on the proposal 
of creating new positions in the political tier at diffe rent levels to further develop the system.   
C. T RADE POLICY OBJECTIVES  
5. Hong Kong, China’s trade policy objectives are to promote a free, open and stable 
multilateral trading system; to safeguard our ri ghts and fulfil our obliga tions under multilateral, 
regional, and bilateral trade and trade-related agre ements and arrangements; and to secure, maintain 
and improve access for our exports. 
6. Active participation in the multilateral trading sy stem through our separate membership in the 
WTO is the cornerstone of Hong Kong, China’s external  trade policy.  Such participation is guided by 
two objectives:  firstly, to sustain the momentum of progressive global trade liberalisation; and secondly, to strengthen and update the rules-based mu ltilateral trading system so that it continuously 
provides an effective framework to promote trade expansion and liberalisation, as well as to protect 
Hong Kong, China against arbitrary and discriminatory actions. WT/TPR/G/173 Trade Policy Review 
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II. ECONOMIC AND TRADE ENVIRONMENT 
A. M ACROECONOMIC SITUATION  
7. Hong Kong is recognised as the world’s freest economy.   The Heritage Foundation has put 
Hong Kong at the top of the list in its Index of Economic Freedom for twelve consecutive years.  
Canada’s Fraser Institute, in conjunction with ins titutes from 71 other countries, has also consistently 
ranked Hong Kong as the freest economy in the worl d in their Annual Report on Economic Freedom 
of the World.  Under the guiding principle of “Market leads, Government facilitates”, the HKSAR 
Government has taken an active role to create a conducive environment for business and to facilitate 
economic development, particularly to enhance H ong Kong’s competitiveness and to allow the market 
to function efficiently and effectively. 
8. Hong Kong is a small open economy.  Its econo mic performance always depends much on 
developments in the global and regional envi ronment.  The Hong Kong economy has undergone 
several years of adjustments in the aftermath of the Asian financial crisis in 1997.  The rebound in 
economic activity in 2000 was interrupted by a seri es of external shocks, including the burst of the 
global IT bubble in 2000 and the 911 incident in 2001.  The severe setback due to the outbreak of 
SARS in the second quarter of 2003 saw a bottoming out of the economy in that quarter.  Once the 
outbreak of the epidemic subsided, the economy re bounded swiftly and entered into a full-fledged 
upturn.  Real GDP growth picked up strongly from 1.8% in 2002 and 3.2% in 2003 to 8.6% in 2004 and 7.3% in 2005.  The two years 2004 and 2005 saw  the fastest pace of economic growth in any two 
consecutive years since 1988. 
9. The Hong Kong economy sustained its upturn in the first half of 2006, with real GDP leaping 
by 6.6% over a year earlier.  The economy expanded further on a broad front, driven by fairly strong 
external trade, a distinct pick-up in consumer sp ending, as well as a continued surge in investment in 
machinery and equipment.   Thus, while external trade continues to grow, domestic demand is also 
playing an increasingly important role in the current economic upturn.  This sustained economic upturn has also led to a broad-based improvement in labour market conditions .  Yet consumer price 
inflation has remained benign. 
10. The outlook for the rest of the year depends on how the various downside risks from the 
external front including, most notably, weaker US economic growth and high oil price would play out 
to affect Hong Kong’s external trade.  Yet at this juncture, the external environment would likely 
remain largely positive in the near term.  With  the resilience in domestic demand and with the 
expected further growth in trade, the economic ou tlook is for a further solid expansion in the second 
half of the year.  Given the actual GDP outturn so far, the Hong Kong economy should easily attain 
the forecast growth range of 4-5%.  Indeed, ba rring any abrupt adverse changes in the external 
environment, GDP growth for 2006 as a whole is likely to be close to 5%.  As for the inflation outlook, overall inflationary pressures are likely to stay  rather moderate in the rest of 2006.  For the 
year as a whole, consumer price inflation is forecast at 2%.   
11. The medium-term prospect for the Hong Kong economy is bright.  With sustained robust 
growth in the mainland of China and with in creasing integration betw een Hong Kong and the 
Mainland, the Hong Kong economy, being market-based  and highly flexible and resilient, will 
continue to shift towards higher value-added services and more knowledge-based activities.  The 
productivity gains achieved in the process will enable the economy to attain a 4% trend growth over 
the medium term.  As Hong Kong has moved into a new phase of economic expansion, there is a need 
to stay alert to the possible thr eat from a resurgence in inflation. Hong Kong, China WT/TPR/G/173 
 Page 7 
 
 
12. Hong Kong has been benefiting from the rapidly growing economy of the mainland of China, 
especially since the latter’s accession to the WTO.  The Chinese government has clearly stipulated in 
its Eleventh Five-Year Plan that it would encourage the rapid development of the service industries, in 
particular modern industries such as finance, insu rance, logistics, information and legal services.  
These industries are where Hong Kong’s niches lie.  In  addition, in terms of comparative advantage, 
there is huge complementarity between Hong K ong’s vibrant service economy and the great 
manufacturing capability of the Pan-Pearl River Delt a, which is Hong Kong’s  natural hinterland and 
the most economically dynamic region in the mainla nd of China.  It is the HKSAR Government’s 
strategy to continue to strengthen economic co- operation under the Pan-Pearl River Delta initiatives, 
which brings together nine provinces1 and the two Special Administ rative Regions of Hong Kong and 
Macao, to enable Hong Kong to tap the vast potential in the market of the mainland of China and to 
enhance the role of Hong Kong as a gateway-cum-bu siness platform for the mainland of China and 
the rest of the world.  The signing of the Ma inland and Hong Kong Closer  Economic Partnership 
Arrangement (CEPA) in mid-2003 was also a significan t milestone in marking the closer ties between 
Hong Kong and its economic hinterland.   
B. F ISCAL SITUATION  
13. Fiscal prudence has been the guiding principle of the HKSAR in managing public finances2.  
Our long-standing fiscal policy objective has been to  maintain sound and stable public finances and to 
foster a fiscal environment conducive to continue d economic growth and success.  Our target is to 
ensure that the right balance is struck between  meeting public demand for better government services 
on the one hand and adhering to our principles of small government and low taxes on the other.   
14. The Operating Account of the HKSAR Governme nt had been in deficit since 1998-99.  To 
restore fiscal balance, the Government has contin ued to rein in government expenditure in recent 
years and managed to achieve, three years ahead of  schedule, all the fiscal targets set in 2004 Budget: 
(a) Operating expenditure reduced to less th an HK$200 billion in 2004-05 and 2005-06; 
(b) Fiscal balance restored in the Operating and Consolidated Acc ounts in 2005-06; and 
(c) Public expenditure as a proportion of GDP lo wered to and remaining below 20 per cent 
from 2004-05, in line with the principle of “Big Market, Small Government”. 
15. The Operating and Consolidated Accounts rest ored balance in 2005-06, the first time since 
1997-98 that both accounts have recorded a surplus.  The fiscal reserves stood at $310.7 billion as at 
31 March 2006, equivalent to 22.5% of GDP or 16 months of government expenditure.  In the 2006-
07 Budget, we projected that both the Operating a nd Consolidated Accounts would remain in surplus 
over the next five years to 2010-11.  We also anticip ated that the fiscal reserves would be maintained 
at a level between $310 billion and $400 billion, the equivalent of 15 to 17 months of government 
expenditure.  With such substantial fiscal reser ves the Government has no borrowing requirement. 
16. The Government launched a public consultation on tax reform including the introduction of a 
Goods and Services Tax (GST) in July 2006.  The main objective of the proposed tax reform is to 
                                                      
 1 These nine provinces include Guangdong, Fujian , Jiangxi, Hunan, Guangxi, Guizhou, Yunan, 
Sichuan and Hainan.  
2 Article 107 of the Basic Law of the HKSAR sets out the budget principles to be followed – “The 
Hong Kong Special Administrative Region shall follow the principle of keeping expenditure within the limits of 
revenues in drawing up its budget, and strive to achiev e a fiscal balance, avoid deficits and keep the budget 
commensurate with the growth rate of its gross domestic product.”  WT/TPR/G/173 Trade Policy Review 
Page 8 
 
 
broaden the tax base so as to ensure future growth and prosperity.  The consultation will last for nine 
months and following the consultation, a report will be  prepared for the Government of the next term 
to consider whether Hong Kong should pursu e such tax reform and introduce a GST. 
C. M ONETARY POLICY   
17. Hong Kong is a highly externally-oriented economy,  with total value of trade in goods and 
services exceeding 350% of GDP.  A credible fixed exchange rate system helps minimize exchange 
rate risk, benefiting externally-oriented business.  A stable Hong Kong dollar is also an important 
anchor for financial stability, which underpins Hong Kong’s role as an international financial centre. 
18. The primary monetary objective of Hong Kong is to maintain currency stability, defined as a 
stable external exchange value of the currency of Hong Kong, in terms of its exchange rate in the 
foreign exchange market against the US dollar, at around HK$7.80 to US$1.  The structure of the monetary system is characterized by currency board arrangements, requi ring the Hong Kong dollar 
monetary base to be at least 100 percent backed by,  and changes in it to be 100 percent matched by 
corresponding changes in, US dollar reserves held in the Exchange Fund at the fixed exchange rate of 
HK$7.80 to US$1.   
D. E
XTERNAL TRADE & FOREIGN DIRECT INVESTMENT  
(a) Merchandise Trade  
19. According to the preliminary figures published by the WTO, Hong Kong, China was the 
world’s 11th largest trading entity in 2005 in terms of va lue of merchandise trade.  It was also the 
world’s 11th largest importer and 11th largest exporter.  
20. Supported by strong performance of the global and regional economic environment, the value 
of Hong Kong’s merchandise trade3 grew from US$408 billion (HK$3,180 billion) in 2002 to US$587 
billion (HK$4,580 billion) in 2005.  Re-exports remained the key driver in overall trade with the 
vibrant trade flows of the mainland of China.  Th e outlook for trade in 2006 remains largely sanguine. 
21. In 2005, articles of apparel and clothing accesso ries accounted for the largest share (41%) by 
value of total exports of goods, followed by electri cal machinery, apparatus and appliances (14%), 
and office machines and automatic processing machines (10%). 
(b) HKSAR’s Major Trading Partners  
22. Hong Kong’s largest trading partner was the mainland of China, which accounted for a 45% 
share by value of total merchandise trade in 2005.  This was followed by the European Union (EU) 
and the United States (US), which accounted for 11% and 10% respectively.   
23. Total merchandise trade between the mainla nd of China and Hong Kong increased from 
HK$1,330 billion in 2002 to HK$2,062 billion in 2 005.  Principal export items to the Mainland in 
2005 included electrical machinery, apparatus and appliances, office machines and automatic data 
processing machines and telecommunications and sound recording apparatus and equipment.  Major 
imports from the Mainland in 2005 included tel ecommunications and sound recording apparatus and 
equipment, electrical machinery, apparatus and appliances and clothing.   
                                                      
 3 Total merchandise trade comprises impor ts, re-exports and domestic exports. Hong Kong, China WT/TPR/G/173 
 Page 9 
 
 
24. Total merchandise trade between the EU a nd Hong Kong increased from HK$359 billion in 
2002 to HK$504 billion in 20054.  Principal export items to the EU in 2005 included clothing, 
telecommunications and sound recording apparatus and equipment and miscellaneous manufactured 
articles.  Major imports from the EU in 2005 includ ed electrical machinery, apparatus and appliances, 
non-metallic mineral manufactures and telecommuni cations and sound reco rding apparatus and 
equipment.   
25. Total merchandise trade between the US and Hong Kong increased from HK$424 billion in 
2002 to HK$480 billion in 2005.  Principal export items to the US in 2005 included clothing, 
miscellaneous manufactured articles and telecomm unications and sound recording apparatus and 
equipment.  Major imports from the US in 2005  included electrical machinery, apparatus and 
appliances, office machines and automatic data pr ocessing machines and miscellaneous manufactured 
articles. 
(c) Trade in Services  
26. According to the preliminary figures published by the WTO, Hong Kong, China was the 
world’s 16th largest services trading entity in 2005.  It was also the world’s 11th largest services 
exporter and the world’s 20th largest services importer.  
(d) Foreign Direct Investment  
27. Hong Kong, China is a major destination for fo reign direct investment (FDI) in Asia.  
According to the World Investment Report 2006 re leased by the United Nations Conference on Trade 
and Development (UNCTAD), Hong Kong, China ranke d sixth in the world in FDI inflows in 2005, 
and was also the second largest recipient of FD I in Asia, after the mainland of China.  The 
preliminary figure of Hong Kong, China’s FDI in flow in 2005 was US$35.9 billion.  Excluding tax 
haven economies, the mainland of China was Hong Kong,  China’s largest source of FDI.  By the end 
of 2004, the Mainland had invested an accumulated total of US$131 billion in Hong Kong, China, accounting for 29% of the total.  Hong Kong, Ch ina was classified in the UNCTAD Report as a 
“front-runner” economy, which means that Hong Ko ng, China out-performed its investment potential 
by attracting high FDI flows relative to its economic size. 
III. TRADE POLICY DEVELOPMENT   
A. P
ARTICIPATION IN THE WORLD TRADE ORGANIZATION (WTO)   
28. Hong Kong is a founding member of the WTO.  Our separate membership continues after 
reunification with China on 1 July 1997 , under the name of “Hong Kong, China’. 
29. As a continuous demonstration of its str ong commitment to the WTO, Hong Kong, China 
hosted the WTO Sixth Ministerial Conference (MC6) in December 2005.  MC6 concluded successfully and Ministers adopted the Hong Kong Mi nisterial Declaration, which sets out a series of 
agreements in the major areas of negotiations, and a timetable for the multilateral trade negotiations 
under the Doha Development Agenda (DDA).   
30. However, progress of the DDA negotiations post- MC6 has not been satisfactory, largely 
because of the failure to reach agreement on the m odalities on agriculture and non-agricultural market 
access.  The DDA negotiations were suspended in July 2006.  Hong Kong, China is deeply 
                                                     
 
 4 On 1 May 2004, 10 new members joined the EU.  To gether with the 15 origin al members, there are a 
total of 25 members in the EU.  Statistics in this  paragraph are compiled based on the new coverage. WT/TPR/G/173 Trade Policy Review 
Page 10 
 
 
disappointed at the suspension.  Hong Kong, China has been maintaining close contacts with major 
WTO Members and the Director-General of the WTO to exchange views and explore ways to bring 
the DDA back on track. 
B. P ARTICIPATION IN ASIA-PACIFIC ECONOMIC CO-OPERATION (APEC)  AND THE 
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD)   
31. Hong Kong, China attaches great importance to regional economic cooperation fora with the 
aim of promoting free trade in support of the multilater al trading system.  In the past four years, we 
have continued to participate actively in the Asia-Pacific Economic Coope ration (APEC) and make 
contribution to its work.  Such work concerns, among others, (a) APEC’s political statements in 
support of the WTO and the Doha Round negotiations, (b) initiatives under the APEC Strategic Plan 
on Capacity Building to enhance APEC developing economies’ capacity in their participation in the 
WTO, and (c) the various initiatives on trade and inv estment liberalization and facilitation undertaken 
by APEC. 
32. Hong Kong, China has been an observer to  OECD's Trade Committee and Committee on 
Financial Markets since 1994 and 1995 respectively.  We have contributed to and benefited from the 
work of these two Committees, and will continue  to participate actively in the Committees. 
C. R EGIONAL TRADE AGREEMENTS  
33. Hong Kong, China considers that free trade agreements (FTAs) which are fully WTO-
consistent should help promote the cause of eventu al global trade liberalisation.  We are positive 
towards more liberalised trade a rrangements which are WTO plus and will actively consider pursuing 
these arrangements with other economies.  So far, we have concluded a Clo ser Economic Partnership 
Arrangement with the mainland of China and have  been discussing a Closer Economic Partnership 
Agreement with New Zealand. 
(a) Hong Kong/New Zealand Closer Economic  Partnership Agreement (HK/NZ CEP)  
34. In May 2001, the HKSAR started its first FTA  negotiations with Ne w Zealand for a CEP 
Agreement.  Five rounds of formal  negotiations have been held so far.  The negotiations encompass a 
wide-ranging scope, covering, among ot hers, elimination of tariffs, liberalisation of trade in services, 
and liberalisation and promotion of bilateral inv estment.  The negotiations have yet to conclude. 
(b) Closer Economic Partnership Arrangement (CEPA)  
35. Discussions on the Mainland and Hong Kong Cl oser Economic Partnership Arrangement 
(CEPA) came to fruition when CEPA was signed on 29 June 2003.  CEPA is the first free trade 
agreement ever concluded by the mainland of Chin a and Hong Kong, China.  It came into full 
implementation on 1 January 2004, and both parties ha ve subsequently entered into consultations and 
reached agreement on the second and third phases of further trade liberalisation measures (CEPA II and CEPA III).  The two economies signed th e Supplement to CEPA on 27 October 2004 and 
Supplement II to CEPA on 18 October 2005 respectively.  The further liberalisation measures of 
CEPA II and CEPA III came into full implemen tation on 1 January 2005 and 1 January 2006 
respectively.  Furthermore, Supplement III to CEPA was signed on 27 June  2006 with additional 
liberalisation measures for trade in goods (taking e ffect from 1 July 2006) and services (taking effect 
from 1 January 2007).  The legal text of CEPA a nd its supplements are available on the designated 
CEPA website of the Trade and Industry Depa rtment (TID) at http://www.tid.gov.hk/english/
 
ceps/legaltext/cepa_legaltext.html . Hong Kong, China WT/TPR/G/173 
 Page 11 
 
 
36. CEPA adopts a building block approach and pr ovides a convenient platform for Hong Kong, 
China and the mainland of China to pursue new tr ade and investment facilitation and liberalisation 
initiatives.  In fulfilment of the pertin ent objectives of CEPA, both sides seek to: 
(a) apply zero tariff to the merchandise of the other party; 
(b) progressively reduce or eliminate existing restrictive measures applicable to service 
suppliers of the other party; and 
(c) promote cooperation in eight designated areas to facilitate tr ade and investment 
flows between both sides5. 
37. Under CEPA, effective from 1 January 2006, a ll products of Hong Kong origin (except for 
some prohibited articles) enjoy tariff free treat ment for import into the mainland of China upon 
fulfilment of the CEPA rules of origin.  On the services front, Hong Kong service suppliers in 27 service areas enjoy WTO-plus preferential market ac cess treatment in the mainland of China.  CEPA 
also enhances co-operation of bot h parties in tourism promotion, mutual recognition of professional 
qualifications and exchange of professional tale nts, as well as strengthens co-operation and 
information sharing in the areas of banking, securities and insurance. 
IV. SECTORAL DEVELOPMENTS   
A. D
EVELOPMENTS IN TRADE IN GOODS  
(a) Textiles and Clothing  
38. Textiles and clothing (T&C) product is a major export item of Hong Kong.  In 2005, domestic 
exports of T&C products amounted to HK$60.9 billi on (roughly US$7.8 billion), which accounted for 
44.8% of our total domestic exports among all merchandise. 
39. Prior to 2005, textiles exports from Hong Kong, China to Canada, the EU and the US were 
subject to quantitative restrictions maintained  under the World Trade Organization Agreement on 
Textiles and Clothing (WTO ATC).  To administer  the quantitative restrictions, Hong Kong, China 
put in place a comprehensive textiles quota control and licensing regime which was backed up by the 
Import and Export Ordinance and its subsidiary le gislations.  All imports  and exports of T&C 
products were required to be  covered by import and export licences or notifications. 
40. With the global elimination of textiles quotas starting 1 January 2005 as prescribed under the 
WTO ATC, Hong Kong, China has streamlined its tex tiles control system in order to provide greater 
facilitation to the trade while ensuring origin co mpliance of the T&C products claiming Hong Kong 
origin.  While all textiles export from and import into Hong Kong (other than a few exempted items6) 
are still required to be covered by valid licences  or notifications, all quot a-related operations and 
export licences for restrained T&C products have been dispensed with since 1 January 2005.  
Licensing requirements for all personal shipments have also been lifted.   
                                                      
5 CEPA promotes cooperation between both sides in trade and investment promotion; customs 
clearance facilitation; commodity inspection and quaran tine, food safety and quality and standardization; 
electronic business; transparency in laws and regulations; co-operation of small and medium enterprises; 
co-operation in Chinese traditional medicine industry; and protection of intellectual property.  
 6 Exempted items are woven or knitted fabric swatches and sample yarn imported by air and not 
exceeding 0.8m2 in size in respect of fabric swatches and 1.2 kilograms in weight in respect of each type of 
yarn; textiles articles that are imported or exported by an individual for his personal use or as a bona fide gift to another individual; and textiles articles to be used by th e crew or passengers of a vessel, aircraft, or vehicle. WT/TPR/G/173 Trade Policy Review 
Page 12 
 
 
41. Under the revised system, different licen sing requirements are applied to textiles 
exports/imports involving the “sens itive” and “non-sensitive” markets in the following manner: 
(a) For sensitive markets7, textiles imports/exports should be covered by consignment- 
specific licences or textiles notifications whereby consignment-specific details of 
individual shipments are captured. 
(b) Places other than the sensitive markets are classified as non-sensitive markets.  For 
shipments to the non-sensitive markets, a co mprehensive licence (valid for a year for 
unlimited shipments) may be used, rega rdless of the product type, quantity and 
country of origin of the goods. 
(c) A Production Notification requirement is  imposed for cut-and-sewn garments 
intended for export to the US and the EU.  Under this requirement, manufacturers are 
required to lodge a Production Notifica tion with the TID shortly before 
commencement of the origin-conferring process in Hong Kong, so as to enable 
officers of the Customs and Excise Departme nt (C&ED) to conduct real time check 
on the garments during the manufacturing process. 
42. The textiles control system is rigorously enfor ced by the C&ED to safeguard the legitimate 
interest of Hong Kong’s textiles trade.  Malpractic es are taken seriously.  Any breach of the origin 
control requirement is an offence under the laws of  Hong Kong, with offenders liable upon conviction 
to a maximum fine of HK$500,000 (roughly US$64,0 00), imprisonment for two years and possible 
forfeiture of the goods concerned. 
(b) Reserved Commodities  
43. Rice is the major staple foodstuff in Hong Ko ng and is therefore scheduled as a reserved 
commodity under the Reserved Commodities Ordina nce (Cap. 296).  The Government has been 
operating a Rice Control Scheme (RCS) to ensure a st able supply of rice and to keep a reserve stock 
sufficient for consumption by the population for a re asonable period to cater for emergencies or short 
term shortage of supply.  The reserve stock level has been subject to regular review and as a result it 
has been reduced gradually from 50 days local consum ption before 1998, to 21 days in 2001, and to 
15 days in 2002.  The rice trade in general agrees that a reserve stock level of 15 days local consumption is reasonable having re gard to the lead time required in replenishing stocks in time of 
sudden surge in demand for rice domestically.  To  enhance competition and market efficiency, the 
TID has implemented significant liberalisati on measures since January 2003 as follows:  
(a)  The registration criteria for rice stockholders have been relaxed.  There are no capital 
and financial requirements, and any interest ed party registered with the Business 
Registration Office could register as a stockholder under the RCS.  The number of 
registered stockholders has increased from 52 in end 2002 to 101 in  September 2006.   
(b)  There is no more import quota for rice.  Th e import level is decided by individual 
stockholders in accordance with their asse ssment of market demand and their own 
marketing capability. 
(c)  To monitor the supply of rice, the TID collates statistics on rice import and reserve 
stock level.  At the same time, aggregate statistics are regularly disseminated to rice traders to facilitate their understanding of the overall market situation.  As a 
                                                     
 
 7 Textiles exports to and imports from the mainland of China, and exports to the US and the EU. Hong Kong, China WT/TPR/G/173 
 Page 13 
 
 
transparency measure, the statistics are uploaded to the TID website at: 
http://www.tid.gov.hk/english/import_export/nontextiles/nt_rice/nt_rice.html. 
44. The rice trade now generally operates in a free market environment.  The gap between the 
c.i.f. import price and the retail price of Thai fra grant rice (accounting for about 92% of total imports 
in the first six months of 2006) has narrowed by about 15% since 2003. 
(c) Strategic Commodities  
45. The Government maintains a comprehensive and effective control system on the import and 
export of strategic commodities.  The system ser ves to prevent the HKSAR from being used as a 
conduit for proliferation, and to secure our conti nued access to high-tech goods and technology that 
are essential for our economic development. 
46. The legal basis for strategic trade control in th e HKSAR is set out in the Import and Export 
Ordinance.  The Ordinance requires the import and export of strategic commodities to be subject to licensing control administered by the TID.  Re-e xport and transshipment cargoes are treated as import 
and export and are subject to the licensing requireme nt.  Certain sensitive items are required to be 
covered by licences when they are transiting through Hong Kong. 
47. The items under licensing control are listed in the Schedules to the Import and Export 
(Strategic Commodities) Regulations under the Ordi nance, and mirror those adopted by various 
international export control regimes and conventions .  Items subject to control include munitions 
items, chemical and biological weapons and their pr ecursors, nuclear materials and equipment, and 
industrial dual-use goods.  End-use control is also imposed on products which are used in connection 
with the development of weapons of mass destructi on.  The control lists ar e updated from time to time 
in order to reflect the changes made by the regimes.   The latest amendment of the control lists which 
was effected in July 2006 refl ects the changes up to end 2005. 
48. Over the years, many facilitation measures have  been introduced in the licensing service for 
strategic commodities.  For example, we introduced in April 2004, an electronic submission system of 
licence applications via the Internet.  With e-app lication system, licence applicants no longer have to 
prepare paper applications a nd submit them in person.  
49. In June 2004, the Chemical Weapons (Convention) Ordinance came into operation.  It enables 
the full implementation of the Chemical Weapons Convention in the HKSAR.  The TID implements a 
permit and notification system for the operation of chemical facilities involved in specified activities 
of chemicals controlled under the Convention. 
(d) Other Licensing Control and Trade Facilitation  
(i) Control of Rough Diamonds  
50. To implement the Kimberley Process
8 Certification Scheme for rough diamonds in Hong 
Kong, amendments were introduced to the Impor t and Export (General) Regulations in 2002 to 
implement a Certification Scheme on rough diam onds.  The Certification Scheme in Hong Kong, 
                                                      
8 The Kimberley Process is a negotiating forum originated from discussions in the United Nations 
General Assembly (UNGA) regarding rebel activities in some  parts of Africa.  It seeks to stop trade in conflict 
diamonds (rough diamonds used by rebe l movements or their allies to fina nce conflicts aimed at undermining 
legitimate governments, as described in relevant United Nations Security Council resolutions, and as understood 
and recognised in the relevant UNGA Resolutions) from fuelling armed conflicts, activities of rebel movements 
and illicit proliferation of armament. WT/TPR/G/173 Trade Policy Review 
Page 14 
 
 
which has been effective since January 2003, comprises a registration system for rough diamond 
traders and a certification system for the imports a nd exports of rough diamonds.  To further facilitate 
the trade, amendments to the Import and Export (G eneral) Regulations were introduced to lift the 
registration requirement in May 2006 for persons  who only carry on a business of carrying rough 
diamonds and are owners of vessels, aircrafts or vehicles lodging manifests with the Director-General 
of Trade and Industry for the im ported and exported rough diamonds. 
(ii) Licensing Control of 9 Categories of Articles  
51. As from January 2004, the licensing control on the import, export or transshipment of nine 
out of 31 categories of articles (namely, television sets, video cassette recorders and players; air 
conditioners and refrigerators; poultry carcasses an d poultry products; ozone depleting substances; 
left-hand-drive vehicles; outboard engines exceed ing 111.9 kilowatts; marine fish; optical disc 
mastering and replication equipment; and radio- communications transmitting apparatus) has been 
relaxed or simplified following the implementation of the Import and Export (Facilitation) Ordinance 
2003.  The relaxation measures, which had been made after careful consideration and wide 
consultation, facilitate the smoot h flow of legitimate trade while maintaining Hong Kong’s  
commitment to fulfil international obligations to  protect public health, safety, environment, and 
intellectual property rights, or to ensure Hong Kong ’s unrestricted access to high technologies and hi-
tech products.   
(iii) Trade Facilitation  
52. To facilitate trade, an additional service pr ovider was appointed by the Government to 
provide electronic submission services for cargo manifests, import/export trade declarations as well as dutiable commodities permits.  Customs clearance documentation and procedures have also been 
further simplified/reduced.  The measures include: 
(a)  Electronic submission of cargo manifests  
 On 11 April 2003, the Import and Export (Electronic Transactions) Ordinance 2002 
came into operation.  It provided a legal b asis for the carriers to electronically submit 
to Hong Kong Customs and other government departments cargo manifests in the air, rail, river and ocean modes of transport.  Electronic submission of air and rail cargo 
manifests became mandatory with effect from 17 July 2004 while electronic submission of ocean and river cargo manif ests became mandatory from 16 June 2006 
onwards.  The system has helped reduce subs tantially the time and effort of traders 
consumed in lodging paper cargo manifests.   The additional service provider started 
to provide the electronic service for cargo manifests from April 2006 onwards. 
(b)  Electronic Submission of Notifications  under the Textiles Trader Registration 
Scheme (TTRS)  
  The Import and Export (General) (Amendment) (No. 2) Regulation 2003 introduced 
the legislative framework for electronic submission of textiles notifications, which 
took effect since 30 May 2003.  The Amendment Regulation provided an open-ended transitional period during which traders may choose to submit notifications in paper 
form or by electronic means. 
(c)  Electronic submission of import/export trade declarations  
 On 1 January 2004, the electronic service for import/export trade declarations was 
enhanced, and the additional service provide r also started to provide the electronic 
service for import/export trade declarations. Hong Kong, China WT/TPR/G/173 
 Page 15 
 
 
(d) Open Bond System 
 With effect from 1 April 2004, Hong Kong Customs implemented an Open Bond 
System to allow all bonded warehouses storin g dutiable goods to operate without full-
time Customs supervision.  The system aims  to facilitate the trade by lowering the 
compliance costs and allowing more fl exibility in business operations.   
(e) Electronic service for processing applications for dutiable commodities permits 
 On 18 August 2004, the electronic service for processing applications for dutiable 
commodities permits was enhanced, and the a dditional service provider also started to 
provide the electronic service for dutiable commodities permits. 
(f) Other customs procedures 
 Starting from 15 November 2004, General Administration of Customs of the PRC 
and Hong Kong Customs have agreed to use the mutually recognized “Green 
Customs Seal” to avoid unnecessary duplica tion of Customs examination, facilitate 
trade and expedite vehicular traffic at the land boundary on both sides. 
B. D EVELOPMENTS IN SERVICES  
(a) Financial Services   
53. To strengthen Hong Kong’s competitiveness under increasing global competition and 
maintain our position as a leading regional and intern ational financial centre, we continue our efforts 
in improving the quality of the market, moderniz ing the regulatory regime and upgrading market 
infrastructure. 
(i) Banking Industry  
54. Hong Kong has an open banking sector whereby lo cal and foreign banks compete on a level 
playing field.  Under the current three-tier licensi ng system maintained by the HKSAR, foreign banks 
may enter the Hong Kong banking market as licensed banks, restricted licence banks or deposit-taking 
companies.  They may operate in the form of local ly incorporated companies or branches of foreign 
banks.   
(ii) Securities and Futures  
55. The Securities and Futures Ordinance (SFO ), which brought Hong Kong’s regulatory 
framework on a par with international standards a nd practices, has been in operation since 1 April 
2003.  The Government plans to introduce amendmen ts to the SFO this year to further update the 
Ordinance in response to recent market development,  and enhance efficiency in administering the new 
licensing regime.   
56. The Securities and Futures (Amendment) Ordi nance 2006, which provides for the separation 
of the role of the Chairman from that of the ex ecutive arm of the Secur ities and Futures Commission 
(SFC) and to create a Chief Executive Officer pos t, commenced operation on 23 June 2006.  This 
model is in line with best governance practices both locally and internationally. 
57. The Government has taken the lead in draw ing up measures to improve the regulation of 
listing to enhance market quality, following p ublic consultation on Proposals to Enhance the 
Regulation of Listing in October 2003.  We are now refining the draft bill in light of comments 
received during the public consultation, and aim to introduce the Bill into the Legislative Council this 
year. WT/TPR/G/173 Trade Policy Review 
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58. The Government is implementing measures to review the existing regulatory framework for 
offers of shares and debentures in phases.  The first phase involved the publication of various 
guidelines by the SFC in February 2003.  The second phase was the commencement of the 
prospectus-related provisions in the Companie s (Amendment) Ordinance 2004 in December 2004 
which simplified the procedures for the registration a nd issue of prospectuses.  The SFC in the third 
phase conducted a public consultation on possible reform s to the prospectus regime.  The consultation 
conclusions setting out the reform initiatives to be pursued were published in September 2006.  The 
SFC will discuss with relevant stakeholders to refi ne details of the specific initiatives proposed to be 
taken. 
59. The Revenue (Profits Tax Exemption for O ffshore Funds) Bill 2005 was passed on 1 March 
2006 to exempt offshore funds from profits tax.  The exemption, which applies with retrospective 
effect to the year of assessment 1996/97, will enhan ce the attraction of Hong Kong to international 
investors in asset management. 
(iii) Insurance  
60. The insurance industry in Hong Kong is a cosm opolitan and competitive one.  A level playing 
field is maintained for all insu rers and insurance intermediaries irrespective of their countries of 
origin.  This is evident from the large number of authorized insurers (174 as at 31 May 2006) and the 
strong presence of foreign companies.  About 50% of  the authorized insurers were incorporated 
outside Hong Kong in 21 places, with the United States (15) taking the lead.   
61. The Office of the Commissioner of Insurance (OCI) has been implementing a number of 
measures to further enhance the regulatory regime in respect of the insurance sector.  To ensure the 
institutional independence of OCI and enhance its fl exibility to respond to market developments, we 
are also studying the proposal of turning OCI into a regulator independent of the Government. 
(iv) Mandatory Provident Fund System  
62. Hong Kong implemented the Mandatory Providen t Fund (MPF) System in December 2000.  
It is a privately managed, mandatory system of provident fund schemes to assist members of the workforce to accumulate financial resources for thei r retirement life.  The MPF System operates under 
a free market competition environment.  There is no barrier to entry, quantitative or qualitative, for 
foreign institutions intending to participate in the MPF market.  MPF schemes are governed by trust.  
Any institution, irrespective of its place of origin , that meets the eligibility requirements (including 
paid up capital and net asset requirements) may apply fo r approval as a trustee, or to provide services 
for MPF schemes like investment management and cu stody of assets.  There is no fixed quota on the 
number of approved trustees and the number is currently 19. 
63. In order to enhance transparency and to enab le scheme members to make more informed and 
effective investment decisions, a Code on Disclosur e for MPF Investment Funds was issued in June 
2004 by the Mandatory Provident Fund Schemes Authority.  A set of Compliance Standards was 
published in July 2005 to assist approved MPF tr ustees in establishing a rigorous framework for 
monitoring their compliance with statutory duties and responsibilities. 
64. The Mandatory Provident Fund Schemes (Gen eral) (Amendment) Regulation 2006 will be 
introduced into the Legislative Council this y ear, aiming to improve the existing investment 
regulation in respect of the MPF scheme funds. Hong Kong, China WT/TPR/G/173 
 Page 17 
 
 
(v) Corporate Governance  
65. Enhancing Hong Kong’s corporate governance (CG) regime is a priority of our work.  The 
Government, together with other re levant parties, attach much impor tance to uphold our CG standards 
in line with international standards. 
66. Good progress has been made in the past few year s.  For example, we together with the SFC 
and the Hong Kong Exchanges and Clearing Limited ha d drawn up a CG Action Plan in 2003.  All 
the initiatives under the Action Plan have been completed or are near completion. 
67. One of the key proposals is the establishment of the Financial Reporting Council (FRC) to 
enhance the regulation of auditors and check the co mpliance of the financial reports of listed entities 
with the relevant legal, accounting and regulator y requirements.  The Financial Reporting Council 
Ordinance, which provides for the legislative fra mework for the establishment of the FRC, was 
enacted by the Legislative Council in July 2006.  With the enabling legislation in place, we are 
working on the start-up of the FRC.   
68. The Hong Kong Financial Reporting Standards, wh ich are issued by the Hong Kong Institute 
of Certified Public Accountants, have been fully  converged with Interna tional Financial Reporting 
Standards since 1 January 2005.  This uniform accounting platform, well understood by global 
investors and financial analysts, is conducive to th e comparison of corporations and their results in 
different jurisdictions and leads to greater confid ence in the transparency and quality of Hong Kong’s 
financial markets.   
69. The Companies Ordinance (CO) is one of the largest and most complex pieces of legislation 
in Hong Kong.  We are embarking on a major exerci se to rewrite the CO, starting this year, to ensure 
that the new CO will provide Hong Kong with an up-t o-date legal infrastructure attuned to our needs 
in the 21st century through streamlining and modernizi ng its provisions, strengthening its existing 
corporate governance framework and leveraging co mpany law developments around the world.   
(b) Telecommunications  
70. Since 2003, the Government has fully opened a ll sectors of the telecommunications market to 
competition.  Thus local and external, services-ba sed and facilities-based telecommunications services 
in Hong Kong are all provided by the private sector.  There are no foreign ownership restrictions.   
71. The Telecommunications (Amendment) Ordinance 2003 was passed by the Legislative 
Council in May 2003.  It sets out a framework for th e regulation of mergers a nd acquisitions of carrier 
licensees in the telecommunications market with an ex post  regulatory regime whereby the 
Telecommunications Authority is empowered to san ction against completed mergers and acquisitions 
which have, or are likely to have, the effect  of substantially lessening competition.   
72. In January 2005, the Government announced the lifting of the prior approval requirement on 
the tariff of services provided by PCCW-HKT Tele phone Limited, an incumbent operator, via the 
issue of a new Fixed Carrier Licence.  The removal of ex ante regulation does not affect the ex post 
regulation.  The criteria of sanction on anti-comp etitive conduct remain unc hanged and the Office of 
the Telecommunications Authority will continue to detect and act against such conduct in a timely 
manner.   WT/TPR/G/173 Trade Policy Review 
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(c) Broadcasting  
73. Hong Kong has a liberalized and vibrant broadcasting market. The Government’s 
broadcasting policy objectives are to widen the programme choice for the community, encourage 
investment and innovation in the broadcasting indu stry, promote fair and effective competition and 
enhance Hong Kong as a re gional broadcasting hub. 
74. The Government announced the implementation frame work for digital terrestrial television in 
July 2004.  The two domestic free television pr ogramme service licensees are now embarking on 
network planning, design and constr uction with a view to launching digital terrestrial television by 
2007 and achieving within 2008 digita l coverage for 75% of Hong Kong. 
75. Following a public consultation in the first half of 2006, the Government plans to introduce 
the legislation to merge the Broadcasting Author ity and the Telecommunications Authority into a 
unified regulator to oversee the entire electronic co mmunications sectors in 2007.  The purpose is to 
ensure coordinated, consistent a nd effective regulation of the conve rging communications industry.   
(d) Professional Services - Legal Services  
76. Lawyers are admitted to practice in Hong Kong eith er as solicitors or barristers, and there are 
different admission requirements for the two bran ches of the profession.  Such requirements are 
provided in the Legal Practitioners Ordinance.  Pursuant to the Ordina nce, the two professional 
bodies, namely the Law Society and the Bar Associ ation, are vested with the power to regulate 
solicitors and barristers in areas such as practice,  conduct, discipline, examination and continuing 
education by way of subsidiary legislation.  It  is provided in the Ordinance that these rules and 
regulations made by the Law Society and the Bar A ssociation would require the prior approval of the 
Chief Justice. 
77. With the amendments to the Ordinance in 1995 and 20009 respectively, the admission criteria 
for solicitors and barristers are now in line with the general obligations of the GATS.  All foreign 
lawyers, coming from common law and non-common law jurisdictions are allowed to take specified 
examinations to become solicitors and barristers. 
C. P ROTECTION OF INTELLECTUAL PROPERTY RIGHTS IN HONG KONG  
78. Hong Kong is committed to protecting intellectua l property rights (IPR).  This commitment is 
underpinned by our respect for private economic ri ghts and our recognition of the importance of IPR 
protection regime to our economic growth. 
79. We achieve this through comprehensive legisl ation, vigorous enforcement action, sustained 
public education, and close co-operation with ri ghts owners and other law enforcement agencies. 
(a) Comprehensive Legislation   
80. Hong Kong has comprehensive legislation for the protection of patents, trade marks, 
copyright, registered designs, layout-designs (topographies)  of integrated circuits and plant varieties.  
Our IPR laws fully comply with the internationa l standards laid down in the Agreement on Trade-
Related Aspects of Intellectual Property Rights (“TRIPS”). 
                                                      
9 The new provision relating to the new admission criteria for barristers commenced on 28 March 2003. Hong Kong, China WT/TPR/G/173 
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81. We keep our laws under constant review to ensu re that they meet the needs of the changing 
environment.  Over the past few years since the l ast Trade Policy Review in 2002, we have introduced 
a number of additional legislative measures to furt her strengthen the protection of IPR.  The major 
ones are: 
(a)  Amendments to the Copyright Ordinance were  made to remove the civil and criminal 
liabilities pertaining to parallel importation into Hong Kong of computer software 
products.   The amendments t ook effect from 28 November 2003. 
(b)  Amendments to the Copyright Ordinance were made to introduce a “copyshop 
offence” to facilitate enforcement and prosecution against illicit reproduction of 
books, magazines or periodicals by copyshops for the purpose or in the course of their 
business.   The amendments t ook effect from 1 September 2004. 
(c)  The new Trade Marks Ordinance (Chapter 559) and Rules came into force on 4 April 
2003.  Instead of a two-part register, the ne w Ordinance provides for a single register.  
It allows filing of a single application for registration of a trade mark in respect of 
multiple classes of goods or services, and provides for streamlined procedures for 
recording assignments and licences of trade marks.  Parallel import of trade marked 
goods is permissible, unless the goods have  been impaired or changed and the 
reputation of the mark is thereby adversely affected.  
(d)  The Trade Marks Ordinance (Chapter 559) and Rules, among other things, provide 
for electronic filing and publication of trad e mark applications.  There have been 
subsequent amendments to the trade mark s legislation, patents legislation and 
registered designs legislation to provide fo r electronic publication of notifications and 
advertisements of patents and designs, elect ronic filing and processing of patents and 
designs applications, and e nhancement of electronic services for the registration of 
assignments and assents relating to registered  trademarks and trademark applications. 
82. With a view to enhancing the protection fo r copyright owners and affirming fair and 
legitimate use of copyright works by certain sect ors of the public, the Government submitted the 
Copyright (Amendment) Bill 2006 to the Legisla tive Council in March 2006.  The Bill reflects the 
outcome of the public consultation conducted in late 2004 – early 2005 and our discussions with 
stakeholders.  It contains, among other things, the Government’s proposal enhancing the anti-
circumvention provisions and copyright protectio n for specified categories of printed works, 
introducing rental rights for films and comic books , providing more flexible exceptions for the 
education sector and persons with print disabilit y, and strengthening enforcement efficiency and 
effectiveness.  The Bill is currently bein g scrutinized by the Legislative Council.  
83. To give effect to the intent of the trade mark  legislation, the Intellectual Property Department 
rolled out a range of e-services to realize the vi sion of convenient, effi cient and high quality 
registration services.  At present, services such  as search, filing, publication and payment for 
trademarks, patents and designs business are available on the Internet.  
(b) Vigorous Enforcement Action  
(i) Copyright Piracy 84. Under Hong Kong Customs’ vigorous enforcemen t, the piracy situation in Hong Kong is 
firmly under control.  At the retail level, the numbe r of retail shops selling pirated optical discs (POD)  WT/TPR/G/173 Trade Policy Review 
Page 20 
 
 
has been reduced from over 100 in 2002 to about 50, with the circulation of PODs reduced from 
20,000 to about 3,000.  
85. Hong Kong Customs has two Anti-Internet Piracy  Teams (AIPT) to fight against infringing 
activities in the cyber world.  One criminal case  of particular importance concerns copyright 
infringement using a “peer-to-peer” (P2P) file-s haring program known as BitTorrent (BT).  The 
defendant was convicted before a magistrate in October 2005 and sentenced to three months’ 
imprisonment.  The conviction gives a strong de terrence against similar infringing activities.  
Moreover, copyright owners have also resorted to  civil actions against infringers on P2P networks. 
86. Since 1 April 2001, Hong Kong Customs has been  actively enforcing the end-user criminal 
provisions of the Copyright Ordinance.  The target s include firms using pira ted software and karaoke 
bars using infringing music videos in the course of their business.  
(ii) Trademark Counterfeiting 
87. Trademark counterfeiting remains firmly under control, and there is no major manufacturing 
operation in Hong Kong.  For the local retail market , only some low-level sales activities of a limited 
scale by hawkers are found in certain black spots.  Due to the vigorous enforcement actions of Hong 
Kong Customs, most counterfeiters operating at the black spots have now adopted a stealthy mode of 
operation.  Only photos of count erfeit goods are displayed and custom ers will be led to showrooms/ 
storage centres in nearby build ings for the actual transactions. 
(iii) Application of the Organized and Serious Crime Ordinance 
88. To enable the forfeiture of the financial pr oceeds obtained from IPR infringing activities, the 
Organized and Serious Crimes Ordinance was first a pplied to piracy and counterfeiting cases in July 
2004 and July 2005 respectively.  Restraint orders  were applied from the High Court to freeze the 
financial proceeds of syndicates involved in IPR offences so that their illicit trade could not be 
revitalized.  So far, financial proceeds of a bout $97 million have been restrained in 6 cases. 
(c) Sustained Public Education  
89. We have on-going and substantial public e ducation programmes to promote the public’s 
respect for IPR.  The Intellectual Property De partment conducts annual benchmark surveys (one 
targeted at the general public since 1999 and the other at the business community since 2004).  An 
annual budget of about HK$7 million (that is, US$1 million) is allocated for the public education 
programmes.  For 2006-2007, the Government will spend an additional sum of HK$2.9 million (that 
is, US$0.37 million) to promote the awareness of IPR and proper software asset management among 
enterprises. 
(d) Close Co-operation with Rights Ow ners and Other Law Enforcement Agencies  
90. We liaise closely with IPR owners to solicit th eir assistance in fighting copyright piracy and 
trade mark counterfeiting.  We also maintain regul ar liaison with other enforcement agencies in the 
region to prevent cross-boundary infringing activities. 
D. E LECTRONIC COMMERCE  
91. The Government is fully aware of the importanc e of promoting the development of electronic 
commerce to sustain Hong Kong’s competitiveness on a global scale.  The Office of the Government 
Chief Information Officer (OGCIO) was set up on 1 July 2004 to provide leadership for the Hong Kong, China WT/TPR/G/173 
 Page 21 
 
 
development of information and communications  technology (ICT) within and outside the 
Government.  The OGCIO provides a single focal point with responsibility for ICT policies, 
strategies, programmes and measures under our Dig ital 21 Strategy (www.digital21.gov.hk).  We 
updated the Digital 21 Strategy in 2004 with a view  to sustaining Hong Kong’s role as a leading e-
commerce community and digital city.  To keep pace  of technological advancements and the evolving 
needs of the community, a public consultation docum ent on the 2007 Digital 21 Strategy was released 
on 18 October 2006, which sets out the blueprint for future development of ICT in Hong Kong.  The 
Government will announce the new strategy next year  after considering feedback received during the 
consultation exercise. 
92. The Electronic Transactions Ordinance (ETO),  enacted in 2000 and amended in June 2004, 
gives electronic records and signatures the same lega l status as that of their paper-based counterparts 
and provides a voluntary recognition scheme for certification authorities.   
93. The Government has been providing support th rough launching Sector-specific Programmes 
(SSP) to enhance the IT and e-business capabilities of  the small and medium enterprises (SMEs).  The 
SSP has so far covered six business sectors, namely tr avel agents, private medical doctors, drugstores, 
logistics, accounting and beauty services providers.  We also provide on-going support for SMEs to 
adopt IT through various initiatives under the TID,  including the SME funding schemes, information 
services, a free IT enquiry service for the business sect or and a free IT advisory service for SMEs, and 
awareness building programmes. 
94. About 97.3% of all persons aged 15 and over had used electronic business services in 2005.  
Hong Kong was also among the forerunners in the 2006 e-Readiness rankings released by the 
Economist Intelligence Unit (EIU) where Hong Kong was ranked second in Asia Pacific and tenth 
among other 68 global economies. 
E. G OVERNMENT PROCUREMENT  
95. The Government adopts an open, fair, competitiv e and transparent system in the procurement 
of goods and services.  Local and overseas suppliers and contractors ar e treated on equal footing.  The 
procurement system of the Government is fu lly consistent with the WTO’s Agreement on 
Government Procurement, to which Hong Kong, China is a party.  There has not been any change to 
the procurement policy since the last Trade Policy Review in 2002. 
F. C OMPETITION POLICY   
96. There have been a number of developments in th is area since the last Trade Policy Review in 
2002. 
97. In June 2005, the Government appointed an independent Competition Policy Review 
Committee (CPRC), with a non-official Chair and me mbers drawn from differen t sectors, to review 
the effectiveness of existing competition policy as well  as the set-up, functions and modus operandi of 
the Competition Policy Advisory Group (COMPAG).  The CPRC is made up mostly of non-
Government stakeholders from the business, academ ic, consumer protection and other sectors to 
review Hong Kong’s competition policy, and in partic ular to consider whether there was a need to 
introduce a general competition law.  The CPRC reporte d back to COMPAG in June this year and its 
review report was published in early July.  Briefl y, the CPRC has recommended that the Government 
introduce a cross-sector competition law targeting specific types of anti-competitive conduct to be 
enforced by a Competition Commission operating out side the normal government structure.  The 
CPRC has recommended that the Commission be given appropriate investigative powers, and that 
penalties in the form of large fines and disqualifi cation from holding directorships should apply to any WT/TPR/G/173 Trade Policy Review 
Page 22 
 
 
parties found to have engaged in prohibited cond uct.  The Government is now considering the 
recommendations in the CPRC report, with a view to consulting the public later this year on the way 
forward, in positive response to the discussions on this topic during the last Trade Policy Review. 
98. Meanwhile, we commissioned a consultancy st udy in mid-2005 to study competition in the 
local auto-fuel retail market.  The consultant comp leted its work in early 2006, and its report was 
made public in April 2006.  In brief, the consulta nt has found no clear evidence of collusion by oil 
companies in the Hong Kong auto-fuel retail market.  However, given the inherent characteristics of 
the local auto-fuel market, the consu ltant suggests there is a risk that  collusion could occur.  As such, 
the consultant recommends that the Government  should consider preventive measures aimed at 
prohibiting cartel behaviour, e ither through general or sector-specific competition laws.  The 
Government is considering the recommendations. 
99. The Government has also publis hed two documents respectively10 entitled “Consultation 
Paper on Future Development of the Electricity Ma rket in Hong Kong – Stage I Consultation” and 
“Consultation Paper on Future Development of th e Electricity Market in Hong Kong – Stage II 
Consultation” in January and December 2005.  The Stage II consultation exercise ended on 31 March 
2006.  Taking into account, among other things, th e public comments received and the prevailing 
situations, the Government plans to further open up the electricity market of Hong Kong in the longer 
terms when the requisite conditions are present. 
V. DOHA DEVELOPMENT AGENDA   
A. H ONG KONG, CHINA ’S OVERALL POSITION IN THE DOHA DEVELOPMENT AGENDA  
100. Hong Kong, China strongly supports the multila teral trade negotiations under the DDA and 
believes that further trade liberalisation can help forestall regression into protectionism and provide 
the engine for sustained economic growth worldwid e.  The successful conclusion of DDA will benefit 
the entire WTO membership.  The current suspension of the talks,  which were seen as a once-in-a-
generation chance to boost growth and ease poverty around the world, is a serious blow to both 
developing and developed economies.  We will spar e no efforts in working with all WTO Members 
towards reviving the DDA negotiations and putting them back on track.  
B. H ONG KONG, CHINA ’S PRIORITY AREAS IN THE NEW ROUND  
101. As a small, open and externally oriented ec onomy, Hong Kong, China’s priorities in the DDA 
negotiations are naturally market-access related is sues, notably market access for non-agricultural 
products and for services.  We also see the need to  clarify and improve WTO rules to make sure that 
they remain relevant and conduc ive to trade and investment. 
(a) Services 
102. Hong Kong, China sees services as one of the three underpinning market a ccess pillars of the 
Doha Round negotiations and together  with the rule-making part of the negotiations, part and parcel 
of the overall deal.  To this end, we attach gr eat importance to the ongoing services negotiations and 
strongly believe that progress has to be made on th is important pillar to achieve a truly balanced 
outcome for the Round. 
                                                      
10 Relevant documents are available at the following websites: (a) Stage I consultation document --
http://www.edlb.gov.hk/edb/eng/papers/electricity/pdf/Consultation_paper.pdf; and (b) Stage II consultation document -- http://www.edlb.gov.hk/edb/eng/papers/electricity/pdf/StageII_CP.pdf Hong Kong, China WT/TPR/G/173 
 Page 23 
 
 
103. Being a strong exporter of services trade, Hong Kong, China is keen on the progressive 
liberalisation of trade in a wide range of services sectors, in particular telecommunications, maritime 
transport, logistics, audio-visual and financia l services.  We aim to seek comprehensive and 
commercially meaningful services commitments from our trading partners so that our service 
providers may compete on a par with their overseas counterparts.  Hong Kong, China tabled its initial 
and revised offers on further liberalisation of servi ces in accordance with the s tipulated timelines.  In 
our offers, we have proposed substantive improveme nts in terms of the number and scope of sectors 
to be committed as well as level of commitments.  Besides, Hong Kong, China has been participating 
actively and constructively in plur ilateral negotiations of those mode s and sectors in which we have 
interests.   
104. In parallel, Hong Kong, China considers it para mount to strengthen the rules in the area of 
services and put in place a proper regulatory structure for services liberalisation, particularly with respect to the adherence to the MFN principle,  stronger disciplines on domestic regulations, and 
enhancing the legal certainty of Members’ specific commitments.  For this purpose, we have been 
providing constructive input for the multilateral discu ssions of these rules issues to help advance the 
discussions in the relevant subsidiary bodi es and bridge the differences amongst Members. 
(b) Non-agricultural Market Access 
105. In the area of non-agricultural market access,  Hong Kong, China’s objective is to seek 
significant market access improvements through substa ntial and early reduction/elimination of tariffs 
and non-tariff barriers.  To this end, we s upport a simple Swiss Formula with two ambitious 
coefficients, for developed and developing Members respectively, to reduce or as appropriate 
eliminate tariffs.  We also support sectoral initiativ es eliminating or reducing tariffs over and above 
what would be achieved by the formula.   
(c) Trade Rules  
106. Hong Kong, China firmly supports the negotiati ons on rules which aim at clarifying and 
improving the Agreements on Anti-dumping (AD) a nd Subsidies and Countervailing Measures, as 
well as disciplines and procedures under the existi ng WTO provisions applying to regional trade 
agreements (RTAs). 
107. As a staunch supporter of free trade, H ong Kong, China has never taken any AD or 
countervailing measures against other economies.  We  are committed to tight ening the AD disciplines 
with a view to making them more competition-fri endly and more compatible with the globalised 
economy.  We seek to ensure that market acces s opportunities under the multilateral trading system 
will not be eroded by the abusive use of trade reme dies.  We have been participating actively and 
constructively in the AD negotiations, and will conti nue to work closely with Members and the Chair 
of the Negotiation Group on Rules to achieve a substantive and meaningful outcome. 
108. On negotiations relating to rules on RTAs, Hong Kong, China considers it important to ensure 
the coherence of RTAs with the multilateral trading system through clarifying and, where appropriate, 
reinforcing existing WTO rules and decision.  We  are committed to the negotiations on WTO rules 
relating to RTAs. WT/TPR/G/173 Trade Policy Review 
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C. O THER AREAS IN THE DOHA DEVELOPMENT AGENDA  
(a) Intellectual Property Rights 
109. Hong Kong, China welcomes the Decision of the General Council of 6 December 2005 on an 
Amendment of the TRIPS Agreement, which gives permanent effect to the arrangements agreed 
under the Doha Ministerial Declaration on the TR IPS Agreement and Public Health.  We fully 
subscribe to the object and purpose of the Prot ocol Amending the TRIPS Agreement.  We are 
studying how our domestic laws shoul d be amended to make them cons istent with the details of the 
Protocol, and will notify Hong Kong, China’s formal  acceptance when we are in a position to do so.  
(b) Trade Facilitation  
110. Hong Kong, China fully supports the negotiations on trade facilitation.  We firmly believe 
that clarified and improved rules on trade facilitatio n will simplify and streamline customs and trade 
procedures, thereby enhancing efficiency a nd reducing costs for business, consumers and 
governments.  We have been actively participa ting in the discussions under the Negotiating Group on 
Trade Facilitation and in collaboration with othe r Members making proposals to expedite text-based 
negotiations, with a view to developing a set of  multilateral commitments on all elements of the 
mandate contained in Annex D of the July Decision. 
(c) Trade and Environment 
111. Hong Kong, China fully supports the objective of  sustainable development and will continue 
to work constructively with Members in the negotia tions to enhance the mutual supportiveness of free 
trade and environment.  We would also actively wo rk with Members to explore other environmental-
related trade issues in the Doha Development Age nda to ensure that environmental measures would 
not be abused for protectionist purpose. 
(d) Dispute Settlement Understanding Review  
112. Hong Kong, China agrees with other Members on the systemic importance of strengthening 
the dispute settlement mechanism without upsetting th e rights and obligations of Members.  We share 
the view that there is room for improving and cl arifying the Dispute Settlement Understanding, for 
example, in the area of sequencing of the compliance determination and suspension of concession 
procedures in Articles 21 and 22 respectively.  We al so support the enhancement of third party rights.  
We will continue to work actively and construc tively with other Members towards a timely and 
satisfactory conclusion of the negotiations. 
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