Report from the Commission to the Council and the European Parliament - Third annual report by the European Commission on the Hong Kong special administrative region
Date: 2001-07-25
Institutions: European Commission
Subjects: Hong Kong, activity report, democratisation, economic situation, fundamental rights, political situation, social situation, the EU's international role

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 25.07.2001
COM(2001) 431 final

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The European Union continues to attach great importance to its relations with the Hong Kong
Special Administrative Region  (HKSAR)  of  the  People’s  Republic  of  China.  The  European
Union has therefore watched closely, with genuine and friendly interest, the evolution of the
HKSAR in general and the implementation of the “One Country, Two Systems” principle in
particular.

The  new  millennium  coincides  with  the  tenth  anniversary  of  the  approval  of  the  HKSAR's
Basic Law by the People’s Republic of China. The  effective and  full  implementation of the
Basic  Law  will  provide  the  cornerstone  for  Hong  Kong’s  lasting  social  peace,  economic
development and democratisation.

As in the Commission's two previous annual  reports1, this  report aims  to assess the  state  of
development of the Hong Kong SAR and its relations with the European Union.

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Both the Central Chinese Government and the HKSAR Government continued to emphasise
the importance they attach to full adherence to the principle of “One Country, Two Systems.”

President  Jiang  Zemin  reiterated  the  Central  Chinese  Government’s  adherence  to  the
principle,  in  his  annual  address  to  the  National  People’s  Congress  in  Beijing.  However,
remarks made by officials of the Central People’s Government Liaison Office in Hong Kong
gave rise  to three  controversies during the  year.  The  first  two  cases  were  related  to  Taiwan
issues while the third was linked to China-Vatican relations.

The first incident occurred in April when a deputy director of the  Liaison Office, Mr Wang
Fengchao, said that “the media should not treat speeches and views which advocate Taiwan’s
independence as normal news items, nor should they report them as normal cases of reporting
the  views  of  different  parties.  The  Hong  Kong  media  has  the  responsibility  to  uphold  the
integrity and sovereignty  of  the  country.’ This statement triggered widespread concerns and
criticism from both the media and Government in Hong Kong. Acting Chief Executive Mrs
Anson Chan issued a statement reaffirming that press freedom was “guaranteed by the Basic
Law as are the freedoms of speech and publication. This means that the Hong Kong media is
free to comment and report on all matters of current interest. They do so in accordance with
the law of Hong Kong.”

At the end of May, an official of the Liaison Office, He Zhiming, remarking on HK-Taiwan
trade,  said  that  some  Taiwanese  “industrial  leading  business  figures  have,  on  the  one  hand,
openly  supported  Taiwanese  independence  on  the  island  and,  on  the  other,  obtained
advantages from their economic activities on the mainland. That is absolutely not permitted. I
believe  all  of  you,  on  listening  to  these  remarks,  will  know  how  to  choose  when  seeking
Taiwan  trading  partners.”  These  remarks  caused  considerable  concern,  inside  and  outside

1

COM (98)796 final and COM (00) 294 final

3

                                                
Hong Kong. The Chief Executive, Mr Tung Chee-hwa immediately contacted the director of
the Liaison Office, Mr Jiang Enzhu, and obtained assurances from him that the Office would
continue  to  operate  according  to  the  Basic  Law  and  would  not  interfere  with  commercial
activities  in  Hong  Kong.  The  Chief  Secretary  for  Administration,  Mrs  Anson  Chan,  also
stressed that the SAR Government had consistently separated trade and business matters from
political considerations.

After  the  announcement  by  the  Vatican  of  the  canonisation  of  87  Chinese  martyrs  and  33
foreign  missionaries  on  1st  October  (Chinese  national  day),  Bishop  Joseph  Zen  Ze-Kiun
revealed that the Liaison Office had told the Hong Kong Catholic Diocese on 18 September to
keep its canonisation celebrations low key. This demarche provoked some concerns in respect
of freedom of religion. Secretary for Home Affairs, Mr Lam Woon-kwong, reacted by stating,
“it is clear that freedom of religion is protected under the Basic Law.”

In the context of the "One Country, Two Systems" principle, and contrary to the  continuing
use  of  the  death  penalty  in  China,  it  is  worth  noting  that  no  capital  punishment  has  been
carried out in Hong Kong since the sixties and that the death penalty was officially abolished
in 1993.

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The debate on institutional development in Hong Kong has been gaining momentum since the
beginning  of  the  year.  This  has  focused  on  the  timetable  for  the  introduction  of  universal
suffrage  for  the  election  of  all  members  of  the  Legislative  Council  (LegCo)  and  the  Chief
Executive,  and  on  relations  between  the  executive  and  LegCo,  with  a  view  to  enhancing
accountability and entrenching democracy.

LegCo  played  an  active  role  throughout  the  year  by  adopting  several  motions  promoting
democracy and accountability in the SAR Government. On 12 January, it passed a motion on
political reform calling for the Government to hold a public consultation on the relationship
between  the  legislature  and  the  executive  and  the  democratic  election  of  the  Legislative
Council members and the Chief Executive by universal suffrage.

On 14 June, LegCo passed a motion on the “Development of the HKSAR’s political system”
urging the government to consider its “Report on the Development of the Political System of
the  HKSAR."  The  report  studied  the  constitutional  system  of  several  countries  and  made  a
number  of  recommendations  including,  inter  alia,  carrying  out  a  review  of  the  role,
appointment,  rules  of  collective  responsibility  and  confidentiality  of  the  Executive  Council
Members  and  their  relations  with  bureau  secretaries.  The  report  also  recommended  the
introduction  of  an  appointment  system  for  principal  officials  on  political  contracts,  by  the
second  term  of  the  Chief  Executive,  and  a  system  for  the  sanction  or  removal  of  principal
officials.

In  a speech delivered  on  5  July,  the  Chief  Executive  stated  that  Hong  Kong  “needs  a  more
accountable ministerial system”. The Chief Executive also noted this in his policy address on
11 October, saying "the previous Legislative Council and the community have expressed the
view that, as senior officials are involved in policy making and play a leading role in public
affairs, they should be held accountable for the outcome of their policies". He agreed that "the
SAR government should respond seriously to LegCo's concerns, undertake a thorough review,

4

and make the system of accountability more  complete for principal officials and secretaries,
and directors of bureau rank level".

The  Chief  Executive  also  announced  that  the  Government  would  examine  ways  of
strengthening  the  existing  mechanism  of  communication  with  LegCo,  so  that  executive
authorities fully understood LegCo’s views and opinions and would be in a better position to
ensure that polices formulated and bills submitted to LegCo would command its support.

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The  second  LegCo  elections  since  the  hand-over,  took  place  on  10  September  2000.  In
accordance  with  the  Basic  Law,  the  number  of  members  directly  elected  in  geographical
constituencies  increased  from  20  to  24,  while  the  number  elected  by  election  committee
decreased  from  ten  to  six.  The  remaining  30  seats  are  elected  through  functional
constituencies.

The  elections  were  conducted  in  a  fair  and  free  manner.  The  turnout  rate  decreased  in
comparison to the 1998 legislative elections but remained higher than in 1991 and 1995. The
Democratic  Party  lost  one  seat  while  the  Democratic  Alliance  for  the  Betterment  of  Hong
Kong (DAB) won one more seat than in 1998. Four-fifths (48 out of 60) of the newly elected
members  were  already  members  of  the  previous  Legislative  Council,  indicating  continuing
stability.

A by-election in the geographical constituency of Hong Kong was held on 10 December, after
the  resignation  from  LegCo  of  DAB  legislator  Mr  Gary  Cheng,  because  of  a  conflict  of
interests involving a business arrangement. Ms Audrey Eu (Independent) won the by-election.

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Hong  Kong  continues  to  negotiate  and  conclude  international  agreements  in  those  fields
provided for under the Basic Law. For example, it is an active member of the WTO and has
signed a Customs  Co-operation Agreement  with the  European  Community.  Hong  Kong  has
also  signed  agreements  with  Canada,  Switzerland  and  the  Federal  Republic  of  Germany  on
the readmission to Hong Kong of Hong Kong citizens who enter those countries illegally. In
May 2000, a US Federal Court of Appeal confirmed the validity of the agreement between the
Hong Kong and the US Government on the surrender  of fugitive offenders,  and agreed  that
the fugitive offender in question should be returned to Hong Kong.

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The  Hong  Kong  SAR  Government  is  preparing  arrangements  for  the  rendition  of  offenders
between  the  mainland  and  the  SAR.  The  Government  has  submitted  a  progress  report  to
LegCo.

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Following  the  interpretation  of  the  Basic  Law  by  the  National  People’s  Congress  Standing
Committee in June 1999 (see reference to right of abode issue in Commission’s 1999 report
COM(2000)294  final  on  web-site:  http://europa.eu.int/comm/external_relations/hong_kong/
doc/index.htm), restrictions were placed on the qualifications for right of abode in the SAR.

5

In  a  judgement  reached  on  11  December  2000,  the  Court  of  Appeal  confirmed  that  5,196
claimants were refused the right of abode in the SAR. Those claimants already in Hong Kong
will have to return to the mainland and apply for residency in Hong Kong through the normal
procedure.  The  Hong  Kong  Government  will  not  implement  forced  repatriation.  However,
enforcement  might  be  carried  out  should  any  appeal  to  the  Court  of  Appeal  result  in  a
negative decision for those seeking the right of abode.

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According  to  Article  23  of  the  Basic  Law,  “the  Hong  Kong  Special  Administrative  Region
shall  enact  laws  on  its  own  to  prohibit  any  act  of  treason,  secession,  sedition  or  subversion
against the Central People’s Government…" The Hong Kong SAR Government has promised
to  proceed  with  a  public  consultation.  The  SAR  Government  has,  thus  far,  proceeded
cautiously on this sensitive issue and  the  Government departments  concerned (Secretary for
Justice and the Security Bureau) are in the process of drafting the required consultation paper.

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Hong Kong citizens remain vigilant in the defence of their basic rights and freedoms and this
caused  much  debate  and  deliberation  during  the  year.  These  debates,  disputes  and
deliberations  took  place  publicly,  both  in  LegCo  and  in  the  media,  and  were  sometimes
accompanied by public demonstrations.

(cid:16)

3UHVV(cid:3))UHHGRP(cid:17)

The Hong Kong press varies greatly in quality, but remains pluralistic and diversified. Fierce
competition means that some of the media place great emphasis on sensational reporting. Last
year, proposals made by the Law Reform Commission to establish a Government-appointed
Press Council were  rejected.  The  Chief Secretary reiterated in November her  preference  for
self-regulation by the media.

In July, some 13 newspapers and news groups decided to create an independent Press Council
made  up  of  major  Chinese  and  English  media  representatives.  Members  of  the  Council
include  the  Federation  of  Journalists,  the  Newspaper  Executive  Association  and  the
Newspaper  Society,  which  represents  proprietors.  The  Hong  Kong  Journalists  Association
and some newspapers, such as the 'Oriental Daily News' the 'Apple Daily', the  'Sun'  and the
'Hong Kong Economic Journal' refused to join the Council.

Following a reorganisation at the South China Morning Post and the subsequent resignation in
November of its respected China Editor, Willy Lam, the issue of self-censorship by the media
resurfaced  in  public  debate.  Some  radio  and  TV  stations  opposed  a  Broadcasting  Authority
proposal  to  impose  a  mandatory  requirement  for  programme  hosts  to  declare  their  political
and  business  interests.  They  suggested  that  individual  hosts  should  be  allowed  to  exercise
self-regulation and to follow an internal code of practice instead.

Overall, the lively debates and discussions reflect  the  fact that,  thus  far,  the  HKSAR  media
remains open, diverse and free.

(cid:16)

3XEOLF(cid:3)2UGHU(cid:3)2UGLQDQFH

The  HKSAR  Government  has  continued  to  allow  public  demonstrations  on  a  range  of
economic, political and social issues. Nevertheless, the rights of demonstration regulated by

6

the 1997 Public Order Ordinance  were also a subject of public controversy and debate.  The
debate was triggered by the arrest of several students who demonstrated in April and June in
violation of the requirement to give prior notification to the police. In apparent recognition of
public feeling on the issue, the Secretary for Justice decided not to prosecute the students.

Several  further  demonstrations  were  organised  in  violation  of  the  provisions  of  the  Public
Order  Ordinance  at  which  LegCo  members  of  the  Democratic  Party  participated.  The  main
subjects  of  the  dispute  were  related  to  the  principle  and  length  of  the  notification
requirements;  the  authority  entitled  to  raise  objections  (an  independent  committee  or  the
judiciary, and not the police), and the penalty for failure to give prior notice to the police.

In response to public concerns, LegCo debated a Government inspired motion on upholding
the  Public  Ordinance  Order,  in  November.  However,  this  was  deferred  until  December
because of pressure from Democratic Party legislators and the public to allow more time for
discussion.  On  21  December,  after  more  than  eight  hours  of  debate,  LegCo  adopted  the
motion, thereby upholding the Public Order Ordinance.

(cid:16)

$FDGHPLF(cid:3))UHHGRP(cid:3)–(cid:3)3ROOVWHU(cid:3)&KXQJ(cid:3)DIIDLU(cid:17)

During the summer, at a time when the HKSAR Chief Executive Tung Che-hwa’s popularity
was at a low ebb, the maintenance of Hong Kong’s academic freedom became a major topic
of  public  debate.  Dr  Robert  Chung,  the  Director  of  a  public  opinion  programme  at  Hong
Kong  University  claimed  that  the  Chief  Executive  had  sent  a  clear  message  to  him  “via  a
special  channel”  that  his  polls  -  which  showed  a  steady  decline  in  the  Chief  Executive's
approval  ratings  -  were  not  welcome.  Chung  conducted  regular  surveys  on  the  Chief
Executive's  popularity  and  the  performance  of  the  SAR  government.  Chung  later  disclosed
that  the  “special  channel”  was  the  university  Vice-Chancellor  Cheng  Yiu-chung  and  Pro-
Vice-Chancellor  Wong  Siu-lun.  It  also  emerged  that  the  Chief  Executive’s  senior  special
assistant  Andrew  Lo  Cheung-on  had  called  on  Vice-Chancellor  Cheng  earlier,  in  January
1999,  to  express  doubts  about  Professor  Chung’s  polls  and  his  dual  role  as  pollster  and
commentator.

The  incident  raised  local  fears  over  possible  attempts  by  the  Government  and  Hong  Kong
University to interfere with academic freedom in Hong Kong. The University’s Council set up
an independent panel to look into the matter. Its report, released on 1 September after 11 days
of hearings, concluded that both the Vice-Chancellor and the Pro-Vice-Chancellor had “acted
to inhibit Dr Chung’s academic freedom”.

The release of the report led to persistent calls for the Chief Executive to remove Andrew Lo
to  save  the  government’s  credibility.  Bowing  to  immense  pressure  from  both  the  university
staff  and  the  public,  Vice-Chancellor  Cheng  and  Pro-Vice-Chancellor  Wong  tendered  their
resignations  on  6  September,  a  move  that  some  believed  was  to  prevent  the  University
Council  from  voting  on  the  panel's  report.  The  two  however  maintained  that  they  were  not
confessing  any  guilt  but  were  only  attempting  to  save  the  University  from  further
embarrassment.

Chairman  of  the  Democratic  Party  Martin  Lee(cid:3) put  forward  a  motion  calling  for  a  LegCo
independent  committee  to  investigate  the  affair  further,  particularly  the  role  of  the  Chief
Executive and his special assistant Lo. However, the motion was defeated by 35 votes to 19.
The  Chief  Secretary  urged  legislators  to  put  the  matter  to  rest  and  pledged  that  the
Government would zealously protect academic freedom.

7

(cid:16)

9LVLWV(cid:3)WR(cid:3)0DLQODQG(cid:3)&KLQD(cid:3)E\(cid:3)GHPRFUDWLF(cid:3)SROLWLFLDQV(cid:17)

The  Central  Government  in  Beijing  seems  to  have  relaxed  its  attitude  to  allow  some
democratic politicians to visit Mainland China, but only under strict conditions. As a result of
demarches made by the Chief Executive, a member of the Hong Kong Alliance in Support of
the Patriotic and  Democratic Movement  in China,  Mr  Lau  Chin-shek, was  twice allowed to
visit his mother in Guangzhou, on humanitarian grounds.

A Democratic Party legislator,  Mr Sin  Chung-kai,  entered  Shenzhen  at  the  end  of  May  and
attended  a  seminar  organised  by  the  Hong  Kong–China  Relations  Strategic  Development
Research Fund.

(cid:25)(cid:17)(cid:3)

7+((cid:3)(&2120<

Hong Kong began emerging from recession in the second part of 1999 and by early 2000 it
had largely recovered from the effects of the 1997 Asian financial crisis. By the end of 2000
the  economy  had  rebounded  strongly:  GDP  growth  for  the  year  was  10.5%.  Although
described  as  broad-based,  the  recovery  was  fuelled  mainly  by  export-led  growth  and  an
impressive increase of 8.8% in investment. Private consumption growth was more limited at
5.4%.  Unemployment  dropped  from  6.3%  to  5%  over  the  year.  There  was  concern  that  the
gap  between  the  rich  and  the  poor  was  widening  as  the  recovery  took  hold.  Contrary  to
expectations,  there  was  a  fiscal  surplus,  which  reached  HK$10  billion,  in  fiscal  year  1999–
2000, because of additional revenue from stamp duties, profits tax and salaries tax, and land
premium  partly  offset  by  lower  than  anticipated  earnings  on  the  investment  with  the
Exchange  Fund.  The  fiscal  reserves  at  the  end  of  fiscal  year  1999-2000  stood  at  HK$444.3
billion.

Hong  Kong  used  the  Asian  financial  crisis  to  implement  some  much-needed  reforms  in  the
financial sector, by demutualising and merging the securities exchanges and clearing houses.

Hong Kong observed China's WTO accession negotiations  closely,  and  a number of  reports
commenting on the impact that it would have on Hong Kong’s economic and business sectors
were  issued.  There  was  unanimous  support  for  China's  accession.  Most  commentators
considered this would have a positive effect on Hong Kong, but the opening up of the Chinese
market would provide both formidable challenges and excellent opportunities for Hong Kong.

The  previous  Commission  report  noted  that  Hong  Kong’s  market  economy  continued  to
operate very much in the same manner as it did before the hand-over. This continues to be the
case  one  year  later  as  the  HKSAR  Government  maintains  its  respect  for  free  market
principles.

The  absence  of  overall  competition  legislation,  which  was  also  noted  in  the  European
Parliament's  report  on  Hong  Kong,  has  been  the  subject  of  considerable  controversy
throughout the year. The HKSAR Government continues to believe that blanket legislation to
combat restrictive competition practices is unnecessary. The Democratic Party and a number
of  consumer  and  business  interests  consider  that  blanket  legislation  would  provide
transparency, benefit consumers and improve the business environment by providing  a level
playing field for all.

Hong Kong introduced a Mandatory Provident Fund (MPF) pension scheme this year, for the
first time, reflecting the fact that the population pyramid was changing. The implementation
of  the  MPF  showed  that  Hong  Kong  citizens  increasingly  consider  Hong  Kong  as  their

8

permanent home, no longer as a temporary refuge and are beginning to demand services that
were  not  previously  considered  necessary.  However,  the  MPF’s  introduction  required
extensive legislative efforts by the Government and much preparatory work by the financial
services  industry.  It  has  been  argued  that  the  MPF  might  depress  domestic  demand,  as
individual households will have to seek savings elsewhere to pay for MPF contributions.

(cid:26)(cid:17)(cid:3)

7+((cid:3)+21*(cid:3).21*(cid:3)6$5(cid:3)$6(cid:3)$1(cid:3),17(51$7,21$/(cid:3)75$’((cid:3)3$571(5(cid:17)

In accordance with the Basic Law, the HKSAR conducts its own trade policy for which it has
full competence as a separate customs territory. Hong Kong is an independent member of the
WTO and of a number of other international organisations.

Hong Kong is a particularly active member of the WTO where the EU and Hong Kong share
a  number  of  common  goals  and  objectives,  and  maintain  close  and  regular  contact.  Hong
Kong is also a vigorous  member  of  APEC, where it has  always called for progress  towards
trade liberalisation.

In 2000, for the first time in its history as a separate customs territory, Hong Kong announced
that it would hold exploratory talks with New Zealand concerning the possible establishment
of  a  Free  Trade  Agreement  between  the  two  territories.  After  the  APEC  summit  in  Brunei,
Hong  Kong  announced  that  it  would  in  future  be  more  flexible  about  regional  or  bilateral
agreements.  This  marked  a  very  important  change  in  Hong  Kong’s  trade  policy,  which  had
previously  maintained  as  one  of  its  main  tenets  that  free  trade  areas  and  regional  trade
agreements could detract from multilateral progress.

Hong Kong is also an active member of the World Customs Organisation.

(cid:27)(cid:17)(cid:3)

(cid:16)

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([FKDQJH(cid:3)RI(cid:3)YLVLWV(cid:17)

Bilateral EU-Hong Kong relations intensified thanks to several high-level visit exchanges.

The Chief Secretary Mrs Anson Chan visited the Commission in June. She was received by
President Prodi, and also met Commissioners Patten and Vitorino.

Commissioner  Solbes  visited  Hong  Kong  in  July.  He  met  the  Chief  Executive,  Financial
Secretary Donald Tsang and representatives of the Hong Kong Bankers’ Association.

Commissioner  Chris  Patten  paid  a  working  visit  to  Hong  Kong  in  October.  He  met  Chief
Executive Mr Tung Chee-hwa, Chief Secretary Mrs Anson Chan, Financial Secretary Donald
Tsang and Secretary for Commerce and Industry Mr Chau Tak-hay. He also met the leaders
of the main political parties.

Mrs  Lily  Yam,  Secretary  for  the  Environment,  visited  the  European  Commission  in
September.

A LegCo delegation led by Mr Edward Ho visited the European Parliament in Strasbourg in
February.  The  delegation  met  Commissioner  Patten  and  Mr  Per  Gahrton,  Chairman  of  the
European  Parliament’s  China  delegation,  who  paid  a  return  visit  to  Hong  Kong  in  early
November.  The  Chief  Executive  Tung  Chee-hwa  and  Mrs  Rita  Fan,  Chairwoman  of  the

9

Legislative Council, and some other members of LegCo, received the European Parliament’s
China delegation in Hong Kong.

(cid:16)

9LVD(cid:3)IUHH(cid:3)DFFHVV(cid:3)WR(cid:3)WKH(cid:3)(8(cid:17)

The European Commission submitted a proposal in January 2000 to the Council of Ministers
in favour of visa-free access to the EU for Hong Kong SAR passport holders.

The EU took the political decision last December to approve the principle of granting Hong
Kong  SAR  passport  holders  visa-free  access2  to  the  territories  of  13  Member  States.  The
HKSAR  Government  welcomed  this  decision.  Once  agreed  by  the  Parliament  and  the
Council, visa-free access will facilitate the exchange of visits between Hong Kong and the EU
considerably.

(cid:16)

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Customs co-operation between the European Community and the HKSAR continued in 2000
under the 1999 Agreement on co-operation and mutual administrative assistance in  customs
matters. The EC and Hong Kong had a good opportunity to review co-operation at the annual
Joint Customs Co-operation Committee  meeting,  held in  Hong  Kong on 21 November.  The
parties  updated  each  other  about  their  initiatives  taken  to  improve  customs  techniques  and
procedures and their efforts to enforce Intellectual Property Rights. The parties also discussed
co-operation in international fora such as the World Customs Organisation, the WTO and the
G7.  Particular  attention  was  paid  to  the  ratification  procedure  for  the  revised  Kyoto
Convention.  The  other  main  area  of  the  Customs  Co-operation  Agreement  is  dedicated  to
mutual  administrative  assistance.  In  the  fight  against  fraud,  this  aspect  of  international  co-
operation becomes increasingly important. During the period of review a number of requests
for  information  have  been  referred  to  the  Hong  Kong  customs  authorities  for  investigation.
The next meeting of the Joint Customs Co-operation Committee will be held in Brussels.

(cid:16)

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The  European  Commission  has  continued  to  monitor  developments  in  this  area  with  great
interest.  In  addition  to  discussions  at  the  Joint  Customs  Co-operation  Committee,
Commission officials visited Hong Kong and held discussions with the Intellectual Property
Department  representatives.  The  moves  of  the  HKSAR  Government  -  in  increasing  the
number  of  officials  responsible  for  IPR  protection,  setting  up  a  Special  Task  Force  and
introducing new legislation - have resulted in a much-improved IPR situation in the SAR.

The  Commission  considers  that  the  IPR  problems  have  not  been  completely  resolved,
however, and urges the Hong Kong authorities to continue to be vigilant in  this area and to
keep  policing  the  situation  in  a  very  intensive  manner.  Nevertheless,  the  Commission  does
recognise the significant progress that has been made and applauds the efforts undertaken to
date.

(cid:16)

2

(8(cid:3)SUHVHQFH(cid:3)DQG(cid:3)LQWHUHVW(cid:3)LQ(cid:3)+RQJ(cid:3).RQJ

In  early  2001,  the  Council  of  Ministers  approved  a  European  Commission  proposal  for  a  Regulation
granting, inter alia, Hong Kong SAR passport holders visa-free access to the territories of 13 Member
States. The Regulation entered into force on 10 April 2001.

10

                                                
Hong  Kong  is  one  of  the  most  important  cities  for  EU  interests  in  Asia.  About  42,606  EU
citizens from all the Member States were estimated to be residents in Hong Kong at the end of
2000.  In  2000,  240  EU  companies  were  using  Hong  Kong  as  their  regional  headquarters,
while 561 had regional offices in the city.

In terms of foreign investment, the EU was the second largest source of external investment in
Hong Kong in 1998. The cumulative value of realised direct investment from the EU in that
year amounted to …(cid:24)(cid:22)(cid:17)(cid:22) billion, accounting for 14% of the total.

The EU presence in Hong Kong covers a wide variety of sectors  and a number of activities
ranging  from  financial  services,  trading  and  manufacturing  to  communications  and
construction.  In  the  insurance  sector,  EU  companies  ranked  first  in  the  number  of  overseas
insurers operating in Hong Kong. Forty-one banks licensed in Hong Kong were incorporated
in  the  EU  as  of  the  end  of  2000.  In  1999,  EU  companies  were  awarded  contracts  totalling
…(cid:21)(cid:19)(cid:24)(cid:3)PLOOLRQ(cid:3)LQ(cid:3) WKH(cid:3)SXEOLF(cid:3)ZRUNV(cid:3) VHFWRU(cid:17)(cid:3)7KH(cid:3) (8(cid:3)DOVR(cid:3) KDV(cid:3) D(cid:3)YHU\(cid:3) LPSRUWDQW(cid:3) UROH(cid:3) LQ(cid:3) VKLSSLQJ
and in air transport.

The EU was Hong Kong’s third largest supplier of goods in 2000, after China and Japan, and
was the third biggest market for Hong Kong's exports, after China and the United States.

(cid:16)

&XOWXUH

The EU has continued its active presence in Hong Kong in the fields of culture and education.
A  number  of  European  Cultural  institutions  are  present  in  Hong  Kong.  The  EU  Working
Group for Culture brings together these institutions with the Consulate-Generals and the HK
European  Commission  Office  to  organise  or  contribute  to  the  organisation  of  a  number  of
events in Hong Kong with a European focus, such as the European Intercultural Week and the
European Film Festival.

(cid:28)(cid:17)(cid:3)

&21&/86,21(cid:17)

The  year  2000  was  rich  in  debate  and  controversy  both  on  the  implementation  of  the  “One
Country, Two Systems” principle and on the safeguarding of some collective and individual
rights,  which  are  guaranteed  by  the  Basic  Law.  These  are  the  foundation  for  safeguarding
Hong  Kong's  future  and  prosperity.  The  Commission  welcomes  the  fact  that  the  debates,
disputes and deliberations were at times accompanied by public manifestations and protests,
from various sectors of interest and opinion. This demonstrates a healthy regard for freedom
and democracy, although it also reveals the need for continuing vigilance.

Some  unwelcome  remarks  by  Hong  Kong  based  mainland  officials,  pertaining  to  Hong
Kong's  liberty  to  act  autonomously,  triggered  concerns  both  in  Hong  Kong  and  in  the
international community. The swift reaction of the Hong Kong SAR Government contributed
to  the  safeguarding  of  Hong  Kong's  autonomy.  However,  the  controversy  concerning  the
presence  of  the  Falun  Gong  movement  in  Hong  Kong  poses  a  new  challenge  to  the  Hong
Kong  authorities  to  continue  to  ensure  that  the  rights  and  freedoms  under  the  Joint
Declaration - including freedom of assembly, freedom of expression and freedom of religion -
are maintained and respected under the law. This issue will no doubt warrant close attention
in the months ahead.

Thanks  to  the  work  of  LegCo  and  pressure  from  public  opinion,  the  principle  of
accountability of senior officials of the SAR Government is widely recognised by all sectors
of public opinion and is acknowledged by the SAR.

11

The  fair  and  free  LegCo  elections  also  showed  the  maturity  of  Hong  Kong  citizens  and
politicians in the exercise of their basic political rights. This constitutes a further sign of the
readiness of Hong Kong people to run Hong Kong in accordance with the “One Country, Two
Systems” principle.

The lively debates and discussions on the exercise of basic rights constitute the best proof that
Hong Kong remains a free society. There were a large number of demonstrations and protests
during the year, which mostly took place in a peaceful manner and, in general, in conformity
with  the  laws  and  regulations.  The  Hong  Kong  police  continued  to  handle  these
demonstrations professionally and according to the law.

The European Commission  welcomes  the impressive recovery  of  Hong  Kong's  economy  so
soon after the serious Asian financial crisis. The economic recovery will no doubt help Hong
Kong to face the new challenges and opportunities that will be created by China's accession to
the  WTO.  The  European  Commission  is  confident  that  the  capacity  and  ingenuity  of  Hong
Kong people will allow them to adapt their economy once more to meet the challenges of the
welcome and full integration of China into the world economy.

12