report from the Commission to the  European Parliament - ANNUAL Report Hong Kong 2009
Date: 2010-06-01
Institutions: European Commission
Subjects: EU relations, Hong Kong, activity report, bilateral relations, cooperation policy

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EUROPEAN COMMISSION 

Brussels, 1.6.2010 
COM(2010)242 final 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

ANNUAL REPORT HONG KONG 2009 

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Foreword to 12th Annual Report on Hong Kong from the Commission to the Council and the 
European Parliament 

Catherine Ashton, High Representative of the Union for Foreign Affairs and Security Policy, 
Vice-President of the European Commission 

I am delighted to be able to provide the foreword to the European Commission's 12th Annual 
Report on Hong Kong, focusing on developments in 2009. Relations and cooperation between 
the  European  Union  and  Hong  Kong  have  continued  to  move  forward  on  a  very  positive 
track, in terms of our trade, investment and dialogue on issues of common interest.  

The  European  Commission  has  continued  to  keep  a  close  watch  on  political,  institutional, 
economic  and  social  developments  in  Hong  Kong.  The  implementation  of  the  'one  country, 
two  systems'  principle  remains  satisfactory,  as  the  rights  and  fundamental  freedoms  of  the 
people of Hong Kong have been respected, the rule of law protected and the market economy 
and positive business environment maintained.  

In  this  period  of  economic  downturn,  the  strong  financial  and  economic  ties  between  the 
European  Union  and  Hong  Kong  have  been  very  valuable.  Hong  Kong's  economy  has 
emerged from the global financial crisis without any major systemic problems. With one of 
the biggest European business communities in Asia and as a financial and economic hub for 
the region, it will continue to be of strategic importance as a trade and investment parner for 
Europe as we kick-start our own growth.  

The  Hong  Kong  SAR  government  has  also  now  published  a  set  of  proposals  for  the  2012 
legislative  and  leadership  elections,  following  a  public  consultation  on  the  matter.  The 
European Union continues to strongly support early and substantial progress towards the goal 
of  genuine  universal  suffrage,  in  accordance  with  the  Basic  Law  of  Hong  Kong  and  the 
wishes of its people.  

Hong Kong continues to be an important player in the region, and the European Union under 
the new Lisbon Treaty arrangements will be able to further intensify ties, especially through 
our Office there.  

Catherine Ashton 

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Hong Kong Special Administrative Region: Annual Report 2009 

Introduction 
Since  the  handover  of  Hong  Kong  to  Mainland  China  more  than  twelve  years  ago,  the 
European Commission has been closely monitoring economic and political developments in 
the Hong Kong Special Administrative Region (SAR), in order to fulfil its 1997 commitment 
to the European Parliament to issue an annual report on developments in Hong Kong. This is 
the twelfth such report covering 2009. 

During  this  period  the  principle  of  ‘one  country,  two  systems’,  as  established  in  the  Sino-
British Declaration and the Basic Law of Hong Kong, has continued to work well. The rights 
and fundamental freedoms of the people of Hong Kong have been respected, the rule of law 
protected and the market economic system and business environment preserved.  

In  2009  bilateral  relations  and  cooperation  between  the  European  Union  and  Hong  Kong 
continued  to  expand.  The  European  Union  maintained  its  position  as  Hong  Kong’s  second 
largest trading partner, despite a decrease in bilateral trade. It is Hong Kong’s biggest source 
of foreign direct investment (after Mainland China and the British Virgin Islands). Home to 
one of the biggest European business communities in Asia, Hong Kong is therefore a strategic 
trading and investment partner for the European Union.. 

The  European  Union  attaches  great  importance  to  Hong  Kong’s  stability,  prosperity, 
democratic development and progress towards the ultimate goal of genuine universal suffrage, 
in  accordance  with  the  Basic  Law  of  the  Hong  Kong  SAR  and  the  wishes  of  the  people  of 
Hong Kong. Hence, the EU will continue to support timely and substantial progress towards 
this goal. 

Political developments 

In 2009 the European Commission continued to keep a close watch on Hong Kong’s political, 
institutional  and  social  developments  in  accordance  with  its  1997  commitment  to  the 
European  Parliament.  In  2009  this  process  was  the  subject  of  Hong  Kong  Government 
proposals  to  reform  the  electoral  methods  for  the  2012  Chief  Executive  election  and  the 
selection of the Legislative Council in 2012. 

On  15  January  2009  Hong  Kong’s  Chief  Executive  Donald  Tsang  announced  the 
postponement  of  the  Hong  Kong  Government’s  public  consultation  on  reforming  electoral 
methods  for  the  2012  elections,  initially  foreseen  for  the  first  half  of  2009,  to  allow  his 
government  to  focus  on  tackling  ‘economic  and  livelihood  concerns’  in  the  wake  of  the 
financial crisis.  

On  18  November  the  Hong  Kong  Special  Administrative  Region  Government  released  its 
consultation paper on the 2012 electoral arrangements for its legislature and leader. This will 
have  a  significant  influence  on  the  city’s  progress  towards  universal  suffrage.  The 
Consultation  Document  on  the  Methods  for  Selecting  the  Chief  Executive  and  for  Forming 
the Legislative Council in 2012 (‘Consultation Document’) was the subject of a three-month 
consultation inviting members of the public to comment on the proposals put forward by the 
government. This consultation period came to an end on 19 February 2010.  

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Henry  Tang,  the  Chief  Secretary  for  Administration,  announced  the  consultation  in  the 
Legislative  Council  and  stressed  that  having  a  more  democratic  electoral  system  in  Hong 
Kong  in  2012  would  be  a  crucial  step  towards  direct  elections  in  2017.  The  Hong  Kong 
Government underlined that the proposals were in line with the National People’s Congress 
Standing  Committee’s  Decision  on  Issues  Relating  to  the  Methods  for  Selecting  the  Chief 
Executive and for Forming the Legislative Council.  

The Consultation Document proposes that in 2012 the number of legislative seats should be 
increased from 60 to 70. Five of these seats would be directly elected through geographical 
constituencies  and  the  other  five  would  be  allocated  to  functional  constituencies,  thus 
retaining the current ratio of directly elected and functional seats. The Consultation Document 
raised  the  possibility  of  having  these  five  new  seats  returned  by  election  among  elected 
District Council members. 

As regards the method for electing Hong Kong’s Chief Executive, the Consultation Document 
proposes enlarging the Election Committee which chooses the city’s leader from 800 to 1 200 
members,  ‘so  as  to  meet  the  requirement  of  gradual  and  orderly  progress,  providing  more 
room for members of the community to participate in the election, and to further enhance the 
representativeness of the Election Committee’. This could be done by adding 100 members to 
each  of  the  four  sectors  represented  in  the  Election  Committee.  The  nomination  threshold 
within the Election Committee would be maintained at its current ratio of one-eighth of  the 
total membership of this Electoral College (that is, 150 votes out of the increased membership 
of  1 200).  The  Consultation  Document  also  proposed  maintaining  the  existing  requirement 
that the Chief Executive should not have any political affiliation. 

The  government’s  Consultation  Document  on  electoral  reforms  for  2012  was  not  supported 
by  the  members  of  Hong  Kong’s  pan-democratic  camp,  who  would  like  to  see  full  and 
genuine  universal  suffrage  in  place  as  soon  as  possible.  They  believe  the  Consultation 
Document  does  not  go  far  enough.  In  addressing  these  concerns,  Chief  Secretary  for 
Administration  Henry  Tang  said  that  ‘the  NPCSC  decision  sets  no  precondition  that 
democratic  progress  must  be  made  for  the  2012  elections  before  universal  suffrage  for  the 
Chief  Executive  and  the  Legislative  Council  could  be  implemented.  However,  if  progress 
could be made  for  constitutional  development in 2012, this would be conducive to a  steady 
transition of Hong Kong’s electoral system to universal suffrage’.  

The  Consultation  Document  does  not  address  the  long-term  existence  of  functional 
constituencies.  During  a  Legislative  Council  question-and-answer  session  on  15  October 
2009,  Chief  Executive  Donald  Tsang  admitted  that  functional  constituency  seats  ‘are  not 
totally  compatible’  with  the  principles  of  equal  and  universal  suffrage  and  that  functional 
constituencies cannot survive in their present form. Hong Kong’s pan-democratic legislators 
have called for functional constituencies to be completely abolished. 

On 28 December 2009, Chief Executive Donald Tsang met Chinese President Hu Jintao and 
Premier  Wen  Jiabao  in  Beijing  in  the  course  of  his  annual  duty  visit.  According  to  media 
reports,  President  Hu  called  on  Donald  Tsang  to  deal  appropriately  and  effectively  with 
political developments to maintain Hong Kong’s harmony and stability. Premier Wen Jiabao 
also called on Donald Tsang to find a more effective solution to Hong Kong’s ‘deep-rooted 
conflicts’. The Hong Kong Government is expected to present its proposals for changing the 
2012 electoral methods later in 2010. A two-thirds majority of legislators must vote in favour. 

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The  European  Commission  continues  to  take  a  close  interest  in  political  developments  in 
Hong  Kong  and  notes  the  Hong  Kong  SAR  Government's  proposals  for  electoral  reform  in 
2012  as  well  as  the  ongoing  public  debate  on  the  constitutional  evolution  of  Hong  Kong. 
According  to  the  European  Commission,  the  best  guarantee  of  stability  and  prosperity  for 
Hong Kong lies in a shift to a system of genuine universal suffrage, in accordance with the 
Basic Law and as set out by the National People’s Congress Standing Committee decision of 
2007. Therefore, the Hong Kong Government and all the parties concerned are encouraged to 
enter into a dialogue which will facilitate and accelerate this process. 

Residents in Hong Kong hold an annual candlelight vigil to mark the 20th anniversary of the 
Chinese Government’s confrontation with the student-led movement in Tiananmen Square on 
4th June 1989. 
The turnout at the 2009 candlelight vigil exceeded expectations (organisers estimated 150 000 
people;  police  estimated  62 800),  making  it  probably  the  largest  turnout  since  the  1990 
candlelight  vigil.  Chief  Executive  Donald  Tsang  told  the  Legislative  Council  that  he 
understood the feelings of the Hong Kong people about 4 June. ‘But the incident happened a 
long  time  ago.  The  country’s  development  has  achieved  tremendous  results  and  brought 
economic prosperity to Hong Kong. I believe the Hong Kong people will make an objective 
assessment of the nation’s development.’  
Events such as this, including the annual first of July demonstrations, illustrate that the ‘one 
country,  two  systems’  principle  is  functioning well  in  Hong  Kong.  It  also  shows  that  rights 
and freedoms guaranteed under the Basic Law of the  Hong Kong SAR, such as freedom of 
speech and assembly, are generally respected. However, various associations of journalists in 
Hong  Kong  have  expressed  rising  concerns  regarding  press  freedom,  particularly  incidents 
where  Mainland  Chinese  police  have  acted  against  Hong  Kong  journalists  reporting  on 
Mainland stories (such as  events in Mainland  China’s Xinjiang Autonomous Region). On 9 
September  2009  Chief  Executive  Donald  Tsang  said  his  government  had  forwarded  Hong 
Kong  journalists’  views  to  the  State  Council’s  Hong  Kong  and  Macao  Affairs  Office  and 
Xinjiang authorities.  
The European Commission also noted serious concerns over border and immigration incidents 
that could lead to repatriation decisions and other arrangements involving restrictions of basic 
rights and freedoms, such as the case of the Chinese dissident Zhou Yongjun or the Lo Wu 
border  protest  on  27  December  2009  in  support  of  Mainland  activist  and  Charter  08  author 
Liu Xiaobo. 

On  28  August  2009  the  United  Nations  Committee  on  the  Elimination  of  Racial 
Discrimination  (UN  CERD)  issued  its  periodic  report  on  China,  including  Hong  Kong  and 
Macao.  It  recommended  that  Hong  Kong  should  adopt  a  law  on  refugees  ‘with  a  view  to 
establishing  a  comprehensive  procedure  for  the  screening  of  individual  asylum  claims.’  In 
response to these observations the Hong Kong Government stated in a press release that ‘the 
asylum claims lodged in Hong Kong were being administered by the UNHCR directly, which 
makes  decisions  on  the  screening  of  genuine  refugees  and  their  resettlement  afterwards.’ 
Regarding  the  Race  Discrimination  Ordinance  adopted  in  2008,  the  UN  CERD  expressed 
concerns about the definition of racial discrimination contained in the Hong Kong legislation, 
‘which  is  not  completely  consistent  with  Article  1  of  the  Convention  as  it  does  not  clearly 
define  indirect  discrimination  with  regard  to  language,  and  it  does  not  include  immigration 
status and nationality among the prohibited grounds of discrimination.’ 

On  2  September  2009,  Chief  Justice  Andrew  Li  announced  his  early  retirement.  He  would 
step down in September 2010 to enable his successor to appoint the successors to a number of 

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senior judges due to retire over the next five years. The European Commission acknowledges 
Chief  Justice  Li’s  contribution  to  preserving  Hong  Kong’s  judicial  independence,  a  key 
element in preserving Hong Kong’s way of life, respect for the rule of law and fundamental 
freedoms. As Mr Li said on 11 January 2010 at the Ceremonial Opening of the Legal Year, 
‘The  independent  judiciary  has  a  vital  constitutional  role  to  ensure  that  the  acts  of  the 
Executive  and  the  Legislature  comply  fully  with  the  Basic  Law  and  that  the  law  and  our 
fundamental  rights  and  freedoms,  which  are  at  the  heart  of  Hong  Kong’s  system,  are  fully 
safeguarded.’ 

The year 2009 also saw an improvement in diplomatic ties between Hong Kong and Taiwan. 
This  is  welcomed  by  the  European  Commission.  The  Secretary  for  Constitutional  and 
Mainland Affairs, Stephen Lam, visited Taipei on 5-6 June 2009 at the invitation of Taiwan’s 
Mainland  Affairs  Council  to  explore  and  discuss  issues  that  would  help  further  enhance 
cooperation  between  the  two  sides.  Stephen  Lam  is  the  first  Hong  Kong  minister  to  visit 
Taiwan  in  an  official  capacity  since  Hong  Kong’s  return  to  Mainland  China  in  1997.  Both 
Hong Kong and Taiwan agreed to set up non-governmental bodies to bolster cooperation in 
trade, economy, tourism, investment and other sectors. In his policy address in October 2009 
the  Chief  Executive  announced  the  establishment  of  a  Hong  Kong–Taiwan  economic  and 
cultural cooperation and promotion council to promote cooperation between Hong Kong and 
Taiwan. 

On  the  whole,  the  European  Commission  believes  that  the  ‘one  country,  two  systems’ 
principle has continued to work well in the Hong Kong SAR and that the rights and freedoms 
of  its  population,  guaranteed  in  the  Sino-British  Joint  Declaration  and  the  Basic  Law,  have 
been respected in general. 

Economic and trade developments 

Hong  Kong’s  economy  and  financial  system  have  emerged  from  the  global  financial  crisis 
without any major systemic problems. Its economy showed progressive improvement during 
2009 and gradually returned to positive growth on the back of a robust Chinese economy. For 
2009 as a whole, GDP contracted in real terms by 2.7 %, the first annual recession since the 
Asian  financial  crisis  in  1998.  The  Hong  Kong  Government  undertook  to  spend  HK$ 87.6 
 8.1 billion)  in  two  years,  equivalent  to  5.2 %  of  its  GDP,  to  cushion  the  economy 
billion  (€
from the aftershock of the global financial crisis, which has helped maintain confidence. The 
unemployment rate improved to 4.9 % in the fourth quarter from a peak of 5.4 % in the second 
quarter.  Inflationary  pressures  quickly  receded  with  the  Composite  Consumer  Price  Index 
rising by 1 %, a sharp fall from 5.6 % in 2008. 

While  maintaining  its  competitiveness  as  an  international  financial  centre,  Hong  Kong  is 
increasingly turning towards servicing the Chinese market. On financial services, Hong Kong 
has positioned itself as the offshore centre of the Renminbi (RMB) and a testing ground for 
China’s  capital  account  liberalisation.  With  the  support  of  the  Central  Government,  Hong 
Kong  began  to  launch  new  RMB  products  and  services  during  2009.  The  most  significant 
development was an RMB cross-border trade settlement scheme whereby Hong Kong became 
the first offshore jurisdiction participating in the pilot programme for Guangdong. Hong Kong 
banks operating in Mainland China were given the green light to issue RMB bonds in Hong 
Kong. In October, the Central Government launched the first RMB sovereign bonds in Hong 
Kong totalling Yuan 6 billion (€

 659 million).  

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As  a  result  of  a  surge  in  global  liquidity,  Hong  Kong  attracted  an  unprecedented  inflow  of 
capital in 2009. According to the Hong Kong Monetary Authority, a total of HK$ 640 billion 
(€
 59  billion)  of  foreign  capital  flowed  into  Hong  Kong's  asset  markets,  as  international 
investors  sought  safe  havens  for  funds  as  well  as  exposure  to  the  fast  growing  Chinese 
economy.  Over  half  of  the  capital  inflows  were  related  to  the  fund-raising  activities  of 
Mainland Chinese companies in Hong Kong. Hence, the Hong Kong Stock Exchange became 
the  biggest  Initial  Public  Offering  (IPO)  market  in  the  world  in  2009.  As  for  the  property 
market, residential property prices rose by 27 % on average during 2009 and luxury flat prices 
returned  to  the  1997  peak.  Reportedly,  speculative  buying  and  the  appetite  of  Mainland 
Chinese  buyers  for  Hong  Kong  property  have  pushed  up  prices.  The  Financial  Secretary 
therefore introduced a set of measures in the 2010-2011 Budget proposals to cool down the 
property market and reduce the risk of asset-price bubbles.  

The Hong Kong economy relies heavily on financial services, prompting the Government to 
search  for  new  growth  areas  to  address  economic  challenges.  Hong  Kong  will  facilitate  the 
development  of  six  knowledge-based  industries:  testing  and  certification,  environmental 
industry, innovation and technology, cultural and creative industries, medical, and educational 
services.  The  European  Commission  welcomes  the  prospect  of  exploring  cooperation  and 
exchanges with Hong Kong in common areas of interest, in particular testing and certification, 
environmental industry, innovation and technology and creative industries. 

Hong  Kong  acted  promptly  to  implement  its  commitment  towards  endorsing  the  OECD 
standard for the effective exchange of information in tax matters following the G20 process. 
An amendment to the related tax legislation was announced in early 2009 and the amendment 
bill  was  passed  unanimously  in  January  2010.  The  European  Commission  welcomes  this 
move. Hong Kong is now ready to sign more comprehensive double taxation agreements with 
third countries, including some EU Member States. 

An  instrument  designed  to  facilitate  economic  integration  between  Hong  Kong  and  China, 
namely Supplement VI to the Closer Economic Partnership Arrangement (CEPA), was signed 
in May 2009. Hong Kong and China agreed on a package of further liberalisation of trade in 
services as well as measures to enhance financial cooperation. Supplement VI also included 
measures  for  early  and  pilot  implementation  of  liberalisation  in  selective  services  sectors  in 
Guangdong  Province.  These  measures  were  aimed  at  enhancing  cooperation  between 
Guangdong  and  Hong  Kong  within  the  service  industry.  The  participation  of  European 
companies in the various CEPA agreements is slowly increasing, up to 151 service suppliers 
in 2009 out of a total of over 1 300 Hong Kong companies. Cooperation with the Hong Kong 
Government  has  been  very  important  in  spreading  information  on  CEPA  to  the  European 
business community. 

In addition to CEPA, the Hong Kong Government has taken a more proactive approach to the 
pursuit  of  free  trade  agreements  with  other  trading  partners,  trying  to  secure  better  market 
access for services in overseas markets. Hong Kong will continue to support the multilateral 
trading system while engaging in bilateral free-trade agreement discussions, provided they are 
WTO-consistent  and  can  contribute  to  multilateral  trade  liberalisation.  In  2009  Hong  Kong 
concluded  the  FTA  negotiations  with  New  Zealand  that  materialised  in  a  Closer  Economic 
Partnership Agreement. It also initiated discussions with Chile, Peru, Malaysia and EFTA.  

European Union-Hong Kong cooperation 

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In 2009 EU and Hong Kong bilateral relations and cooperation continued to expand, based on 
a shared interest in addressing mutual and global concerns. Hong Kong is a strategic trading 
and  investment  partner  of  the  European  Union.  It  also  plays  an  important  role  as  an 
intermediation  platform  for  trade  and  investment  flows  between  the  European  Union  and 
China. 

In 2009 the European Union maintained its position as Hong  Kong’s  second largest  trading 
partner after Mainland China. Conversely, in the same year Hong Kong was the 17th largest 
trading partner of the European Union. Total bilateral trade between the European Union and 
Hong Kong fell by 10.4 % to €

 29.2 billion as the global financial crisis took its toll.  

Next to Mainland China and the British Virgin Islands, the European Union was the biggest 
foreign  investor  in  Hong  Kong,  contributing  to  around  10 %  of  the  total  foreign  direct 
investment  (FDI)  stock  in  2008.  Conversely,  Hong  Kong  investment  in  Europe  has  been 
developing steadily, and has become one of the major sources of direct investment from Asia.  

Despite  the  global  economic  crisis,  Hong  Kong  has  continued  to  attract  a  large  number  of 
European citizens to reside and work in the territory, totalling around 28 320 as of the end of 
2009  according  to  official  Hong  Kong  Immigration  figures.  This  still  represents  one  of  the 
biggest concentrations of European Union citizens in Asia and continues to be a motivating 
factor for the European Union’s involvement in Hong Kong. An investment survey conducted 
by the Hong Kong Census and Statistics Department showed that as of June 2009 there were 
1 252  regional  headquarters  and  2 328  regional  offices  in  Hong  Kong  representing  parent 
companies  located  outside  Hong  Kong.  Of  those,  the  European  Union  continues  to  be  the 
largest  source  of  foreign  companies  in  the  territory  with  419  regional  headquarters  and  679 
regional  offices.  The  European  Union’s  business  presence  covers  a  large  variety  of  sectors, 
mainly  financial  and  business  services,  trading,  logistics  but  now  also  construction  and 
infrastructure projects. 

With these substantive trade and economic flows and an important European Union presence, 
relations  with  Hong  Kong  are  guided  by  the  policy  framework  contained  in  the  European 
Commission’s Communication ‘The EU, Hong Kong and Macao: possibilities for cooperation 
2007-2013’. It fixes a number of challenging objectives designed to move European Union-
Hong  Kong  relations  forward  by  deepening  and  broadening  cooperation  in  key  areas  of 
mutual interest. 

European Union-Hong Kong cooperation was reinforced in 2009, the first year of operation of 
the ‘European Union Business Information Programme’ for Hong Kong and Macao (EUBIP). 
EUBIP  implemented  a  work  programme  of  content-driven  business-related  events  in  close 
partnership  with  relevant  business  and  industry  associations  from  the  European  Union  and 
Hong  Kong.  Areas  targeted  in  2009  were:  regulatory  exchanges,  financial  services,  the 
environment,  intellectual  property  and  food/product  safety.  A  well-attended  seminar  on  the 
European  Union’s  chemical  regulation  (REACH),  with  expertise  from  the  European 
Chemicals  Agency  and  supported  by  the  Hong  Kong  Government,  was  a  case  in  point. 
EUBIP is thus proving to be an important instrument for promoting better understanding and 
knowledge exchange between Hong Kong and the European Union.  

The third European Commission-Hong Kong Structured Dialogue was held in Hong Kong on 
17 December 2009. This has proven to be an effective high-level platform for officials from 
both  sides  to  continue  expanding  bilateral  relations  through  substantive  dialogue  and 

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cooperation.  The  third  Dialogue  focused  on  the  incipient  signs  of  recovery  from  the  global 
financial  crisis.  In  thoroughgoing  discussions  both  sides  agreed  to  continue  enhancing 
bilateral  cooperation,  including  through  EUBIP,  on  financial  services,  information  and 
communications technology, environment, standardisation issues and education, as well as to 
expand cooperation and initiatives on testing and certification, innovation and technology and 
creative  industries.  These  new  areas  are  part  of  the  six  knowledge-based  industries  Hong 
Kong  wishes  to  develop  further.  Channels  for  information  exchange  on  European  Union 
regulatory  and  technical  standards,  e-passports,  and  financial  legislation  will  also  be 
strengthened.  

The number of senior-level visits by the Commission to Hong Kong increased in 2009, thus 
contributing to the strengthening of European Union-Hong Kong bilateral relations and to the 
development of new cooperation initiatives in areas such as aviation, financial services, health 
and  consumer  protection,  anti-corruption  initiatives,  education  and  trade  as  well  as  to  the 
deepening of the ongoing dialogue in the field of taxation of savings. Professor K. C. Chan, 
Secretary  for  Financial  Services  and  the  Treasury,  visited  Brussels  in  May  2009  to  discuss 
financial market regulations. A visiting group from the Economic and Social Committee met 
representatives of Hong Kong civil society in July 2009.  

With  the  largest  financial  expertise  in  Asia,  a  well-regulated  market  and  a  good  arbitration 
system,  Hong  Kong  is  a  strong  candidate  to  become  a  regional  trading  platform  for 
innovative,  green  financial  products,  possibly  benefitting  from  EU  experience  in  carbon 
trading  with  the  European  Trading  System  (ETS).  Hong  Kong  has  also  been  active  in 
Copenhagen, with Secretary for the Environment Edward Yau attending the conference as a 
member of the Chinese Delegation. Hong Kong’s civil society was also well represented. 

The European Commission regrets that European Union–Hong Kong relations in the field of 
aviation made little progress in 2009. The Commission maintained contacts with officials to 
urge  Hong  Kong  to  update  bilateral  air  services  agreements  with  European  Union  Member 
States  and  to  give  legal  certainty  to  existing  agreements,  either  by  including  a  Community 
Designation Clause or by opting for a horizontal air services agreement. Exchanges between 
EU and Hong Kong experts will continue but have yet to bear fruit, as Hong Kong remains 
one of the few jurisdictions in Asia that still does not recognise EU designation. 

Competition is one area of bilateral exchange. The Hong Kong Government confirmed during 
the  2009  Structured  Dialogue  that  the  Competition  Bill,  which  is  still  at  the  drafting  stage, 
would  be  enacted  within  the  2009-2010  legislative  year.  The  European  Commission  urges 
Hong Kong to enact the Competition Bill as soon as possible. 

In the region Hong Kong is a centre of free press and free speech, a leading media hub and a 
gateway  to  Mainland  China.  European  Union  public  diplomacy  efforts  have  continued  to 
focus on making the European Union more visible in Hong Kong and on delivering prompt 
and  substantial  information  on:  European  Union  trade  and  regulatory  policies,  energy  and 
climate  change,  financial  regulations,  intercultural  dialogue,  the  European  Parliament 
elections, the Treaty of Lisbon and the European Union’s role in the world. These efforts were 
made possible thanks to the teamwork of the European Union Office in Hong Kong and the 
Member States officially represented in the territory.  

Future Perspectives  

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Hong Kong’s economy has been able to recover well from the impact of the global financial 
crisis,  on  the  basis  of  sound  economic  and  financial  fundamentals  and  an  open  market 
economy.  Maintaining  a  steady  recovery  path  and  Hong  Kong’s  status  as  an  international 
financial centre, based on rule of law, judicial independence and a stable legal environment, 
will be important factors for creating more European trade and investment in Hong Kong in 
2010 and in the long-term future.  

Hong Kong is also facing the dual challenge of developing further as a unique platform for 
trade,  economic  cooperation  and  investment  with  Mainland  China,  in  particular  the  Pearl 
River Delta region, and of maintaining its role as a financial intermediary between Mainland 
China and the rest of the world. 

Hong Kong will continue to be an important partner for the European Union in Asia, because 
of  our  bilateral  trade  and  investment  flows,  extensive  economic  cooperation  and  broad 
European  presence  and  interests.  The  European  Union  will  maintain  its  substantial 
commitment  to  the  Hong  Kong  SAR  Government  to  step  up  our  regulatory  exchanges, 
facilitate trade and expand our cooperation into areas of mutual interest, including health, the 
environment and new technologies. Emphasis will be given to improving knowledge sharing 
and  experience  in  matters  related  to  competition,  financial  services,  certification  and 
immigration. People-to-people exchanges and contacts should continue to develop so that the 
people of Hong  Kong can  benefit from Europe’s cultural diversity and Europeans can learn 
from Hong Kong’s east-meets-west culture. 

The  entry  into  force  of  the  Treaty  of  Lisbon  in  December  2009  should  lead  to  a  further 
consolidation  of  the  joint  efforts  of  the  European  Commission  and  the  European  Union 
Member States to make the European Union more visible in Hong Kong. The Treaty has been 
warmly  welcomed  by  the  Hong  Kong  authorities.  Since  its  implementation  on  1  January 
2010, the Office of the European Union to Hong Kong and Macao (previously the Office of 
the  European  Commission)  represents  the  European  Union  as  coordinator  and  negotiator  in 
this  Special  Administrative  Region.  It  will  continue  to  strive  to  improve  European  Union–
Hong Kong relations. 

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