Information Paper for
LegCo Panel on Trade & Industry

Reports on the work of Hong Kong Economic and Trade Offices overseas and the latest development on various economic and trade matters in the countries concerned

Attached at Appendices 1 to 11 for Members' reference are reports on the work of the Hong Kong Economic and Trade Offices (ETOs) overseas and the latest developments on various economic and trade matters in the countries concerned.

Appendix 1

The UK Prime Minister Tony Blair visited Hong Kong in early October. The Chief Secretary for Administration visited London in end October to deepen the HK-UK relationship. Earlier the Financial Secretary visited London and Edinburgh to exchange views with the UK Government and the financial community on the developments of the international financial markets.

Other government officials who visited London included the Chief Executive of the Hong Kong Monetary Authority, the Secretary for Health and Welfare, the Commissioner of the Independent Commission Against Corruption, the Commissioner for Police, the Director of Health and the former Solicitor General. The London Office arranged high-level meetings with their counterparts in the UK Government and organised events with the business community and the media.

To celebrate the first anniversary of the establishment of the SAR, we organised a series of events including a Hong Kong film festival and a cultural evening.

Up to end October, we have conducted 129 company visits, and organised one major conference, four seminars and one inward investment mission to promote understanding of and interests in doing business in Hong Kong. So far we have been successful in directly helping 13 British companies set up their business in Hong Kong.

Appendix 2

Commercial Relations

We continue to monitor developments in the EU's anti-dumping policy and to report specific anti-dumping or anti-circumvention actions taken by the EU against HK exports, and new technical regulations and standards promulgated by the EC and Member States which might affect our trade interests. We continue to follow closely discussions on the Economic and Monetary Union (EMU), the launching of the Euro in January 1999, the EU's enlargement, the EU's position on the multilateral trade front and the EU's bilateral relations with third countries. Where Hong Kong's interests are being affected, we continue to make representations to the EC as well as individual Member States.

Public Relations

There are considerable interests in the post-handover situation in Hong Kong and how Hong Kong has been coping with the continuing financial crisis in Asia. Over the last 12 months, we have done a lot in briefing ministers, politicians, officials, the financial and business communities on what has happened in Hong Kong since 1 July 1997. We organised three high level visits this year, namely the CE's visit to Germany and France in March, the FS's visit to Germany and the Netherlands in September/October and the CS's visit to Italy in October. We continue to promote visa-free access for HKSAR passport holders, particularly amongst Schengen countries. So far, experts from a number of Schengen countries have visited Hong Kong to look at our border control and passport issuing systems.

On the media side, we continue to monitor about 160 newspapers and periodicals published in Europe. We liaise regularly with the major ones and provide them with the latest news concerning Hong Kong.

Investment Promotion

We continue to run an active investment promotion programme. In the first 10 months of 1998, we have conducted five direct mailing exercises in France, Germany, Italy and Portugal, covering over 9000 companies, and we have visited 150 manufacturing and services companies based on returns from mailing exercises we have conducted.

Appendix 3

The Geneva Office's prime responsibility is to represent the interests of the SAR in the World Trade Organisation, in which we are a separate member known as "Hong Kong, China" (as provided for under Art. 116 of the Basic Law).

As the eighth largest trading economy in the world, we play an active role in the many councils and committees of the WTO. Our emphasis is on the liberalisation of international trade and strengthening the rules of the multilateral trading system, with a view to both improving market access for our exports and establishing stronger provisions against any unilateral action by our trading partners.

Although active across the full spectrum of WTO work, our current priority subjects include trade in services, WTO aspects of competition policy (including anti-dumping), the WTO framework for regional trade agreements, trade in textiles and clothing and the WTO's dispute settlement mechanism.

The current focus of the WTO is the breadth and coverage of future negotiations. Some members are concerned primarily with the difficulty of implementing existing WTO agreements, while others wish to be more ambitious and forward looking. Decisions on these matters will be taken at the next Ministerial Conference, to take place in the U.S. in late 1999. We are closely involved in the initial preparatory work and, together with a number of like-minded members, wish to ensure that future negotiations will be both comprehensive and balanced, including at least some of the subjects of priority interest to us.

The Geneva Office also liaises with the Organisation for Economic Cooperation and Development (OECD), based in Paris. Hong Kong, China is an observer of selected parts of the OECD's activities. In particular, the Geneva Office continues to play an active and constructive role in the OECD's Trade Committee.

Appendix 4

The Commissioner oversees three Hong Kong Economic and Trade Offices in USA (Washington, D.C., New York and San Francisco) which are responsible for:

1. safeguarding Hong Kong's commercial interests and strengthening economic and trade ties with the U.S.;

2. looking after Hong Kong's public relations interests in the U.S.; and

3. promoting U.S. investments into Hong Kong.

We conduct a proactive and vigorous programme of activities. Our targets include the U.S. Administration, Congress, political leaders, business community, media, think-tanks and academic institutions. We maintain regular dialogue with our interlocutors through personal calls, meetings, briefings, public speeches, seminars, conferences, interviews and media-related activities. We raise our public visibility through newsletters, press releases, websites and electronic mail distribution services. We also work closely with our network of advocates who are opinion-formers and influential leaders prepared to speak up for Hong Kong.

U.S. perception on Hong Kong has been less skeptical with greater understanding. Key issues of concern include institutional issues like rule of law and elections but currently focus mainly on the economic and trade aspects such as Hong Kong Government's incursion in the stock market, free market policy, HK-US dollar link, intellectual property rights, strategic commodity trade controls and illegal transshipment.

The U.S. 105th Congress closed on 21 October following an extended session to conclude the budget appropriations, including the passage of US$18 billion funding for the IMF. Mid-term elections are scheduled on 3 November and Republicans are expected to retain the majority in both the Senate and the House with a few additional seats. President Clinton's approval rating remains high despite the upcoming impeachment inquiry.

Appendix 5

The Washington HKETO's primary responsibility is to protect and promote Hong Kong's commercial interests. Specifically :

1. Congress. The HKETO maintains close working contact with the offices of over 100 Senators and Congressmen on key committees or with a particular interest in Hong Kong, as well as many other offices on a more general basis. Recent issues included annual Normal Trade Relations (NTR, formerly MFN) for China, textiles, strategic commodity trade and treaties. Explanations of LegCo electoral arrangements, the rule of law, and impact of the financial crisis were also called for.

2. U.S. Administration. Close liaison with State Department is important on various issues, including that department's annual report on Hong Kong. Relations with U.S. Trade Representative's Office, Department of Commerce and U.S. Customs are maintained on issues like textiles, WTO affairs, strategic commodity trade, intellectual property, import requirements and monitoring for trade disputes with other economies which could affect Hong Kong trade.

3. Business and Opinion-formers. The U.S. political machine works closely with U.S. business and relies heavily on input from think-tanks. The HKETO builds alliances with pro trade business and maintains a dialogue with as many think-tanks as possible.

4. The Media. Electoral arrangements, the new airport, and the impact of the Asian financial crisis required regular media briefings, op-eds and frequent press releases to represent Hong Kong's position.

5. General. Regular events, functions, film festivals, speaking engagements have been designed to draw attention to the HKSAR in Washington, D.C..

Appendix 6

The New York office conducts a vigorous and proactive programme of activities to reach out to companies, business groups, think- tanks and economic and trade officials in 31 states under our purview. We also liaise with the electronic and print media to provide them with information on Hong Kong. The theme of our message is that Hong Kong, with its strong economic fundamentals, continues to offer business opportunities in a free and fair environment.

The Asian financial crisis has been monitored closely in eastern U.S. especially New York which inarguably is the largest financial centre in the world. The incursion into the market by the Government had caught the attention of the media and the financial community. The recent visit by FS to address the issues and clarify our position has gone a long way to explain to the people here about the circumstances leading to our action. Our contacts are supportive of the call for more transparency in the global financial market.

Outside the New York tri-state area, the public is less informed about the situation in Hong Kong. We are continuing with our visits to these states to give talks and have meetings with a view to further their understanding of the economic and trade opportunities in Hong Kong, mainland China and Asia as a whole.

Appendix 7

The main objective of the San Francisco office is to promote a greater understanding and appreciation of Hong Kong's economic and trading philosophy and practice and to promote Hong Kong's interests in 19 western states (west of Mississippi) of the U.S..

To this end, the Director and staff of the office meet with relevant individuals and organizations, address gatherings and attend other events, promote and arrange visits in both directions, and monitor developments on the West Coast. The main target groups include businessmen, government officials, politicians, media and academics.

Interest in Hong Kong remains high throughout the year. More recently, the opening of the new airport in early July and the counter measures taken by the Government in the stock and futures market in mid August generated considerable attention. Speculation as to whether and when Renminbi would devalue and whether and when the HK/US dollar peg would delink continued.

Overall sentiments improved in October. The CE's policy address, FS's visit to the U.S., the stabilization of interest rates, and the revival of the stock and property markets all contributed to a more positive outlook of Hong Kong's economy.

Appendix 8

The Tokyo ETO continues to develop a high-level liaison network in the political and business circles to project a positive image of Hong Kong in Japan.

Specifically, we have put in place a vigorous programme of calls on top political and business leaders, during which they are briefed on the latest developments in Hong Kong. Close liaison with the Japanese media is maintained through press conferences, briefings, meetings and luncheons. The Tokyo ETO also organizes and participates actively in seminars to get Hong Kong's message across. In June this year, a major Hong Kong Promotion in Japan was launched under the patronage of the Chief Secretary for Administration. Special focus was given to tourism promotion. The Tokyo ETO also arranged official visits by other senior officials to Japan during the year, including the Financial Secretary, Secretary for Trade and Industry, Secretary for Transport, Secretary for Education and Manpower and Secretary for Economic Services.

In the coming year, we will continue with and, where possible, step up our efforts in cultivating a strong Japan/Hong Kong relationship. We will also continue to monitor and keep Hong Kong abreast of any major political and economic developments in Japan through timely reports.

Appendix 9

Due to slackened export demand from Asian economies, exports from Canada have declined by more than 30% in the first seven months of the year. Canada's economic growth has stalled since June and the Canadian currency remains weak. As a result of the global economic difficulty, Canada has now revised its GDP this year downward to below 3% and expects a marked slowdown in 1999.

On the political front, the Government led by Prime Minister Chretien remains firmly in power. The federal surplus in 1997/98 - a first in 27 years - has certainly helped boost support for the Liberal Government. Quebec Premier Bouchard decided to hold the provincial election in November/December and, if reelected, might call another referendum on the sovereignty issue. The Progressive Conservative's leadership race has started and the former Prime Minister Joe Clark is widely regarded as the front-runner. However, both the Reform Party (the Official Opposition) and the Progressive Conservative are not expected to pose serious threat to the Chretien Government.

So far, the Toronto Office has conducted 41 keynote speeches/remarks. We have held 38 press conferences/media briefings, 100 interviews, and issued 81 press releases and 29 op-eds/letters to editors. We issue newsletters regularly to keep our 4,500 contacts closely informed of developments in Hong Kong. A website was also established by Toronto Office in April to facilitate Canadians in obtaining information on Hong Kong. We conduct visits to major cities of Canada and organize various activities such as business seminars, receptions, and photo exhibitions to promote Hong Kong. We maintain regular contacts with and conduct briefings for officials from three levels of Government, academia, think-tanks, business and the financial community, journalists, and the former Hong Kong community. The Investment Promotion Unit has assisted six companies in establishing/expanding their presence in Hong Kong and conducted 22 investment promotion events (e.g. calls on companies/participation in seminars) so far this year.

Appendix 10

The Singapore Office continued to monitor closely the economic and trade developments within ASEAN and to promote a better understanding of Hong Kong among government authorities, chambers of commerce, think-tanks and academic institutions. Furthermore, we conduct regular press conferences and media briefings in different countries to update them on the latest situation and government policies in Hong Kong.

Singapore is an increasingly popular destination for visitors from Hong Kong, as borne out by the fact over 10 Policy Secretaries and Heads of Departments have entered this country within the past 10 months. At this time, the final stage of planning is in hand to prepare for the Chief Executive's participation in the APEC Economic Leaders' Meeting scheduled to be held in Kuala Lumpur in mid-November.

The ASEAN countries are undergoing a drastic process of economic, social and political adjustments brought about by the regional financial turmoil. In response, Singapore has embarked on a strategy to deregulate its financial sector as well as to invest in research and education/re-training, with the aim of strengthening its competitiveness as a regional services hub, a headquarters for multinational corporations and a centre of excellence for IT developments. However, Malaysia took a different path by imposing a series of controversial measures to control capital movement, with the effect of sheltering itself from global economic changes. Tension has also been developed between Malaysia and Singapore over a number of bilateral issues. The situation in Indonesia appears to have stabilised but it would be a long way to full recovery.

Appendix 11

In the past ten months, the Sydney Office continued to promote Hong Kong as a place for business and to explain government policies to political leaders, government officials, the business community and the general public through regular business contacts, speaking engagements, press interviews, press conferences/media briefings, and press releases and op-eds/letters to editors. The Investment Promotion Unit conducted investment promotion visits to Australian companies and assisted them in establishing/expanding their presence in Hong Kong.

In June 1998, the Chief Executive's visit attracted extensive media coverage and attention on Hong Kong. The Chief Executive explained clearly the situation of Hong Kong after the handover and the impact of the Asian financial crisis in Hong Kong. The visit also substantially enhanced the understanding of Hong Kong by Australians. In August 1998, the first Hong Kong Film Festival was held in Sydney and Melbourne, with a view to promoting the appreciation of Hong Kong films and to providing an opportunity for exchanges between the film industries of Hong Kong and Australia. A website was also established by Sydney Office in September to facilitate the public in obtaining information on Hong Kong.

The Australian federal election was held on 3 October 1998. The Liberal/National Coalition succeeded in returning for a second term government although its majority has decreased from a 44 seats lead to only 13 seats in the House of Representatives. Mr John Howard remains as Prime Minister, and has made some reshuffling in his ministry to reflect the Coalition's agenda in the next three years. The Coalition will push for tax reforms with the introduction of a goods and services tax. On the trade front, the Government is likely to continue to adopt an Asia first policy although it will also try to expand the European and US markets through bilateral and multilateral efforts.

The Australian economy showed remarkable resilience in the face of recession in Asia. The GDP grew by 3.9% during the 1997/98 financial year. This was achieved by strong domestic consumption underpinned by low interest rate, low inflation, and expansion of exports into European and US markets which more than compensated the loss in exports to the Asian markets. For 1998/99, the Government forecasts a 2.75% growth. The IMF revised upward its projection of Australian GDP growth to a similar level (2.25%). Again the optimism is based on factors including solid retail trade, high levels of corporate profitability, reasonably abundant job vacancies and good business confidence.