Annexes to JOIN(2024)20 - - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | JOIN(2024)20 - . |
|---|---|
| document | JOIN(2024)20 |
| date | June 13, 2024 |
Hong Kong fell by one place in the World Investment Report 2023 by the United Nations Conference on Trade and Development (June), making it the world’s fourth largest investment destination for foreign direct investment (FDI) in 2022 (down from third in 2021)33. The latest survey on foreign companies by the Hong Kong government indicates that the number of non-Chinese foreign companies in the territory stabilised in 2023 (at a lower level than before COVID), after several years of decline amid strict pandemic-related restrictions. Hong Kong’s population also largely recovered after a drop of about 170 000 people during the pandemic. As of mid-2023, the population increased by 2.1% (126 500 people) from a low in mid-2022 – but was still 0.3% lower (39 500) than before the pandemic (end-2019)34.
Hong Kong’s economy returned to growth in 2023, with a 3.2% increase in GDP year on year (after a contraction of 3.7% in 2022)35, but is yet to recover to its level of 2018. The financial industry and the trade and logistics industry faced significant challenges. Industries dependent on tourism partially recovered to pre-pandemic levels.
Inflation remained moderate, with an annual 2.1% increase in the consumer price index during the year36. The unemployment rate continued to improve and was back to pre-pandemic levels – at 3.0% for the full year 2023, down from 4.3% in 202237.
The trade and logistics sector – which accounts for 23% of Hong Kong’s GDP – continued to face challenges. GDP from the import and export industry contracted by 11.0% year on year in the first 9 months of 202338 and the value of Hong Kong’s external trade in goods dropped by 6.7% to HK$8.82 trillion (EUR 1.04 trillion)39 in the year 202340. External trade returned to growth in the last 3 months of the year, ending 16 months of consecutive decline. Hong Kong’s trade in goods has a large exposure to the external trade of mainland China, by far its largest trading partner, given Hong Kong’s role as a transit and re-export centre for the mainland.
The financial industry (22% of Hong Kong’s GDP) contracted by 1.7% year on year in the first 9 months of 2023. The industry was a key growth driver for the city in the past years until it halted in 2022 (growing by only 0.1% year on year) and contracted in 2023.
The number of initial public offerings (IPOs) further decreased to 73 in 2023, from 90 in 2022. The amount raised through IPOs dropped by 55.8% year on year to HK$46.3 billion (EUR 5.4 billion). Hong Kong was the world’s eighth largest hub for IPOs in 2023, down from fourth in 2022 and 2021, second in 2020 and first in 2019.
During the year, the Hong Kong Hang Seng Index lost 13.8% of its value, while market capitalisation on the Hong Kong Stock Exchange dropped by 13.0% to HK$31.0 trillion (EUR 3.6 trillion). Average daily market turnover was down by 15.9% year on year to HK$105 billion (EUR 12.4 billion)41. As of the end of October 2023, Hong Kong was the world’s seventh largest and Asia’s fourth largest stock market by market capitalisation and the largest offshore renminbi business hub.
The drop in market capitalisation and in IPOs was due to a combination of factors. These included high interest rates in the US, investor concerns over the Chinese economy and the quality of Chinese assets (Chinese companies accounting for about 78% of Hong Kong’s stock market capitalisation), and geopolitical tensions.
Tourists are a source of revenue for several sectors in Hong Kong’s economy. Industries exposed to tourist spending include retail, food and beverage, transport, travel and hospitality. Hong Kong welcomed 34 million visitors in 2023, a significant increase from 604 564 in 2022, but half (52%) of the number in 2018)42. In the second half of the year visitors increased, reaching about 60% of the 2018 level. Mainland Chinese visitors constituted the largest group of tourists (78% in 2023; similar to 2018) and accounted for an estimated 40% of the city’s retail sales before the pandemic.
In the first 9 months of 2023, GDP from accommodation and food services industries and from wholesale and retail sales increased by 35.8% and 29.2% respectively year on year. This supported Hong Kong’s economic growth, but the sectors still accounted for only 56% and 68% respectively of GDP in the same period in 2018, showing that the recovery was only partial. During the year, retail sales increased by 16.2% from 2022 to HK$406.7 billion (EUR 47.9 billion) but were still only 83.8% of the 2018 level. Restaurant receipts increased by 33.9% year on year in the first 9 months to HK$82.1 billion (EUR 9.7 billion), 92% of the same period in 2018. Hotel room occupancy was 82%, compared to 65% in 2022 and 92% in 2018.
The aviation industry and related industries partially recovered. The number of flights at Hong Kong International Airport roughly doubled compared to 2022 but were still only 65.8% of their pre-pandemic level (2019). The number of passengers increased to 39.4 million (from 5.6 million in 2022), accounting for only slightly more than half (55.3%) of the 71.3 million passengers in 2019. Air cargo volume decreased by 3.2% year on year, to 91.4% of 2019 levels43.
The construction and real estate industries recorded increases of 4.8% and 6.7% respectively in the first 9 months of the year. Property prices decreased during the year, but Hong Kong remained one of the most expensive cities in the world.
The SAR’s Linked Exchange Rate System remained in place during the year, within a HK$7.75-7.85 to one US dollar band. Foreign currency reserve assets were mostly stable, ending 2023 at USD 425.5 billion, from USD 424.0 billion at the end of 2022.
Hong Kong is expected to retain a fiscal deficit for the 2023-2024 financial year (ending in March 2024). This would be the SAR’s fourth deficit in 5 years, unusual for an economy accustomed to recording fiscal surpluses. The budget presented in February 2023 forecasted a deficit for the 2023-2024 fiscal year of HK$119 billion (EUR 14 billion), excluding proceeds from the issuing of government bonds, but the government later warned that it would be noticeably higher. The budget was presented with the expectation that the economy would grow by 3.5% to 5.5%, instead of the actual 3.2%.
The recent deficits were largely funded by tapping into Hong Kong’s large fiscal reserves. The fiscal reserves amounted to HK$692 billion (EUR 81.4 billion) in December 2023, a decrease of 10.5% year on year and of 40.3% from HK$1.2 trillion in March 2020. Reserves are equivalent to an estimated 12 months of expenditures, compared to 24 months before COVID-19.
In December, Moody’s downgraded the credit rating outlook of Hong Kong to negative from stable. This followed Moody’s outlook change on China’s A1 rating to negative from stable and its assessment of tight political, institutional, economic and financial linkages between Hong Kong and the mainland resulting in a credit rating gap between the two economies which should not be wider than one notch. The outlook also mentioned signs of reduced autonomy of Hong Kong’s political and judicial institutions. Even after the downgrade, Hong Kong’s rating (Aa3) still reflected Moody’s assessment of the SAR’s ‘significant credit strengths, including its wealthy and competitive economy, substantial fiscal and external buffers, and track record of effective monetary and fiscal policy’. These strengths continued to offer a ‘significant degree of resilience’ to shocks and to negative trends such as a rapidly ageing population, the structural slowdown in mainland China’s economy and sustained geopolitical and strategic uncertainty.
The International Monetary Fund, in its latest Article VI consultations (May 2023), forecasted growth of below 3% in the mid-term. The Fund recommended not returning to a balanced budget too quickly as the economy still needs support. Hong Kong was also advised to introduce unemployment benefits, broaden its tax system and increase the housing supply. The IMF praised the city’s high-quality financial sector oversight and substantial buffers and welcomed plans for positive countercyclical capital buffers. Risks to growth relate to global banking stress, monetary policy tightening, a global growth slowdown and to Hong Kong being ‘at the forefront of rising geo-economic fragmentation as a financial gateway to China’. The SAR needed to monitor credit risk and financial stability in the light of exposure to mainland China’s real estate and the remaining impact of the pandemic on Hong Kong firms’ financial situation. Regarding an ongoing debate on the usefulness (and political desirability) of the USD peg, the IMF considered that the Linked Exchange Rate System was still the appropriate arrangement for the territory as an anchor for macro and financial stability. Hong Kong should continue to guarantee the free flow of capital and preserve the rule of law while boosting innovation and strengthening links with the Greater Bay Area and with countries that are members of the Regional Comprehensive Economic Partnership (RCEP).
Business environment
Political developments, including implementation of the National Security Law, freedom of information, data privacy and sanctions, remain a concern for the international business community and affected the perception of Hong Kong as an international business hub.
More pronounced issues cited in the business surveys are the challenges in accessing talent and the economic outlook of Hong Kong. In the meantime, many in the business sector acknowledge that the SAR remains a competitive place for business, thanks to its simple tax system, connectivity and access with mainland China, common law system, free movement of capital and full convertibility of its currency.
The lifting of the COVID-19 restrictions improved the business environment in the SAR. With the reopening of Hong Kong, and of mainland China, businesses were again able to make full use of Hong Kong as a regional hub. However, several sectors of the economy continue to underperform (tourism-related industries for instance). The outflow of talent during the pandemic is also still having an impact on companies’ capacity to hire staff. The strict COVID-19 policies and continued political concerns have eroded the attractiveness and perception of Hong Kong for overseas talent. At the end of 2023, Hong Kong’s labour force was still 4.0% smaller than before the start of the pandemic (equivalent to 160 000 workers), due to a combination of emigration and foreign employees leaving the city.
An annual survey on foreign companies in Hong Kong44 indicated that as of 1 June 2023, the decrease in the number of foreign companies (excluding mainland Chinese companies) had halted (0.0% change in number of companies from June 2022). However, it had stabilised at a level 5.2% lower when compared to June 2019 (pre-COVID level). The number of staff employed by these companies also dropped by 5.2% from June 2019. The number of foreign (non-Chinese) regional headquarters dropped more noticeably (-6.1% year on year and -17.8% compared to 2019), indicating that Hong Kong might be losing relevance as a regional business hub. While non-Chinese foreign companies dropped in the survey, mainland Chinese companies in Hong Kong increased by 3.0% year on year and by 21.0% from 2019.
Attracting talent and companies back to Hong Kong and promoting the SAR to the world was a policy priority during the year. The Office for Attracting Strategic Enterprises (OASES) commenced operations in December 2022, with the mission to attract strategic enterprises to Hong Kong, including in targeted key technologies. On 4 October, it signed an agreement with a first batch of 20 enterprises setting up or expanding their businesses in Hong Kong45. Talent schemes were enhanced and, to attract wealthy individuals, in December 2023 the government reintroduced the Capital Investment Entrant Scheme (CIES) (suspended in 2015). This is an investment-migration scheme that offers a faster route to residency for people who invest at least HK$30 million (EUR 3.5 million) in the stock market or other assets, excluding residential real estate.
In the annual Policy Address on 25 October 2023, the Chief Executive proposed policies to support the growth and recovery of the economy, to further advance integration with the Greater Bay Area (GBA) of economic, financial and people-to-people flows (including visa facilitation for expatriates) and to participate further in the Belt and Road Initiative. Attracting more talent and enterprises to set up a presence in Hong Kong, including headquarters, will remain a priority. For the economy, the Chief Executive announced measures to support the tourism industry and the setting-up of a New Industrialisation Development Office, as well as a HK$10 billion (EUR 1.18 billion) New Industrialisation Acceleration Scheme. Cultural and creative industries will also be further promoted. With regard to the financial industry, the priorities are to improve market liquidity, strengthen mutual access with mainland China’s capital market (including via the ‘connect’ schemes), facilitate the internationalisation of the renminbi and support financial technologies (Fintech) and green finance. The Policy Address also announced an action plan to develop Hong Kong into a leading international maritime centre, promote high value-added maritime services and facilitate GBA maritime collaboration (an action plan on maritime and port development strategy was released in December). New energy transport, decarbonised buildings and recycling will also be promoted.
Developing Hong Kong into an innovation and technology (I&T) centre is another policy objective. In March 2023, China’s Ministry of Science and Technology and the Hong Kong government signed the ‘Mainland and Hong Kong Arrangement on Accelerating the Development of Hong Kong into an International Innovation and Technology Centre’. The aim of the arrangement is to deepen scientific collaboration, share innovation and exchange talent, leveraging Hong Kong’s advantages as an international city. Hong Kong is establishing an artificial intelligence supercomputing centre (the first phase is to be completed in 2024 as per the Policy Address). The Policy Address furthermore announced plans to establish a Hong Kong microelectronics research and development (R&D) institute. The 2023-2024 budget (February 2023) earmarked HK$3 billion (EUR 352 million) to develop international scientific research collaboration and attract leading I&T talent, research teams and enterprises. Construction of the Hong Kong-Shenzhen Innovation and Technology Park (HSITP), on the border with Shenzhen (and geographically located within the Northern Metropolis), continued with Shenzhen. Batch 1 should be completed by 2027.
Works to develop the Northern Metropolis continued. The development zone, which will include residential districts, an I&T zone, a logistics hub and connecting railway infrastructure with the rest of Hong Kong and Shenzhen, will further integrate Hong Kong with the Greater Bay Area. The Northern Metropolis Coordination Office was established in June to formulate and promulgate an action agenda and an implementation plan. Another large development project is the construction of the Kau Yi Chau Artificial Islands (1 000 ha, for new residential and business districts). A public engagement report was released in August.
On green finance, Hong Kong issued additional green bonds during the year under the government green bond programme launched in 2018. The Hong Kong Monetary Authority also launched preparatory work to establish a green taxonomy for Hong Kong, including using the Common Ground Taxonomy (developed jointly by the EU and mainland China) as a reference. Hong Kong also pledged to adopt the international financial reporting standards (IFRS) sustainability disclosure standards.
On 1 June 2023, Hong Kong’s new licensing regime for virtual asset trading platforms came into force, setting out regulatory requirements for licensed virtual asset trading platforms. Under the new regime, centralised virtual asset trading platforms operating in Hong Kong will need to apply for a licence under the Securities and Futures Ordinance and/or the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
Trade policy
Hong Kong has eight free trade agreements (FTAs). These are with mainland China (CEPA, June 2003 and enhanced thereafter), New Zealand (March 2010), the Member States of the European Free Trade Association (EFTA) (June 2011), Chile (September 2012), Macao (October 2017), the Association of Southeast Asian Nations (ASEAN) (November 2017), Georgia (June 2018) and Australia (March 2019). Hong Kong has also signed 23 investment promotion and protection agreements (IPPAs) with foreign economies (including with 10 EU Member States) and negotiations have been concluded (pending signature) with Bahrain, the Maldives and Myanmar.
Hong Kong continues to seek early accession to the Regional Comprehensive Economic Partnership (RCEP). Hong Kong submitted its accession request in January 2022. In January 2023, Hong Kong started negotiations for an FTA with Peru. In October, an IPPA was signed with Türkiye46. IPPAs with Bangladesh, Russia and Saudi Arabia are under negotiation.
In his Policy Address of October 2023, the Chief Executive said that Hong Kong will continue its efforts to join RCEP and would also be holding or participating in 70 related events with RCEP members and stakeholders in 2024. Hong Kong will also be actively seeking to enhance its Closer Economic Partnership Arrangement (CEPA) with mainland China, including by striving for further liberalisation, aiming especially at those sectors where Hong Kong enjoys competitive advantages (such as financial services).
Economic integration with mainland China
On financial integration and mutual access, in May the northbound trading leg of the ‘Swap Connect’ scheme was launched47. It aims to provide a channel for international investors to trade interest rate swap products in the mainland via a connection between infrastructure institutions in Hong Kong and the mainland. The scheme aims to facilitate global investors’ management of interest rate risks arising from their allocation to mainland bonds and increase their participation in the onshore bond market via Hong Kong. In June, Hong Kong Exchanges and Clearing Limited (HKEX) launched the HK$-RMB Dual Counter Model, which offers investors in Hong Kong a choice of trading the shares of a Hong Kong-listed company in either HK$ or renminbi.
In September 2023, regulators in Hong Kong and mainland China announced that the Greater Bay Area ‘Wealth Management Connect’ scheme would be expanded48, including with regard to eligibility criteria, scope, products and quota.
During the year, policy directions and initiatives were issued with regard to developing the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (located in Shenzhen) and enhancing links between Qianhai and Hong Kong. This included facilitating the opening of bank accounts, Hong Kong insurance firms establishing an insurance after-sales service centre in Qianhai, and helping Qianhai enterprises to make use of Hong Kong for fundraising and establishing overseas operations.
With regard to the Greater Bay Area, the Policy Address proposed: (i) a joint investment fund with the Guangdong provincial government to invest in GBA projects; (ii) the promotion of cross-boundary data flows; (iii) logistics clusters in the north of Hong Kong to serve as a logistics gateway to the GBA; and (iv) further bolstering of mutual-access financial cooperation (including with Qianhai and the setting-up of a cooperation committee on financial cooperation with Shenzhen). Hong Kong also sought to extend to the whole GBA (currently only in Qianhai and some free trade zones) options for mainland enterprises to adopt Hong Kong’s law and dispute resolution services by enhancing cross-border cooperation on issues like bankruptcy proceedings. Cross-boundary medical collaboration will be increased (including medical research, healthcare and elderly care).
III. Relations between Hong Kong and mainland China
The Chinese central government underwent a leadership reshuffle in the annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference, known as ‘Two Sessions’, in March. This resulted in a series of personnel changes pertaining to Hong Kong.
Ding Xuexiang, a member of the Politburo Standing Committee of the Communist Party, became a Vice Premier and the Head of the Central Leading Group on Hong Kong and Macao Affairs. Former Chief Executive Tung Chee-hwa stepped down from his position as a Vice-chairperson of the Chinese People’s Political Consultative Conference. Former Chief Executive CY Leung kept his seat as the Vice-chairperson of the same body.
On 11 March, Starry Lee, a lawmaker and a former chairperson of the pro-Beijing political party ‘Democratic Alliance for the Betterment and Progress of Hong Kong’ (DAB), succeeded Tam Yiu-chung as Hong Kong’s sole representative in the Standing Committee of the National People’s Congress.
At the local level, on 14 January Beijing appointed Zheng Yanxiong, the former Director of the Office for Safeguarding National Security of the Central People’s Government in the Hong Kong SAR, as the Director of the Liaison Office of the Central People’s Government in the Hong Kong SAR and the National Security Adviser to the Committee for Safeguarding National Security of the Hong Kong SAR, succeeding Luo Huining. On 18 July, Beijing appointed Dong Jingwei as Head of the Office for Safeguarding National Security in the Hong Kong SAR, succeeding Zheng Yanxiong.
Alongside the personnel changes, Beijing announced on 16 March its plan to elevate the Hong Kong and Macao Affairs Office under the State Council to the Hong Kong and Macao Work Office of the Communist Party of China Central Committee. Between 13 and 18 April, Xia Baolong, the Director of the Hong Kong and Macao Work Office, visited Hong Kong. During his stay, Xia met with senior officials from the executive, legislature and judicial branches of the Hong Kong government as well as representatives from the business, legal, technology and education sectors. Xia also attended the opening ceremony of the city’s National Security Education Day on 15 April. In a speech delivered on 22 December, Xia Baolong laid out his expectations for various sectors of Hong Kong society, including the government, political groups, businesses and ordinary people.
Between 29 October and 5 November, a delegation of 17 judges and judicial officers visited Beijing for an exchange visit that was part of the ongoing professional exchanges between the Hong Kong and mainland judges and judicial officers. Between 19 and 25 November, over 30 officials visited the mainland for the first national studies programme for politically appointed officials of the current administration.
The facilitation of Hong Kong’s integration with mainland China remained a political priority for authorities both in Hong Kong, the Pearl River Delta region and Beijing. On 7 November, the Guangdong provincial government published the ‘Three-Year Action Plan for the Construction of the Digital Greater Bay Area’. The plan seeks to provide comprehensive electronic services in areas such as business start-up and financing services.
Mainland China was Hong Kong’s largest trading partner in goods during the year, accounting for 49.2% of Hong Kong’s total trade. In turn, Hong Kong was an important trading hub for mainland China and ranked as China’s fifth largest trading partner in 2023.
The province of Guangdong remained an important outward-processing base for Hong Kong. The Closer Economic Partnership Arrangement (CEPA) with mainland China (2003) was Hong Kong’s most substantial trade agreement. There was no major amendment to the agreement in 2023. The value of goods re-exported through Hong Kong from and to mainland China accounted for about 85.4% of Hong Kong’s total re-export trade value (2022).
Hong Kong remained mainland China’s key offshore financial centre and investment hub. At the end of 2022, mainland China was Hong Kong’s largest source of inward foreign direct investment, excluding offshore centres, and the first destination for Hong Kong’s outward FDI, accounting for 30% and 49% of total stocks respectively49. In turn, Hong Kong was the largest source of FDI in mainland China, accounting for 55.9% of the total FDI into the mainland (at the end of 2022), and the leading destination for mainland China’s FDI, with 55.9% of the total (at the end of 2022). There were 1 447 mainland enterprises listed in Hong Kong, accounting for 76.5% of the total market capitalisation and 86.5% of the equity turnover.
Hong Kong and mainland China’s capital markets are connected via the ‘Stock Connect’ scheme, linking the Hong Kong Stock Exchange with its counterparts in Shanghai and Shenzhen, and the ‘Bond Connect’ mutual market access scheme for bond markets. This was complemented in September 2021 by the launching of a ‘Wealth Management Connect’ scheme for the GBA, allowing eligible mainland Chinese, Hong Kong and Macao residents to invest in wealth management products distributed by banks in each other’s market. In 2023, the ‘Stock Connect’ schemes were enhanced and the northbound trading leg of the ‘Swap Connect’ scheme was launched.
IV. EU-Hong Kong bilateral relations and cooperation
In 2023, Hong Kong reopened for business and travel following the very restrictive measures in place during the pandemic. This presented new opportunities in terms of physical meetings, events and visitors.
The Head of the EU Office and Member State Consuls-General engaged in regular dialogue with senior officials of the Hong Kong government, including the Chief Executive.
The EU Office, together with the European Chamber of Commerce in Hong Kong (Eurocham), organised the second edition of the ‘Green Way’ event with high-level participation, resulting in recommendations that would allow greater participation of EU industry and standards in support of Hong Kong’s environmental agenda. In addition, public outreach took place on relevant EU policies including the Carbon Border Adjustment Mechanism, the Due Diligence Directive, circularity, the Battery Regulation, green finance, ESG reporting standards, etc.
The EU and Hong Kong continued their dialogue on taxation issues and Hong Kong amended its tax regime with regard to foreign sourced income exemptions. Hong Kong and the EU also agreed on equivalence of the digital COVID certificate.
In 2023, the Hong Kong authorities decided to continue supporting the participation of Hong Kong entities in ‘Horizon Europe’. The Hong Kong Research Grants Council proposed the ‘EU-Hong Kong Research Cooperation Co-funding Mechanism by the Research Grants Council’ to financially support entities based in Hong Kong seeking to join Horizon Europe consortia. Events promoting people-to-people exchanges between the EU and Hong Kong were organised.
The EU remained the largest foreign business community in the city, ahead of Japan, the US and the UK, according to the annual survey on foreign companies by the Hong Kong Census and Statistics Department50. As of June 2023, at least 1 548 EU companies had set up business in Hong Kong. Many of them (797) were using the city as their regional headquarters or regional offices. EU businesses were present in a wide range of sectors, including financial and business services, trading and logistics, retail, food and beverage, and construction. In the survey, the number of EU companies recorded a decrease of 3.4% from their pre-COVID level (June 2019), while the total number of non-Chinese foreign companies dropped by 5.2% in the period. This indicates that EU companies were more resilient to local developments than other foreign business communities. However, EU companies that have cut or relocated some activities and/or staff while remaining in Hong Kong are not reflected in these statistics.
In the first 11 months of 2023, bilateral trade in goods between the EU and Hong Kong amounted to EUR 28.5 billion, an increase of 4.2% on the same period in 2022. EU exports of goods to Hong Kong amounted to EUR 23.4 billion, while imports from Hong Kong totalled EUR 5.1 billion, resulting in a surplus of EUR 18.2 billion for the EU51. The EU was Hong Kong’s third largest trading partner in goods in 2023, after mainland China and Taiwan52. Hong Kong remained an important platform for trade between mainland China and the EU.
The EU was Hong Kong’s third largest trading partner in services (latest available data, Hong Kong statistics)53. In 2022, Hong Kong was the EU’s 10th largest partner for Extra EU imports of services and eighth largest partner for Extra EU exports of services (Eurostat)54. Eurostat data shows that EU trade volumes in services with Hong Kong reached a total of about EUR 41 billion in 2022, with increases in recent years (+8% in 2022, +30% in 2021). The main services traded are transport, telecommunications, financial services and other business services.
The EU was the fifth largest investor in Hong Kong and the second destination for Hong Kong’s foreign direct investment globally. According to Eurostat, Hong Kong was the ninth largest source of FDI stock into the EU in 2022, with EUR 194.5 billion (11.6% higher year on year but down 4.2% from a high in 2019), and the 15th destination of EU FDI stock, with EUR 95.7 billion (3.1% higher year on year but down 42.8% from a record high in 2019)55.
The EU-Hong Kong Policy Dialogue Support Facility continued to provide a platform for discussions on topics such as sustainability and higher education exchanges.
On 18 September, the Commissioner’s Office of the Ministry of Foreign Affairs issued a Note Verbale, requiring foreign diplomatic representations to submit personal information relating to local staff. On 8 December, the government adopted a bill that required foreign diplomatic missions to apply for approval with the Commissioner’s Office of the Ministry of Foreign Affairs to extend land leases.
The EU Office organised the European Union Film Festival 2023, opened by a Ukrainian film. Other events included a photo exhibition marking one year of the Russian war of aggression against Ukraine, an event on the World Press Freedom Day, a panel discussion with civil society representatives on the rights of LGBTI+ people in Hong Kong in the context of the Hong Kong Gay Games and a movie screening with a subsequent discussion to mark International Human Rights Day 2023.
The Council Conclusions of July 2020 on Hong Kong56 mandated the continued observation of the trials of pro-democracy activists. The EU Office and the EU Member States in Hong Kong conducted 122 trial observations in 2023.
1 Post by the High Representative/ Vice-President on the arrest warrant on eight activists, 5 July, available at: https://twitter.com/JosepBorrellF/status/1676663898886361088
2 Statement by the Spokesperson on the changes to the District Council electoral system, 6 July, available at: https://www.eeas.europa.eu/eeas/hong-kong-statement-spokesperson-changes-district-council-electoral-system_en
3 Statement by the Spokesperson on the start of the national security trial against Jimmy Lai, 18 December, available at: https://www.eeas.europa.eu/eeas/hong-kong-statement-spokesperson-start-national-security-trial-against-jimmy-lai_en
4 Post on the sentencing of 4 June vigil organisers for failing to comply with a notice from the national security police, available at: https://twitter.com/NabilaEUspox/status/1634573843116220419
5 Post on the District Council election, available at: https://twitter.com/nabilaEUspox/status/1734134836573479177?s=48&t=DhTwM2QUg9VBLA9NCBIQXw
6 https://www.eeas.europa.eu/node/425784_fr
7 https://www.europarl.europa.eu/doceo/document/TA-9-2023-0242_EN.html
8 https://www.censtatd.gov.hk/en/web_table.html?id=81 (adding up EU MS).
9 Article 23 of the Hong Kong Basic Law requires the Hong Kong Special Administrative Region to enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organisations or bodies from conducting political activities in the Region, and to prohibit political organisations or bodies of the Region from establishing ties with foreign political organisations or bodies. The last attempt at drafting Art. 23 legislation in 2003 triggered widespread public protests, leading to the halt of the legislative project.
10 The Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region outlaws secession, subversion, terrorist activities and collusion with a foreign country or with external elements to endanger national security.
11 https://www.ohchr.org/sites/default/files/documents/issues/detention-wg/opinions/session96/A-HRC-WGAD-2023-30-AEV.pdf
12 https://rsf.org/en/more-100-media-leaders-around-world-join-rsf-calling-release-hong-kong-press-freedom-emblem-jimmy
13https://www.doughtystreet.co.uk/sites/default/files/media/document/Lai%20Petition%20%28Final%29%20%2801.11.2023%29.pdf
14 https://worldjusticeproject.org/rule-of-law-index/global
15 https://tbinternet.ohchr.org/_layouts/15/treatybodyexternal/Download.aspx?symbolno=E%2FC.12%2FCHN%2FCO%2F3&Lang=en
16 https://tbinternet.ohchr.org/_layouts/15/treatybodyexternal/Download.aspx?symbolno=E%2FC.12%2FCHN%2FCO%2F3&Lang=en
17 https://spcommreports.ohchr.org/TMResultsBase/DownLoadPublicCommunicationFile?gId=27848
18 https://spcommreports.ohchr.org/TMResultsBase/DownLoadPublicCommunicationFile?gId=27992
19 https://spcommreports.ohchr.org/TMResultsBase/DownLoadPublicCommunicationFile?gId=28178
20 https://spcommreports.ohchr.org/TMResultsBase/DownLoadPublicCommunicationFile?gId=28323
21 https://www.ohchr.org/en/press-releases/2023/10/chinahong-kong-sar-un-experts-concerned-about-ongoing-trials-and-arrest
22 https://www.cato.org/sites/cato.org/files/2023-12/human-freedom-index-2023-county-profiles.pdf
23 https://www.eiu.com/n/campaigns/democracy-index-2022/
24 https://www.v-dem.net/publications/democracy-reports/
25 https://rsf.org/en/index
26 https://www.fcchk.org/statement-on-results-of-fccs-press-freedom-survey/
27 https://www.hkja.org.hk/en/press-release/hong-kongs-press-freedom-index-hits-new-low-with-most-hesitation-in-criticising-the-central-government/
28 https://twitter.com/UNHumanRights/status/1665415438514176002
29 https://academic-freedom-index.net/#:~:text=The%20AFI%20assesses%20de%20facto,and%20the%20V%2DDem%20Institute
30 World Trade Statistical Review 2023 by the World Trade Organization https://www.wto.org/english/res_e/publications_e/wtsr_2023_e.htm
31 World Investment Report 2023 by the United Nations Conference on Trade and Development
https://unctad.org/system/files/official-document/wir2023_en.pdfs
32 Ratio calculated using GDP and external trade statistics (10-month 2023) from the Census and Statistics Department of the Hong Kong Special Administrative Region
https://www.censtatd.gov.hk/en/scode250.html
https://www.censtatd.gov.hk/en/scode230.html
33 World Investment Report 2023 by the United Nations Conference on Trade and Development https://unctad.org/system/files/official-document/wir2023_en.pdf
34 The Census and Statistics Department of the Hong Kong Special Administrative Region:
https://www.censtatd.gov.hk/en/scode150.html
35 Advance estimates on gross domestic product for 2023, January 2024, the Census and Statistics Department of the Hong Kong Special Administrative Region
https://www.censtatd.gov.hk/en/press_release_detail.html?id=5380
36 The Census and Statistics Department of the Hong Kong Special Administrative Region https://www.censtatd.gov.hk/en/press_release_detail.html?id=5378
37 The Census and Statistics Department of the Hong Kong Special Administrative Region:
https://www.censtatd.gov.hk/en/scode200.html
38 Chain volume measures of GDP by economic activity - in chained (2021) dollars, the Census and Statistics Department of the Hong Kong Special Administrative Region https://www.censtatd.gov.hk/en/web_table.html?id=310-34501
39 Exchange rate dated from December 2022 of EUR 1 = HK$8.0965.
40 The Census and Statistics Department of the Hong Kong Special Administrative Region
https://www.censtatd.gov.hk/en/scode230.html
41 Market statistics, website of Hong Kong Exchange and Clearing Limited
https://www.hkex.com.hk/Market-Data/Statistics/Consolidated-Reports/HKEX-Monthly-Market-Highlights?sc_lang=en
42 Visitor Arrivals to Hong Kong; Hong Kong Tourism Board https://partnernet.hktb.com/en/research_statistics/latest_statistics/index.html
43 Air Traffic Statistics, Civil Aviation Department
https://www.cad.gov.hk/english/statistics.html
44 Report on 2023 Annual Survey of Companies in Hong Kong with Parent Companies Located outside Hong Kong, the Census and Statistics Department of the Hong Kong Special Administrative Region https://www.censtatd.gov.hk/en/EIndexbySubject.html?pcode=B1110004&scode=360
45 Press release by the Government of the Hong Kong Special Administrative Region: https://www.news.gov.hk/eng/2023/10/20231004/20231004_173732_399.html
46 Press release by the Government of the Hong Kong Special Administrative Region: https://www.info.gov.hk/gia/general/202310/31/P2023103100544.htm
47 Press release by the Hong Kong Monetary Authority:
https://www.hkma.gov.hk/eng/news-and-media/press-releases/2023/05/20230515-3/
48 Press release by the Hong Kong Monetary Authority:
https://www.hkma.gov.hk/eng/news-and-media/press-releases/2023/09/20230928-4/
49 Statistical report on External Direct Investment Statistics of Hong Kong (2021 Edition), 8 December 2023: available at https://www.censtatd.gov.hk/en/EIndexbySubject.html?pcode=B1040003&scode=260
50 Report on Annual Survey of Companies in Hong Kong with Parent Companies Located outside Hong Kong, 2023 edition, the Census and Statistics Department of Hong Kong Special Administrative Region, available at: https://www.censtatd.gov.hk/en/EIndexbySubject.html?pcode=B1110004&scode=360
51 Source: Eurostat: European Union trade in goods
https://ec.europa.eu/eurostat/comext/newxtweb/
52 Census and Statistics Department of the Hong Kong Special Administrative Region: https://www.censtatd.gov.hk/en/scode230.html#section4.
53 The Census and Statistics Department of the Hong Kong Special Administrative Region:
https://www.censtatd.gov.hk/en/EIndexbySubject.html?pcode=B1020011&scode=240
54 Eurostat: European Union trade in services
https://ec.europa.eu/eurostat/data/database and https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240130-1
55 Source: Eurostat: European Union foreign investment statistics https://ec.europa.eu/eurostat/databrowser/view/bop_fdi6_geo/default/table?lang=en
56 https://www.consilium.europa.eu/media/45222/council-conclusions-on-hong-kong.pdf.
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