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Diplomacy in Action

Hong Kong (01/06)


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For the most current version of this Note, see Background Notes A-Z.

Flag of Hong Kong is red with a stylized, white, five-petal bauhinia flower in the center.

PROFILE

OFFICIAL NAME:
Hong Kong Special Administrative Region

Geography
Area: 1,100 sq. km.; Hong Kong comprises Hong Kong Island, Kowloon, the New Territories, and numerous small islands.
Terrain: Hilly to mountainous, with steep slopes and natural harbor.
Climate: Tropical monsoon. Cool and humid in winter, hot and rainy from spring through summer, warm and sunny in fall.

People
Population (2004): 6.9 million.
Population growth rate (2004): 1.0%.
Ethnic groups: Chinese 95%; other 5%.
Religions: About 43% participate in some form of religious practice. Christian, about 9.6%.
Languages: Cantonese (a dialect of Chinese) and English are official.
Education: Literacy--92% (95% male, 88% female).
Health (2004): Infant mortality rate--2.7/1,000. Life expectancy--81.9 yrs. (overall); 79.0 yrs. males, 84.7 yrs. females.
Work force (2004): 3.5 million. Wholesale, retail, and import/export trades and restaurants and hotels--28.4%; finance, insurance, real estate, and business services--12.7%; manufacturing--4.7%.

Government
Type: Special Administrative Region (SAR) of China, with its own constitution (the Basic Law).
Branches: Executive--Administration (Chief Executive Selection in June 2005), Executive Council, serving in an advisory role for the Chief Executive. Legislative--Legislative Council elected in September 2004. Judicial--Court of Final Appeal is highest court, other lower courts.
Subdivisions: Hong Kong, Kowloon, New Territories.
Suffrage: Permanent residents, at 18 years or over, living in Hong Kong for the past 7 years are eligible to vote.

Economy (2004)
GDP (2004): $165.5 billion.
GDP real growth rate (2004): 8.2%.
Per capita GDP (2004): $24,045.
Natural resources: Outstanding deepwater harbor.
Industry: Types--textiles, clothing, electronics, plastics, toys, watches, clocks.
Trade: Exports--$259 billion: clothing, electronics, textiles, watches and clocks, office machinery. Imports--$271 billion: consumer goods, raw materials and semi-manufactures, capital goods, foodstuffs, fuels.

PEOPLE
Hong Kong's population has increased steadily over the past decade, reaching about 6.9 million by 2004. Hong Kong is one of the most densely populated areas in the world, with an overall density of some 6,380 people per square kilometer. Cantonese, the official Chinese language in Hong Kong, is spoken by most of the population. English, also an official language, is widely understood. It is spoken by more than one-third of the population. Every major religion is practiced freely in Hong Kong. All children are required by law to be in full-time education between the ages of 6 and 15. Preschool education for most children begins at age 3. Primary school begins normally at the age of 6 and lasts for 6 years. At about age 12, children progress to a 3-year course of junior secondary education. Most stay on for a 2-year senior secondary course, while others join full-time vocational training. More than 90% of children complete upper secondary education or equivalent vocational education.

HISTORY
According to archaeological studies initiated in the 1920s, human activity on Hong Kong dates back over five millennia. Excavated neolithic artifacts suggest an influence from northern Chinese stone-age cultures. The territory was settled by Han Chinese during the seventh century, A.D., evidenced by the discovery of an ancient tomb at Lei Cheung Uk in Kowloon. The first major migration from northern China to Hong Kong occurred during the Sung Dynasty (960-1279). The British East India Company made the first successful sea venture to China in 1699, and Hong Kong's trade with British merchants developed rapidly soon after. After the Chinese defeat in the First Opium War (1839-42), Hong Kong was ceded to Britain in 1842 under the Treaty of Nanking. Britain was granted a perpetual lease on the Kowloon Peninsula under the 1860 Convention of Beijing, which formally ended hostilities in the Second Opium War (1856-58). The United Kingdom, concerned that Hong Kong could not be defended unless surrounding areas also were under British control, executed a 99-year lease of the New Territories in 1898, significantly expanding the size of the Hong Kong colony.

In the late 19th century and early 20th centuries, Hong Kong developed as a warehousing and distribution center for U.K. trade with southern China. After the end of World War II and the communist takeover of Mainland China in 1949, hundreds of thousands of people fled from China to Hong Kong. Hong Kong became an economic success and a manufacturing, commercial, finance, and tourism center. High life expectancy, literacy, per capita income, and other socioeconomic measures attest to Hong Kong's achievements over the last five decades.

GOVERNMENT
The Hong Kong Special Administrative Region (SAR) is headed by Chief Executive Donald Tsang, who officially took office on June 21, 2005 after China's State Council announced its approval. Former Chief Executive Tung Chee Hwa tendered his resignation on March 12, 2005, citing ill health. Mr. Tung has since been confirmed as a vice-chairman of the National People's Political Consultative Conference. The selection process for a new Chief Executive concluded on June 15, 2005 when Tsang garnered 710 of the 800 nomination votes from the Election Committee, preventing any other candidate from garnering the minimum 100 votes needed to become an official candidate. Although pro-democratic groups argued for a full five-year term for the new Chief Executive, as outlined in the Basic Law, Mr. Tsang will simply complete the remaining two years in Mr. Tung's term. Mr. Tung was the first Chief Executive of Hong Kong and began his second five-year term on July 1, 2002, after his nomination by a selection committee established by the Basic Law. The selection committee is made up of 800 Hong Kong residents from four constituency groups: commercial, industrial, and financial interests; professionals; labor, social services, and religious interests; and the legislature, the Chinese People's Political Consultative Conference, and the P.R.C. National People's Congress.

The 2004 Legislative Council elections were seen as generally free, open, and widely contested, though there were allegations of voter intimidation. The Hong Kong Government and the Legislative Council are currently engaged in a public consultation process intended to lead to changes in the mechanism for choosing the Chief Executive and forming the Legislative Council and move toward the "ultimate aim" of universal suffrage as prescribed by the Basic Law. In April 2004, the P.R.C. National People's Congress Standing Committee issued a decision on the scope and pace of constitutional reform, which laid out certain conditions for the process of democratic development. This decision precluded major changes to the electoral systems for the 2007 Chief Executive and 2008 Legislative Council elections. In December 2005 the Legislative Council rejected a Hong Kong Government-proposed package of incremental reforms to the mechanisms for choosing the Chief Executive in 2007 and forming the Legislative Council in 2008. The Hong Kong Government also implemented the Principal Officials Accountability System in July 2002, which was designed to make the government more responsive to public concerns. Eleven political appointees, directly responsible to the Chief Executive, to run the 11 policy bureaus were added. Three other senior civil service positions--the Chief Secretary, Financial Secretary, and Justice Secretary--also were converted to political appointments, although without a change in personnel.

Principal Government Officials
Chief Executive--Donald Tsang
Chief Secretary--Rafael Hui
Financial Secretary--Henry Tang
Secretary for Justice--Wong Yan-long
Secretary for Security--Ambrose Lee
Secretary for Commerce, Industry and Technology--John Tsang
Secretary for Housing, Planning and Lands--Michael Suen
Secretary for Education and Manpower--Arthur Li
Secretary for Health, Welfare and Food--Dr. York Chow
Secretary for the Civil Service--Joseph Wong
Secretary for Home Affairs--Patrick Ho
Secretary for Economic Development and Labor--Stephen Ip
Secretary for the Environment, Transport and Works--Sarah Liao
Secretary for Financial Services and the Treasury--Frederick Ma
Secretary for Constitutional Affairs--Stephen Lam

POLITICAL CONDITIONS
On July 1, 1997, China resumed the exercise of sovereignty over Hong Kong, ending more than 150 years of British colonial rule. Hong Kong is a Special Administrative Region of the People's Republic of China with a high degree of autonomy in all matters except foreign and defense affairs. According to the Sino-British Joint Declaration (1984) and the Basic Law, Hong Kong will retain its political, economic, and judicial systems and unique way of life for 50 years after reversion and will continue to participate in international agreements and organizations under the name, "Hong Kong, China." In the past year and a half, China has taken on a more active role in overseeing the Hong Kong Government's management of political developments in the Special Administrative Region. While Hong Kong remains a free and open society where human rights are respected, courts are independent, and there is well-established respect for the rule of law, Hong Kong groups have alleged manipulation or pressure in connection with the September 12, 2004 Legislative Council election. The Hong Kong Government has promised to investigate thoroughly all such allegations. On June 21, 2005, Chief Executive Donald Tsang was sworn in to complete the remaining two years of former Chief Executive Tung Chee Hwa's term. Tsang won 710 of the 800 nomination votes from the Election Committee. As a result, no other candidate was able to garner the minimum 100 votes needed to become eligible to run for Chief Executive.

ECONOMY
Hong Kong is one of the world's most open and dynamic economies. Hong Kong per capita GDP is comparable to other developed countries. Real GDP expanded by 8.2% in 2004 year-on-year, driven by thriving exports, vibrant inbound tourism and strong pick up of consumer spending. While severe acute respiratory syndrome (SARS) caused the Hong Kong economy to shrink during the first half of 2003, second quarter real GDP expanded by 3.2% year-on-year. Hong Kong experienced deflation from November 1998 until July 2004, when inflation reappeared at a 0.9% rate, measured year-on-year. A slack property market has also contributed significantly to deflation. By mid-2003, property prices had fallen 66% from their late 1997 peak, but have since rebounded by about 58% from that lower base. The Hong Kong Government has generally resisted pressure for large-scale public expenditures to stimulate the economy due to growing public policy concerns with the government budget deficit. The surplus for fiscal year 2004-05 was $2.7 billion or 1.7% of GDP, attributed to the sales of government bonds and notes.

Hong Kong enjoys a number of economic strengths, including accumulated public and private wealth from decades of unprecedented growth, a sound banking system, virtually no public debt, a strong legal system, and an able and rigorously enforced anti-corruption regime. The need for economic restructuring poses difficult challenges and choices for the government. Hong Kong is endeavoring to improve its attractiveness as a commercial and trading center, especially after China's entry into the WTO, and continues to refine its financial architecture. The government is deepening its economic interaction with the Pearl River Delta in an effort to maintain Hong Kong's position as a gateway to China. These efforts include the conclusion of a free trade agreement with China, the Closer Economic Partnership Arrangement (CEPA), which applies zero tariffs to all Hong Kong-origin goods and preferential treatment in 27 service sectors. Hong Kong, along with the Macau SAR, is also participating in a new pan-Pearl River Delta trade block with nine Chinese provinces, which aims to lower trade barriers among members, standardize regulations, and improve infrastructure. U.S. companies have a generally favorable view of Hong Kong's business environment, including its legal system and the free flow of information, low taxation, and infrastructure. The American Chamber of Commerce's annual business confidence survey, released in December 2005, showed 98% of respondents had a "good" or "satisfactory" outlook for 2006. Survey results indicated a positive economic outlook through 2008.

On the international front, Hong Kong is a separate and active member of the World Trade Organization (WTO) and the Asia Pacific Economic Cooperation (APEC) forum, where it is an articulate and effective champion of free markets and the reduction of trade barriers. Hong Kong residents across the political spectrum supported China's accession to the WTO, believing this would open new opportunities on the Mainland for local firms and stabilize relations between Hong Kong's two most important trade and investment partners, the United States and China.

FOREIGN RELATIONS
Hong Kong's foreign relations and defense are the responsibility of China. Hong Kong is an independent customs territory and economic entity separate from the rest of China and is able to enter into international agreements on its own behalf in commercial and economic matters. Hong Kong, independently of China, participates as a full member of numerous international economic organizations including the World Trade Organization (WTO), the Asia Pacific Economic Cooperation forum (APEC), and the Financial Action Task Force (FATF).

U.S.-HONG KONG RELATIONS
U.S. policy toward Hong Kong, grounded in a determination to promote Hong Kong's prosperity, autonomy, and way of life, is stated in the U.S.-Hong Kong Policy Act of 1992. The United States maintains substantial economic and political interests in Hong Kong. The United States supports Hong Kong's autonomy by concluding and implementing bilateral agreements; promoting trade and investment; arranging high-level visits; broadening law enforcement cooperation; bolstering educational, academic, and cultural links; and supporting the large community of U.S. citizens and visitors.

Hong Kong is an active member of the global coalition against terrorism. Hong Kong has joined the Container Security Initiative and remains an important partner with regard to eliminating funding for terrorist networks and combating money laundering. Hong Kong has passed legislation designed to bring Hong Kong into compliance with applicable UN anti-terror resolutions and Financial Action Task Force recommendations.

The United States has substantial economic and social ties with Hong Kong. There are some 1,100 U.S. firms, including 868 regional operations (262 regional headquarters and 606 regional offices), and about 54,000 American residents in Hong Kong. According to U.S. Government statistics, U.S. exports to Hong Kong totaled $15.8 billion in 2004. U.S. direct investment in Hong Kong at the end of 2004 totaled about $43.7 billion, making the United States one of Hong Kong's largest investors, along with China, Japan, and the Netherlands.

The United States and Hong Kong signed a new civil aviation agreement in October 2002, which significantly liberalized the aviation market. Hong Kong enjoys a high degree of autonomy as a separate customs territory, with no changes to borders, staffing, or technology export controls since the 1997 handover. Intellectual property rights (IPR) protection has improved substantially in recent years and the introduction of effective new legislation to control illicit production and improved enforcement has now made Hong Kong a regional model for effective IPR protection. The Office of the U.S. Trade Representative and other U.S. agencies now regularly cite Hong Kong as an example for others.

The Hong Kong Government maintains three Economic and Trade Offices in the United States. Addresses, telephone numbers, and web sites for these offices are listed below:

1520 - 18th Street NW
Washington, DC 20036
Tel: (202) 331-8947
Fax: (202) 331-8958
Web Site: http://www.hketowashington.gov.hk/dc/index.htm

115 East 54th Street
New York, NY 10022
Tel: (212) 752-3320
Fax: (212) 752-3395
Web Site: http://www.hketony.gov.hk/ny/index.htm

130 Montgomery Street
San Francisco, CA 94104
Tel: (415) 835-9300
Fax: (415) 421-0646
Web Site: http://www.hketosf.gov.hk/sf/index.htm

Principal U.S. Officials
Consul General--James B. Cunningham
Deputy Principal Officer--Marlene Sakaue

The U.S. Consulate General is located at 26 Garden Road, Hong Kong. Tel: (852) 2523-9011 (general). Fax: (852) 2845-1598 (general); (852) 2147-5790 (consular); (852) 2845-9800 (commercial).



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