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China Supports Hong Kong's Future Autonomy

by Mary Swire,, Hong Kong

13 June 2014

A White Paper issued by the Chinese Government on June 10 has confirmed the Government's continued support for Hong Kong's autonomy to set its own trade, financial and taxation policies, noting the territory's successes under the 'One Country, Two Systems' policy.

Under the title, "The Practice of the 'One Country, Two Systems' Policy in the Hong Kong Special Administrative Region (HKSAR)," the White Paper, the first of its kind, describes how the implementation of the principle of "one country, two systems" in the HKSAR has achieved widely recognized success and remains in the long-term interests of Hong Kong and of foreign investors.

It confirms how Hong Kong has maintained and enhanced its status as an international financial, trade, and shipping center. As an important international banking center, it says, "Hong Kong boasts the world's sixth-largest securities market and [the] fifth-largest foreign exchange market. As the world's ninth-largest trading economy, Hong Kong has regular trading ties with almost every country and region in the world. It is one of the world's largest container shipping ports and fourth-largest ship-registration center."

It is also pointed out that Hong Kong has maintained a sound business environment, and is generally recognized as one of the world's freest economies. In its World Investment Report 2013, the United Nations Conference on Trade and Development ranked Hong Kong third in the world in attracting foreign direct investment, and, for many years, Hong Kong has been listed among the world's most competitive economies.

It notes China's support for Hong Kong as an international financial center, in particular through the internationalization of the renminbi, which has consolidated Hong Kong's position as the world's largest offshore RMB trading center.

In addition, after the signing of the Closer Economic Partnership Arrangement (CEPA) between the Mainland and Hong Kong in 2003, and its ten supplementary agreements, the Mainland now gives zero tariff treatment to all products of Hong Kong origin, and has adopted more than 400 liberalization measures in respect of trade in services. Following implementation of the CEPA, the Mainland is also the largest trading partner of Hong Kong, and Hong Kong is the Mainland's most important trading partner, as well as a key export market and the Mainland's largest offshore financial center.

By the end of 2013, the number of Mainland enterprises listed in Hong Kong totaled almost 800, accounting for 48.5 percent of the total number of Hong Kong-listed companies. In addition, their total market value accounted for 56.9 percent of the total value of the Hong Kong stock market. The Mainland and Hong Kong are each other's largest source of overseas direct investment.

For its part, the Hong Kong Government welcomed the promulgation of the White Paper - the first to be issued by China on Hong Kong's position. It confirmed that "Hong Kong has benefited from the unique advantages of 'One Country, Two Systems' and attained remarkable achievements in economic and social development."

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TAGS: tax | investment | business | accounting | banking | equity investment | international financial centres (IFC) | tariffs | trade treaty | China | offshore | agreements | stock exchanges | Hong Kong | currency | trade | services | Investment | Invest | Investment

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