U.S. and Hong Kong (2004)

HONG KONG

COUNTRY COMMERCIAL GUIDE

Including Macau

Fiscal Year 2005

U.S. COMMERCIAL SERVICE
AMERICAN CONSULATE GENERAL, HONG KONG
JULY 2004

This Country Commercial Guide (CCG) presents a comprehensive look at Hong Kong's and Macau's commercial environment using economic, political and market analyses. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. CCGs are prepared annually at U.S. embassies and consulates through the combined efforts of several U.S. Government agencies.

U.S. exporters seeking general export information and assistance, or country-specific commercial information, should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's Trade Information Center at (800) USA-TRADE, or go to one of the following web sites: www.export.gov or www.buyusa.com.

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY

2. ECONOMIC TRENDS AND OUTLOOK

A. Major Trends and Outlook
B. Principal Growth Sectors
C. Government Role in the Economy
D. Balance of Payments Situation
E. Infrastructure Situation
F. Macau Economic Scene
G. Pearl River Delta - Hong Kong's Hinterland

3. POLITICAL ENVIRONMENT

A. Nature of Political Relationship with the United States
B. Major Political Issues Affecting the Business Climate
C. Brief Synopsis of the Political System, Schedule for Elections, and Orientation of Major Political Parties
D. Macau Political Scene

4. MARKETING U.S. PRODUCTS AND SERVICES

A. Distribution and Sales Channels
B. Use of Agents/Distributors/Finding a Partner
C. Franchising
D. Direct Sales
E. Joint Ventures/Licensing
F. Steps to Establishing an Office
G. Selling Factors/Techniques
H. Advertising and Trade Promotion
I. Pricing Product
J. Sales Service/Customer Support
K. Selling to the Government
L. Protecting Your Product from IPR Infringement
M. Need for a Local Attorney

5. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

A. Best Prospects for Non-Agricultural Goods and Services
B. Best Prospects for Agricultural Products
6. TRADE REGULATIONS
A. Overview
B. Standards
C. Conformity Assessment
D. Product Certification
E. Accreditation
F. Technical Regulations
G. Export Controls
H. Labeling/Marking
I. Contact Information

7. INVESTMENT CLIMATE STATEMENT

HONG KONG
A. Openness to Foreign Investment
B. Conversion and Transfer Policies
C. Expropriation and Compensation
D. Dispute Settlement
E. Performance Requirements/Incentives
F. Right to Private Ownership and Establishment
G. Protection of Property Rights
H. Transparency of the Regulatory System
I. Efficient Capital Markets and Portfolio Investment
J. Political Violence
K. Corruption
L. Bilateral Investment Agreements
M. OPIC and Other Investment Insurance Programs
N. Labor
O. Foreign Trade Zones/Free Ports
P. Foreign Direct Investment Statistics
MACAU
A. Openness to Foreign Investment
B. Conversion and Transfer Policies
C. Expropriation and Compensation
D. Dispute Settlement
E. Performance Requirements/Incentives
F. Right to Private Ownership and Establishment
G. Protection of Property Rights
H. Transparency of the Regulatory System
I. Efficient Capital Markets and Portfolio Investment
J. Political Violence
K. Corruption
L. Bilateral Investment Agreements
M. OPIC and Other Investment Insurance Programs
N. Labor
O. Foreign Trade Zones/Free Ports
P. Foreign Direct Investment Statistics

8. TRADE AND PROJECT FINANCING

A. Banking System
B. Foreign Exchange Controls Affecting Trading
C. General Availability of Financing
D. How to Finance Exports/Methods of Payment
E. Types of Available Export Financing and Insurance
F. Availability of Project Financing/OPIC and Eximbank Project Finance/Lending from Multilateral Institutions
G. List of Banks with Correspondent U.S. Banking Arrangements
H. The Asian Development Bank

9. BUSINESS TRAVEL

A. Business Customs
B. Travel Advisory and Visas
C. Holidays
D. Business Infrastructure
E. Temporary Entry of Goods

10. ECONOMIC AND TRADE STATISTICS

APPENDIX A -- COUNTRY DATA
a. Population
b. Population Growth Rate
c. Religion(s)
d. Government System
e. Language(s)
f. Workweek
APPENDIX B -- DOMESTIC ECONOMY
a. GDP
b. Real GDP Growth
c. GDP Per Capita
d. Government Spending as a percent of GDP
e. Inflation
f. Unemployment
g. Foreign Exchange Reserves
h. Average Exchange Rate for US$1.00
i. Debt Service Ratio
j. U.S. Military/Economic Assistance
APPENDIX C -- TRADE STATISTICS
a. Total Hong Kong Exports
b. Total Hong Kong Imports
c. U.S. Exports
d. U.S. Imports

11. U.S. AND HONG KONG CONTACTS

A. U.S. Consulate General Trade-Related Contacts
B. American Chamber of Commerce and U.S. China Business Council
C. Hong Kong Trade and Industry Associations in Key Sectors
D. Hong Kong Government Offices Relating to Key Sectors and Significant Trade Related Activities
E. Hong Kong Market Research Firms
F. Licensed U.S. Commercial Banks in Hong Kong
G. TPCC Trade Information Center in Washington
H. U.S. Department of Agriculture and U.S. Market Development Cooperator Organizations Represented in Hong Kong

12. MARKET RESEARCH

A. Market Research Reports Prepared by Commercial Service
B. Reports Prepared by FAS

13. TRADE EVENT SCHEDULE

A. Trade Events with Commercial Service Involvement
B. Trade Events Schedule

CHAPTER 1 EXECUTIVE SUMMARY

July 1, 2004 marked the seventh anniversary of Hong Kong's reversion to Chinese sovereignty after 156 years of British rule. The Sino-British Joint Declaration, signed in 1984, and the Basic Law, passed by China's National People's Congress in 1990, form the legal basis for China's "One Country, Two Systems" formula for governance of the Hong Kong Special Administrative Region (SAR) of China. Hong Kong, under Chinese sovereignty, has remained one of the freest economies in the world. Article 12 of the Basic Law states that the Hong Kong Special Administrative Region (SAR) shall enjoy a high degree of autonomy. The central government in Beijing is responsible for foreign and defense policy issues related to the Hong Kong SAR. Hong Kong continues to conduct its affairs with a high degree of autonomy across a broad range of activities.

The economic road since the landmark 1997 handover to China has not been smooth, although Hong Kong's economy has been improving steadily since mid-2003. Coincident with the handover was the start of the Asian financial and economic crisis in 1997-98 and Hong Kong's economy suffered with the rest of east and Southeast Asia. Despite a growth burst in 2000/01, Hong Kong's economy was sluggish, following world economic trends, until mid-2003. While the GDP growth rate in 2003 was 3.0 percent, in the second half growth was much higher, compensating for contraction in the second quarter related to the outbreak of the Severe Acute Respiratory Syndrome (SARS) in March 2003. Consumer confidence is returning to Hong Kong, in tandem with the recovery in the United States. Retail sales grew by double digits in the first half of 2004. While much of this growth was a result of increased mainland tourists, consumer durables and automobile sales, up 8.4 percent and 9.4 percent respectively during the first four months of 2004, showed that local consumers were purchasing more. The central government has taken some measures to promote prosperity. At the beginning of 2004, a free trade agreement, the Closer Economic Partnership Arrangement (CEPA) went into effect, liberalizing trade in 373 product and 18 service sectors. The People's Republic of China government has relaxed requirements for individual travel to Hong Kong by residents of Beijing, Shanghai, Guangdong Province and the three largest cities of three other coastal provinces. Visitors from China increased by more than a third in the second half of 2003, boosting the tourism, retail, restaurant, and entertainment sectors. In February 2004, Hong Kong banks also began handling deposit, exchange, remittance, and credit card renminbi services. Recent economic growth contributed to a fall in the unemployment rate, from 8.3 percent in mid-2003, to 7.0 percent in July 2004. Regional economists predict 2004 growth in the range of 6.0 percent and 2005 growth of about 4.5 percent.

The Hong Kong economy depends on trade. Trade in 2003 was 2.9 times Hong Kong's GDP, an indication that Hong Kong remains one of the freest economies in the world. A service-based economy, Hong Kong enjoyed a US$20.7 billion services trade surplus in 2003, versus a US$8.1 billion merchandise trade deficit. The United States is Hong Kong's second-largest trading partner, and Hong Kong is the United States' thirteenth-largest market for exports. According to U.S. government statistics, U.S. goods exports to Hong Kong were US$13.5 billion in 2003, while U.S. goods imports from Hong Kong were US$8.9 billion. U.S. exports of commercial services to Hong Kong were US$3.4 billion in 2002 (latest data available) and U.S. imports of commercial services from Hong Kong were US$3.7 billion. Sales of services in Hong Kong by majority U.S.-owned affiliates were US$7.8 billion in 2001 (latest data available), while sales of services in the United States by majority Hong Kong-owned firms were US$1.2 billion.

Hong Kong remains committed to the keys to its economic success - its free-market philosophy, entrepreneurial drive, absence of trade barriers, well-established rule of law, low and predictable taxes, transparent regulations, free flow of information, and complete freedom of capital movement. In the fall of 2003, due to significant popular opposition, the government postponed indefinitely its proposal to enact new national security legislation under Article 23 of Hong Kong's Basic Law.

American business presence in Hong Kong is formidable and demonstrates the attraction of doing business in Hong Kong. There are over 1,100 U.S. firms in Hong Kong, including more than 600 regional operations. There are about 50,000 American citizens residing in Hong Kong. According to U.S. government statistics, U.S. direct investment in Hong Kong totaled US$35.8 billion by year-end 2002 (based on historical costs), making the United States one of Hong Kong's largest investors, along with the United Kingdom, China, and Japan.

Since China's accession to the World Trade Organization (WTO) Hong Kong has been well positioned to play a productive role for U.S. firms wishing to expand exports to one of the world's fastest-growing markets. Hong Kong is a trading hub for China and the region. Its trading firms are experts at promoting U.S. products and services in China. Similarities in linguistic and cultural traditions have enabled Hong Kong traders to maximize opportunities for U.S. firms, and in particular for small and medium-sized enterprises and first-time exporters. CEPA has the potential to further strengthen Hong Kong's position as the leading gateway to the China market.

With a per-capita GDP of about US$23,300 and as the gateway port for China's richest Southern region, Hong Kong's market offers outstanding prospects for a full range of U.S. products and services. The Hong Kong government's focus on the environment and its continued spending on infrastructure projects also provide opportunities for U.S. firms. Other attractive sectors for U.S. firms include the medical and pharmaceutical sectors, information technology and telecommunication products, high-value food and consumer goods, and safety products.

CHAPTER 2 ECONOMIC TRENDS AND OUTLOOK

A. Major Trends and Outlook

Hong Kong is experiencing robust economic growth after six years of weak macroeconomic conditions and substantial deflation. While the overall GDP growth rate in 2003 was 3.0 percent, in the second half growth was 4.4 percent, compensating for contraction in the second quarter as a result of the outbreak of the Severe Acute Respiratory Syndrome (SARS) in March 2003. Consumer confidence has returned to Hong Kong, rising five percent year on year in the first quarter. Gross domestic fixed capital formation grew 5.8 percent year on year in the first quarter, up from 1.9 percent in the last quarter of 2003. Investment was largely spurred on by spending on machinery, equipment, and computer software, which jumped almost 16 percent year-on-year in 2004's first quarter. The central government has contributed measures to promote prosperity. At the beginning of 2004, a free trade agreement, the Closer Economic Partnership Arrangement (CEPA) went into effect, liberalizing trade in 373 product and 18 service sectors. The mainland government has significantly relaxed requirements for individual travel to Hong Kong for residents of Beijing, Shanghai, Guangdong Provinces and the three largest cities of three other coastal provinces. Visitors from China increased by more than a third in the second half of 2003, boosting the tourism, retail, restaurant, and entertainment sectors. In February 2004, Hong Kong banks also began handling deposit, exchange, remittance, and credit card renminbi services. Recent economic growth caused the unemployment rate, 8.3 percent in mid-2003, to fall to 7.1 percent in April 2004. Regional economists predict 2004 growth of 6.0 percent and 2005 growth of 4.5 percent.

The Hong Kong economy grew 3.0 percent in real terms to US$158.3 billion in 2003, after the prior year's 2.3 percent growth. Exports of goods and services, including tourism, drove growth in 2003. As of April 2004 unemployment stood at 7.1 percent, down from 8.3 percent a year earlier. Hong Kong has experienced price deflation for 67 months since the Asian financial crisis. Prices declined by 2.5 percent in 2003, as measured by the Consumer Price Index, after falling by 3.0 percent in 2002. However, deflation has ceased at retail outlets and is expected to end during the second half of 2004. The main reason for lingering deflation at the start of 2004 was persistent downward pressure on housing rentals, which comprise 30 percent of Hong Kong's Consumer Price Index.

Trade is a key driver of the Hong Kong economy. Hong Kong's trade in 2003 was equal to 2.9 times its GDP, an indication of its open trade regime and role as a global entrepot. Hong Kong's merchandise exports rose 11.7 percent to US$223.4 billion in 2003. About 93 percent of total exports are re-exports (goods made outside the territory) that enter Hong Kong for some value-added processing. In recent years, re-exports have increased while domestic exports have declined. This trend continued in 2003 as re-exports increased by 13.4 percent in value terms while domestic exports diminished by 7.1 percent. Imports rose by 11.5 percent in value terms in 2003 to US$231.5 billion. Hong Kong's merchandise trade deficit increased by 7.5 percent to US$8.1 billion in 2003.

Hong Kong is increasingly a provider of services to the Asian region. This trend was reflected in a US$20.7 billion services trade surplus in 2003, which offset the merchandise trade deficit and led to an overall trade surplus of US$12.6 billion.

The United States is Hong Kong's second largest trading partner overall. It is Hong Kong's second largest market, after China, and its fifth largest source of imports, after China, Japan, Taiwan, and South Korea. According to U.S. government statistics, U.S. exports to Hong Kong in 2003 totaled nearly US$13.5 billion and imports from Hong Kong US$8.9 billion.

Reflecting strong demand for China's exports in world markets, Hong Kong's external trade grew in the first three months of 2004. Total exports increased 13.0 percent compared to the previous year. Domestic exports, however, dropped by 0.6 percent. Imports surged 15.7 percent.

Since 1983, the Hong Kong dollar has been linked to the U.S. dollar at a rate of approximately HK$7.8 = US$1 under a currency board mechanism. The Hong Kong government remains committed to the link. Under this system, local interest rates track those in the United States. The market exchange rate of the Hong Kong dollar against the U.S. dollar remained on the strong side of the link during 2003, ranging from 7.799 to 7.763.

B. Principal Growth Sectors

Services dominate Hong Kong's economy. In 2002, they accounted for 87.5 percent of GDP, employed 88.5 percent of the work force, and increased as a share of exports. Principal service sectors include trade and business services, finance, and tourism.

Manufacturing as a percentage of GDP has declined steadily as companies have shifted production facilities to lower cost locations in China and elsewhere. Manufacturing in 2002 accounted for about 4.5 percent of GDP and 8.2 percent of the work force.

(1) Business Services

Reflecting its position as a regional business hub, Hong Kong was the third largest services exporter in Asia after Japan and China in 2003, according to the World Trade Organization. In 2003, exports of services rose 3.7 percent from the previous year to US$44.9 billion. Merchandizing and other trade-related services was the largest services sector, contributing 37.0 percent to total services exports. This was followed by transportation which contributed 30 percent to total services exports. Imports of services dropped 2.2 percent to US$24.3 billion in 2003. Travel and transportation were the largest import services sectors, contributing 47.6 percent and 27.5 percent to total services imports, respectively.

(2) Financing

Hong Kong is an international financial center. The combined financial and insurance sectors contributed 12.2 percent of GDP in 2002. In 2003, Hong Kong was the world's 13th largest international banking center in terms of external assets and the Hong Kong Stock Exchange was the world's 10th largest stock market with a capitalization of US$711.3 billion. In addition, Hong Kong is the leading fund management center in Asia. According to a survey conducted by the Hong Kong Securities and Futures Commission, there were 192 fund management companies in Hong Kong managing assets totaling US$191.2 billion at end-2002, 63 percent of which were attributed to investors outside Hong Kong.

(3) Tourism and Retail Sales

Tourism is a key sector of the economy and one of Hong Kong's largest earners of foreign exchange. It generated revenues of US$9.9 billion in 2002, up by 25.3 percent from 2001. Visitor arrivals totaled about 15.5 million in 2003, down by 6.6 percent. This was due primarily to the outbreak of the Severe Acute Respiratory Syndrome (SARS) in March 2003. Visitor arrivals rose since July 2004 after the SARS has been contained and a surge in mainland Chinese tourists after Beijing, at Hong Kong's request, removed quotas on the number of mainland visitors. China accounted for 54.5 percent of Hong Kong's total arrivals in 2003, followed by Taiwan with 11.9 percent, Southeast Asia with 8.8 percent, Japan with 5.6 percent, and the United States with 4.4 percent. The volume of visitors from the United States in 2003 decreased to 683,791 from 1 million in 2002. Overall tourist numbers rose strongly in the first quarter of 2004, rising by 14.7 percent from the same period of 2003 to 4.9 million.

Retail sales volume rebounded in the first half of 2004, after shrinking by 0.6 percent in 2003, reflecting weak consumer demand in the first half of the year further depressed by SARS, following a 2.6 percent decrease in 2002. Retail sales grew by double digits in the first half of 2004. While much of this growth was a result of increased mainland tourists, consumer durables and automobile sales, up 8.4 percent and 9.4 percent respectively during the first four months of 2004, showed that local consumers were purchasing more. The largest increases in sales volume in 2003 were electrical goods and photographic equipment (up 17.5 percent), consumer durable goods (up 11.8 percent), and medicines and cosmetics (up 7 percent). Other retail segments showed volume decreases in 2003, including alcoholic drinks (down 13.3 percent), motor vehicles and parts (down 13.1 percent) and fuels (down 10.9 percent). In the first three months of 2004, retail sales volume rose 7.3 percent from the previous year.

(4) Property

The property sector has played an important, albeit decreasing, role in Hong Kong's economy. In 2003, average monthly rental prices for Grade A (the highest grade) office space in Central, Hong Kong's premier district, dropped 21.3 percent from 2002, due to corporate downsizing, SARS, and a slowdown in the financial services industry. Office rentals in Central averaged about US$3.2 per square foot per month, 60 percent lower than levels before the Asian financial turmoil. As of May 2004, Grade A office space in Central cost an average of US$3.1 per square foot, with prime space costing US$3.8-4.9 per square foot. In 2003, prices for Grade A space in Wan Chai North, another popular commercial district for multinational companies on Hong Kong Island, declined by 19.7 percent. Grade A office space in Wan Chai averaged US$2.3 per square foot.

Between 1997 and 2003, property prices slid by 67 percent. From this lower base, residential property prices increased about 40 percent during the second half of 2003 and the first quarter of 2004. Prices remained relatively flat in the second quarter, with opinions mixed about the direction of the market. The government has emphasized that it will continue to support a "stable" property market, that is, a market in which mass residential property prices do not fluctuate significantly. In November 2002, the government unveiled nine housing measures to restore public confidence in housing prices. These measures include the suspension of land auctions until the end of 2003 and cancellation of the sales of public rental flats. The first auction since the land sale freeze took place on May 25, 2004. The Peak, Wan Chai, Mid-levels, and the Southern District of Hong Kong Island are the most popular living areas for expatriates. Rental prices in these areas in May 2004 had fallen some 30 percent from their 1997 peak, with average rents of US$3.5 to US$5.7 per square foot for the Peak, US$2.7 to $3.8 for Wan Chai and Mid-levels, and $2.8 to $4.4 for the Southern District.

(5) Infrastructure (construction, environment)

See Chapter 2 Section E below for a discussion of these sectors.

C. Government Role in the Economy

The Hong Kong government pursues a generally non-interventionist approach to economic policy that stresses the predominant role of the private sector. Prior to the high-tech downturn, the government became somewhat more proactive in support of high technology development. The Hong Kong government describes its economic policy as, "big market, small government," and says the government should act as a "proactive market enabler." This means reducing government expenditure, investing in human resources, providing infrastructure that the private sector will not invest in, and securing foreign market access for local exports. The government has also said it will facilitate the movement of Hong Kong firms up the value-added chain in the financial services, logistics, tourism, and producer and professional services sectors. In addition, it seeks to leverage Hong Kong's traditional ties to the mainland by encouraging greater cross-border flows of people, goods, information, and services.

Hong Kong has consistently supported an open multilateral trading system. The government is an active member of the World Trade Organization (WTO) and the Asia Pacific Economic Cooperation Forum (APEC). Hong Kong maintains no anti-dumping laws, countervailing duty laws, import quotas or tariffs. There are consumption taxes on a few items that apply equally to imports and local products. Hong Kong urges similar open trade policies for its trading partners. Hong Kong is a separate customs territory from the PRC.

The tax system in Hong Kong is simple and tax rates are low. To help reduce a growing budget deficit, former Financial Secretary Antony Leung announced phased tax increases in his March 2003 budget address. The highest income tax rate is 16 percent (up from 15 percent) and the business profits tax is 17.5 percent (up from 16 percent). As a result of allowances under the law, 60 percent of the work force pays no income tax. The business profits tax is payable only on net profits arising in Hong Kong or derived from business performed in Hong Kong. There are no taxes on capital gains, dividends, or interest. Other government revenue sources include a stamp duty on property and stock market transactions, betting duties, an estate duty and a hotel accommodation tax. Under the Sino-British Joint Declaration and China's Basic Law on Hong Kong, Beijing cannot tax Hong Kong or otherwise extract revenue from the Hong Kong government. Beijing also plays no role in formulating Hong Kong's budget and fiscal policies.

Hong Kong government-funded core infrastructure projects have fueled the development of Hong Kong's economy. In fiscal year 2004, which ended March 31, 2004, public expenditure accounted for about 22.6 percent of GDP. The government has set a target to reduce public expenditure to 18.04 percent of GDP by 2007-08. Prudent fiscal management and ample reserves have traditionally made it unnecessary for the Hong Kong government to incur debt to finance expenditures. The Hong Kong Monetary Authority (Hong Kong's de facto central bank) had a total of US$15.4 billion in Exchange Fund bills and notes outstanding at year-end 2003. The bills and notes are used as instruments of monetary policy and are a principal means by which the Hong Kong government has worked to develop a local debt market. They are not used to finance expenditures.

D. Balance of Payments Situation

In 2003, Hong Kong recorded an overall balance of payments surplus of US$973 million, compared to a deficit of US$2.4 billion in 2002. The current account registered a surplus of US$17.4 billion in 2003, equal to 11 percent of GDP. The trade deficit in goods was US$5.8 billion, and the trade surplus in services was US$20.7 billion. A net inflow of factor incomes totaled US$4.4 billion, and a net outflow of current transfers comprised US$1.9 billion.

E. Infrastructure Situation

Hong Kong's modern and efficient infrastructure supports Hong Kong's role as a trade entrepot and regional financial and services center. Rapid growth has placed severe demands on that infrastructure, requiring major new investments, particularly for transportation and shipping facilities. Hong Kong has plans to invest US$18.6 billion over the next five years with the goal of enhancing its competitiveness as a regional center. Significant elements include a planned expansion of container terminal facilities, additional roadway and railway networks, major residential/commercial developments, community facilities, and environmental protection projects. In May 2004, the Legislative Council passed a bill allowing the Hong Kong Government to issue US$2.6 billion bonds to fund infrastructure or other investment projects.

(1) Airport

In 2003 Hong Kong's new international airport at Chek Lap Kok handled daily an average of 514 flights, 74,942 passengers, and more than 7,238 tons of cargo. Seventy international airlines operated some 4,000 scheduled flights per week between Hong Kong and 130 cities around the world. Hong Kong is a major gateway to China. There are direct flights from Hong Kong to nearly 40 mainland cities. The demand for services to China is growing. The Hong Kong airport is in the world's top ranks in terms of passenger and cargo throughput.

With 24-hour operations, two all-weather runways, an ability to cater to all types of commercial aircraft, and high-speed transport links from the terminal to the city, the airport is well positioned to meet Hong Kong's aviation needs in the coming decades.

The airport has a multi-modal marine cargo terminal that provides vessel services between 16 ports in the Pearl River Delta and the airport. The Airport Authority has awarded contracts for new logistics and air express cargo centers. It has plans for other commercial developments to boost revenues, including an international exhibition center, an office and retail complex, and a cross-boundary passenger ferry terminal. In 2003, the Hong Kong Civil Aviation Department completed enhancements of six critical air traffic control systems and put them in operation. The overall air traffic control system is coping well with foreseeable growth in traffic volumes.

(2) Shipping and Port Activities

Hong Kong enjoys one of the best natural deep-water ports on the Chinese coast. With continued high economic growth and industrialization in China, the development of deep-water ports at Yantian and Gaolan in south China should complement Hong Kong's facilities over the medium-term. Over the longer-term, the Hong Kong port will face increased competition from those ports and from Shanghai, with likely improvements in service efficiency.

Hong Kong's container port is one of the world's busiest. In 2003, Hong Kong's eight, privately-operated container terminals and mid-stream operators handled 20.5 million twenty-foot equivalent units (TEUs) of cargo. Some 80 international shipping lines are providing over 400 container liner services per week connecting to over 500 destinations worldwide.

Given long-term growth projections, Hong Kong expects that it will require additional container terminals. Hong Kong's eight terminals have 18 berths. Hong Kong is completing a ninth container terminal (CT 9) with six more berths, on Tsing Yi Island opposite the eight existing terminals at Kwai Chung. The first 4 berths came on stream between July 2003 and mid-2004 respectively. The whole terminal will be completed by end of 2004. The Hong Kong Government has also made provisions for port facilities (CT 10 & 11) on reclaimed land on Lantau Island. Hong Kong's river trade terminal, which services the Pearl River Delta transportation system, occupies 65 hectares with a quay length of 3,000 meters, and is capable of handling 1.3 million TEUs of river trade cargo a year.

(3) Roads and Railroads

Hong Kong's roads have one of the highest vehicle densities in the world. In February 2004, there were 524,448 licensed vehicles and about 1,934 kilometers of roads, or 271 vehicles per kilometer of road. This high vehicle density, combined with difficult terrain and high density building development, poses a constant challenge to transport planning, road construction and maintenance. To cope with worsening traffic congestion, largely due to the rapid growth in the number of private cars, the Highways Department has launched an extensive road construction program. The department has budgeted US$4.2 billion for road projects through 2007-08. Hong Kong will also build a bridge to Macau and Zhuhai, paving the way for accelerated development of the Western Pearl River Delta region. (See Section G.)

Hong Kong is serviced by three major railway systems. The Mass Transit Railway Corporation (MTRC) operates a five-line metro system, including the 34km Airport Express. The Kowloon-Canton Railway Corporation (KCRC) operates a 34km line that services the new towns in the Northeastern New Territories and also provides border crossing and freight service into China. In December 2003, KCRC opened its West Rail, which is a 30.5km twin-track passenger railway with nine stations running between the North West New Territories and urban Kowloon. In addition, KCRC also operates a Light Rail Transit System in the Northwestern New Territories. Hong Kong is working on a massive expansion of its rail system. The investment in Hong Kong's domestic and cross-boundary rail networks in the next decade is expected to exceed in scale the US$20 billion spent on the transportation facilities associated with the airport. In August 2002, MTRC's existing rail line extension (Tseung Kwan O Extension) came into service for a new town in East Kowloon. Four major domestic passenger rail projects are already at various stages of construction. The construction of Sheung Shui to Lok Ma Chau Spur Line commenced in October 2002 for completion in 2007. This second rail boundary crossing will be supported by a passenger bridge to connect the future Lok Ma Chau Terminus with the Shenzhen Metro. The other 3 projects are the Tai Wai to Ma On Shan Rail Link (construction to be completed in 2004), the Tsim Sha Tsui Extension (construction to be completed in 2004), and the Penny's Bay Rail Link (construction to be completed in 2005). In addition, a second cross-harbor rail link is high on the railway network development priority list. The government is studying the feasibility of a new express railway linking Hong Kong, Shenzhen and Guangzhou.

(4) Environment

Hong Kong has serious air and water pollution problems resulting from its own effluents and emissions and those from neighboring Guangdong province. The government is beginning to take steps to address these problems both domestically and in cooperation with mainland authorities. In 2003, total government expenditure devoted to environmental protection work amounted to US$841.8 million. Of this amount, US$264.5 million, or 31.4 percent, was for waste facilities, improvement of air quality, prevention of noise problems, and environmental assessment and planning. Sewage services, including planning, design and construction of sewage systems, sewage treatment, and disposal facilities, used up US$229.3 million or 27.2 percent of the total. In 2004, estimated government spending on the environment will increase by 1.5 percent over 2003.

The Harbor Area Treatment Scheme (HATS), formerly the Strategic Sewage Disposal Scheme, is by far the largest of all environmental infrastructure projects in Hong Kong. Phase I of HATS, which provides for the collection and primary treatment of 70 percent of Hong Kong's sewage before discharge into the inner harbor, was completed in December 2001. To further protect the marine environment, the Hong Kong government is undertaking various studies to determine the level of treatment and technology requirements of future sewage systems. These studies have largely been completed and the government will undertake a public consultation in mid-2004 on the various options before selecting the most favorable model. In addition, the Government plans to spend about US$641 million over the next 5 years to improve sewage facilities in other parts of Hong Kong.

The Hong Kong government has been developing tighter vehicle emission standards as well as encouraging the use of cleaner fuel to improve the city's air quality. With the provision of government grants, about 100 percent of all 18,000 taxis have switched to liquefied petroleum gas (LPG) and the government plans to replace the whole fleet of 6,300 diesel light buses with LPG or electric light buses by the end of 2005. Together with the tightening of sulfur content of motor diesel to 0.005 percent, the concentrations at urban roadside of particulates and nitrogen oxides dropped by 13 percent and 23 percent respectively in 2003 from 1999. In December 2003, the Government drew up with the Guangdong Provincial Government a "Regional Air Quality Management Plan" to reduce the emissions of four major air pollutants in the Pearl River Delta Region, including nitrogen oxides and volatile organic compounds that are to be reduced by 20 percent and 55 percent respectively.

The Waste Reduction Framework Plan (WRFP) sets out the various waste reduction and recycling initiatives the government has put in place. On a daily basis, Hong Kong generates more than 16,800 tons of municipal waste. At this rate, Hong Kong's three existing landfills will be full within the next 10 to 15 years. The government is now embarking on an intensive program to provide recycling facilities, but Hong Kong will eventually need new waste treatment or disposal facilities. In June 2003, the Government introduced a bill into the Legislative Council for controlling the management of clinical waste and the disposal of imported waste. The bill will also set out in the Waste Disposal Ordinance the international ban prohibiting the export of hazardous waste from developed countries (known as the Basel Ban). In December 2003, the Government introduced a bill into the Legislative Council for implementation of a construction waste disposal charging scheme in line with the polluter pays principle.

F. Macau Economic Scene

Macau is a thirteen square mile territory of approximately 450,000 persons. It became a Special Administrative Region of the People's Republic of China on December 20, 1999.

U.S. business interests in Macau are modest, but growing significantly. There are approximately 1,000 Americans residing in Macau, engaged in business, academic and missionary work. The United States is Macau's most important foreign market, taking nearly 50 percent of Macau's total exports. Imports from the United States amount to 3.9 percent of Macau's total imports.

Driven by increased tourism and investment in the gaming sector, Macau's real GDP in 2003 grew by 15.6 percent compared with 10.1 percent in 2002. Nominal GDP was US$7.9 billion. Deflation continued in 2003, as prices declined 1.6 percent compared with a drop of 2.6 percent in 2002. Unemployment averaged 6 percent in 2003 compared with 6.3 percent in 2002. Unemployment is projected to drop below five percent by the end of 2003. The Macau government's fiscal position is strong due to the significant tax revenue generated by gaming activities. In 2003, the budget surplus totaled US$332.2 million, up by 52.7 percent from US$217.5 million in 2002. Macau has no public debt. Investment in Macau is also being driven by low taxes, with the top corporate tax rate being 15 percent, compared to Hong Kong's17.5 percent.

Macau's most important industries are textiles, gaming, and tourism. Textile exports in 2003 accounted for about 83.1 percent of all merchandise exports. Total exports were US$2.6 billion and total imports were US$2.8 billion. Exports increased by 9.4 percent while imports rose 8.7 percent.

The Macau government awarded gambling concessions to two companies with U.S. interests in February 2002, thereby ending a 40-year gambling monopoly held by a local Macau company. This opening of the gaming sector is expected to lead to significant new investment in casinos, hotels, and related facilities. It should over time dramatically raise the U.S. business profile in Macau and is the centerpiece of the government's efforts to transform Macau into a Las Vegas-style gaming and convention center. The first U.S. gaming facility, the Sands, opened on May 18. Macau also hopes to leverage its well-developed infrastructure, relatively low rents, and warehouse capacity to become a gateway to China.

Table 1: Macau - Estimates for Major Indicators (real growth rate percent change)

	2001	2002	2003
Real GDP	2.2	10.1	15.6
Inflation	-2.0	-2.6	-1.6
Private Consumption	2.9	5.1	4.9
Public Consumption	-0.1	2.8	6.0
Gross Fixed Capital Formation Public Sector Private Sector	-9.0 --- ---	3.3 --- ---	40.5 --- ---
Unemployment	6.4	6.3	6.0
Trade Balance (US$ MN)	-86.4	-173.4	-174.6

Table 2: 2001-2003 Nominal Trade Figures (US$ millions)

	2001	2002	2003
Total Goods Exports Domestic Exports Re-exports	2,291.5 1,883.0 408.5	2,347.6 1,839.2 508.4	2,587.5 2,032.6 554.9
Total Services Exports	3,784.2	4,366.9	5,221.2
Total Goods Imports	2,377.9	2,521.0	2,762.2
Macau/U.S. Trade Imports from U.S. Exports to U.S.	99.6 1,113.4	105.3 1,143.9	109.0 1,290.0

Sources: Based on compilation by Research Department of the Macau Economic Services Bureau.

Note: Preliminary figures for 2003; all figures are converted from Patacas using average yearly exchange rates of 8.034, 8.033 and 8.021 for years 2001, 2002 and 2003 respectively.

G. Pearl River Delta - Hong Kong's Hinterland

Located in the southern part of Guangdong Province, the Pearl River Delta (PRD) covers an area of 42,821 sq. km and is home to 47.8 million people. In 2002 its GDP reached US$113.5 billion and accounted for 9 percent of China's total GDP. The combined GDP of Hong Kong and the PRD, at about US$290 billion in 2002, was greater than that of any other region in the Chinese mainland, and bigger than that of Switzerland (US$268.4 billion). In terms of per capita GDP, the levels of income of PRD cities are taking the lead in China. For instance, per capita GDP in Shenzhen reached US$5,589 in 2002, surpassing that of Shanghai and Beijing.

The PRD is China's largest export base, especially in consumer goods. In 2002, the PRD accounted for 34.6 percent of China's total exports. Many foreign companies set up production bases in the PRD as part of their strategy for penetrating the domestic market of China. For the past decade, the eight mainland cities that form the core of the PRD have absorbed China's largest share of FDI. From 1995 to 2002, cumulative actual FDI in the PRD amounted to US$87 billion, i.e. 24.5 percent of the national total. What is unusual about the PRD versus other economically vibrant regions in the mainland is that its growth has been fueled mainly by the private sector, not government expenditures.

Hong Kong has been a big part of this boom. Since the early 1980's, much of Hong Kong's manufacturing base has moved to the PRD in search of lower-cost land and labor. As a result, 63,000 Hong Kong enterprises now own and manage a far-reaching network of activities in the area employing nearly 11 million people (58 times the size of Hong Kong's own manufacturing workforce). Most of these companies are SMEs that are able to adapt quickly to market changes but do not command the access or leverage larger entities have with local authorities. The majority of Hong Kong investment that flows into China continues to be directed at the PRD. The relationship is a win-win situation. The assembly of goods takes place in the PRD but the high value-added elements, such as management, design, quality control, marketing, and finance, remain in Hong Kong. Shifting its manufacturing base has also allowed Hong Kong's economy to focus on the service sector, which brings with it higher paying jobs. Products formerly known around the world as "Made in Hong Kong" could now rightly be marked "Made by Hong Kong."

The PRD's Cantonese speaking population is heavily influenced in forming its tastes and fashions by Hong Kong's Cantonese language media. According to Hong Kong public relations agencies, at least 20 percent of Hong Kong broadcast advertising is directed towards mainland consumers. This trend in targeting the mainland customer shows that Hong Kong-based companies look to the PRD not only as a low-cost manufacturing base, but also more and more as a market in and of itself. For example, the Hong Kong office of the convenience store 7-11 has finalized plans to open 300 outlets throughout Guangdong Province. Other leading Hong Kong restaurants and clothing chains are also looking at opening up branches.

The PRD's infrastructure is constantly changing. At the top of the list of priorities is infrastructure that will better integrate Hong Kong and the region including: a bridge that will connect Hong Kong to Macau and Zhuhai (next to Macau); the construction of the Shenzhen Western Corridor; a 5.1 km bridge from Tuen Mun to Dongjiaotou; a new logistic center for the Shenzhen airport; and a light rail to run from Shenzhen to Guangzhou. In addition, Guangdong Province's telecom infrastructure is well-developed, with more than 32.1 million mobile subscribers, 15.6 percent of China's total and 10.9 percent of China's 52.5 million Internet users. All of this rapid development provides opportunities for U.S. companies.

The synergy between the PRD "workshop" and Hong Kong "front office" will increase as the two become more closely interconnected. The Closer Economic Partnership Agreement (CEPA) signed on June 29, 2003 between Hong Kong and the mainland has the potential to accelerate this development, as do efforts to coordinate development strategies among Guangdong, eight other southern Chinese provinces, and Hong Kong and Macau under the Pan-PRD Forum (launched in June 2004). On the one hand, Hong Kong and the PRD will together further develop into a production base in the global supply chain. On the other hand, Hong Kong and the PRD can well serve as the operational center for foreign companies targeting China's domestic market.

Despite this complementary economic relationship, China's cumbersome and non-transparent regulatory system continues to hamper some areas of cooperation. With several competing jurisdictions, resource allocation is often not as efficient as it could be. This is one of the main reasons U.S. companies, particularly SMEs, have been successful in the region by linking up with Hong Kong SMEs to market their products and services to this dynamic PRD region.

CHAPTER 3 POLITICAL ENVIRONMENT

A. Nature of Political Relationship with the United States

The United States and Hong Kong maintain close and cooperative relations. Hong Kong is our fifteenth largest trading partner overall. U.S. direct investment in Hong Kong through 2002 totaled US$35.8 billion. Our cooperation in the war on terror and lour long-standing, deep cooperation on law enforcement matters represent solid pillars supporting an extensive and mutually productive bilateral relationship. Together we conduct a wide range of cultural and educational exchanges. About 50,000 American citizens reside in Hong Kong and more than 1,100 U.S. companies have offices there. U.S. Navy ships make regular port calls on Hong Kong.

B. Major Political Issues Affecting the Business Climate

Hong Kong became a "Special Administrative Region" (HKSAR) of the People's Republic of China on July 1, 1997. The Sino-British Joint Declaration, signed in 1984, and the Basic Law of the HKSAR, passed by China's National People's Congress in 1990, form the legal basis for China's "One Country, Two Systems" formula for governance of Hong Kong. The HKSAR enjoys a high degree of autonomy. While the central government in Beijing is responsible for the foreign and defense policies of the HKSAR, the HKSAR government is empowered under the Basic Law to conduct a wide range of external affairs on its own, including negotiating bilateral agreements.

Since reversion, the HKSAR has maintained its capitalist system, retained the status of a free port and international financial center, and continued a free trade policy with free movement of goods and capital. It formulates its own monetary and financial policies and safeguards the free operation of business and financial markets. The Basic Law states that the HKSAR will maintain its own currency and use revenues exclusively for its own purposes. The Hong Kong Dollar continues to be freely convertible and foreign exchange, gold and securities markets operate as before. Hong Kong's 1997 reversion did not change Hong Kong's economic regulatory and supervisory framework. Hong Kong has separate membership in international organizations such as the World Trade Organization, APEC and the World Customs Organization.

The rule of law and an independent judiciary remain the foundation for Hong Kong's free and open society. In 2002 the government proposed legislation pursuant to Article 23 of the Basic Law to criminalize treason, secession, sedition, subversion, theft of state secrets and links with foreign political organizations that are harmful to national security. The government's proposed Article 23 legislation elicited extensive public debate regarding the potential impact of such legislation on civil liberties and fundamental freedoms, culminating July 1, 2003 in the largest demonstration seen in Hong Kong since 1989. In September, the Hong Kong Government withdrew Article 23 legislation pending further consultation with the community. After July 2003, there was also increased pressure on the government to begin moving forward toward the Basic Law's "ultimate aim" of universal suffrage in the election of the Chief Executive and Legislative Council. Concern in Beijing and among some sectors in Hong Kong that Hong Kong's stability and prosperity would be undermined by too rapid progress on democratization resulted in a constitutional interpretation by the National People's Congress Standing Committee ruling out universal suffrage in 2007/2008. The Hong Kong press remains free and continues to comment critically on issues, including Hong Kong's proposed constitutional development, China and its leaders, and the Hong Kong Government. There have been numerous demonstrations for and against government positions. Mainland Chinese companies in Hong Kong remain subject to the same laws and regulatory supervision as all other enterprises in Hong Kong.

C. Brief Synopsis of the Political System, Schedule for Elections, and Orientation of Major Political Parties

When Hong Kong became a Special Administrative Region of China in July 1997, the Basic Law guaranteed for 50 years the continuation of the rights and freedoms that Hong Kong residents already enjoyed: in essence, the continued rule of law and the life-style of the Hong Kong people.

Hong Kong is a free society with legally protected rights. Hong Kong's human rights record is excellent. The police force is under civilian control. A Chinese People's Liberation Army garrison remains a largely unseen and symbolic pressure in Hong Kong. Executive powers are vested in the Chief Executive, C.H. Tung, who is serving a five-year term that will conclude on July 1, 2007. The Hong Kong government has a layer of politically-appointed "ministers" between the Chief Executive and the Civil Service. Its Executive Council, which is similar to the U.S. Cabinet, includes all the Secretaries of policy bureaus. The judiciary is an independent body, which operates according to the precepts of the Common Law, with certain variations. The Basic Law (Article 8) stipulates that the laws in force in Hong Kong before reversion, except for any which contravene the Basic Law, remain in force. The Court of Final Appeal (CFA) is the final adjudicator of cases brought in Hong Kong courts. Under the Basic Law, the power of interpretation of the Basic Law is vested in China's National People's Congress Standing Committee, but Hong Kong courts are authorized to interpret, on their own, provisions of the Basic Law that are within the limits of the autonomy of the HKSAR.

Hong Kong's Legislative Council exercises legislative power, but the Basic Law stipulates limits on the types of private member bills that may be tabled. The most recent elections for the Legislative Council took place in September 2000 and the next will occur in September 2004. Under the current formula, the Legislative Council consists of 24 geographic seats, 30 seats from "functional" constituencies representing the professions, business sectors, and labor, and 6 seats from an electoral committee. The number of directly elected sector seats will increase to 30 in 2004 in accordance with the Basic Law. The leading opposition political party is the Democratic Party, which received 35 percent of the vote in the September 2000 elections and has 11 seats in the Legislative Council. The pro-government Democratic Alliance for the Betterment of Hong Kong (DAB) is the second leading party and has ten seats.

D. Macau Political Scene

Under the principle of "one country, two systems" specified in the 1987 Sino-Portuguese Joint Declaration, the Macau Special Administrative Region (SAR) enjoys a high degree of autonomy except in foreign affairs and defense. The Joint Declaration and Basic Law (the Special Administrative Region's mini-constitution) specify that Macau's economy and way of life will remain unchanged for 50 years. After the 1999 handover, laws in force continued to apply. New laws were passed to provide for a new judicial system, including the establishment of a Court of Final Appeal. Macau's judiciary is independent.

The Macau SAR government is headed by Edmund Ho, who was selected Chief Executive in May 1999 by a 200-member Selection Committee, in turn chosen by the Beijing-appointed Preparatory Committee. Macau's next election for Chief Executive, which will take place on August 29, 2004 will be decided by a 300-member Selection Committee, as stipulated by Macau's Basic Law. Ho has already declared his candidacy. Candidates need 50 nominations from Selection Committee members to be eligible to run.

Macau held its first post-handover Legislative Assembly election in September 2001. Voters elected 10 of Macau's twenty-seven legislators in direct elections in geographical constituencies. Ten more were elected by "functional" constituencies. The Chief Executive appointed seven members. Macau does not have political parties. In contrast to the pre-handover system where both the Portuguese Governor and the Legislative Assembly exercised legislative power, only the legislature now has legislative power. However, the Basic Law stipulates limits on the types of private-member bills that may be offered.

Macau's human rights record is good. The police force is under civilian control. A Chinese People's Liberation Army garrison in Macau serves primarily as a symbolic presence to underscore Chinese sovereignty. The government has made dealing with crime and corruption a priority, and its efforts, coupled with a clampdown on organized-crime activity on the Chinese side of the border, have resulted in a sharp decrease in organized-crime violence.

CHAPTER 4 MARKETING U.S. PRODUCTS AND SERVICES

For many American products and services, initial market penetration in Hong Kong does not require an expensive investment. Given that Hong Kong is a "free port" with virtually no duties or tariffs and that it has a wide-ranging network of agents and distributors, a well-managed market penetration program with a moderate investment in market development is generally all that is required initially. Due to its open nature, however, Hong Kong is among the most competitive and price sensitive markets in the world. Companies considering entering this market should be aware that the Hong Kong business climate is extremely fastpaced. Decisions are made quickly, and companies need to be able to respond to inquiries immediately or they risk losing the market to faster moving suppliers.

Numerous American products and services can be found in Hong Kong, and throughout China. Many excellent agents and distributors for China are located in Hong Kong, although given China's size and diversity, it is sometimes advisable to work with different agents for different regions of China. Hong Kong companies are eager to talk to potential exporters and have a strong interest in representing good quality, competitively-priced U.S. products from companies committed to the market. Commitment to the market is demonstrated in various ways but should include: quoting in metric, providing Chinese language material, responding quickly to inquiries, meeting relevant standards, and visiting the market for first-hand understanding and relationship building.

A. Distribution and Sales Channels

One of the best ways to sell products in Hong Kong is through the use of agents or distributors. It is also an excellent way of minimizing the initial investment in the market. There is a wide range of companies that can serve as agents or distributors for U.S. firms. Other options for pursuing Hong Kong's market are establishing an office or partnering. Companies that are looking to sell equipment needing long-term maintenance, technical support or installation, or are seeking to become involved in infrastructure projects, frequently seek to partner with local companies.

B. Use of Agents/Distributors/Finding a Partner

Working with agents and distributors in Hong Kong is very much like working with an agent in the United States. An agent takes orders in the supplier's name. Distributors act in their own name and may stock products purchased from the manufacturer for resale. The choice depends on the relationship with which the manufacturer/supplier is most comfortable and the nature of the business.

Hong Kong has no special legislation regarding agents and distributors. Virtually anything which both sides can agree to and put into a written contract is acceptable and enforceable, including restrictions on territory and a grace period for termination of the agreement. While not required by Hong Kong law, the more complex the contract, the more helpful legal counsel can be in drafting the text. Items that are often in the contract include:

Discussion of exclusivity and sales territories (always a sensitive issue; business people should be careful about granting an exclusive agency too soon or in too large a territory if the agent is to have coverage beyond Hong Kong)
Discussion of proprietary information (local law prohibits theft of intellectual property, but prevention of piracy is always less expensive and more effective than post-facto legal action)
Levels of sales activity - set specific targets and goals to qualify for maintaining or renewing the agreement
Duration
Payment terms
Quality control - inspection - verification
Rule of law - jurisdiction in the United States vs. Hong Kong (it is generally Hong Kong, but another location may be specified - usually for arbitration.)
Covenants restricting activity following cancellation of the contract.

There are many types of agents and distributors in Hong Kong, ranging from those who simply stock retail stores with standard items to agents who provide sales, engineering and technical support for complex systems. It is common for a single company to deal in a wide variety of products in a particular sector. Agents and trading companies may be less specialized than companies in a large economy like the United States, but the best ones are focused and have contacts in a general line of business.

C. Franchising

The concept of franchising has been catching on in Hong Kong for the past decade, in line with Hong Kong consumers becoming more affluent. The number of franchise operations in Hong Kong grew from 52 in 1992, to 130 in June 2003. Nearly 80 percent of the franchise operations in Hong Kong are of U.S. origin. Home-grown franchises have also developed, especially in catering and fashion wear. Many have expanded their franchises to Southeast Asia and China.

D. Direct Sales

Hong Kong has a well-developed network of retail outlets. Supermarkets, department stores, convenience stores and modern shopping malls have become increasingly popular, because of their easy access, convenient location and seven-day availability. Consumers prefer buying products from retail outlets to buying products sales through mail order and person-to-person selling, as they consider retail shopping a leisure activity. Direct sales account for less than one percent of total retail sales though it has increased in popularity following the economic slowdown in 1998. Many who lost their jobs turned to direct selling while others who suffered pay cuts also joined direct selling companies to augment their income. Direct sales surged between five percent and 10 percent over the past few years. Many local companies, particularly Chinese herbal supplement distributors, have adopted direct sales.

E. Joint Ventures/Licensing

Joint ventures or strategic alliances can be very helpful in entering the market, and are particularly important in competing for major projects. (For additional information on joint ventures, see Chapter 7, Investment Climate Statement, below.)

Licensing is increasingly common in the field of brand-name product manufacturing and marketing.

F. Steps to Establishing an Office

Foreign companies are allowed to incorporate their operations freely in Hong Kong, register branches, or set up representative offices. There is no restriction on the ownership of such operations. Company directors need not be citizens of, or reside in, Hong Kong. Reporting requirements are straightforward and not onerous. There is no distinction in law or practice between investment by foreign-controlled companies and those controlled by local interests. There are no disincentives to foreign investment such as limitations on the use or transfer of foreign currency, or any system of quotas, performance requirements, bonds, deposits, or other similar regulations. High labor and rental costs are the major disincentives to establishing a presence in Hong Kong.

To incorporate or register an overseas company, the company should first file statutory declarations with the Registrar of Companies. It should then submit necessary documents to the Administration Section of the Companies Registry. Specific information on establishing an office in Hong Kong is available at:

Overseas Companies Section
Companies Registry
29/F, Queensway Government Offices
66 Queensway
Hong Kong
Tel: (852) 2867-4655
Fax: (852) 2523-5629
E-mail: crenq@cr.gov.hk
Web site: http://www.info.gov.hk/cr

Another reference publication is "Establishing an Office in Hong Kong," an annual "how to" handbook with reviews of business services as varied as freight forwarding, law, and consulting, published by The American Chamber of Commerce in Hong Kong. See Chapter 11 for contact information for the Chamber.

G. Selling Factors/Techniques

The major selling factors are the same as in the United States: price, quality, timeliness in delivery, and service. Initial sales require more face-to-face contact as Asians generally place a premium on developing personal connections.

H. Advertising and Trade Promotion (including listing of Major Newspapers and Business Journals)

U.S. companies can use a variety of promotional vehicles to introduce and raise the visibility of their products and services in the Hong Kong market. These include:

Special trade fairs and exhibitions
Advertising in the media and other public relations activities
Seminars
In-store promotions
Joint promotions with wholesale and retail outlets

Hong Kong is a major conference and exhibition center. Hundreds of international exhibitions are held annually. The Hong Kong Convention and Exhibition Centre (operated by the quasi-governmental Hong Kong Trade Development Council), has approximately 500,000 square feet of exhibition space, including 300,000 square feet added in a major expansion completed in the summer of 1997. For more information please contact:

Hong Kong Convention & Exhibition Centre
No. 1 Expo Drive
Wan Chai, Hong Kong
Venue Booking Hotline: (852) 2582-1111
Tel: (852) 2582-8888
Fax: (852) 2802-7284
E-mail: info@hkcec.com
Web site: www.hkcec.com

Television is a widely-used medium with an estimated daily audience of 2.25 million households out of a population of nearly 6.8 million people. Hong Kong Television also reaches much of neighboring Guangdong Province in China, where it is very popular.

As one of the largest centers in the world for Chinese language publications, the territory produces more than 760 publications, including 53 newspapers (25 are Chinese, 10 English, five bilingual, five in other languages, and other news agency bulletins), a number of electronic newspapers, and 709 periodicals. Advertising agencies, including many of international standing, offer a full range of services in Hong Kong.

Suppliers should provide technical catalogs in English, and preferably in Chinese as well, for distribution to agents and firms. Company brochures are particularly useful when visiting Hong Kong for the first time. English-Chinese business cards are also helpful.

Newspapers:

South China Morning Post
South China Morning Post Publishers Limited
16/F, Somerset House, Taikoo Place
979 King's Road
Quarry Bay, Hong Kong
Tel: (852) 2565-2222
Fax: (852) 2811-1048
E-mail: info@scmp.com
Web site: www.scmp.com

The Standard
Sing Tao Holdings Ltd.
3/F, Sing Tao Building
1 Wang Kwong Road
Kowloon Bay
Kowloon, Hong Kong
Tel: (852) 2798-2798
Fax: (852) 2795-3009
Web site: www.thestandard.com.hk

Chinese Newspapers:

Apple Daily
8, Chun Ying Street
Tseung Kwan O Industrial Estate West
Tseung Kwan O, N.T.
Hong Kong
Tel: (852) 2990-8388
Fax: (852) 2741-0830
Web site: www.appledaily.atnext.com

Hong Kong Economic Journal
4/F, North Point Industrial Building
499 King's Road, North Point
Hong Kong
Tel: (852) 2856-7502
Fax: (852) 2597-5822

Hong Kong Economic Times
6-7/F, Kodak House II
321 Java Road, North Point
Hong Kong
Tel: (852) 2565-4288
Fax: (852) 2811-1926

Ming Pao Daily News
Ming Pao Newspapers Limited
15/F, Block A, Ming Pao Industrial Centre
18 Ka Yip Street, Chai Wan
Hong Kong
Tel: (852) 2595-3111
Fax: (852) 2898-3783
Web site: www.mingpao.com

Oriental Daily News
Oriental Press Centre
Wang Tai Road
Kowloon Bay, Kowloon
Hong Kong
Tel: (852) 2795-1111
Fax: (852) 2795-2299
E-mail: odninfo@oriental.com.hk
Web site: www.orisun.com.hk

Sing Tao Daily
Sing Tao Limited
3/F, Tower B, Sing Tao Building
1 Wang Kwong Road
Kowloon Bay, Kowloon
Hong Kong
Tel: (852) 2798-2323
Fax: (852) 2795-3022
E-mail: info@singtao.com
Web site: www.singtao.com

Trade Journals:

AmCham (Monthly)
American Chamber of Commerce in Hong Kong
1904 Bank of America Tower
Central, Hong Kong
Tel: (852) 2526-0165
Fax: (852) 2537-1682
E-mail: amcham@amcham.org.hk
Web site: www.amcham.org.hk

Asia Computer Weekly (ACW)
CMP Asia Ltd.
17/F, China Resources Building
26 Harbour Road
Wanchai, Hong Kong
Tel: (852) 2827-6211
Fax: (852) 2805-5696
Web site: www.asiacomputerweekly.com

Building Journal
Construction & Contract News (Monthly)
China Trend Building Press Ltd.
Room 703, 9 Chong Yip Street
Kwun Tong, Kowloon
Hong Kong
Tel: (852) 2802-6299
Fax: (852) 2802-6458
E-mail: trend@building.com.hk
Web site: www.building.com.hk

Far Eastern Economic Review (Weekly)
Review Publishing Company Limited
G.P.O. Box 160
Hong Kong
Tel: (852) 2573-7121
Fax: (852) 2503-1530
E-mail: review@feer.com
Web site: www.feer.com

Fortune
CCI Asia-Pacific Ltd.
23/F, Tianjin Building
167 Connaught Road West
Hong Kong
Tel: (852) 2858-0789
Fax: (852) 2857-6309
E-mail: marketing@cci.com.hk
Web site: www.cci.com.hk

Hong Kong Entrepreneur (monthly)
The Chinese Manufacturers' Association of Hong Kong
PR & Publications Division
3/F, CMA Building
64 Connaught Road Central
Hong Kong
Tel: (852) 2545-6166
Fax: (852) 2541-4541
E-mail: info@cma.org.hk
Web site: www.cma.org.hk

Hong Kong Industrialist (Monthly)
Federation of Hong Kong Industries
4/F, Hankow Center
5-15 Hankow Road
Tsimshatsui, Kowloon
Hong Kong
Tel: (852) 2732-3176
Fax: (852) 2721-3494
E-mail: fhki@fhki.org.hk
Web site: www.fhki.org.hk

Logistics HK (Monthly)
Hong Kong Productivity Council
HKPC Building
78 Tat Chee Avenue
Yau Yat Chuen, Kowloon Tong
Kowloon, Hong Kong
Tel: (852) 2788-5678
Fax: (852) 2788-5900
E-mail: hkpcenq@hkpc.org
Web site: www.hkpc.org

Machinery & Materials (in Chinese)
B & I Publication Co. Ltd.
Unit 902, 9/F, Edward Wong Tower
910 Cheung Sha Wan Road
Kowloon
Hong Kong
Tel: (852) 2785-6622
Fax: (852) 2866-7732
E-mail: hkmm@hkmachine.com.hk
Web site: www.hkmachine.com.hk

I. Pricing Product

If possible, quote in metric, on a deliverable basis to Hong Kong (i.e. CIF or C&F rather than FOB). Hong Kong companies have many options, so American companies must make it as easy as possible to buy American.

J. Sales Service/Customer Support

Some sort of local presence, whether it is a branch office or an agent or distributor, is very important in getting established in the market. Business in Hong Kong (and elsewhere in Asia) requires relationships that can only be developed with some kind of local presence. Prompt after-sales service is also crucial to succeeding in this very competitive market.

K. Selling to the Government

The Government Logistics Department (GLD) is the central purchasing, storage and supply organization for the Government of the Hong Kong Special Administrative Region, serving over 80 government departments, subvented organizations and certain non-government public bodies. The GLD normally purchases by open tender, with decisions based on compliance with tender specifications, competitiveness in price, back-up service and delivery. The GLD gives no preference to any particular source of supply from any country or organization. The GLD spent US$948 million in 2003, with American products winning approximately 48 percent of the total procurement contracts (about US$455 million). Hong Kong joined the WTO Agreement on Government Procurement in May 1997. Tenders are now covered by the Agreement on Government Procurement of the World Trade Organization (WTO GPA), and a Review Body on Bid Challenges has been set up by the Government to handle challenges made against alleged breaches of the WTO GPA. Invitations to open tender are published in the Government of the Hong Kong Special Administrative Region Gazette and in selected Hong Kong newspapers. Tender notices are also published on the Internet in the GLD's Electronic Tendering System (ETS) web site (http://www.ets.com/hk). Tenderers usually have at least three weeks to prepare their offers. For procurement covered by the WTO GPA, the time allowed for bid submission is 40 days. Payment to overseas suppliers is usually effected by telegraphic transfer, bank draft or letter of credit upon acceptance of the goods. Contract awards with the names of successful tenderers and contract sums are published monthly in the Government Gazette and on the Internet.

For information about a subscription to the Government of the Hong Kong Special Administrative Region Gazette contact:

Information Officer
Publications Sales Section
Information Services Department
4th Floor, Murray Building
Garden Road
Central, Hong Kong
Tel: (852) 2537-1910
Fax: (852) 2523-7195
E-mail: puborder@isd.gov.hk
Web site: http://www.isd.gov.hk/eng/publication.htm#gaze

The GLD maintains lists of registered suppliers for issuing tender invitations. Any company not currently registered with the GLD wishing to be considered for inclusion in these lists may apply in writing to the Director of Government Logistics or through the Electronic Tendering Systems at www.ets.com.hk. Companies are required to provide basic information about their organizations and the goods they offer, such as the business registration certificate, company profile, annual report and product catalogs. The GLD evaluates this information and those companies that are found acceptable will be included on the lists. The Electronic Tendering System (ETS) allows GLD-registered suppliers to download tender documents, submit tender offers, and related questions on-line. To access ETS, firms need to subscribe. Details are available at http://www.ets.com.hk/.

The U.S. Commercial Service at the U.S. Consulate General in Hong Kong regularly reports on government tenders. These reports are available via the web site: www.export.gov.

Companies seeking more information on the GLD are encouraged to contact:

The Director of Government Logistics
Government Logistics Department
10/F, North Point Government Offices
333 Java Road
North Point, Hong Kong
Tel: (852) 2231-5398
Fax: (852) 3107-0120
E-mail: info@gld.gov.hk
Web site: http://www.gld.gov.hk

L. Protecting Your Product from IPR Infringement

The best protection for an American company is to aggressively market in Hong Kong. By using a good local agent, American manufacturers or suppliers can make their product legally available. Dealers have a strong incentive to stop any piracy, and with good local connections, have a better chance of making that happen than an American company that is not actively participating in the market. The chief law enforcement body for Intellectual Property Rights (IPR) is the Hong Kong Customs and Excise Department. However, protecting copyrights or trademarks takes vigilance, and even with the U.S. Government vigorously pressing Hong Kong on this issue, enforcement is still dependent on reporting incidents of product piracy to the authorities and, in some cases, providing evidence in court. For more information on intellectual property legislation and registration, see Chapter 7, Section G, below.

M. Need for a Local Attorney

Hong Kong follows the Common Law System and disputes that cannot be resolved between the interested parties are commonly pursued through the court system. Attorneys are needed for most court proceedings and are extremely expensive.

CHAPTER 5 LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTS

Leading sectors for U.S. exporters to Hong Kong are closely linked to those of China's Pearl River Delta region, due to geographical proximity and Hong Kong's role as a staging point for new-to-China-market American companies. Hong Kong's advantages (such as the rule of law, a robust financial system and a fully convertible currency) are not easily duplicated. Small and medium-sized companies, in particular, will continue to use Hong Kong as a base to trade with China, and Hong Kong firms stand ready to represent U.S. companies as distributors or agents in China. With the second highest per capita income in Asia, Hong Kong's market offers good opportunities for U.S. exporters. Medical/pharmaceutical and security products are among the most promising sectors for U.S. exporters due to growing health and safety concerns in the region. Interest in information technology and telecommunications products should remain strong given their high priority in the Hong Kong government's agenda. Other strong sectors for U.S. companies include: cosmetics, franchising, air conditioning and parts, plastic materials and resins, building equipment and sports/leisure equipment. With the signing of the CEPA, a modified free trade agreement between Hong Kong and China, many Hong Kong products will be given duty/tariff reductions. U.S. companies may be able to take advantage of this market opening if they have maintained prior operations in Hong Kong and if their products conform to the country of origin rules/Hong Kong content rules, which will be finalized by the end of the calendar year.

A. Best Prospects for Non-Agricultural Goods and Services

Following is a list of the non-agricultural goods and services best prospects sectors for U.S. exporters to Hong Kong:

No.	Code	Sector Description
1	HTL	Hotel and Restaurant Equipment
2	AIR	Air Conditioning
3	CON & PVC	Construction Equipment and Technology
4	SEC	Security and Safety Equipment
5	PET	Pet Foods and Pet Supplies
6	APS	Automotive Parts and Accessories
7	ELC	Electronic Parts/Components
8	TEL, TES	Telecommunications Equipment and Services
9	LAB	Laboratory and Scientific Instruments
10	DRG	Drugs/Pharmaceuticals
11	PMR	Plastic Materials and Resins
12	SPT	Sports Equipment
13	FNS, INV	The Hong Kong Venture Capital Market

1. Hotel and Restaurant Equipment (HTL)

The import market for hotel and restaurant equipment in Hong Kong is highly competitive. In 2002, total hotel and restaurant equipment imports amounted to US$46 million. United States was the largest supplying country capturing 20 percent of total market share and competing with their European counterparts in the high-quality and high-price market segment. Taiwanese suppliers competed with those from China in the low-end market. As the market seeks higher-end equipment, the U.S. market share should continue to compete favorably.

Hong Kong relies on imported hotel and restaurant equipment. An increasing population, changes in lifestyle and a significant tourism industry contribute to a strong demand. While the recent SARS outbreak and economic slowdown have had some temporary negative effects, the future remains promising as sizable hotel development projects and major tourist attractions gradually come into operation.

Hong Kong is a fast-paced international city with a population of more than 6.8 million. A change in the lifestyle and an increasing number of working women have contributed to citizens dining out five to six times a week, giving rise to a steady demand for restaurant equipment. By 2003, there were more than 10,000 restaurants in Hong Kong, of which about 8,000 were general restaurants and 2,000 were specialty light-refreshment restaurants. While conventional restaurant business has declined, business in specialty restaurants (coffee shops and light lunch restaurants) has grown by more than 15 percent annually.

The tourism industry is a pillar of Hong Kong's economy. At the end of 2002, Hong Kong had 98 hotels, with about 39,000 rooms. Hong Kong's approved 24 new hotel development projects (including two Disney hotels) will bring the total number of rooms to more than 51,000 by the end of 2006. A fellow Special Administrative Region, Macau, has recently awarded new gaming franchises to two consortia, both with US interests. Major hotels and convention facilities are on their development blueprints. These massive projects will generate a substantial demand for hotel and restaurant equipment for both cities.

Year	2001	2002	2003
Total Market Size	41	36	65
Total Local Production	10	10	10
Total Exports	28	20	25
Total Imports	59	46	80
Total Imports from the U.S.	13	9	18

All figures are in US$ million. The above statistics are unofficial estimates.

2. Air Conditioning (AIR)

Hong Kong's Severe Acute Respiratory Syndrome (SARS) epidemic has increased public awareness about hygiene. Concern regarding the indoor air quality of work premises is stimulating demand for air-filtering and germ-killing components in Hong Kong's HVAC market.

Hong Kong schools follow U.S. standards and are provided 10 liters of fresh air per person. To meet this standard, the Government's Architectural Services Department is requiring two fresh air preconditioners per classroom, thus creating a demand for an average of 100 units per school. In Hong Kong, there are over 700 public schools in addition to kindergartens, universities, and private schools. Fresh air preconditioners in Hong Kong are predominately Japanese, e.g., Mitsubishi, Daikan. U.S. preconditioner manufacturers should target school refurbishment and new school projects.

Energy efficiency is high on the government's agenda. Items that facilitate energy recovery or energy efficiency will gain market acceptability. For example, energy-efficient air handling units with heat recovery components, vacancy sensors, and frequency inverters will become popular.

Hong Kong has fewer than ten manufacturers of air conditioner (A/C) parts and components. All are medium-size companies and include Efatar, Air Master, and Ryowo. These companies' production facilities are in China. Their products include chillers, air handling units, fan coil units, cooling towers, heat exchangers, water pumps, VAV boxes, air louvers, air dampers, fire dampers, timers, evaporator coils, and condenser coils. Product sales are mainly local and for export to China and Macau.

The majority of Hong Kong's A/C parts are imported. U.S. and European products dominate the market for chillers, air filters, ventilation fans, and blowers. U.S. brands (Honeywell and Johnson's Control) dominate the market for control products. Other A/C parts such as boilers, gaskets, bearings, and valves are imported from Southeast Asian countries, as well as from Europe and the United States.

Year	2001	2002	2003
Total Market Size	292	210	252
Total Local Production	15	10	12
Total Exports	469	405	486
Total Imports	746	605	726
Total Imports from the U.S.	56	34	4

All figures are in US$ million. The above statistics are unofficial estimates.

3. Construction Equipment and Technology (CON & PVC)

Hong Kong is a densely populated city of 6.7 million people in a total area of 1,100 square kilometers. It is becoming difficult the conventional cut-and-cover method to install and repair essential underground infrastructure without inconveniencing traffic, society and the environment. There has been increased usage of trenchless technology since 1998, when the Hong Kong Government's Water Supplies Department (WSD) constructed a large-scale water main project using this technique. Relevant industry contacts expect a 20% growth in the market for trenchless technology products in the coming years, due particularly to increased water pipe rehabilitation and underground cable connection.

Each year, Hong Kong suffers 25 percent water burst and leakage due to aging water mains and the high-pressure pipe capacity. WSD plans to rehabilitate 3,000 kilometers of water mains during 2000-2020 at an estimated cost of US$1.3 billion. The water pipe rehabilitation plan will create demand for pipes, pumps, and other trenching equipment.

Although many trenchless technologies are in use, Hong Kong has been leaning towards pipe jacking in the past few years. Horizontal directional drilling (HDD) has become popular recently, and relining projects will increase significantly due to demand for water main repair. Equipment in high demand will include locators, radar, CCTV, robotic cutters, tee off tools, pipe cleaning equipment, computer software for rehabilitation design, pipe supplies, drill rods, drill bits, mud pumps, mud motors, and bentonite. There will also be strong demand for underground detection and trenchless consultancy.

All trenchless equipment is imported, mostly through agents and distributors who sell or lease to contractors. Timely delivery, technical support availability and equipment durability are the most important factors in making purchase decisions. U.S. products perform well in the HDD and ramming sectors. European products compete strongly in the relining, closefit lining, pipe jacking, and microtunneling equipment sectors. For detection equipment, UK products have 70 percent of the market. U.S. CCTV equipment and parts, compressor and boilers are popular.

Year	2001	2002	2003
Total Market Size	146	121	146
Total Local Production	3	2	3
Total Exports	144	167	200
Total Imports	287	286	343
Total Imports from the U.S.	23	22	26

All figures are in US$ million. The above statistics are unofficial estimates.

4. Security and Safety Equipment (SEC)

Hong Kong is a growing market for safety and security equipment and services. In general, the Hong Kong market leans towards more sophisticated, high-tech products, an area in which U.S. firms enjoy a prominent market share. In 2002, imports of security and safety equipment totaled approximately US$727 million. After Japan, the U.S. was the second largest supplier of high-tech security products. The European Union was the third major competitor in this area. China and Taiwan were the market leaders in the low-end technology security market.

In 2002, Hong Kong authorities reported a total of 75,877 criminal cases, an increase of four percent over 2001. Among them were 3,493 cases of robbery, 8,211 cases of burglary, 29,542 cases of thefts (including 7,470 shop thefts and 2,412 vehicle thefts). Commercial and industrial establishments, and even the general public, are spending more on security-related equipment and services.

In recent years, the Hong Kong Police Department's Crime Prevention Bureau has succeeded in raising the public's security awareness. Effective methods include introducing security equipment, holding tailored security seminars, conducting security studies, and designing security plans for commercial and residential premises. Popular products include surveillance equipment, high-security locks, reinforced safes, burglar alarms, access controls, property protection devices, central alarm systems, and identification devices.

Security industry associations and insurance companies have joined forces to promote the installing sophisticated systems in commercial and industrial premises. Retailers are investing in detection equipment, such as Electronic Article Surveillance (EAS) because of increased shop theft. Individual property owners are seeking better protection for their possessions. Concern about fire and other safety hazards has boosted demand for fire security products and services.

While Hong Kong is one of the safest cities in the world, increased security concerns worldwide following 9/11 and the recent SARS outbreak have fueled local demand for airport and border-crossing security equipment, such as chemical and thermal detection equipment.

Hong Kong plans to build a large detention complex (Superjail) in one of its outlying islands. The estimated project cost for this centralized prison facility is approximately US$2 billion. Upon completion, the facility will have a 7,000-inmate capacity. The Hong Kong Government will seek detention equipment, especially centralized electronic control systems for the project.

Year	2001	2002	2003
Total Market Size	73	61	80
Total Local Production	180	185	190
Total Exports	810	851	860
Total Imports	703	727	750
Total Imports from the U.S.	66	55	65

All figures are in US$ million. The above statistics are unofficial estimates.

5. Pet Foods and Pet Supplies (PET)

Hong Kong's pet food and pet supplies imports were about US$27 million in 2002. The U.S. had a 55 percent market share, owing to a favorable quality image, especially for products in the medium to high-end price range. U.S. brands such as Pedigree, Pal, Whiskas, Iams, Eukanuba, and Naturalife are popular in the market.

Owning pets in Hong Kong is perceived as having status. As more and more households own pets, the pet food and pet supply market is growing, though the economic downturn affected the type of pet foods and pet supplies that pet owners demand. Medium-income pet owners are turning increasingly to lower-priced products, reflecting their reduced spending power. Packaging is also an import factor affecting the buying decisions of the medium-income pet owners. Higher-income pet owners have price-inelastic demand and will continue to buy the premium products. U.S.-made products, with their attractive packaging and nutritional value, are most popular among these higher-income pet owners.

Pet products with the best prospects for increasing sales to Hong Kong include pet foods for dogs and cats, both standard and premium grade (formulated for healthy skin, hair and of low fat content); pet care and health products such as shampoos; flea control products; transporters for dogs and cats; fanciful dog collars; dog treats; disinfectant products for pets; and vitamins.

Pet breeders and retail outlets (pet shops and supermarkets) purchase their products through local agents and distributors. U.S. suppliers interested in selling their products to Hong Kong should consider appointing a local distributor or agent. Many Hong Kong distributors also distribute their products in China's expanding market.

Year	2001	2002	2003
Total Market Size	23	27	32
Total Local Production	0	0	0
Total Exports	8	5	5
Total Imports	31	32	37
Total Imports from the U.S.	12	15	17

All figures are in US$ million. The above statistics are unofficial estimates.

6. Automotive Parts and Accessories (APS)

Hong Kong's automotive parts and accessories imports in 2002 approached US$2 billion, a 10 percent increase over 2001. Although the U.S had only 2 percent of the market share, Hong Kong's imports from the U.S. increased 35 percent from US$34 million in 2001 to US$46 million in 2002. Major U.S. parts and accessories included storage batteries, car radios, locks and electrical ignition parts.

Since Hong Kong does not have its own automobile industry, imported automotive parts are mainly for the local after-market and re-export markets, China and other parts of the world. The local after-market for U.S.-made parts remains small, as Japanese and European cars hold 65 percent and 35 percent market shares, respectively. Hong Kong, however, is an important trading hub for automotive parts into China, which does import U.S. vehicles. In 2002, over 30 percent of Hong Kong's total exports of automotive parts and accessories went into China, totaling approximately US$523 million.

In 2002, China's vehicle sales rose to 3.2 million units, a 35-45 percent increase over the previous year. With China's continued economic growth, continuing development of roads and expressways, growing middle class, expected reforms in car-financing legislation, and diminishing tariff and non-tariff barriers, market analysts speculate the vehicle market will continue to grow 20-30 percent annually. As many Chinese automotive parts and components manufacturers are still not competitive in terms of quality and reliability, demand for overseas automotive parts and components will rise. Due to its geographical proximity to China and its experience in China trade, Hong Kong will continue to be an ideal place for U.S. exporters who would like to sell into China.

Year	2001	2002	2003
Total Market Size	607	628	680
Total Local Production	180	189	198
Total Exports	1,563	1,744	1,918
Total Imports	1,990	2,183	2,400
Total Imports from the U.S.	34	46	51

All figures are in US$ million. The above statistics are unofficial estimates.

7. Electronic Parts and Components (ELC)

Hong Kong's electronic parts and components imports in 2002 reached US$49 billion, a 16 percent increase over 2001. The value of U.S. electronic parts and components exports to Hong Kong was US$3.5 billion, although the U.S. had only 7 percent of the market. Major U.S. exported electronic parts and components include integrated circuits, switches, diodes, transistors, semi-conductors, capacitors, printed circuits, and parts for computers and telecommunications equipment.

Hong Kong imports a wide range of electronic parts and components, particularly for computers, telecommunications equipment, telephone apparatus, toys, games, watches /clocks, and audio/visual equipment. China, Japan and Taiwan are the top 3 major electronic parts and components exporters, sharing 28 percent, 17 percent and 14 percent, respectively. Many Hong Kong manufacturers have switched to producing high-end electronic parts and components for commercial & industrial equipment. Local production in 2002 reached US$6.5 billion. The growing popularity of the Internet, mobile-commerce, digitization as well as new developments and applications in multimedia will sustain near-term demand for parts and accessories for computers and telecommunications.

China's Five-Year Plan to develop its electronic information industry and its WTO membership will sustain continuous demand for electronic parts and components. The Five-Year-Plan aims to develop (1) local computer hardware including network equipment and products, digital products, peripherals, spare parts, information security products, and applications; (2) software; (3) integrated circuits; (4) communication equipment; and (5) digital visual products. U.S. companies should be aware of the latest developments in Hong Kong's technology and focus on Hong Kong and China's growing demand for high-technology electronics parts and components.

Hong Kong plays an important role in U.S. exports to China due to its geographical proximity to China and its experience in China trade. In 2002, 40 percent of Hong Kong's total exports of electronic parts and components went to China, totaling approximately US$18 billion. As most Hong Kong manufacturers have relocated their production facilities to adjacent southern China to maintain cost competitiveness, Hong Kong re-exported a substantial amount of imported electronic parts and components such as integrated circuits (ICs) and micro-assemblies to China for further production.

Year	2001	2002	2003
Total Market Size	8,248	9,576	10,534
Total Local Production	5,900	6,500	7,150
Total Exports	40,487	46,517	51,168
Total Imports	42,835	49,593	54,552
Total Imports from the U.S.	3,728	3,536	3,889

All figures are in US$ million. The above statistics are unofficial estimates.

8. Telecommunications Equipment and Services (TEL, TES)

The HKG has fully liberalized its telecommunications market in 2003 as outlined in its 1998 Review of Fixed Telecommunications and Television Policy report. This full liberalization will create significant opportunities for U.S. companies to provide telecommunications services in Hong Kong.

A number of significant developments in Hong Kong's telecommunications market took place in 2002 and the first quarter of 2003. From January 2003, the local and external Fixed Telecommunications Network Services (FTNS) markets will be fully liberalized and there will be no pre-set limit to the number of licenses for the operation of local wireline-based fixed networks. There will be no rollout or capital expenditure commitments required from licensees of local wireline-based fixed networks and/or external facilities that are licensed to operate from January 2003. The HKG will not consider granting any fixed carrier licenses to operate local wireline-based fixed networks to those applicants who intend to rely primarily on the interconnection with, and access to, the infrastructure of other operators or fixed carrier licensees to rollout their network or to provide their services. In addition, new licensed local wireline-based fixed network operators will, on a case-by-case basis and subject to certain conditions, obtain rights of access to buildings and road opening. These developments provide U.S. companies an open opportunity to enter Hong Kong's local and external FTNS markets.

There are currently nine wireline FTNS licenses (PCCW-HKT, New World Telephone Limited, Wharf T&T Limited, Hutchison Global Crossing Limited, Hong Kong Broadband Network Ltd., Eastar Technology Ltd., CM Tel. (HK) Ltd, TraxComm Ltd., and Hong Kong Cable Television Limited). Though not a traditional phone company, Hong Kong Cable Television Limited is permitted to offer telecommunications services over its hybrid fiber coaxial cable network. Two wireless FTNS operators are: Winstar Wireless Hong Kong Limited (formerly known as PSI Net Wireless Hong Kong Limited) and Smartone Broadband Services Limited.

On the mobile telecommunications front, the Office of the Telecommunications Authority (OFTA) granted four licenses for third generation (3G) mobile services in the last half of 2001 (Hong Kong CSL, Hutchison, SmartTone, Sunday). OFTA awarded the new licenses based on a pre-licensing screening followed by a royalty-based spectrum auction. This will also create additional demand for network hardware and software, support services and consulting, and content services for U.S. companies.

In March 2003, the market penetration of mobile phones in Hong Kong was estimated to have been over 94 percent, one of the highest in the world. Currently there are six companies operating 11 networks. Many companies have already introduced data services such as Wireless Application Protocol (WAP) and many have plans to introduce more advanced data services, such as GPRS, to their networks by the end of this year.

Both fixed and mobile telecommunications operators have made significant commitments to build their network and provide new services, such as value-added and data services to attract and retain customers. This presents opportunities for U.S. companies that have experience with deploying new technologies and innovative services such as electronic commerce, interactive broadcasting services, telemedicine, broadband data delivery, long distance education, and any other technologies or services that can help the carriers differentiate themselves in this intensely competitive market. With increasingly complex and diversified networks, there will also be a constant demand for telecommunications integration, network management, and consulting services. In addition, there are significant opportunities to partner with the operators to provide telecommunications services in Hong Kong and the region. These developments in the market and technology provide significant opportunities for U.S. companies to bring their telecommunications services to Hong Kong.

Hong Kong's telecommunications industry is facing one of its biggest transformations in history. The government is determined to make Hong Kong a regional leader in the information technology field. Full liberalization of Hong Kong's telecom market, robust growth in China's telecommunications market, as well as CEPA (Closer Economic Partnership Agreement) which was signed in June 29, 2003, augur well for the industry. Hong Kong's telecom industry has started to rebound and has made Hong Kong increasingly important as a sourcing center for telecommunications equipment used in China. Sales of telecommunications equipment in Hong Kong in 2002 reached an estimated US$16.8 billion. The United States is the seventh largest supplier, supplying approximately three percent of Hong Kong's imports, following China, Japan, Korea, Taiwan, Singapore and Malaysia. It should be noted that these statistics do not capture U.S. exports of telecom networking equipment such as co-axial cables, optic fiber cables and switches, and understate the Hong Kong's telecom market for U.S. products.

Year	2001	2002	2003 (estimated)	2004 (estimated)
Total Market Size	13,389	14,779	15,381	16,919
Total Local Production	11	11	10	10
Total Exports	1,705	2,085	2,294	2,523
Total Imports	15,083	16,853	17,665	19,432
Total Imports from the U.S.	607	441	464	510

All figures are in US$ million. The above statistics are unofficial estimates.

9. Laboratory and Scientific Instruments (LAB)

Hong Kong relies on imported analytical instruments to sustain growth of its industrial testing and inspection industry, which is crucial to biotech, Chinese medicine, environmental technology, textile, industrial machinery, toy and consumer electronic industries. The United States is a leading supplier of these instruments. In 2002, Hong Kong imports of laboratory and scientific instruments totaled US$1,451 million. The major players in the high-end product segment are the United States, Japan, Germany and the United Kingdom, while Taiwan and China share the low-end product market. Traditionally, European instruments enjoyed an advantage over other competitors because Hong Kong used to conform to British standards. The situation, however, has been changing since the 1997 transition. Hong Kong is gradually recognizing other international standards, thereby creating more opportunities for U.S. suppliers.

To support R&D in Hong Kong's industries, the Hong Kong Government set up the Innovative & Technology Fund in mid-1999 with an initial injection of more than US$645 million. For the two-and-a-half year following its establishment, the Fund spent US$68 million to support 236 projects. The electronics, biotechnology, Chinese medicine, and other industries using high valued-added manufacturing technology benefit the most from the fund.

In addition, the Hong Kong Government also established the Science & Technology Parks Corporation (Science Park) in May 2001 to offer one-stop infrastructural support to technology-based companies and applied R&D activities. Moreover, the Hong Kong Jockey Club Charities Trust has donated US$65 million to support research on Chinese Medicine. These initiatives will boost demand for various types of sophisticated analytical instruments.

Owing to the rapid rate of industrialization of China and the vast number of Hong Kong firms establishing their production facilities in southern China, many Hong Kong testing laboratories have established sub-offices in China that will require advanced testing instruments for their cross-border operations.

Year	2001	2002	2003
Total Market Size	374	155	170
Total Local Production	280	285	290
Total Exports	1,448	1,581	1,600
Total Imports	1,542	1,451	1,480
Total Imports from the U.S.	428	335	360

All figures are in US$ million. The above statistics are unofficial estimates.

10. Drugs/Pharmaceuticals (DRG)

Imports supply 80 percent of Hong Kong's drug market. Major suppliers include the U.K., Japan, Germany, China, and the U.S.

U.S. pharmaceuticals enjoy an excellent reputation in Hong Kong. Hong Kong's imports of U.S.-made pharmaceuticals reached only US$52 million in 2002, but did not include many U.S. pharmaceutical products produced in, and imported from, other countries in the region. Hong Kong consumers generally consider U.S. pharmaceuticals to be effective and safe, knowing that the U.S. Government exerts strict oversight over pharmaceutical manufacturing. U.S. Food & Drug Administration (FDA) Certification is well recognized by the Pharmacy and Poisons Board of Hong Kong's Department of Health, which is responsible for registering pharmaceuticals in Hong Kong. Only local companies registered with the Department are permitted to import drugs into the territory.

Hospital Authority (HA) is responsible for the management and control of all public hospitals, and is the biggest end user in Hong Kong. Drugs are a major expense for HA. It spent US$231 million on drugs during fiscal 2002/2003. Expenditures for the new fiscal year are likely to increase - especially because of the SARS outbreak in late March, 2003. In addition, the Hong Kong Government has granted US$168 million to improve infectious disease surveillance and to strengthen medical research and treatment options. The Hong Kong Jockey Club Charity Foundation has pledged US$64 million and the Government will also earmark US$64 to establish a Disease Control Center to assist medical research on infectious diseases. This provides a great opportunity for U.S. exports of pharmaceutical products to Hong Kong.

The China market has tremendous potential for pharmaceutical products, due to its large population and growing purchasing power. In 2002, Hong Kong exports of pharmaceutical products reached US$640 million, mainly to China. As China's economy becomes more affluent, more people can afford top-end, Western-style medical care. In addition, the average age of the population continues to increase, creating demand for innovative medical and health care products and services from Western countries. China's accession to the World Trade Organization is also decreasing tariff and non-tariff barriers in this sector.

Year	2001	2002	2003 (est.)
Total Market Size	276	315	338
Total Local Production	129	129	131
Total Exports	735	640	685
Total Imports	882	826	892
Total Imports from the U.S.	62	52	55

All figures are in US$ million. The above statistics are unofficial estimates.

11. Plastic Materials and Resins (PMR)

Hong Kong's plastic raw materials companies mainly trade plastic resins and resin compounds. The majority of local plastic raw materials manufacturers only engage in processing and compounding. They are usually small establishments that convert plastic resins into resin compounds by coloring and plasticizing. Domestic production supplies only 20 percent of local demand. Total imports of plastic materials in 2002 were US$6.3 billion, a 12 percent increase from 2001. The industry experts are anticipating an additional 13 percent growth in 2003. The major suppliers of plastic resins are Taiwan, Japan, South Korea and the U.S.

Hong Kong is a major world supplier of toys, shoes, packaging, housewares, fiber optic cables and casings of electronic consumer goods (even though most Hong Kong firms have set up offshore manufacturing operation in southern China), and the demand for resins will continue to be substantial. The plastics industry in Hong Kong will continue to grow, led by China's rapid development of the automotive, telecommunication, medical, packaging, and consumers goods industries and its accession to WTO. According to the Hong Kong Plastic Material Suppliers Association, China's auto industry urgently requires large quantities of plastics products. The demand for engineering plastics and specialized plastics should increase substantially due to the rapid development of China's automotive sector, for both parts and after-market parts. Compared with other major plastic raw materials suppliers, the U.S. has a competitive edge in engineering resins. According to the China Auto News, industry experts forecast that China's auto industry will require 49,700 tons of plastics by 2005. Most plastics users in China rely on imports, since the domestic chemical industry does not have sufficient capacity to meet the increasing demand.

The most effective approach for exporting plastic resins to Hong Kong and through Hong Kong into China is to appoint a distributor to perform marketing and distribution functions. Hong Kong has approximately 500 resin distributors (mainly re-exporters shipping to China).

Year	2001	2002	2003 (est.)
Total Market Size	1,134	1,145	1,349
Total Local Production	483	359	351
Total Exports	4,961	5,510	6,116
Total Imports	5,612	6,296	7,114
Total Imports from the U.S.	633	645	680

All figures are in US$ million. The above statistics are unofficial estimates.

12. Sports Equipment (SPT)

The Hong Kong sports equipment market was worth US$376 million in 2002, with about 80 percent comprising imports. Imported sports equipment from the U.S. in 2002 was US$61 million. Major U.S. products were golf and gym equipment, scuba equipment, canoes, bicycles, tenpin bowling balls, surfboards, skateboards and pellets and paintball shooting ammunition. The best sales prospects for the next few years are golf equipment, bicycles, and fitness and gym equipment.

Golf continues to boom in Hong Kong as young Chinese "yuppies" are increasingly participating in what they perceive to be a sophisticated sport. More are joining golf clubs in southern China. There are an estimated 100,000 golfers in Hong Kong. Local health authorities are advising outdoor exercise as one way to combat the chances of catching SARS. Sports activities that do not require investment or minimal investment in sports equipment such as fitness and weight training, kickboxing, and yoga will become increasingly popular. Industry sources feel that there is room for more fitness centers and the prospects for U.S. companies to supply gym and fitness equipment, including those for home-use, remains bright.

According to sports retailers, higher-end Hong Kong sports participants choose equipment for performance, quality, and durability rather than price. U.S. brands rank high among these high-end sports participants, who trust the quality and performance of U.S. brands and consider them well-designed. They would continue to buy U.S. brands even if some of the equipment is not 100 percent U.S. origin. For lower-spending sports participants, price would determine the brand they would buy. Products from China, Taiwan, or Korea dominate this market sector.

Year	2001	2002	2003
Total Market Size	390	376	356
Total Local Production	12	10	8
Total Exports	686	694	659
Total Imports	1,064	1,060	1,007
Total Imports from the U.S.	54	61	64

All figures are in US$ million. The above statistics are unofficial estimates.

13. The Hong Kong Venture Capital Market (FNS, INV)

Hong Kong is the largest venture capital center in Asia, managing 30 percent of the total capital pool in the region. The total number of funds under management by Hong Kong venture capital firms has remained steady, at around US$25 billion in 2002. Over the past three years, Hong Kong venture capital firms have seen the market transformed. The technology boom of 1999 and early 2000 fueled a surge in venture capital fund raising, as well as providing attractive returns on existing investments. Since then, market activity has fallen off considerably, reinforced by gloomy results from the technology sector, the global recession and the events of Sept 11, 2001.

Despite the unfavorable recent investment climate, industry players generally continued to have a bullish outlook on the performance of the Hong Kong venture capital industry. The relative strength of the mainland China market is a major contributing factor. Given that the mainland's capital market remains relatively undeveloped, most venture funds have their exit strategies outside China, mainly through Hong Kong's main board and Growth Enterprise Market, as well as U.S.'s Nasdaq.

Mainland China's relatively underdeveloped capital market, coupled with distressed assets opportunities strewn across Asia as well as the rapid development of technology projects and industrial sectors in China, bode well for U.S. venture capital funds over the next five years.

The U.S. share of Hong Kong's sources of funds increased from 65 percent of total venture capital pool in 2001 to 68 percent in 2002. U.S. sources of funds are projected to increase over the next five years. It should be noted that the United States has been Hong Kong's largest source of funds over the past few years. This substantial high level of investment serves to highlight Hong Kong's high receptivity to U.S. venture capital.

Sources of Hong Kong Venture Capital Funds

Year	2001	2002	2003 (est.)
U.S.	59% 14,200	65% 17,000	68% 17,000
Europe	12% 2,900	15% 3,900	18% 4,500
Asia	29% 7,000	20% 5,200	14% 3,500
Total	24,100	26,100	25,000

All figures are in US$ million. The above statistics are unofficial estimates.

B. Best Prospects for Agricultural Products

Sector Description

Citrus Fruit
Poultry
Cotton
Tree Nuts
Grapes
Raw Fur
Ginseng
Hardwood Lumber
Sauces and Condiments
Apples
Frozen Potatoes
Cherries
Plums

Of all U.S. agricultural exports to Hong Kong, poultry meat, hides & skins, citrus fruits, and hardwood lumber are the leading items. Poultry meat once again topped the list of U.S. food exports to Hong Kong in 2003, reaching a value of US$270 million. Chicken meat was the star performer as Hong Kong consumers continue to enjoy U.S. chicken wings, feet, franks and leg quarters. Hong Kong was the fourth largest market for U.S. fruit exports. U.S. fresh fruit exports to Hong Kong amounted to US$238 million in 2003. Popular items include oranges, apples and grapes.

Hong Kong's agricultural import market continues to command the attention of producers, manufacturers, processors and exporters of U.S. agricultural products, due to several factors, including:

1. the absence of trade barriers on agricultural products other than alcoholic beverages and processed tobacco products,

2. a strategic location next to the potentially enormous mainland China market, frequently resulting in "unofficial" re-exports subject to low or no duties, and

3. a highly-developed marketing system and affluent consumers who demand high value imports. Per capita income (US$23,300 in 2003) in Hong Kong is among the highest in Asia, with a significant portion of income spent on food.

Although Hong Kong's unemployment rate dropped from a height of over 8 percent in 2003 to 7.1 percent in April 2004, the downturn of the economy in recent years has affected consumers' eating and shopping habits. Whereas most people used to eat out frequently, more are now shopping for groceries and preparing more meals at home, or eating meals at low-end or fast food restaurants. Hong Kong's relatively sophisticated shoppers are buying an increasing percentage of their groceries in supermarkets, as opposed to traditional wet markets. Demand for grocery store products, meats, poultry, eggs and fresh fruit continues to be very strong.

CHAPTER 6 TRADE REGULATIONS

A. Overview

Hong Kong's policy, in accord with the World Trade Organization (WTO) Agreement on Technical Barriers to Trade, is to adhere to international standards to the extent possible.

B. Standards

Hong Kong does not have a central standards body that develops and implements domestic standards. Hong Kong regulatory agencies adopt standards as and when necessary, and generally avoid using standards to dictate market development or protect certain sectors of the economy. More information on standards used in Hong Kong is available from the Standards, Regulations and Conformity Assessment Database. (http://www.standard.gov.hk/standard/eng)

The Product Standards Information Bureau (PSIB) of the Innovation and Technology Commission (ITC) represents Hong Kong in the APEC Sub-Committee on Standards and Conformance (SCSC), the International Organization for Standardization (ISO) and the Pacific Area Standards Congress (PASC). The Hong Kong Accreditation Service of ITC actively participates in the Pacific Accreditation Cooperation (PAC), Asia Pacific Laboratory Accreditation Cooperation (APLAC), International Accreditation Forum (IAF) and International Laboratory Accreditation Cooperation (ILAC). In addition, the Standards and Calibration Laboratory of ITC is a full member of the Asia Pacific Metrology Program and is an Associate of the General Conference of Weights and Measures (CGPM) of the Metre Convention, while the Customs and Excise Department is a Correspondent Member of the International Organization of Legal Metrology (OIML) and a Member of the Asia Pacific Legal Metrology Forum (APLMF). The Office of the Telecommunications Authority also sends its officers to attend meetings of the International Telecommunications Union (ITU).

C. Conformity Assessment

Hong Kong has a comprehensive range of conformity assessment services including testing, calibration, certification and inspection. The majority of such services are provided by the private sector. Compliance is certified through third party accreditation.

D. Product Certification

The Hong Kong Accreditation Service (HKAS) of the Innovation and Technology Commission (ITC) is running a program called "Hong Kong Laboratory Accreditation Scheme (HOKLAS)," which is a program open to voluntary participation from any Hong Kong laboratory that performs objective testing and calibration falling within the scope of the Scheme and meets the HOKLAS criteria of compliance. HOKLAS has concluded mutual recognition agreements/ arrangements (MRA) with forty-eight laboratory accreditation bodies in thirty-seven countries, including the United States.

Mutual Recognition Agreements/Arrangements

Every effort is made to promote acceptance of test data from accredited laboratories, both internationally and locally. HOKLAS has signed the following types of mutual recognition agreements/arrangements:

HOKLAS currently has bilateral agreements with six overseas national laboratory accreditation programs - NATA of Australia, RvA of the Netherlands, IANZ of New Zealand, SAC of Singapore, UKAS of United Kingdom and A2LA of the United States.

HOKLAS also has a bilateral group agreement with the European Co-operation for Accreditation (EA). This agreement with the EA multilateral agreement group in effect means HOKLAS accepts accreditation from the following national programs - BMwA of Austria, BKO/OBE and BELTEST of Belgium, CAI of Czech Republic, DANAK of Denmark, FINAS of Finland, COFRAC of France, DAR of Germany including DACH, DAP, DASMIN, DATECH and DKD, NAB of Ireland, ISRAC of Israel, SIT and SINAL of Italy, LA of Lithuania, RvA of the Netherlands, NA of Norway, IPQ of Portugal, SNAS of Slovakia, ENAC of Spain, SWEDAC of Sweden, SAS of Switzerland and UKAS of the United Kingdom.

As a member of the Asian Pacific Laboratory Accreditation Co-operation (APLAC) Multilateral Mutual Recognition Agreement, HOKLAS accepts accreditation from NATA of Australia, SCC of Canada, NABL of India, KAN of Indonesia, JAB, IA Japan of Japan, KOLAS of Korea, IANZ of New Zealand, CNAL of the People's Republic of China, SAC-SINGLAS of Singapore, CNLA of Taiwan, China, VILAS/STAMEQ of Vietnam and A2LA, ICBO and NVLAP of the United States.

HOKLAS is one of the signatories of the International Laboratory Accreditation Cooperation (ILAC) Multilateral Mutual Recognition Agreement signed in Washington DC on 2 November 2000 at the General Assembly of the ILAC. This arrangement, which involves 33 accreditation bodies from 26 countries, authorizes signatory countries to accept test results issued by a laboratory that is accredited by any of the other signatory countries of the Arrangement.

The following areas have special regulations, standards and conformity assessment mechanisms: animals and plants (sanitary and phytosanitary); boilers and pressure vessels; building materials; chemicals (pesticides); consumer goods; drugs and medical devices; electrical products; energy; environment; food; information technology equipment; radioactive substances and irradiating apparatus; shipping safety; toys and children's products; and transport equipment. Please visit the following web site for specific product regulations and standards: http://www.standard.gov.hk/standard/eng/database.htm.

E. Accreditation

The Hong Kong Accreditation Service (HKAS), a government organization set up in 1998, provides accreditation for laboratories, certification bodies and inspection bodies. HKAS operates three accreditation programs - Hong Kong Laboratory Accreditation Scheme (HOKLAS) for laboratories, Hong Kong Certification Body Accreditation Scheme (HKCAS) for certification bodies, and Hong Kong Inspection Body Accreditation Scheme (HKIAS) for inspection bodies. HOKLAS was launched in 1985, HKCAS was launched in 1998, and HKIAS was launched in 1999. Participation in these programs is voluntary.

HKAS participates in a number of mutual recognition arrangements. It is a member of the International Accreditation Forum (IAF), International Laboratory Accreditation Cooperation (ILAC), Pacific Accreditation Cooperation (PAC) and Asia Pacific Laboratory Accreditation Cooperation (APLAC).

Contact information for HKAS:

Hong Kong Accreditation Service
Quality Services Division
Innovation and Technology Commission
36/F, Immigration Tower
Wan Chai, Hong Kong
Tel: (852) 2829-4840
Fax: (852) 2824-1302
E-mail: hkas@itc.gov.hk
Web Site: www.info.gov.hk/itc/eng/quality/hkas

F. Technical Regulations

Technical regulations are proposed and passed by respective relevant government departments. There may or may not be public consultation before each regulation is passed, depending on the specifics of that particular technical regulation.

Information on Hong Kong's technical regulations can be obtained from the following web site:

http://www.standard.gov.hk/standard/eng/alignment.htm.

Technical regulations are published in the Government of the Hong Kong Special Administrative Region Gazette.

For information about a subscription to the Government of the Hong Kong Special Administrative Region Gazette, contact:

Information Officer
Publications Sales Section
Information Services Department
4th Floor, Murray Building
Garden Road, Central
Hong Kong
Tel: (852) 2537-1910
Fax: 9852) 2523-7195
E-mail: puborder@isd.gov.hk
Web site: www.isd.gov.hk/eng/publication.htm#gaze

G. Export Controls

Hong Kong maintains an effective, highly autonomous, and transparent export control regime that the U.S. government has encouraged others to emulate. The United States continues to provide the same level of access by Hong Kong importers to controlled dual-use U.S. technologies as before reversion. The Hong Kong Government imposes restrictions on the import and export of high-technology products, mirroring the control lists of the internationally observed multilateral export control regimes (Wassenaar, MTCR, Australia Group and, as of early 2004, the Chemical Weapons Convention. Hong Kong has also adopted catch-all export license provisions that cover exports or re-exports to entities and institutions involved in promoting the production of weapons of mass destruction. This includes restrictions on unlicensed re-exports from Hong Kong to the People's Republic of China. A caution to U.S. exporters - Hong Kong has not adopted U.S. unilateral export controls. But the U.S. Government will penalize U.S. firms involved in transactions covered by U.S. unilateral dual-use export law where the goods transiting Hong Kong go to countries or entities sanctioned by U.S. export control laws.

Textile and apparel exports are subject to licensing through the end of 2004 because of Hong Kong's obligations under the WTO Agreement on Textiles and Clothing. These obligations will cease when WTO members eliminate all remaining quotas on textile and apparel imports from other WTO members on January 1, 2005.

H. Labeling/Marking

Food products, such as milk, prepackaged food, beverages, and frozen confections, need to be legibly marked or labeled in either the English or Chinese language or in both languages. The label/marking needs to include the full company name and address or details of the registered or principal office of the manufacturer or packer. It also must have the food's name or designation, list of ingredients, composition or contents, with the net weight or net volume, and indication of "Best before" or "Use by" date. Statements of special conditions for storage or instructions also need to be legibly marked or labeled.

Pharmaceuticals and over-the-counter (OTC) drugs must have indications of dosage and frequency on the label in both Chinese and English.

I. Contact Information

Central contact point:

Innovation and Technology Commission
Executive Administrator, Hong Kong
Accreditation Service
36/F, Immigration Tower
7 Gloucester Road
Wan Chai, Hong Kong
Tel: (852) 2829-4867
Fax: (852) 2583-9371, 2824-1302
E-mail: psib@itc.gov.hk
Web site: www.info.gov.hk/itc/psis

For regulatory contact points, please refer to the following web site:

http://www.itsd.gov.hk/standard/eng/contact.htm.

Standards point of contact at Commercial Service:

Fanny Chau, Commercial Specialist
U.S. Commercial Service
American Consulate General
26 Garden Road
Central, Hong Kong
Tel: (852) 2521-3721
Fax: (852) 2845-9800
E-mail: fanny.chau@mail.doc.gov

CHAPTER 7 INVESTMENT CLIMATE STATEMENT

HONG KONG

A. Openness to Foreign Investment

Hong Kong pursues a free market philosophy, and there is minimum government interference in the economy. The government welcomes foreign investment. It offers no special incentives nor does it impose disincentives for foreign investors. Hong Kong's well-established rule of law is applied consistently and without discrimination. There is no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Hong Kong is a member of the World Trade Organization in its own right and a separate customs territory. Hong Kong is a duty free port, except for a small number of tariffs on products such as cigarettes and alcohol. There are no quotas or dumping laws.

Foreign firms and individuals are allowed freely to incorporate their operations in Hong Kong, to register branches of foreign operations, and to set up representative offices without discrimination or undue regulation. There is no restriction on the ownership of such operations. Company directors are not required to be citizens of, or resident in Hong Kong. Reporting requirements are straightforward and not onerous.

Hong Kong's extensive body of commercial and company law generally follows that of the United Kingdom, including the common law and rules of equity. Most statutory law is made locally. The local court system provides for effective enforcement of contracts, dispute settlement and protection of rights. Formalities are minimal for company incorporation and business registration. Foreign and domestic companies register under the same rules and are subject to the same set of business regulations. The Hong Kong Government's Invest Hong Kong encourages inward investment as a means of introducing new or improved products, processes, designs and management techniques. U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis.

There is no capital gains tax, nor are there withholding taxes on dividends and royalties. Profits can be freely converted and remitted. Foreign-owned and domestically owned firms are taxed at the same rate, 17.5 percent of profits. There are no preferential or discriminatory export and import policies that affect foreign investors. There are no direct subsidies to domestic industries. In recent years, the government became somewhat more proactive in support of high technology development. This included efforts to encourage applied research and development in the industrial park-like "Cyberport" and "Science Park" projects. With government support, these two projects, which were open to foreign and domestic companies on an equal basis, were intended to offer lower than market prices for office rental space.

There are no disincentives to foreign investment such as quotas, bonds, deposits, or other similar regulations. The Hong Kong Code on Takeovers and Mergers (1981) sets out general principles for acceptable standards of commercial behavior.

According to Hong Kong government statistics, there were 3,207 regional operations of overseas companies in Hong Kong in 2003. The government defines regional operations as: regional headquarters which control the operation of other branches in the region without frequent referrals to the parent company outside Hong Kong; and regional offices as offices which coordinate operations elsewhere in the region with frequent referrals to the parent company outside Hong Kong or a regional headquarters. The U.S. has the largest number of regional headquarters and offices in Hong Kong (740 companies), followed by Japan (610 companies) and the UK (282 companies). The major lines of business of the regional headquarters included wholesale/retail, import/export, finance and banking, manufacturing, and transport and related services.

The Hong Kong Government owns all land, granting long-term leases without transferring title. Local and foreign leaseholders are treated equally. The government plays a significant role in the housing market: about 50 percent of homes in Hong Kong are rented from the government or purchased with government assistance at below market rates.

With few exceptions, the Hong Kong Government does not attempt to limit the activities of foreign investors either in specified projects or sectors. Foreign investment in Hong Kong flows freely into the industrial sector as well as into services, franchises, restaurants, the entertainment industry, and the ownership of property, both residential and commercial. The telecommunications services market has been fully liberalized since January 1, 2003.

The exceptions to the Hong Kong government's open foreign investment policy are:

i) Broadcasting - Voting control of free-to-air television stations by non-residents is limited to 49 percent. There are also residency requirements for the directors of broadcasting companies.

ii) Legal Services - Foreign lawyers are able to practice foreign and international law in Hong Kong. Foreign lawyers can apply to take the Hong Kong Bar Examination and, if successful, practice Hong Kong law. Foreign law firms may not hire local lawyers to advise on Hong Kong law, but may themselves become "local" firms after satisfying certain residency and other requirements. They may thereafter hire local attorneys, but must do so on a 1:1 basis with the foreign lawyers. They also can form associations with local law firms.

B. Conversion and Transfer Policies

There are no restrictions on conversion and inward or outward transfer of funds for any purpose. The HK dollar is a freely convertible currency that, since late 1983, has been linked to the U.S. dollar at an exchange rate of HK$7.8 = US$1. Government authorities are committed to exchange rate stability through maintenance of the linked rate. There is no allocation of foreign exchange.

C. Expropriation and Compensation

The U.S. Consulate General is not aware of any expropriation actions in the recent past. However, expropriation of private property may occur if it is clearly in the public interest, but only for well-defined purposes such as implementation of public works projects. If this is the case, expropriations are to be conducted through negotiations, in a non-discriminatory manner in accordance with established principles of international law. Due process and transparency are to be observed. Investors in and lenders to expropriated entities are to receive prompt, adequate, and effective compensation. Property may be acquired under the State Land Resumption Ordinance, the Land Acquisition Ordinance, the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance or the Roads Ordinance. These ordinances provide for payment of compensation. If agreement cannot be reached on the amount payable, either party can refer the claim to the Land Tribunal.

D. Dispute Settlement

The U.S. Consulate General is not aware of any investor-state disputes in recent years involving U.S. or other foreign investors or contractors and the Hong Kong Government. The Hong Kong Department of Justice is also not aware of any such disputes. Private investment disputes are normally handled in the courts or via private negotiation. Alternatively, disputes may be referred to the Hong Kong International Arbitration Center.

The Hong Kong Government accepts international arbitration of investment disputes between itself and investors. Following reversion to Chinese sovereignty on July 1, 1997, Hong Kong applies provisions of the International Center for the Settlement of Investment Disputes (ICSID), known as the Washington Convention, and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Hong Kong has also adopted the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration.

Hong Kong and China signed a Memorandum of Understanding (MoU) in June 1999 on an arrangement parallel to the New York Convention for the reciprocal enforcement of arbitral awards, since the New York Convention, being an international agreement, is no longer applicable to the enforcement of arbitral awards between Hong Kong and China.

Hong Kong's legal system is firmly based on the rule of law and the independence of the judiciary. Courts of justice in Hong Kong include the Court of Final Appeal, the High Court (composed of the Court of Appeal and the Court of First Instance), the District Court, the Magistrate's Courts, the Coroner's Court, and the Juvenile Court. There are also a Lands Tribunal, Labor Tribunal, and other statutory tribunals.

E. Performance Requirements/Incentives

Consistent with its non-interventionist economic philosophy, Hong Kong imposes no export performance or local content requirements as a condition for establishing, maintaining or expanding a foreign investment. Hong Kong offers no special privileges to attract foreign investment. There are no requirements that Hong Kong residents own shares, that foreign equity be reduced over time, or that technology be transferred on certain terms.

All of Hong Kong is a duty-free zone. Subject to non-discriminatory application of excise taxes and restricted entry in some sectors, as noted above, local and foreign firms are free to take advantage of investment opportunities as they arise.

F. Right to Private Ownership and Establishment

Hong Kong law and regulations provide for the right of foreign and domestic private entities to establish, own and to dispose of interests of business enterprises. Foreign investors are allowed, except for the sectors noted above, to engage in all lawful forms of remunerative activity. The Hong Kong government does not generally engage directly in business activity via public enterprises. Business privileges, franchises and land development rights are granted on the basis of competitive equality.

G. Protection of Property Rights

Hong Kong's commercial and company laws provide for effective enforcement of contracts and protection of corporate rights. Hong Kong has filed its notice of compliance with the trade-related intellectual property requirements of the World Trade Organization. The Intellectual Property Department, which includes the Trademarks and Patents Registries, is the focal point for the development of Hong Kong's intellectual property regime. The Customs and Excise Department is the principal enforcement agency for intellectual property rights (IPR). Hong Kong has acceded to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, and the Geneva and Paris Universal Copyright Conventions. Hong Kong also continues to participate in the World Intellectual Property Organization, as part of China's delegation.

The Hong Kong government devotes significant attention to IPR enforcement. Implementation of laws passed in recent years, including aggressive raids at the retail level, has significantly reduced illegal production and retail sales of copyright and trademark protected products. The Hong Kong courts have imposed longer jail terms for violations of Hong Kong's copyright ordinance. The Hong Kong government has conducted public education efforts to encourage respect for intellectual property rights. Nevertheless, pirated and counterfeit products remain available at the retail level throughout Hong Kong. End-use piracy is also a problem, particularly for software and textbooks, and affected industries claim enforcement in this area is ineffective. Health authorities permit the registration of generic drugs for marketing without regard to whether these products infringe on valid patents. The pharmaceutical industry has submitted a proposal for establishing some a form of patent linkage in the drugs registration process to the government. Hong Kong's recent efforts to increase liaison with mainland IPR officials should help to better protect IPR in Hong Kong.

The Government continues to refine its IPR law. In July 2003 the Legislative Council passed an IPR bill that liberalized the parallel importation of computer software. In March 2004 the Legislative Council passed an IPR bill that facilitates enforcement action and prosecution work against illicit reproduction of printed works. The bill will take effect September 1, 2004. In addition, the bill maintains criminal liability for business-related end-use piracy of computer programs, movies, television dramas, and musical recordings while continuing to exclude the business-related end-use piracy of printed works from criminal liability. These provisions will stay in effect through July 2006, by which time the Hong Kong Government intends to propose new legislation covering end-use piracy. The Hong Kong Government continues to engage with industry and users on the appropriate scope of end-user criminal liability.

The Copyright Ordinance protects any original copyright work created or published by any person anywhere in the world. It provides for rental rights for sound recordings and computer programs but not films. It provides for enhanced penalty provisions against copyright piracy and additional legal tools to facilitate enforcement. It decriminalizes parallel imports of copyrighted products one year after their release anywhere in the world, but maintains civil penalties.

The Patent Ordinance allows for granting of an independent patent in Hong Kong based on the patents granted by the UK and the Chinese Patent Offices. The patent granted in Hong Kong is independent and capable of being tested for validity, rectified, amended, revoked and enforced in Hong Kong courts.

The Registered Design Ordinance is modeled on the EU design registration system, with certain modifications. To be registered, a design must be new. The system requires no substantive examination. Protection is for an initial period of five years, and may be extended for four periods of five years each, up to a maximum of 25 years.

Hong Kong's trademark law is TRIPS-compatible and allows for registration of trademarks relating to services. All trademark registrations originally filed in Hong Kong are valid for seven years and renewable for 14-year periods. Proprietors of trademarks registered elsewhere must apply anew and satisfy all requirements of Hong Kong law. When evidence of use is required, such use must have been in Hong Kong.

Hong Kong has no specific ordinance to cover trade secrets. Under the Trade Description Ordinance, however, the government has the duty to protect information being disclosed to other parties. The Trade Description Ordinance prohibits false trade descriptions, forged trademarks and misstatements in respect of goods supplied in the course of trade.

H. Transparency of the Regulatory System

Hong Kong's body of law and regulation recognizes the value of competition in economic endeavor. Tax, labor, health and safety and other laws and policies avoid distortions or impediments to the efficient mobilization and allocation of investment. Bureaucratic procedures and "red tape" are held to a minimum and are equally transparent to local and foreign investors. Hong Kong does not have an anti-trust law. The Hong Kong government does not support competition legislation. It states that an all-embracing law would not be able to take into account the specific requirements of individual sectors. Instead of a Competition Authority, the government has established a Competition Policy Advisory Group (COMPAG), chaired by the Financial Secretary, to review competition issues that have substantial policy or systemic implications. Certain sectors of the economy are dominated by monopolies or cartels, not all of which are regulated by the Hong Kong government. These entities do not discriminate against U.S. goods or services, but they can use their market position to block effective competition.

I. Efficient Capital Markets and Portfolio Investment

There are no impediments to the free flow of financial resources. Non-interventionist economic policies, complete freedom of capital movement and a well-understood regulatory and legal environment have greatly facilitated Hong Kong's role as a regional and international financial center. Hong Kong's foreign exchange markets handled an average daily turnover of US$66.8 billion in 2001, making it the seventh largest in the world and the third largest in Asia.

Hong Kong has a three-tier system of deposit-taking institutions: licensed banks, restricted license banks, and deposit-taking companies. Only licensed banks can offer current (checking) or savings accounts. At the end of 2003, Hong Kong had 134 licensed banks, 42 restricted licensed banks, 39 deposit-taking institutions, and 87 representative offices. The Hong Kong & Shanghai Banking Corporation (HSBC) is Hong Kong's largest banking group. With its majority-owned subsidiary Hang Seng Bank, and 298 branches, the group controls more than 36.1 percent of Hong Kong dollar deposits. The Bank of China (Hong Kong) is the second-largest banking group (300 branches), and controls 16.8 percent of Hong Kong dollar deposits. Twenty-nine American "authorized financial institutions" operate in Hong Kong. U.S. banks licensed in Hong Kong are listed in Chapter 11 Section F below. Most banks in Hong Kong maintain U.S. correspondent relationships.

Hong Kong's five largest banks, in terms of total assets (2003), are as follows:

Rank	Institution	Total Assets (US$ Billion)
1	Hong Kong & Shanghai Banking Corporation (HSBC)	275.5
2	Bank of China ( Hong Kong)	97.8
3	Hang Seng Bank Ltd.	64.5
4	Standard Chartered Bank, Hong Kong Branch	39.1
5	Bank of East Asia, Ltd.	25. 4

Sources: Companies' annual reports

Credit in Hong Kong is allocated strictly on market terms and is available to foreign investors on a non-discriminatory basis. The private sector has access to the full spectrum of credit instruments as provided by Hong Kong's banking and financial system. Legal, regulatory, and accounting systems are transparent and consistent with international norms. The Hong Kong Monetary Authority (HKMA) functions as a de facto central bank. It is responsible for maintaining the stability of the banking system and managing the Exchange Fund backing Hong Kong's currency. The HKMA, with the assistance of the banking sector, has upgraded Hong Kong's financial market infrastructure. Real Time Gross Settlement helps minimize risks in the payment system and brings Hong Kong in line with international standards. The Hong Kong Mortgage Corporation (HKMC) promotes the development of the secondary mortgage market in Hong Kong. The HKMC is 100 percent owned by the government through the Exchange Fund. The HKMC purchases residential mortgage loans for its own retained portfolio and also repackages mortgages into mortgage-backed securities for sale. In 2003, the HKMC issued US$1.4 billion worth of unsecured debt securities in the local debt market, raising the outstanding amount of debt securities to US$4.7 billion.

The Legislative Council passed in May 2004 the bill on Deposit Protection Scheme to enhance deposit protection in Hong Kong. HKMA expects the scheme will start in 2006.

Under the Insurance Companies Ordinance, insurance companies are authorized by the Insurance Authority to transact business in Hong Kong. Hong Kong has the highest number of authorized insurance companies in Asia. As of April 2004, there were 186 authorized companies. Of these, 93 were foreign companies from 23 countries. A number of the world's top insurance companies in terms of assets have branch offices or subsidiaries in Hong Kong.

With a total market capitalization of US$711.3 billion and 1,037 listed firms at year-end 2003, Hong Kong's stock exchange ranked second in Asia after Tokyo, and tenth in the world in terms of capitalization. Hong Kong Exchanges and Clearing Limited (HKEx), a listed company, operates the stock and futures exchanges. The Securities and Futures Commission, an independent statutory body outside the civil service, has licensing and supervisory powers to ensure the integrity of markets and to protect investors.

In April 2003, the government implemented a major modernization of the legal framework for Hong Kong's securities market designed to upgrade transparency and corporate governance, boost regulators' enforcement powers, and improve investor protections. To enhance market competitiveness, HKEx in the same month removed the rule on minimum brokerage commission rates for stock and futures transactions.

There are no discriminatory legal constraints to foreign securities firms establishing in Hong Kong via branching, acquisition, or subsidiaries. In practice, foreign firms typically establish in Hong Kong as subsidiaries. Rules governing operations are the same, irrespective of ownership. Portfolio investment decisions are left to the private sector. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation/association that limit or prohibit foreign investment, participation, or control.

The stock exchange plays a significant role in raising capital for Chinese state-owned enterprises. Chinese state enterprises raise equity (through the issuance of so-called "H" shares) in Hong Kong provided they meet Hong Kong regulatory and accounting requirements. These "H" shares are denominated in Renminbi, but must be purchased in Hong Kong dollars. In 2003, a total of 64 Chinese enterprises had "H" share listings on the stock exchange, with market capitalization of US$51.7 billion.

Hong Kong has made a concerted effort to develop a local debt market with the Exchange Fund bills and notes program. Maturities now extend to ten years. Hong Kong dollar debt (public and private) has increased gradually, from US$3.46 billion at the end of 1989 to US$71.5 billion by the end of 2003. Regional infrastructure financing requirements and increasing investor demand are projected to stimulate further development of the local debt market. In May 2004, for the first time, Hong Kong issued bonds securitizing the revenues from government tunnels and bridges. In June 2004, the governmental Hong Kong Mortgage Corporation also set up a US$2.6 billion retail bond program. The Hong Kong government is also slated to sell bonds for its first time during the summer of 2004.

The Hong Kong government requires workers and employers to contribute to retirement funds under the Mandatory Provident Fund (MPF) scheme. Contributions are expected to channel US$3-4 billion per year into various investment vehicles. By the end of 2003, the net asset values of MPF funds amounted to US$11.5 billion.

The Exchange Fund Investment Limited (EFIL), established by the government to dispose of the stock portfolio it purchased during the Asian Financial Crisis, completed its operations in January 2003. EFIL disposed of the stocks in the form of a mutual fund, the Tracker Fund of Hong Kong (TraHK). The government decided to retain a portion of the stocks (worth about US$410 million) as a long-term investment. The HKMA is responsible for the management of these stocks. TraHK is traded on the stock exchange.

J. Political Violence

Hong Kong is politically stable. The U.S. Consulate General is not aware of any incidents involving politically motivated damage to projects or installations.

K. Corruption

Hong Kong has an excellent track record in combating corruption. Many governments study Hong Kong's anti-corruption practices each year. U.S. firms have not identified corruption as an obstacle to foreign direct investment. The well-known Independent Commission Against Corruption (ICAC) is responsible for combating corruption. The ICAC is independent of the public service and the ICAC Commissioner is responsible directly to the Chief Executive. A bribe to a foreign official is a criminal act, as is the giving or accepting of bribes, for both private individuals and government employees. Penalties are stiff. For example, a civil servant who solicits or accepts any advantage without special permission of the government can receive one year's imprisonment and a HK$100,000 fine if convicted. Individuals in both the private and public sector can receive up to 7 years imprisonment and a HK$500,000 fine for offering, soliciting or accepting a benefit for performance or non-performance of an official duty.

L. Bilateral Investment Agreements

Hong Kong is negotiating a series of bilateral investment agreements -- the Hong Kong Government calls them "Investment Promotion and Protection Agreements" -- with major foreign investors. To date, Hong Kong has signed agreements with Australia, Austria, Belgo-Luxembourg Economic Union, Denmark, France, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Sweden, Switzerland and the United Kingdom. The Hong Kong Government has initialed agreements with Canada and Vietnam. It is negotiating agreements with Singapore and Thailand. All such agreements are based on a model text approved by China through the Sino-British Joint Liaison Group. The United States and Hong Kong held talks on a bilateral investment agreement in the late 1990s, but certain differences could not be resolved and negotiations were suspended. U.S. firms, however, are not at a competitive or legal disadvantage since Hong Kong's market is open and its legal system impartial.

M. OPIC and Other Investment Insurance Programs

Overseas Private Investment Corporation (OPIC) coverage is not available in Hong Kong. Hong Kong is a member of the World Bank Group's Multilateral Investment Guarantee Agency (MIGA).

N. Labor

In the 1980s and much of the 1990s, Hong Kong's unemployment rate hovered around two percent. Reflecting structural changes in the local economy and weak global economic conditions, the unemployment rate rose to a record level of 8.3 percent in May 2003. The job market improved gradually since then, with the unemployment rate standing at 7.1 percent in April 2004. An employee retraining board provides skills retraining for local employees to cope with ongoing structural change in the economy.

To address a shortage of highly skilled technical and financial professionals, the government has made efforts to attract qualified foreign and mainland Chinese workers, though requirements for the latter group were tighter. However, effective from July 2003, conditions for admitting mainland Chinese for employment will be eased and aligned with those applicable to foreign nationals.

The average number of days lost due to industrial conflicts is one of the lowest in the world. In 2002, membership in Hong Kong's 622 registered unions totaled 676,534, a participation rate of about 22.15 percent. Hong Kong has implemented 40 conventions of the International Labor Organization in full and 18 others with modifications.

Local law provides for the right of association and the right of workers to establish and join organizations of their own choosing. The government does not discourage or impede the formation of unions. Workers who allege antiunion discrimination have the right to have their cases heard by the Labor Relations Tribunal. Although there is no legislative prohibition of strikes, in practice most workers must sign employment contracts that state that walking off the job is a breach of contract and can lead to summary dismissal. Collective bargaining is legal in Hong Kong, but there is no obligation on employers to engage in it. In practice, collective bargaining is not widely used. For more information on labor regulations in Hong Kong, please check the following website: www.justice.gov.hk/home.htm (click on Chapter 57 "Employment Ordinance").

O. Foreign Trade Zones/Free Ports

Hong Kong is a free port without foreign trade zones.

P. Foreign Direct Investment Statistics

Table 1: Position of Inward Foreign Direct Investment by Major Investor Country/Territory, as at end of 2002.

Country	U.S.$ Billion	% Share of Total
China	76.2	31.2
Bermuda	27.0	11.1
Netherlands	26.3	10.8
United States	23.9	9.8
British Virgin Islands	21.1	8.6
Japan	18.1	7.4
Singapore	9.4	3.9
United Kingdom	7.2	2.9
Australia	5.7	2.3
Cayman Islands	3.6	1.5
Others	25.5	10.5
TOTAL	244.0	100.0

Source: Hong Kong Census and Statistics Department

Note 1: Excluding inward direct investment from offshore financial centers, which were originally from Hong Kong.

Note 2: US$1 = HK$7.8

Table 2: Position of Inward Foreign Direct Investment by Major Economic Activity, as at end of 2002.

	US$ Billion	% Share of Total
Investment holdings, real estate and various business services	102.1	41.8
Wholesale, retail and import/export trades	42.0	17.2
Banks and deposit-taking companies	34.4	14.1
Insurance	10.8	4.4
Financial institutions other than banks and deposit-taking companies	10.7	4.4
Communications	8.8	3.6
Manufacturing	8.7	3.6
Transport and related services	7.4	3.0
Construction	4.4	1.8
Restaurants and hotels	3.1	1.3
Other activities	11.7	4.8
TOTAL	244.0	100.0

Source: Hong Kong Census and Statistics Department

Note: Excluding inward direct investment from offshore financial centers, which were originally from Hong Kong.

Table 3: Position of Outward Foreign Direct Investment by Major Resident Country/Territory, as at end of 2002.

Country	U.S.$ Billion	% Share of Total
China	108.1	49.8
British Virgin Islands	68.7	31.6
United States	4.1	1.9
Malaysia	3.6	1.6
Singapore	3.3	1.5
Thailand	2.7	1.2
United Kingdom	2.6	1.2
Taiwan	1.9	0.9
Bermuda	1.9	0.9
Panama	1.9	0.9
Others	18.4	8.5
TOTAL	217.2	100.0

Source: Hong Kong Census and Statistics Department

Note: Excluding outward direct investment of offshore financial centers which were channeled back to Hong Kong.

Table 4: Position of Outward Foreign Direct Investment by Major Economic Activity, as at end of 2002.

	US$ Billion	% Share of Total
Investment holdings, real estate and various business services	101.2	46.6
Wholesale, retail and import/export trades	27.2	12.5
Manufacturing	16.9	7.8
Communications	9.3	4.3
Transport and related services	7.9	3.7
Financial institutions other than banks and deposit-taking companies	5.9	2.7
Restaurant and hotels	4.9	2.3
Insurance	3.5	1.6
Banks and deposit-taking companies	3.2	1.5
Construction	2.6	1.2
Other activities	34.6	15.9
TOTAL	217.2	100.0

Source: Hong Kong Census and Statistics Department

Note: Excluding outward direct investment of offshore financial centers that were channeled back to Hong Kong.

Table 5: Amount and Growth of U.S. Investment in Hong Kong for 2000/2001/2002 in US$ Millions.

Year	Amount	% Change
2000	27,447	20.6
2001	32,089	16.9
2002	35,764	11.5

Note 1: The U.S. Department of Commerce estimates the total U.S. direct investment position in Hong Kong at historical cost (the book value of U.S. direct investors' equity in, and net outstanding loans to, their foreign affiliates).

Note 2: U.S. Department of Commerce statistics differ from HKG statistics. Per Table 1 above, the latter indicates total U.S. investments of US$24.8 billion at year-end 2001.

Note 3: Preliminary figures for 2002.

Source: U.S. Department of Commerce, Bureau of Economic Analysis, U.S. Direct Investment Position Abroad on a Historical Cost Basis.

Table 6: Hong Kong's Pledged and Actual Direct Investment in China in US$ Billions and Percent Share of Total Investment in China.

Year	Amount Pledged	Actually Invested	Share of Total Investment
1999	13.3	16.4	40.6
2000	17.4	16.2	39.8
2001	20.7	16.7	35.7
2002	25.2	17.9	33.9
2003 (Jan-Jun)	19.8	10.5	34.7
1978-2003 (Jan-Jun)	394.1	216.0	45.2

Source: PRC Ministry of Commerce.

Table 7: Major Foreign Investor Firms.

United States: American International Group, AT&T, Bank of America, Caltex, Citibank, Coca-Cola, Compaq Computer, CSX, Disney, Exxon, Federal Express, Goldman Sachs, IBM, JP Morgan Chase, Kodak, Merrill Lynch, Mobil, Morgan Stanley, Motorola, Pacific Waste Management, Pepsi.

Japan: C. Itoh, Citizen Watches, Daido Concrete, Hitachi, Jusco, Mitsubishi, NEC, Nishimatsu, Nomura, Olympus, Uny.

United Kingdom: HSBC, Inchcape Pacific, Jardine Matheson, Lloyds, P & O Shipping, Standard Chartered Bank, Swire Pacific Group.

West Europe: Carlsberg, Hong Kong Petrochemicals (Italian/Korean/Chinese joint venture), Siemens, Heraeus, Philips, Bouygues/Dragages, Bachy-Soletanches, Banque National de Paris, Banque Indosuez, Chanel, Cartier, Christian Dior, Remy, Ericsson, Asea Brown Boveri, Tetrapak, Electrolux.

China: Bank of China (Hong Kong), Beijing Enterprises, China Everbright, China Investment and Trust Corporation (CITIC), China Merchants, China Mobile, China National Offshore Oil Corporation (CNOOC), China National Petroleum Corporation, China Ocean Shipping Co (COSCO), China Overseas Construction, China Resources, China Travel Services, China Unicom, Guangdong Enterprises, Legend Holdings, Petro China, Shanghai Industrial, Yue Xiu Enterprises.

Asia: San Miguel Brewery, News Corp., Pioneer, Sime Darby, Shangri-la/Kerry Trading, Park View Properties, Lippo Group, C.P. Pokphand, LG, First Pacific Group.

MACAU

A. Openness to Foreign Investment

Macau became a Special Administrative Region (SAR) of the People's Republic of China on December 20, 1999. Macau's status since reverting to Chinese sovereignty is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law, Macau's constitution. Under the concept of "One Country, Two Systems" articulated in these documents, Macau is promised a high degree of autonomy in economic matters and its economic system is to remain unchanged for 50 years. Since reversion, the Macau government has maintained a transparent, non-discriminatory and free market economy. Macau has separate membership in the World Trade Organization (WTO).

The government hopes to diversify Macau's economy by attracting foreign investment and is committed to maintaining an investor-friendly environment. Corporate taxes are low. The tax rate is 15 percent for a company's net profits greater than US $37,500 (300,000 patacas). For net profits less than US$37,500, the tax ranges from 2%-15%.

The government is seeking to develop Macau into a commercial and trade service provider for China, particularly the West Guangdong region. It also aims to facilitate trade and economic cooperation between China and Portuguese-speaking countries. The awarding of two gaming concessions to consortia with U.S. interests is significantly boosting the U.S. business profile and investment in Macau.

Macau and the PRC, implemented a free trade agreement, the Closer Economic Partnership Arrangement (CEPA) on January 1, 2004. The agreement is similar to the CEPA between the Hong Kong SAR and the PRC signed on June 29, 2003. It provides for market opening in 273 product and 18 service sectors and provides for trade facilitation measures. Not all the products are exactly the same as those in the Hong Kong-PRC CEPA. In December 2003, the government started the construction of the cross-border industrial zone located between northern part of Macau and Zhuhai. It is expected that manufacturers will be able to begin operating in the industrial zone by the end of 2004.

Macau is heavily dependent on the gaming sector and tourism industries. In addition, a single product category, textiles and apparel, accounts for approximately 83 percent of its exports.

Foreign firms and individuals are free to establish companies, branches and representative offices without discrimination or undue regulation in Macau. There are no restrictions on the ownership of such establishments. Company directors are not required to be citizens of, or resident in Macau.

The government is liberalizing the telecommunications sector under a law passed in August 2001. Macau has liberalized the mobile phone market and Internet services.

It has issued three mobile telephone licenses to 2 foreign companies and one local firm.

Certain requirements are imposed on three professional services sectors as described below. Under Macau law (Decree Law 14/95/M, 22/96M and 22/97/M), qualified professionals and executives may apply for the right of temporary residency.

i) Education - an individual applying to establish a school must have a Macau Certificate of Identity or have the right to reside in Macau. The principal of a school must be a Macau resident.

ii) Newspapers and magazines - applicants must first apply for business registration and register with the Government Information Bureau as an organization or an individual. The publisher of a newspaper or magazine must be a Macau resident or have the right to reside in Macau.

iii) Legal services - lawyers from foreign jurisdictions who seek to practice Macau law must first obtain residency in Macau. They also must pass an examination before they can register with the Lawyer's Association, a self-regulatory body. The examination is in either Chinese or Portuguese. After passing the examination, foreign lawyers are required to serve 18-month internship before they are able to practice law in Macau.

B. Conversion and Transfer Policies

Profits and other funds associated with an investment, including investment capital, earnings, loan repayments, lease payments, and capital gains, can be freely converted and remitted. The domestic currency, Macau Official Pataca (MOP), is pegged to the Hong Kong dollar at 1.03 and indirectly to the U.S. dollar at an exchange rate of approximately MOP8 = US$1. The Monetary Authority of Macau, the de facto central bank, is committed to exchange rate stability through maintenance of the peg to the Hong Kong dollar.

Although Macau imposes no restrictions either on capital flows or foreign exchange operations, exporters are required to convert 40 percent of foreign currency earnings into MOP. This legal requirement is not applied to tourism services.

C. Expropriation and Compensation

The U.S. Consulate General is not aware of any expropriation actions. Expropriation of property may occur if it is in the public interest. In such cases, the SAR government will exchange the private property with an equivalent public property based on the valuation and conditions of the property. The exchange of property is in accordance with established principles of international law. There is no remunerative compensation.

D. Dispute Settlement

The U.S. Consulate General is not aware of any investor-state disputes involving U.S. or other foreign investors or contractors and the SAR government. Private investment disputes are normally handled in the courts or via private negotiation. Alternatively, disputes may be referred to the Hong Kong International Arbitration Center.

Macau has an arbitration law (Decree 55/98/M), which adopts the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration. The SAR government accepts international arbitration of investment disputes between itself and investors.

Macau's legal system is based on the rule of law and the independence of the judiciary. Macau has commercial and bankruptcy laws (Decree 40/99/M). Courts in Macau include the Court of Final Appeal, Intermediate Courts and Primary Courts. There is also an Administrative Court, which has jurisdiction over administrative and tax cases. These provide an effective means for enforcing property and contractual rights. Commercial and bankruptcy laws are written under the Macau Commercial Code (Decree 40/99/M).

E. Performance Requirements/Incentives

To attract foreign investment, the SAR government offers investment incentives to investors on a national treatment basis. These incentives are contained in Decrees 1/86/M, 58/99/M, 23/98/M and 49/85/M and provided if companies can fulfill at least one of the purposes of promoting economic diversification, contributing to promotion of exports to new unrestricted markets, promoting added value within their activity's value chain, and contributing to technical modernization. There is no requirement that nationals own shares. These incentives are categorized as fiscal incentives, financial incentives and land concessions.

Fiscal incentives include full or partial exemption from profit/corporate tax, industrial tax, property tax, stamp duty for transfer of properties, and consumption tax. The tax incentives are consistent with the WTO Agreement on Subsidies and Countervailing Measures as they are neither export subsidies nor import substitution subsidies as defined in the WTO Agreement. Financial incentives include government-funded interest subsidies (ranging from 4-6 percent) on private bank Pataca loans for buying/leasing new equipment or construction/leasing of industrial buildings. Land concessions are granted to investors with a significant investment in Macau. In addition, Macau provides other subsidies for overseas promotions and applications for quality and environment management certification. Offshore companies are granted fiscal incentives and their managers and specialists who are not Macau residents are exempted from paying professional tax for the first 3 years of employment.

F. Right to Private Ownership and Establishment

Macau law and regulation provide for the right of foreign and domestic private entities to establish, acquire and dispose of interests in business enterprises.

G. Protection of Property Rights

Macau is a member of the World Intellectual Property Organization. Macau has acceded to the Berne Convention for the Protection of Literary and Artistic Works. Patents and trademarks are registered under Decree 97/99/M. Macau's copyright laws are TRIPS compatible and government offices are required to use only licensed software. The SAR government devotes considerable attention to intellectual property rights enforcement and coordinates with copyright holders. Source Identification Codes are stamped on all optical discs produced in Macau. Macau Economic Services (MES) uses an expedited prosecution arrangement to speed up punishment of accused pirate retailers.

The Macau government has devoted considerable resources to combating optical disc piracy in recent years and claims to have closed down all illicit optical disc production lines. Piracy of television signals (and much U.S.-origin program content) is rampant. The Macau government does not have a clear position on whether there is criminal liability for commercial end-use piracy of copyrighted works. The Consulate General has raised these issues with Macau officials and continues.

H. Transparency of the Regulatory System

The government has transparent policies and laws that establish clear rules and do not unnecessarily impede investment. The basic elements of a competition policy are set out in Macau's 1999 Commercial Code.

I. Efficient Capital Markets and Portfolio Investment

Macau allows free flows of financial resources. Foreign investors can obtain credit in the local financial market. At present, there are 24 financial institutions in Macau, including 11 local banks and 13 branches of banks incorporated outside Macau. In addition, there are ten moneychangers, two cash remittance companies, two financial intermediaries and one representative office of a financial institution. These institutions provide a range of credit instruments. Banks with capital originally from China and Portugal have a combined market share of about 66 percent of total deposits in the banking system. Total deposits amounted to US$13.6 billion in February 2004. In March 2004, banks in Macau maintained a capital adequacy ratio at 17.5 percent, well above the minimum 8 percent recommended by the Bank for International Settlements. Accounting systems in Macau are consistent with international norms.

Macau has no stock market, but companies can seek a listing in Hong Kong's stock markets. There is cooperation between Macau and Hong Kong financial regulatory authorities.

Under the Macau Insurance Ordinance, the Monetary Authority authorizes and monitors insurance companies. There are 11 life insurance companies and 15 non-life insurance companies in Macau. Total gross premium income from insurance services amounted to US$198.2 million in 2003.

Offshore finance businesses, including credit institutions, insurers, underwriters, and offshore trust management companies, are regulated and supervised by the Monetary Authority. Profits derived from offshore activities are fully exempted from all form of taxes.

J. Political Violence

Macau is politically stable. The U.S. Consulate General is not aware of any incidents in recent years involving politically motivated damage to projects or installations.

K. Corruption

Macau's anti-corruption agency is called the Commission Against Corruption (CAC). The CAC has powers of arrest and detention. Its budget and manpower have been increased in recent years. The number of complaints of corruption handled by CAC has increased significantly as a result of these changes and a public outreach campaign. The CAC's overall effectiveness remains constrained by legislation limiting the scope of its authority to public, but not private sector corruption.

L. Bilateral Investment Agreements

Macau has signed investment protection agreements with Portugal and the Netherlands.

M. OPIC and Other Investment Insurance Programs

Overseas Private Investment Corporation (OPIC) coverage is not available in Macau.

N. Labor

Macau's high, recent unemployment rate is decreasing. During the first quarter of 2004, the jobless rate was 5.5 percent, down from 6.1 percent in 2003. While the relocation of manufacturing facilities across the border to Zhuhai in China drove up unemployment rates, the increase in the number of gaming facilities and hotels will have a big positive impact on employment and some shortages of skilled workers may develop. Macau has labor importation schemes for unskilled and skilled workers who cannot be recruited locally. The current migrant labor pool is approximately 24,970, out of a total workforce of 215,500.

O. Foreign Trade Zones/Free Ports

Macau is a free port without foreign trade zones.

P. Foreign Direct Investment Statistics

According to the Enterprise Survey 2002 conducted by the Statistics and Census Service, there were 715 foreign direct investment companies in Macau, employing 29,629 workers. Hong Kong was the largest foreign investor in Macau, accounting for 71 percent of total foreign direct investment.

Table 1: Stock of foreign direct investment by country, 2002

Country	Amount US$ Million	% Share of Total
Hong Kong	2,417.8	71.0
China	383.4	11.3
Portugal	330.5	9.7
United Kingdom	102.1	3.0
United States	48.8	1.4
Others	121.3	3.6
TOTAL	3,403.9	100.0

Source: Statistics and Census Service

Table 2: Stock of foreign direct investment by industry, 2002

Sector	Amount US$ Million	% Share of Total
Cultural, recreational, gaming and other services	1,932	56.8
Banks and securities	660.5	19.4
Industrial production	364.3	10.7
Transport, storage and communications	251.4	7.4
Hotels and restaurants	198.4	5.8
Construction	69.6	2.0
Insurance	71.5	2.1
Wholesale and retail	-143.6	-4.2
TOTAL	3,404.0	100.0

Sources: Statistics and Census Service

CHAPTER 8 TRADE AND PROJECT FINANCING

A. Banking System

Hong Kong has an open financial system, with no controls on currency movement. A more complete description is contained in Chapter 7 Section I above.

B. Foreign Exchange Controls Affecting Trading

The local currency, the Hong Kong Dollar (HK$), is freely convertible and there are no foreign exchange controls.

C. General Availability of Financing

Commercial trade financing is available in Hong Kong for qualified customers. All licensed banks are authorized to provide loans to residents and non-residents in the currency of their choice. Letters of credit and other financial instruments are widely used to protect participants in trade arrangements. All banks maintain close working relationships with correspondent banking institutions. The financial system is highly developed and efficient.

D. How to Finance Exports/Methods of Payment

The preferred method of quoting is "CIF" or "C and F" in HK$. The U.S. dollar and other freely convertible currencies may be accepted for bids and pro forma invoicing. Terms of payment depend on the relative negotiating strength of the buyers and sellers. U.S. suppliers should seek to obtain letters of credit or sight draft terms when dealing with buyers who are not well known to them. Asking for a letter of credit is a standard business practice, and your potential customer will not generally interpret this as a sign of mistrust.

The importance of trade finance to Hong Kong has resulted in a high level of bank efficiency in providing import payment services. Letters of credit, document collection and international remittance are widely available. The risk of financing receivables can be readily evaluated via locally available credit information. Prospective exporters should make use of banking relationships to determine credit risk.

E. Types of Available Export Financing and Insurance

The U.S. EX-IM Bank offers both trade financing and insurance for U.S. exports (see below). Commercial vendors are also readily available.

Export Credits: The U.S. Export-Import Bank, an independent agency of the U.S. government, seeks to increase the competitive position of U.S.-based exporters in overseas markets. By providing export insurance, loan guarantees, direct loans and other types of financing support EX-IM Bank supports the sales of U.S. exports and thereby creates U.S. jobs. The terms and conditions of standard financing are governed by the OECD Export Credit Arrangement. Direct lending rates are set monthly and are called Commercial Interest Reference Rates (CIRRs).

For more information concerning Ex-Im Bank programs and application procedures contact Ex-Im Bank in Washington, D.C. at (800) 565-EXIM or (202) 565-3946. Fee calculations and applications can be found on-line at the web site www.exim.gov.

F. Availability of Project Finance/OPIC and Ex-Im Bank Project Finance/Lending

From Multilateral Institutions

Hong Kong and Macau are not recipients of official development assistance (i.e. OPIC, AID, USTDA). Projects are financed on commercial terms. Hong Kong is also a major center for commercial project financing for China.

G. List of Banks with Correspondent U.S. Banking Arrangements

The list of Hong Kong-based banks with correspondent U.S. banking arrangements is too large to include here. Chapter 11 Section F provides a list of U.S. banks licensed in Hong Kong. Hong Kong's five largest local banks are indicated in Chapter 7 Section I, above.

H. The Asian Development Bank

Asia's premier multilateral development finance institution, the Asian Development Bank (ADB), is headquartered in Manila, Philippines. ADB was founded in 1966 and is owned by 61 member countries. The United States and Japan are the largest shareholders. The Bank's regional membership extends from East Asia to South Asia, through the Pacific Islands up to Central Asia.

The ADB's total lending in 2003 totaled $6.1 billion. In addition, the ADB provided $180 million in technical assistance to its member countries. India was the largest borrower (24.6 percent of total, or $1.5 billion). Second largest was the PRC (24.4 percent or $1.49 billion) followed by Pakistan (14.3 percent or $871 million). Bangladesh ranked fourth (8.7 percent or $532 million), then Sri Lanka (4.5 percent or $275 million).

Sectorally, transport and communications again received the largest share of bank lending in 2003, garnering 42 percent of total lending. The social infrastructure sector regained position with 18.5 percent, followed by energy with 12.4 percent; finance - 7.9 percent; and multi-sector - 7.6 percent. (Sectoral and selected Country Market Briefs may be obtained from the U.S. Commercial Liaison Office for ADB).

The ADB maintains resident offices in Bangladesh, Cambodia, China, India, Indonesia, Kyrgyz Republic, Laos, Nepal, Pakistan, Philippines, Sri Lanka, Vietnam, Vanuatu (for the South Pacific), Uzbekistan, Kazakhstan and Mongolia; a field office in Gujarat, India, and a country office in the Philippines. The bank also maintains three representative offices in Tokyo, Washington, D.C., and Frankfurt.

The U.S. Department of Commerce maintains a Congressionally mandated Commercial Liaison Office for the ADB (CS ADB). The Office's mission is to help American firms access, enter and expand in Asian markets that benefit from ADB assistance. For example, the office provides counseling, advocacy, project information and conducts outreach programs in the region as well as in the United States to help U.S. firms take advantage of commercial opportunities in countries borrowing from the ADB.

To perform its mandate, the office cooperates with the U.S. Executive Director's Office at the ADB and works closely with Commercial Service posts in the region. CS ADB's cooperation with CS Hong Kong has resulted in a number of project development efforts to help U.S. consortia and their affiliates better access ADB's private sector window. An American Senior Commercial Officer, Frank Foster, heads the office. CS ADB invites American firms to work with it in pursuing ADB commercial and infrastructure project development opportunities. The office's contact information:

Address:
The U.S. Commercial Liaison Office for ADB (CS ADB)
American Business Center
25th Floor, Ayala Life-FGU Building
6811 Ayala Avenue
Makati City, Philippines 1226

U.S. mailing address:
PSC 500 Box 33
FPO AP 96515-1000
E-mail: manila.adb.office.box@mail.doc.gov
Telephones: (632) 887-1345(-6)
Fax: (632) 887-1164

CHAPTER 9 BUSINESS TRAVEL

A. Business Customs

Over the years, Hong Kong has developed as a unique society based on a blend of Chinese tradition and Western technology. Most people who are familiar with Hong Kong know that Hong Kong means business. Above all, it is a society that emphasizes hard work and success.

Americans encounter few if any cultural problems when conducting business in Hong Kong. Americans should be aware that Hong Kong people tend to be more formal than many Americans. Business acquaintances are addressed as Mr. or Ms. unless they state that their first name should be used. Business cards are exchanged frequently and the exchange should be fairly formal: the card should be accepted with both hands and a moment taken to read it carefully. "Face" is very important, and problems or areas of disagreement are handled indirectly to avoid loss of "face." While a study of local customs and practices may be helpful, most people in Hong Kong are sufficiently familiar with Western customs that they are tolerant of cultural differences. Business contacts should be treated the same as a formal business relationship in the United States. Western business attire (suit and tie for men, business suits for women) is appropriate.

B. Travel Advisory and Visas

Visas allowing residence and local employment for expatriates are granted on the basis of simple, comprehensible procedures, are handled in a timely manner and managed in a way that is consistent with the interests of employees. There are no quotas, bonds, or guarantees required. All residents are equal under the law, enjoy freedom of movement, access to public education, and basic civil freedoms.

Visiting Americans generally fit in well. Most Hong Kong business executives speak English, and are accustomed to dealing with Westerners.

C. Holidays

2004

September 29		The day following Mid-Autumn Festival
October 1		National Day
October 22		Chung Yeung Festival
December 25		Christmas Day
December 27		First weekday after Christmas Day

2005

January 1		New Year's Day
February 9		Lunar New Year's Day
February 10		The second day of the Lunar New Year Day
February 11		The third day of the Lunar New Year
March 25		Good Friday
March 26		The day following Good Friday
March 28		Easter Monday
April 5		Ching Ming Festival
May 2 *		Additional General Holiday for Labor Day
May 16 *		Additional General Holiday for the Buddha's Birthday
June 11		Tuen Ng Festival
July 1		Hong Kong Special Administrative Region Establishment Day
September 19		The day following Chinese Mid-Autumn Festival
October 1		National Day
October 11		Chung Yeung Festival
December 26		The first weekday after Christmas Day
December 27 *		Additional General Holiday for Christmas Day

* As Labor Day and the Buddha's Birthday in 2005 fall on Sunday, the days following will be designated as the additional general holidays. Also, as Christmas Day in 2005 falls on a Sunday, the second weekday after Christmas Day will be designated as an additional general holiday.

D. Business Infrastructure (e.g. transportation, language, communications, housing, health, food)

Housing, food, telecommunications, transportation and healthcare are all available at levels comparable to major American cities. Most people live in apartments in high-rise buildings. Rents for housing are very high. Hong Kong has many different types of restaurants, offering a wide variety of international foods. Grocery stores are also stocked with an international selection of items. Communications facilities are excellent. Long distance telephone and facsimile services can be easily arranged with telecommunications companies, and are available in hotels and business centers. Hong Kong also has a very good public transportation system. Major modes of transportation include buses, the Mass Transit Railway (underground subway system), trams, ferries, the Kowloon-Canton Railway and taxis. In addition, almost all major airlines service Hong Kong. Healthcare facilities are also excellent, and Hong Kong's private hospitals and private physicians are of international standards.

Your business partners will often speak English, and will negotiate on a very business-like basis. It should be noted however, that as companies from China continue to expand their business activities in Hong Kong, more business is being conducted in Mandarin. When conducting business with these companies, U.S. business people may be well advised to bring along a Mandarin-English interpreter to avoid any misunderstandings.

E. Temporary Entry of Goods (e.g. laptop computers, software, exhibit materials)

Hong Kong Customs does not restrict the temporary import of goods into Hong Kong, such as laptop computers, software and general exhibit materials, for business purposes so long as the goods are not restricted items which normally require an import license. The temporary import of supercomputers, which is a controlled item, or of any exhibit materials which are also controlled items, would require a license even if the commodity is being shipped in only for exhibit purposes.

General and country-specific travel information can be retrieved from the Department of State's web site at http://travel.state.gov. Business travelers to Hong Kong seeking appointments with U.S. Consulate General Hong Kong officials should contact the Commercial Section in advance. The Commercial Section can be reached by telephone at (852) 2521-1467, fax at (852) 2845-9800, or email at Hong.Kong.Office.Box@mail.doc.gov or visit U.S. Consulate General web site at: http://hongkong.usconsulate.gov.

CHAPTER 10 ECONOMIC AND TRADE STATISTICS

APPENDIX A -- COUNTRY DATA

a.	Population	6.81 million (End-2003)
b.	Population Growth Rate	0.4%
c.	Religion(s)	Buddhism, Taoism, Christianity (all denominations), Confucianism, small numbers of Moslems, Hindus, Jews, and Sikhs.
d.	Government System	Reverted to Chinese sovereignty and became a Special Administrative Region of China on July 1, 1997 with a high degree of autonomy until 2047.
e.	Language(s)	English and Cantonese are the languages of administration and commerce. Mandarin Chinese is becoming more common.
f.	Workweek	Business hours are 9 to 5, Monday through Friday. Many companies now have a 5-day workweek.

APPENDIX B -- DOMESTIC ECONOMY

(US$ Millions, unless otherwise noted)

		2002	2003	2004 (Forecast)
a.	GDP (current price)	161,509	158,326	162,788
b.	Real GDP Growth (%)	2.3	3.3	6.0
c.	GDP Per Capita (US$) (current Prices)	23,797	23,273	23,654
d.	Government Spending as % of GDP (FY)	18.9	20.1	20.4
e.	Inflation (%)	-3.1	-2.5	-1.0
f.	Unemployment (%)	7.3	7.9	7.0
g.	Foreign Exchange Reserves	111,919	118,388	121,940
h.	Average Exchange Rate for US$1.00	7.799	7.787	7.798
i.	Debt Service Ratio *	N/A	N/A	N/A
j.	U.S. Military/Economic Assistance	N/A	N/A	N/A

Sources: Hong Kong Government; forecasts for 2004, except for real GDP growth, nominal GDP, and inflation are U.S. Consulate General estimates.

Note: Beginning July 1, 1997, the Land Fund, estimated to be US$19.2 billion, has been included in the Foreign Exchange Reserves.

* Hong Kong has no foreign debt.

APPENDIX C -- TRADE STATISTICS

(US$ Millions, unless otherwise noted)

		2002	2003	2004 (Forecast)
a.	Total Hong Kong Exports Total Exports (including re-exports) Of which: Domestic Exports	200,066 16,785	223,389 15,601	235,676 15,367
b.	Total Hong Kong Imports Total Imports Of which: Retained Imports	210,314 59,344	231,509 63,408	249,104 69,749
c.	U.S. Exports U.S. Exports to Hong Kong	11,454	12,153	12,953
d.	U.S. Imports Hong Kong Exports to the U.S. (domestic exports) (re-exports)	5,373 37,313	5,017 36,549	4,933 38,554

Note: The above statistics are based on Hong Kong Government trade statistics. U.S. Department of Commerce statistics show U.S. exports to Hong Kong in 2003 of $13.5 billion, and imports from Hong Kong of $8.9 billion.

The 2004 number is based on U.S. Consulate General unofficial projections.

Sources: Hong Kong Government

CHAPTER 11 U.S. AND HONG KONG CONTACTS

A. U.S. Consulate General Trade Related Contacts

U.S. Consulate General, Hong Kong
26 Garden Road
Central, Hong Kong
Tel: (852) 2523-9011
Fax: (852) 2845-1598
Web site: http://hongkong.usconsulate.gov

Commercial Service -- Hong Kong

Senior Commercial Officer: Stewart Ballard
Deputy Senior Commercial Officer: Sarah Kemp
BIS Officer: Mark Bayuk
U.S. Consulate General
26 Garden Road
Central, Hong Kong
Tel: (852) 2521-1467
Fax: (852) 2845-9800
E-mail: Hong.Kong.Office.Box@mail.doc.gov
Web site: http://www.buyusa.gov/hongkong

Economic/Political Section -- Hong Kong

Chief: Simon Schuchat
U.S. Consulate General
26 Garden Road
Central, Hong Kong
Tel: (852) 2841-2101
Fax: (852) 2526-7382

Foreign Agricultural Service -- Hong Kong

Agricultural Trade Officer: Lloyd Harbert
Asst. Agricultural Trade Officer: David Wolf
18/F, St. John's Building
33 Garden Road
Central, Hong Kong
Tel: (852) 2841-2350
Fax: (852) 2845-0943
E-mail: ATOHongKong@usda.gov
Web site: www.usfoods-hongkong.net

Department of Commerce -- International Trade Administration

Office of PRC and Hong Kong, Director: Cheryl McQueen
Country Desk Officer: Zarema Arutyunova
U.S. Department of Commerce
Room 2317, Office of China, Hong Kong and Mongolia
14th & Constitution Ave, NW
Washington, D.C. 20230
Tel: (202) 482-3932
Fax: (202) 482-1576

US&FCS Office of International Operations, Regional Director: Ann Bacher
U.S. Department of Commerce
Room 1223, Office of International Operations
14th & Constitution Ave, NW
Washington, D.C. 20230
Tel: (202) 482-0423
Fax: (202) 501-6165

Department of State

Director: Stephen M. Young

U.S. Department of State
Office for Chinese and Mongolian Affairs
Room 4318, Main Building, Harry S. Truman Building
2201 C Street, NW
Washington, D.C. 20520
Tel: (202) 647-6803
Fax: (202) 647-6820

U.S. Commercial Service Offices in China:

Beijing
U.S. Commercial Service
31st Floor, North Tower
Beijing Kerry Center, No. 1 Guanghua Lu
Beijing 100020, China
Tel: (86-10) 8529-6655
Fax: (86-10) 8529-6558/9
E-mail: Beijing.Office.Box@mail.doc.gov
Web site: www.buyusa.gov/china

Chengdu
U.S. Commercial Service
4 Lingshiguan Lu, Renmin Nanlu Section 4
Chengdu
Sichuan 610041, China
Tel: (86-28) 8558-3992/9642
Fax: (86-28) 8558-9221/3520
E-mail: Chengdu.Office.Box@mail.doc.gov

Guangzhou
U.S. Commercial Service
14/F, China Hotel Office Tower, Room 1461
Liu Hua Road
Guangzhou 510015, China
Tel: (86-20) 8667-4011
Fax: (86-20) 8666-6409
E-mail: Guangzhou.Office.Box@mail.doc.gov

Shanghai
U.S. Commercial Service
Shanghai Centre, Suite 631
1376 Nanjing West Road
Shanghai 200040, China
Tel: (86-21) 6279-7630
Fax: (86-21) 6279-7639
E-mail: Shanghai.Office.Box@mail.doc.gov

Shenyang
U.S. Commercial Service
52 Shi Si Wei Lu
Shenyang
Liaoning Province 110003, China
Tel: (86-24) 2322-1198
Fax: (86-24) 2322-2206
E-mail: Shenyang.Office.Box@mail.doc.gov

B. American Chamber of Commerce and U.S. China Business Council

American Chamber of Commerce in Hong Kong
Frank G. Martin, President
Room 1904, Bank of America Tower
12 Harcourt Road
Central, Hong Kong
Tel: (852) 2526-0165
Fax: (852) 2810-1289
E-mail: amcham@amcham.org.hk
Web site: http://www.amcham.org.hk

U.S.-China Business Council
Suite 200, 1818 N. Street, NW
Washington, D.C. 20036
Tel: (202) 429-0340
Fax: (202) 775-2476
E-mail: info@uschina.org
Web site: http://www.uschina.org

C. Hong Kong Trade and Industry Associations in Key Sectors

Chinese General Chamber of Commerce, Hong Kong
Dr. the Hon. Tsang Hin-chi, Chairman
4th Floor, 24-25 Connaught Road
Central, Hong Kong
Tel: (852) 2525-6385
Fax: (852) 2845-2610
E-mail: cgcc@cgcc.org.hk
Web site: http://www.cgcc.org.hk

Chinese Manufacturers' Association of Hong Kong
Dr. Jose S. S. Yu, President
CMA Building
64-66 Connaught Road
Central, Hong Kong
Tel: (852) 2545-6166
Fax: (852) 2541-4541
E-mail: info@cma.org.hk
Web site: www.cma.org.hk

The Cosmetic & Perfumery Association of Hong Kong Ltd.
Mr. Jacky Choi Ho-Sang, President
Room 308, Winning Commercial Building
46-48 Hillwood Road
Tsimshatsui, Kowloon
Hong Kong
Tel: (852) 2366-8801
Fax: (852) 2312-0348
E-mail: webmaster@cosmetic-perfume.com
Web site: www.cosmetic-perfume.com

Federation of Hong Kong Industries
Mr. Andrew Leung, Chairman
4th Floor, Hankow Center
5-15 Hankow Road, Tsimshatsui
Kowloon, Hong Kong
Tel: (852) 2732-3188
Fax: (852) 2721-3494
E-mail: fhki@fhki.org.hk
Web site: http://www.fhki.org.hk

Hong Kong Association of Banks
Standard Chartered Bank, Chairman
Room 525, Prince's Building
Central, Hong Kong
Tel: (852) 2521-1169
Fax: (852) 2868-5035
E-mail: info@hkab.org.hk
Web site: www.hkab.org.hk

Hong Kong Association of Certification Laboratories Ltd.
Mr. K. L. Tsang, Chairman
1/F, CMA Building
64-66 Connaught Road
Central, Hong Kong
Tel: (852) 2542-8620
Fax: (852) 2541-8154
E-mail: acl@cma.org.hk
Web site: www.hkacl.org

Hong Kong Association of the Pharmaceutical Industry
Mr. Stephen Leung, President
Room A, 13/F, Trust Tower
68 Johnston Road
Wan Chai, Hong Kong
Tel: (852) 2528-3061
Fax: (852) 2865-6283
E-mail: hkapi@netvigator.com

The Hong Kong Chinese Importers' & Exporters' Association
Mr. Wong Ting-Kwong, President
7-8th Floors, Champion Building
287-291 Des Voeux Road
Central, Hong Kong
Tel: (852) 2544-8474
Fax: (852) 2544-4677/2581-4979
E-mail: info@hkciea.org.hk
Web site: www.hkciea.org.hk

Hong Kong Computer Society
Mr. Sunny Lee, President
Room 1915, China Merchants Tower
Shun Tak Centre, 168 Connaught Road Central
Hong Kong
Tel: (852) 2834-2228
Fax: (852) 2834-3003
E-mail: hkcs@hkcs.org.hk
Web site: www.hkcs.org.hk

Hong Kong Construction Association, Ltd.
Mr. Billy Wong, President
3/F, 180-182 Hennessy Road
Wan Chai
Hong Kong
Tel: (852) 2572-4414
Fax: (852) 2572-7104
E-mail: admin@hkca.com.hk
Web site: www.hkca.com.hk

Hong Kong Economic and Trade Association Ltd.
Dr. Eddy Li Sau-Hung, President
11/F, Kee Shing Centre
74-76 Kimberley Road
Tsimshatsui, Kowloon
Hong Kong
Tel: (852) 2723-6223
Fax: (852) 2722-6705
E-mail: hketa@hketa.org.hk

The Hong Kong Electronics Industries Association Ltd.
Dr. Chan Kei Biu, Chairman
Room 1201, 12/F, Harbour Crystal Centre
100 Granville Road, Tsimshatsui East
Kowloon, Hong Kong
Tel: (852) 2778-8328
Fax: (852) 2788-2200
E-mail: hkeia@hkeia.org
Web site: www.hkeia.com

The Hong Kong Federation of Insurers
Mr. K. P. Chan, Chairman
29/F, Sunshine Plaza
353 Lockhart Road, Wan Chai
Hong Kong
Tel: (852) 2520-1868
Fax: (852) 2520-1967
E-mail: hkfi@hkfi.org.hk
Web site: www.hkfi.org.hk

Hong Kong Franchise Association
Ms. Charlotte Chow, General Manager
c/o Hong Kong General Chamber of Commerce
22/F, United Centre
95 Queensway, Admiralty
Hong Kong
Tel: (852) 2529-9229
Fax: (852) 2527-9843
E-mail: hkfa@franchise.org.hk
Web site: www.franchise.org.hk

The Hong Kong General Chamber of Commerce
Mr. Anthony Nightingale, Chairman
22nd Floor, United Center
95 Queensway
Hong Kong
Tel: (852) 2529-9229
Fax: (852) 2527-9843
E-mail: chamber@chamber.org.hk
Web site: www.chamber.org.hk

The Hong Kong Medical Association
Dr. Lo Wing Lok, President
5/F, Duke of Windsor Social Service Building
15 Hennessy Road, Wan Chai
Hong Kong
Tel: (852) 2527-8285
Fax: (852) 2865-0943
E-mail: hkma@hkma.org
Web site: http://www.hkma.org

Hong Kong Printers Association
Mr. James T.W. Lee, Chairman
1/F, 48-50 Johnston Road
Wan Chai
Hong Kong
Tel: (852) 2527-5050
Fax: (852) 2861-0463
E-mail: printers@hkprinters.org
Web site: www.hkprinters.org

Internet & Telecom Association of Hong Kong
Mr. Tony Hau, Chairman
G.P.O. Box 13461
Hong Kong
Tel: (852) 2504-2732
Fax: (852) 2504-2752
E-mail: info@itahk.org.hk
Web site: www.itahk.org.hk

Plastic Technology Center
Mr. K. K. Lee, Manager
LG2, HKPC Building
78 Tat Chee Avenue
Kowloon Tong, Kowloon
Hong Kong
Tel: (852) 2788-6168
Fax: (852) 2788-6169
E-mail: ptc@hkpc.org
Web site: www.hkpc.org/ptc

Travel Industry Council of Hong Kong
Mr. Ronnie Ho, Chairman
Rooms 1706-1709, Fortress Tower
250 King's Road, North Point
Hong Kong
Tel: (852) 2807-1199
Fax: (852) 2510-9907
E-mail: office@tichk.org
Web site: www.tichk.org

D. Hong Kong Government Offices Relating to Key Sectors and Significant Trade
Related Activities

Agriculture, Fisheries and Conservation Department
Mr. Thomas Chun-yuen Chan, Director
5/F, Cheung Sha Wan Government Offices
303 Cheung Sha Wan Road
Kowloon, Hong Kong
Tel: (852) 2708-8885, 2150-6666
Fax: (852) 2311-3731
E-mail: mailbox@afcd.gov.hk
Web site: http://www.afcd.gov.hk

Airport Authority Hong Kong
Dr. Victor Kwok-king Fung, Chairman
Airport Authority Building
1 Cheong Yip Road
Hong Kong International Airport
Lantau, Hong Kong
Tel: (852) 2188-7111
Fax: (852) 2824-0717
Web site: www.hongkongairport.com/eng/index.jsp

Buildings Department
Mr. Marco Wu Moon-hoi, Director
18/F, Pioneer Centre
750 Nathan Road, Mongkok
Kowloon, Hong Kong
Tel: (852) 2626-1616
Fax: (852) 2840-0451
E-mail: enquiry@bd.gov.hk
Web site: http://www.info.gov.hk/bd/english/index.html

Census and Statistics Department
Mr. Frederick Ho Wing-huen, Commissioner for Census and Statistics
21st Floor, Wanchai Tower
12 Harbour Road, Wan Chai
Hong Kong
Tel: (852) 2582-4004
Fax: (852) 2824-1003, 2119-0161
E-mail: gen-enquiry@censtatd.gov.hk
Web site: http://www.info.gov.hk/censtatd/home.html

Civil Aviation Department
Mr. Lo Shung-man, Director-General
46th Floor, Queensway Government Offices
66 Queensway
Hong Kong
Tel: (852) 2867-4203
Fax: (852) 2869-0093
E-mail: enquiry@cad.gov.hk
Web site: http://www.info.gov.hk/cad/index.htm

Consumer Council
Mrs. Pamela W.S. Chan, Chief Executive
22nd Floor, K. Wah Center
191 Java Road, North Point
Hong Kong
Tel: (852) 2856-3113, 2929-2222
Fax: (852) 2856-3611
E-mail: cc@consumer.org.hk
Web site: www.consumer.org.hk/website/ws_en/

Customs and Excise Department
Mr. Timothy H.M. Tong, Commissioner
9th Floor, Harbour Building
38 Pier Road, Central
Hong Kong
Tel: (852) 2815-7711
Fax: (852) 2542-3334
E-mail: customsenquiry@customs.gov.hk
Web site: www.info.gov.hk/customs/eng/content_e.html

Department of Health
Dr. P.Y. Lam, Director
17th & 21st Floors, Wu Chung House
213 Queen's Road East, Wan Chai
Hong Kong
Tel: (852) 2961-8989
Fax: (852) 2836-0071
E-mail: enquiries@dh.gov.hk
Web site: http://www.info.gov.hk/dh/index.htm

Drainage Services Department
Mr. Raymond Cheung Tat-kwing, Director
43rd Floor, Revenue Tower
5 Gloucester Road, Wan Chai
Hong Kong
Tel: (852) 2877-0660
Fax: (852) 2827-8605
E-mail: enquiry@dsd.gov.hk
Web site: www.dsd.gov.hk/index.htm

Electrical and Mechanical Services Department
Mr. Roger Lai Sze-hoi, Director
98 Caroline Hill Road, Causeway Bay
Hong Kong
Tel: (852) 2882-8011
Fax: (852) 2890-7493
E-mail: info@emsd.gov.hk
Web site: www.emsd.gov.hk

Environmental Protection Department
Mr. Robert J.S. Law, Director
24th-28th Floors, Southorn Centre
130 Hennessy Road, Wan Chai
Hong Kong
Tel: (852) 2835-1018
Fax: (852) 2838-2155
E-mail: enquiry@epd.gov.hk
Web site: www.epd.gov.hk/epd/

Food & Environmental Hygiene Department
Mr. Gregory Leung Wing-lup, Director
44th Floor, Queensway Government Offices
66 Queensway
Hong Kong
Tel: (852) 2868-0000
Fax: (852) 2869-0169
E-mail: enquiries@fehd.gov.hk
Web site: www.fehd.gov.hk

Government Logistics Department
Mrs. Stella Hung Kwok Wai-ching, Director
10/F, North Point Government Offices
333 Java Road, North Point
Hong Kong
Tel: (852) 2231-5105
Fax: (852) 2887-6591
E-mail: info@gld.gov.hk
Web site: www.gld.gov.hk

Hong Kong Productivity Council
Mr. Andrew Leung, Chairman
HKPC Building
78 Tat Chee Avenue
Yau Yat Chuen, Kowloon Tong
Kowloon, Hong Kong
Tel: (852) 2788-5678
Fax: (852) 2788-5900
E-mail: hkpcenq@hkpc.org
Web site: www.hkpc.org

Hong Kong Tourism Board
Miss Clara Ming-Wah Chong, Executive Director
9-11/F, Citicorp Centre
18 Whitfield Road, North Point
Hong Kong
Tel: (852) 2807-6543
Fax: (852) 2806-0303
E-mail: info@discoverhongkong.com
Web site: www.discoverhongkong.com

Hong Kong Trade Development Council
Mr. Fred Lam, Executive Director
38th Floor, Office Tower, Convention Plaza
1 Harbour Road, Wan Chai
Hong Kong
Tel: (852) 2584-4333
Fax: (852) 2824-0249
E-mail: hktdc@tdc.org.hk
Web site: www.tdctrade.com

Hospital Authority
Dr. C. H. Leong, Chairman
Hospital Authority Building
147B Argyle Street
Kowloon, Hong Kong
Tel: (852) 2300-6555
Fax: (852) 2881-8058
E-mail: webmaster@ha.org.hk
Web site: www.ha.org.hk

Information Technology Services Department
Mr. Alan Wong, Director
14-16 & 25/F, Wanchai Tower
12 Harbour Road, Wan Chai
Hong Kong
Tel: (852) 2582-4520
Fax: (852) 2824-3208
E-mail: enquiry@itsd.gov.hk
Web site: www.itsd.gov.hk

Innovation and Technology Commission
Mr. Anthony S.K. Wong, Commissioner
20th Floor, Wu Chung House
213 Queen's Road East
Wan Chai, Hong Kong
Tel: (852) 2737-2208
Fax: (852) 2730-4633
E-mail: enquiry@itc.gov.hk
Web site: www.info.gov.hk/itc

Intellectual Property Department
Mr. Stephen Selby, Director
24th & 25th Floor, Wu Chung House
213 Queen's Road East, Wan Chai
Hong Kong
Tel: (852) 2803-5860/2961-6901
Fax: (852) 2838-6276
E-mail: enquiry@ipd.gov.hk
Web site: www.info.gov.hk/ipd

Invest Hong Kong
Mr. Mike Rowse, Director-General
15th Floor, One Pacific Place
88 Queensway, Hong Kong
Tel: (852) 3107-1000
Fax: (852) 3107-9007
E-mail: enq@investhk.gov.hk
Web site: www.investhk.gov.hk

Office of the Commissioner of Insurance
Mr. Richard Yuen, Commissioner
21st Floor, Queensway Government Offices
66 Queensway, Central
Hong Kong
Tel: (852) 2867-2565
Fax: (852) 2869-0252
E-mail: iamail@oci.gov.hk
Web site: www.info.gov.hk/oci

Office of the Telecommunications Authority
Mr. M. H. Au, Director General
29th Floor, Wu Chung House
213 Queen's Road East, Wan Chai
Hong Kong
Tel: (852) 2961-6333
Fax: (852) 2803-5110
E-mail: webmaster@ofta.gov.hk
Web site: www.ofta.gov.hk

Trade and Industry Department
Mr. Kevin Ho Chi-ming, Director-General
Ground Floor, Trade and Industry Department Tower
700 Nathan Road, Mong Kok
Kowloon, Hong Kong
Tel: (852) 2392-2922
Fax: (852) 2787-7422
E-mail: enquiry@tid.gov.hk
Web site: www.tid.gov.hk

E. Hong Kong Market Research Firms

AC Nielsen Hong Kong Office
2/F, Warwick House, Taikoo Place
979 King's Road, Quarry Bay
Hong Kong
Tel: (852) 2563-9688
Fax: (852) 2516-6856
E-mail: info@acnielsen.com.hk
Web site: www.acnielsen.com.hk

Boston Consulting Group, The
34th Floor, Shell Tower
Times Square, 1 Matheson Street
Causeway Bay, Hong Kong
Tel: (852) 2506-2111
Fax: (852) 2506-9084
Web site: www.bcghk.com.hk

China Concept Consulting
27/F, Wyndham Place
44 Wyndham Street, Central
Hong Kong
Tel: (852) 2524-6788
Fax: (852) 2810-6764
Web site: www.chinaconcept.com

Hong Kong Productivity Council
Marketing Group
HKPC Building, 78 Tat Chee Avenue
Yau Yat Chuen, Kowloon Tong
Kowloon, Hong Kong
Tel: (852) 2788-5678
Fax: (852) 2788-5042
E-mail: hkpcenq@hkpc.org
Web site: www.hkpc.org

International Data Corporation Asia Pacific Ltd.
12/F, St. John's Building
33 Garden Road, Central
Hong Kong
Tel: (852) 2530-3831
Fax: (852) 2537-7347
Web site: www.idc.com

Marketing & Management Solutions
16/F, New Hennessy Tower
263 Hennessy Road
Wan Chai, Hong Kong
Tel: (852) 2511-2021
Fax: (852) 2598-7378
E-mail: mandms@netvigator.com

NFO International
3/F, Sun Hung Kai Centre
30 Harbour Road, Wan Chai
Hong Kong
Tel: (852) 2811-9668
Fax: (852) 2811-9988
E-mail: info@nfow.com.hk
Web site: www.nfow.com.hk

ORC International Holdings, Inc.
1602, Ming An Plaza 1
8 Sunning Road, Causeway Bay
Hong Kong
Tel: (852) 2882-3042
Fax: (852) 2882-4515
Web site: www.orcinternational.com/hongkong

Pacific Rim Group Ltd.
Suite 1901, Ruttonjee House
11 Duddell Street, Central
Hong Kong
Tel: (852) 2524-6078
Fax: (852) 2810-6265
E-mail: HongKong@PacificRimGroup.com
Web site: www.pacificrimgroup.com

Research International Asia Ltd.
Unit 3503, 35/F, Hong Kong Telecom Tower
Taikoo Place, 979 King's Road
Quarry Bay, Hong Kong
Tel: (852) 2591-2591
Fax: (852) 2591-2599
Web site: www.research-int.com

Ringe Marketing Services Ltd.
1306 Hermes Commercial Centre
4 Hillwood Road, Tsimshatsui
Kowloon, Hong Kong
Tel: (852) 2366-3089
Fax: (852) 2722-6300
E-mail: ringe@netvigator.com

WirthlinAsiaPacific
Unit 2602, MLC Millennia Plaza
663 King's Road, North Point
Hong Kong
Tel: (852) 2832-9707
Fax: (852) 2591-9385
Web site: www.wirthlin.com

F. Licensed U.S. Commercial Banks in Hong Kong

American Express Bank Ltd.
36th Floor, One Pacific Place
88 Queensway
Hong Kong
Tel: (852) 2844-0688
Fax: (852) 2845-3637
Web site: www.americanexpress.com/hk/

Bank of America, N.A.
2/F, Bank of America Tower
12 Harcourt Road, Central
Hong Kong
Tel: (852) 2847-5333
Fax: (852) 2847-5410

Bank of New York (HK Branch)
7th Floor, New Henry House
10 Ice House Street, Central
Hong Kong
Tel: (852) 2840-9888
Fax: (852) 2810-5279
Web site: www.bankofny.com

Bank One
7/F, Jardine House
1 Connaught Place, Central
Hong Kong
Tel: (852) 2844-9222
Fax: (852) 2844-9445
Web site: www.bankone.com

Citibank NA
40/F, Citibank Tower
Citibank Plaza, 3 Garden Road
Central, Hong Kong
Tel: (852) 2868-8888
Fax: (852) 2306-8111
Web site: www.citibank.com.hk

Fleet National Bank
33/F, Jardine House
1 Connaught Place, Central
Hong Kong
Tel: (852) 2526-4361
Fax: (852) 2845-9222

J. P. Morgan Chase & Co.
35/F, Tower I, Exchange Square
8 Connaught Place, Central
Hong Kong
Tel: (852) 2841-4321
Fax: (852) 2841-4396
Web site: www.chase.com.hk

NBD Bank, NA
Room 804, Tower 1, Lippo Center
89 Queensway
Hong Kong
Tel: (852) 2523-1816
Fax: (852) 2810-6582

State Street Bank and Trust Company
32/F, Two Exchange Square
8 Connaught Place, Central
Hong Kong
Tel: (852) 2840-5388
Fax: (852) 2868-1606
Web site: www.statestreet.com

Union Bank of California, N.A.
15th Floor, Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central, Hong Kong
Tel: (852) 2826-0600
Fax: (852) 2877-2666
Web site: www.uboc.com

Wells Fargo Bank NA
27/F, Edinburgh Tower, Landmark
15 Queen's Road Central
Central, Hong Kong
Tel: (852) 2315-9500
Fax: (852) 2721-0033
Web site: www.wellsfargo.com

Note: This list does not include U.S. restricted license banks, deposit taking companies, and representative offices.

G. TPCC Trade Information Center in Washington

Trade Information Center (TIC)
International Trade Administration
U.S. Department of Commerce
Tel: 1-800-USA-TRADE (1-800-872-2723)
Fax: (202) 482-4473
http://www.export.gov/tic
E-mail: tic@ita.doc.gov

TIC specialists provide basic export counseling and information on export services and programs offered by 20 federal agencies of the Trade Promotion Coordinating Committee (TPCC). The annual report of the TPCC, "The National Export Strategy", designates "the Trade Information Center, situated in the U.S. Department of Commerce, as the single TPCC-wide information office that will coordinate specialized non-agricultural export information offices."

H. U.S. Department of Agriculture

Mr. Phip Shull
Director
Ag Export Services Division
U.S. Department of Agriculture
Tel: (202) 690-0159
Fax: (202) 690-0193
E-mail: Philip.shull@fas.usda.gov
Web site: www.fas.usda.gov

U.S. Market Development Cooperator Organizations Represented in Hong Kong

ALASKA SEAFOOD MARKETING INSTITUTE
CALIFORNIA PRUNE BOARD
Ms. Megan Tong, Marketing Coordinator
Unit 1205, 12th Floor, Sino Plaza
255 Gloucester Road, Causeway Bay
Hong Kong
Tel: (852) 6191-6369
Fax: (852) 2349-2789
Internet Homepage: http://www.alaskaseafood.org
E-Mail: megan_tong@yahoo.com

ALMOND BOARD OF CALIFORNIA
CALIFORNIA CHERRY ADVISORY BOARD
U.S. DAIRY EXPORT COUNCIL
U.S. POTATO BOARD (Frozen / Dehydrated)
USA RICE FEDERATION
Mr. Daniel Chan / Ms. Sylvaine Siu
Suite 1406, Block B, Maiden Court
46 Cloudview Road, North Point
Hong Kong
Tel: (852) 2833-5977
Fax: (852) 2893-7538
E-Mail: hkg@prcon.com

AMERICAN FOREST & PAPER ASSOCIATION, INC.
AMERICAN HARDWOOD EXPORT COUNCIL
Mr. John Chan, Director
Room 528, New World Office Building
AIA Tower, 20 Salisbury Road
Tsimshatsui, Kowloon
Hong Kong
Tel: (852) 2724-0228
Fax: (852) 2366-8931
Internet Homepage: http://www.ahec-china.org
E-Mail: info@ahec-china.org

CALIFORNIA KIWI FRUIT COMMISSION (Hong Kong)
CALIFORNIA PISTACHIO COMMISSION (China)
CALIFORNIA STRAWBERRY COMMISSION (Hong Kong)
CALIFORNIA TABLE GRAPE COMMISSION (China & Hong Kong)
FLORIDA DEPARTMENT OF CITRUS (China & Hong Kong)
PEAR BUREAU NORTHWEST (Hong Kong)
RAISIN ADMINISTRATIVE COMMITTEE (China & Hong Kong)
Mr. Louis Ng
Louis Ng & Associates Ltd.
Room 1301-4, Wah Fu Commercial Building
111 Queen's Road West
Hong Kong
Tel: (852) 2858-2230
Fax: (852) 2559-5896
E-Mail: lnahk@netvigator.com

COTTON COUNCIL INTERNATIONAL
Mr. Jeff Coey, Director, China & South East Asia
20/F, Zoroastrian Building
101 Leighton Road, Causeway Bay
Hong Kong
Tel: (852) 2890-2755
Fax: (852) 2882-5463
E-Mail: cci-hongkong@cotton.org

NATIONAL RENDERERS ASSOCIATION, INC.
Dr. Yu Yu, Asia Regional Director
Unit A, 22/F, Circle Tower
28 Tang Lung Street, Causeway Bay
Hong Kong
Tel: (852) 2890-2529
Fax: (852) 2576-8045
E-Mail: nrahkg@nrahongkong.com.hk

SUNKIST GROWERS, INC.
Ms. Maria Kwok
SunKist (Far East) Promotion Limited
Room 1303, Bank of America Tower
12 Harcourt Road, Central
Hong Kong
Tel: (852) 2524-9219
Fax: (852) 2845-3454
E-Mail: sunfe@netvigator.com

U.S. POTATO BOARD (Fresh)
CALIFORNIA TREE FRUIT AGREEMENT
Mr. Michael Wong
Michael Wong & Co.
7C Queen's Road Centre
58-64 Queen's Road East, Wan Chai
Hong Kong
Tel: (852) 2891-3889
Fax: (852) 2891-3702
E-Mail: michaelcfwong@hotmail.com

U.S. WHEAT ASSOCIATES
Mr. Matt Weimar, Far East Director
12/F, Zoroastrian Building
101 Leighton Road, Causeway Bay
Hong Kong
Tel: (852) 2890-2815
Fax: (852) 2576-2676
E-Mail: mweimar@uswheat.org

U.S. MEAT EXPORT FEDERATION
Mr. Joel Haggard
8th Floor, Zoroastrain Building
101 Leighton Road, Causeway Bay
Hong Kong
Tel: (852) 2890-7408
Fax: (852) 2576-7345
Internet Homepage: http://usmef.org
E-Mail: hongkong@usmef.org

USA POULTRY & EGG EXPORT COUNCIL
Ms. Sarah Li, Director of Market Development
Room 2010, Hang Lung Center
2-20 Paterson Street, Causeway Bay
Hong Kong
Tel: (852) 2890-2908
Fax: (852) 2895-5546
E-Mail: hkoffice@usapeec.com.hk

WASHINGTON STATE DEPARTMENT OF AGRICULTURE
NORTHWEST CHERRY GROWERS
Mr. Philander Fan
Marketing Plus
Room 2102, Kingsfield Center
18-20 Shell Street, North Point
Hong Kong
Tel: (852) 2815-6773
Fax: (852) 2544-7858
E-Mail: philfan@netvigator.com

Mid-America International Agri-Trade Council (MIATCO)
Mr. Phillip C. Holloway
Ringe Marketing Service Limited
1306 Hermes Commercial Centre
4 Hillwood Road, Tsimshatsui
Kowloon, Hong Kong
Tel: (852) 2366-3089
Fax: (852) 2722-6300
E-Mail: ringe@netvigator.com

CHAPTER 12 MARKET RESEARCH

A. Market Research Reports Prepared by Commercial Service

Commercial Service Hong Kong prepares a number of market research reports such as International Market Insight (IMI) and Industry Sector Analyses (ISA) every year. These reports are on subsectors of our Best Prospects or other market segments, which offer good opportunities for U.S. exports. These reports are available on the following web site: http://www.export.gov/OneStopConsumer/OneStop/mrllogin.jsp.

B. Reports Prepared by FAS

The Agricultural Trade Office (ATO) Hong Kong prepares a broad range of market reports which are available to the public by contacting the Foreign Agricultural Service, through the mail at: PSC 464, Box 17, FPO AP 96521-0006; fax: (852) 2845-0943, or by E-mail at: ATOHongKong@usda.gov. These reports are also available for download at ATO website: www.usfoods-hongkong.net.

Hong Kong - Livestock and Products (Semi-Annual Report - Jan., 2004)
Hong Kong - Poultry and Products (Semi-Annual Report - Jan., 2004)
Hong Kong - Hong Kong Temporary Bans Poultry Imports From China (Feb., 2004)
Hong Kong - Hong Kong Temporary Suspends Poultry Imports from Delaware (Feb., 2004)
Hong Kong - Hong Kong Suspends Poultry Imports from the United States (Feb., 2004)
Hong Kong - HRI Food Service Sector (Mar., 2004)
Hong Kong - Tobacco and Products (Annual Report - Apr., 2004)
Hong Kong - Cotton and Products (Annual Report - May 2004)
Hong Kong - Evaluation of H5 Avian Influenza Vaccination (July 2003)
Hong Kong - Food and Agricultural Import Regulation and Standards (July 2003)
Hong Kong - No Re-export License for China's Prohibited Meat and Poultry Products, Says Hong Kong Government (Aug., 2003)
Hong Kong - Closer Economic Partnership Arrangement (Aug., 2003)
Hong Kong - Livestock and Products (Annual Report - Aug., 2003)
Hong Kong - Poultry and Products (Annual Report - Aug., 2003)
Hong Kong - Exporter Guide (Sept., 2003)
Hong Kong - Promotion Opportunities Annual Report (Sept., 2003)
Hong Kong - Retail Food Sector Report (Nov., 2003)
Hong Kong - Food and Agricultural Import Regulations and Standards Update - Hong Kong to go Nutrition Labeling (Dec., 2003)
Hong Kong - Hong Kong Temporarily Bans U.S. Raw Beef Products (Dec., 2003)

CHAPTER 13 TRADE EVENT SCHEDULE

A. Trade Events with Commercial Service Involvement:

Commercial Service trade events can be retrieved from the following web site: http://www.export.gov/comm_svc/tradeevents.html.

B. Trade Events Schedule

For major trade shows that will be held in Hong Kong can be retrieved from the Hong Kong Trade Development Council homepage at http://www.tdctrade.com/exh-con/. Readers are advised to check with the show organizers directly if they wish to participate in or attend a particular event. Organizers contact details or more up-to-date information on trade events can be retrieved from the Hong Kong Trade Development Council homepage at http://www.tdctrade.com/exh-con/.

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