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Hong Kong

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Hong Kong brief

Political Overview

Hong Kong, officially known as the Hong Kong Special Administrative Region of the People's Republic of China, is a former British territory that reverted to Chinese sovereignty on 1 July 1997. Hong Kong is governed by the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China (the Basic Law), passed by China's National People's Congress (NPC) in 1990. The Basic Law serves as Hong Kong's 'mini-constitution'. It provides for independent executive, legislative and judicial powers, and accords the territory a high degree of autonomy under the principle of 'one country, two systems' in all areas except defence and foreign affairs (for which China is responsible).

Hong Kong can conclude and implement agreements with states, regions and international organisations. It does so in areas such as the economy, trade, shipping, fishing regulation, communications, tourism, culture and sport. Hong Kong is a member of the World Trade Organisation (as a separate customs territory) and the Asia-Pacific Economic Cooperation (APEC) forum.

National Security Law

The National Security Law (NSL) for Hong Kong was passed unanimously by Beijing’s National People’s Congress (NPC) Standing Committee on 30 June 2020 and came into effect in Hong Kong on 1 July 2020.

The NSL establishes three new security institutions in Hong Kong and creates four new criminal offences: secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security. It includes extensive and untested extra-territorial provisions, under which any person in any country could be held liable for NSL offences.

On 9 July, the Prime Minister, Foreign Minister and Attorney-General expressed deep concern about China’s imposition of the NSL on Hong Kong and the law’s erosion of democratic principles that have underpinned the One Country, Two Systems framework. The Prime Minister announced Australia would: suspend our extradition agreement with Hong Kong; introduce new visa measures for graduates and skilled workers from Hong Kong who want to work and live in Australia; and update our travel advice for Hong Kong to reflect the increased risks under the NSL.

DFAT keeps its travel advisories under close review. We encourage all Australians in Hong Kong to subscribe to Smartraveller for the latest updates.

Chief Executive

The Basic Law designates a system of governance led by a Chief Executive (CE) and an Executive Council, with a two-tiered system of representative government and an independent judiciary. The CE makes policy decisions and has the power to initiate legislation. According to the Basic Law, the CE is 'accountable to the Central People's Government and the Hong Kong Special Administrative Region'.

The CE is appointed by Beijing after election by an Election Committee, whose 1,200 members are themselves elected through a limited franchise from a number of professional, business and community bodies, Hong Kong deputies to the NPC, and Hong Kong members of the Chinese People's Political Consultative Conference. Chief Executives are appointed for a period of five years. On 1 July 2017, Mrs Carrie Lam Cheng Yuet-ngor was sworn in as Hong Kong's fourth CE.

Legislative Council

The major function of the Legislative Council (LegCo) is to enact laws, examine and approve budgetary matters, monitor the government's performance, and debate issues of public interest. The LegCo also endorses the appointment and removal of judges of the Court of Final Appeal. It cannot initiate bills involving government expenditure, limiting its role in policy development. Its meetings are open to the public.

Elections for the eighth LegCo were scheduled to take place on 6 September 2020. On 31 July 2020, CE Carrie Lam announced that the LegCo election would be postponed for one year due to the COVID-19 pandemic. The seventh LegCo’s term was due to expire on 30 September 2020. China’s National People’s Congress Standing Committee announced on 11 August it had unanimously passed a motion extending the current LegCo’s term for at least one year. Foreign Minister Payne expressed grave concern at the disproportionate postponement of the election and disqualification of candidates.

District Council Elections were held in Hong Kong on 24 November 2019. The elections attracted a record turnout with nearly three million people voting, the equivalent of 71 per cent of registered voters. The pro-democracy camp won 388 of 452 directly elected seats. The pro-Beijing camp won 59 seats, a significant loss from their nearly 300 seats held since the 2015 election. Independents secured five seats. Pro-democracy groups now control 17 of the 18 district councils.

Judiciary

Under Hong Kong’s Basic Law, the judiciary is independent of the executive and legislative branches of government. The Court of Final Appeal in Hong Kong replaced the British Privy Council as the highest appellate court after Hong Kong reverted to Chinese sovereignty in 1997. China's National People's Congress Standing Committee (NPCSC) has the power of final interpretation of the Basic Law. The NPCSC has exercised this power on five occasions concerning the right of abode (1999), universal suffrage (2004), the term of office of the Chief Executive (2005), state immunity (2011) and lawmakers' oath of allegiance to Hong Kong as part of China (2016).

As Hong Kong is Australia's most popular business base in north-east Asia, we have a substantial stake in the integrity of Hong Kong's legal system. Distinguished Australian jurists have been appointed to the Court of Final Appeal as non-permanent judges, including former justices of the High Court, Sir Francis Gerard Brennan, Sir Daryl Dawson, Robert French, Anthony Murray Gleeson, William Gummow, Sir Anthony Mason and Michael McHugh. French, Gleeson and Gummow are currently appointed to the Court of Final Appeal.

Economic Overview

Hong Kong occupies an area smaller than the Australian Capital Territory and has a population of 7.5 million. In the last few decades, Hong Kong's economic growth and prosperity have been underpinned by an open trade and investment regime complemented by a highly educated and flexible workforce and a transparent legal and regulatory environment. The city has evolved into an efficient global and regional transport and trade hub.

The free movement of capital in and out of Hong Kong has accelerated the city's development as an international commercial and financial centre. A strong institutional framework including the rule of law has attracted a number of important corporate headquarters to Hong Kong. It has emerged as a major provider of services to China and is the mainland's designated centre for the internationalisation of the Renminbi (China's currency).

Hong Kong's economic integration with mainland China developed through the 1980s with the establishment of China's first Special Economic Zone in Shenzhen, across the border, transforming a fishing village into a global manufacturing centre of nearly 13 million people. Investment by Hong Kong industrialists across the Pearl River Delta (PRD) - arcing from Hong Kong in the East, through Shenzhen, Dongguan, Guangzhou, Foshan, Zhongshan and Zhuhai to Macau in the West - has been one of the main drivers of China's rapid economic modernisation.

Since 2004, the China-Hong Kong Closer Economic Partnership Arrangement (CEPA) has accelerated integration between Hong Kong and the PRD, giving favourable treatment to Hong Kong manufactures and services. In July 2017, Hong Kong signed two economic agreements with the Central Government under CEPA, including an Investment Agreement and an Agreement on Economic and Technical Cooperation. At the same time, Hong Kong and the Central Government also signed a Framework Agreement on Deepening Guangdong-Hong Kong-Macao Cooperation in the Development of the Greater Bay Area. Hong Kong is part of the Greater Bay Area, which is a Chinese government scheme to link nine cities of Guangdong's Pearl River Delta (Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing) with the Special Administrative Regions of Hong Kong and Macau into an integrated economic and business hub.

Australian companies have benefitted from greater access to mainland China, in part due to CEPA’s delivery of a more level playing field for foreign-owned companies. Infrastructure projects such as a high-speed rail link from Hong Kong to Guangzhou via Shenzhen, which opened in September 2018, and a bridge linking Hong Kong, Macau and Zhuhai, which opened in October 2018, are improving transport links with the region.

Hong Kong has been in recession since the second half of 2019. According to the Hong Kong government’s half-yearly economic report for 2020, real GDP fell by 9.0 per cent year-on-year in the second quarter of 2020, following a record decline of 9.1 per cent in the preceding quarter. In August, the government revised down real GDP growth forecast for 2020 as a whole to -6 per cent to -8 per cent, down from -4 per cent to -7 percent in late April.

Bilateral Relations

Australia has extensive and enduring interests in Hong Kong built on strong trade and investment connections and close people-to-people links. The Australian Government supports the  high degree of autonomy afforded to Hong Kong in the Basic Law and in accordance with the One Country, Two Systems' framework.

The Australian Consulate-General represents the Australian Government in Hong Kong. In Australia the Hong Kong Economic and Trade Office, based in Sydney, represents the Hong Kong Government.

Then Prime Minister Malcolm Turnbull visited Hong Kong on 11-12 November 2017. This was the first official visit by an Australian Prime Minister since 1984, and helped strengthen cooperation between Australia and Hong Kong on trade, investment, innovation, law enforcement and combating transnational crime.

People-to-people links

Hong Kong has one of the largest Australian communities abroad with around 100,000 Australians residing in Hong Kong. Around 96,000 people born in Hong Kong live in Australia.

Education cooperation between Australia and Hong Kong is deepening. In 2018, there were 130 formal agreements between Australia and Hong Kong, covering student and staff exchange, academic and research collaboration, and study abroad.

As at July 2020, Hong Kong ranked 14th as a source location for international students to Australia in the year to date, with 13,635 student enrolments across all sectors. From 2002 to 2019 there were almost 158,000 higher education course enrolments and more than 50,000 VET course enrolments by students from Hong Kong.

Hong Kong was one of the four host locations that participated in the pilot phase of the New Colombo Plan in 2014. The New Colombo Plan is a signature initiative of the Australian Government, which aims to lift knowledge of the Indo Pacific in Australia by supporting Australian undergraduates to study and undertake internships in the region. By the end of 2020, the NCP will have supported around 1,500 Australian undergraduates to undertake New Colombo Plan experiences in Hong Kong, across diverse fields including business, communications, education, engineering, health, science and urban design.

In December 2019, Minister Payne announced that the Australia-China Council (ACC) will be replaced by the National Foundation for Australia-China Relations. For The new and innovative National Foundation, based in Sydney and in operation from early-2020, works to  further strengthen this important bilateral relationship.

Bilateral trade and investment

The Australia-Hong Kong Free Trade Agreement and associated Investment Agreement entered into force on 17 January 2020. Together, they strengthen Australia's relationship with one of our most important trading partners. The FTA locks in zero tariffs for Australian exporters and provides Australian service suppliers with guaranteed access into key sectors of Hong Kong's growing services market. The Investment Agreement (which updates and replaces the 1993 agreement for the Promotion and Protection of Investments) will protect investors on both sides, including providing for a minimum standard of treatment, a requirement to pay compensation in certain circumstances where an investment is expropriated, and protection against discrimination.

Australia and Hong Kong have a longstanding trade relationship. In 2019, Hong Kong was Australia’s eleventh largest merchandise export market. Bilateral trade in goods between Hong Kong and Australia amounted to approximately $9.2 billion in 2019. Australia's major merchandise exports to Hong Kong were vegetables and fruit, telecommunications and sound recording and reproducing apparatus and equipment and meat and meat preparations.

Australia is an important source of high-quality food and beverages for Hong Kong's retail and hospitality sectors — featured exports include wines, fresh and chilled seafood, beef and pork, premium fruit, nuts, vegetables and dairy products. Australian products are highly regarded for their freshness, innovation and adherence to safety standards. Hong Kong's strategy to become a wine trading and distribution centre for the Asian region presents opportunities for Australian wine producers and for providers of wine-related services, such as storage and auctioning.

In 2019, Hong Kong was Australia’s seventh largest services export market. Bilateral services trade with Hong Kong is centred on transport, recreational travel and business services.

Hong Kong was Australia’s fifth largest source of total foreign investment in 2019. Investment sectors include utilities, infrastructure, transport, telecommunications, resources, clean energy and hotels, and increasingly agri-food, major infrastructure and health services. Hong Kong businesses see Australia as a safe, reliable and open investment destination with a well-performing and well-managed economy.

Hong Kong is also an attractive investment destination for Australia. It was the tenth largest destination for total Australian investment abroad in 2019, worth $6.3 billion. Sectors of interest include banking and finance, construction and engineering, health and medical services, telecommunications, insurance, legal services, education, information technology, consulting, logistics, and transport.

Hong Kong has Australia's largest commercial presence in Asia. The Australian Chamber of Commerce in Hong Kong is Australia's largest offshore Chamber of Commerce.

For more information about business opportunities in Hong Kong, see Information on doing business and opportunities in Hong Kong .

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