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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 (PRC), 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 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 Standing Committee on 30 June 2020 and came into effect in Hong Kong on 1 July 2020.

The NSL establishes 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. The NSL allows some cases to be remanded to the courts of the PRC, rather than Hong Kong's separate common law judicial system, and includes untested extra-territorial provisions, under which any person in any country could be held liable for NSL offences. Since its introduction, the NSL has been applied broadly by local authorities and has enabled crackdowns on political opposition and news media critical of the government.

Electoral System

In March 2021, China's NPC introduced sweeping changes to the operation of the Legislative Council and Chief Executive (CE) elections. The Australian Government has expressed concern that these changes undermine Hong Kong's democratic principles, Basic Law and the high degree of autonomy China guaranteed Hong Kong under the UN-registered Sino-British Joint Declaration of 1984.

Chief Executive

The Basic Law designates a system of governance led by a 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'.

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. The next Chief Executive election is scheduled for 27 March 2022.

Legislative Council

The major functions of the Legislative Council (LegCo) are 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 but Hong Kong authorities have deferred them twice, citing risks associated with the COVID-19 pandemic. Elections for the seventh LegCo are scheduled for 19 December 2021.

District Councils

Hong Kong has 18 district councils responsible for advising government on local matters and managing public facilities and services. District council elections were last held in Hong Kong on 24 November 2019. The pro-democracy camp won 388 of 452 directly elected seats and took control of 17 of the district councils.

By July 2021 the majority of pro-democracy councillors have resigned in response to a new law requiring district councillors to pledge allegiance to the HKSAR and Central Governments, and to uphold the Basic Law. The next district council elections are not due until 2023.

Judiciary

Under Hong Kong's Basic Law, the judiciary is independent. 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 Australia's largest business base in Asia, we have a substantial stake in the integrity of Hong Kong's legal system. Australian jurists have regularly served, and continue to serve, on the Court of Final Appeal as non-permanent judges in their private capacity. These include former Australian 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 and James Spigelman.

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.

Hong Kong's economic fundamentals are strong. It remains a free port, a WTO member, with free flows of capital and data across international borders. It has no financial controls, independent regulators, and its economy is underpinned by common law. Hong Kong has major heft as an international financial hub. In April 2021 total market capitalisation in HKEX was USD7.76 bn. Much of this is due to being a gateway to China through its RMB liquidity pool (70 per cent of world's total). In 2020, Hong Kong raised USD51 bn via IPOs raising and was second globally for funds.

Hong Kong's economic integration with mainland China accelerated in the 1980s on the back of China's first Special Economic Zone in Shenzhen, which transformed a fishing village into a global manufacturing centre of nearly 13 million people. Investment by Hong Kong industrialists across the Pearl River Delta (PRD) - 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 PRC, giving favourable treatment to Hong Kong manufacturing 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 based in Hong Kong 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.

Following a period of negative growth in 2019 and 2020, due largely to US-China trade friction, local political unrest and the COVID-19 pandemic, the Hong Kong economy experienced visible growth in the first quarter of 2021. According to the Hong Kong government's May 2021 quarterly update, real GDP grew by 7.9 per cent year-on-year, led by strong growth in goods exports. However, due to the uneven nature of the recovery and uncertainty around the ongoing COVID-19 pandemic, the Hong Kong Government forecasts economic growth of 3.5 per cent to 5.5 per cent in 2021.

Bilateral Relations

Australia has extensive and enduring interests in Hong Kong built upon strong trade and investment connections and close people-to-people links. The high degree of autonomy afforded to Hong Kong in the Basic Law and in accordance with the ‘One Country, Two Systems' framework has played an important role in the territory's success.

The Australian Government has expressed concern about political responses in Hong Kong to the 2019 protest movement, including Beijing's imposition of the NSL, the arrest of pro-democracy figures, and the suppression of rights and freedoms granted to Hong Kongers under the Basic Law. Because of concerns about the NSL, Australia suspended the bilateral extradition agreement with Hong Kong (October 2020). The Australian Government has introduced new visa measures for graduates and skilled workers from Hong Kong who want to work and live in Australia (see the Department of Home Affairs for the latest information).

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.

People-to-people links

Hong Kong is home to one of the largest Australian communities abroad, with around 100,000 Australians residing in Hong Kong. Around 86,000 people born in Hong Kong live in Australia. The COVID-19 pandemic has disrupted the high volume of two-way flows of people between Hong Kong and Australia but enduring people-to-people links continue to be a foundation of the bilateral relationship.

Education, science, business and cultural links between Australia and Hong Kong remain strong. 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 April 2021, Hong Kong ranked 12th as a source location for international students to Australia. Despite the COVID-19 pandemic, in the year to date, around 11,000 Hong Kong students have enrolled across all sectors. From 2002 to 2020 there were over 167,000 higher education course enrolments and more than 52,000 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 2021, the NCP will have supported over 2,000 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 2019, the Foreign Minister announced the establishment of the National Foundation for Australia China Relations. The Foundation works to build links between Australia and China, by bringing together government, business and communities to find and support ways to engage constructively including through a competitive grants program. For more information about the Foundation, go to australiachinafoundation.org.au.

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 2020, Hong Kong was Australia's tenth largest export market. Bilateral trade in goods and services between Hong Kong and Australia amounted to approximately $9.1 billion in 2020.

Australia's goods exports to Hong Kong in 2020 were valued at approximately $7.2 billion. 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.

Australian services exports to Hong Kong were worth approximately $1.9 billion in 2020. Bilateral services trade with Hong Kong is centred on transport, travel and financial and other business services.

Hong Kong is Australia's fifth-largest source of total foreign investment (direct, portfolio and other) with stock of $142 billion in 2020; and the eleventh-largest foreign direct investor in Australia with stock of $16.7 billion in 2020. 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. Hong Kong is Australia's eighth-largest destination for total investment with stock of $71 billion in 2020; and Australia's tenth-largest direct investment destination with stock of $9 billion in 2020. 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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