3 The UK and Hong Kong as partners
UK
representation in Hong Kong
17. The UK Consulate-General in Hong Kong (also responsible
for Macao) was opened on 1 July 1997, the day China assumed sovereignty
over Hong Kong. It is one of the largest UK Consulates-General
in the world, currently employing 95 staff with an operational
budget of almost £1.5 million in 2014-2015.[24]
It is also one of the busiest posts for consular assistance, with
a quarter of a million British citizens living and working in
Hong Kong.[25] The FCO
told us that the Consul-General in Hong Kong reports directly
to the head of the China Department at the FCO in London, rather
than to the UK Ambassador in Beijing as would typically be the
case for a regional consulate.[26]
We consider this unusual arrangement to be indicative of Hong
Kong SAR's special status and close ties with the UK.
BRITISH NATIONALS (OVERSEAS)
18. According to the FCO, there are approximately
3.4 million holders of British National (Overseas) passports in
Hong Kong.[27] BN(O)
status was created by the Hong Kong Act 1985, to allow people
who held British Dependent Territories Citizen status before the
handover to retain a connection with the UK after the transfer
of sovereignty to China. Those who wanted BN(O) status were required
to register between 1987 and 1997, after which point it was no
longer made available. The status is non-hereditary and does not
confer right of abode in either the UK or Hong Kong, nor are British
nationals (overseas) considered UK nationals by the EU. British
nationals (overseas) are entitled to UK consular assistance and
protection, and if legally resident in the UK they enjoy all rights
granted to Commonwealth citizens.[28]
However, since this category of nationality was in effect invented
specifically for natives of Hong Kong, the vast majority of British
nationals (overseas) are of Chinese ethnicity. China therefore
considers them to be Chinese nationals only, as China does not
recognise dual nationality. This means that the UK cannot offer
consular assistance to British nationals (overseas) within the
territory of China, including Hong Kong SAR.[29]
The last FCO six-monthly report to include a paragraph on the
status of BN(O) passport holders, covering January to June 2009,
said that the FCO remains "fully committed to providing the
highest standard of consular and passport services to BN(O) passport
holders" outside of China, Hong Kong and Macao.[30]
19. We received some written submissions from British
nationals (overseas) arguing for easier pathways to UK citizenship
for BN(O) passport holders.[31]
A submission by the organisation BritishHongKong also asked the
FCO to lobby several countries to treat BN(O) passport holders
like UK citizens for visa and immigration purposes.[32]
Our predecessor Committee recommended that the UK Government ensure
that the European Council agreed a draft Regulation, still under
consideration at that time, to allow BN(O) passport holders to
travel visa-free in the Schengen area.[33]
This welcome development took place in December 2006.[34]
20. We recommend that the Government state, in
its response to this report, whether its policy is to support
the expansion of visa-free travel worldwide for BN(O) passport
holders resident in Hong Kong. If this is the case, the Government
should set out what progress has been made in achieving this goal
since 2006.
Economic and trade relations
21. The UK and Hong Kong retain strong economic ties.
According to the FCO, Hong Kong was the UK's 13th-largest
export market for goods in 2013, and its second-largest export
market in Asia-Pacific (after mainland China).[35]
Bilateral trade between Hong Kong and the UK in both goods and
services totalled some £16.6bn last year.[36]
The Hong Kong Association, an organisation supporting UK-Hong
Kong business and trade ties, also told us that at the end of
2012 British investment in Hong Kong comprised 40% of all UK investment
in Asia, adding that this figure probably underestimates the total
given how much UK investment is routed through offshore localities
like Bermuda.[37] According
to the Association, as of 2013 there were 126 British companies
using Hong Kong as their regional headquarters, and another 209
companies with offices there.[38]
Investment also flows in the other direction. Hong Kong is the
12th-largest investor into the UK, and the single largest
foreign company investing in the UK is Hong Kong-based Hutchinson
Whampoa.[39]
HONG KONG'S ROLE IN CHINA
22. In 2006, our predecessor Committee reported that
many UK firms used Hong Kong as a "springboard" to mainland
China.[40] We were told
that although this was still the case for some companies, it was
no longer true on the same scale due to mainland China's economic
growth and market liberalisation.[41]
We heard, for example, that while 50% of China's goods trade was
routed through Hong Kong in 1997, today that figure has dropped
to approximately 13%.[42]
It is now easier than ever for UK firms to operate directly on
the Chinese mainland, and cities like Shanghai, which launched
its own free-trade zone in 2013, are increasingly competing to
attract business and investment.
23. We heard from many witnesses, however, that Hong
Kong retains a number of advantages as a platform for British
companies seeking to trade or invest in China, in terms of its
legal and political structures as well as its reputation. The
Hong Kong Association said these factors included "low and
simple taxation, rule of law based on the common law, an independent
judiciary, freedoms of speech and movement and a competent and
non-corrupt civil service."[43]
Jonathan Fenby, former editor of the South China Morning Post,
cited the rule of law as particularly important in maintaining
Hong Kong's competitive advantage.[44]
Speaking to us on behalf of UKTI, the UK's Consul-General in Hong
Kong, Caroline Wilson, said that these qualities would ensure
that Hong Kong retained an important role in China for the foreseeable
future:
The advantages that Hong Kong has are not ones
that are replicated overnight or could be easily replicated by
other centres. As you know, it takes quite some time to build
up the rule of law, an independent judiciary and the kind of regulatory
structures that we have here in Hong Kong, so I think those will
certainly be enduring.[45]
Similarly, Duncan Innes-Ker, an analyst at the Economist
Intelligence Unit, told us that Hong Kong has an international
culture that cities on the Chinese mainland will take a long time
to match.[46] We expect
Hong Kong to remain a vital hub for UK business and investment
in China, especially in light of the recent launch of the Shanghai-Hong
Kong Stock Connect which allows investors in Hong Kong to trade
directly in shares listed on the Shanghai stock market via Hong
Kong-based brokers.
RMB INTERNATIONALISATION
24. One reason for Hong Kong's continuing importance
as a financial centre in China is its position as the platform
for the internationalisation of the renminbi (RMB), China's currency.
In mainland China the RMB is not freely convertible, but since
2004 Hong Kong banks have been able to offer RMB banking services
including currency exchange. This was followed in 2007 with the
launch of so-called "dim sum" bonds (RMB-denominated
bonds issued in Hong Kong). Hong Kong is today the largest hub
for RMB trading outside mainland China, with a 65% share of the
global RMB market.[47]
25. RMB internationalisation was cited by the FCO
as a key policy area on which the UK and Hong Kong governments
have cooperated in recent years. This cooperation largely takes
place in the format of the London-Hong Kong RMB Forum, which brings
together the City of London's RMB initiative, the Hong Kong Monetary
Authority and HM Treasury.[48]
The forum met in London in 2014, and will meet in Hong Kong in
2015.[49] According to
the FCO this high level of cooperation has helped London to become
the second-largest offshore centre for RMB trading after Hong
Kong.[50]
THE BUSINESS CLIMATE FOR UK FIRMS
IN HONG KONG
26. Consul-General Wilson said that there were "few
hurdles" for British businesses operating in Hong Kong. She
told us that UK businesses got on "extremely well" there,
adding:
This is an open, transparent and competitive
market; it is largely English speaking; the rule of law is very
familiar to British businesses; and the Hong Kong people are very
efficient. The culture of Hong Kong is business, so it is fair
to say that if you can't do business in Hong Kong, you're probably
not going to be able to do business very well anywhere.[51]
This was also the view of Lord Powell of Bayswater,
representing the Hong Kong Association, who told us he could not
think of an easier or better place in the world to do business
than Hong Kong.[52] Asked
for specific examples of obstacles that UK companies face in Hong
Kong, both Ms Wilson and Lord Powell said there were very few.[53]
27. We heard, however, some concerning reports that
UK firms had recently come under pressure from the Hong Kong authorities
to state publicly their opposition to the Occupy Central protest
movement that has dominated Hong Kong's political scene since
September 2014.[54] We
were reassured to be told by the Hong Kong Association that none
of their members had mentioned being put under this type of pressure.[55]
Freedom from political pressure is one of Hong Kong's greatest
strengths as a place to do business, especially relative to the
Chinese mainland. If this freedom were compromised, it could do
great damage to Hong Kong's reputation and ability to attract
international business and investment.
28. We welcome reports that economic ties between
the UK and Hong Kong remain strong and that UK firms continue
to operate in Hong Kong easily and successfully. The UK Government
should ensure that its strategy on improving UK-Chinese economic
and trade relations continues to recognise the special role of
Hong Kong as a partner for the UK. The FCO should also continue
to be active and vigilant in monitoring reports of political pressure
being applied to UK companies in Hong Kong, and raise any resulting
concerns with the Hong Kong government.
The work of the British Council
29. The British Council office in Hong Kong is one
of the oldest and largest in the world, with a staff of over 200.[56]
The main aspects of its work are English language teaching and
conducting examinations, and it is also involved in facilitating
educational exchange, the arts and creative industries and social
entrepreneurship. The British Council in Hong Kong told us that
it has excellent relationships with the Hong Kong government,
particularly the Education Bureau and the Leisure, Culture and
Sports Department.[57]
It also said that the UK remains the market leader in receiving
Hong Kong students, with 56% of students who choose to go abroad
enrolling in UK schools and universities.[58]
30. As time passes since the end of British colonial
rule and Hong Kong becomes a more international city, the British
Council told us that employers report a decline in English language
proficiency.[59] The
British Council therefore has an important role to play in ensuring
that Hong Kong's young people continue to have a high standard
of English proficiency, which benefits jobseekers in an international
market and strengthens cultural ties between the UK and Hong Kong.
Language teaching, however, is not enough to bolster social and
cultural relations between Hong Kong and the UK. The British Council's
participation in projects like the West Kowloon Cultural District—a
£1.73bn scheme involving the construction of a new cultural
and artistic hub with 18 museums, theatres and other cultural
facilities on the Hong Kong waterfront—offer key opportunities
for raising the profile of the UK in Hong Kong's cultural scene,
and for creating new contacts between Hong Kong and the UK.[60]
We consider that the British Council has an important role
to play in maintaining strong social ties between the UK and Hong
Kong, and we welcome its work in language teaching, educational
exchange and creative engagement with Hong Kong's artistic and
cultural life.
24 Foreign and Commonwealth Office (HNG 0748) para
39 Back
25
Foreign and Commonwealth Office (HNG 0748) para 40 Back
26
Q342 Back
27
Foreign and Commonwealth Office (HNG 0748) para 41 Back
28
GOV.uk, Types of British nationality, accessed 3 February 2015 Back
29
Foreign and Commonwealth Office, Support for British nationals abroad: A guide,
2014, p 5 Back
30
Foreign and Commonwealth Office, The Six-monthly Report on Hong Kong: 1 January to 30 June 2009,
July 2009, p 11 Back
31
BritishHongKong (HNG 0345) para 18; Medium Raw Productions (HNG 0721)
para 10; Deryck Y K Chan (HNG 0473) paras 16-18 Back
32
BritishHongKong (HNG 0345) para 20 Back
33
Foreign Affairs Committee, Seventh Report of Session 2005-06,
East Asia, HC 860-I, para 418 Back
34
Council Regulation (EC) No 1932/2006 Back
35
Foreign and Commonwealth Office (HNG 0748) para 43 Back
36
Foreign and Commonwealth Office (HNG 0748) para 43 Back
37
Hong Kong Association (HNG 0738) para 2 Back
38
Hong Kong Association (HNG 0738) para 2 Back
39
Foreign and Commonwealth Office (HNG 0748) para 45 Back
40
Foreign Affairs Committee, Seventh Report of Session 2005-06,
East Asia, HC 860-I, para 409 Back
41
Qq82, 282 Back
42
Q261 Back
43
Hong Kong Association (HNG 0738) para 6 Back
44
Q82 Back
45
Q51 Back
46
Q260 Back
47
Q341 Back
48
Foreign and Commonwealth Office (HNG 0748) para 21 Back
49
Foreign and Commonwealth Office, Remarks by Consul-General Caroline Wilson at "UK - the Western RMB Hub" event,
26 January 2015 Back
50
Q341 Back
51
Q52 Back
52
Q281 Back
53
Qq53, 281 Back
54
Q61 Back
55
Q288 Back
56
British Council (HNG 0503) para 2.1 Back
57
British Council (HNG 0503) para 2.2 Back
58
British Council (HNG 0503) para 5.2 Back
59
British Council (HNG 0503) para 4.2 Back
60
British Council (HNG 0503) para 6.2 Back
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