The UK's relations with Hong Kong: 30 years after the Joint Declaration - Foreign Affairs Contents

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.


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]


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.


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]


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, 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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© Parliamentary copyright 2015
Prepared 6 March 2015