IV. Efforts Made by the Central Government to Ensure the Prosperity and Development of the HKSAR

The central government has always given high priority to Hong Kong's economic development and improvement of its people's livelihood, and fully supported it in meeting various difficulties and challenges. It gives full play to its role in adopting and executing the national development strategy, and actively promotes exchanges and cooperation between Hong Kong and the mainland, thus providing solid backing for Hong Kong's prosperity and stability.

1. Supporting the HKSAR in Defusing Risks and Meeting Challenges

-Supporting Hong Kong in the fight against the Asian financial crisis. In 1997, the Asian financial crisis broke out, and spread rapidly around the region. Hong Kong was attacked by international speculative forces, its financial market was volatile, its dollar pegged exchange rate system came under attack, and its financial system faced a grave threat. Given these circumstances, the central government solemnly announced that it would safeguard the stability and prosperity of the HKSAR at all costs, strongly support the HKSAR government in protecting the pegged exchange rate system, and not depreciate the RMB. With this support from the central government, the HKSAR government took swift measures that ensured the stability of its financial system and the Hong Kong society.

-Supporting Hong Kong in the fight against SARS. In the first half of 2003, the SARS epidemic hit Hong Kong. It not only posed a threat to the lives and health of the Hong Kong people, but also dealt a blow to Hong Kong's economy that had not recovered from the Asian financial crisis, resulting in deflation, market slump and a high unemployment rate of 8.7 percent. To ensure the safety of life of the Hong Kong people and help the Hong Kong economy climb out of recession, the central government promptly lent a helping hand. Although the mainland also needed medical supplies in the fight against SARS, the central government provided a large quantity of free medical supplies to Hong Kong. The Chinese leaders also went to the hardest-hit areas and hospitals of Hong Kong to inspect local conditions and console victims. On June 29, the mainland and Hong Kong signed the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), which outlines the steps that the mainland and Hong Kong should take in trade in goods and services, and trade and investment facilitation as well as the goals to be achieved. Later, the Individual Visit Scheme was introduced, allowing mainland residents to visit Hong Kong on their own. These measures helped Hong Kong overcome the SARS attack and boosted its economic growth.

-Supporting Hong Kong in the fight against the international financial crisis. When the international financial crisis broke out in the second half of 2008, the central government was highly concerned about its impact on Hong Kong. In December of that year, it introduced 14 policies to ensure economic and financial stability in Hong Kong. In January 2009, the central government launched more policies, including the signing of a RMB200 billion currency swap agreement by the People's Bank of China with the Hong Kong Monetary Authority. Later, when visiting Hong Kong, the Chinese leaders announced a number of policies to support Hong Kong's economic development, improve the local people's livelihood, and strengthen its exchanges and cooperation with the mainland. All these policies played a positive role in boosting confidence, strengthening capability to defuse risks and stimulating the economic recovery of Hong Kong.

2. Supporting the HKSAR in Reinforcing and Enhancing Its Competitive Strengths

-Supporting Hong Kong as an international center of finance, trade and shipping. The central government supports Hong Kong in launching individual use of RMB, issuing RMB bonds and conducting trials of RMB settlement in cross-border trade, thus consolidating Hong Kong's position as a leading offshore RMB market. It has continued to encourage the listing of mainland enterprises on the stock market in Hong Kong, and introduced other measures to support Hong Kong's financial sector. In 2013, a total of 216 Hong Kong banks joined the RMB clearing platform, and the amount of cross-border RMB settlement in Hong Kong reached RMB3.84 trillion, accounting for 82.9 percent of the total cross-border RMB settlement of China. The balance of Hong Kong's RMB customer deposits and depository receipts reached RMB1 trillion. Hong Kong has become the world's largest offshore RMB trading center. After the signing of the CEPA in 2003 and its coming into force in January 2004, the mainland signed and implemented ten supplementary agreements with Hong Kong. The mainland now gives zero tariff treatment to all products of Hong Kong origin. From that time to the end of 2013, the mainland imported from Hong Kong goods worth US$7.161 billion under the CEPA, with tariff preference of RMB3.983 billion for Hong Kong. The mainland also adopted a total of 403 liberalization measures in respect of trade in services. Based on WTO classification, the mainland has opened to Hong Kong 149 areas of trade in services under the CEPA and its supplementary agreements, accounting for 93.1 percent of the total number of such areas of the mainland. This makes the CEPA the most open agreement on free trade that the mainland has ever signed. In addition, Guangdong Province has adopted 82 pilot measures to open its services industries to Hong Kong. When drawing up the National Plan for the Layout of Coastal Ports, and the 12th Five-Year Plan for the Comprehensive Development of Transportation Systems, the central government took into account the need to consolidate and enhance Hong Kong's position as an international shipping center.

-Supporting Hong Kong in developing its tourism and retail sectors, and Hong Kong-invested companies on the mainland. At the request of the HKSAR government, the central government gradually expanded the Individual Visit Scheme to 49 pilot cities, with a total population of over 300 million. By the end of 2013, some 129 million mainland residents had visited Hong Kong under the Individual Visit Scheme. According to estimate of the HKSAR government, in 2012 alone the Individual Visit Scheme contributed to 1.3 percent increase of Hong Kong's GRP of the year, and it created more than 110,000 jobs, accounting for 3.1 percent of the local employment. To bring more benefits to medium-sized and small businesses and residents in Hong Kong, the central government also allows Hong Kong residents to start individual businesses on the mainland. By the end of 2013, a total of 5,982 individual businesses opened by Hong Kong residents had been registered on the mainland, employing 16,476 people. The central government encourages the development of Hong Kong processing and trading companies on the mainland, and has assisted the transformation and upgrading of Hong Kong-invested companies on the mainland. In 2009, Guangdong Province introduced 30 policies to help companies established with Hong Kong, Macau and Taiwan investment weather the international financial crisis and accelerate their transformation and upgrading. In December 2011, the central government issued the Guidelines on Promoting the Transformation and Upgrading of Processing Trade, and set up demonstration zones and pilot cities for the transformation and upgrading of processing trade in Suzhou and Dongguan, as well as 44 key areas in central and western China to relocate enterprises of processing trade in a phased way.

3. Supporting the HKSAR in Strengthening Exchanges and Cooperation in Various Fields with the Mainland

Since Hong Kong's return to China in 1997, the central government has made the maintenance of its prosperity and stability an important part of the country's overall development strategy. Both the 10th and 11th Five-Year Plans stress the need to ensure lasting prosperity and stability in Hong Kong, and strengthen its position as an international center of finance, trade and shipping. In the 12th Five-Year Plan, for the first time, the development of Hong Kong and Macau is dealt with in an independent section. This has further defined Hong Kong's strategic position in China's development strategy and stressed the state support for Hong Kong in enhancing its competitive edge, fostering emerging industries and deepening economic cooperation with the mainland.

-Supporting the HKSAR further in developing economic and trade cooperation with the mainland. The implementation of the CEPA and its supplementary agreements has removed a great deal of institutional barriers in trade, investment and other sectors between Hong Kong and the mainland, strengthened their economic and trade relations, and broadened the range of cooperation, with both sides benefiting from their cooperation. Currently, the mainland is the largest trading partner of Hong Kong. According to Hong Kong statistics, in 2013 the trade volume between Hong Kong and the mainland reached HK$3.8913 trillion, 3.49 times that of 1997 and accounting for 51.1 percent of Hong Kong's external trade. At the same time, Hong Kong is the mainland's most important trading partner, a key export market and the mainland's largest off-shore financial center. By the end of 2013, mainland enterprises listed in Hong Kong had totaled 797, accounting for 48.5 percent of the total number of Hong Kong listed companies. In addition, their total market value had reached HK$13.7 trillion, accounting for 56.9 percent of the total value of the Hong Kong stock market. In addition, the mainland and Hong Kong are each other's largest source of overseas direct investment (ODI). By the end of 2013, Hong Kong's ODI from the mainland had exceeded US$358.8 billion, accounting for nearly 60 percent of the mainland's total ODI; the mainland had approved nearly 360,000 projects with Hong Kong investment, involving US$665.67 billion in total and accounting for 47.7 percent of the mainland's total ODI.

-Supporting the HKSAR in strengthening cooperation with mainland provinces, autonomous regions and municipalities directly under the central government, particularly Guangdong Province. The central government has endorsed the establishment of the Hong Kong-Guangdong Cooperation Joint Conference, and the Pan-Pearl River Delta Regional Cooperation and Development Forum. It approved the implementation of the Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), the Overall Development Plan of Hengqin, the Overall Development Plan for the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, and the Development Plan for the Nansha New District of Guangzhou, and approved the signing by Guangdong with the HKSAR of the Framework Agreement on Hong Kong-Guangdong Cooperation, which identifies the three key areas of cooperation, namely, building the Hengqin New District of Zhuhai, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and the Nansha New District of Guangzhou, the central government has urged Guangdong and Hong Kong to work together to build more competitive world-class urban cluster with cutting-edge manufacturing and service industries. The central government has also approved the establishment by the HKSAR of regional cooperation mechanisms with Beijing and Shanghai, and supported the HKSAR government to set up offices on the mainland. Currently, in addition to its Beijing Office, the HKSAR government has also set up commercial offices in Guangzhou, Shanghai, Chengdu and Wuhan, and liaison offices in Shenzhen, Chongqing and Fuzhou, which are instrumental in promoting Hong Kong's economic and trade cooperation with the various localities in the mainland and exchanges in other areas.

-Supporting efforts by the HKSAR and the mainland in cross-border infrastructure construction and facilitation for personnel and cargo customs clearance. The Hong Kong-Shenzhen Western Corridor, which opened to traffic in 2007, has become the fourth land passage linking Hong Kong with the mainland. The Hong Kong-Zhuhai-Macau Bridge, the construction of which started in 2009 and scheduled for completion in 2016, will connect Hong Kong in the east and Zhuhai and Macau in the west, and will become a new road transport corridor linking eastern and western banks of the Pearl River. The Guangzhou-Shenzhen-Hong Kong High-Speed Railway, when completed, will connect Hong Kong with China's national high-speed rail network. As things stand now, the mainland and Hong Kong have achieved full mutual recognition of inspection results at all land and water ports. In 2013, a total of 40.75 million mainland residents visited Hong Kong, which was 17.3 times that of 1997; while 76.88 million Hong Kong residents visited the mainland, up from 39.77 million in 1997.

-Supporting the HKSAR in strengthening exchanges and cooperation with the mainland in education, science and technology, culture and some other fields. The central government has supported universities of Hong Kong and the mainland in enrolling students from each other; supported cooperation in academic affairs between institutions of higher learning of Hong Kong and the mainland, and supported teaching staff and students from the two sides in carrying out exchange activities. It has supported Hong Kong's institutions of higher learning, research bodies and the science and technology parks in Hong Kong in setting up Partner Labs of Key State Laboratories, the Hong Kong branch of the National Engineering Research Center and the National High-tech Industrialization Base; supported Hong Kong universities in establishing research institutes in Shenzhen; supported Hong Kong science workers and institutions in applying for projects under China's National Research Program; and endeavored to make the country's key sci-tech projects more accessible to Hong Kong. In 2005, the mainland and Hong Kong signed the Mainland and Hong Kong Closer Cultural Ties Arrangement Agreement, launching overall cooperation in cultural conservation, and industrial development and exchanges. The central government supported Hong Kong, Macau and Guangdong in jointly and successfully including the Yueju opera in the UNESCO's Representative List of Intangible Cultural Heritage of Humanity in 2009; and supported Hong Kong's successful bid to list its Geopark in Sai Kung as part of the UNESCO Global Geoparks Network in 2011. It has also supported Hong Kong in joint production of films with the mainland; since the signing of the CEPA, Hong Kong and the mainland have worked together in producing 322 films, accounting for 70 percent of mainland's total in such area. The central government has supported Hong Kong in cooperating with the mainland in sports personnel exchanges, training and some other aspects. It invites Hong Kong athletes to take part in National Games and other events. It has also supported exchanges and cooperation between the two sides in the development of traditional Chinese medicine, health care management, notification and prevention and treatment of infectious diseases, notification and cooperation in cases of public health crises, etc.

-Supporting the HKSAR government in establishing exchange and cooperation mechanisms with relevant departments of the central government. The HKSAR government has established a number of exchange and cooperation mechanisms at different levels and covering different areas with relevant departments of the central government to coordinate and promote related work. For example, the two sides established the CEPA Joint Steering Committee to oversee the implementation of the CEPA, solve problems, and supplement and amend the CEPA; and cooperation mechanisms in the areas of entry-and-exit control, customs, inspection and quarantine, finance, public health, tourism and other fields, to promote communication, jointly handle emergencies and combat illegal activities. In addition, the central government established a Joint Inter-ministerial Conference System for the Promotion of Qianhai, Nansha and Hengqin, to strengthen guidance, coordination and services for the development and building of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, Nansha New District in Guangzhou and Hengqin New District in Zhuhai; and the HKSAR government is a member of this system. These mechanisms have played a positive role in promoting mutually beneficial cooperation between Hong Kong and the mainland, and in handling related issues of regional development and governance of common concern.

4. Ensuring Secure and Stable Supplies of Basic Necessities to the HKSAR

Because of the limitations of its natural environment, Hong Kong mainly relies on the mainland for the supply of fresh water, vegetables, meat and other basic necessities. Since the early 1960s, when the mainland opened "three express trains" to supply Hong Kong with fresh and frozen goods, and started the Dongjiang-Shenzhen Water Supply Project, the central government and the relevant local governments on the mainland have made great efforts to ensure the supply of foodstuff, agricultural and sideline products, water, electricity, natural gas, etc., to the HKSAR. By the end of 2013, some 95 percent of live pigs, 100 percent of live cattle, 33 percent of live chicken, 100 percent of freshwater fish, 90 percent of vegetables and 70 percent or more of flour on the Hong Kong market had been supplied by the mainland. The first pass yield of foodstuff supplied by the mainland to Hong Kong has maintained at a fairly high level. In 2013, in accordance with the revised agreement, Guangdong supplied Hong Kong with 606 million cu m of fresh water. From 1994, the Daya Bay Nuclear Power Plant started to supply Hong Kong with electricity, and now its annual power supply accounts for a quarter of the annual power consumption of Hong Kong. In 2013, the mainland supplied Hong Kong with 2.531 billion cu m of natural gas.