Major Economic Indicators

• Recent Developments
• Current Economic Situation
• Trade Policy
• Textiles and Clothing
• Non-textile Manufacturing Products
• Scheme of Generalised Tariff Preferences
• Anti-dumping Measures
• Hong Kong's Trade with France
• French Involvement in the Hong Kong Economy
• Major Economic Indicators

Recent Developments

• As France is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.

• Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China had been established to monitor EU imports of Chinese textiles and apparel, which was scheduled to operate for one year, covering 8 out of the 10 previously restricted categories. Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.

• The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and will remain in force until 31 December 2011. While the Chinese mainland remains a beneficiary, certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, will be excluded from preferential treatment.

• A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, ironing boards and certain saddles, which are of interest to Hong Kong exporters.

• Hong Kong’s total exports to France grew by 19% to US$3.4 billion in the first eight months of 2011, while its imports from France soared by 43% to US$3.5 billion.

• The total stock of French direct investment in Hong Kong amounted to US$3.1 billion (or HK$24.1 billion) as at the end of 2009.

• Given the country’s high exposure to euro zone debts, growth of the French economy is expected to be softer in the balance of this year and 2012. Chronically high unemployment, coupled with the rising inflationary pressure, will continue to weigh on consumption, while weaker external demand will drag down exports. Against this backdrop, France is forecast to end this year with GDP growing 1.7% and next year with a lower estimate of 1.4%.

Current Economic Situation

The French economy ended last year with GDP growth of 1.4% and kicked off 2011 with a vigorous start. The resilience of private consumption (with substantial buffers due to historically high savings rates and a dynamic demography) and the limited size of the manufacturing sector have been considered shields guarding the French economy through the global economic crisis. That said, the country’s high exposure to debt in weak euro zone economies and chronically high joblessness are said to hinder the recovery of the French economy, not to mention the weaker external demand from its neighbours.

Looking ahead, France’s resilient domestic demand will remain the major stimulus to growth. However, the fading of recovery measures such as one-off social transfers and a car-scrapping premium, along with the weaker external demand, is going to moderate manufacturing activities and business investment. This, coupled with higher inflation and the expected increase in the labour force after the general pension reform and cancellation of exemptions to job search obligation, will set to add pressure to the labour market and subsequently consumer sentiment. To complicate matters, the lingering European sovereign debt spiral will continue to cast dark clouds over France’s growth outlook. In all, France is forecast to end this year with GDP growing 1.7% and next year with a lower estimate of 1.4%.

Trade Policy

France is a member of the EU, and it follows EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.

Textiles and Clothing

Hong Kong’s textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.

Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China was established to monitor EU imports of Chinese textiles and apparel for one year, covering 8 out of the 10 previously restricted categories.

Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.

Non-textile Manufacturing Products

Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.

Scheme of Generalised Tariff Preferences

The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and will remain in force until 31 December 2011. The scheme classifies products into two categories, namely sensitive products that enjoy the benefits of reduced tariff rates by 3.5 percentage points, and non-sensitive products that enjoy total tariff suspension. Under the new GSP scheme, the Chinese mainland remains a beneficiary. But certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, are excluded from preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.

Anti-dumping Measures

The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of mainland-origin items subject to EU’s anti-dumping measures, including bicycles, ironing boards and certain saddles, which are among the affected products of interest to Hong Kong. As at the end of June 2011, the EU did not apply any AD measures on imports from Hong Kong.

Other Measures

To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.

For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which will come into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.

On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.

The recast RoHS Directive was published on 1 July 2011. It will have to be implemented throughout the EU-27 as of 2 January 2013. The new Directive will continue to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.

Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. Under the recast, the collection and recycling targets will increase, although there is a battle going on at EU level as to how high some of these targets should ultimately be. To clear the remaining conflicting issues during negotiations over the recast, the implementation may not occur before 2014.

On the heels of the recast RoHS Directive and the soon-to-be adopted recast WEEE Directive, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.

Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.

Hong Kong's Trade with France

Hong Kong’s total exports to France grew by 19% to US$3.4 billion in the first eight months of 2011, after growing by 22% to US$4.5 billion in 2010. Major export items to France during January-August 2011 included semi-conductors, electronic valves/tubes (shared 12% of the total), telecommunications equipment and parts (9%), articles of apparel, of textile fabrics (9%), jewellery (7%), travel goods and handbags (5%), and toys, games & sporting goods (4%).

On the other hand, Hong Kong’s imports from France soared by 43% to US$3.5 billion in the first eight months of 2011, after increasing by 28% to US$3.9 billion in 2010. Major import items from France during January-August 2011 included travel goods and handbags (shared 22% of the total), alcoholic beverages (11%), aircraft & associated equipment; spacecraft & parts (9%), perfumery and cosmetics/toilet preparations (5%), telecommunications equipment and parts (5%) and jewellery (4%).

^   Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

French Involvement in the Hong Kong Economy

France has a substantial investment in Hong Kong. The total stock of direct investment amounted to US$3.1 billion (or HK$24.1 billion) as at the end of 2009.

Over 600 French companies are operating in Hong Kong, including BNP Paribas, Credit Lyonnais, Credit Agricole and AXA (banking and finance), LVMH Asia Pacific Ltd and Parfums Christian Dior Far East (trading/distribution), Air France (transport), Agence France-Presse and Maya Press (media), BSO Network Solutions and TheTMSway (information and communications technology), Maltem (IT consultancy), Gameloft (video game publisher) and DESSANGE Paris (beauty care).

As at 1 June 2010, there were 62 French companies with regional headquarters in Hong Kong, while another 105 had regional offices here. Reflecting France’s diverse activities, there were 2,930 French nationals resided in Hong Kong as at the end of 2010.

Major Economic Indicators