Enormous potential exists for trade and economic co-operation between China and the European Union (EU), and established relations will continue to prosper, says David Ting, head of the European Commission's office in Hong Kong.

"The EU has always attached high importance to relations with China, and mutual relations are better than ever before thanks to increasingly strengthened diversified ties," Ting says.

According to the country's first-ever EU Policy Paper released in mid-October, China expects the EU to become China's largest trading and investment partner in five years.

Currently, the Chinese mainland is the EU's third most important trading partner and vice versa. EU statistics reveal that the trade volume between the mainland and the bloc reached 115 billion euros (US$135 billion) in 2002.

"In a larger sense, including Hong Kong, Macao and Taiwan, Greater China has been the second largest trading partner of the EU since 2001," says Ting.

Trade volume between the EU and Greater China stood at 174.8 billion euros (US$206.3 billion) in 2001 and 178.4 billion euros (US$210.5 billion) in 2002, accounting for 8.8 and 9.1 per cent, respectively, of the EU's total foreign trade.

"It is obvious that the economic links of Hong Kong, Macao, Taiwan and the mainland are growing much closer. When we examine the EU's trade relationship with these areas, we cannot separate them as they are, in fact, in the same country," he adds.

Ting says he is fully confident that economic co-operation between the EU and Greater China will continue to deepen. "It is hard to estimate how fast mutual economic ties will develop as the market is so vast and promising, especially since China joined the World Trade Organization in 2001," he remarks.

But what does the thriving market mean to Hong Kong, long dubbed the gateway between the mainland and the rest of the world?

"Hong Kong's role as the 'middleman' is now weaker than ever but it could be reinvigorated thanks to the recent signing of the Closer Economic Partnership Arrangement between Hong Kong and the mainland," Ting says.

EU statistics indicate that bilateral trade between Hong Kong and the EU is declining slightly. Total bilateral trade volume decreased from 31.3 billion euros (US$36.9 billion) in 2001 to 29.6 billion euros (US$34.9 billion) in 2002.

This is partly because many EU-based multinational companies have been able to invest directly on the mainland. In addition, more than 90 per cent of Hong Kong's exports are re-exports from the mainland, but a growing number of mainland companies are now able to export and invest overseas without the help of the "middleman", Ting notes.

"Hence, the people of Hong Kong should continue brushing up their skills and strengthening their understanding of the mainland in order to stay ahead of the competition," he says.

Considering the size of the motherland, the Hong Kong public would do well to learn from their mainland counterparts. Putonghua, for example, is the most basic prerequisite for enhancing mutual understanding and an effective tool for paving the way into the mainland market.

But not that many Hong Kong residents speak Putonghua fluently, Ting says, adding that the English language and the international perspective that once gave Hong Kong its edge are no longer unique competitive advantages given the rapidly rising number of mainland students studying abroad and returning to China.

"As another example, it is not difficult to find talent with fluent French or German in big mainland cities like Beijing and Shanghai. However, it is never easy in Hong Kong," Ting says.

What, then, are Hong Kong's options?

Ting believes that Hong Kong's future lies in integration with the mainland, particularly the neighbouring Pearl River Delta, in which Hong Kong has a role to play.

"Hong Kong's further economic integration with the mainland, particularly the Pearl River Delta, is an asset for both, provided that Hong Kong retains its individual personality within the framework of the 'One Country, Two Systems' principle," says Ting in his annual report on the Hong Kong Special Administrative Region (HKSAR) for 2002.

According to him, Hong Kong is still superior to its mainland counterparts in the legal system, the rule of law, clean governance and its efficient civil service, attributes which should be fully maximized.

In addition, Ting points out that CEPA, a dynamic catalyst for mutual integration, will enhance Hong Kong's attractiveness as a regional business hub.

"But it should be noted that the free-trade pact is by no means a panacea to reinvigorate the city's economic situation. The people of Hong Kong should carry on with their 'can-do' spirit and make the best of the business deal," he urges.

Ting, who took his current post in 2000, notes in his annual report that Hong Kong's economic adjustment will understandably be a long and difficult process.

"The people of Hong Kong should remain confident about future economic development and continue to take full advantage of the assets the HKSAR possesses as an international financial centre and a service-oriented economy."

As the European Commission's branch in Hong Kong celebrates its 10th anniversary today, Ting says that bilateral relations between Hong Kong and Europe have improved in the past decade.

During the period, the two parties established two major agreements: the mutual agreement on co-operation and administrative assistance in customs matters signed in 1999, and the readmission agreement of 2002.

The first agreement streamlines the secure and rapid exchange of information between EU and HKSAR customs authorities, while the second ensures the swift and effective identification and return of persons illegally entering or remaining in their respective territories.

In addition, the EU granted visa-free access to HKSAR passport holders in 2001, to further facilitate mutual business and cultural exchanges.

On the economic front, the EU is Hong Kong's third largest trading partner after the mainland and the United States.

Meanwhile, Hong Kong remains an important regional base for European companies. As of June 2003, 284 EU-based companies set up regional headquarters in Hong Kong and 641 EU enterprises established regional offices in the SAR.

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