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The strong economic ties with the
Mainland, especially with the Pearl River
Delta (PRD), are one of Hong Kong's
fundamental strengths. The relocation of
production processes to the Mainland in
the last two decades has triggered a
remarkable transformation in the economy
of both Hong Kong and the PRD and
brought about the development of Hong
Kong as an international financial centre
and services hub.

Hong Kong is a leading international trading and services hub as well as a high value-added manufacturing base. It is widely recognised as one of the freest economies in the world, and the gateway to the Mainland market.

In 2004, Hong Kong's total merchandise trade amounted to $4,130.2 billion. Over 289 000 business establishments in a wide range of services and manufacturing sectors are operating in Hong Kong, and the vast majority are small and medium enterprises (SMEs). There is also a strong presence of international businesses in Hong Kong. In 2003, Hong Kong had 9 072 enterprise groups with inward direct investment.

Hong Kong's continuing economic success owes much to a simple tax structure and low tax rates, a versatile and industrious workforce, excellent infrastructure, free flow of capital and information, the rule of law, and the Government's firm commitment to free trade and free enterprise.

The Government sees its task as facilitating commerce and industry within the framework of a free market. It maintains no tariffs and no regulatory measures impinging on international trade, other than those required to discharge its international obligations or to protect health, the environment and access to high technology. The HKSAR also adopts an open and liberal investment policy and actively encourages inward investment.

The Government's industrial policy aims to promote industrial development by creating a business-friendly environment and providing adequate support services. The Government zones land for general and specialised industrial use. It also ensures a modern legislative and regulatory environment, and supports industry in enhancing productivity and quality through technology and management improvement. The Government, however, does not subsidise any specific industries.

With the weight of the Hong Kong economy shifting towards knowledge-based and higher value-added activities, the Government puts increasing emphasis on promoting innovation and technological improvement in industry and business. It aims to strengthen support for technology development and application, develop a critical mass of fine scientists and engineers, skilled technicians and venture capitalists, and encourage the development of a significant cluster of technology-based businesses.