The communication, entitled "The European Union, Hong Kong and Macao: possibilities for Cooperation 2007-2013", was adopted by the European Commission (EC) in Brussels and released here by the EC Head Office in Hong Kong and Macao.

The EU's relations with the Hong Kong and Macao special administrative regions (SARs) have continued to develop since they returned to the motherland, said the paper, adding that both the SARs have been governed according to the principle of "One country,Two systems" set out in detail in a separate basic law for each.

"In general, the 'One country, Two systems' principle has been respected and is working well for the people of Hong Kong and Macao," said the document.

The document sets a number of challenging new objectives for moving forward cooperation in seven key areas: trade and customs, finance, people to people links including academia, transport, the environment, health and food safety.

"EU interests in Hong Kong are substantial," said the paper, noting that the SAR is EU's 16th bilateral trading partner by volume, and if the huge transit trade via Hong Kong to China is taken into account, ranks as high as six.

The two-way trade remains close to 30 billion euros on an annual basis, and Hong Kong continues to play a "gateway" function for a number of EU newcomers looking for access to the Chinese mainland market, according to the paper.

European business activity in Hong Kong accounts for the largest foreign presence, with EU companies constituting the largest number of foreign companies with regional headquarters and regional offices based in Hong Kong, said the paper.

As to Macao, the document says that the EU is Macao's third largest trading partner. "While there are only a few EU companies based in Macao, those that are there express satisfaction with the infrastructure and communications," said the document.

Hong Kong and Macao are important partners that share many values and institutional structures with the EU in the economic, regulatory, social and cultural spheres, said the paper.

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