"Dialogue and cooperation should therefore be backed up and reinforced by an EU financing instrument," said the document.

In response to the EC's communication, a government spokesman of the Hong Kong Special Administrative Region (HKSAR) said that the government welcomed the EC acknowledgment that the "One Country, Two Systems" principle had been respected and was working well for the people of Hong Kong.

The spokesman also welcomed the EC proposal to enhance co-operation and development of closer relations between the EU and the HKSAR in trade, economic and other areas within Hong Kong's high degree of autonomy under the Basic Law.

"For this purpose, we will continue to work out arrangements with the EC for conducting the proposed regular dialogue between the HKSAR Government and the EC. The agenda for the dialogue will cover items to be mutually agreed," the spokesman said.

Hong Kong will continue to strengthen customs co-operation on intellectual property rights. "This includes measures to combat copyright infringement and counterfeit activities," he added.

On co-operation on tax matters, the spokesman said that the HKSAR is committed to pursuing effective exchange of information within the ambit of bilateral comprehensive double taxation agreements and in accordance with its legislation.

"We also have stringent anti-tax avoidance legislation. We are vigilant in combating tax avoidance and evasion, and we support international co-operation on this front by improving transparency and the exchange of information in accordance with our legislation."

On constitutional development, the spokesman said that the Central Authorities and the HKSAR Government are fully committed to achieving the ultimate aim of universal suffrage in accordance with the Basic Law.

In November last year, the Chief Executive initiated the discussion on formulating a roadmap for universal suffrage through the Commission on Strategic Development, he said. "The discussion is progressing well."

"Constitutional development is part of our internal affairs. The HKSAR will deal with it in accordance with the Basic Law.

We hope and believe that the EC will continue to respect this principle," the spokesman added.

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