Mrs Polfer, who is also Minister of Foreign Affairs as well as External Trade, told the South China Morning Post that her first visit was an 'opportunity to see for myself the economic, social and cultural realities of Hong Kong'. It was also a chance to forge closer ties with important political and business leaders, she said. Mrs Polfer's visit was the first by a Luxembourg foreign minister in 14 years.

Luxembourg's honorary consul in Hong Kong, Dr James Kung, who is also chairman of Chekiang First Bank, described the bilateral relationship as 'excellent'.

'In economic terms, all major Luxembourg companies are present in Hong Kong - Trade Arbed, Cargolux, with up to 10 flights a week, SES as a main shareholder in Asia Satellite, and banks and related companies,' he said.

Commercial relations were building up, he said, adding that engagement at a cultural level should be further developed.

Mrs Polfer said the Luxembourg presence in Hong Kong was evident in sectors of the economy, including banking and finance, transport, media, and telecommunications.

'We want to improve our relations,' she said. In her meeting with Mr Tung, Mrs Polfer said she exchanged views with the chief executive about how Hong Kong had successfully adapted in the post-handover era. She also updated Mr Tung on political, social and economic developments in Luxembourg, which now has a new head of state, Grand Duke Henri, who ascended the throne in October last year.

Reflecting on Hong Kong's importance as a global and regional financial centre, Mrs Polfer said that Luxembourg played a similar premier role in Europe and the world.

The Grand Duchy is Europe's largest investment fund centre, with assets under management totalling 862.7 billion euro (HK$5.74 trillion) as at March. But global financial market volatility has contributed to a 1.05 per cent decline in the value of portfolios from 871.8 billion euro in February this year. There are more than 1,800 funds domiciled in the Grand Duchy.

The banking sector plays an important a role in the economy, with 197 banks operating, as at April, with combined assets at 673 billion euro.

While the financial arena remains a major force, corporations in the steel, media and telecommunications sectors have been transforming themselves into global giants by investing in new assets.

Steel conglomerate Arbed, which maintains a presence in Hong Kong, is evolving into a global giant through its merger with Usinor of France and Aceralia of Spain. Similarly, the satellite operation SES (Societe Europeenne des Satellites), 'holds a major stake in AsiaSat', Mrs Polfer said.

'Already present in Europe, in Asia and Latin America, it is now in the process of acquiring another large satellite company,' she said. The acquisition will 'make it the largest provider of satellites in the world, with some 40 satellites in orbit'.

The Western European state became prosperous following the discovery of iron ore in the south, and while the steel industry remains important, Honorary Consul Dr Kung points out, that the Jean-Claude Juncker government 'has been attempting to establish value-added industries'.

The government's long-term objective is to reduce dependency on the banking sector.

To promote investment and entrepreneurship, Luxembourg has been taking policy initiatives such as lowering corporate and personal income taxes.

Over the past two decades, the economy has undergone structural change.

Addressing the Lux-Asia forum late last year in Luxembourg, Economy Minister Henri Grethen, said that as the economy shifted from an agricultural and steel-based economy, Luxembourg has evolved into an international financial centre, and that in recent years 'a substantial potential for development of the communications, media and information industries, has emerged'.

He attributed the structural change in the economy to a policy of diversifying the manufacturing sector, restructuring of the European and Luxembourg steel industry, the city's emergence as a global financial centre, and a policy of encouraging research and development as well as promoting innovative companies in new sectors.

Lux-Asia promotes collaboration between small and medium-sized enterprises in Southeast Asia and Europe.