CEPA Supplement VI furthers services liberalization

As Hong Kong Financial Secretary John C. Tsang (front row, left), and Vice Minister of Commerce Jiang Zengwei sign Supplement VI to the Mainland and Hong Kong Closer Economic Partnership Arrangement on May 9, Hong Kong Chief Executive Donald Tsang (back row, center), looks on. Other guests in attendance were (back row, from left): Director-General of Trade and Industry Joseph Lai, Permanent Secretary for Commerce and Economic Development (Commerce, Industry & Tourism) Yvonne Choi, Secretary for Commerce and Economic Development Rita Lau, Deputy Director of Hong Kong and Macau Affairs Office of the State Council Zhou Bo, Deputy Director-Liaison Office of the Central People's Government in the HKSAR Guo Li and Director-General-Department of Taiwan, Hong Kong and Macau Affairs, Ministry of Commerce Tang Wei.

The Hong Kong Special Administrative Region Government and the Central People's Government agreed on May 9 to greater liberalization of services and trade cooperation under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).

With Hong Kong Chief Executive Donald Tsang and other guests in attendance, Hong Kong Financial Secretary John C. Tsang and China’s Vice Minister of Commerce Jiang Zengwei signed the CEPA Supplement VI.

Under this agreement, the Mainland will introduce 29 liberalization measures covering 20 service sectors, including two new sectors: rail transport and research and development. CEPA now covers 42 service sectors.
Some noteworthy liberalization measures include:

1. Tourism: Authorized Mainland travel agents will be able to organize group tours for Mainland residents who hold a valid Taiwan exit/entry permit and a travel endorsement to enter and remain in Hong Kong in transit. This measure aims to develop multi-destination tour products. Moreover, permanent Hong Kong residents with Chinese citizenship will be able to obtain Mainland outbound tour escort credentials. They can be employed by Mainland international travel agents authorized to operate outbound group tours for Mainland residents, as well as by Hong Kong and Macau travel agents authorized to operate group tours to Hong Kong and Macau for Mainland residents.
2. Banking: Established Hong Kong banks in Guangdong Province will be able to establish service points in other areas without first establishing branches there. This will enable banks to expand their business network and improve the quality and efficiency of banking services provided to enterprises (including Hong Kong-invested enterprises in Guangdong).
3. Security services: Qualified Hong Kong and Mainland companies will soon be able to establish Guangdong joint venture securities investment advisory companies. The Hong Kong securities company will be able to hold a maximum one-third of the total shareholding of such a company. This will allow Hong Kong securities companies to participate in the development of the Mainland’s securities market.
4. Audio-visual services: Hong Kong service suppliers (HKSS) will be able to provide videos and sound recording (including motion picture products) distribution services on the Mainland in the form of wholly owned operations. In addition, the post-production of domestic films (including co-productions) will be able to be processed in Hong Kong after obtaining the approval of the State Administration of Radio, Film and Television.
5. Telecommunications services: HKSS will be able to distribute fixed/mobile telephone service cards in Guangdong that can be used only in Hong Kong.
6. Legal services: After intensive training and assessment, experienced Hong Kong legal practitioners will be eligible to practice law on the Mainland. Hong Kong legal practitioners must have at least five years’ legal experience and must have passed the National Judicial Examination to qualify for the intensive Mainland training. In addition, Hong Kong law firms that have set up Mainland representative offices will be able to operate in association with established Mainland law firms in Guangdong. Those Mainland law firms must be at least 1 year old, with a founding member having been in legal practice for five years or more.
7. Convention and exhibition: On a pilot basis, HKSS will be able to organize exhibitions in Beijing, Tianjin, Chongqing, Zhejiang Province, Jiangsu Province and Fujian Province. Furthermore, registered enterprises set up by HKSS as wholly owned, equity joint ventures or contractual joint ventures in Guangxi, Hunan, Hainan, Fujian, Jiangxi, Yunnan, Guizhou and Sichuan will be able to organize overseas exhibitions, also on a pilot basis. These liberalization measures extend the geographical reach of the 2007 CEPA measure on cross-border supply of services and the 2008 measure allowing HKSS to organize overseas exhibitions on a pilot basis.
8. Transportation services: HKSS will be able to construct, operate and manage the Shenzhen Metro Line 4 project in Shenzhen through wholly owned operations. This is a newly added service sector. In addition, HKSS will be able to set up wholly owned shipping companies on the Mainland to provide such regular business services as shipping undertaking, issuance of bills of lading, settlement of freight rates and signing of service contracts. These shipping services will be provided for HKSS-operated transport between Hong Kong and Class B ports in Guangdong that use chartered Mainland vessels.
9. Printing and publishing services: HKSS will be able to establish on the Mainland typesetting and production services companies on a wholly owned, equity joint venture or contractual joint venture basis to provide such pre-press services as proofreading, design and typesetting.
10. Research and development services: This is a newly added sector. HKSS will be able to set up wholly owned enterprises on the Mainland to provide research and experimental development services in the natural sciences and engineering.

Supplement VI to the CEPA also includes nine measures for early and pilot implementation in Guangdong in such sectors as legal, convention and exhibition, public utility, telecommunications, banking, securities, maritime transport and rail transport. These measures will enhance the cooperation of the services industry between Guangdong and Hong Kong.

All the liberalization measures will take effect October 1. This date is three months ahead of schedule — normally, such measures take effect the first day of the following year.

Apart from service liberalization, the two sides also agreed to enhance financial cooperation and work toward mutual recognition of professional qualifications.

To enhance financial cooperation, qualified Mainland securities companies approved by the China Securities Regulatory Commission will be able to establish subsidiaries in Hong Kong. Furthermore, the Mainland will also actively explore the introduction there of “open-ended, index-tracking, exchange-traded funds,” the portfolios of which would be comprised of Hong Kong-listed stocks.

Supplement VI also includes a number of measures to encourage the mutual recognition of professional qualifications, as well as technical exchange work among professionals from the accounting, construction, real estate and printing sectors. In addition, Hong Kong pharmacists will be able to sit for examination and register on the Mainland. These measures will provide greater business opportunities and facilitate the upgrading of professional standards of the two places.

On the whole, the Supplement VI measures will help enhance HKSS’s competitiveness on the Mainland. Such measures will not only help enterprises overcome the current financial crisis, but will also promote the long-term economic development of both sides.

Details on CEPA, including the newly agreed liberalization and cooperation measures, will be uploaded to the Trade and Industry Department's CEPA Web site: [www.tid.gov.hk/english/cepa/index.html].