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CEPA Supplement VII expands economic and trade cooperation
The Closer Economic Partnership Arrangement (CEPA) continues to benefit Hong Kong enterprises and the economy as a whole, according to an updated assessment by the Hong Kong Special Administrative Region Government. The study looked at CEPA’s impact on the Hong Kong economy after the liberalization of trade in services and the implementation of the Individual Visit Scheme (IVS).
From 2004 to 2009, cumulative business receipts obtained by service companies in Hong Kong from Mainland-related business due to CEPA reached US$7.89 billion. From 2007 to 2009, CEPA-induced business receipts obtained by operations established by HKSS in the Mainland amounted to US$25.44 billion. During the same period, companies in Hong Kong obtained additional business receipts totaling approximately US$7.06 billion due to CEPA.
Under the arrangement, the IVS has been extended to 49 Mainland cities. By March 2010, more than 49 million Mainland visitors had come to Hong Kong under the program. In cumulative terms, IVS visitors spent more than US$10.87 billion from 2004 to 2009.
The liberalization of trade in services and IVS under CEPA resulted in 54,700 new jobs in Hong Kong and 40,600 jobs in the Mainland by the end of 2009. |
The Hong Kong Special Administrative Region Government and the Central People's Government recently reached agreement on further liberalizing trade in services and enhancing cooperation in trade and investment facilitation under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).
Hong Kong Financial Secretary John C. Tsang signed the agreement with China’s Vice Minister of Commerce Jiang Zengwei in the presence of Hong Kong Chief Executive Donald Tsang and other guests on May 27.
Supplement VII to CEPA provides for 35 market liberalization and trade- and investment-facilitation measures in 19 sectors. Twenty-seven are liberalization measures in 14 service sectors, of which eight are measures for “early and pilot implementation.”
The agreement also further relaxes market-access conditions in 14 service sectors comprising construction; medical services; technical testing, analysis and product testing; specialty design; audiovisual services; distribution; banking; securities; social services; tourism; cultural services; air transport; qualification examinations for professionals and technicians; and individually owned stores. Among them, technical testing, analysis and product testing and specialty design are new sectors, bringing the total number of liberalized service sectors under CEPA to 44.
All the liberalization measures under Supplement VII will take effect January 1, 2011.
This latest agreement will expedite and facilitate Hong Kong service industries to enter and expand in the Mainland market and foster service industries’ integration and professional exchanges on both sides.
Most of these measures cover the four pillar industries and the six economic industries in which Hong Kong has a competitive edge, and as such will help consolidate Hong Kong’s status as an international financial, trade, shipping, logistics and high value-added service center. They also lay the foundation for the two sides to jointly develop education, medical services, testing and certification, environmental, innovative technology and cultural industries.
Hong Kong service suppliers (HKSS) are allowed to set up wholly owned hospitals in the municipalities of Shanghai and Chongqing, and in the provinces of Guangdong, Fujian and Hainan. They are also allowed to set up convalescent hospitals in the form of wholly owned, equity joint ventures or contractual joint ventures in Guangdong.
No requirement is imposed on the total investment in setting up hospitals by HKSS on an equity joint venture or contractual joint venture basis in Guangdong, and no restriction is imposed on the ratio of capital investment between Hong Kong and Mainland partners in setting up hospitals in the form of equity joint ventures or contractual joint ventures in Shanghai, Chongqing, Guangdong, Fujian and Hainan.
Hong Kong travel agents, established on a wholly owned or joint venture basis in Beijing and Shanghai, are allowed to apply to operate, on a pilot basis, group tours to Hong Kong and Macau for permanent residents registered in Beijing and Shanghai.
Hong Kong banks that have maintained a representative office in the Mainland for more than one year can apply to set up a wholly foreign-funded bank or a foreign bank branch. A Hong Kong bank's operating institution in the Mainland can apply to conduct renminbi business if it has been operating for more than two years and has been profitable for one year prior to the application. Foreign banking institutions established in the Mainland by Hong Kong banks can establish specialized institutions to provide financial services to small enterprises.
Plans are under way for cooperation in financial services and product development, and for the launch on the Mainland of open-end, index-tracking exchange-traded funds constituted by Hong Kong listed stocks.
Hong Kong professionals who have obtained the Mainland's Class 1 registered architect qualification or Class 1 registered structural engineer qualification are allowed to act as partners to set up construction and engineering design offices in the Mainland, without restrictions on the ratio of the number of Hong Kong partners to the number of Mainland partners, the ratio of the total capital contributed by the Hong Kong partners to that by the Mainland partners, or the Hong Kong partners’ period of residence in the Mainland.
Hong Kong professionals who have obtained the Mainland's Class 1 registered architect qualification or Class 1 registered structural engineer qualification through mutual recognition are also allowed to register and practice in Guangdong.
Sales agencies set up by HKSS in the Mainland in the form of wholly owned enterprises, equity joint ventures or contractual joint ventures are allowed to operate air transport sales agency services on domestic routes in the Mainland. HKSS can also operate aircraft repair and maintenance services in the Mainland in the form of wholly owned enterprises or with majority shareholding in the enterprises.
Distribution enterprises set up by HKSS in the Mainland are allowed to sell books published in Hong Kong.
Testing organizations in Hong Kong can cooperate with designated Mainland organizations to undertake testing of products under the China Compulsory Certification (CCC) System on a pilot basis, with respect to selected products listed in the CCC Catalog and processed in Hong Kong. These testing organizations must be accredited by the HKSARG’s accreditation body to be capable of performing testing for the relevant products under the CCC System.
HKSS are allowed to set up enterprises on a wholly owned, equity joint venture or contractual joint venture basis in the Mainland to produce video and sound recording products.
HKSS are allowed to set up wholly owned enterprises in the Mainland to provide specialty design services.
Details on CEPA can be found on the Trade and Industry Department’s CEPA website: [www.tid.gov.hk/english/cepa/index.html].
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