CEPA offers more business opportunities for HK, mainland

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Last updated at: (Beijing Time) Tuesday, September 30, 2003

CEPA offers more business opportunities for HK, mainland

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The signing here on Monday of the six annexes to the main text of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and Chinese mainland is set to bring more business opportunities to both sides, said senior trade officials.

Speaking at the signing ceremony, Vice Minister of Commerce An Min and Hong Kong's Financial Secretary Henry Tang also shared the view that the CEPA is a continuous and open agreement, adding that more efforts will be made to enhance and broaden its content. The framework CEPA accord was signed on June 30.

The annexes, which set out the arrangement's implementation details, include arrangements for implementation of zero tariff for trade in goods; rules of origin for trade in goods, procedures for the issuing and verification of certificates of origin; specific commitments on liberalization of trade in services; the detailed definition of "Service Supplier" and related requirements;and trade and investment facilitation.

Speaking at a press conference after the signing ceremony, Hong Kong's Secretary for Commerce, Industry and Technology John Tsang said CEPA holds good potential to open up many more new business opportunities in Chinese mainland for Hong Kong as well as to enhance Hong Kong's attractiveness to overseas investors.

"We believe that the zero import tariff preference will make itmore attractive to undertake in Hong Kong manufacturing of brand name products, or manufacturing processes with high-value-added content or substantial intellectual property input," said Tsang.

"The WTO-plus market liberalization measures for trade in services would also give enterprises in Hong Kong a 'first mover' advantage," he said.

On trade in goods, the mainland has agreed to eliminate tariffson imported goods of Hong Kong origin in stages. Starting from Jan.1, 2004, a total of 273 mainland product codes meeting CEPA rules of origin will enjoy zero tariffs.

For other products, the mainland will apply zero tariff no later than Jan. 1, 2006 upon applications by local manufacturers and upon CEPA rules of origin being agreed upon and met.

For 70 percent of the 273 mainland product codes covered in the initial phase, Hong Kong's existing process-based origin rules will be adopted as the CEPA origin rules. For the rest, either the "Change in Tariff Heading" approach or the "30 percent value-added" requirement will be used.

"While the 30 percent rule already compares favorably with other free-trade agreements whose thresholds range from 40 percent to 60 percent, product development costs will also be counted in the calculation in the case of CEPA," Tsang said.

On trade in services, the two sides have agreed on some furtherclarifications and refinements regarding the liberalization of the 17 sectors of services agreed and announced.

Moreover, Chinese mainland has also agreed to grant preferential treatment in one additional sector, telecoms services,taking the total number of sectors covered under CEPA to 18. In addition, equity participation in mainland insurance companies will also be relaxed.

As regards the definition of "Hong Kong Service Suppliers", generally speaking, "juridical persons" include companies, partnerships, sole proprietorships. "Juridical persons" and "natural persons" of Hong Kong will be able to enjoy preferential treatment provided that they fulfill the definition and related requirements of Hong Kong service suppliers stipulated in relevantannex of CEPA.

Unless otherwise specified in CEPA, a "natural person" means a Hong Kong permanent resident whereas a "juridical person" means any legal entity duly constituted or otherwise organized under theapplicable laws of Hong Kong and which has engaged in substantive business operations in Hong Kong for three to five years.

Hong Kong's Trade and Industry Department will provide the one-stop enquiry and certification services for the implementation of CEPA in Hong Kong. A designated branch has been set up in the department to handle public enquiries, disseminate practical information and process applications for the certification of "Hong Kong Service Suppliers."

With regard to trade and investment facilitation, both sides agreed on the contents and modalities of cooperation for each of the seven areas which are stipulated in the main parts of CEPA, and that new areas of trade and investment facilitation might be added in the future.

With a view to broadening CEPA's scope and coverage, the two sides will pursue further liberalization on goods and services trade in the latter phases. A Joint Steering Committee, responsible for overall coordination of CEPA, will be set up soon. It will be jointly chaired by Financial Secretary Henry Tang and Vice Minister of Commerce An Min.

"CEPA adopts a building-block approach and provides a mechanismfor further liberalization measures. In formulating the strategy for the subsequent phases of CEPA, we will continue to consult thebusiness and professional communities to understand their needs," Tsang said.

"We will also discuss with the concerned business sectors on appropriate policy measures that may be required to enable them togain the greatest benefits from CEPA," he added.

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