CEPA Extended To 11 New Service Areas

by Mary Swire, Tax-News.com, Hong Kong

04 July 2007

Hong Kong and China have signed a supplement on further services liberalisation and economic co-operation under the Closer Economic Partnership Arrangement (CEPA), introducing 40 liberalisation measures in 28 services areas, including 11 new ones.

Financial Secretary, Henry Tang and Vice-Minister of Commerce, Liao Xiaoqi signed the CEPA supplement last week. Chief Executive, Donald Tsang and Minister of Commerce, Bo Xilai witnessed the signing.

Tang explained that the new package of liberalisation and co-operation measures will provide further and broader opportunities for Hong Kong business, and reinforce Hong Kong's comparative advantages in tapping the Mainland market's potential.

"The CEPA package provides a positive response to a number of recommendations in the Final Report of the Economic Summit on China's 11th Five-Year Plan & the Development of Hong Kong, which call for the opening up of further market opportunities on the Mainland," he stated.

CEPA has played an important role in the economic development of both Hong Kong and the Mainland since it was first signed in June, 2003.

The SAR Government's latest study indicated that between 2004 and 2006, CEPA generated 36,000 new jobs for Hong Kong residents and attracted HK$5.1 billion in additional capital investment in the city. The pact also created 16,000 new jobs for Mainlanders and attracted HK$9.2 billion additional capital investment by Hong Kong companies on the Mainland.

"The implementation outcomes indicate that CEPA is a mutually beneficial arrangement, allowing Hong Kong to explore the vast Mainland market while assisting the Mainland in integrating with the world economy. Both sides will continue to ensure the smooth implementation of CEPA and seek to further enrich its content," Mr Tang observed.

Under Supplement IV, the Mainland will introduce 40 liberalisation measures in 28 services areas, including existing ones such as banking, tourism, convention and exhibition, and medical, plus 11 new ones including elderly services, environmental services and public utilities. The two sides will boost co-operation in finance, convention and exhibition, and mutual recognition of professional qualifications.

In banking, the minimum total asset requirement for a Hong Kong bank acquiring a shareholding in a Mainland bank will be lowered to US$6 billion from US$10 billion. Both sides will bolster co-operation, including establishing green lanes for Hong Kong banks to set up branches in the central western and northeastern areas and in Guangdong, and encouraging Mainland banks to set up subsidiary operations in Hong Kong.

On conventions and exhibitions, Hong Kong services suppliers will be allowed to organise exhibitions in Guangdong and Shanghai through cross-border supply on a trial basis. Hong Kong enterprises established in Guangdong and Shanghai can organise overseas exhibitions for Mainland enterprises in these areas. The Mainland will support Hong Kong in attracting and organising international conventions and exhibitions.

In tourism, the minimum annual business turnover required of Hong Kong travel enterprises setting up joint ventures and wholly-owned enterprises on the Mainland will be reduced to US$8 million and US$15 million respectively. Hong Kong travel agencies established in Guangxi, Hunan, Hainan, Fujian, Jiangxi, Yunnan, Guizhou and Sichuan can to apply to operate group tours to Hong Kong and Macau for permanent residents in these provinces, an extension of similar arrangements already in place in Guangdong on a trial basis.

The required capital investment for Hong Kong service suppliers for setting up equity or contractual joint-venture medical institutions on the Mainland will be lowered from RMB20 million to RMB10 million.

Also under the auspices of Supplement IV, Hong Kong service providers can operate elderly service agencies in the form of wholly-owned private non-government enterprises to provide elderly services in Guangdong Province on a trial basis. Hong Kong service providers will also be allowed to establish wholly-owned enterprises to provide environmental services on the Mainland.

In public utilities, Hong Kong service providers can set up wholly-owned operations to construct and operate networks of gas, heating, water supply and water drainage for medium-sized cities on the Mainland.

All the services liberalisation measures will come into force on January 1, 2008. The Mainland will work out and promulgate the necessary implementation rules and regulations as appropriate.

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