CEPA Has Benefited Hong Kong's Businesses And Economy, Study Finds

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

14 April 2005

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Chinese mainland has brought considerable benefits to both business enterprises and the Hong Kong economy as a whole, according to an Administration study on CEPA's economic impact.

The study, which has just been submitted to the Legislative Council's Panel on Commerce and Industry, covers trade in goods and services and the Individual Visit Scheme (IVS) and assesses the economic impact of the first phase of CEPA (CEPA I) since its introduction in January 2004.

For trade in goods, more than 90% of the responding companies considered that CEPA I was beneficial to the Hong Kong economy, and 89% considered that the trade pact had been beneficial to the manufacturing sector.

In 2004, more than 3,000 certificates of origin were issued under CEPA I, involving products with a total value of $1.15 billion, which enjoyed tariff free treatment on importation into the Mainland. It is expected that the value of CEPA exports to the Mainland will increase by $1.2 billion in 2005, doubling that in 2004.

However, for trade in services, it was found that whilst 78% of the responding companies considered that CEPA I was beneficial to the Hong Kong economy, only 46% thought that it had benefited their own industries.

The study found that more than 660 companies had obtained Hong Kong Service Supplier certificates in 2004, and revealed that 27% of them had already set up operations under CEPA I in the Mainland.

Furthermore, companies in the 18 sectors covered in CEPA I increased their capital investment in Hong Kong by $1 billion in 2004 due to CEPA. The amount is expected to surge to $4.5 billion in 2005.

Meanwhile, mainland residents made 4.26 million trips to Hong Kong in 2004 under the IVS scheme, accounting for 34.8% of all the Mainland visitors or 20% of total visitors. These IVS visitors generated an additional $6.5 billion in tourist spending during the year.

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