CEPA So Far Fails To Impress Hong Kong Firms

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

09 April 2004

The much-heralded Closer Economic Partnership Arrangement that has removed tariffs on hundreds of goods traded between Hong Kong and China has failed to ignite a boom in trade, or so it would appear.

"We haven't seen where CEPA has changed people's perceptions of business opportunities. It's not a topic that a lot of companies are talking about," one Hong Kong-based economic analyst told Dow Jones Newswires.

The lack of enthusiasm amongst corporate Hong Kong would appear to be backed up by recently published figures by the government. As of the third week of March, some HK$210 million (US$27 million) worth of goods had been approved with zero tariff status under the term of the CEPA deal. However, this amount pales into insignificance in comparison to the value of exports originating from Hong Kong in the three months from December 2003 to February 2004, which were worth HK$27.64 billion.

Applications for zero tariff status are also predominately from firms in certain sectors. Of the 166 application approved by the Chinese regulators, more than half were from firms in the transportation and logistics sector (188 applications and 91 approvals). This is despite the fact that over 1,200 trading companies and 57 wholesale firms are eligible to apply under the terms of the CEPA deal.

Some observers however, state that many large multinationals already have significant manufacturing operation in mainland China, and stand to gain little from the CEPA arrangement.

“Those who will benefit are smaller firms who haven't already gone across the border," observed Christopher Hammerbeck, executive director of the British Chamber of Commerce in Hong Kong.

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