It has been announced that the Hong Kong and Chinese governments have reached agreement on a further enhancement of their economic and trade co-operation and exchanges under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).
Supplement X to the CEPA was signed on August 29, 2013, by Hong Kong's Financial Secretary, John C Tsang, and the Chinese Vice-Minister of Commerce, Gao Yan, and provides for a total of 73 services liberalization and trade and investment facilitation measures, strengthens co-operation in areas of finance, trade and investment facilitation, and further promotes the mutual recognition of professional qualifications in the two places.
It brings to 403 the total number of liberalization measures for trade in services under CEPA, since its signing in 2003. Tsang said that, among the supplements made since that original signing, Supplement X contains the greatest number of measures. "Some of the measures are more liberal than those contained in recent supplements," he added, "and some have been longed for by the trades for a long time."
Under CEPA and previous Supplements, 28 sectors have already been partly liberalized for Hong Kong, including legal services, computer and related services, real estate, telecommunications, banking, securities, tourism, and maritime, air and road transport. Supplement X will further relax the market access conditions for all these sectors, with effect from January 1, 2014.
With regard to legal services, Guangdong law firms will be allowed to enter into agreements with representative offices set up by Hong Kong law firms in Guangdong Province, while, in banking, a Hong Kong bank's operating institution in the Mainland, after obtaining approval to conduct renminbi business for Hong Kong enterprises, may provide services to enterprises in the Mainland that are recognized as owned by Hong Kong investors, despite investors of those enterprises being based in a place other than Hong Kong.
Hong Kong-funded securities companies will be allowed to make reference to the total securities assets being managed by their group when applying for Qualified Foreign Institutional Investor status; and Hong Kong-funded financial institutions will be allowed to set up joint venture fund management companies in the Mainland with a shareholding greater than 50 percent.
In addition, Hong Kong-funded financial institutions, which satisfy the requirements for establishing foreign-invested securities companies, will now be allowed to set up one fully-licensed joint venture securities company each in Shanghai, Guangdong Province and Shenzhen, with a maximum Hong Kong shareholding percentage of 51 percent.
In telecommunications, for example, Hong Kong service suppliers will be allowed to set up joint venture enterprises in Guangdong Province to provide online data processing and transaction processing services. Hong Kong service suppliers' shareholding should not exceed 55 percent.
For a number of sectors, contractual service providers employed by Hong Kong service suppliers are to be allowed to provide a temporary service in the Mainland for the performance of the service contract(s) secured in the Mainland by their employers. The contractual service providers should each hold a Hong Kong identity document and their employers should be Hong Kong service suppliers without a commercial presence in the Mainland.
With regard to financial co-operation, the Mainland has agreed to actively study the mutual recognition of fund products between the Mainland and Hong Kong, and to actively support qualified Hong Kong insurers to take part in compulsory traffic accident liability insurance business in the Mainland.
In conclusion, it was confirmed that CEPA is the most liberalized free trade agreement signed by the Mainland, with its latest Supplement also including various CEPA-plus liberalization measures covered in the services agreement signed by the Mainland and Taiwan in late June this year under their Economic Cooperation Framework Agreement.
The various new measures in the Supplement X will enable Hong Kong services industries to develop the Mainland market, and are conducive to the continued economic co-operation and development of the two places. The Chinese Government has already pledged to achieve, through CEPA, the full liberalization of trade in services between the Mainland and Hong Kong before the end of the National 12th Five-Year Plan period, and the signing of Supplement X to CEPA was said to mark a further step towards this goal.A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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