Hong Kong's economy is soon expected to receive a welcome boost with the conclusion of the CEPA (Closer Economic Partnership Agreement) negotiations, the finer details of which are currently being ironed out.
From January 1st next year, tariffs on 273 types of goods manufactured in Hong Kong will be eliminated by the Chinese government under the CEPA agreement, and companies in the SAR will get more liberal access to 17 business sectors including financial services and banking and telecommunications.
One stumbling block in the negotiations, however, has been the definition of goods made in Hong Kong, although it is thought that this will be resolved by the end of the month. "The final arrangements have not been made but we're confident when we talk about tax reduction, over half of those items will enjoy existing origin rules in Hong Kong," explained Henry Tang, the territory's Financial Secretary. "And when we talk about complementary value-added goods, I think 30 percent can enjoy the existing rules of origin."
Mr Tang has also revealed that the government has been in active discussions with the Chinese mainland in a bid to expand the agreement to allow more business sectors in the territory to take advantage of its opportunities. One other key future development that has been discussed with officials from the mainland is the prospect of a yuan exchange.
Chinese officials accept informally that a fully fledged market in yuan exchange is an inevitabilty: "Renminbi (or yuan) circulation in Hong Kong has become a reality, so to create an overseas yuan market is something that is going to happen sooner or later," an official from the Chinese State Administration for Foreign Exchange told Reuters last month. When this happens, it may be the signal for Hong Kong to move from an exclusive dollar peg to a mixed dollar/renminbi peg, or if the circumstances of China's float are sufficiently encouraging, to go straight to a renminbi peg. The fear in Hong Kong of course is that a 'dirty' float accompanied by loose internal monetary controls would expose Hong Kong's currency to unacceptable risks.
http://www.channelnewsasia.com/cgi-bin/search/search_content.pl?status=&search=tax&id=48423 http://www.tax-news.com/asp/story/story.asp?storyname=13145
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