Hong Kong Banks Exploit CEPA Insurance Rules

by Mike Godfrey, Tax-News.com, Washington

16 March 2005

The CEPA II agreement between Hong Kong and China allows mainland branches of Hong Kong banks to act as agents for insurance products after obtaining approval from relevant authorities, as from 1 November 2004, and banks are wasting no time in taking advantage of the new rules.

Mainland branches of other foreign banks are not allowed to act as agents for insurance products, giving Hong Kong incorporated banks a massive advantage. This is the sort of thing that has caused the WTO to cast a jaundiced eye on the CEPA - but any problems are far off.

Mainland branches of Hong Kong banks have to apply to the appropriate office of the China Banking Regulatory Commission for authorization to act as insurance agents. Bank of East Asia has approval to use its Shenzhen and Guangzhou branches to sell insurance, while Hang Seng Bank's Shenzhen branch also has clearance; both banks plan further expansion.

Hang Seng Bank's Shenzhen branch will soon start selling Ming An Insurance property fire policies, and it is in talks with Ping An Insurance to sell its products. HSBC and Standard Chartered Bank have also submitted applications to sell insurance products, and are awaiting approval.

The Closer Economic Partnership Arrangement (CEPA) between the mainland and Hong Kong is a continuous and open agreement, and both sides are making ongoing efforts to enhance and broaden the content of the free-trade deal. Vice-Minister of Commerce An Min and Financial Secretary Henry Tang agreed on launching CEPA in 2002, and its scope is reviewed annually. CEPA II was agreed in October, 2004, and enormously expanded the list of products covered, as well as liberalizing a number of service sectors. All Hong Kong-originated products will be subject to zero tariffs by January 2006.

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