Hong Kong Firms Rush To Take Up Beijing Offer

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

26 October 2001

After Beijing mayor Liu Qi this week freed Hong Kong investors from all foreign-venture restrictions in the Chinese capital, major Hong Kong companies yesterday rushed to begin linking up with Beijing firms to take advantage of the incentive package offered by the mainland government. The incentives include lower borrowing rates, tax cuts, quicker processing of project permits, discounts, preferential treatment and financial assistance. Two Hong Kong conglomerates have already completed deals. Kerry Properties has sealed an 11bn renminbi (S$2.4bn) agreement with Beijing Holdings to set up a logistics centre, while Hutchison Whampoa is tying up with Beijing Enterprises Holdings to form a tourism company.

Under the incentive package, which is intended to stimulate uptake of US$13.7bn (S$24.9bn) in projects to prepare the city for hosting the Olympic Games in 2008, Hong Kong-mainland joint ventures in the capital will be treated as local businesses, qualifying for a range of tax and fee exemptions previously denied them..

"Joint-venture businesses will not be bound by restrictions of enterprise type, ownership relations or geography,'' Mr Liu told a Beijing-Hong Kong economic co-operation seminar attended by local businessmen and Financial Secretary Antony Leung Kam-chung.

As part of the package, Beijing will also:

• Disclose planned infrastructure projects to Hong Kong in advance;
• Set up a special channel to assess SAR-backed investment projects;
• Allow SAR investors a head start in projects opened for foreign investment;
• Open job vacancies in city government departments - such as the Foreign Economic Co-operation and Trade Bureau, and the Tourism Administration - to SAR citizens; and
• Encourage more Beijing residents to visit Hong Kong, with the aim of boosting the number from 300,000 a year to 350,000.

Antony Leung welcomed the policies, saying: "The privileges endorsed by the policies are provided within the regulation of the World Trade Organisation. The business sector will benefit.'' He added that the government would bargain with other mainland cities for similar inter-city privileges, to expand the market for Hong Kong businesses.

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