China's mainland and Hong Kong will embrace even closer economic
ties during the third anniversary of the Closer Economic
Partnership Arrangement (CEPA) this July.
The two sides are expected to sign a further agreement launching
a series of measures to boost economic cooperation, particularly in
service trade, such as further opening up of renminbi services and
allowing Hong Kong professionals to "go north."
China's central government might allow banks in Hong Kong to
provide more renminbi services, as mentioned by Premier Wen Jiabao
during his visit to Africa.
"It might make it possible for mainland traders to use renminbi
settlement in Hong Kong," said a source close to the situation. So
far, renminbi business in Hong Kong includes deposit, withdrawal,
exchange and remittance services.
Meanwhile, the central government might agree to lower the
threshold of Hong Kong doctors, lawyers and accountants entering
mainland markets, sources said.
Details of the possible agreement are expected to be announced
today in Hong Kong at a ceremony marking the anniversary.
China's Vice-Minister of Commerce Liao Xiaoqi said in an earlier
interview the new round of opening up should focus on the
mainland's service trade market.
"In the long run, co-operation in the service trade will play a
larger role than cargo trade," he said.
He explained that Hong Kong enjoys a competitive advantage in
the service sector, but mainland companies still have a lot to
learn in the area. And opening up the mainland market to Hong Kong
will help mainland companies to improve before the markets are
completely open to all foreign investors.
So far the mainland has opened up 27 service sectors, such as
logistics, distribution, tourism and banking, to investors from
Hong Kong.
Some sectors have been opened up one to three years ahead of the
World Trade Organization timetable the government committed to.
Restrictions on wholly owned companies have been lifted in some
areas, and qualification or registration of capital for investors
has been lowered in some sectors for Hong Kong businesses.
The CEPA, the free trade pact within China, was officially
launched at the beginning of 2004, covering trade in goods,
services and investment facilitation. Two additions were made to
the agreement later in 2004 and in 2005.
"The arrangement was largely designed to facilitate Hong Kong
people's business on the mainland," Liao said. "Because the Hong
Kong market has already been totally opened to all traders and
investors from all over the world."
The goods trade sector has been the first to benefit from the
free trade pact.
According to the General Administration of Customs, a total of
US$600 million worth of Hong Kong goods was exported to the
mainland by the end of May, saving 400 million yuan (US$50 million)
in tariffs.
The categories benefiting from the agreement have been broadened
to 1,370 items from 374 items in 2004, ranging from pharmaceutical
products, plastic products and textiles to food and jewellery. The
mainland has now eliminated import tariffs on all cargo originating
from Hong Kong.
By the end of May, the Hong Kong Trade and Industry Department
had received 13,627 applications for certificates of Hong Kong
origin and had approved 13,037.
To most experts, however, compared with the flow of tangible
goods, the other two aspects of the CEPA, service trade and trade
and investment facilitation, are more important.
"Free trading goods are welcomed and easy to understand (by the
public)," said Mike Rowse, director-general with Invest Hong Kong,
an agency specializing in promoting foreign direct investment to
the city.
"But (trade and investment facilitation) is taking a strategic
perspective. Looking at 10 years or 20 years ahead, it is that
aspect of the CEPA that's the most important one."
Rowse said this is because the CEPA facilitates the central
government and the Hong Kong government talking to each other every
year and agreeing to further measures that make business
easier.
Annual discussion between the central government and Hong Kong
in previous years has enabled mutual recognition of professional
qualifications and facilitation of business visas and the
individual tourism scheme.
(China Daily June 29, 2006)
