During the 19th CPC National Congress, President Xi Jinping stressed that the state will support Hong Kong in integrating its own development into the overall progress of the country, and will give priority to the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), thus advancing mutually beneficial cooperation.
The Mainland’s growing middle class and other favourable factors will provide support to the country’s economy. At the same time, Hong Kong – with its advantages in financial and professional services coupled with the free flow of people, goods, capital and information – should get on board the express train of national development.
As a new driver of China’s economic development, the success of the GBA depends on the cross-boundary flow of capital, people and services. However, Hong Kong SMEs who want to expand into the Mainland market still face problems such as tax differences and high entry thresholds. To maximize the benefits of the GBA, the authorities concerned need to attend to these problems.
Promoting tax reform is an important measure to attract talent. At present, for Hong Kong residents working in the Mainland, if their stay exceeds 183 days within any 12-month period, they are subject to individual income tax in the Mainland. At the ‘Summit on New Directions for Taxation’ in October, I proposed that the authorities should refer to the special tax provisions for crossboundary workers in the European Union. Such provisions would allow Hong Kong residents working in the Mainland to pay tax only in Hong Kong. This would help attract Hong Kong businesses and professionals to the Mainland.
The market entry threshold for Hong Kong businesses to operate in the Mainland is another issue. I am pleased to see that the Investment Agreement and the Agreement on Economic and Technical Cooperation, signed under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) framework by the Government in June, has further broadened the scope of CEPA and has included some investment protection terms. The relevant authorities should implement the detailed arrangement as soon as possible to foster trade financing and investment as well as lower the entry thresholds for various professional service providers in the region, thus facilitating the “four flows” in the GBA.
The National Congress demonstrated the country’s commitment to enhancing long-term political stability and promoting economic development. As the GBA continues to develop, I hope the Government will strengthen cooperation with the Mainland in areas such as tax reform and detailed arrangements for implementation of CEPA agreements, with a view to addressing the problem of “big doors are open, but small doors are not yet open” that Hong Kong SMEs often encounter in the Mainland. When this is achieved, Hong Kong can give full play to its unique geographical advantage and professional services capabilities.