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CEPA Q&A

QUESTION: We operate wholesale and retail businesses in Hong Kong, dealing in pharmaceuticals. Now that CEPA allows Hong Kong companies to operate wholly-owned wholesale and retail services in China, can we engage in drug wholesaling and retailing in the Mainland?

ANSWER:  Since January 1, 2004, Hong Kong distributors can set up wholly-owned enterprises in the Mainland under CEPA. The Ministry of Commerce also abolished in April 2004 the asset and turnover requirements imposed on foreign-invested commercial enterprises. In other words, Hong Kong distributors, regardless of size, can operate wholly-owned businesses provided that they have obtained a "Certificate of Hong Kong Service Supplier."  However, companies are still subject to the following restrictions on foreign wholesale and retail businesses.       

Foreign-invested wholesale commercial enterprises are prohibited from engaging in drugs, agricultural chemicals and agricultural films before December 11, 2004, and chemical fertilizers, finished oil and crude oil before February 11, 2006.   

Foreign-invested retail commercial enterprises are prohibited from engaging in drugs, agricultural chemicals, agricultural films and finished oil before December 11, 2004, and chemical fertilizers before December 11, 2006.

Foreign-invested wholesale commercial enterprises are prohibited from engaging in salt and tobacco wholesaling, while foreign-invested retail commercial enterprises are prohibited from engaging in tobacco  retailing  (see "Administrative Measures for Commercial Enterprises with Foreign Investment" announced by the Ministry of Commerce in April 2004).

As such, your distribution company in the Mainland cannot engage in drug wholesaling or retailing until the end of this year.   

These and other questions and answer can be found on the Chamber's CEPA page at, www.chamber.org.hk/cepa. If you have a question, please email ruby@chamber.org.hk