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Taiwanese Firms Looking to Benefit from CEPA

Taiwanese businesses are carefully examining how they can take advantage of the Hong Kong and Mainland Closer Economic Partnership Arrangement, prominent business leaders said at the joint annual meeting of the Taiwan Federation of Industries and HKGCC on November 20.

Wang Chen-fu, Director, First Bilateral Trade Division, Bureau of Foreign Trade from Taiwan, said industries across the Taiwan Strait could pursue division of labour cooperation in their supply chains with Hong Kong firms.

"Taiwan could be responsible for research and development, Hong Kong could be responsible for providing professional services while the Mainland could concentrated on the labour-intensive side of the operation," he suggested.

Under CEPA, 273 Hong Kong product codes can be imported into China tariff free starting January 1, 2004, resulting in tariff savings as high as 20 percent. Mr Wang said Taiwanese enterprises could manufacture products with high tariff savings in Hong Kong or develop them in cooperation with their Hong Kong counterparts to take advantage of the zero-tariff benefit. 

For trade in services, Jasper F M Shih, Chief Accountant, Hamber Accounting Firm, said CEPA lowers market access requirements for Hong Kong service suppliers in the Mainland, but Taiwanese service suppliers are still viewed as foreign investors. As a result, Taiwanese investors would be at a disadvantage when entering the Mainland market. Therefore, the value of mergers, acquisitions or partnerships become increasingly attractive, he added.

Chamber Vice Chairman Dr Lily Chiang, echoed his comments and highlighted the recent cases of Fubon Financial buying IBA Group in Hong Kong, and Mega Holdings' plans to acquire another licensed local bank to enter the Mainland market through CEPA. Dr Chiang said such business deals that have arisen from CEPA represent exciting business opportunities for both Taiwanese and Hong Kong service companies.

KC Kwok, Chief Economist, NE Asia, Standard Chartered Bank, also speaking at the event, provided a macro analysis of CEPA. He believes that the benefits of CEPA will be magnified by the booming Mainland economy. He also thinks that various sectors in Hong Kong will gradually start to benefit from the "Free Travellers Scheme," which allows Mainland visitors to visit Hong Kong independently.

The Hon Lau Ping-cheung, Vice-chairman, Hong Kong Coalition of Professional Services, said CEPA will help small and medium-sized professional service suppliers access the Mainland market. With major cities in the Mainland, such as Shanghai, becoming increasingly international, demand for professional services is expected to continue rising, he added.

Following the seminar, the Chamber and the Taiwan Federation of Industries signed a memorandum of understanding to jointly explore further business opportunities under CEPA.

The 25-member delegation from Taiwan was led by the federation's Chairman Ho Jen-shyong. During their three-day visit to Hong Kong, delegates met and exchanged ideas with HKSAR Chief Executive Tung Chee-hwa, Secretary for Constitutional Affairs Stephen Lam, and representatives from the Trade Development Council, and the Chinese General Chamber of Commerce.

Comparison of market access for Hong Kong and Taiwanese enterprises
CEPA (Applicable to Hong Kong Enterprises)	Regulations on Foreign Investment (Applicable to Taiwanese Enterprises)
Real Estate
Allowed to set up wholly-owned enterprise to engage in activities relating to high-standard real estate projects; and to provide real estate services on a fee or contract basis in the Mainland.	Not allowed to set up wholly-owned enterprise to engage in activities relating to high-standard real estate projects; EJV allowed to provide real estate services on a fee or contract basis in the Mainland.
Insurance (The maximum limit of capital participation in Mainland insurance companies)
24.9%	10%
Audio visual (Distribution of audio-visual products in the Mainland in the form of joint venture)
Equity share of Hong Kong firms up to 70%.	Only CJV is allowed with majority of shares being owned by the Mainland partner.
Audio visual (Construct and renovate cinema theatres in the form of EJV or CJV.)
Majority ownership by Hong Kong firms is allowed.	Majority ownership only by Mainland enterprises.
Audio visual (Film making)
Hong Kong companies are free from quotas to produce films with Mainland partners.	Foreign firms are prohibited from making or distributing films in the Mainland.
(Extracted from the speech of Jasper F M Shih, Chief Accountant, Hamber Accounting Firm)
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