Businesses are delighted that CEPA, which the Chamber and I have strongly supported over the last few years, has been concluded. I expect that it will bring substantial benefits to the Hong Kong economy, boost investments in Hong Kong and China, and improve unemployment in the local labour market.

Without doubt, SARS knocked the wind out of the local economy. According to the latest statistics, unemployment in Hong Kong has risen from 7.8 percent to 8.3 percent, while underemployment now stands at 3.8 percent, up from 3.2 percent. Both figures are at record highs and reflect that more companies have been forced to close down, cut their headcount or have asked employees to take unpaid leave.

Under these circumstances, the long-awaited CEPA agreement could not have come at a better time. Although it is unlikely to bring immediate relief to the economy, it will boost confidence tremendously and help to improve our economic outlook.

The agreement benefits a wide spectrum of industries and sectors, and includes zero tariffs on Hong Kong goods entering the Mainland market. The arrangement is expected to attract Hong Kong garment, jewellery, clock and watch manufacturers in the Mainland, among others, to return to Hong Kong.

With early liberalisation of the Mainland market for Hong Kong companies and professionals, China can also benefit from CEPA. By absorbing practical experience and related knowledge opening its markets, China will be able to ready itself for the fierce competition expected to come with the influx of large foreign enterprises, once all of its WTO obligations are realised. CEPA, therefore, will bring economic benefits to both sides.

Although some details of CEPA have yet to be finalised, I hope that the "rule of origin" and the "definition of Hong Kong companies" subsidiaries' in CEPA will only be set after looking very carefully at Hong Kong's status as an international business centre. For the former, I suggest that we follow international practice to label products as "Hong Kong made" if 25 percent or more of their production is carried out in Hong Kong. For the latter, I feel that companies once registered in Hong Kong should be regarded as Hong Kong companies, irrespective of the source of capital.

In last month's Bulletin, I wrote that I had informed the administration about problems arising from the HK$3.5 billion loan guarantee scheme, especially its overly rigid restrictions.

According to government's rely in Legco, only 600 or so applications were received within the first three weeks after the loan scheme was launched, 400 of which were approved and the amount of loans granted was about HK$120 million.

This is obviously unsatisfactory since only few companies have benefited from the scheme, and as such the government agreed to relax application requirements. Instead of getting shareholders holding 90 percent or more of the equity to guarantee the loans, firms now only need to get shareholders holding 70 percent or more. Moreover, loans can now be used to order goods or to pay rent, as opposed to just staff salaries in the past.