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Op-Ed

2013/06/29

Under CEPA, Opportunities Keep on Opening up for Hong Kong Businesses

The idea of exporting goods and services to mainland China tariff-free is the stuff dreams are made of for many international businesses. Ten years ago today, that dream became a reality for Hong Kong companies as the Closer Economic Partnership Arrangement (Cepa) came into being.

The Hong Kong General Chamber of Commerce first proposed the concept of a free- trade arrangement to the Hong Kong government in 2000, as a way to inject vitality into our then ailing economy. The celebrations marking the end of the severe acute respiratory syndrome outbreak, to help the city's economy bounce back, provided the perfect opportunity to announce Cepa.

So, on January 7, 2004, it was fitting that a member company went into the history books as the first company to export made-in-Hong Kong goods to the mainland tariff-free. Other Hong Kong companies quickly seized the opportunity. Products entering the mainland tariff-free were gradually followed by Hong Kong businesses setting up operations and offering services across the mainland.

Today, Cepa continues to evolve with the signing of supplements. There are plenty of success stories of how Hong Kong businesses have made use of Cepa. For instance, Mannings, the pharmacy brand under Dairy Farm, was the first Hong Kong retailer admitted into the mainland under Cepa. Watsons, Maxim's, Jusco and 7-Eleven are just a few of the companies that have also entered via Cepa.

One supplement signed in 2009 paved the way for Hong Kong-based banks to open sub-branches in Guangdong. The Bank of East Asia, Wing Hang Bank and others began opening branches across the province under a pilot scheme. In particular, the Bank of East Asia maintains the largest network of mainland branches among foreign banks.

Meanwhile, the lowering of thresholds for foreign insurance operations on the mainland, under a supplement signed in 2011, has provided opportunities for Hong Kong insurers to set up wholly owned operations in Guangdong, also under a pilot scheme. Further relaxation of restrictions on market access to the mainland financial market, particularly the anticipated pilot scheme to be adopted in Qianhai, will provide more opportunities for Hong Kong's financial sector.

Cepa's coverage has expanded from goods to services. Professional services, not least the big four accounting firms, indirectly benefited from the outset by serving their clients who were taking advantage of Cepa.

More recently, other companies in the sector have entered the mainland market following the relaxation of criteria for their respective professions, including the first outpatient clinic established in Guangzhou city. The most conspicuous benefit for Hong Kong from Cepa, witnessed closer to home, has been the relaxation for mainlanders to visit the city independently. The domestic retail and tourism industries have benefited primarily as a result of the influx of mainland visitors, whose ripple effect has also benefited other sectors of our economy.

While success stories abound, some businesses trying to enter the mainland market have had limited success. Some common issues include: implementation problems on the ground; mutual recognition of professional qualifications; transparency of regulations; application and approval procedures; and communication channels.

Implementation is the key to ensuring the continued success of the agreement, but so, too, is greater transparency. With the signing of the latest Cepa supplement last June, 149 service sectors on the mainland are open to Hong Kong, constituting over 90 per cent of all the 160 service sectors categorised by the World Trade Organisation. Among the 338 liberalisation measures introduced under Cepa, 64 are Guangdong pilot measures. To address implementation problems that businesses have been experiencing, the Hong Kong government has invited mainland authorities to jointly set up the Cepa Joint Working Group, which held its first meeting in Guangzhou last week. Chief Executive Leung Chun-ying says the group has made progress in five sectors - audiovisual, accounting services, construction services, medical and property management.

Let's hope the group can solve the problem of local governments' interpretation of the Cepa provisions being different from those of the central government.

Premier Li Keqiang indicated last year that the trade in services between the mainland and Hong Kong will effectively achieve full liberalisation before the end of the 12th five-year plan, in 2015.

With the wholehearted support of the central and Hong Kong governments, as well as the business community, the continued development in Cepa should help deepen both investment and trade in a wider range of industries, and bring about more significant economic benefits.

 

C K Chow

Chairman

Hong Kong General Chamber of Commerce

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