The Hong Kong General Chamber of Commerce (HKGCC) today published a report titled: “Mainland China/Hong Kong Closer Economic Partnership Arrangement: Business Assessment”. This comprehensive 140-pages report, based on input from members of HKGCC, analyzes CEPA from a business standpoint and is designed to help businesses decide how they can take advantage of CEPA.
The report contains an analysis of the benefits of zero tariff for Hong Kong's manufacturing industry. These benefits range from substantial tariff saving for industries like some garment and paper products; expanded production for previously high-tariff products like jewelry and cosmetics; to building of new brands for the Mainland market for garment and watches. Businesses may also manufacture new products to take advantage of zero-tariff after 2006, especially those with high design and intellectual property content.
The opportunities and implications arising from liberalization of the 18 service sectors under CEPA have also been examined. A number of liberalisation commitments in the retail and distribution, real estate services, exhibition services, legal services sectors are considered “very substantial” concessions. However, a “big concession” does not necessarily mean it must be “very useful” for Hong Kong service suppliers; therefore, the report also analyzes the "usefulness" of the concessions and how the market opening can benefit both Hong Kong and the Mainland. The following table provides a brief summary of the findings.
Business and professional services
- Accountants, lawyers and management consultants will benefit from the improved business of their clients, as more companies are trying to understand, interpret and make use of CEPA in an enlarged Mainland market.
- Individual practitioners can practise in the Mainland more easily, but they will be open to more competition from Mainland professionals at the same time.
- Doing business in China is still complicated due to the highly regulated nature of their businesses in the Mainland.
Retail, distribution and logistics
- The threshold is still high for many companies, but CEPA does enable more Hong Kong companies to qualify, especially if they are interested in the Western region for which the threshold is even lower.
- Hong Kong companies can develop niche areas in selected logistics services. However, despite easier market entry, licensing and domestic regulation remain problems to be addressed.
Travel and tourism
- Most of the individual travellers are likely to come from the more well-to-do parts of the Mainland. Already the beneficial effects of liberalisation in individual travellers have been felt in the retail, hotels and tourist services sectors of Hong Kong.
Financial services
- Eight local banks will now benefit from the lower threshold. The concessions over RMB business also pave the way for making Hong Kong the Mainland’s RMB offshore centre.
- CEPA opens up a huge opportunity for individual insurance agents and actuaries to sell products or practice in the Mainland. For insurance firms, CEPA provides the motivation to go into strategic partnership through mergers and acquisitions.
Telecommunications and audio-visual services
- The value of commitment on telecommunications may be small, but it gives Hong Kong operators a material advantage in terms of preparedness and competency. It also creates a precedent to enable more benefits to be given in the future.
- The enlarged market in the Mainland will encourage more investment in the industry thus raising the quality of production. For film distribution, the lack of intellectual property rights protection is the key constraint in the Mainland. For cinemas, Hong Kong operators can create their own high-quality cinema networks, to the benefit of both the Mainland consumer and film producers.
Taken as a whole, CEPA’s provisions (zero-tariff on goods and liberalization in services) combine to reinforce the economic positioning of Hong Kong as a world class service-oriented economy that is integrated with the economic development of Mainland China. Hong Kong should continue our economic restructuring and to strengthen our service economy.
“CEPA is no magical pill for the Hong Kong economy, and it does not apply to everyone who does business in Hong Kong. However, it does provide a WTO-compliant way for Hong Kong’s economic development to be connected more concretely to China’s economic progress. As a result, CEPA now can benefit a wider community of businesses in Hong Kong, and also has stimulated strong interest globally, as well as inside China, with many provinces and cities eager to cooperate with Hong Kong in view of CEPA,” commented Mr. Anthony Nightingale, the Chamber Chairman.
“Businesses should take a close look at the details of this report, so that you can ask yourself the question of how you can benefit from CEPA. And those who can benefit should start planning to use this agreement at once, since many of the benefits are time-related. The chamber would now be looking to move beyond the initial agreement and expand into other areas, such as monitoring any implementation issues and working with our members on the next phase of CEPA,” added Dr Eden Woon, Chamber CEO.
Please contact Wendy Chan at 2823 1207 for details on how you can purchase a copy of the report. Click here to order on-line now >>
For media inquiries, please contact Dr Eden Woon, CEO, HKGCC at 2823-1211