(Left) Financial Secretary Antony Leung and Vice-Minister of Commerce An Min exchange CEPA documents as Premier Wen Jiabao (5th from left) and CE Tung Chee-Hwa applaud

Visiting Premier Wen Jiabao said: "CEPA is a special arrangement under 'One Country, two Systems' and under the WTO framework. It embodies a closer economic relationship with Hong Kong and the mainland. The basic objective is to phase out tariffs, and phase in the liberalisation of trade and investment. We hope it brings more opportunities for Hong Kong businesses and growth to the Hong Kong economy."

 The agreement was hailed as "the most significant development since China's accession to the WTO and opens up new dimensions on the mainland for Hong Kong based companies of all nationalities," according to TDC Chairman Peter Woo.

"The Closer Economic Partnership Agreement (CEPA) with its focus on the liberalisation of trade in goods and services, anchors on Hong Kong's world-leading position as a global platform for China business," said Mr Woo. CEPA covers three broad areas, namely trade in goods, trade in services and trade and investment facilitation.

Through CEPA, Hong Kong-based service providers and qualified professionals are now better placed to expand their China business and to assist mainland customers and counterparts to develop and streamline their business, he added.

CEPA is expected to spur overseas investment in Hong Kong and speed up economic recovery. As such, nationality rules within the arrangement have deliberately been non-restrictive, allowing foreign companies in Hong Kong to qualify as local firms.

Companies of all nationalities which register in Hong Kong, pay profits tax, open their offices in the SAR and hire half their staff locally will be able to enjoy many privileges under CEPA. Overseas firms will need to satisfy the definition of what constitutes a Hong Kong company in order to benefit from it.
 
Under CEPA, the business that firms intend to conduct on the mainland must be the same as what they do in Hong Kong and they need to be in the city for at least three years. However, a five-year requirement is set for banks, insurance companies and construction firms which must be licensed to get CEPA's benefits.

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