Carson Fung, managing director of Mitex International Ltd, a member of Japanese logistics firm Mitsui-Soko Group, says getting Cepa status has boosted confidence in the company

The Cepa free trade pact gives a headstart to Hong Kong and overseas companies in China, said the head of the local subsidiary of a leading Japanese logistics group. Mitex International (HK) Ltd, a subsidiary of Mitsui Soko Group, is among one of the first logistics companies granted rights to set up a wholly owned unit in China under Cepa terms.

Mitex managing director Carson Fung said the Closer Economic Partnership Arrangement or Cepa would put his company ahead of other competitors and boost the company's confidence in further expansion on the mainland.

"With Cepa status, we intend to further expand our distribution network into northern and eastern China. We have been evolving our business in China for 20 years and we already have two joint ventures with mainland partners in the eastern China cities of Shanghai and Nantong. While joint ventures have their own advantages, now that we are given the right to set up wholly owned units, there are more opportunities for expansion," said Mr Fung.

The stock price for Mitsui Soko surged some 10 per cent recently upon news that it was granted Cepa status and that the company was taking significant steps in further mainland expansion.

Hong Kong vital link in overseas firms applying for Cepa status

Mr Fung said Hong Kong is a vital link and an important factor for Japanese and other overseas companies wanting to penetrate further into the mainland on Cepa terms. "Firstly, you have to qualify as a Hong Kong company to be eligible for Cepa status. Without that you can't get the certificate and cannot set up a wholly owned company. Secondly, Hong Kong is strategically located as the gateway to China so geographically we have a definite advantage over other places."

Without Cepa, Mr Fung added, "it would be more difficult and tougher to expand in China."

"We will have to wait longer. As China continues to open up in accordance with its WTO commitments, the window of first mover advantage for Hong Kong players is brief. Cepa definitely gives us a headstart in China."

Cepa which came into effect on 1 January this year grants easier access to mainland markets for Hong Kong-made products and Hong Kong-based companies. It covers 18 service sectors and any nationality company can apply if it is incorporated in Hong Kong, has operated for 3-5 years (depending on sector), pays Hong Kong profits tax and employs 50 per cent of its staff locally.

Foreign companies can also be regarded as a Hong Kong company one year after acquiring majority shares in a Hong Kong company through merger or acquisition.

More details in Cepa.

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Mitex International (HK) Ltd