Services in the CEPA spotlight (hktdc.com)


	Financial Secretary John Tsang and Vice-Minister of Commerce Jiang Zengwei sign Supplement V to the Hong Kong-Mainland Closer Economic Partnership Arrangement

	Andrew Brandler, Hong Kong General Chamber of Commerce Chairman, welcomes the latest CEPA initiatives

Good news for Hong Kong-based businesses in the services sector. The latest phase of CEPA, the Closer Economic Partnership Arrangement between Hong Kong and the Chinese mainland, will bring with it more opportunities.

The newest additions to CEPA, signed in July, brings to 40 the number of services now covered by the free trade agreement, introduced in 2003. CEPA created 36,000 jobs and attracted more than US$642 million of investment into Hong Kong in its first three years. CEPA gives favourable trading and investment treatment to a range of Hong Kong-incorporated manufacturers and services through tariff exemptions and greater mainland access.

Overseas companies not based in Hong Kong can also take advantage of CEPA by outsourcing to, or partnering with, CEPA-qualified manufacturers or service providers in Hong Kong.

The latest phase, Supplement V, covers sectors such as tourism, accounting, medical and dental services, education, construction and related engineering. Two new sectors have been added: services related to mining, for oil and gas exploration; and associated scientific and technical consulting services for the prospecting and surveying of iron, manganese and copper in the mainland. Supplement V also introduces a mechanism for increased cooperation on branding, trademarks and e-commerce.

The new phase puts special focus on strengthening economic and trade cooperation between Hong Kong and the southern mainland province of Guangdong, making it easier for Hong Kong services providers to open businesses in the province. Among the new CEPA commitments, 25 will be initiated as pilot projects in Guangdong, a testing ground for the rest of the mainland.

Tangible benefits

Industry bodies have welcomed the latest signing. Hong Kong General Chamber of Commerce (HKGCC) Chairman Andrew Brandler said the agreement would bring tangible benefits to many Hong Kong companies and professionals as they expand their operations in the mainland. It would also foster growth in services, he said.

"For example, under the framework of Trade and Investment Facilitation, both parties will promote cooperation in electronic commerce. Under Trademark, they will set up a working team to encourage communication and cooperation in trademark registration, management and protection," said Mr Brandler. "In addition, Brand Cooperation between Hong Kong and the mainland is a new sector under CEPA Trade and Investment Facilitation. The chamber has been calling for these measures to be added to CEPA, so we are glad to see they have been included in the latest supplement."

HKGCC Chief Executive Officer Alex Fong said the services sectors covered were relevant to business needs. Commenting on a CEPA working mission that the chamber organised to Guangdong last year, Mr Fong said the cases observed there "helped to generate proposals for our CEPA wish list." Mr Fong was also pleased to see that the newly signed supplement contains 25 liberalisation provisions between Guangdong and Hong Kong. "These should allow more Hong Kong enterprises to operate businesses in the province. At the same time, implementation of CEPA will be improved, which will help Hong Kong companies make use of their competitive edge there."

Faster and easier

The Hong Kong Institute of Certified Public Accountants said the new agreement would bring Hong Kong accountants more opportunities to practise on the mainland.

"For the accounting profession, it means that Hong Kong certified public accountants (CPAs) need only pass the tax and law papers of the Chinese Institute of Certified Public Accountants' exam to become CICPA members. Mainland CPAs now only need to pass the taxation module and the final exam of the Hong Kong Institute of CPAs qualification programme to become Hong Kong Institute of CPAs members," said Winnie CW Cheung, Chief Executive and Registrar of the Hong Kong Institute of CPAs.

"These exemptions make it faster and easier for accountants to qualify, or become licensed, in each market. And it's going to bring the two professions another step closer to full mutual recognition."

Chairman of the Federation of Hong Kong Industries Clement Chen said the agreement on trademark cooperation could encourage more Hong Kong companies to develop new products and build their own brands.

"The cooperation mechanism for intellectual property protection and branding will help encourage Hong Kong enterprises to invest in developing new products and branding. This will assist them in targeting the newly emerged middle class consumer market in the mainland," Mr Chen said. "The distribution sector will benefit from the liberalisation measures of the new CEPA package. By allowing Hong Kong enterprises to operate on a wholly-owned basis in China, it will be easier for them to open up chain stores in the targeted cities, and to gradually set foot in the massive mainland domestic market."

CEPA Supplement V comes into effect 1 January 2009.