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Mainland and Hong Kong Closer Economic Partnership Arrangement （ CEPA ）

Mainland and Hong Kong Closer Economic Partnership Arrangement （ CEPA ）. 1. Trade The Mainland is HK's largest trading partner, accounting for 48.7% of HK's total trade value in 2009.

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Mainland and Hong Kong Closer Economic Partnership Arrangement （ CEPA ）

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  1. Mainland and Hong Kong Closer Economic Partnership Arrangement （CEPA） 1

  2. Trade The Mainland is HK's largest trading partner, accounting for 48.7% of HK's total trade value in 2009. HK is the Mainland's 3rd largest trading partner, accounting for about 8% of the Mainland's total external trade in 2009. Investment HK is the Mainland's largest source of realised direct foreign investment, accounting for about 42.5% of the national total as at June 2010. The Mainland is HK's most important external investor. At end-2008, the stock of inward direct investment from the Mainland accounted for about 36.5% of HK' s total. Close Economic Ties betweenMainland and Hong Kong

  3. Enormous Business Opportunities in the Mainland Market potential for quality goods - Demand for quality goods will rise over time. HK can play a key role in the development of the Mainland’s services industry HK can act as the Mainland’s service centre - With the Mainland’s rapid and sustained economic growth, greater market openness, and continued expansion of external trade, Mainland enterprises have bigger need for different kinds of services. HK can act as two-way platform - HK is the preferred choice for many enterprises eyeing the Mainland market. It is also a springboard for Mainland enterprises to “venture out” to the world market.

  4. CEPA, the first free trade agreement concluded by the Mainland and Hong Kong, was signed on 29 June 2003 • Seven Supplements have been concluded since 2004; the latest Supplement VII signed on 27 May 2010 Signing of CEPA 4

  5. Trade in Services Trade and Investment Facilitation Coverage of CEPA Trade in Goods CEPA 5

  6. CEPA Preferences • WTO-plus preferences • Trade in goods: zero tariff • Trade in services: WTO-plus liberalisation commitments in various service sectors • CEPA remains the mostpreferentialamong the FTAs signed by the Mainland

  7. Trade in Goods • The Mainland applies zero tariff to goods imported from Hong Kong that meetCEPA rules of origin (ROO) • The two sides have reached agreement on the CEPA ROO for 1,592 products 7

  8. Trade in Goods In terms of FOB value, the five major product categories covered by CO(CEPA) (as at October 2010)- 8

  9. Trade in Services • Preferential market access to service industries in the Mainland – reduced registered capital requirement; less restrictions in equity shareholding, geographical coverage of operation and business scope etc. • Strengthen cooperation in financial services • Strengthen cooperation in tourism • Facilitate mutual recognition of professional qualifications 9

  10. Trade in Services • Inclusive of Supplement VII to CEPA, nearly 280 liberalisation measures covering 44 service sectors have been introduced 10

  11. Trade in Services “Early and Pilot Implementation” 41 measures for “early and pilot implementation” in Guangdong Province Sectors covered: accounting, construction, medical services, banking, securities, convention and exhibition, tourism, placement and supply services of personnel, telecommunications, public utility, environmental, social services, maritime transport, road transport, rail transport 11

  12. Trade in Services Beneficiaries: Hong Kong Service Suppliers (HKSS) Juridical persons (e.g. companies, partnerships, sole proprietorships) • Require an HKSS Certificate before applying directly to Mainland authorities for provision of services in the Mainland • Incorporated / established in HK • Substantive business operation in HK for 3 or 5 years • Paid profit tax in HK • Own or rent business premises in HK • Majority staff are HK residents • Applicable to all businesses operating in HK regardless of source of investment 12

  13. Hong Kong Service Supplier Certificates (As at October 2010) 13

  14. Trade and Investment Facilitation • Trade and investment promotion • Customs clearance facilitation • Commodity inspection and quarantine, food safety and quality and standardization • Electronic business • Transparency in laws and regulations • Cooperation of small and medium enterprises • Cooperation in industries • Protection of intellectual property • Cooperation on branding • Cooperation on education 14

  15. Examples of CEPA Advantages Medical services

  16. Examples of CEPA Advantages Legal services

  17. Examples of CEPA Advantages Accounting

  18. Examples of CEPA Advantages Construction and related engineering services

  19. Examples of CEPA Advantages Air transport services

  20. Opportunities to Foreign Investors Trade in Goods • To enjoy zero tariff benefits on importation into the Mainland by setting up manufacturing operations in HK to produce goods that meet CEPA origin rules Trade in Services • To enjoy preferential access to Mainland’s service industries by • establishing business in HK • acquiring or joining forces with enterprises in HK

  21. Based on a rough estimate, about 45% of HKSS certificate holders are believed to have received foreign investments The most popular CEPA service sectors among foreign companies are : transport and logistics distribution air transport advertising job referral agency / job intermediary Utilization of CEPA by Foreign Investors 21

  22. During 2004-09, business receipts obtained by companies in HK due to CEPA from Mainland-related business reached HK$61.6 billion • During 2007-09, CEPA-induced business receipts obtained by operations established by HK service suppliers on the Mainland amounted to HK$198.5 billion • During 2007-09, companies in HK obtained additional business receipts totalling about HK$55.1 billion due to CEPA Economic Impact of CEPA 22

  23. Economic Impact of CEPA • From Sept 2004 to end 2009, 2,602 Mainland enterprises were granted approval to invest in HK, involving over US$24.4 billion of investment • In 2009, InvestHK assisted 265 foreign companies to invest or expand in HK, 26% of them cited CEPA as one of the key considerations for investing in HK 23

  24. TID’s Support Services • Disseminate information on CEPA and provide enquiry services • Promote CEPA • Render appropriate assistance to manufacturers or service suppliers to make use of CEPA benefits Website：http://www.tid.gov.hk/english/cepa/index.html 24

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