Wed, Dec 24, 2003 - Page 11 News List

Pundits call for HK alliances

SERVICE SECTOR Business analysts say domestic companies will have to form ties with Hong Kong companies if they want to gain preferential access to China's market


With the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China set to take effect next month, pundits and business leaders suggested yesterday that the domestic service sector work with its Hong Kong counterparts to exploit the Chinese market.

"If Taiwan does not enter the market through this mechanism like many foreign companies do, Taiwan will soon be marginalized in the Asian economy," Kao Charng (高長), director at National Dong Hwa University's Institute of Public Administration, said at a forum on the opportunities and challenges the CEPA may bring to industry.

Under the CEPA signed on June 29 by Hong Kong and the Chinese government, 18 of Hong Kong's service industries -- including legal, construction, real estate, securities, insurance, transportation and banking -- will be able to open businesses in China without having to form joint ventures with Chinese partners. Exports of 273 types of goods will enjoy zero tariffs.

Macau signed a similar deal with China on Oct. 17.

Last month, an official from China's Ministry of Commerce said Beijing would like to offer the same pact to Taiwan, provided the CEPA was signed under the "one China" framework.

"Although the Chinese authorities said the pact was aimed at improving the Hong Kong and Macau economies, the move was also a touchstone for its ambition to lead the integration of economies in East Asia," Kao said. "Furthermore, it obviously exerted pressure on Taiwan."

Companies in Hong Kong and Macau will lose their trade advantages in 2005 when China has to comply with WTO rules and open up its markets to all WTO members. Despite this, many companies are keen to purchase Hong Kong businesses to outflank their rivals in China's massive market ahead of the WTO liberalization.

Fubon Financial Holding Co (富邦金控), the country's second-largest financial services provider, for example, plans to buy Hong Kong's International Bank of Asia (港基銀行).

"To avoid missing the wave, the government should help companies form strategic alliances with related Hong Kong businesses," Kao said.

Cathy Chin (秦玉玲), an official at the Taipei Computer Association (台北市電腦公會), which held the forum, indicated that the tactic is necessary in view of the rapid growth of the Chinese economy.

Taiwan's logistics sector, for example, is expected to suffer under the China-Hong Kong CEPA, as Hong Kong's logistics businesses will expand in China, Chin said.

"Shanghai has already outpaced Kaohsiung as the world's fourth-largest port this year, and I expect other major ports in China like Shenzhen will soon catch up under the free-trade pact," Chin said.

In addition to concerns over lagging behind Hong Kong companies, the government predicted that foreign investors may flock to Hong Kong to take advantage of the CEPA.

As of June, there were 966 regional headquarters and 2,241 regional offices of foreign enterprises in Hong Kong, according to the results of an annual survey conducted by Hong Kong's Census and Statistics Department.

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