China signed a new free trade pact with Hong Kong yesterday, further opening the mainland markets to the special administrative region two days before the 10th anniversary of its return from British to Chinese rule.
The new Closer Economic Partnership Arrangement (CEPA) builds on a trade agreement established in 2003 when Hong Kong was suffering a sharp economic slowdown, due in part to the devastating outbreak of SARS that year.
The agreement will further relax conditions for Hong Kong businesses operating in China's banking, tourism, exhibitions and medical services sectors.
The pact, which will come into force on Jan. 1 next year, has also been expanded to cover services for the elderly, environmental services and public utilities.
It was signed by Chinese Vice-Minister of Commerce Liao Xiaoqi (
Tang said CEPA had played an important role in the economic development of both Hong Kong and the mainland and would open up further opportunities.
The new provisions will make it easier for Hong Kong banks to set up branches in certain parts of the mainland and encourage Chinese banks to set up subsidiary operations in Hong Kong.
In particular, the agreement cuts the amount of assets Hong Kong banks need to buy in Chinese banks to US$6 billion from US$10 billion.
A pilot scheme will allow Hong Kong companies to organize exhibitions in Guangdong and Shanghai, China's commercial center.
The minimum turnover threshold for Hong Kong tourism companies wanting to set up operations in China has also been reduced.
Hong Kong service providers will also be allowed to provide environmental services on the mainland and set up construction operations for gas, heating, water supplies and water drainage for medium-sized Chinese cities.
The Hong Kong government said CEPA had generated 36,000 jobs for its residents and 16,000 for people on the mainland since its signing.
But an Hong Kong observer said the new CPA accord would not have much of an effect.
"Lowering the banks' asset requirement doesn't help much," said Raymond So Wai-man (蘇偉文), assistant professor in business administration at the Chinese University of Hong Kong. "Clients in China would prefer going for the big-name banks to do business, not the small-size ones."
China still requires Hong Kong professionals to jointly operate and own companies, So said.
As more China companies go public, CEPA should allow more Hong Kong-based accountants and lawyers to set up their own firms in China to provide services to those IPO firms, he said.
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