Supplement VIII to CEPA deepens liberalisation of trade in services
Tuesday, December 13, 2011
The Hong Kong Special Administrative Region Government (HKSARG) and the Central People's Government today (December 13) reached agreement on the enhancement of economic and trade co-operation and exchanges between the two places under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).
Witnessed by the Chief Executive, Mr Donald Tsang, and other guests, the Financial Secretary, Mr John C Tsang, and the Vice-Minister of Commerce, Mr Jiang Yaoping, signed Supplement VIII to CEPA today.
Supplement VIII to CEPA provides for a total of 32 services liberalisation and trade and investment facilitation measures, including 23 liberalisation measures in 16 service sectors, and strengthens co-operation in areas such as finance, tourism, innovation and technology. Both sides also agreed to enhance origin criteria under trade in goods, and relax the definition and related requirements of Hong Kong service suppliers. Among the 32 measures, 15 are related to the implementation of measures announced by the Vice-Premier Li Keqiang during his visit to Hong Kong in August. The respective measures are summarised below:
Trade in Goods
At present, some Hong Kong products have to fulfil the "value-added content" requirement in order to benefit from the zero tariff arrangement under CEPA. Supplement VIII to CEPA allows traders to include the value of raw materials and component parts originated from the Mainland when calculating the "value-added content". The value allowed to be included into the calculation can be up to half of the "value-added content" (i.e. 15 per cent). The measure facilitates the trade to make use of the zero tariff preferential treatment offered to Hong Kong goods under CEPA.
Trade in Services
Market access conditions will be further relaxed in 13 existing sectors, namely, legal; construction; technical testing, analysis and product testing; placement and supply services of personnel; distribution; insurance; banking; securities; hospital; tourism; road transport; qualification examinations for professionals and technicians; and individually owned stores. Liberalisation measures will also be introduced in three new sectors, namely, inter-disciplinary research and experimental development services; services incidental to manufacturing; and library, museum and other cultural services. These will bring the total number of liberalised service sectors under CEPA from 44 to 47, involving a total of 301 liberalisation measures.
On legal, to further develop closer co-operation between the legal professions of the Mainland and Hong Kong, and to explore ways of improving the mode of association of law firms of the two places; and to consider broadening the scope of businesses of Hong Kong residents who have acquired Mainland legal professional qualification and hold a Mainland lawyer's practice certificate in acting as agents in civil litigation cases in the Mainland relating to Hong Kong residents and juridical persons.
On construction, to allow Hong Kong professionals who have obtained the Mainland's construction professional qualifications through mutual recognition, to register and practise in Guangdong and enjoy the same treatment as Mainland professionals having the same professional qualifications. To recognise Hong Kong professionals who have obtained the Mainland's class 1 registered architect qualification or class 1 registered structural engineer qualification through mutual recognition as registered practitioners for the purpose of declaration of engineering design enterprise qualifications within Guangdong Province, in accordance with the relevant Mainland regulations.
On hospital, in addition to Shanghai Municipality, Chongqing Municipality, Guangdong Province, Fujian Province and Hainan Province, to allow Hong Kong service suppliers to set up wholly-owned hospitals in all municipalities directly under the Central Government and provincial capitals in the Mainland.
On banking, to allow any Mainland-incorporated banking institution established by a Hong Kong bank to engage in the sale and distribution of mutual funds.
On securities, to continue to support qualified Mainland financial institutions engaged in securities activities to set up subsidiaries in Hong Kong and to operate businesses in accordance with law; and to deepen co-operation between the Mainland and Hong Kong in financial services and products development, and to allow investments in the Mainland securities market by means of the Renminbi Qualified Foreign Institutional Investor scheme.
On insurance, to allow Hong Kong insurance brokerage companies to set up wholly-owned insurance agency companies in Guangdong Province (including Shenzhen) on a pilot basis. The place of operation should be in Guangdong Province (including Shenzhen), and the applicant must fulfil the following criteria: (1) the applicant should have been operating insurance brokerage businesses in Hong Kong for over 10 years; (2) the applicant's average annual business revenue for the past three years before application should not be less than HK$500,000 and the total assets as at the end of the year before application should not be less than HK$500,000; (3) within three years before application, there has been no serious misconduct and record of disciplinary action; and (4) the applicant should have set up a representative office in the Mainland for over one year.
On tourism, to optimise the current "144-hour facilitation visa" policy in Guangdong Province through relaxing the requirement to pre-register the outbound control point, and reviewing the requirement regarding tour size at an appropriate juncture.
On technical testing, analysis, and product testing, to expand the scope of product testing that can be undertaken by testing organisations in Hong Kong for the China Compulsory Certification (CCC) System to all existing products processed in Hong Kong that require CCC. These testing organisations have to be accredited by the accreditation body of HKSARG (i.e. the Hong Kong Accreditation Service) to be capable of performing testing for the relevant products under the CCC System.
On distribution, to allow the same Hong Kong service supplier that opens more than 30 stores accumulatively in the Mainland and sells different types and brands of commodities (including staple food) coming from multiple suppliers to operate in Guangdong on a wholly-owned basis as a pilot measure.
On individually owned stores, to expand the scope of services and relax the restrictions of individually owned stores set up by Hong Kong permanent residents with Chinese citizenship in the Mainland, i.e. the number of persons engaged in the operation is relaxed from no more than eight persons to 10 persons, and the business area for certain types of services is relaxed from not exceeding 300 square meters to 500 square meters.
Relaxation in the definition of Hong Kong service supplier
To relax the criteria of "substantive business operations" under the definition of Hong Kong service supplier. Unless individual CEPA measures, or the laws, regulations as well as administrative regulations of the Mainland impose specific requirements on the nature and scope of business, the scope of CEPA preferential measures that Hong Kong service suppliers may apply is not restricted to the scope of their business in Hong Kong.
Supplement VIII to CEPA clearly supports Mainland banks to make use of Hong Kong's international financial platform to develop their international businesses on the premises of prudent operation; and supports Hong Kong insurance companies to enter the market through setting up business institutions or capital participation, so as to participate and share in the development of the Mainland insurance market. It also enhances bilateral co-operation in areas such as development of insurance products, business operation and operational management, etc.
Co-operation in Tourism
The two sides agreed to strengthen co-operation in tourism, including measures to jointly improve the quality of tourism services in the Mainland and Hong Kong, and to strive together for the healthy and orderly development of the Mainland's Hong Kong-bound tourism market; to take forward the Mainland and Hong Kong's co-operation in overseas joint tourism promotion, joint development of "multi-destination" itineraries featuring the Mainland and Hong Kong, and closer co-operation between the overseas tourism offices of the two places; to encourage mutual entry of tourism enterprises and investments in the two places to enter each other's markets; to support strategically Hong Kong service suppliers to set up travel agents in the Mainland; and to enhance support for developing Hong Kong as a homeport for cruise tourism.
Co-operation in Trade and Investment Facilitation
The two sides agreed to further strengthen co-operation in commodity inspection and quarantine, food safety, quality and standardisation; and to strengthen co-operation between the two places in the area of innovation and technology, so as to support Hong Kong's development in innovation and technology.
Under Supplement VIII to CEPA, measures pertaining to enhancement of origin criteria, relaxation of the definition and related requirements of Hong Kong service supplier, and measures relating to trade in services will be effective from April 1, 2012.
ConclusionThe signing of Supplement VIII to CEPA fully reflects the support of the Central Government for the Hong Kong Special Administrative Region. The Supplement provides for preferential measures in trade in goods, trade in services, as well as trade and investment facilitation.
On trade in goods, the measure for origin criteria allows Hong Kong manufacturing enterprises to include materials and component parts originated from the Mainland in the calculation of "value-added content", which will help to further improve the CEPA origin criteria and enable more Hong Kong products to enter the Mainland market under the zero tariff preferential arrangement, thus increasing their competitiveness, as well as attracting and encouraging the manufacturing industry to move towards diverse and sustainable development.
The liberalisation and trade and investment facilitation measures for the pillar industries and those industries in which Hong Kong has a competitive edge will help Hong Kong service industries accelerate their opening up of the Mainland market. This will be greatly conducive to the sustainable development of these industries, and will foster the economic and trade integration and professional exchanges between the two places.
The measures for individually owned stores will expand the scope of business and improve operating conditions. This will help small and medium enterprises tap the Mainland market and increase the beneficiaries of CEPA.
The relaxation on the criteria of "substantive business operations" in the definition of Hong Kong service supplier also enables Hong Kong businesses to expand their scope of business in the Mainland with greater flexibility and diversity, thereby maximising CEPA's benefits.
The public can visit the Trade and Industry Department's CEPA website at www.tid.gov.hk/english/cepa/index.html for details on CEPA.