|
Pamphlet
China's
Accession to the World Trade Organization and Hong Kong
After 15 years of
protracted negotiations, China joined the World Trade Organization (WTO)
as the 143th member on 11 December 2001. As a WTO member, China can take
part in the formulation of multilateral trade rules, enjoy the "most-favoured-nation"
treatment granted by over 140 economies and, in the event of trade disputes,
be able to resort to the multilateral framework of resolution, leading
to an improved and more stable external trading environment. China's
accession demonstrates its commitment to abide by international trade
rules, lower import tariffs, open its domestic markets and enhance transparency
in the promulgation and implementation of trade-related regulations. All
these will better enable China to boost trade; attract the inflow of capital,
talents and technology; spearhead economic reforms and improve corporate
standards.
The development in
China after her WTO accession will have profound ramifications for Hong
Kong. Greater understanding of the opportunities and challenges
arising will help the businesses and individuals in our community gear
up for the future and take the Hong Kong economy to new heights.
Overall
Impact on Hong Kong's Economy
- By 2010, Hong Kong's
exports involving the Mainland of China will be increased by 15% (averaging
at 1.3 percentage points per annum). Its GDP is estimated to grow by
5.5% (averaging at 0.5 percentage point per annum). This refers to the
growth impact stemming from the Mainland's tariffs cuts and non-tariff
relaxation on visible trade. There will also be growth impact
stemming from the Mainland's service sector liberalisation.
- As a leading trade
and financial centre, Hong Kong possesses the unique advantages of the
rule of law, a low tax regime, a clean government, a first-rate financial
services system, the free flow of information and capital, and a workforce
well-versed in both the Mainland and international markets. It
will continue to play a vital role in the Mainland's development and
grow with it in the process.
- Hong Kong businesses
will benefit from reduced transaction costs as the Mainland refines
its economic and trade regulations and improves market efficiency.
- The economic and
trading relationship between the Mainland and its trading partners will
be governed by the WTO framework upon accession, thus reducing the chances
of unilateral trade sanctions against the Mainland. This will
help create a more stable external trading environment for Hong Kong.
Opportunities
- Surge in the Mainland's
external trade and investment flows will boost Hong Kong's external
trade and intermediary services.
- Opening up of the
Mainland's services sectors, including trading and logistics, retail,
distribution, telecommunications, finance, professional services, and
tourism, will provide more business opportunities for companies and
individuals in Hong Kong.
- Competition in
the Mainland market will be on a fairer ground with the convergence
of treatment for domestic and foreign companies.
- Reduced tariffs
and improved trading environment will cut down on the importing costs
of equipment and raw materials. Companies using the Mainland as a manufacturing
base are set to benefit, and will become more competitive in the export
market.
- Restrictions on
domestic sale by foreign manufacturing companies (including Hong Kong
companies) will be lifted. Hong Kong manufacturers who have production
in the Mainland will enjoy free access to the Mainland domestic market.
- More Mainland and
overseas companies will set up their offices here to capitalise on Hong
Kong's advantages. This will in turn stimulate local economic
growth and create employment opportunities
- Expanded opportunities
for Hong Kong companies, especially for small and medium-sized enterprises
(SMEs), to partner with overseas companies keen to enter the China market,
as well as with Mainland companies targeting international markets.
Challenges
- Increased competition
for business in the Mainland market, not only from domestic but also
overseas companies.
- To many SMEs, the
entry thresholds of the Mainland's services market remain too high.
- Need to upkeep
the quality excellence of our services and products, in order to maintain
our unique gateway role when the Mainland markets become directly accessible
to international investors.
- The Hong Kong economy
needs to transform itself further in order to maintain competitiveness
in the face of the challenges posed by the rapid development in the
Mainland. Our business sector and workforce will likewise have to be
better prepared and more nimble in adapting to the changes.
Sectoral
Implications
Banking
| Commitments |
- Foreign banks
to conduct renminbi business with Mainland enterprises in 2 years,
and with Chinese individuals in 5 years.
|
|
Opportunities
|
- Provide renminbi
retail banking Services. Promising growth in pesonal banking
services and expanded scope of business in a wide range of financial
support services.
- Greater demand
for financial human resources and expertise.
|
| Challenges
|
- Keen competition
from foreign and Mainland banks.
- Difficult
to meet the entry threshold (US$20 billion).
|
Back
to Top
Insurance
| Commitments |
- 50% foreign
ownership for life insurance.
- 51% foreign
ownership for non-life insurance.
|
| Opportunities |
- Collaborate
with multinational corporations, and provide professional support
to Mainland companies.
- Position
as a major intermediary services centre in such areas as international
re-insurance, and insurance agency and brokerage.
|
| Challenges
|
- Difficult
to meet the asset requirement (US$5 billion or more).
|
Back
to Top
Retail and Distribution
| Commitments |
- Lift all
restrictions on domestic distribution services in 3 years, and
on services auxiliary to distribution in 6 years.
|
| Opportunities |
- Greater demand
for merchandising, networking and sales promotion specialists
in the Mainland.
|
| Challenges |
- Great competition
from foreign and Mainland companies.
- Entry thresholds
on capital size and business track records still difficult to
meet.
|
Back
to Top
Trading and Logistics
Services (including freight transport)
| Commitments |
- Industrial
tariffs reduced to an average of 8.9%.
- Agricultural
tariffs reduced to an average of 15%.
|
| Opportunities |
- More demand
for sourcing, merchandising, distribution, transportation, trade
financing and trade insurace.
- External
freight transport facilities for Mainland goods. Logistics
operations in the Mainland through the application of e-commerce,
networking and modern management techniques.
|
| Challenges |
- Direct trade
between foreign and Mainland operators.
- Competition
from Mainland ports, as they charge less and continue to improve
on service quality.
|
Back
to Top
Fund Management
(including securities trading)
| Commitments |
- 33% foreign
participation in joint ventures for fund management upon accession,
rising to 49% in 3 years.
- 33% foreign
participation in joint ventures for securities houses.
|
| Opportunities |
- Set up joint
ventures and raise funds for Mainland companies.
- Provide a
wide range of services in investment banking to develop capital
markets in the Mainland.
- Assist in
the training of Mainland finance professionals.
|
| Challenges |
- Competition
from global securities houses.
|
Back
to Top
Telecommunications
(including information technology services)
| Commitments |
- Geographical
restrictions on paging and value-added services to phase out in
2 years, mobile/cellular in 5 years, domestic and international
wireline services in 6 years.
- Foreign ownership
in value-added services capped at 30% initially and raised to
50% after 2 years. 49% foreign ownership for mobile services
in 3 years, domestic and international services in 6 years.
- Internet
services liberalised at the same rate as other key telecommunications
services
|
|
Opportunities
|
- An Internet
hub for East Asia.
- An entrepot
for telecommunications traffic between the Mainland and the rest
of the world.
- An international
telecommunications trading centre to provide one-stop services.
- A wireless
technology promotion fulcrum to develop wireless or satellite
technology related services.
- A training
centre for IT professionals.
|
|
Challenges
|
- Intensive
competition from multinational and Mainland companies.
|
Back
to Top
Professional Services
| Commitments |
- Open up markets
for a broad range of professional services, such as accountancy,
legal services, construction and surveying.
|
| Opportunities |
- Relaxation
of entry restrictions provides a more favourable environment for
professional firms in areas such as legal and accountancy services,
management consultancy, advertising, etc.
|
| Challenges |
- Need to uphold
service quality and contain costs to preserve competitiveness.
- Need to acquire
professional qualifications in the Mainland.
|
Back
to Top
Manufacturing
| Commitments |
- Reduce customs
duty on imports of automobile to 25%, and on imports of auto parts
to 10% by 2006.
- Phase out
by 2005 all tariff and non-tariff restrictions on imports of IT
equipment.
|
| Opportunities |
Textiles
and Clothing
- Form partnerships,
establish brand names, and expand into retail and distribution
businesses.
Automobile
- Auto parts
suppliers to penetrate the rather diverse market.
IT equipment
- Provision
of supporting products and services to Mainland enterprises.
|
| Challenges |
Textiles
and Clothing
- Keen competition
arising from increasingly high-quality Mainland products and the
elimination of export quotas.
Automobile
- Keen competition
from Mainland manufacturers and overseas importers.
IT equipment
- Need to identify
niche positions in a market dominated by major Mainland and international
players.
|
Back
to Top
Travel and Tourism
| Commitments |
- Majority
foreign ownership of hotels upon accession, full foreign ownership
in 4 years.
- Wholly-owned
travel agencies in 6 years.
|
| Opportunities |
- Run hotels,
provide inbound travel services, and develop tourist spots.
- Multi-destination
itineraries for foreigners in the Mainland, including Hong Kong
as a stop during the trip.
|
|
Challenges
|
- Human resources
of an adequate calibre and expertise are essential.
|
Back
to Top
Compiled by the
Government of the Hong Kong Special Administrative Region
November 2001
|
