INTRODUCTION

A new agreement on trade in services was signed on 27 November 2015 under the framework of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) between Hong Kong Special Administrative Region Government and the Ministry of Commerce to further open up the services market, thereby basically achieve liberalisation of trade in services between the Mainland and Hong Kong. Details are set out below.

BACKGROUND

2. The Mainland and Hong Kong signed the CEPA in 2003.  Thereafter, pursuant to Article 3 of CEPA, the two sides broadened and enriched the content of CEPA and signed ten Supplements between 2004 and 2013, expanding market liberalisation and further facilitating trade and investment.  In December 2014, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong (the Guangdong Agreement) was signed under the framework of CEPA, enabling early realisation of basic liberalisation of trade in services with Hong Kong in Guangdong.
3. On the basis of the Guangdong Agreement, the two sides continued with discussion in 2015 and on 27 November 2015, signed the Agreement on Trade in Services (the Agreement), extending the geographical coverage to the whole Mainland for basic liberalisation of trade in services. The legal text of the Agreement is available at the Trade and Industry Department's (TID) website.

DETAILS

Framework of the Agreement

4. The Agreement made reference to the framework of the Guangdong Agreement. In addition to including new liberalisation measures introduced in 2015, by covering and consolidating commitments relating to liberalisation of trade in services provided in CEPA and its Supplements and also the Guangdong Agreement, the Agreement becomes a stand-alone, subsidiary agreement relating to trade in services under the framework of CEPA.
5. The main text of the Agreement sets out provisions for, among others, national treatment, most-favoured treatment, safeguard measures, exceptions, and investment facilitation; the three annexes of the Agreement set out respectively the specific commitments of the Mainland and Hong Kong in liberalisation of trade in services, and the definition of "Service Supplier" and related requirements.
6. Generally speaking, trade in services can be classified into four modes¹.  With respect to the mode of "commercial presence", the Agreement sets out, in the form of a negative list, the restrictive measures reserved by the Mainland on Hong Kong that are inconsistent with the obligation of national treatment under the 134 services trade sectors².  Except for those reserved restrictive measures as well as the horizontal management measures, the Mainland does not impose any particular restrictions for eligible Hong Kong service suppliers, i.e. national treatment applies.  As for the mode of cross-border supply, consumption abroad, movement of natural persons (collectively known as "cross-border services"), as well as sectors of telecommunications and cultural services, the Mainland's liberalisation measures for Hong Kong remain positively listed.

Mainland's Liberalisation Measures

7. Key contents of the Agreement are summarised as follows:
   1. Overall speaking, there are 153 sectors which the Mainland has fully or partially opened up to Hong Kong services industry, accounting for 95.6% of all the 160 services trade sectors.  In respect of the mode of "commercial presence", national treatment will be applied to Hong Kong in 62 sectors.
   2. In respect of the mode of "commercial presence", the negative list covers 134 services trade sectors, reserving 120 restrictive measures as inconsistent with the obligation of national treatment.
   3. The positive lists covering cross-border services as well as the sectors of telecommunications and cultural services³ have newly-added 28 liberalisation measures.
   4. The Agreement has liberalisation measures in a number of important sectors.  Specific examples are set out in the Annex.
   5. With regard to investment facilitation, for Hong Kong service suppliers in majority of services trade sectors, filing administration is adopted in lieu of prior approval of contracts and articles of association for establishment and change of enterprises.

Hong Kong's Liberalisation Measures

8. Following past practice, Hong Kong will not impose any new discriminatory measures on Mainland services and service suppliers in the areas of services covered by the Agreement.
9. The Agreement shall come into effect on the day of signing and be implemented as from 1 June 2016.

CONCLUSION

10. The Central Government announced in 2011 to basically achieve liberalisation of trade in services in the Mainland for Hong Kong by the end of the National 12th Five-Year Plan period. The Guangdong Agreement signed in 2014 achieved this goal in advance in Guangdong in the form of early and pilot implementation and it was the first free trade agreement drawn up by the Mainland with pre-establishment national treatment and in the form of negative list. On the basis of the Guangdong Agreement, the Agreement signed in 2015 further enhances the liberalisation in both breadth and depth, including extending the implementation of the majority of Guangdong pilot liberalisation measures to the whole Mainland; reducing the restrictive measures in the negative list; and adding 28 liberalisation measures in the positive lists for cross-border services as well as cultural and telecommunications services. The Agreement will basically achieve liberalisation of trade in services between the Mainland and Hong Kong, enabling both sides to reach a new milestone after the continuous liberalisation of trade in services through CEPA over the years.
11. Hong Kong's favourable position to enjoy the most preferential liberalisation measures of the Mainland is assured by the "Most-Favoured Treatment" provision of the Agreement which specifies that any preferential treatment the Mainland accorded to other countries or regions, if more preferential than those under CEPA, will be extended to Hong Kong.

ENQUIRIES

12. For enquiries on issues related to CEPA, please contact the relevant sections in the TID.