Full steam ahead for stronger trade ties
The Closer Economic Partnership Arrangement (Cepa) means different things to different people.
For Hong Kong manufacturers, it means tariff-free exports to China. For local service providers, it means the chance to get a foothold in mainland markets. And for Chinese enterprises, it means the opportunity of a partnership with a Hong Kong company.
For both signatories it means closer economic and trade ties designed to lift the fortunes of Hong Kong and improve the competitive edge of mainland companies facing an influx of foreign competitors.
'China today needs to develop many of its services industries,' says Kwok Kwok-chuen, chairman of the Hong Kong Coalition of Service Industries and chief regional economist at Standard Chartered.
'The preferential access to the mainland market given to Hong Kong companies and professionals gives these local providers an early-mover advantage,' he says.
'It will also enable China to learn earlier what the liberalisation of its services industries will entail before the country is opened up to giant multinational corporations under the World Trade Organisation framework.'
Under Cepa rules, companies in 18 service sectors will be given easier access to the mainland market.
Among these is the insurance industry. Under the Cepa details announced in June, a Hong Kong insurer will be able to hold up to 24.9 per cent of a mainland domestic insurer, up from 10 per cent now.
The threshold change is expected to entice foreign firms keen for a foothold in China to forge partnerships with Hong Kong insurers.
Speaking at last month's Beijing-Hong Kong Economic Co-operation Symposium, the director of the Hong Kong Trade Development Council's China office, Roger Chu, said Cepa would offer Hong Kong investors even more of a head start in market access than WTO commitments to liberalise would grant foreign investors.
'Cepa is not just an end product,' he said. 'It is just the beginning, and we can find all kinds of opportunities together.'
Cepa is not just a one-way street, and many Chinese enterprises and entrepreneurs are expected to take advantage of the new rules governing cross-border trade by investing in Hong Kong.
The chief executive of the Hong Kong General Chamber of Commerce, Eden Woon Yi-teng, says the chamber had been in contact with more than 30 provinces and cities in China in the past three months. He says each is keen to discuss possibilities of co-operation with Hong Kong.
'These contacts include enterprises interested in possibly moving some selected manufacturing to Hong Kong to take advantage of zero tariffs, and using the territory as an export platform to the international market,' he says.
'Some companies are also interested in co-operation with local service firms in order to upgrade their own service quality.'
Dong Hong, a vice-party secretary of the city of Beijing, spelled out to the Beijing-Hong Kong Economic Co-operation Symposium just what Cepa could mean to mainland corporations and why Chinese companies were keen to get involved with Hong Kong partners.
'Hong Kong is our third-largest trading partner, and a total of 6,742 Hong Kong firms have invested US$17.1 billion in our city,' he explained.
'We are extremely interested in Cepa. The few years to come will offer tremendous opportunities for economic co-operation between Hong Kong and Beijing.'