The Closer Economic Partnership Arrangement (Cepa) has been a bit of a disappointment to city businesses seeking access to potentially lucrative mainland markets. To bring any real benefit to Hong Kong, the mainland regulator must be willing to cut the red tape.
The Hong Kong General Chamber of Commerce last week made an interesting proposal to the Hong Kong government on how to make Cepa work better. It wants Beijing to allow certain local firms involved in logistics, tourism or retailing to be given direct access to Guangdong, without the need to wait for regulatory approval.
The tough approval procedures currently in place are exactly why Cepa has failed to live up to expectations. If Beijing was willing to listen to the chamber's suggestion, it would be a real break.
Cepa was meant to help Hong Kong, but as usual, what was intended is not what has been achieved. Launched in 2003 as a way to boost the weak Hong Kong economy following the Sars outbreak, the many rounds of Cepa measures announced in the past 10 years were intended to allow the city's banking, retail and film sectors to enter the mainland market.
But so far only very few Hong Kong firms have been allowed to enter through Cepa, because they are required to first secure mainland regulatory approval.
Just ask any bank, broker or accountant, and they will describe for you the lengthy and painful experience of obtaining the necessary approval to gain access to the mainland.
As an example, Cepa had proposed allowing Hong Kong-based futures brokers to set up joint ventures on the mainland. But so far, only a few such ventures have been given the green light.
By contrast, many mainland brokerages and fund houses have been allowed to set up in Hong Kong.
Insurers are also theoretically welcome to apply to set up business, but Beijing allows only international insurers with assets of at least US$5 billion to operate on the mainland - a threshold no Hong Kong-based firm can reach. Domestic insurers only need 200 million yuan (HK$252 million) in capital to set up on the mainland.
Accountants do not fare much better. So far, none of the 35,000 members of the Hong Kong Institute of Certified Public Accountants have become a partner in a mainland firm, a prerequisite for opening their own practice.
Under Cepa, Hong Kong accountants are exempt from four of the six exams needed to become a member of the China Institute of Certified Public Accountants. But just 152 Hongkongers have passed the tests that are required. These examinations are conducted in Chinese, making them difficult for Hong Kong-based accountants, who are generally trained in English.
Under the latest Cepa deal, Hong Kong accountants with the CICPA qualification can become partners in firms in Qianhai, the new economic-development zone in Shenzhen, as part of a pilot scheme. But the Hong Kong accountants need to have first worked on the mainland for three years.
It is hard to believe that Beijing will completely remove regulatory-approval procedures for Hongkongers. But it would certainly help if the approval process was at least simplified, and the bar for entry set lower.
This will benefit both the Hong Kong and mainland economies. If Beijing is really keen to open up its markets, it should push the door open wider.