Making the best of Hong Kong's free-trade deal
Of all the changes Hong Kong has gone through since the handover, the shift in the economy is the most remarkable. Shopping streets are swarmed with mainland tourists snapping up products from luxury watches and handbags to baby food and toiletries. Like it or not, they are now the lifeline of retail and tourism. On the other hand, more locals go north for jobs and businesses, and many home-grown brands can be found on the mainland. Such cross-border activities were unthinkable 10 years ago, as the separation of the two systems still preceded the one country. Today, integration is so essential that it is difficult to imagine the city alienated from the mainland.
All these would not have been possible without the Closer Economic Partnership Arrangement (Cepa), a trade pact giving Hong Kong goods and services greater access to the world's most sought-after market. Signed in 2003 after the outbreak of severe acute respiratory syndrome, the deal eliminated tariffs on products and gave mutual recognition of professional qualifications. The preferential treatments were subsequently extended to most industries, including banking, accounting, legal, medical, real estate and architecture. Hopes were high that Beijing could use the "handout" to win the hearts of the community and boost our ailing economy. For our neighbours, it was believed that they could also benefit through learning from our experience.
The past decade has seen winners and losers. Some took advantage of the deal to open businesses across the border. But as reported in this paper earlier, progress in some industries is still slow, as some mainland authorities are still reluctant to open up. The gains are also not as big as expected. Our government boasted HK$61.6 billion in earnings for companies from business facilitated by Cepa between 2004 and 2009. This is no small achievement. But professionals and firms who made inroads into the new market are still in the minority.
The integration also brought problems. Our economy risks becoming overdependent on the mainland. The influx of cash-rich mainland visitors has fuelled tension and animosity. Protests and criticisms abound. Our unique position as a special part of China has enabled us to enjoy advantages envied by other competitors. As Cepa expands further in the coming years, more challenges will arise. It is imperative for both sides to capitalise on the opportunities while easing the friction.