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Manufacturers confident the accord will generate more investment, while chief executive looks ahead to next stage

Hong Kong has started looking at what can be included in the next stage of its free-trade pact with the mainland, Chief Executive Tung Chee-hwa  said yesterday.

Mr Tung said the government wanted to deepen and broaden the Closer Economic Partnership Arrangement (Cepa) between the city and the mainland even further when it enters the third stage.

He said the government started looking at Cepa's second stage shortly after the free-trade pact became effective in January this year.

Under stage two of the agreement, signed yesterday morning, all products made in Hong Kong can be exported tariff-free to the mainland from January 1 next year.

To attract investment, 184 goods not yet produced here, including some types of frozen fish and eels, bedding, flat-rolled stainless steel products and medical equipment, will also enjoy zero-tariff status from January 1, 2006.

Seven service industries, including airport  and job referral agency services will have easier market access, while permanent residents can sit for 30 mainland professional examinations.

Welcoming the deal, Airport Authority chairman Victor Fung Kwok-king  said it would boost the aviation industry.

The chief executive of the Hong Kong General Chamber of Commerce, Eden Woon Yi-teng,  who has been lobbying for mainland liberalisation of the market for service industries, described the latest deal as 'promising'.

He said: 'The momentum of trade liberalisation has been set, even though not all our recommendations have been included, we expect they will be  in the next stage. We just need to be more patient.'

Chan Wing-kee, permanent honorary president  of the Chinese Manufacturers' Association of Hong Kong, was confident the latest Cepa accord would generate more investment for Hong Kong.

Mr Chan, who is also a standing committee member of the Chinese People's Political Consultative Conference, said the future tariff-free status  was a huge market waiting for the business sector to tap.

'They are high-value-added goods, related to high quality of living. I'm sure it will be very attractive for the business community.'

But Priscilla Lau Pui-king,  an associate professor of business studies at Hong Kong Polytechnic University, was uncertain it  would lure investment. Ms Lau, who is also a delegate to the National People's Congress, said: 'Hong Kong and the mainland should make the trade pact a two-way interaction. It shouldn't be just about the city's business entering the mainland.

'It can also be liberalising capital and human flow between the two places, such as mainlanders  coming to the city not just in the name of travel or business, they should be allowed to come here for education and disease diagnosis.'

Kim Eng Securities economist Samuel Chiu Chi-yeng  said: 'It is very difficult to quantify. Perhaps in  sentiment it may provide a boost, but it will not be very substantial.'

The Federation of Hong Kong Industries said it  would be a big boost  for the economy. Chairman Andrew Leung Kwan-yuen  said the  second stage  should be more popular because local industries suggested the  products.

'[It] should be able to attract Hong Kong capital back to the local industries and thus boost local employment,' he said.

HOW CEPA II WILL FREE TRADE FURTHER

Goods

- Zero tariffs will be introduced on products under 713 mainland 2004 tariff codes: 529 on January 1, 2005, the remaining 184 on Janurary 1, 2006. Currently, 374 codes have zero import tariff.

- Products that can enter the mainland duty-free from January 1, 2005, includes: 37 types of fish (fresh and frozen), 41 kinds of preserved meats and nuts, 22 styles of men's clothing and 37 makes of electrical goods.

- Discussion will be completed on the rules of origin for the 713 tariff codes in the next month.

Services

- Sectors to be further liberalised: legal services, construction, distribution, transportation (including road passenger and maritime transport), freight forwarding agencies, medical, audio-visual, accounting, banking, individually owned stores, securities and futures services.

- New sectors to be liberalised: airport services, IT, patent agency, trademark agency, job referral agency, cultural entertainment, job intermediary, as well as professional qualification and examination.

Mutual recognition

- Mutual recognition of professional qualifications will be encouraged in: estate surveying and architects, securities and futures industry, patent agency, structural engineering and accounting services.



HK looks to deepen ties struck in Cepa