Hong Kong's unemployment rate is the lowest in almost a decade, thanks to an economy that has enjoyed a three-year expansion averaging almost 7 per cent a year. The latest employment data, released on August20 by the Census and Statistics Department, shows the seasonally adjusted unemployment rate declined from 4.2 per cent in April to June this year to 4.1 per cent (provisional figure) in May to July - the lowest level seen since mid-1998. The banking and finance sector has been a standout sectoral performer in the overall employment mix, while local manufacturing jobs have been on the decline. A reliable measure of the demand and supply equation across all sectors of the employment market is the comparative wage rate in each sector. Data shows how the banking and finance sector payroll growth outstripped growth in pay in other sectors as employers raised salaries to secure the skills they required. The Census and Statistics Department publishes a series titled: 'Nominal Indices of Payroll Per Person Engaged by Industry Sector', which measures the growth of payroll per person based on an index figure of 100 as at the first quarter of 1999. Data shows that salaries in the 'Financing, Insurance, Real Estate and Business Services' sector consistently grew in excess of 5 per cent on an annual basis over the past five quarters, pushing the index to 113 in the first quarter of this year - a significant outperformance compared with other employment sectors. Now, after three years of sustained job creation delivered by domestic demand, policymakers are looking to the latest round of Closer Economic Partnership Arrangement - CepaV - market access arrangements with the mainland to provide a second-stage booster to the employment market. The latest round of special access measures granting Hong Kong incorporated companies favourable entry to China's markets under Cepa, was unveiled on June29 and will become effective from next January. Cepa, launched in 2003 and expanded in its scope since then, is a bilateral trade and services initiative to promote integration between Hong Kong and China. The latest round of liberalisation measures due to kick in next year will be to: Expand the number of products with Cepa origin rules by 17 to 1,465; Introduce 40 liberalisation measures spanning 28 services sectors; Allow Hong Kong permanent residents with Chinese citizenship to set up individually owned businesses on the mainland; and Build on existing co-operative agreements in the areas of finance, conventions and exhibitions. The borderless banking and finance industry has already seen a two-way flow of investment and jobs across the Pearl River Delta, and is now poised for an even deeper level of integration as a result of the latest Cepa arrangements. And this will be reflected in employment practices in the industry. In a commentary published on August6 on the latest measures, the Hong Kong Trade Development Council noted that Hong Kong's banking sector had benefited significantly under Cepa since its introduction - gaining advantages over rivals elsewhere in the process. 'For example, the requirement for total assets for a Hong Kong bank seeking to open a branch in China is set at US$6billion, significantly lower than the requirement under WTO commitments of US$20billion,' the TDC said. Now, under CepaV, the 'substantial business operation' requirement will be lowered from five years of local incorporation to two. A bank can qualify as a Hong Kong service supplier to operate in the mainland if it has operated as a branch for two years or as an incorporated entity for three years in Hong Kong. In the view of most commentators, CepaV looks set to bring fresh benefits to the services sector, and the inescapable conclusion is that the services sector (of which banking and finance companies are a major component), will continue to grow its share of the economy at the expense of the manufacturing sector. Forecasters making this bet are on reasonably safe ground because this is a trend that has been under way for many years as data collated for Composite Employment Estimates indicates. The data tracks the employment share of each sector of the labour market and shows that between 2001 and 2006 the service sectors taken together increased their share of the labour market from 83.8 per cent to 86.3 per cent, while the combined employment share of the manufacturing and construction sectors continued to decline - from 15.5 per cent in 2001 to 13.1 per cent in 2006. That negative trend in the hard-hat sector stands in sharp contrast with the overall growth rates tracked in the official labour data, which shows that total employment increased by about 9,000, from 3,485,000 in April to June 2007 to an all-time high of 3,494,000 (provisional figure) in May to July 2007. Over that period, the labour force rose by 11,200, from 3,640,700 also to a new high of 3,651,900 (provisional figure). The number of unemployed people (not seasonally adjusted) rose by about 2,200, from 155,700 in April to June this year to 157,900 (provisional figure) in May to July, while the number of underemployed people rose by 2,300, from 81,200 to 83,500 (provisional). TDC comments on Cepa V The Hong Kong Trade Development Council said that China's 11th five-year plan plainly stated that the mainland would support 'the development of financial services in Hong Kong' and 'maintaining the status of Hong Kong as an international financial centre'. It was within this broader context, the TDC said, that the mainland and Hong Kong agreed in the CepaV package to enhance financial co-operation. The outcome of the agreement was that on the side of the Chinese mainland, it will support mainland banks in setting up subsidiary operations in Hong Kong, a move that builds on the mainland's prior Cepa commitments in financial co-operation, which encourage mainland financial institutions to: Actively participate in Hong Kong to acquire international best practices; Relocate their international treasury and foreign exchange trading centres to Hong Kong; and Develop networks in Hong Kong to acquire international best practices. Mainland financial institutions are also encouraged to seek stock listings in Hong Kong, which became highly visible last year as some listings of top mainland banks took place in Hong Kong. Under CepaV, the mainland is committed to setting up green lanes for processing applications of Hong Kong banks to open branches in Guangdong and the central western and northeastern areas of the mainland. Hong Kong banks will also be encouraged to set up banks in the mainland's rural areas. 'This would help accelerate access of Hong Kong banks on the mainland and thereby facilitate banking and financial development in the concerned mainland areas,' the TDC said.