Further Services Liberalization Under CEPA
In May, further services liberalization and trade cooperation measures were agreed under Supplement VI of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong’s free trade pact with the Mainland of China.
Under Supplement VI, the Mainland will introduce 29 liberalization measures covering 20 service sectors, including two new sectors (research and development, and rail transport). Thus, the total number of service sectors covered by CEPA will be expanded from 40 to 42. Among them, the noteworthy liberalization measures are:
Tourism: On tourism, Mainland travel agents authorized to operate group tours to Taiwan can organize group tours for Mainland residents, who hold valid exit/entry permit for traveling to and from Taiwan and travel endorsement, to enter and remain in Hong Kong in transit. This measure aims to facilitate the travel trade in the Mainland and Hong Kong to develop multi-destination tour products. Moreover, Hong Kong permanent residents with Chinese citizenship can obtain Mainland outbound tour escort credential.
They can be employed by Mainland international travel agents authorized to operate outbound group tours for Mainland residents, as well as by Hong Kong and Macau travel agents authorized to operate group tours to Hong Kong and Macao for Mainland residents.
Banking: On banking, branches established by a Hong Kong bank in Guangdong Province, can set up “cross-location” sub-branches within the Guangdong Province. In other words, Hong Kong commercial banks can establish service points in other administrative areas without first establishing branches there. This will enable the banks to expand their business network, and improve the quality and efficiency of banking services provided to enterprises (including Hong Kong-invested enterprises in the Guangdong Province).
Securities: On securities services, qualified Hong Kong securities companies and Mainland securities companies which satisfy the requirements for establishing subsidiaries, can set up in Guangdong Province joint venture securities investment advisory companies, with the scope of business focusing specifically on securities investment advisory services.
The percentage of shareholding of the Hong Kong securities company could, at a maximum, reach 1/3 of the total shareholding of such joint venture securities investment advisory company. This will allow Hong Kong securities companies to participate in the development of Mainland’s securities market.
Audi-visual: On audio-visual services, Hong Kong service suppliers (HKSS) can provide videos and sound recording (including motion picture products) distribution services in the Mainland in the form of wholly-owned operations. In addition, the post production of domestic films (including co-productions) is allowed to be processed in Hong Kong after obtaining the approval of the State Administration of Radio, Film and Television.
Telecommunications: On telecommunications services, HKSS can distribute in Guangdong Province fixed/mobile telephone service cards which can only be used in Hong Kong.
Legal: In relation to legal services, the Mainland will allow Hong Kong legal practitioners who have at least five years’ experience in legal practice and who have passed the National Judicial Examination to undergo intensive training offered by lawyers associations in the Mainland that lasts for at least one month in accordance with the relevant Mainland rules. Upon completion of the training and passing of the assessment, they can apply to practice as lawyers in the Mainland.
Moreover, the Mainland will also allow Hong Kong law firms which have set up representative offices in the Mainland to operate in association with Mainland law firms in Guangdong Province; the Mainland law firms shall have been established for one year or more, with at least one person who established the firm having been in legal practice for five years or more.
Convention and exhibition: On convention and exhibition, HKSS can organize exhibitions, in the form of cross-border supply, in Beijing Municipality, Tianjin Municipality, Chongqing Municipality, Zhejiang Province, Jiangsu Province and Fujian Province on a pilot basis. Furthermore, enterprises set up by HKSS on a wholly-owned, equity joint venture or contractual joint venture basis in the provinces and autonomous regions of Guangxi, Hunan, Hainan, Fujian, Jiangxi, Yunnan, Guizhou and Sichuan can organise overseas exhibitions on a pilot basis.
Participating enterprises should be registered enterprises in that province or autonomous region. These liberalization measures represent further geographical extension of the 2007 measure on cross-border supply of services and the 2008 measure on allowing HKSS to organize overseas exhibitions on a pilot basis.
Transportation: On transportation services, HKSS can construct, operate and manage the Shenzhen Metro Line 4 project in Shenzhen in the form of wholly-owned operations. This is a newly added service sector.
In addition, HKSS can set up wholly-owned shipping companies in the Mainland to provide regular business services such as shipping undertaking, issuance of bills of lading, settlement of freight rates, signing of service contracts, etc. for the shipping transport between Hong Kong and Class B ports in Guangdong operated by HKSS using chartered Mainland vessels.
Print and publishing: On printing and publishing services, HKSS can establish typesetting and production services company on a wholly-owned, equity joint venture or contractual joint venture basis in the Mainland to provide pre-press services such as proof-reading, design and typesetting for books.
Research and development: Regarding research and development services, which is also a newly added sector, HKSS can set up wholly-owned enterprises in the Mainland to provide research and experimental development services on natural sciences and engineering.
Following on the building block approach in further liberalization, Supplement VI to the CEPA also includes nine measures for early and pilot implementation in Guangdong Province, covering sectors which include legal, convention and exhibition, public utility, telecommunications, banking, securities, maritime transport and rail transport. These measures can enhance cooperation of services industry between Guangdong and Hong Kong.
All the services liberalization measures will take effect from October 1, 2009. To allow the trade to enjoy the benefits earlier, the effective date is three months ahead of the usual schedule which falls on the first day of following year.
Apart from service liberalization, the two sides have also agreed to enhance financial cooperation and take forward the work on mutual recognition of professional qualifications.
To enhance financial cooperation, qualified Mainland securities companies approved by the China Securities Regulatory Commission can set up subsidiaries in Hong Kong in accordance with the relevant requirements. Furthermore, the Mainland will also actively explore the introduction in the Mainland of “open-end index-tracking exchange-traded fund”, the portfolios of which are constituted by Hong Kong listed stocks.
Regarding mutual recognition of professional qualifications, Supplement VI to CEPA also includes a number of measures to encourage mutual recognition of professional qualifications as well as technical exchange work among professionals from accounting, construction, real estate and printing sectors. On medical and dental services, Hong Kong pharmacists can sit for examination and register in the Mainland. These measures will provide greater business opportunities for the trade and facilitate the upgrading of the professional standards of the two places.
On the whole, the new measures can help enhance the HKSS’ competitiveness in the Mainland. Such measures will not only help enterprises overcome the current financial crisis, but will also promote the long term economic development of both sides.
Details on CEPA including the newly agreed liberalization and cooperation measures will be uploaded to the Trade and Industry Department's CEPA dedicated Web site http://www.tid.gov.hk/english/cepa/index.html.
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