Hong Kong enterprises, which are mainly engaged in processing supplied materials in Guangdong, will be allowed to reform their business ownership structure.

The regulation, jointly issued by 11 government offices in the southern province of Guangdong, is aimed at helping thousands of Hong Kong-invested processing trade enterprises in the Pearl River Delta area to upgrade their businesses.

"After being re-registerred as Sino-foreign joint ventures, or cooperative ventures and exclusively foreign-funded enterprises, traditional processing trade manufacturers in the area will have more opportunities to tap the mainland market," said Li Yancheng, a senior consultant of the Shenzhen International Investment and Promotion Association.

Currently, traditional manufacturers, involved in the processing of supplied goods, can only sell products to overseas markets.

"It means they don't need to close their current businesses for industrial upgrading," said Li, adding the mainland market will play a key role for traditional manufacturers to continue their businesses.

In the past, processing trade enterprises had to close businesses and pay the overdue tax of imported equipment before shifting to three kinds of foreign-invested companies.

Currently there are more than 35,000 Hong Kong-backed processing trade enterprises in Guangdong. These firms had faced difficulties after the Ministry of Commerce issued a regulation to ban a wide range of imported raw items last year.

"In the long term, more imported items will be banned for processing trade enterprises," said Li, adding it would be very urgent for such companies to shift to three kinds of foreign-invested ventures.

Steve Lee, general manager of a Hong Kong-invested electronic gadget factory, said: "We had the idea to shift into an exclusively foreign-invested company two years ago. But the cost of upgrading was just too high at that time."

Lee's Shenzhen-based company has met difficulties in exporting products since last year.

"We are expecting more preferential policies, such as the recent regulation to help us in business upgrading on the mainland," he said.

The regulation came after an agreement signed by Hong Kong and Guangdong trade and economic authorities last Tuesday to push Hong Kong-backed processing trade enterprises to upgrade their businesses in the Pearl River Delta region.

Under the agreement, Guangdong authorities have pledged to issue a series of preferential policies and measures to help Hong Kong-invested processing trade companies in industrial upgrading.

Editor: Yan