China's mainland is scheduled to implement zero tariffs on all products originating from Hong Kong from January 1, 2006.

International Olympic Committee (IOC) president Jacques Rogge (R) and Hong Kong Sports Federation & Olympic Committee president Timothy Fok gesture under the Olympic rings during an unveiling ceremony of the Olympic House in Hong Kong July 11, 2005. [Reuters] 

The move will mark the start of the third phase of the Closer Economic Partnership Arrangement (CEPA) between the two sides.

The dropping of tariffs was revealed last week by Wang Liaoping, director of the Taiwan, Hong Kong and Macao Affairs Department of the Ministry of Commerce.

The official said that under the arrangement, an additional 300 categories of Hong Kong products, ranging from textile products, garments, and food to electrical products and machinery, would be covered by the zero-tariff agreement.

All Made-in-Hong-Kong products will be tariff-free when being exported to the mainland.

Wang said the two sides had reached an accord over the standards of origin of watches and clocks, a market in which Hong Kong is advanced, so that watch and clock products processed in Hong Kong would enjoy qualified tariff-free treatment.

As for the service sector, the mainland is also to open more industries to Hong Kong investors in addition to the existing 26, such as logistics, distribution, advertising and tourism, which are already available.

According to a survey conducted by Hong Kong authorities, its manufacturers, taking advantage of CEPA, are expected to double their exports to the mainland in 2005.

The framework of CEPA was expected to help the two sides overcome the obstacles of tariffs as well as accelerate integration of the two economies, Wang said.

Bilateral trade volume of the mainland and Hong Kong reached a record high last year after the arrangement was launched.

The mainland's imports from Hong Kong reached some US$4.0 billion in the first four months this year, an increase of 14.3 per cent year-on-year. Exports to Hong Kong stood at US$33.7 billion, up 24.5 per cent over the same period of the previous year.

Since the implementation of the CEPA free trade pact in January 2004, more than 3,000 certificates of origin have been issued to Hong Kong companies, covering products with a total value of HK$1.15 billion (US$150 million), ensuring their tariff-free treatment when entering the mainland market.

CEPA has not only facilitated the trade flow between the mainland and Hong Kong but also promoted bilateral investment, experts say.

Hong Kong investors are increasing their investment in the mainland as they are allowed to tap industries before their foreign rivals.

During CEPA's first 12 months, 19 Hong Kong enterprises applied to invest in the commercial fields of mainland industries, compared to just 18 in the previous 11 years, according to statistics from the Ministry of Commerce.

Editor: Yan