Related Special:   Guangdong And CEPA

The Closer Economic Partnership Arrangement (CEPA) between the mainland and Hong Kong is a continuous and open agreement, and both sides will make ongoing efforts to enhance and broaden the content of the free-trade deal.

Vice-Minister of Commerce An Min and Financial Secretary Henry Tang reached the consensus yesterday after they signed six annexes of CEPA at a ceremony held in Hong Kong.

An said CEPA is set to "bring new dynamics and opportunities to Hong Kong as well as the mainland".

The documents, which set out the implementation details of CEPA, covered areas such as zero tariffs for trade in goods, commitments on liberalization of trade in services and a definition of "Hong Kong service suppliers".

"It is now up to our private sector to realize the potential benefits of CEPA," Tang said while commenting on the signing.

Chief Secretary Donald Tsang said the most important challenge and the future focus of the government will be to attract more foreign investors to take advantage of CEPA and to create job opportunities in Hong Kong.

According to the annexes signed yesterday, the mainland's insurance and telecom sectors will open up further to Hong Kong firms.

Hong Kong insurance companies will be allowed to hold up to 24.9 per cent stake in a mainland insurance firm, up from the 15 per cent announced in late June.

Five of the mainland's value-added telecom service sectors will open up to Hong Kong investors starting from October 1, with the equity share of the Hong Kong side in a joint venture limited to no more than 50 per cent.

Those five sectors are storage and forward, Internet access, Internet data centre, call centre and content supply. This will give Hong Kong a three-month head-start over other overseas investors, which will be allowed access to those sectors only in January next year under China's commitments to the World Trade Organization, said Raymond Young, acting permanent secretary for commerce, industry and technology.

Under CEPA, which will be implemented in January next year, 273 Hong Kong products will be exempted from tariffs when exported to the mainland.

All Hong Kong products will be subject to zero tariff by January 2006 upon application of Hong Kong manufacturers.

CEPA also further opens up 18 service sectors, including banking, legal services and film production, to Hong Kong firms and individuals.

Although the government said it is hard to quantify the overall economic benefit CEPA will bring to Hong Kong, firms in the territory are expected to consequently save HK$750 million in tariffs a year based on 2001 export figures.

On the rules of origin under CEPA, an annex clarifies that 187 of the 273 types of products, including garments, jewellery, cosmetics, pharmaceuticals, and plastic and paper products, will be subject to Hong Kong's existing rules.

Change in tariff heading approach will be applied to 46 types of products, including chemicals, metals, and some electronic products.

For the other types of products, including some electronic and optical products, watches and clocks, 30 per cent of added value is required to take place in Hong Kong to be eligible to zero tariff under CEPA.

Product development costs, including those incurred from designing, development and intellectual property rights, will also be calculated in the value-added percentage.

The 30 per cent level strikes a proper balance between boosting Hong Kong's export sector and manufacturing, said John Tsang, secretary for commerce, industry and technology.

According to a related annex, the mainland and Hong Kong will confirm the product list and complete consultations on the origin rules on products outside the 273 types before October every year. The Trade and Industry Department will take charge of giving out Certificates of Hong Kong Origin under CEPA and Certificates of Hong Kong Service Supplier, with details of application procedures to be announced in November (2003).

Editor: Catherine