28 Nov 2019
CEPA boon for services in Hong Kong
As Hong Kong’s world-renowned service industries seek to expand beyond the city, some of the most fertile ground is just to the north – in Mainland China, especially the Guangdong-Hong Kong-Macao Greater Bay Area.
Authorities in Mainland China and Hong Kong have agreed to lower barriers to entry into the mainland market for a wide range of Hong Kong services, signing the Agreement Concerning Amendment to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Agreement, or Amendment Agreement for short, on Trade in Services on 21 November. The changes take effect on 1 June 2020.
The agreement updates the commitments on liberalisation and facilitation of trade in services under the Agreement on Trade in Services implemented in June 2016.
The latest agreement will help sustain the first-mover advantage of Hong Kong's trades in establishing footholds in the mainland market. It also ensures that Hong Kong service suppliers will continue to enjoy the most preferential treatment and most favourable conditions for development in the mainland, thus enabling them to reach broader and deeper into the mainland market at a lower cost and to contribute to the development of the Greater Bay Area.
The Amendment Agreement eases access for several service industries historically strong in Hong Kong – financial services, legal services, construction and related engineering services, testing and certification, television, motion pictures and tourism services. Hong Kong service suppliers in these sectors will find it easier to set up and develop business in the mainland. Obtaining qualifications to practise in the mainland will also be easier for Hong Kong professionals, bringing more of Hong Kong's quality services to the mainland market.
Liberalisation measures include removing or relaxing restrictions on equity shareholding, capital requirements and business scope in the establishment of enterprises; relaxing qualification requirements for provision of services by Hong Kong professionals; and relaxing the quantitative and other restrictions for Hong Kong's exports of services to the mainland market.
Liberalisation measures applicable to the entire mainland include the following, by sector.
Support will be provided to mainland insurance companies issuing catastrophe bonds in the Hong Kong market and relevant requirements will be relaxed. The measure can promote the development of the insurance and bond markets in Hong Kong. For banking, further relax the restrictions on business scope, remove assets requirements and restrictions on equity shareholdings.
The variety of securities products under the mainland-Hong Kong stock-connect schemes will be enhanced. Consideration will be given to extending the scope of eligible products under the mutual market access programme by including exchange-traded funds.
The minimum capital input ratio requirement for the Hong Kong side in establishing a Hong Kong-mainland partnership law firm will be removed. The measure benefits small and medium-sized law firms wishing to enter the mainland legal services market through partnership associations. Legal practitioners from Hong Kong can be employed as legal consultants by not more than three mainland law firms simultaneously and can obtain practice qualification in the nine Pearl River Delta municipalities of the Greater Bay Area by passing a special examination, and to engage in matters on specific areas of mainland law.
Construction and related engineering services
Expired agreements for mutual recognition of professional qualifications will be renewed, providing Hong Kong professionals with more room for development. These include agreements of structural engineers, planners, building surveyors and architects, Hong Kong construction professionals can register and practise in the entire mainland through mutual recognition of professional qualifications or examination.
Testing and certification
The scope of product testing under the China Compulsory Certification (CCC) System to allow tests to be undertaken by qualified testing organisations in Hong Kong in cooperation with designated mainland organisations for products ranging from those processed or manufactured in the mainland or processed in Hong Kong to CCC products processed or manufactured in any place. The measure will enable testing organisations in Hong Kong to provide quality testing services for the huge mainland consumer goods market (including products imported from other places).
There will be no restriction on the quantity of Hong Kong-produced television dramas and animation TV programmes imported by TV stations, audiovisual websites and cable TV networks into the mainland. The measure will help Hong Kong-produced TV dramas and animated programmes enter the mainland market.
For motion pictures co-produced by Hong Kong and the mainland, there will be no restriction on the percentage of Hong Kong principal creative personnel and artistes or mainland-related content. Fees for establishing mainland and Hong Kong co-production motion picture projects will also be waived. The measures will make co-production more flexible.
A Hong Kong enterprise can organise exhibitions in the mainland with no need to set up a company there first.
A Hong Kong enterprise can own up to 70% of a joint-venture printing factory in the mainland engaging in printing of publications and other printed matters. The fisheries industry in Hong Kong can invest and engage in mainland ocean fisheries.
Greater Bay Area
The Amendment Agreement also introduces some liberalisation measures for pilot implementation in the Guangdong-Hong Kong-Macao Greater Bay Area. For example, in the tourism services sector, the 144-hour visa-exemption transit policy would be enhanced for foreign group tours entering the Pearl River Delta Area and Shantou from Hong Kong by increasing the number of inbound control points and expanding the area groups can visit and stay in. Players in Hong Kong's tourism trade will be able to develop more multi-destination products targeting foreign visitors, which can attract more overseas travellers to visit Hong Kong and the mainland via Hong Kong.
Mainland-Hong Kong meetings
Hong Kong Special Administrative Region (HKSAR) Chief Executive Carrie Lam witnessed the signing of the Amendment Agreement by Chinese Vice Minister of Commerce Wang Bingnan and HKSAR Financial Secretary Paul Chan.
The agreement was signed after the Mainland and Hong Kong Economic and Trade Co-operation Committee’s second meeting in Hong Kong on 21 November, co-chaired by Mr Wang and Mr Chan.
Belt and Road pivotal
The Mainland and Hong Kong Belt and Road Task Group under the Committee, co-chaired by Mr Wang and HKSAR Secretary for Commerce and Economic Development Edward Yau, met on the same day.
The Task Group agreed at the meeting to further promote trade and economic cooperation under the Belt and Road Initiative, including exploring and implementing possible policy measures, and trying out measures to facilitate business matching and collaboration between Hong Kong enterprises and the mainland’s overseas economic and trade cooperation zones. Both sides also agreed to support and participate in the Belt and Road Joint Conference Policy Exchanges and Capacity Building Programme, and to roll out collaboration on capacity building and human resources development. Missions to Belt and Road-related countries and regions, comprising mainland and Hong Kong enterprises and professionals, will continue to be organised in conjunction with China’s Ministry of Commerce to encourage "going global" en bloc. Mainland authorities will also support Hong Kong in staging the fifth Belt and Road Summit in September next year, and other business matching and information sharing activities as well as project partnerships.