11 mainland and hong kong closer economic partnership arrangement （ cepa ）

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Mainland and Hong Kong Closer Mainland and Hong Kong Closer Economic Partnership ArrangementEconomic Partnership Arrangement

（（ CEPACEPA ））

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TradeTrade

The Mainland is HK's largest trading partner, The Mainland is HK's largest trading partner, accounting for 48.7% of HK's total trade value in 2009. accounting for 48.7% of HK's total trade value in 2009.

HK is the Mainland's 3rd largest trading partner, HK is the Mainland's 3rd largest trading partner, accounting for about 8% of the Mainland's total accounting for about 8% of the Mainland's total external trade in 2009.external trade in 2009.

InvestmentInvestment HK is the Mainland's largest source of realised direct HK is the Mainland's largest source of realised direct

foreign investment, accounting for about 42.5% of the foreign investment, accounting for about 42.5% of the national total as at June 2010.national total as at June 2010.

The Mainland is HK's most important external The Mainland is HK's most important external investor. At end-2008, the stock of inward direct investor. At end-2008, the stock of inward direct investment from the Mainland accounted for about investment from the Mainland accounted for about 36.5% of HK' s total. 36.5% of HK' s total.

Close Economic Ties betweenClose Economic Ties betweenMainland and Hong KongMainland and Hong Kong

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Enormous Business OpportunitiesEnormous Business Opportunities in the Mainland in the Mainland

Market potential for quality goods Market potential for quality goods - Demand for quality goods will - Demand for quality goods will rise over time.rise over time.

HK can play a key role in the development of the Mainland’s HK can play a key role in the development of the Mainland’s services industryservices industry

HK can act as the Mainland’s service centre -HK can act as the Mainland’s service centre - With the Mainland’s With the Mainland’s rapid and sustained economic growth, greater market openness, rapid and sustained economic growth, greater market openness, and continued expansion of external trade, Mainland enterprises and continued expansion of external trade, Mainland enterprises have bigger need for different kinds of services.have bigger need for different kinds of services.

HK can act as two-way platformHK can act as two-way platform - HK is the preferred choice for - HK is the preferred choice for many enterprises eyeing the Mainland market. It is also a many enterprises eyeing the Mainland market. It is also a springboard for Mainland enterprises to “venture out” to the world springboard for Mainland enterprises to “venture out” to the world market.market.

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Signing of CEPASigning of CEPA CEPA, the first free trade agreement concluded CEPA, the first free trade agreement concluded

by the Mainland and Hong Kong, was signed on by the Mainland and Hong Kong, was signed on 29 June 2003 29 June 2003

Seven Supplements have been concluded since Seven Supplements have been concluded since 2004; the latest Supplement VII signed on 2004; the latest Supplement VII signed on 27 May 201027 May 2010

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Coverage of CEPACoverage of CEPA

CEPATrade in Services

Trade and

Investment

Facilitation

Trade in

Goods

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CEPA PreferencesCEPA Preferences

WTO-plus preferencesWTO-plus preferences

Trade in goods: zero tariffTrade in goods: zero tariff

Trade in services: WTO-plus liberalisation Trade in services: WTO-plus liberalisation commitments in various service sectorscommitments in various service sectors

CEPA remains the mostCEPA remains the most preferentialpreferential among among the FTAs signed by the Mainlandthe FTAs signed by the Mainland

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Trade in GoodsTrade in Goods

The Mainland applies The Mainland applies zero tariffzero tariff to goods imported to goods imported from Hong Kong that meetfrom Hong Kong that meet CEPA rules of origin CEPA rules of origin (ROO)(ROO)

The two sides have reached agreement on the CEPA The two sides have reached agreement on the CEPA ROO for ROO for 1,592 products1,592 products

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In terms of FOB value, the five major product categories In terms of FOB value, the five major product categories covered by CO(CEPA) (as at October 2010)covered by CO(CEPA) (as at October 2010) - -

Trade in GoodsTrade in Goods

Product Categories FOB ValueCumulative No.of CO(CEPA)

Approved

1. Pharmaceutical Products HK$9.24 billion 7,408

2. Plastics and Plastic Articles HK$6.96 billion 10,204

3. Textiles and Clothing HK$3.15 billion 15,301

4. Food and Beverages HK$2.45 billion 15,817

5. Base Metal Products HK$1.88 billion 2,889

:: :: ::

:: :: ::

Total HK$27.1 billionHK$27.1 billion 61,43161,431

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Trade in ServicesTrade in Services

Preferential market access to service industries in Preferential market access to service industries in the Mainland – reduced registered capital the Mainland – reduced registered capital requirement; less restrictions in equity requirement; less restrictions in equity shareholding, geographical coverage of operation shareholding, geographical coverage of operation and business scope etc.and business scope etc.

Strengthen cooperation in financial servicesStrengthen cooperation in financial services

Strengthen cooperation in tourismStrengthen cooperation in tourism

Facilitate mutual recognition of professional Facilitate mutual recognition of professional qualificationsqualifications

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Trade in ServicesTrade in Services Inclusive of Supplement VII to CEPA, nearly 280 Inclusive of Supplement VII to CEPA, nearly 280

liberalisation measures covering 44 service sectors have liberalisation measures covering 44 service sectors have been introducedbeen introduced

Accounting Environmental Patent agency Services incidental to mining

Advertising Examinations for professional and technical

qualification

Photographic Services related to management consulting

Air transport Freight forwarding agency Placement and supply services of personnel

Social services

Audiovisual Individually owned stores Printing Specialty design

Banking Insurance Public utility Sporting

Building-cleaning Legal Rail transport Storage and warehousing

Computer and related services

Logistics Real estate Technical testing, analysis and product testing

Construction and related engineering

Management consulting Related scientific and technical consulting

services

Telecommunications

Convention and exhibition

Maritime transport Research and development

Tourism

Cultural Market research Road transport Trade mark agency

Distribution Medical Securities and futures Translation and interpretation

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Trade in ServicesTrade in Services

““Early and Pilot Implementation”Early and Pilot Implementation”

41 measures for “early and pilot implementation” in 41 measures for “early and pilot implementation” in Guangdong ProvinceGuangdong Province

Sectors covered: accounting, construction, medical Sectors covered: accounting, construction, medical services, banking, securities, convention and services, banking, securities, convention and exhibition, tourism, placement and supply services of exhibition, tourism, placement and supply services of personnel, telecommunications, public utility, personnel, telecommunications, public utility, environmental, social services, maritime transport, environmental, social services, maritime transport, road transport, rail transportroad transport, rail transport

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Trade in Services Trade in Services Beneficiaries: Hong Kong Service Suppliers (HKSS)Beneficiaries: Hong Kong Service Suppliers (HKSS)

Juridical persons Juridical persons

(e.g. (e.g. companies, partnerships, sole proprietorships)companies, partnerships, sole proprietorships) Require an Require an HKSS Certificate HKSS Certificate before applying directly before applying directly

to Mainland authorities for provision of services in the to Mainland authorities for provision of services in the MainlandMainland

• Incorporated / established in HKIncorporated / established in HK• Substantive business operation in HK for 3 or Substantive business operation in HK for 3 or

5 years5 years• Paid profit tax in HKPaid profit tax in HK

• Own or rent business premises in HKOwn or rent business premises in HK• Majority staff are HK residentsMajority staff are HK residents

Applicable to all businesses operating in HK Applicable to all businesses operating in HK regardless of source of investmentregardless of source of investment

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Hong Kong Service Supplier CertificatesHong Kong Service Supplier Certificates(As at October 2010)(As at October 2010)

Service sectorsNo. of HKSS

Certificates Issued

1. Transport and Logistics 1,214

2. Distribution 345

3. Air Transport 140

4. Job Referral Agency/Job Intermediary

107

5. Advertising 105

: :

Total 2,296

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Trade and Investment FacilitationTrade and Investment Facilitation Trade and investment promotionTrade and investment promotion Customs clearance facilitationCustoms clearance facilitation Commodity inspection and quarantine, food Commodity inspection and quarantine, food

safety and quality and standardizationsafety and quality and standardization Electronic businessElectronic business Transparency in laws and regulationsTransparency in laws and regulations Cooperation of small and medium enterprisesCooperation of small and medium enterprises Cooperation in industriesCooperation in industries Protection of intellectual propertyProtection of intellectual property Cooperation on brandingCooperation on branding Cooperation on educationCooperation on education

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Examples of CEPA AdvantagesExamples of CEPA AdvantagesMedical servicesMedical services

Foreign Foreign investorsinvestors

HKSSHKSSunder CEPAunder CEPA

Wholly-owned hospitalsWholly-owned hospitals Permitted in Guangdong, Permitted in Guangdong,

Shanghai, Chongqing, Fujian and Shanghai, Chongqing, Fujian and HainanHainan

JV hospitalsJV hospitals Foreign investment ratio Foreign investment ratio ≤≤ 70%70%

No restrictionNo restriction on foreign on foreign investment ratioinvestment ratio

Wholly-owned convalescent Wholly-owned convalescent hospitalshospitals

Permitted in GuangdongPermitted in Guangdong

Wholly-owned out-patient Wholly-owned out-patient clinicsclinics

Permitted in GuangdongPermitted in Guangdong

JV out-patient clinicsJV out-patient clinics Investment requirement : Investment requirement : 20 million RMB20 million RMB

Investment requirement : Investment requirement : 10 million RMB (non-Guangdong)10 million RMB (non-Guangdong)

No requirement (Guangdong)No requirement (Guangdong)

Foreign investment ratioForeign investment ratio ≤≤ 70% 70%

No restriction in GuangdongNo restriction in Guangdong

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Examples of CEPA AdvantagesExamples of CEPA Advantages

Legal servicesLegal services

Foreign Foreign

investorsinvestors

HKSSHKSS

under CEPAunder CEPA

Operate in association with Operate in association with Mainland law firm Mainland law firm

(can only set up (can only set up representative representative

offices)offices)

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Accounting Accounting


HKSS HKSS under CEPAunder CEPA

““Provisional Licence to Provisional Licence to Perform Audit-Related Perform Audit-Related Services”Services”

6-month validity 6-month validity

5-year validity5-year validity


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Construction and related engineering servicesConstruction and related engineering services


HKSS HKSS under CEPAunder CEPA

JV construction JV construction engineering design engineering design enterprisesenterprises

Foreign Foreign investment ratio investment ratio

≤ 75%≤ 75%

No restriction on No restriction on foreign investment foreign investment

ratioratio


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Air transport services Air transport services

Foreign Foreign

investorsinvestors

HKSSHKSS

under CEPA under CEPA

Wholly-owned air transport Wholly-owned air transport sales agenciessales agencies

JV air transport sales JV air transport sales agencies agencies

Operation of civil air Operation of civil air passenger sales agency passenger sales agency services in domestic services in domestic routes routes notnot allowed allowed

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Opportunities to Foreign InvestorsOpportunities to Foreign Investors

Trade in GoodsTrade in Goods To enjoy To enjoy zero tariffzero tariff benefits on importation into benefits on importation into

the Mainland by setting up manufacturing the Mainland by setting up manufacturing operations in HK to produce goods that meet operations in HK to produce goods that meet CEPA origin rulesCEPA origin rules

Trade in ServicesTrade in Services To enjoy To enjoy preferential access to Mainland’s preferential access to Mainland’s

service industriesservice industries by by establishing business in HKestablishing business in HK acquiring or joining forces with enterprises acquiring or joining forces with enterprises

in HKin HK

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Based on a rough estimate, about 45% of Based on a rough estimate, about 45% of HKSS certificate holders are believed to have HKSS certificate holders are believed to have received foreign investments received foreign investments

The most popular CEPA service sectors The most popular CEPA service sectors among foreign companies are :among foreign companies are : transport and logisticstransport and logistics distributiondistribution air transport air transport advertisingadvertising job referral agency / job intermediaryjob referral agency / job intermediary

Utilization of CEPA by Foreign InvestorsUtilization of CEPA by Foreign Investors

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Economic Impact of CEPAEconomic Impact of CEPA

During 2004-09, business receipts obtained by companies During 2004-09, business receipts obtained by companies in HK due to CEPA from Mainland-related business in HK due to CEPA from Mainland-related business reached reached HK$61.6 billionHK$61.6 billion

During 2007-09, CEPA-induced business receipts obtained During 2007-09, CEPA-induced business receipts obtained by operations established by HK service suppliers on the by operations established by HK service suppliers on the Mainland amounted to Mainland amounted to HK$198.5 billionHK$198.5 billion

During 2007-09, companies in HK obtained additional During 2007-09, companies in HK obtained additional business receipts totalling about business receipts totalling about HK$55.1 billionHK$55.1 billion due to due to CEPACEPA

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Economic Impact of CEPAEconomic Impact of CEPA

From Sept 2004 to end 2009, 2,602 Mainland From Sept 2004 to end 2009, 2,602 Mainland enterprises were granted approval to invest in enterprises were granted approval to invest in HK, involving over US$24.4 billion of investmentHK, involving over US$24.4 billion of investment

In 2009, InvestHK assisted 265 foreign companies In 2009, InvestHK assisted 265 foreign companies to invest or expand in HK, 26% of them cited to invest or expand in HK, 26% of them cited CEPA as one of the key considerations for CEPA as one of the key considerations for investing in HKinvesting in HK

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TID’s Support ServicesTID’s Support Services

Website ： http://www.tid.gov.hk/english/cepa/index.html

Disseminate information on CEPA and provide Disseminate information on CEPA and provide enquiry servicesenquiry services

Promote CEPAPromote CEPA

Render appropriate assistance to manufacturers or Render appropriate assistance to manufacturers or service suppliers to make use of CEPA benefitsservice suppliers to make use of CEPA benefits

11 mainland and hong kong closer economic partnership arrangement （ cepa ）

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