H.K., China sign deals on free-trade pact details

Asian Economic News, Oct 6, 2003

HONG KONG, Sept. 29 Kyodo

Mainland China and Hong Kong on Monday signed six documents detailing implementation arrangements, rules of origin and liberalization commitments of a free-trade pact that they sealed three months ago.

Hong Kong officials hail the agreements, saying they will open up more new business opportunities in the Chinese market for the former British colony, as well as enhance the city's attractiveness to overseas investors.

''Now it is up to our private sector to realize the potential benefits of CEPA,'' Hong Kong's Financial Secretary Henry Tang said, referring to the free-trade pact inked between the two sides in June, which is known as the Closer Economic Partnership Arrangement (CEPA).

''It will be a continuous effort to enhance as well as broaden the content of CEPA,'' Tang said.

The free-trade pact has been seen as China's boost for Hong Kong's sagging economy and its support for the administration of Chief Executive Tung Chee-hwa, which has been blamed by many locals for the city's social and economic woes.

On Monday, the Chinese side said it has agreed to liberalize its market for Hong Kong's telecommunications industry, apart from the 17 service sectors announced in June.

Hong Kong companies from these sectors will be able to gain early footholds in the Chinese market ahead of their foreign counterparts.

On the definition of a Hong Kong firm, the two sides agreed that legal entities duly constituted or organized under the applicable laws of Hong Kong that have engaged in substantive business operations in the territory for three to five years will be able to enjoy preferential treatment by mainland China.

As for the 273 Hong Kong goods to enter the mainland Chinese market tariff free from Jan. 1, 2004, the CEPA annexes signed Monday detailed that 68% of the products will adopt the city's existing origin rules.

Those products include textiles and clothing, jewelry, cosmetics, pharmaceutical products, and plastic and paper articles.

About 15% of the goods, such as some electronic and optical components, watches and clocks, can enjoy zero tariff treatment if 30% of their value-added activities are undertaken in Hong Kong.

''We believe that the zero import tariff preference will make it more attractive to undertake in Hong Kong manufacturing of brand name products, or manufacturing processes with high-value added content or substantial intellectual property input,'' said John Tsang, Hong Kong's secretary for commerce, industry and technology.

''The WTO (World Trade Organization)-plus market liberalization measures for trade in services would also give enterprises in Hong Kong a 'first mover' advantage,'' Tsang said.

To broaden CEPA's scope and coverage, mainland China and Hong Kong vowed to pursue further liberalization on goods and services trade in the future.

A joint steering committee will be set up to be responsible for overall coordination of the free-trade pact, they said.