_News Center_China International Fair for Investment & Trade (CIFIT)

Distinguished Guests, Ladies and Gentlemen:

I’m very delighted to meet my old friends and make new friends at the Hong Kong promotional seminar for the 12th China International Fair for Investment and Trade. I’d like to take advantage of this opportunity to talk about the opportunities for economic and trade cooperation between Hong Kong and the mainland under the CEPA framework, especially cooperation in the service sectors. Hopefully, my talks will be of some use to our friends in the Hong Kong business community who are intended to tap into the service sector market in the mainland.

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was signed in 2003 and became effective on January 1, 2004, ushering in a new chapter of economic and trade relations between Mainland and Hong Kong characterized by institutional cooperation. Over the past five years, as economic and trade relations between the mainland and Hong Kong continue to deepen, four supplements to CEPA have been signed.

CEPA and its supplements primarily cover the following six areas:

-- In terms of trade in goods, since January 1, 2006, the mainland has been implementing a “tariff free” policy for all goods originating from Hong Kong. As of the end of 2008, the mainland has imported a cumulative total of USD 1.6 billion worth of goods of Hong Kong origin which enjoy the tariff free treatment, saving Hong Kong exporters RMB 1.19 billion in tariffs.

-- In terms of trade in services, the mainland has introduced 192 liberalization measures in 38 areas such as legal services, banking, tourism and logistics, to provide Hong Kong with wider access to the mainland market. These measures include easing or lifting equity restrictions, lowering register capital and qualification requirements, opening more areas to investment, and expanding the scope of business allowed. To date, nearly 2,000 Hong Kong enterprises have applied to invest in the mainland under the preferential conditions provided in CEPA, and half of them have started operation.

-- In terms of trade and investment facilitation, the mainland and Hong Kong have strengthened cooperation in the following eight areas, including trade and investment promotion; customs clearance facilitation; e-commerce; transparency in laws and regulations; quarantine and inspection of commodities, food safety and quality assurance; cooperation of small and medium-sized enterprises; industry cooperation; and protection of intellectual property rights.

-- In terms of mutual recognition of professional qualification, the mainland and Hong Kong have made significant headway in six areas, including construction, accounting, securities, legal services, medical services, and insurance. So far, 2,037 construction professionals on both sides have obtained recognition of their professional qualification by the other side.

-- In terms of tourism cooperation, the mainland’s “Individual Visitor Scheme” has been expanded to 49 cities in 22 provinces, autonomous regions and municipalities directly under the Central Government, covering nearly 300 million people. As of April 2008, 28.04 million mainlanders have visited Hong Kong under the “Individual Visitor Scheme”, accounting for 42.2% of outbound mainland visitors.

-- In terms of financial cooperation, as of the end of March 2008, a total of 37 Hong Kong banks have opened RMB deposit, remittance, exchange and credit card services for individuals, and attracted RMB 57.6 billion in RMB deposits. As of the end of April 2008, 443 mainland enterprises have been listed on the Hong Kong Stock Exchange, with a combined market capitalization of HKD 11 trillion, accounting for 58.6% of the total capitalization and 74.2% of the total turnover of the Hong Kong Stock Exchange.

Ladies and Gentlemen:

As the first high-level free trade agreement signed by China since its accession to the WTO, CEPA has provided unique institutional arrangements for Hong Kong investors to gain wider and faster access to the mainland market, especially the service sector market.

First, mainland industries have mostly been opened to Hong Kong investment under CEPA earlier than they are under the mainland’s WTO commitments. This is especially true in the area of professional services, where Hong Kong enjoys a competitive edge. For example, in the management consultancy sector, the mainland market was opened to Hong Kong investors under CEPA four years earlier than it was under China’s WTO commitments; in the advertising service and cargo agents’ service sector, the mainland market was opened under CEPA two years earlier than it was under China’s WOP commitments. In the logistics service sector, which was not fully opened under China’s WTO commitments, the market was opened under CEPA to Hong Kong investors as early as 2004.

Second, CEPA and its four supplements have continuously relaxed market access conditions. For example, in the finance sector, in consideration of the characteristics and needs of Hong Kong’s banking industry, the total assets requirements for a Hong Kong bank to open a branch in the mainland and acquire a stake in a mainland bank have been lowed from not less than USD 20 billion and USD 10 billion, respectively, to USD 6 billion. In the tourism sector, the annual total business turnover requirement for a Hong Kong travel agency to set up a joint venture and a wholly owned enterprise in the mainland have been lowered to not less than USD 8 million and USD 15 million, respectively, far below the business turnover requirements of USD 40 million and USD 500 million for other foreign-funded travel agencies. Moreover, Hong Kong travel agencies have been allowed to operate group tours on a pilot basis to Hong Kong and Macao for residents not only from Guangdong but also from the other eight provinces in the Pan-Pearl River Delta Region.

Third, compared with China’s free trade agreements with ASEAN and New Zealand, CEPA provides more favorable access conditions. For example, in the legal and accounting service sectors, CEPA offers Hong Kong service providers far more preferential provisions on regions opened to investment, scope of business and length of stay than the free trade agreements between ASEAN and New Zealand. In addition, CEPA also allows Hong Kong enterprises in the social service, convention and exhibition, tourism and cultural recreation sectors to operate on a pilot basis in economically strong regions such as Guangdong and Shanghai. All these have created favorable conditions for Hong Kong investors to grow in the mainland.

In the meantime, in order to ensure a thorough implementation of CEPA, we’ve also taken the following steps:

First, we’ve amended related laws and regulations. Since the signing and implementation of CEPA and its four supplements, related Central Government departments have amended 109 laws and regulations, ensuring the successful implementation of CEPA and its supplements.

Second, we’ve strengthened supporting efforts. The Ministry of Commerce has launched a CEPA training program to train commerce officials from throughout China on a rotary basis, and published CEPA texts so that frontline commerce personnel can become more familiar with and more skilled in applying CEPA to provide better services for Hong Kong investors.

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