Press Release - September 29, 2003

The Hong Kong Special Administrative Region Government (HKSARG) and the Central People's Government (CPG) today (September 29) signed the six Annexes to the main text of the Closer Economic Partnership Arrangement.

This followed the signing of the CEPA main text at a ceremony presided over by Premier Wen Jia Bao and the Hong Kong Chief Executive, Mr. Tung Chee Hwa on June 29.

Signing the six CEPA Annexes were the Vice Minister of Commerce, Mr An Min, representing the CPG; and the Financial Secretary, Mr Henry Tang, representing the HKSARG.

Speaking at a press conference held after the signing ceremony, the Hong Kong�s Secretary for Commerce, Industry and Technology, Mr John Tsang, said that CEPA had good potential to open up many more new business opportunities in the Mainland for Hong Kong, as well as enhance the attractiveness of Hong Kong to overseas investors.

"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.

"The WTO-plus market liberalisation measures for trade in services would also give enterprises in Hong Kong a 'first mover' advantage," Mr Tsang said.

Echoing Mr. Tang�s remarks, the Director of the Hong Kong Economic and Trade Office (Canada), Mr. Bassanio So, said that CEPA would make Hong Kong more attractive to foreign companies and investors, including those in Canada, as a unique and the best gateway to doing business with China, particularly in the Pearl River Delta Region.

The Annexes, which set out the implementation details of CEPA, cover the following areas: arrangements for implementation of zero tariff for trade in goods, rules of origin for trade in goods, procedures for the issuing and verification of certificates of origin, specific commitments on liberalisation of trade in services, the detailed definition of "Service Supplier" and related requirements, and trade and investment facilitation.

On trade in goods, the Mainland has agreed to eliminate tariffs on imported goods of Hong Kong origin by stages. A total of 273 Mainland product codes meeting CEPA rules of origin will enjoy zero tariff starting from January 1, 2004. For other products, the Mainland will apply zero tariff at the latest by January 1, 2006 upon applications by local manufacturers and upon CEPA rules of origin being agreed and met.

For 70% of the 273 Mainland product codes covered in the initial phase, Hong Kong's existing process-based origin rules will be adopted as the CEPA origin rules. For the rest, either the "Change in Tariff Heading" approach or the "30% value-added" requirement will be used.

"While the 30% rule already compares favourably with other FTAs whose thresholds range from 40% to 60%, product development cost will also be counted in the calculation in the case of CEPA," Mr Tsang said.

On trade in services, the two sides have agreed on some further clarifications and refinements regarding the liberalisation of the 17 sectors of services agreed and announced.

Moreover, the Mainland has agreed to grant preferential treatment in one additional sector, i.e. telecommunications services, taking the total number of sectors covered under CEPA to 18. Also, rules on equity participation in Mainland Insurance companies will be relaxed.

As regards the definition of "Hong Kong Service Suppliers", generally speaking, "juridical persons" include companies, partnerships, sole proprietorships. "Juridical persons" and "natural persons" of Hong Kong will be able to enjoy preferential treatment provided that they fulfil the definition and related requirements of Hong Kong service suppliers stipulated in the relevant annex of CEPA.

Unless otherwise specified in CEPA, a "natural person" means a Hong Kong permanent resident, whereas a "juridical person" means any legal entity duly constituted or otherwise organised under the applicable laws of Hong Kong and which has engaged in substantive business operations in Hong Kong for three to five years.

The Trade and Industry Department of HKSAR will provide one-stop enquiry and certification services for the implementation of CEPA in Hong Kong. A designated branch has been set up in the Department to handle public enquiries, disseminate practical information and process applications for the certification of "Hong Kong Service Suppliers".

With regard to trade and investment facilitation, both sides agreed on the contents and modalities of cooperation for each of the seven areas which are stipulated in the main parts of CEPA, and agreed that new areas of trade and investment facilitation might be added in future.

With a view to broadening CEPA's scope and coverage, the two sides will pursue further liberalisation on goods and services trade in the latter phases. A Joint Steering Committee, responsible for overall coordination of CEPA, will be set up soon. It will be jointly chaired by the Financial Secretary and Mr An Min.

"CEPA adopts a building block approach and provides a mechanism for further liberalisation measures. In formulating the strategy for the subsequent phases of CEPA, we will continue to consult the business and professional communities to understand their needs.

"We will also discuss with the concerned business sectors on appropriate policy measures that may be required to enable them to gain the greatest benefits from CEPA," Mr Tsang added.

For more information, please contact:
John Tam, Chief Information Officer of Hong Kong Economic and Trade Office at: (416) 924-5544 or email: [email protected] or Elison Chu, Senior Information Officer, [email protected].