The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is the first free trade agreement ever concluded by the Mainland of China and Hong Kong since 2003. CEPA opens up huge markets for Hong Kong goods and services, greatly enhancing the already close economic cooperation and integration between the Mainland and Hong Kong. It is also a win-win agreement, bringing new business opportunities to the Mainland and Hong Kong. For Hong Kong, It provides a window of opportunity for Hong Kong businesses to gain greater access to the Mainland market. It also benefits the Mainland as Hong Kong serves as a perfect "springboard" for Mainland enterprises to reach out to the global market and accelerating the Mainland's full integration with the world economy. As the supplements’ titles imply, we can generally conclude that the major features of 11’s and 12’s will be deepening the liberalization of trade in services and boosting access to Mainland market for Hong Kong service industries respectively.
Supplement VIII to CEPA (deepens liberalization of trade in services)
Supplement VIII to CEPA provides for a total of 32 services liberalization and trade and investment facilitation measures, including 23 liberalization measures in 16 service sectors, and strengthens co-operation in areas such as finance, tourism, innovation and technology. Both sides also agreed to enhance origin criteria under trade in goods, and relax the definition and related requirements of Hong Kong service suppliers.
Of interest to note is that a lot of liberalizations incorporated within Supplement VIII to CEPA were actually touched upon by Vice Premier Li Keqiang. Aside from unfolding a package of 36 measures, the vice premier indicated that the trade in services between the Chinese mainland and Hong Kong should be basically free by the end of the 12th Five-year plan in 2015. This is perhaps one of the clearest indications regarding how soon and how far the mainland market will eventually open up for Hong Kong service suppliers and professionals.
To cope with the fallout of the international financial crisis, Hong Kong has advocated since 2009 the development of six new industries in which Hong Kong enjoys clear advantages. It is good to know that CEPA, in both Supplements VIII and VII, has incorporated measures geared to assisting Hong Kong service suppliers to gain enhanced access to the mainland market progressively
However, the liberalization rate of the Supplement VIII still seems to be not enough and thus it is not so possible to achieve Li’s indication mentioned above. For example: On banking, supplement allows any Mainland-incorporated banking institution established by a Hong Kong bank to engage in the sale and distribution of mutual funds. Yet, it is only for the Mainland-Hong Kong-incorporated banks and they are allowed to sell and distribute the mutual funds only; On individually owned stores, the number of persons engaged in the operation is only relaxed from no more than eight persons to 10 persons and the business area is only relaxed from not exceeding 300 square meters to 500 square meters; On insurance, the Supplement allows Hong Kong insurance brokerage companies to set up wholly-owned insurance agency companies in Guangdong Province on a pilot basis, however, the applicant must fulfill 4 criteria, such as: the applicant should have been operating insurance brokerage businesses in Hong Kong for over 10 years. As the over-all liberalization is relatively limited, so the impact of the Supplement VIII will be small to Hong Kong.
Supplement IX to CEPA (boosts access to Mainland market for Hong Kong service industries)
Supplement IX to CEPA provides for a total of 43 services liberalization and trade and investment facilitation measures, including 37 liberalization measures in 22 service sectors, strengthens...