The central government will further open mainland markets to Hong Kong and Macao under the framework of the Closer Economic Partnership Arrangement (CEPA), according to a senior trade official.

Cooperation between the mainland and the special administrative regions is expected to lead to breakthroughs in areas covering intellectual property rights protection and energy conservation, Vice-Minister of Commerce Liao Xiaoqi said yesterday.

"We will improve regional cooperation with the two cities, in particular we will cooperate in the Pan-Pearl River Delta area," he said.

Liao noted that the CEPA, the free trade pact within China, had operated smoothly since it was officially launched in January 2004.

He said the mainland had not only totally eliminated import tariffs on all goods originating from Hong Kong and Macao, but had also opened 27 service sectors, covering logistics, distribution, tourism and banking, to investors from the two cities.

The mainland opened some sectors to Hong Kong and Macao investors one to three years ahead of the timetable it committed to when it joined the World Trade Organization.

It lifted restrictions on establishing wholly owned companies, the government lowered the qualification or registered capital needed for investors from the two regions and it allowed specialists to receive mainland licences.

A total of US$494 million worth of Hong Kong goods was exported to the mainland by the end of the first quarter of this year, saving 302 million yuan (US$37.8 million) in tariffs.

In 2005, the trade value between the mainland and Hong Kong amounted to US$136.7 billion, reflecting a year-on-year increase of 21.3 percent and accounting for 9.6 percent of the mainland's total external trade. Hong Kong remains the mainland's fourth-largest trade partner.

Under the CEPA, the central bank allows all retail banks in Hong Kong to provide renminbi services, including renminbi deposits, and withdrawal, exchange and remittance services.

Total renminbi deposits in Hong Kong reached 23 billion yuan (US$2.9 billion) by the end of April.

As for investment, Hong Kong continues to be the largest overseas source of funds for the mainland.

Liao said the CEPA had boosted two-way trade and economic integration.

The opening-up of mainland markets had helped Hong Kong to recover from the economic crisis in 1997, Liao said.

For example, allowing individual tourism to Hong Kong and Macao has boosted the growth of hotels, restaurants and shops in the two cities.

The growth rate for gross domestic product doubled in 2004 in both Hong Kong and Macao from a year ago. "Facts speak louder than words," Liao said.

"In the long run, their service sectors will play a more important role than cargo trade."

The US$100 billion or so bilateral trade is not big compared with the mainland's annual trade volume of US$1 trillion, Liao said, but the CEPA is expected to help promote the service sector on the mainland.

"Hong Kong and Macao enjoy a competitive edge in service industries, from which mainland firms could learn," he added.

(China Daily June 20, 2006)