The central government has lowered the capital requirements for Hong Kong-based companies on the mainland and granted them wider access to 11 new industries through a recently signed supplement to the Closer Economic Partnership Arrangement.
According to the supplement, the asset requirements of Hong Kong banks hoping to purchase stakes in mainland counterparts was cut to US$6 billion from US$10 billion. And Hong Kong tourism agencies, hospitals, public utility-related businesses, and elderly and environmental services would be given wider access to mainland markets.
The amendments are scheduled to take effect on January 1, 2008.
Speaking at the signing ceremony, Hong Kong Financial Secretary Henry Tang said the new CEPA package would provide broader opportunities for Hong Kong business while reinforcing Hong Kong's capabilities of better tapping the mainland market.
He said that the new package provides a positive response to a number of recommendations included in the Final Report of the Economic Summit of the mainland's 11th Five-Year Plan.
"It's stepping forward gradually, to make ways of doing business more diversified on the mainland," said James Sung, a political science lecturer at the City University of Hong Kong.
"The mutual recognition of professional qualifications from both the mainland and Hong Kong is going to encourage better cross-border communications."
The fourth amendment of the arrangement covers 38 different sectors, making it the furthest reaching yet.
The new accord enhances cooperation in finance, conventions and exhibitions, and mutual recognition of professional qualifications.
In addition to easing the capital threshold, the mainland would also develop green lanes for Hong Kong banks to set up branches in new areas. And mainland banks and fund management companies would also be able to establish subsidiaries in Hong Kong.
To boost tourism, the agreement stipulates that the minimum annual business turnover required of a Hong Kong travel enterprise setting up a joint venture or wholly owned enterprise on the mainland would be respectively reduced to US$8 million and US$15 million.
The required capital investment for Hong Kong medical-services suppliers setting up equity or joint ventures on the mainland would be reduced from 20 million yuan (US$2.6 million) to 10 million yuan (US$1.3 million).
Hong Kong service providers would be allowed to operate elderly service agencies in the form of wholly owned, private, non-governmental enterprises in Guangdong Province on a pilot basis.
According to the clauses addressing public utilities, Hong Kong service providers would be allowed to set up wholly owned operations to construct and operate gas, heating and water-supply networks, in addition to water-drainage services, for medium-sized mainland cities.
Vice-Chairman of the Hong Kong Association of Travel Agents Paul Leung said the arrangement would be a win-win situation.
"It not only helps increase exposure for Hong Kong travel agents in the mainland market, but also, the quality of mainland players can be improved through the consequential competition," he said.
"Small and medium-sized Hong Kong banks can speed up their mainland expansion with the help of the CEPA," said the Hong Kong Association of Banks Chairman Peter Sullivan.
(China Daily June 30, 2007)