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C.E.P.A CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT

C.E.P.A CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT. Your springboard to China What is C.E.P.A . Free Trade Agreement under WTO rules Gives preferential access to mainland market for Hong Kong companies Exceeds China’s WTO requirements Effective from 1 st January 2004. Next.

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C.E.P.A CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT

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  1. C.E.P.ACLOSER ECONOMIC PARTNERSHIP ARRANGEMENT Your springboard to China What is C.E.P.A. Free Trade Agreement under WTO rules Gives preferential access to mainland market for Hong Kong companies Exceeds China’s WTO requirements Effective from 1st January 2004 Next

  2. I’m a manufacturer, how can I benefit from C.E.P.A? • Zero tariff on 90% of Hong Kong domestic exports to mainland. • 273 types of products initially and growing. • H.K. manufacturers enjoy greater flexibility to access mainland market. • More Hong Kong players allowed to engage in distribution business in the mainland. Next

  3. I’m in the services sector, how can I benefit from C.E.P.A? • Faster/easier market access for 18 service sectors. • Lower entry thresholds for smaller players. • More opportunities for Hong Kong services professionals to practice in the mainland. • Allows H.K permanent residents to set up individually owned retail stores in Guangdong. Next

  4. Who benefits from C.E.P.A?Manufacturers/Distributors • Goods must qualify as made in H.K. • Not necessary for company to be based in H.K. • To qualify goods must be substantially transformed • 30% of value must be added in H.K. (inc. R+D, design costs) How can overseas companies benefit? • Service companies partner with, invest in, or buy into a C.E.P.A. qualified firm in Hong Kong. • Manufacturers/traders partner with, or outsource to, a H.K. manufacturer. Next

  5. Who benefits from C.E.P.A?Services HONG KONG BASED SERVICE PROVIDERS 18 Sectors: Advertising Accountancy Audiovisual Banking Construction/Real Estate Conventions/Exhibitions Distribution Freight Forwarding Insurance Legal Logistics Management/Consultancy Medical/Dental Securities Storage/Warehouse Telecommunications Tourism Transport • Company must be incorporated in Hong Kong • Doing business in Hong Kong at least 3 years • Liable to pay profits tax • Employ 50% of staff in Hong Kong • Any nationality Next

  6. Service sectors covered by C.E.P.A. • NB: any company that satisfies Cepa-elegibility can benefit, regardless of nationality • Accounting: One year permits for Hong Kong companies to conduct auditing services on the mainland. Hong Kong-qualified accountants who have practised on the mainland will be treated as Mainland accountants. • Advertising: Firms from Hong Kong can establish wholly-owned advertising companies on the mainland. • Audiovisual: Hong Kong-produced Chinese language movies will be exempt from the 20 overseas film quota and can be distributed on the mainland. Co-produced movies will be treated as mainland films. • Banking: Asset requirement for banks to establish mainland branches is reduced from US$20 bn to US$6 bn. • Conventions: Hong Kong firms can set up wholly owned operations. Next

  7. Service sectors covered by C.E.P.A. • Construction and real estate: Hong Kong firms can set up wholly-owned operations. • Distribution (exc tobacco): Hong Kong firms providing distribution services, retailing or franchising can set up wholly-owned operations. Hong Kong car dealers can open up to 30 wholly-owned retail outlets. • Freight forwarding: Hong Kong firms can operate on a wholly-owned basis. • Insurance: Max limit of capital by a Hong Kong insurance firm in a mainland firm is 24.9 per cent. Hong Kong insurance agents can practice with mainland professional qualifications. • Legal: Hong Kong lawyers can work for mainland firms. Minimum requirements are waived for those operating in Shenzhen and Guangzhou and shorted to two months for other areas. Next

  8. Service sectors covered by C.E.P.A. • Logistics: Hong Kong companies can set up wholly-owned operations on the mainland. • Management/Consultancy: Most companies can set up wholly-owned enterprises. • Medical/Dental: Hong Kong doctors can work on the mainland for up to three years. Hong Kong medical workers can sit exams to work on the mainland. • Securities: Hong Kong Exchanges and Clearing can set up a representative office in Beijing. • Storage/Warehousing: Hong Kong companies can operate wholly-owned operations. Next

  9. Service sectors covered by C.E.P.A. • Telecommunications: Hong Kong companies can set up JV enterprises on the mainland. No geographic restriction for JV enterprises formed by Hong Kong service suppliers and the mainland to provide value-added services. • Tourism: Hong Kong companies can run hotels/restaurants on a wholly-owned basis. • Transport: Hong Kong companies can operate on a wholly-owned basis. For more detail, check www.tid.gov.hk/english/cepa Next

  10. How will C.E.P.A. make it easier for you to access the Chinese Market? • Earlier Market Entry – Under WTO commitments china is gradually making it easier for overseas companies to set up. CEPA offers a one to five year head start to Hong Kong based companies • Setting up wholly-owned companies - In many cases CEPA allows for the creation of wholly-owned companies. Next

  11. How will C.E.P.A. make it easier for you to access the Chinese Market? • Lower capital thresholds – Capital requirements to set up in China have been reduced substantially opening up the field to smaller players. • Recognition of Qualifications – Many Hong Kong professional qualifications will be recognised in China, and access to sit China professional exams will be broadened. Next

  12. Law Firms –H.K. Firms can practice in China • Currently must be qualified H.K. lawyer to advise on H.K. law. • Law Society of H.K. allows overseas lawyers to register as FOREIGN REGISTERED LAWYERS (FRL’s) • Can only advise lawyers on their own law. Associations: • Foreign Law Firms can register as being associated with a H.K. law firm. Typically, would be described as: Wong & Wong In association with Su, Grabbett and Runne • After 3 years of Association foreign law firm can absorbe local law firm and use its own name without reference to an association. Next

  13. H.K. Firms – Road to China • April 2006 – Gaungdong’s Department of Justice approved a partnership formed by David Fung and Co (H.K.) and the Guangdong Zhongyaun Law Firm. • First local parternship formed in China by H.K. and mainland law firms. • October 2005 – CEPA III signed – allows each H.K. office on the mainland to enter into partnership with one domestic law firm in the province, autonomous region or municipality where it is located. Next

  14. H.K. Firms – Road to China • Currently 18 offices opened by 17 law firms. • H.K. Legal sector accounts for 40% of International Lawyers in Asia. • China is the largest M and A market in Asia. • 6 out of 10 of the top 10 Legal Advisors in Asia’s M and A deals have a significant presence in Hong Kong. • In a February 2005 survey of Law Firms in H.K. – 83% of the respondents have dealt with cross-border commercial transactions. • Both CEPA and the simplified procedures for mainland enterprises to invest and set up offices in H.K. will not only boost the demand for a wide range of professional services provided by H.K. lawyers, but also speed up the pace of internationalisation of mainland enterprises. • For more information see www.millerpeart.com Repeat

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