Economic and Trade Relations between the Mainland and Hong Kong And T he Mainland and Hong Kong Closer Economic Partne

1. Economic and Trade Relations between the Mainland and Hong Kong And The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Ms. Joyce Tam, Acting Deputy Director-General of Trade and Industry

2. Close Economic Tie between Mainland and HK Trade • The Mainland is HK's largest trading partner, accounting for 47.5% of HK's total trade value in 2008. • Hong Kong is the Mainland's third largest trading partner, accounting for 8% of the Mainland's total external trade in 2008. Investment • HK is the Mainland's largest source of realised direct foreign investment, accounting for about 40% of the national total as at June 2009. • The Mainland is HK's most important external investor. At end-2007, the stock of inward direct investment from the Mainland accounted for 40.7% of HK' s total. Establishments in the Guangdong Province • More than 99,000 HK-invested enterprises have been approved by the Guangdong Province at end‑2007. • HK-related enterprises in the nine cities of the Pearl River Delta of the Guangdong Province hired around 9.6 million employees.

3. Building Block Approach CEPA Mainland and HK 1st free trade agreement • CEPA • Main Text signed on 29 Jun 2003 • Six Annexes signed on 29 Sept 2003 • Implementation since 1 Jan 2004 • Supplement to CEPA • Supplement to CEPA signed on 27 Oct 2004 • Implementation since 1 Jan 2005 • Supplement II to CEPA • Supplement II to CEPA signed on 18 Oct 2005 • Implementation since 1 Jan 2006 • Supplement III to CEPA • Supplement III to CEPA signed on 27 Jun 2006 • Implementation since 1 Jan 2007 • Supplement IV to CEPA • Supplement IV to CEPA signed on 29 Jun 2007 • Effective from 1 Jan 2008 • Supplement V to CEPA • Supplement V to CEPA signed on 29 Jul 2008 • Effective from 1 Jan 2009 • Supplement VI to CEPA • Supplement VI to CEPA signed on 9 May 2009 • Effective from 1 Oct 2009

4. Trade in Goods Trade in Services Trade & Investment Facilitation CEPA CEPA Coverage

5. Trade in Goods (1) – Zero Tariff Benefits • Zero Tariff Benefits: ALL products of Hong Kong origin (except for prohibited articles) to the Mainland since 1 January 2006 • Criterion: Products to meet CEPA rules of origin (ROOs) • Products with no agreed ROOs: consultations held twice a year

6. Trade in Goods (2) - Implementation • Cumulative CO(CEPA) Statistics (as at end Sept 2009)

7. accounting • freight forwarding agency • patent agency • social services • advertising • individually owned stores • photographic • sporting • air transport • information technology • printing • telecommunications • audiovisual • insurance • professional qualification examinations • tourism • banking • job intermediary • public utility trade mark agency • building cleaning • job referral agency • real estate and construction • translation and interpretation • computer and related services • legal • related scientific and technical consulting services • transport (including road freight/passenger and maritime transport) • convention and exhibition • logistics • securities and futures • cultural • management consulting • services incidental to mining • distribution • market research • services related to management consulting • environmental • medical and dental • storage and warehousing Trade in Services (1) – 42 Service Areas Preferential Treatment in 42 Service Areas of the Mainland Market : • research and development • rail transport

8. Trade in Services (2) – Better Market Access Forms of Preferential Treatment: • relaxing the equity share restrictions • reducing the requirements of registered capital • reducing the requirements of business turnover • relaxing the restrictions over geographical location and business scope • allowing cross border supply of services • delegating approval authority

9. Trade in Services (3) - HKSS Beneficiaries: Hong Kong Service Suppliers (HKSS) • Juridical persons(e.g. companies, partnerships, sole proprietorships) - incorporated in HK and engaged insubstantive business operationsfor 3 or 5 years • To obtain anHKSS Certificatefrom TID before applying directly to Mainland authorities for provision of services in the Mainland • Natural persons(HK permanent residents, professionals, individually owned stores)

10. Trade in Services (4) - Implementation Cumulative Statistics of HKSS Certificates(As of end Sept 2009)

11. Mutual Recognition of Professional Qualifications Agreements or arrangements on mutual recognition of professional qualifications concluded so far: Construction • estate surveyors; • architects; • structural engineers; • planners; • quantity surveyors; and • building surveyors Finance • accounting; and • qualified personnel and expertise in respect of the securities and futures industry

12. Trade and Investment Facilitation • Trade and investment promotion • Customs clearance facilitation • Commodity inspection and quarantine, food safety and quality and standardization • Electronic business • Transparency in laws and regulations • Cooperation of small and medium enterprises (SMEs) • Cooperation in Chinese traditional medicine and medical products sector • Protection of intellectual property (IP) • Cooperation on Branding

13. CEPA Supplement VI • Signing of CEPA Supplement VI on 9 May 2009, with implementation from 1 Oct 2009, ahead of usual schedule • Contains a total of 29 liberalization measures, covering 20 services sectors (including two new sectors) • Total no. of service sectors covered by CEPA expands from 40 to 42

14. Highlights of CEPA Supplement VI (1) • Major characteristics of liberalization measures under CEPA Supplement VI : • relaxation in equity share restrictions (e.g. audio visual, public utility, and rail transport services) • lowering of entry threshold (e.g. distribution services, banking services) • elimination of geographical limitation (e.g. convention and exhibition services)

15. Highlights of CEPA Supplement VI (2) • Expansion of allowable business scope (e.g. securities services, telecommunications, tourism) • Inclusion of liberalization commitments made by the Mainland under other free trade agreements (medical and dental services, research and development services, and real estate services) • Encourage mutual recognition of professional qualifications (e.g. accounting, construction, real estate, printing, pharmacy)

16. Highlights of CEPA Supplement VI (3) • Guangdong pilot measures (e.g. legal, public utility, banking, transport, telecommunications) • Enhance financial cooperation (e.g. ETF)

17. Benefits of CEPA Supplement VI (1) • Liberalization of key service sectors which Hong Kong has competitive advantages : • Financial services • Tourism • Creative industry • Transport services

18. Benefits of CEPA Supplement VI (2) • Signing of CEPA Supplement VI : • reflects Central People’s Government’s support for Hong Kong • complements the policy direction, as advocated in the “Outline of the Plan for the Reform and Development of the Pearl River Delta” • consolidates Hong Kong’s status as an international financial, trade, shipping, logistics and high value-added service centre • promotes the long term economic development of both sidesand upgrades the professional standards of the two places

19. Benefits of CEPA • HKSARG’s preliminary assessment of the economic impact ofCEPAto HK • Created 43,200 new jobs in 2004 to 2008; • Generated an additional spending of HK$58.4 billionin 2004 to 2008. • Generated HK$45.9 billion worth of services receipts from the Mainland for HKSS holders in 2004 to 2008; • HKSARG’s latest assessment of the economic impact ofCEPAto the Mainland • Created 49,500 new jobs in 2004 to 2008;

20. Opportunities to Overseas Investors A new platform to tap the vast opportunities of the Mainland market: • For trade in goods, to set up manufacturing operations in Hong Kong to produce goods meeting CEPA origin rules to enjoy the zero tariff benefits. • For trade in services, to make full use of CEPA benefits in entering the Mainland market by: - establishing their businesses in Hong Kong - acquiring or joining forces with enterprises in Hong Kong

21. Support & Promotion of CEPA • TID’s CEPA Website(http://www.tid.gov.hk/english/cepa/) - Information Database on CEPA Service Sectors • Free Enquiry Services Hotline:(852) 2398 5667E-mail:cepa@tid.gov.hk • Organizing and participating in seminars or briefings • Co-operation with HKSARG Offices in the Mainland (Beijing, Guangdong, Shanghai and Chengdu) for assistance cases

22. Thank you