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HK-mainland sign annexes to flesh out CEPA trade accord
( 2003-09-29 16:49) (Dow Jones)

Top Hong Kong and mainland trade officials signed Monday six annexes to the closer economic partnership arrangement, to flesh out details of the trade deal.

Hong Kong Financial Secretary Henry Tang and Chinese Vice Minister of Commerce An Min signed the annexes in a ceremony in Hong Kong.

CEPA will take effect Jan. 1, 2004, and give Hong Kong companies greater access and lower tariffs to mainland's markets than companies from other places. The annexes signed Monday detail what the accord covers and how it is to be implemented.

A total of 273 different goods amounting to 90% of Hong Kong's exports to the mainland by value will enter the mainland without facing any import tariffs under CEPA. The accord will also give Hong Kong companies a head-start over foreign rivals in entering the Chinese mainland market.

The new annexes will cover arrangements on zero tariffs, details of rules of origin for trade in goods, procedures for issuing and verifying certificates of origin, details of the 18 service sectors to be opened to Hong Kong companies, the definition of a service supplier and related requirements, and the facilitation of trade and investment.

Most of the details of the CEPA accord detailed by the six annexes have been known for weeks. However, new openings to Hong Kong companies in the insurance and telecommunications sectors were unexpected.

Under the CEPA accord signed on June 29, the ownership ceiling for Hong Kong companies investing in mainland's insurance sector was set at 15%. That cap has been raised to 24.9%, said Hong Kong's acting Permanent Secretary for Commerce, Industry & Technology Raymond Young.

When CEPA was signed, it covered just 17 sectors. However, an 18th, telecommunications, was added at the behest of Hong Kong negotiators.

In all, Hong Kong companies have been given access to five telecommunications businesses from Oct. 1, giving them an earlier head-start in telecommunications than in other service sectors, which will see the Chinese market open only from Jan. 1, 2004.

The five telecommunications businesses are: Internet data services; call centers; Internet access centers; content services; and storage and forwarding services.

Hong Kong telecommunications companies will be permitted to enter these businesses by forming joint ventures, holding a maximum of 50% of any jointly-owned company.

Hong Kong exporters of goods will also see benefits. Based on 2001 trade data, Hong Kong exports would save up to HK$750 million in tariffs due to the zero- rating of the 273 product codes covered by CEPA, Commerce, Industry & Technology Secretary John Tsang said at a press conference following the signing ceremony.

All other Hong Kong products will be granted the same tariff-free status by Jan. 1, 2006 at the latest.

"The (closer economic partnership) arrangement will provide a new launch pad strengthening economic ties between the mainland and Hong Kong, bringing new momentum and opportunities for Hong Kong's economy," An said, following the signing ceremony.

The trade and investment accord is seen by economists and political analysts as an effort by the central government to help shore up a Hong Kong economy sagging under the weight of near-record unemployment, uncompetitive manufacturing and years of falling consumer and property prices.

"The next step is to discuss further liberalization. It will start very soon," Tsang said.

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