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Private sector to gain from CEPA
( 2003-07-02 10:25) (China Daily HK Edition)

The newly-signed trade agreement between the mainland and Hong Kong is seen as a win-win scenario for private enterprises in both Hong Kong and the mainland, according to economic researchers and business people.

They stressed that mainland private firms will enjoy long-term benefits from the Closer Economic Partnership Arrangement (CEPA) despite some short-term challenges.

Some of the services provided by Hong Kong will help mainland private enterprises improve their overall quality of management, they said, while the existing distribution networks of the mainland companies are likely to provide ready sales channels to their Hong Kong peers.

From January next year, the mainland will eliminate import tariffs on hundreds of categories of goods and services made or originating from Hong Kong.

The deal is also expected to give Hong Kong enterprises, especially service industries such as banks and accountancy firms, greater access to the rapidly-growing mainland market.

Zhang Yansheng, director of the Institute of International Economic Studies under the State Development and Reform Commission, described the agreement as a "win-win" solution.

He dismissed the belief held by some mainland businessmen and government officials that Hong Kong firms will enjoy by far the greater opportunities than their mainland counterparts. "The trade deal will benefit the economy, trade and related industries both in Hong Kong and the mainland as long as both sides can co-ordinate their progress from time to time," Zhang said.

He noted that one of the immediate benefits for mainland private firms is their easy access to quality professional services from Hong Kong, especially in the financial industry.

Mainland private enterprises have long been suffering lingering problems in management, accounting and auditing partly due to shortages of qualified professionals.

The poor corporate governance in mainland private enterprises has been highlighted by a series of scandals involving several Hong Kong-listed firms such as Euro-Asia Agricultural (Holdings) Co Ltd, Shanghai Land Holdings Ltd and Shanghai Merchants Holdings Ltd.

Statistics suggest that mainland private firms account for about 80 per cent of enterprises that are waiting for IPOs (initial public offerings) in Hong Kong.

"But with Hong Kong firms given the green light to march into the 17 service sectors, mainland private businesses will have a better chance to strengthen their management and improve corporate governance," Zhang said.

Under the trade pact, the mainland will allow Hong Kong firms to set up wholly-owned companies to provide management consulting, advertising distribution, logistics, distribution and other services.

Zhang noted that although mainland firms in the fledgling service sector will unavoidably meet with grave challenges from their Hong Kong counterparts, their development will be aided in the long term.

The introduction of badly-needed capital and top professionals from Hong Kong will greatly help domestic enterprises upgrade their own services and speed up their integration with the international market, according to the researcher.

He cited the great contribution made by Hong Kong firms to the fast economic development in the Pearl River Delta region through exporting both capital and services over the past two decades.

Leung Wai-ho, a standing committee member of the Hong Kong Chinese General Chamber of Commerce, predicted that even the influx of Hong Kong-made goods to the mainland market will spell enormous business opportunities for domestic private firms.

Hong Kong firms will depend on a huge sales network and deep knowledge about the mainland market to succeed in promoting sales of their goods, Leung was quoted as saying by the China Central Television.

"Mainland private firms can then make best use of their unique advantages such as well-established national sales networks and familiarity with the mainland market to join hands with their Hong Kong counterparts in tapping the market," he said.

The businessman suggested mainland enterprises set up strategic partnership with Hong Kong firms to boost their own development.

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