Mainland China and Hong Kong have agreed to expand the scope of the Closer Economic Partnership Arrangement (CEPA). The new measures cover goods and services, and enhanced cooperation in intellectual property protection.

On goods, a total of 37 more Hong Kong products are entitled for zero tariff in entering the Mainland market starting from July 1, 2006. They include aquatic products, food and seasonings, and mechanical and electrical products. The total number of approved product areas has been increased from 1,370 to 1,407, since January 1, when the Mainland granted all products of Hong Kong origin tariff-free treatment if applications by Hong Kong manufacturers met the CEPA rules of origin.

In the services sector, 10 areas will see new liberalization measures. These include legal services, construction, information technology, convention and exhibition, audiovisual, distribution, tourism, air transport, road transport, and individually owned stores.

Some of the moves targeting legal services include:

• waiving the requirement regarding the number of full-time lawyers employed by Mainland law firms that operate in association with Hong Kong law firms;
• waiving the residency requirement for representatives stationed in representative offices of Hong Kong law firms in the Mainland;
• allowing Hong Kong residents qualified for practice in the Mainland to act as agents in matrimonial and succession cases relating to Hong Kong;
• allowing Hong Kong barristers to act as agents in civil-litigation cases in the Mainland in the capacity of citizens; and
• allowing Hong Kong residents who have acquired Mainland lawyer qualifications or legal professional qualifications to undergo internships in a branch office of a Mainland law firm set up in Hong Kong.

In construction, Hong Kong service suppliers will be allowed to set up wholly-owned construction-engineering cost-consulting enterprises in the Mainland. The enterprise’s performance in both Hong Kong and the Mainland will be taken into account in assessing their qualification in the Mainland.

Both sides are committed to encouraging mutual recognition of professional qualifications as part of the services trade under CEPA. In this connection, a mutual recognition agreement between Mainland construction supervising engineers and Hong Kong building surveyors was signed on June 27 in Beijing, bringing the number of mutual-recognition agreements or arrangements under CEPA to 10.

Hong Kong travel agents will be allowed to set up wholly-owned or joint-venture operations in Guangdong Province to apply to operate group tours to Hong Kong and Macau for residents of Guangdong Province on a pilot basis.

Hong Kong air-transport sales agencies may set up wholly-owned agencies in the Mainland. The registered capital requirement will be the same as that for Mainland enterprises.

All these measures will take effect starting from January 1, 2007, and the Mainland will work out the implementation rules.

Intellectual property protection is another new initiative under CEPA, aimed at facilitating trade and investment. The Mainland Intellectual Property Protection Coordination Center will be set up in Hong Kong to help in related information exchanges.

CEPA provides an open and continuous platform for closer economic cooperation between the Mainland and Hong Kong. It also generates new business opportunities for international companies based in Hong Kong. On the services side, at least 46% of the Certificates of Hong Kong Service Supplier issued under CEPA have been taken up by foreign-linked companies. It also brings in foreign investment. CEPA was cited as one of the factors for investment in 27% investment projects completed in Hong Kong in 2005.