A Complete Information on the CEPA Agreement Between Hong Kong & Chinese Mainland

Hong Kong and the Chinese mainland inked two new agreements on 28 June 2017, namely the Investment Agreement and the Economic Technical Cooperation Agreement (Ecotech Agreement) to further facilitate trade and investment between the two. With the two new agreements, CEPA has broadened its scope to become a comprehensive free trade agreement (FTA) covering investment as well as economic and technical cooperation on top of trade in goods and trade in services. Chinese Vice-Minister of Commerce, Ms. Gao Yan, and the Financial Secretary of the Hong Kong Special Administrative Region (“Hong Kong”), Mr. Paul Chan, executed the Investment Agreement.

Financial Secretary Paul Chan Mo-po called the upgraded arrangement “a modern and comprehensive free trade agreement” that was “more attuned to the need of trade development between two sides and the new trend of international investments”. The agreements make CEPA a comprehensive free trade pact by broadening its scope to cover trade in services, trade in goods, technical co-operation, investment and economic cooperation.

The Investment Agreement further include non-service sector investment into CEPA framework. Both the Mainland and Hong Kong commit to offer national treatment and most-favoured treatment in the non-service sector investment to the investors from the other side. Neither Hong Kong nor China will enforce tough restrictions on the investors of both countries. Here are some fascinating features of the CEPA agreement signed between the Mainland China and Hong Kong:

  • Enforce a commitment or undertaking
  • Performance requirements
  • Both the countries will release the entry restrictions of members of senior management and boards of directors and other personnel
  • Eligible Hong Kong residents are allowed to take qualification examinations for proficiency in computer technology and software for professionals and technicians in the Mainland
  • CEPA allows Hong Kong service suppliers to set up joint ventures or wholly-owned enterprises within the Mainland to provide online data processing and transaction processing services, store and forward services and content services

The Investment Agreement is the Mainland’s first investment deal with pre-establishment national treatment commitments made for the advocation of investment adopting a negative listing approach. The Agreement made reference to the framework of the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong (the Guangdong Agreement) signed in December 2014, covers and consolidates commitments relating to liberalization of trade in services provided in CEPA and its Supplements and also the Guangdong Agreement, becomes a stand-alone, subsidiary agreement relating to trade in services under the framework of CEPA.

“[The new agreement] will make it easier for us to invest on the mainland,” said Eddy Li Sau-hung, president of the Chinese Manufacturers’ Association of Hong Kong. Li said local manufacturers often had to form a joint venture with mainland partners to conduct businesses over the border per Chinese law. Under the upgraded agreement, most firms are allowed to exert full control of their mainland companies.

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