Under the framework of the Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”), most Hong Kong service suppliers can expect to receive the same treatment as companies from the Mainland when they start businesses in Guangdong, according to the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong (“Agreement”) signed on 18 December 2014.
The Agreement shall come into effect on the day of signing, and shall be implemented on 1 March 2015.
Three Main Concepts under the Agreement
With the exception of the list of reservations etc., eligible Hong Kong service suppliers can expect to enjoy the same treatment as the Mainland enterprises in Guangdong in terms of market access requirement, i.e. “permitted if not forbidden”.
A Hybrid System of Negative and Positive Listings
The opening-up mode in the Agreement is innovative. Since 2003, liberalization measures under CEPA and its Supplements have been listed positively. The Agreement, however, adopts a hybrid system of negative and positive listings.
Besides the traditional positive listing, “reserved restrictive measures” have been set out in a negative list. Upon adoption of the negative list, except for those reserved restrictive measures etc., the Mainland will not impose any particular restrictions on eligible Hong Kong service suppliers in Guangdong in terms of market access requirement, i.e. they can receive national treatment and enjoy the same treatment as the Mainland enterprises.
Compared to positive listing, negative listing is a more transparent and comprehensive way of listing liberalization commitments.
The negative list is only adopted in the mode of “commercial presence”, i.e. to provide services by establishing legal entities in China. The negative list in the mode of “commercial presence” is, therefore, primarily used to meet the most popular business mode adopted by Hong Kong industries, which will help them better tap into the Mainland market.
Concerning the mode of cross-border services, as well as sectors of telecommunications and cultural services, the Mainland’s additional liberalization measures for Hong Kong in Guangdong continue to be positively listed.
Features of the Agreement
The breadth and depth of liberalization achieved by the Agreement surpass the previous CEPA measures.
Key features are as follows:
These 153 services trade sub-sectors span a number of sectors, including business services, communication services, construction and related engineering services, distribution services, education services, environmental services, financial services, health related and social services, tourism and travel related services, recreational, cultural and sporting services and transport services.
Hong Kong’s Liberalization Measures
Consistent with the past practice, Hong Kong will not impose any new discriminatory measures on Mainland services or service suppliers coming to Hong Kong in the areas of services covered by the Agreement.
For the first time, Hong Kong service suppliers can expect to receive national treatment in Guangdong, with exceptions on the negative list. The Agreement will further liberalization of trade in services and facilitate economic cooperation between Guangdong and Hong Kong. It will open up the Guangdong market in various service sectors to Hong Kong investors, consolidating Hong Kong’s position in international finance, trade and shipping, bringing new vitality to the economy of the Mainland and benefiting the integration of the economy of the Mainland and Hong Kong.
Investors interested in entering the Guangdong market should pay attention to the Agreement, as they may benefit from the liberalization measures offered by the Agreement and take advantage of the opening up of the Guangdong market.