Mainland	  China	  and	  Hong	  Kong	  Closer	  Economic	  Partnership	  Arrangement	  (CEPA)	  As	  an	  Asia	  bu...
 	  	  	  More	  factors	  that	  contribute	  to	  the	  ease	  of	  accessing	  the	  China	  market	  include	  CEPA’s	...
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Mainland China and Hong Kong Closer Economic Partnership Arrangement (CEPA)

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The article provides a summary of the China and Hong Kong Closer Economic Partnership Agreement (CEPA). Included are examples of real benefits to companies operating in Hong Kong and China.

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Mainland China and Hong Kong Closer Economic Partnership Arrangement (CEPA)

  1. 1.      Mainland  China  and  Hong  Kong  Closer  Economic  Partnership  Arrangement  (CEPA)  As  an  Asia  business  hub,  a  tax  efficient  city,  and  one  of  the  freest  economies  in  the  world,  Hong  Kong  is  internationally  renowned  for  being  an  ideal  business  city.  Like  all  economies,  Hong  Kong  would  have  been  hard  hit  by  the  global  economic  crisis.    However,  lessons  learnt  from  the  previous  financial  crisis  and  closer  collaboration  with  Mainland  China  have  helped  to  lessen  the  impact  of  the  recession.  Since  the  1st  of  January  2004,  when  Mainland  China  and  Hong  Kong’s  first  free  trade  agreement  was  signed,  close  economic  cooperation  between  the  two  regions  has  drastically  improved.  Not  only  did  the  Mainland  and  Hong  Kong  Closer  Economic  Partnership  Agreement  (CEPA)  help  save  Hong  Kong  from  economic  crisis,  but  it  has  also  helped  open  up  large,  and  lucrative,  markets  for  Hong  Kong  goods  and  services.  On  a  business  level,  this  agreement  has  therefore  opened  up  many  opportunities  for  local  and  international  entrepreneurs,  especially  those  who  would  like  to  expand  their  business  operations  from  Hong  Kong  to  Mainland  China,  or  vice  versa.  Thus,  the  CEPA  has  certainly  granted  greater  business  freedom  for  entrepreneurs  undertaking  China  or  Hong  Kong  company  formation.    A  Hong  Kong  based  business  wanting  to  expand  to  Mainland  China,  may  now  do  so,  without  having  to  face  too  many  bureaucratic,  tax  or  ownership  restraints  it  once  had  to  before  CEPA.  For  example,  Hong  Kong  businesses  that  trade  in  90%  of  ‘Made  in  Hong  Kong’  goods  are  exempt  from  paying  tariffs  when  they  import  to  Mainland  China.  Businesses  in  the  Food  and  Beverages  industry  are  greatly  attracted  by  this  incentive,  as  over  14,000  Food  and  Beverage  businesses  are  qualified  with  the  CEPA.  There  are  also  over  14,000  Textile  and  Clothing  CEPA-­‐qualified  firms.  Service  based  business  conducted  by  foreigners  in  Hong  Kong  wishing  to  expand  to  China  is  also  made  easier  by  the  CEPA.  This  is  due  to  the  18  industry  sectors  the  CEPA  has  opened  up  to  Hong  Kong  based  service  providers.  The  18  sectors  include  advertising,  accountancy,  banking  real  estate  and  tourism.  A  business  in  one  of  the  approved  sectors  from  any  nationality  can  apply,  but  only  if  it  is  incorporated  in  Hong  Kong,  has  been  run  for  three  to  five  years,  has  50%  of  its  local  staff,  and  pays  Hong  Kong  corporate  tax.    Foreigners  registered  under  the  CEPA  also  benefit  from  CEPA’s  allowance  for  the  creation  of  wholly  owned  companies.        www.healyconsultants.com  
  2. 2.        More  factors  that  contribute  to  the  ease  of  accessing  the  China  market  include  CEPA’s  earlier  market  entry,  whereby  Hong  Kong  based  companies  registered  under  the  CEPA  can  benefit  from  getting  a  one  to  five  year  head  start  into  the  China  market.  Small  businesses  get  an  even  greater  head  start  as  they  now  benefit  from  lower  capital  requirements.  Once  set  up  in  China,  employees  can  profit  from  higher  recognition  of  Hong  Kong  professional  qualifications,  and  have  the  opportunity  to  sit  for  a  broader  range  of  China  professional  exams.          As  well  as  benefits  in  trading  goods  and  services  the  CEPA  provides  for  Hong  Kong  based  businesses,  China  also  benefits  from  the  CEPA.  The  agreement  has  helped  to  liberalize  the  China  market.  More  foreign  business  in  China  means  more  business  opportunities  for  the  Mainland  and  more  collaboration  with  international  companies,  which  helps  Chinese  organisations  access  global  markets  and  accelerate  China’s  full  integration  with  the  world  economy.  Furthermore,  more  business  activity  in  China  from  Hong  Kong  allows  manufacturers  in  China  to  use  Hong  Kong’s  reputable  services.    Thus,  the  CEPA  is  a  win-­‐win  situation  where  Hong  Kong  and  China  benefit  from  greater  business  opportunities.  Both  the  Mainland  and  Hong  Kong  enjoy  enhanced  cooperation  in  various  trade  and  investment  facilitation  areas.  For  example,  the  CEPA  has  helped  integrate  the  economies  of  Hong  Kong  and  the  Pearl  River  Delta  region  of  southern  China.  Hong  Kong’s  highly  respected  services  industry,  coupled  with  the  Pearl  River  Delta’s  advantage  in  manufacturing  offers  a  more  competitive  way  to  do  business.    Closer  cooperation  between  Mainland  China  and  Hong  Kong  through  the  Mainland  and  Hong  Kong  Closer  Economic  Partnership  Agreement  has  therefore  garnered  plenty  of  business  opportunities  and  economic  advantages.  Since  the  signing  of  the  CEPA,  both  regional  and  international  business  activities  have  been  easier,  and  have  given  international  entrepreneurs  the  opportunity  to  choose  Hong  Kong  as  a  gateway  to  opportunities  in  China.    Healy  Consultants  is  a  leading  corporate  services  firm  that  assists  entrepreneurs  and  investors  complete  offshore  incorporation,  including  setting  up  a  business  in  Hong  Kong  and  China.  The  firm  provides  a  range  of  corporate  services  to  assist  entrepreneurs  with  setting  up  their  company,  including  offshore  company  formation  and  opening  a  corporate  bank  account.  More  information  on  company  formation  can  be  found  by  visiting  http://www.healyconsultants.com.    www.healyconsultants.com  

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