Analyses the Impact of Supplement VII of CEPA on Various Hong Kong Sectors

Share Article predicts that the latest enhancement to the economic trade agreement between Hong Kong and mainland China will have a positive impact on Hong Kong’s business sectors.

Hong Kong Company Formation

Hong Kong’s proximity to China and the close ties it shares with the mainland through CEPA, makes it natural platform for companies that wish to enter the China market.

The seventh supplementary agreement of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and mainland China was ratified on May 27th 2010.’s analysis shows that the enhanced agreement will facilitate access of Hong Kong firms to the mainland market. Thus, businesses that incorporate a Hong Kong company are the ones most likely to benefit from CEPA’s supplementary measures.

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is a bilateral free trade agreement between mainland China and Hong Kong that came into effect in January 2004. Under CEPA, Hong Kong incorporated companies and Hong Kong made products gain preferential access to the mainland China market. Overseas companies who collaborate with, invest in or buy into a CEPA qualified firm in Hong Kong also gain preferential access to China.

The seventh supplement has introduced a total of 35 market liberalization and investment facilitation measures in 19 sectors. Among the 19 sectors, market access conditions have been relaxed in 14 service sectors. Trade and investment facilitation has been enhanced by increasing cooperation in the cultural, environmental, education, innovation and technology industries. All the market liberalization measures in service sectors such as construction; medical services; technical testing, analysis and product testing ; specialty design; audiovisual services; distribution; banking; securities; social services; tourism; cultural services; air transport; qualification examinations for professionals and technicians; and individually owned stores will take effect from January 2011.

Certain Hong Kong sectors will see immediate benefits. For instance, under the enhanced agreement, Hong Kong registered health-care professionals can provide short-term services in the mainland and Hong Kong service suppliers (HKSS) can set up hospitals in certain mainland provinces. Certain qualifying Hong Kong banks with banking institutions in the mainland can provide financial services to small enterprises and can also apply to conduct Renminbi (RMB) business. Additionally, certain qualifying Hong Kong banks can now apply to set up a wholly foreign-funded bank or a foreign bank branch in mainland China.

On the tourism front, Hong Kong travel agents operating in Beijing and Shanghai can arrange for group tours from those cities to Hong Kong and Macau. Hong Kong air transport sales agencies operating in mainland China can can sell domestic air tickets in the mainland. Hong Kong-based aircraft repair and maintenance service providers can also offer their services in the mainland.

As for the construction sector, Hong Kong professionals who have obtained mainland qualifications can act as partners to set up construction and engineering design offices in the mainland. Hong Kong design companies can set up subsidiaries in mainland China. Under the accord, Hong Kong residents with Chinese citizenship can setup certain individually-owned subsidiaries or stores on the mainland. Hong Kong distributors that have setup operations in the mainland can sell Hong Kong publications. The supplement also allows testing organizations in Hong Kong to undertake technical testing, analysis and product testing services in collaboration with designated mainland organizations. Finally, Hong Kong audio-visual enterprises can set up mainland operations to produce video and sound recording products.

According to Ms. Jacqueline Low, the Director of Corporate Services at Janus Corporate Solutions - the company that runs the site, “ welcomes this initiative. The seventh supplement to CEPA provides a boost to Hong Kong’s services sector, which now has greater access to China’s domestic market. This strengthens the potential market of Hong Kong companies. Foreign companies wishing to enter China’s market can easily do so by first setting up a company in Hong Kong and then moving to China as Hong Kong firms.”

CEPA has had a tremendous positive influence on the Hong Kong economy. According to Hong Kong’s Trade and Industry Department, it is estimated that during 2004-2009, business receipts of Hong Kong companies from mainland related businesses under CEPA reached HK$61.6 billion, while business receipts obtained from operations established by Hong Kong service suppliers on the mainland amounted to HK$198.5 billion. Furthermore, Hong Kong-based companies obtained additional business receipts to the tune of HK$55.1 billion due to CEPA, during the same period.

“With China emerging as the global economic powerhouse, increasing number of foreign enterprises, investors and entrepreneurs are moving to Asia. Hong Kong’s proximity to China and the close ties it shares with the mainland through CEPA, makes it natural platform for companies that wish to enter the China market. Foreign investors and entrepreneurs who wish to access mainland China and do business in the region will find it advantageous to form a company in Hong Kong. We strongly urge businesses to leverage upon the CEPA provisions and hope to see more Hong Kong company incorporation activity in the near future.” added Ms. Low.

More information about Hong Kong company incorporation can be found at

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