On 29 August 2013, the Hong Kong Government and the Chinese Government entered into “Supplement X to the Mainland and Hong Kong Closer Economic Partnership Arrangement” (CEPA X). Both the telecom and the media and entertainment sectors are offered additional commitments by the Chinese Government. This e-bulletin summarises these new commitments.
Under CEPA X, two new commitments are offered to Hong Kong Service Suppliers (HKSS):
- allowing HKSS to establish joint ventures in the Guangdong Province to provide online data processing and transaction processing services (在线数据处理与交易业务), with HKSS being allowed to own equity interest up to 55% in such JVs; and
- allowing “contractual service providers” employed by HKSSs to provide value-added telecom services in the Mainland.
Since the signing of CEPA I in 2003, a series of commitments has been granted in connection with the telecom sector to HKSSs, including notably, allowing HKSSs to establish either a wholly foreign-owned enterprise or a joint venture, with no limitation on a HKSS’s ownership in such JVs, to operate offshore call centre in two designated cities in the Mainland.
The present new commitment which allows HKSSs to own up to 50% equity interest in the JVs goes beyond the WTO commitments which China has delivered in respect of foreign companies’ participation in the value-added telecom business market in China, which is currently capped at 50%. It remains to be seen how foreign investors through its operation in Hong Kong are going to make use of this new commitment.
CEPA X also introduces a new concept “contractual service providers”. This essentially allows a HKSS which does not have a commercial presence in the Mainland to send in Hong Kong employees to work on projects or contracts relating to the value-added telecom business won by such HKSS in the Mainland. It should be noted that this new concept is introduced not only to the telecom sector, but also all sectors for which commitments have been granted by the Chinese Government under CEPA.
In addition to the “contractual service providers” commitment discussed above, a number of other commitments are also offered in this sector:
- Mainland motion pictures and motion pictures co-produced by Hong Kong and the Mainland can be processed in Hong Kong;
- Broadly, motion pictures produced by Hong Kong can be screened with the original sound track of the dialects spoken (which will be Cantonese in the majority of the cases); and
- Dialect version (which will be the Cantonese version in the majority of the cases) of motion pictures produced by Hong Kong or co-produced by Hong Kong and the Mainland can be distributed and screened in the Mainland.