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 the Mainland, according to the Agreement on Trade in Services (“Agreement”) signed on 27 November 2015.
On the basis of the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong (“Guangdong Agreement”) signed in December 2014, the new Agreement includes new liberalization measures. It covers and consolidates commitments relating to liberalization of trade in services provided in CEPA, its Supplements and also the Guangdong Agreement.
The Agreement shall be implemented from 1 June 2016 onwards.
Three Main Concepts under the Agreement
1. National treatment
Hong Kong service suppliers in services trade sectors where national treatment applies will enjoy the same treatment as Mainland enterprises.
2. Positive listing
Liberalization measures are set out for Hong Kong by the Mainland, indicating what type of access and what type of treatment for each sector the Mainland is prepared to contractually offer to Hong Kong service suppliers.
3. Negative listing
A negative list requires that discriminatory measures affecting all included sectors be liberalized unless specific measures are set out in the list of reservations.
With the exception of reserved restrictive measures (as set out in the form of a negative list) and horizontal management measures, eligible Hong Kong service suppliers can expect to enjoy the same treatment as Mainland enterprises in terms of market access requirement, i.e. “permitted if not forbidden”.
Features of the Agreement
The breadth and depth of liberalization achieved by the Agreement surpass the previous CEPA measures and the Guangdong Agreement.
Key features are as follows:
- The Mainland has fully or partially opened up 153 sectors to the Hong Kong services industry, accounting for 95.6% of all the 160 services trade sectors.
- National treatment will be applied to Hong Kong in 62 sectors.
- The negative list sets out 120 restrictive measures covering 134 services trade sectors. Except for the restrictive measures and horizontal management measures, eligible Hong Kong service suppliers can enjoy the same treatment as Mainland enterprises.
- The positive lists covering cross-border services as well as the sectors of telecommunications and cultural services have newly-added 28 liberalization measures.
- The Agreement has liberalization measures in a number of important sectors. Examples of such sectors include legal services, accounting services and insurance services.
- For Hong Kong service suppliers in majority of services trade sectors, filing administration is adopted in lieu of prior approval of contracts and articles of association for establishment and change of enterprises.
- The Agreement is a standalone, subsidiary agreement relating to trade in services under the framework of CEPA. In case of conflict between CEPA and the Agreement, the Agreement shall prevail.
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.
On the basis of the Guangdong Agreement of December 2014, the new Agreement enhances the liberalization of trade in services in both breadth and depth. Hong Kong service suppliers can now expect to receive national treatment not only in Guangdong, but also in other parts of the Mainland, with exceptions on the negative list.
The expansion of scope under the framework of CEPA will create huge opportunities for Hong Kong investors interested in entering the China market, since they may benefit from the liberalization measures offered by the Agreement.