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FS' speech "Business Opportunities under CEPA" for Japanese Companies Seminar


Following is the speech by the Financial Secretary, Mr Henry Tang - "Business Opportunities under CEPA" - for the Japanese Companies Seminar in Tokyo today (October 30)(English only):

Good afternoon, ladies and gentlemen,

It is a great pleasure to welcome all of you to this seminar and share with you the business opportunities for Japanese companies under CEPA, the Closer Economic Partnership Arrangement.

Japan and Hong Kong


Japan and Hong Kong have strong economic ties and your country has contributed substantially to Hong Kong's development and foreign investment. The Japanese Chamber of Commerce in Hong Kong tells us that there are some 2,000 Japanese companies doing business in Hong Kong.

Japanese banks constitute one of the largest groups of foreign banks in Hong Kong. As of May 2003, there were 40 Japanese banks with branches or representative offices in Hong Kong: 15 licensed banks, four restricted licensed banks, six deposit-taking companies and 15 local representative offices. Japanese insurance companies are also well-represented in Hong Kong. In light of Hong Kong's position as a regional trading centre, almost all leading Japanese trading companies and manufacturers have a base in Hong Kong. A lot of these companies are increasingly engaged in business with Mainland China. Japanese SMEs also flourish, particularly in the areas of import/export and IT.

Japan is also the third largest export market of Hong Kong. In the first four months of 2003, Hong Kong's total exports to Japan rose by 12.9% compared with the previous year. Hong Kong's re-exports to Japan increased by 14.1%. Japan is also the second largest source of imports for Hong Kong. Total trade between Japan and Hong Kong in 2002 amounted to US$34 billion. In addition, there are 160 regional headquarters of Japanese companies and 471 regional offices in Hong Kong (according to Hong Kong's Census and Statistics Department).

Explaining CEPA


I believe CEPA will make Hong Kong even more attractive for Japanese companies looking to expand in China.

The main parts of CEPA were signed on June 29, 2003 by the Central People's Government and the Hong Kong Special Administrative Region Government. Three months after that, both Governments reached agreement on implementation details and signed six Annexes to CEPA.

CEPA opens up new and exciting opportunities for Hong Kong, as well as for our friends in Japan. CEPA will eliminate tariffs on many Hong Kong goods exported to the Mainland, provide local businesses and professionals in various services sectors with early access to the Mainland and simplify cross-border trade. CEPA covers three areas:

* Trade in goods

* Trade in services

* Trade and investment facilitation

Trade in Goods


Regarding trade in goods, the Mainland will apply zero import tariffs from the first of January next year for exports from Hong Kong meeting CEPA origin rules in 273 Mainland products codes. As a result of the zero tariff concession under CEPA and China's commitments upon accession to the WTO, about 90% of Hong Kong's domestic exports to the Mainland will enjoy zero tariffs right from the beginning of next year.

These products include electrical and electronic products, plastic articles, paper articles, textiles and clothing, chemical products, pharmaceutical products, clocks and watches, jewellery, cosmetics and metal products.

Trade in Services


As for trade in services, the Mainland will grant preferential treatment to a total of 18 sectors. Those of particular interest to Japanese companies include telecommunications, real estate and construction, banking, securities, logistics and freight-forwarding, transport, tourism and advertising services.

This month, the Mainland implemented the new arrangements for telecommunications services suppliers in Hong Kong. The specific commitments for the other 17 sectors will take effect right from the beginning of next year.

Trade and Investment Facilitation


On trade and investment facilitation, we will be doing a great deal in making the usual regulatory procedures more user-friendly to all parties concerned.

Further Liberalisation


CEPA adopts a building-block approach and provides a mechanism for further liberalisation measures. In order to broaden the scope and coverage, the two Governments have agreed to pursue further liberalisation in both goods and services trade. Liaison mechanisms already established will be utilised for implementation purposes as far as possible and the Joint Steering Committee of CEPA will be responsible for overall co-ordination.

CEPA also creates considerable potential for Hong Kong to strengthen its position as a centre for value-added manufacturing and high quality services for a vast domestic market of 1.2 billion people. With China's accession to the WTO and the signing of CEPA, Hong Kong's role as an international trade and business centre and a gateway to China - and attraction to Japanese companies - will be further enhanced.

Moreover, the emergence of Mainland China as one of the world's most dynamic economies offers a range of additional opportunities - especially in the Pearl River Delta (PRD), which is the fastest growing portion in the fastest growing region in the fastest growing large economy in the world. With its population of 48 million, the PRD has enjoyed double-digit average annual growth for more than a decade. Each day, an estimated US$300 million worth of goods are produced by thousands of factories in the region.

Benefits for Japanese Companies


CEPA should strengthen the appeal of Hong Kong for Japanese investors in several ways. For example, Japanese manufacturers will be able to take advantage of the zero import tariff preference to produce brand name products or run manufacturing processes with high-value-added content or substantial intellectual property input. The WTO-plus market liberalisation measures for trade in services would give Japanese or other enterprises in Hong Kong a "first mover" advantage. It naturally is up to companies to decide how best to take advantage of the opportunities offered by CEPA to gain greater access into the Mainland market.

For Japanese companies looking to profit from a Hong Kong/Mainland China strategy, Hong Kong is the ideal base. The city's infrastructure, business and cultural links with the Mainland, as well as its institutions, regulatory environment and people provide an excellent entry platform.

And we are ready to help you succeed. Invest Hong Kong, the investment promotion agency of the Hong Kong Government, is in business to help you do business. It can assist you with setting up in Hong Kong, link you up with business partners and service suppliers, guide you through government regulations and requirements and provide sector-specific expert advice together with the Hong Kong Trade Development Council.

CEPA will have a profound impact on Hong Kong's economic integration with the Mainland and encourage investment in Asia's world city. It clearly opens a new chapter in cross-border trade and investment, making it considerably easier for Hong Kong-based companies to expand across the boundary. These opportunities should be especially attractive for Japanese companies in the services sector, where Hong Kong is particularly strong.

In conclusion, I believe that CEPA will reinforce and expand Hong Kong's advantages as an investment destination for Japanese companies. We welcome you to do business, maximise your opportunities and achieve success in Hong Kong.

Thank You.

Ends/Thursday, October 30, 2003


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