HONG KONG: Hong Kong and China signed a landmark free trade deal yesterday aimed at boosting the Asian financial centre's ailing economy.
”The agreement has given us an opportunity that our neighbouring countries can only dream of,” Financial Secretary Antony Leung told a news conference after the signing.
The Closer Economic Partnership Arrangement (Cepa), which many see as a precursor to more aid from Beijing, will eliminate mainland import tariffs on many goods made in the territory and is expected to save its exporters billions of Hong Kong dollars.
“This agreement has not only given Hong Kong new impetus and advantages...it will also boost Hong Kong people's confidence in overcoming difficulties and reaching out for victory,” Chinese Premier Wen Jiabao told an audience of government officials and tycoons at the signing.
From Jan 1, China will eliminate tariffs on 273 types of Hong Kong-made goods accounting for about 60% of its exports to the mainland and covering electrical and electronics products, textiles, clothing and jewellery among others.
The government said Hong Kong exporters would save HK$750mil (RM365mil) a year in reduced tariffs on sales to China under the deal, much lower than economists had expected.
But the two sides are still negotiating over the definition of “made in Hong Kong'' under the Cepa deal. Officials said they hoped to reach an agreement on those terms in coming months.
China has also agreed to waive tariffs on all other Hong Kong-made goods by Jan 1, 2006.
The agreement also opens up 17 sectors in China, including banking and financial services, giving Hong Kong firms greater access to China's rapidly growing market.
Analysts say expansion of the service sector is key to Hong Kong's competitive survival as it cannot beat China and many of its Asian neighbours on land and labour costs.
Cepa will lower the asset requirement for Hong Kong banks to set up branches in mainland China to US$6bil (RM22.8bil) from US$20bil (RM76bil). It also will allow Hong Kong firms to set up wholly owned companies to provide management consulting, advertising, distribution and logistics.
Hong Kong firms will also be able to take up to 15% of capital in mainland insurance companies next year, up from the present 10%.
Such moves are a major concession by China, which has been loath to give up majority control of its companies to foreign interests. – Reuters
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