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Mainland, HK settle landmark trade pact ( 2003-06-30 15:01) (chinadaily.com.cn)
The mainland and Hong Kong concluded on Sunday a broad free-trade agreement
providing greater access to the Chinese market for Hong Kong businesses. It is
said the new trade pact goes beyond the market opening that Beijing pledged when
it joined the World Trade Organization in November 2001.
According to the pact, the mainland is going to throw open its markets to
Hong Kong's highly competitive shipping, logistics and moviemaking industries;
eliminate most tariffs on imports from Hong Kong's manufacturing sector; and
allow Hong Kong's banks, management consultants and lawyers greater privileges
in the mainland than their rivals from elsewhere in the world.
Hong Kong made few trade concessions to China because it already does not collect any tariffs and allows companies of any nationality to set up subsidiaries to offer services. In the agreement, Hong Kong pledged not to begin collecting tariffs on exports from the mainland or to restrict its service industries. A big issue from the start of the negotiations lay in how the pact would define what qualifies as a Hong Kong company. Some local business leaders had suggested a fairly restrictive definition that might narrowly limit the agreement to businesses owned by local residents. But Mr. Tang said that Hong Kong had decided to comply with its obligations to the World Trade Organization by not discriminating against companies based on their nationality. The agreement nonetheless contains provisions designed to prevent multinationals not already active in Hong Kong from quickly opening shell companies as a way to perform an end run around Chinese trade rules. Most of the concessions for service industries require companies to have been doing business in HK for at least three to five years, depending on the industry. In addition, negotiators must still work out whether goods assembled in Hong Kong from imported parts - as is common for most of Hong Kong's modest manufacturing sector - would qualify for duty-free treatment. The agreement referred to an annex for the rules that would determine what
qualifies as goods manufactured in Hong Kong, but the annex itself, in the
packet of papers released by the government, was a single sheet of paper
pledging to reach an understanding by the end of the year. The most surprising mainland concession was to allow unlimited shipments to the mainland of movies that are produced by Hong Kong companies, including by the local subsidiaries of Hollywood studios.
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