GUANGZHOU: Service industries in Guangdong Province are expected to be upgraded and witness strong growth starting next year when the CEPA (closer economic partnership arrangement) comes into effect.

"Guangdong's service industries will benefit most from CEPA which was signed between the mainland and Hong Kong last Sunday," said a provincial foreign trade official yesterday.

The arrival of Hong Kong's service companies and investment will not only bring challenges but also plenty of business opportunities for the province's service industry, said Zhang Peng, deputy chief of the trade development department of the Guangdong Provincial Bureau of Foreign Trade and Economic Co-operation.

"There is still a lot of room for co-operation between Hong Kong and Guangdong in the service sector," Zhang said.

Hong Kong companies' investment, experience, information channels and advanced management systems and skills will certainly help Guangdong firms to further improve their competitiveness, he added.

According to CEPA, apart from many Hong Kong-made products enjoying zero tariffs on the mainland, the SAR's service companies will be allowed to set up their own firms and joint ventures and expand their presence in the mainland.

As a bordering province of Hong Kong, Guangdong is, of course, the first choice for Hong Kong companies to expand their business in the vast mainland market, Zhang said.

Currently many Hong Kong service companies are negotiating with Zhang's bureau to set up companies or expand their business; and the number will surge next year, creating many opportunities in the local job market, Zhang said.

Guangdong's service industries which include retail, logistics, finance, insurance, trade and transportation are expected to develop quickly in the following years when many Hong Kong companies and investment come to the province.

In addition to improving their strength, Zhang urged Guangdong companies to get ready for fierce competition with their Hong Kong counterparts.

"Guangdong companies have to join hands with their counterparts to make the market even bigger and expand business in the international market to survive competition in the future," Zhang said.

Guangdong is expected to become a new international centre of logistics, transportation, finance and trade in the southern Chinese region, Zhang said.

The CEPA will surely help improve the competitiveness of the Greater Pearl River Delta which includes Hong Kong and Macao, Zhang added.

Meanwhile, Zhang denied reports that many Hong Kong investors would move their processing companies back to Hong Kong after 273 products begin to enjoy zero tariffs in the mainland market beginning next year - dealing a blow to Guangdong's processing industry.

Zhang said he was confident that Hong Kong investors would refuse to move their companies back because of Guangdong's strong technological force, plenty of skillful workers, low land price and salaries.

But Zhang worried some foreign and Hong Kong high-tech companies would move their research and development (R&D) departments back to Hong Kong leaving behind only their production bases in Guangdong.

(HK Edition 07/03/2003 page7)

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