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Supplement IX to CEPA further increases Mainland access

CEPA VIII takes Effect on 1 April 2012 Further Liberalises Macao-Mainland Trade in Services

Supplement VII to CEPA Further Broadens Mainland-Macao Co-operation

Supplement VI to CEPA: broaden development for Macao’s service and convention and exhibition Industries

CEPA Proves Ideal for Macao’s Convention and Exhibition Development

Supplement III to CEPA – Beneficial for Macao to Pursue Diversification in Industrial Growth

Tan Heong San Coffee Company Explores the Mainland Market

Macao’s First Exhibition and Conference Company and Law Firm Obtain CEPA Certificates

The Mainland and Macao Closer Economic Partnership (CEPA) Arrangement Creates New Opportunities-Recent Developments

Introduction on "Rules on Approving Mainland Enterprises to Invest in Enterprises In Hong Kong or Macao Special Administrative Regions"

How to Make Use of the Opportunities Offered by CEPA to Enter into the Service Market of Mainland China

Hong Kong and Macao Join Hands in Promoting CEPA on the Mainland

Thanks to CEPA, the First Three Batches of Tariff-free “Made in Macao” Goods Arrive on the Mainland

CEPA Information Centre

The Mainland and Macao Closer Economic Partnership Arrangement, Its impacts on Macao

CEPA Will Help Macao Achieve Sustainable Development

CEPA with the Chinese Mainland Will Help Macao Diversify its Industrial Structure

New Challenges and Opportunities for Macao's SMEs

 

Supplement IX to CEPA further increases Mainland access
(Source : Government Information Bureau, 02-07-2012)

Representatives of the Macao Government and the Ministry of Commerce today signed a supplement to the Closer Economic Partnership Agreement (CEPA) to further increase the level of economic and trade exchanges between Macao and the Mainland.
Supplement IX to CEPA signed at Government Headquarters takes it to a total of 318 liberalisation in 48 trades in services sectors opened to Macao businesses on the Mainland.
The Secretary for Economy and Finance, Mr Tam Pak Yuen, and the Vice Minister of Commerce, Mr Jiang Yaoping, led official delegations from the two governments to the high-level meeting of the 2012 CEPA Joint Steering Committee.
After the meeting, Mr Tam and Mr Jiang signed on behalf of the two governments. The new document has added two new areas to th Agreement -- education and training, and rail transportation.
The Chief Executive, Mr Chui Sai On, the Director of the Liaison Office of the Central People’s Government in MSAR, Mr Bai Zhijian, the Deputy Commissioner of the Foreign Ministry in Macao, Ms Zhang Jinfeng, the Director of Exchange and Co-operation of the Hong Kong and Macao Affairs Office of the State Council, Mr Qian Lijun and the Director-General of the Macao Customs, Mr Choi Lai Hang attended the signing ceremony.
Both sides agreed to further relax market access conditions and the expand on business scope in some 20 sectors, namely legal, accounting, construction, medical, computer and its related services, technical testing and analysis, personnel placement and supply services, printing, exhibition, and other business services, telecommunications, audio-visual, distribution, environment, banking, securities, social services, tourism, cultural, and individual industrial and commercial households among other areas.
Meanwhile, considering the needs of Macao banks to participate in the development in Hengqin Island, the Arrangement allows Macao banks to lower their year-end asset minimum requirement to $4 billion US dollars.
It would also allow International schools based in Hengqin to expand the scope of recruiting new students, to set up entertainment places, service centres for the elderly and people with disabilities, education and training organisations. It would also simplify documentation for staff members of Macao accounting firms to work on the Mainland.


* Chinese and Portuguese are the official langugages of Macao, the English version of the web site is the translation from the Chinese originals and is provided for reference only.


CEPA VIII takes Effect on 1 April 2012 Further Liberalises Macao-Mainland Trade in Services
(“Macao Image”, Issue No. 55, published in Jan 2012 by IPIM)

The Supplement VIII to the Mainland and Macau Closer Economic Partnership Arrangement (CEPA 8), which will be effective from 1 April, 2012, mainly comprises new measures concerning trade in services and trade and investment facilitation that will further liberalise the service sector.

The latest supplement will add three new areas in trade in services raising the total number of liberalised service sectors to 46 and further open the market access conditions in 11 existing sectors, involving a total of 281 liberalisation measures.

Witnessed by Chui Sai On, Chief Executive of Macao SAR, Zhou Bo, Deputy Director of Hong Kong and Macao Affairs Office of the State Council, Gao Yan,Deputy Director of the Liaison Office of the Central People’s Government, Hu Zhengyue, Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the Macao Special Administrative Region and Choi Lai Hang, Director General of the Macao Customs Service, the Supplement VIII to CEPA was signed by Vice Minister of Commerce Jiang Yaoping and Secretary for Economy and Finance Tam Pak Yuen at Government House on 14 December, 2011.

Vice Minister Jiang said after the signing ceremony that the implementation of CEPA and its supplements, has not only promoted development opportunities in Macao,but also a vitality to the mainland’s economy, achieving mutual benefits. He also said that the 36 support measures for Hong Kong announced by Vice Premier Li Keqiang earlier this year will also be applicable to Macao according to the actual situation, adding that through CEPA, Macao would gain full liberalisation of trade in services as one of the goals laid out in the central government’s 12th Five-Year Plan.

Secretary Tam pointed out that after eight phases of expansion of CEPA, the co-operation of Macao and China has been much closer , great progress has been made in trade and investment facilitation so Macao’s market will be fully in line with the mainland’s.

Supplement VIII to CEPA relaxes the criteria for Macao’s service providers’ to operate in the mainland, by allowing the service suppliers to participate in businesses in the service sectors under CEPA, on condition that they adhere to the mainland’s laws and regulations.

Taking into account Macao’s efforts to develop into a regional business and trade service platform and world tourism and leisure centre, Supplement VIII to CEPA also has closer co-operation arrangements in the financial and tourism fields. It supports Mainland banks to use Macao as an international financial platform to develop international business; allow Macao to use the Renminbi Qualified Foreign Institutional Investors (RQFII) scheme to invest in the mainland’s securities market; supports Macao insurance companies to enter the market by setting up business institutions or capital participation, in order to involve and share in the development of the mainland’s insurance market and will enhance bilateral co-operation in areas such as development of insurance products,business operations and operational management.

In trade and investment facilitation, supplement VIII will further relax the market access criteria for sectors such as legal, placement and supply services of personnel, distribution, banking, securities, insurance,hospital services, tourism, road transport, qualification examinations for professionals and technicians and individually owned stores, as well as adding three new service sectors, including inter-disciplinary research and experimental development services, and manufacturing related services so as library, archive, museum and other cultural services, services related to manufacturing.

According to statistics, duty-free exports from Macao to the mainland amounted to MOP 244 million to the end of November 2011.

In addition, goods exported to the mainland using CEPA’s duty-free access during the first 11 months of this year amounted to MOP 77 million, representing a 35.4 % increase from the same period in 2010.

Key points of CEPA Supplement VIII

Legal

To consider broadening the scope of businesses of Macao residents who have acquired mainland legal professional qualifications and hold a m ainland lawyer’s practice certificate to act as agents in civil litigation cases in the mainland relating to Macao residents and juridical persons.

Banking

To allow mainland-incorporated banking institutions established by a Macao bank to engage in the sale and distribution of mutual funds.

Securities

To deepen co-operation between the mainland and Macao in financia l services and products development and to allow investment in the mainland securities market by means of the RMB Qualified Foreign Institutional Inves tor scheme.

Hospital

In addition to Shanghai Municipality, Chongqing Municipality, Guangdong,Fujian and Hainan provinces, Macao service providers are allowed to set up wholly-owned hospitals in all municipalities directly under the central government and provincial capitals in the mainland.

Qualification examinations for professionals and technicians

To allow eligible Macao permanent residents to take the qualification examination for land surveyors in the mainland, and a certificat e will be issued to those who pass the examination.

Placement and supply services of personnel

The minimum registered capital required for Macao service providers to set up human resources service providers in the human resources service industrial parks approved by the Ministry of Human Resources and Social Security that follows the requirements applicable to mainland enterprises in the municipality where the industrial park is located.


Supplement VII to CEPA Further Broadens Mainland-Macao Co-operation

(“Macao Image”, Issue No. 52, published in August 2010 by IPIM)

Supplement VII to the Closer Economic Partnership Arrangement (CEPA) was signed in Macao on 28 May by Mr. Jiang Zengwei, Vice Minister of Commerce of PRC, and Mr. Francis Tam Pak Yuen, Secretary for Economy and Finance of Macao SAR Government.

Vice Minister Jiang Zengwei said that while CEPA provided greater capacity for the mutual development of Macao and the Mainland, it would also benefi t residents of both places. The Mainland could utilise Macao’s special relations with Portuguese-speaking countries to conduct more extensive co-operation with them.

Mr. Jiang also mentioned that the key feature of Supplement VII to CEPA was the further openingup of the areas and scope of liberalisation based onthe original foundation. Up to now, the Mainland has liberalised 43 areas for Macao services industry, with 261 specific measures implemented. A vast scope for co-operation is possible within the framework and the agreement serves as a broad platform for the mutual development.

Mr. Francis Tam Pak Yuen, Secretary for Economy and Finance, indicated that since CEPA was fi rst signed in 2003 and fully implemented in 2004, the Mainland market has established close links with the Macao market over the past six years. There are now no barriers for Macao enterprises and professionals to develop their businesses in Mainland and therefore, it is high time that all kinds of opportunities to develop Macao should be utilised, Mr. Tam concluded.

He pointed out that currently Foshan, Zhuhai, the North New Zone of Chongqing and the Pudong New Zone in Shanghai have been selected as model cities for CEPA implementation. The Ministry of Commerce would in future select more suitable cities to co-operate with Macao under the free-trade agreement. This is very helpful to effectively promote and publicise CEPA, and assist Macao enterprises to concentrate their business expansion in these model cities.

He emphasised the importance of concentrating all resources to promoting the implementation of CEPA in the next stage in order to highlight its positive effects.

Educational, Cultural and Environmental Co-operation Projects Added Supplement VII to CEPA includes liberalisation measures in trade and investment facilitation and trade in services. On trade and investment facilitation, cooperation in education has been added, thus increasing the total number of co-operation areas in trade and investment facilitation to 10. In industrial co-operation, based on the existing Traditional Chinese Medicine and convention and exhibition industries, co-operation in culture, environmental protection and innovation and technology industries have also been added with corresponding co-operation mechanisms and contents.The total number of industrial co-operation areas has been increased to five, laying a better foundation for future growth in related industries. The two regions have also agreed to further co-operation in the convention and exhibition industry in order to promote its development in Macao. As requested by the Macao SAR Government and agreed to by the national administrative authorities, the Mainland government departments concerned will facilitate the issue of visas for Mainland personnel participating in conventions and exhibitions in Macao, enabling them to take part in events in the city.

In trade in services, further liberalisation arrangements will be implemented from 2011 based on existing arrangements. The industries concerned include the construction, health, audio-visual, distribution,banking, social services, tourism, cultural and recreational, air transportation services as well as professional and technical personnel qualifi cation examination and individually owned businesses, for a total of 11 areas in trade in services. Two new areas were added to the list: technical testing, analysis and product testing services as well as specialty design services. The total number of areas that are liberalised has been increased to 43.

Six years have passed since the signing of CEPA in 2003 and the overall implementation of CEPA in 2004. During this time the number of industries included have been expanded and developed every year. For example, since 2006, all goods produced in Macao are entitled to zero-tariff treatment for export to the Mainland according to the Rule of Origin. To date, there are more than 1,209 kinds of goods that meet the criteria for Rule of Origin. By the end of June 2010, the total value of Macao’s exports entitled to zero-tariff treatment reached MOP 137 million.

For trade in services, by the end of 2009, Macao enterprises and residents have established more than 700 companies or individually-owned businesses on the Mainland via the CEPA mechanism. The Individual Visit Scheme has been expanded to 49 cities in 18 provinces and municipalities. Currently, the number of Mainland tourists visiting Macao under this scheme has reached nearly 34 million.

Trade and Investment Facilitation is another vital part of CEPA apart from trade in goods and in services. When CEPA was signed in 2003, the two sides agreed to conduct co-operation in seven areas. After that the two sides signed Supplement III in 2006 and Supplement V in 2008, adding new co-operation areas as in Intellectual Property Rights protection and brand co-operation. This year Co-operation in education was added. The total number of co-operation areas has reached 10. In these different areas, Macao and the Mainland carried out a series of promotional activities in the past few years, such as establishing a joint group, signing co-operation agreements, mutual visits of government departments and industries and other activities.


 

Supplement VI to CEPA: broaden development for Macao’s service and convention and exhibition Industries

(“Macao TradeInvest Information”, Issue No. 243, published in June 2009 by IPIM)

Supplement VI to the Mainland and Macao Closer Economic Partnership Arrangement (CEPA) signed on 11 May focuses on the implementation of 31 specific measures in three areas, including broadening the liberalisation of Trade in Services, promoting Trade and Investment Facilitation and advancing mutual recognition of professional qualifications. The new arrangements will take effect from 1 October 2009, three months earlier than the previous practice of bringing the new measures into effect on 1 January the following year.

Trade in Services: Supplement VI to CEPA extends the liberalisation of 18 existing CEPA service sectors, bringing the total number of service sectors covered by CEPA to 41, with the noteworthy sectors of convention and exhibition, tourism and medical service widened.

Under Supplement VI to CEPA, three new measures are added to the convention and exhibition sector as follows:
• apart from Guangdong Province and Shanghai, allow Macao service suppliers to organize exhibitions, in the form of cross-border supply, in the municipalities of Beijing, Chongqing and Tianjin, plus the provinces of Fujian, Jiangsu and Zhejiang in a pilot scheme;

• to facilitate the approval process, Guangdong province will be entrusted with the authority to approve applications submitted by Macao service suppliers for the organisation of foreign economic and technical exhibitions exceeding 1,000 square metres in Guangdong province; and

• in addition to Guangdong province, the municipalities of Beijing, Chongqing, Shanghai and Tianjin and Zhejiang province, Macao service suppliers can also organise overseas exhibitions as a pilot scheme in other areas of the Pan-Pearl River Delta Region, including 8 provinces and autonomous regions namely Guangxi, Guizhou, Hainan, Hunan, Fujian, Jiangxi, Sichuan and Yunnan.

In the area of tourism, new measures will be implemented to allow Mainland tourists visiting Taiwan to enter and remain in Macao in transit which will facilitate the development of “one route, multi-stops” tourism products. In addition, Macao permanent residents with Chinese citizenship are allowed to obtain Mainland outbound tour escort credentials. They can be employed by Mainland international travel agents authorised to operate outbound group tours for Mainland residents, Macao and Hong Kong travel agents are also authorised to operate group tours to Macao and Hong Kong for Mainland residents. These measures will encourage co-operation between Macao tourism operators and their Mainland counterparts, as well as attract more Mainland tourists to Macao and promote the development of tourism, retail, catering and related industries.

Facilitation in Trade and Investment: On the basis of the existing 9 liberalisation measures and the co-operation measures to support Macao’s convention and exhibition industry development, both sides agree to adopt measures to intensify the exchanges and co-operation in trademark protection in order to enhance collaboration in the area of intellectual property rights protection. Such measures include the setting up of a communication mechanism between the State Administration for Industry and Commerce of P.R.C and Macao Economic Services to strengthen mutual co-operation in trademark issues, organising seminars, discussions, website publicity and personnel training programmes on trademark registration.

Early and pilot implementation of 7 service sectors in Guangdong province: Supplement VI to CEPA also strengthen the role played by Guangdong province in the early and pilot stage implementation of CEPA. For the 7 service sectors namely legal, convention and exhibition, public utilities, telecommunications, banking, securities and maritime transport, the area of operations that Macao service suppliers are engaging in will be expanded in Guangdong province, the entry threshold for related sectors in Guangdong province is lowered and the province is entrusted with the authority to approve applications, with the aim of promoting exchanges and co-operation between Guangdong and Macao.

IPIM assists industrial and commercial sectors to explore CEPA business Opportunities

CEPA enhances industrial co-operation between the Mainland and Macao, particularly in the creation of more favourable conditions for further co-operation in the convention and exhibition industry. The convention and exhibition industry plays the vital role as an accelerator to build Macao into a trade and economic service platform and promoting the moderate diversification of economic development. On the one hand, it helps to foster the development of related upper and lowerstream industries such as hotel, logistics and retail sectors, while on the other, encourages the development of other emerging industries such as environment, cultural and innovative industries.

IPIM is engaged in various aspects assisting local enterprises to seize the opportunities brought about by CEPA, including further strengthening co-operation between the Mainland and Macao’s sectors and promote Macao’s service and convention and exhibition industries development. IPIM’s efforts include the following:

Strengthening communication between Mainland and Macao enterprises: IPIM will continue to organise trade and economic activities on the basis of “introducing foreign capital and technology and establishing domestic connections”, organise Macao entrepreneurs to take part in Mainland visits, exhibitions and also receive Mainland delegations, actively coorganise seminars with the Mainland including trade and economic exchange activities such as franchising conferences and the “Guangdong and Macao Branded Products Fair 2009” to promote trade and investment exchanges between the two regions.

Promotes trade and economic co-operation between Guangdong and Macao: IPIM and the Guangdong Department of Foreign Trade and Economic Co-operation signed a Comprehensive Strategic Co-operation Agreement in March 2009. All cities and districts in Guangdong province and Macao will join forces to develop more trade and economic activities to explore international markets. Both regions will also conduct regular business matching activities based on the trade and investment cooperation projects on hand. Co-operation project highlights include the “Guangdong and Macao Branded Products Fair 2009”, co-organised by IPIM and Guangdong Department of Foreign Trade and Economic Cooperation, to act as a platform to showcase the outstanding commodities produced in Guangdong and Macao. Business matching sessions, trade and economic seminars will be held to assist enterprises in both regions to tap new markets and promote economic development.

Liaison offices to provide back-up support to Mainland enterprises and Macao businesses: IPIM has established liaison offices in Chengdu, Sichuan province, Hangzhou, Zhejiang province and Jieyang, Guangdong province, which will continue to carry on IPIM’s role of enhancing communication and co-ordination. Apart from providing advisory services and assistance to Macao enterprises in their trade and investment on the Mainland, the liaison offices also establish a communication mechanism, clientele and project database to liaise with potential investors from the Mainland and Macao, to assist enterprises to make the best use of the increasing business opportunities brought about by the CEPA liberalisation measures.

Providing CEPA China Business Advisory Service: IPIM has invited representatives from the Ministry of Commerce to provide a China Business Advisory Service in the Macao Business Support Centre. The advisory service for tapping into Mainland markets is provided to Macao enterprises and overseas businesses using Macao as a service platform and follows up on the referral and administrative procedures for Mainland investment projects.

CEPA covers three broad areas:
Trade in Goods, Trade in Services, Trade and Investment Facilitation

Trade in Goods

The Mainland agrees to apply zero tariffs for all goods of Macao origin which have obtained a Certificate of Origin from 1 January 2006. After stages of implementation, the Rules of Origin for 681 goods of Macao origin have been formulated; the goods can then enjoy preferential treatment of zero tariffs.
Goods categories include: Food and beverages, chemical products, pharmaceutical products, cosmetics, plastic articles, paper articles, textiles and clothing, jewellery, electrical and electronic products, optical apparatus, clocks, watches and musical instruments, photographic items and items required for developing film, building stone and articles of stone, metal products among others.

Trade in Services

Mainland confers preferential treatment for market access to 41 sectors of Macao service suppliers:
Legal, accounting, architecture, medical and dental, real estate, advertising, management consulting, convention and exhibition, value-added telecommunication services, audiovisual, construction and related engineering services, distribution, insurance, banking, securities, tourism, transport, logistics, airport management services, information technology, professional qualification examinations, cultural and recreational, trade mark agency, patent agency, job referral agency, job intermediary, stores owned by a single proprietor, calculator and related services, market research, services related to management consulting, public utilities, building-cleaning, photography, printing and publication, translation and interpretation, environmental, social, sports services, services incidental to mining (gas and natural gas only), consultation services related to science and technology, research and development service.

Trade and Investment Facilitation

Both sides develop facilitation in trade and investment co-operation in 9 areas:
Trade and investment promotion, customs clearance facilitation, commodity inspection, inspection and quarantine of animals and plants, food safety, sanitary quarantine, certification, accreditation and standardization management, electronic business, transparency in laws and regulations, co-operation of small and medium-sized enterprises, industrial co-operation (co-operation of Chinese medicinal enterprises and convention and exhibition sectors), protection of intellectual property rights and brand promotion.


 

CEPA Proves Ideal for Macao’s Convention and Exhibition Development

(“Macao Image”, Issue No. 46, published in June 2007 by IPIM)

The Mainland and Macao’s Closer Economic Partnership Arrangement (hereinafter referred to as CEPA) has been in effect for more than three years since 1 January 2004. In recent years, the Macao SAR Government further strengthen the economic diversification, thus facilitating the development of the convention and exhibition industry. According to Supplement III to CEPA which signed in June 2006, since 1 January 2007, market access for and operation conditions of convention and exhibition were outlined under CEPA to further specify the commitment to service industries. According to the Supplement III to CEPA, service providers in Macao can set up wholly-owned, equity joint venture or contractual joint venture on the Mainland to organise exhibitions in Macao and Hong Kong. Convention and Exhibition co-operation was added to the list of industrial co-operation under trade and investment facilitation of CEPA.

Signed on 2 July 2007, Supplement IV to CEPA covers new measures related to the convention and exhibition sector, namely, that the Mainland will provide support and co-operation to Macao when there are large-scale international conventions and exhibitions to be organised, allowing Macao service suppliers to organise exhibitions in Guangdong Province and Shanghai Municipality on a trial basis through cross-border supply. It allows enterprises set up by Macao service suppliers on a wholly-owned, equity joint venture or contractual joint venture basis in Guangdong Province and Shanghai Municipality to organise overseas exhibitions on a trial basis.

As China’s reforms and trade exposure continue, greater numbers of domestic companies want access to international markets. Participating in international exhibitions is one of the most important promotional or marketing means. With the relaxation of policies by the central government, the participation of Mainland enterprises’ in economic and trade activities including conventions and exhibitions in Hong Kong and Macao will be more prevalent, more companies will have the opportunity to visit Hong Kong and Macao for international conventions and exhibitions.

New Measures of Mutual Benefit and Reciprocity

Deputy Division Chief Jiang Zhijian of the Services Division of the Department of Foreign Investment of MOFCOM, stated at a recent seminar that since the promulgation of the Provisional Regulation on Setting up Foreign-invested Convention and Exhibition Companies in January 2004, 93 such companies have been set up mainly in Beijing, Shanghai as well as Guangdong province with a total investment of US$220 million.

According Supplement IV to CEPA, more liberal measures will be introduced for 17 existing areas of trade in services. In addition, the supplementary sections allow Macao’s service supplier to be active in 11 areas of trade in services on the Mainland. All theses liberal measures will come into force on 1 January 2008. In general, since its inception 38 services areas have been liberalised.

In the convention and exhibition area, under the section of trade and investment facilitation under Supplement IV, the Mainland will provide support and co-operation to Macao in the organisation of large-scale international conventions and exhibitions. Furthermore, the Mainland will allow Macao service suppliers to organise exhibitions in Guangdong Province and Shanghai Municipality on a trial basis through cross-border supply. It also allows enterprises set up by Macao service suppliers on a wholly-owned, equity joint venture or contractual joint venture basis in Guangdong Province and Shanghai Municipality to organise overseas exhibitions on a trial basis. Participating enterprises should be registered enterprises in the relevant province or municipality.

Closer Cooperation in Three Areas

Macao SAR government has given a great deal of support to convention and exhibition and given it a high priority. However the industry is constrained by lack of space and human resources.

The total area of existing convention and exhibition facilities in Macao is 40,000 square metres which will be increased to 140,000 square metres in 2007 with the completion of the Venetian Convention and Exhibition Centre. With a total area of 100,000 square metres, the Venetian Convention and Exhibition Centre will be the largest convention and exhibition facility in Macao. There are about 30 convention and exhibition companies in Macao now. According to the statistics of Macao Convention and Exhibition Association, Macao holds about 300 conventions and exhibitions annually of which over 80% are local events or regional corporate meetings. International convention and exhibition events are few in number and small in size, thus not many economic or social benefits have been generated from the industry. Macao SAR government is committed to expanding the industry. It has encouraged gaming operators to build convention and exhibition facilities and the industry to cultivate human resources.

Chairman Jin Zhongyun of the Macao Convention and Exhibition Association said that 49 Mainland cities are members of the Facilitated Individual Travel scheme (FIT) to Hong Kong and Macao, making it easier for Mainland people to take part in exhibitions held in Macao. In recent years there have been increasing numbers of exchanges and co-operation between convention and exhibition industries on the Mainland and in Macao, mainly in training, consultation, industry exchanges and information. Chairman Jin Zhongyun pointed out that since the launch of CEPA, four Macao enterprises have obtained the Macao Service Provider Certificate from the Economic Department of Macao SAR and commenced business operations on the Mainland.

Mainland Interested in Exploring New Exhibition Markets

According to statistics from the China Council for the Promotion of International Trade (CCPIT) there are about 200 companies or organisations arranging overseas exhibitions. They are divided into three groups. The first are government agencies, such as economic and trade departments of provinces and autonomous regions. The second are chambers of commerce or associations, such as local CCPIT’s or industry associations. The third group are companies associated with Stateowned enterprises (SOEs). Mainland exhibitors generally go to advanced economies such as North America, Western Europe and Japan. The Top ten exhibition destinations for Mainland enterprises are France, Germany, Indonesia, Italy, Japan, Malaysia, Russia, the United Arab Emirates, the USA and Vietnam. Exhibition organisers on the Mainland are looking for new markets.

Since the implementation of CEPA, economic co-operation opportunities in the Pan-Pearl River Delta and Macao’ s advantage as a bridge between the Mainland and Portuguese-speaking countries provides greater prospects for co-operation between the convention and exhibition industry on the Mainland and the rest of the world.


 

Supplement III to CEPA – Beneficial for Macao to Pursue Diversification in Industrial Growth

(“Macao TradeInvest Information”, Issue No. 226, published in August 2006 by IPIM)

After sovereignty of Macao was returned China, the Government established an economic policy to “place the gaming and tourist industries at the head of the main economic push, closely followed by the service industry, with the parallel development of other sectors”. The implementation of CEPA in 2003 and the launch of the “individual travel” scheme for Mainland visitors operated in co-ordination with the liberalisation of the gaming industry in 2002, which drove forward the tourism, gaming, wholesale trade and construction industries, allowing the Macao's overall economy to enter a new phase of development. Gross Gaming Receipts increased by 29%, 43% and 8% respectively in 2003, 2004 and 2005; in addition, Gross Domestic Product went up by 14.2%, 28.3% and 6.7% over the same period.

1) Improving conditions for industrial diversification

Macao's vibrant economy allows for a growth spurt for industry. “The Historic Centre of Macao” has been successfully listed as a UNESCO World Cultural Heritage Site, the continuous development of Macao's flight destinations and the establishment of various low cost aviation companies have added significant advantages to Macao's economy and tourism. In terms of accommodation, according to information provided by the Land, Public Works and Transport Bureau, the number of hotels under construction in the second quarter are 19 (with a total of 17,133 rooms), this will double the number of hotel rooms in Macao on completion.

In the Convention and Exhibition sector, many foreign funded Convention and Exhibition companies have set themselves up in Macao, bringing with them management experience, professional personnel and branded exhibitions. In respect of venues, with Macao Stadium, Fisherman's Wharf Convention and Exhibition Centre and the Venetian Macao-Resort-Hotel gradually coming into operation a total of over 100 thousand square metres of convention and exhibition facilities will be available. The Macao Trade and Investment Promotion Institute not only actively encourages and arranges for Macao's enterprises to exhibit abroad and overseas enterprises to exhibit and sell here, but also provides various training, research, study tours and professional exchanges, so as to cultivate local convention and exhibition talents and raise the level of Macao's Convention and Exhibition industry.

2) “Supplement III to CEPA” Brings Positive Factors for Macao's Industrial Diversification

Irrespective of developing Macao into a Gaming and Entertainment City, a Regional Service Platform or a Convention and Exhibition Centre, it all needs a influx of foreign enterprises and personnel, CEPA is beneficial allowing Macao's enterprises and products to enter the Mainland on the one hand and facilitating Mainland enterprises and personnel to come to Macao on the other.

The Supplement III to CEPA was formally signed on 26 June. In the Service Facilitation area, the Mainland added 13 measures (for details please refer to appendix 1) to the original commitment to opening up services in the areas of legal, construction, convention and exhibition, audiovisual, distribution, tourism, transport and individually owned stores. In terms of Investment Facilitation, to support and align with Macao's industrial structure diversification, the two sides included the Convention and Exhibition sector in Industrial Co-operation and protection of Intellectual Property Rights in the Trade and Investment Facilitation area.

“Supplement III to CEPA” Brings Positive Factors to Macao's Convention And Exhibition Sector and Tourism

Regarding the Convention and Exhibition sector, CEPA allows Macao service providers to set up wholly-owned convention and exhibition companies in China. Supplement III to CEPA goes further to “allow Macao service providers to set up wholly-owned, equity joint venture or contractual joint venture enterprises on the Mainland to provide services to organise exhibitions in Macao and Hong Kong”, facilitating the organisation of Mainland enterprises to participate in exhibitions in Macao and further expand the source of exhibitors and purchasers, giving more room for Macao's convention and exhibitions companies to develop their business. By virtue of the fact that China's Convention and Exhibition level is higher than Macao's and the strengthened co-operation under the framework of CEPA, will, without a doubt push forward the development of Macao's Convention and Exhibition industry. The next 10 years will be the golden time for developing Macao's Convention and Exhibition. Provided that the Government's Policy Guidance and the business community work in co-ordination to train personnel and cultivate brand name, together with the influx of enterprises and personnel brought by CEPA, Macao's will be in a good position to become an Asian Conference and Exhibition Centre.

In respect to the Tourism sector, CEPA allows for the setting up of individual proprietorship travel agencies in China by Macao entrepreneurs. Supplement II to CEPA reduces the annual turnover requirement for Macao's invested Travel Agencies in China to US$25 million for sole proprietorship (other foreign investment is US$500 million) and US$12 million for joint-ventures (other foreign investment is US$40 million). Supplement III to CEPA was a breakthrough in China's present laws and regulations as it opened up, on a pilot basis, the most prominent group tours to Hong Kong and Macao allowing them further development, these opening measures allowed Macao to take the lead in exploring the Mainland tourist market.

APPENDIX 1:
Supplement III to CEPA – Main Content of Commitments for Further Liberalisation

Area

Specific Commitments

Legal services

There will be no requirement on the number of full-time lawyers employed by Mainland law firms that operate in association with Macao law firms (offices); there will be no residency requirements on the Mainland for representatives stationed in representative offices of Macao law firms (offices) on the Mainland; to allow Macao residents who have acquired Mainland lawyer or legal professional qualifications and hold Mainland lawyer's practice certificates to engage in activities as agents in marriage and inheritance cases relating to Macao in the capacity of Mainland lawyers and to allow Macao lawyers to act as agents in civil litigation cases on the Mainland in the capacity of citizens.

Construction

To allow Macao service suppliers to set up wholly-owned construction engineering cost consulting enterprises on the Mainland; for applying qualification when setting up construction engineering cost consulting enterprises on the Mainland, the performance of the Macao service suppliers in both Macao and the Mainland is taken into account in assessing the qualifications of the enterprises.

Convention
and exhibition
services

To allow Macao service suppliers to set up wholly-owned, equity joint venture or contractual joint venture enterprises on the Mainland to provide services for organising exhibitions in Macao and Hong Kong.

Audiovisual services

The State Administration of Radio, Film and Television will delegate to the provincial radio, film and television administration the authority of examining the finished tapes of Mainland domestically-produced television dramas produced by the production organisations under the provinces, autonomous regions or municipalities and participated in by artistes or production crew from Macao.

Distribution services

For any Macao service supplier which opens more than 30 stores on the Mainland, if the commodities for sale include books, newspapers, magazines, pharmaceutical products, pesticides, mulching films, chemical fertilisers, staple foods, vegetable oil, edible sugar and cotton and the above commodities are of different brands and come from different suppliers, the Macao service supplier is allowed to become the controlling shareholder, with the proportion of capital contribution not exceeding 65%.

Travel Agency

To allow Macao travel agencies set up on a wholly-owned or joint venture basis in Guangdong Province to apply on a pilot basis to provide group tours to Macao and Hong Kong for the residents of Guangdong Province (residents registered with permanent residence in Guangdong Province).

Air Transport Services

To allow Macao air transport sales agencies to set up wholly-owned air transport sales agencies on the Mainland. The registered capital requirement will be the same as that for Mainland enterprises.

Road transport services

To allow Macao service suppliers to set up wholly-owned enterprises on the Mainland to provide the following road transport related services: road freight transport depots, and workshops for the repair of motor vehicles and motorcycles.

Individually owned stores

To allow Macao permanent residents with Chinese citizenship to set up, in accordance with the relevant Mainland laws, regulations and administrative regulations, individually owned stores in all provinces, autonomous regions, municipalities directly under the Central Government on the Mainland without being subject to the approval procedures applicable to foreign investments, to provide the following services (excluding franchising): cultivation; animal husbandry; aquaculture; computer repair services; technology exchange and promotion services. The number of employees for each store shall not exceed 8 people.

(This article was prepared by IPIM’s Research and Information Division.)


 

Tan Heong San Coffee Company Explores the Mainland Market

(“Macao Image”, Issue No. 44, published in June 2006 by IPIM)

During his visit to the US in April, President Hu Jintao joked when meeting with the business community, “There are more and more franchise coffee stores in China. If possible, I would also like to go to Starbucks to have a cup of coffee.” His humorous re­marks reflect growing receptiveness of the Chinese to the culture of coffee.

Drinking coffee is no longer con­fined to major cities in China, it has also become popular in smaller cities and towns. This demonstrates the enor­mous potential China has as a coffee market. Well-known international cof­fee chains and coffee suppliers of differ­ent sizes have come to China one after another. Not wanting to be left behind, the business community in Macao has taken advantage of CEPA and entered the mainland coffee market. Macao’s 50 year old Tan Heong San Enterprise Limited exported the first consignment of tariff-free coffee to the Mainland in 2005 and hence took the first step in its strategy to access the market. Executive Manager of Tan Heong San, Sam Leung admits, “Expansion into the Mainland market is something we must do.”

Aroma of half a century

Set up in 1950, Tan Heong San Enterprise Limited has been committed to coffee culture research, expanding the coffee market and providing quality coffee to Macao and neighbouring areas. Its product portfolio grew from one variety at beginning, to the current 26 kinds of coffee. Its clientele includes food vendors, tea restaurants, coffee houses, western restaurants, hotels and recreational facilities. Half of the “Cha Chan Teng” (Chinese tea restaurants) and 70% of hotels in Macao use Tan Heong San’s coffee products, this is a proof of the uniqueness of the compa­ny’s coffee.

Sam Leung says Macao’s coffee cul­ture has been deeply influenced by the Portuguese and thus is different to that in Hong Kong and Japan, so most of Tan Heong San’s coffee is continental style that has a rich flavour and pleas­ant aroma. They have high-end prod­ucts for coffee connoisseurs, such as Ja­maican Blue Mountain No.1 for which they are the sole agents. Some of their products specifically target the tea res­taurant culture such as “Tan Heong San” coffee and Italian coffee that are very popular among consumers.

Macao imported 782,762 kilograms of coffee in 2005, worth MOP10,746,044 and exported 261,409 kilograms, worth MOP4,100,895.

According to Sam Leung, Tan Heong San has stable sales in Macao and Hong Kong and sells nearly 60,000 pounds of coffee to the two cities ev­ery month, of which 30,000 to 40,000 pounds goes to Hong Kong. In recent years they have adjusted their market­ing strategy, introduced modern man­agement, strict blending techniques and quality control so that the company can continue to grow. The Mainland market is now their new target. Sam frankly admits that although their busi­ness in Hong Kong is growing steadily, the market there and Macao is sure to become saturated. However, the Main­land market has great potential and so they have to expand business there.

Extensive distribution network to tap into the market

“Given the size of China’s coffee mar­ket, we need to have an extensive distribu­tion network. Once conditions are ripe, CEPA is going to have a huge effect on our effort to expand our presence in the Main­land market.” Sam Leung says. Tan Heong San is increasing the number of distribu­tion outlets on the Mainland now. They will first go to major Mainland cities such as Shanghai and Beijing and then expand their business nation-wide. He hopes that CEPA with the zero tariff preferential pol­icy will give them a price advantage on the Mainland.

Tan Heong San is now in discussion with Wal-Mart Stores Inc (China) and Parkson Group Shanghai office.

Wal-Mart Stores Inc. is the biggest su­permarket chain in the US and dominates the global retail sector. By the beginning of 2006, it had 80 stores on the Mainland. Tan Heong San is in talks with Wal-Mart about selling Tan Heong San coffee in its supermarkets, the two sides have now agreed on prices and terms. Tan Heong San is working on new packaging for the brand. If the negotiations are concluded successfully, CEPA and zero tariffs will benefit them even more as supermarkets purchase in bulk.

He tells Macao Image if sales go well, Wal-Mart may allow Tan Heong San coffee products to be sold in all its Asian super­market branches. This is a dream for many food and drink producers because this way, their products will leave Macao and gain a foothold on the Mainland, in Asian or even global retail markets.


 

Macao’s First Exhibition and Conference Company and Law Firm Obtain CEPA Certificates

(“Macao Image”, Issue No. 42, published in June 2005 by IPIM)

CEPA has led to rapid growth in Macao’s export of goods to the Mainland, trade in services has also picked up. Macao Economic Services granted “Macao Service Provider Certificates” to a local lawyer and an exhibition and conference company in January, 2005. This means that they are now able to set up a branch or pursue their businesses on the Mainland.

During the annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference in Beijing in February this year, an exhibition and conference company from Macao opened in Beijing. As the first Macao exhibition and conference company that has successfully acquired a CEPA certificate and set up a branch on the Mainland, it has attracted extensive media attention and coverage.

Prime Marketing and Promotional Services Company Limited is a professional exhibition and conference organiser based in Macao. According to Ms. Eva Lo Tak Wah, its Director and General Manager, the company tried to set up a joint venture with a partner in Beijing 18 months ago, but to no avail. Later, when CEPA made it possible for service providers in Macao to run a wholly owned subsidiary on the Mainland to provide conference and exhibition services excluding overseas exhibitions, the company decided to apply for a CEPA certificate.

After obtaining the CEPA certificate from Macao Economic Services, Prime Marketing and Promotional Services Co. Ltd. set up a company in Beijing and was granted a business license on 27 February. The company opened formally on 4 March. It is the first exhibition and conference company from Macao to have set up a wholly owned branch on the Mainland.

Ms. Lo says her company has four business fields in Macao, international conferences, exhibitions, marketing and advertising, while their Beijing branch will be focused primarily on exhibitions and conferences. Ms. Lo said she believes competition in the advertising industry on the Mainland is already fierce, but competition in the exhibition and conference industry is still “not that bad.” “Although over 90 per cent of conferences and meetings in Beijing are organised by the China Council for the Promotion of International Trade (CCPIT), there are still opportunities in the area of small and medium sized international conferences, mainly because Beijing is the capital and therefore attracts a lot of international meetings.” she said.

Ms. Lo believes that the key to the success of a Mainland branch is to build a very scientific management system and then to expand business by taking advantage of local resources. Her company has been operating for several months in Beijing and is building a stable business base.

Macao’s First Lawyer to Have Obtained the CEPA Certificate

Rui Cunha is the first Macao lawyer to have obtained a CEPA certificate for legal services providers. His law firm started co-operating with Mainland firms ten years ago and has partnership arrangements with firms in Guangzhou, Shanghai, Suzhou, Xiamen and Zhuhai, Mr. Cunha describes the CEPA certificate as “a logical and natural step”, “With the CEPA certificate, we are able to pursue our business on the Mainland more easily and freely. The CEPA certificate can also enhance our co-operation with domestic partners.”

With our partnership law firms in Shanghai and Zhuhai, we are able to assist clients in anything they need on the Mainland. I am interested in finding a partnership law firm in Beijing because it is the capital city.” Mr. Cunha’s law firm provides a whole range of services on the Mainland from ordinary businesses like trademark registration and property transactions to collecting debts and litigations on behalf of Mainland clients in Macao.

Mr. Cunha believes running a law firm is like any other business. According to him, there are many competent lawyers in Macao and they are the ones to decide whether they should develop Mainland business, according to their individual policies and strategies. “For us, we will try to be present in all the places where our clients may request our services. Business nowadays is global and you cannot afford to hide in a shell. We feel that we need to contact more people now.”
“The Macao Lawyers Association has close ties with the Mainland. I hope more lawyers from Macao will understand the spirit of CEPA”

Since CEPA’s implementation, 26 service sectors, instead of the initial 18, are now allowed to enter the Mainland market by setting up wholly owned entities or joint ventures. More service providers are now applying for CEPA certificates. Goods qualifying for zero-tariff entry to the Mainland market have been increased from 311 to 501 items. More local industries and goods are finding their way onto the Mainland market thanks to CEPA. According to statistics from the Economic Services Bureau, the government issued 62 certificates of origin in 2004, when CEPA-enabled exports reached MOP2.06 million, with tariff reductions and exemptions amounting to MOP180,000.

Macao Economic Services issued 51 CEPA certificates of origin, worth MOP4.53 million in the first quarter of this year. Exports to the Mainland are more diversified than in the past. So far, MOP3.5 million of goods have been exported, with tariff reductions and exemptions amounting to MOP400, 000. The CEPA-enabled exports volume to the Mainland in the first three and a half months of 2005 was 1.7 times that of last year.


 

The Mainland and Macao Closer Economic Partnership (CEPA) Arrangement Creates New Opportunities-Recent Developments

(“Macao TradeInvest Information”, Issue No. 218, published in April 2005 by IPIM)

Preface

The signature and the implementation of “The Mainland Macao Closer Economic Partnership Arrangement” (CEPA), marks a new stage in the Mainland and Macao’s trade exchange and economic co-operation and also provides opportunities for local and regional enterprises to develop businesses and markets. In this issue we shall combine the contents of CEPA’s first and second phases, present the related market information, to provide investors with a reference on how to grasp CEPA’s opportunities.

Introduction of CEPA and Supplementary Protocol

  • CEPA is a free trade agreement -like arrangement which comes under the umbrella of two separate customs territories of a single sovereign state which came into force on 1 January 2004.
  • CEPA mainly covers three categories: trade in goods; trade in services; trade and investment facilitation
  • On 29 October 2004, Mainland China and the Macao SAR signed a supplementary agreement to CEPA to further liberalise trade in goods and trade in services from 1 January 2005
  • The Mainland agreed to apply zero tariffs to the second batch of 190 goods (Mainland 2004 tariff codes) of Macao origin from 1 January 2005. Together with the first batch of 311 goods, a total of 501 types of good originating in Macao benefit from zero tariffs.
  • First phase of CEPA - The Mainland has given preferential treatment to 18 service sectors in Macao to access China, the second phase has widened the liberalisation of 11 of the existing services and added 8 more service sectors.

CEPA 3 CATEGORIES: TRADE IN GOODS, TRADE IN SERVICES,
TRADE AND INVESTMENT FACILITATION

Trade in Goods

- Mainland applies zero tariffs to 501 goods items:
Goods categories include: Food and beverages, chemical products, pharmaceutical products, cosmetics, plastic articles, paper articles, textile and clothing, jewellery, electrical and electronic products, optical apparatus, clocks, watches and musical instruments, building stone and articles of stone, metal products among others

Trade in Services

- Mainland confers preferential treatment for market access to 26 sectors of Macao service providers:
Legal, accounting, architectural, medical and dental, real estate, advertising, management consulting, convention and exhibition, value-added telecommunication, audiovisual, construction and related engineering, distribution, insurance, banking, securities, tourism, transport, logistic, airport management, information technology, professional and technicians qualification examinations, cultural entertainment, trademark agency, patent agency, job referral agency, job intermediary

- Both sides strengthen mutual co-operation in finance, tourism and encourage recognition in specialist qualifications

Trade and Investment Facilitation

- Both sides develop trade and investment co-operation in 7 areas:
Trade and investment promotion; customs clearance facilitation; commodity inspection, inspection and quarantine of animals and plants, food safety, sanitary and inspection, certification, accreditation and standardisation management; electronic business; transparency in laws and regulations; cooperation between small and medium-sized enterprises; industrial co-operation

Recent developments

Trade in Goods: CEPA has strengthened Macao's product competitiveness in the Mainland market and greatly widened business developing opportunities. Since its implementation, many categories of products originating in Macao have enjoyed tariff free treatment on importation to the Mainland, including: cement, busways, textile and clothing products, rewritable CDs, plastic bags as well as confectionary. The Supplementary Protocol further enlarged the list of products eligible for zero customs duty and the value of CEPA exports recorded noticeable rises this year. According to Guangzhou Customs statistics’, the value of CEPA goods exported to the Mainland through Guangdong Port in the first quarter of 2005 amounted to USD 363,000 and reduced the customs duty by RMB 276,000, recording 900% and 1280% growth when compared to same period last year.

Macao's CEPA origin products accelerated access to Mainland markets has demonstrated the development potentials and has also reflected the fact that enterprises have entered a new stage of development and grasp the related procedures and established customer networks. In addition, the newly added 190 items are mostly textile and clothing products, including: clothes, gloves and other clothing accessories made of leather or of composition leather; wool; yarn (silk, wool, flax yarn, ramie yarn, nylon); overcoats or wind-cheaters, suits, ensembles, jackets and blazers, trousers, skirts, downs and the most preferential rate for these goods imported to the Mainland last year ranged from 5% to 38%. As garment processing being main sector of Macao manufacturing industries, it provides great potential for development and is eyed by local entrepreneurs.

Trade in Services: CEPA has provided Macao's service sector with exceptional opportunities for developing the Mainland market. Currently, a number of enterprises from various sectors (namely: freight forwarding agency, logistics, warehousing, transportation, distribution, conference and exhibition, telecommunication and advertising) have already obtained the "Certificate of Macao Service Supplier" issued by Macao Economic Services and have set up operations under CEPA on the Mainland. Moreover, under CEPA's framework Macao's medical and legal professionals are eligible to take the qualification examinations on the Mainland and up to the end of 2004, 1202 individually owned stores have already registered in Guangdong Province from Macao's businessmen under CEPA.

Furthermore, the exhibition and convention sector which has been developing rapidly in Macao in recent years, has been active in developing the Mainland market under CEPA while a exhibition company has already cracked to Beijing as a sole proprietor. Also, some conference and exhibition service suppliers that have obtained the "Certificate of Macao Service Supplier" stated that through Macao's international networks they could join foreign investors in setting up operations on the Mainland in searching for exhibitors for Macao's fairs and for a training and market development network base.

Trade and investment facilitation: In line with the liberalisation of trade in goods and trade in service, the Mainland and Macao have developed trade and investment facilitation in 7 areas. Under this framework, both sides have signed the "Arrangement of Co-operation in Customs between the General Administration of Customs and Macao Customs Service, "Arrangement of Co-operation in Inspection, Quarantine and Food Safety" and "Arrangement of Co-operation in Product Safety and Origin" and have established 7 trade and investment facilitation working groups composed of related departments from both sides cementing the co-operation.

For promoting CEPA, Macao Trade and Investment Promotion Institute hosted a series of promotional activities in various Mainland cities/provinces as well as overseas, jointly organised with relevant organisations large-scale activities like "Promotion Week for CEPA on the Mainland, Hong Kong and Macao" in Beijing, Shanghai and Guangzhou, "Promotional Activities for the Economic Co-operation Between Chongqing and Macao under CEPA" and "Promotional Activities for the Economic Co- operation Between Sichuan and Macao under CEPA" and one of the themes of the 9th MIF held last October was "Seizing Unprecedented Business Opportunities with CEPA". IPIM has signed with many Mainland cities and provinces trade promotion organisations co-operation agreements under the CEPA framework to further increase all sides trade and investment co-operation to better support and assist enterprises to explore business opportunities.

This article was prepared by IPIM’s Research and Information Division.

Source: 1 Macao Daily, 14 April 2005
Source: 2 Guangdong Economic and Trade Commission, 25 JAN 2005 data

The Macao SAR Government set up the 'CEPA Information Centre' in Macao Trade and Investment Promotion Institute's, Macao Business Support Centre's offices. The CEPA Information Centre provides a number of information services for the public, including: enquiry service for CEPA, especially in the affairs of trade in goods, trade in service and trade and investment facilitation; CEPA related materials and application forms and handling of the "Certificate of Macao Service Suppliers" application

Address: Alameda Dr. Carlos d´ Assumpção no. 263, Edif. China Civil Plaza, 20th floor, (Macao Business Support Centre) Macao
Tel: (853) 8798 9708
Fax: (853) 2875 5011
Email: info@economia.gov.mo
Homepage: www.economia.gov.mo


 

Introduction on "Rules on Approving Mainland Enterprises to Invest in Enterprises In Hong Kong or Macao Special Administrative Regions"

(“Macao TradeInvest Information”, Issue No. 215, published in October 2004 by IPIM)

The Ministry of Commerce and the Hong Kong and Macao Affairs Office of the State Council jointly announced on August 31 "Rules on Approving Mainland Enterprises to Invest in Enterprises in Hong Kong or Macao" (hereinafter referred as "Rules"). The content include facilitated approval procedures as well as shorten the examination and approval time and so on other measures which further allowed Mainland enterprises to invest in Hong Kong and Macao.

The Ministry of Commerce and Hong Kong and Macao Affairs Office of the State Council formulated the "Rules" for the purpose of implementing the "Mainland and Hong Kong Closer Economic Partnership Arrangement" and "Mainland and Macao Closer Economic Partnership Arrangement" (CEPA), to further encourage and support mainland enterprises from China wanting to invest in Hong Kong and Macao.

The "Rules" stated that the Mainland authorities encourage and support all types of mainland enterprises to invest in setting up enterprises in Hong Kong and Macao and provide a list of the enterprises that mainland companies may invest in, for example local legal capacity in trade, engineering contract, labor service cooperation, production and manufacture, traffic and transportation, tourism, service, research and development, investment, science and technology or the enterprises already established by mainland entrepreneurs in Hong Kong or Macao or other countries and regions may also invest in Hong Kong and Macao. The modes of investing and establishing enterprises include newly establishment (including single proprietorship, joint venture, co-operation and so on), acquisition, merger, becoming a shareholder, capital injection, stockholder's rights replacement.

The Ministry of Commerce is the department that authorises mainland enterprises to establish business (excluding financial institutions trade) in Hong Kong and Macao. The relevant commercial administrations under Provincial Governments (hereinafter referred to as "provincial relevant commercial administrations") examine or approve preliminarily local enterprises' investment in Hong Kong and Macao with the authorization of the Ministry of Commerce. If it is required they will ask the advice of the Hong Kong and Macao Affairs Office of the State Council, Hong Kong and Macao Liaison Office under the Central Government. In addition, the "Rules" lay out the regulations for the mainland enterprise and the state enterprise to establish enterprises in the Hong Kong and Macao. If local enterprises invest in enterprises in Hong Kong and Macao with the intention of being listed on overseas stock exchange, or investing in other businesses, they should obtain the approval of the Ministry of Commerce. Others should be approved by provincial relevant commercial administrations authorised by the Ministry of Commerce. If state companies invest in enterprises in Hong Kong and Macao, they should seek the approval of the Ministry of Commerce.

According to the "Rules" if the application is complete and meets the statutory form or the applicants have added any missing documentation in accordance with the stated guidelines, a decision on whether the application is approved or rejected should be made within 15 working days of receipt. Moreover, after being approved, the Provincial relevant commercial administration will issue the Approval Certificate of Mainland Enterprises Investing in Hong Kong and Macao (hereinafter referred to as "Approval Certificate") for the local enterprises. The Ministry of Commerce issues the Approval Certificate to state enterprises.

Mainland enterprises investing and setting up enterprises in Hong Kong and Macao should provide the following documents.

The application letter (including the name, registered capital, investment funds, business scope, business term, organization structure, stockownership structure).
Memorandum of the enterprise and related agreements or contracts;
Mainland business license and the documents required by laws and regulations.
Examination and approval documents issued by foreign exchange authority on the source of foreign exchange (transaction must be in foreign exchange);
Other documents required by law, regulations and the State Council.
Reference: "Rules on Approving Mainland Enterprises to Invest in Enterprises In Hong Kong or Macao Special Administrative Regions"

(This article was prepared by IPIM’s Research and Information Division.


 

How to Make Use of the Opportunities Offered by CEPA to Enter into the Service Market of Mainland China

(“Macao TradeInvest Information”, Issue No. 212, published in April 2004 by IPIM)

The Trade in Services of the Closer Economic Partnership Arrangement (CEPA) covers 18 sectors, and more than 40 specific service activities. The Arrangement lowers the barriers to the entry for Macao service providers, annulled some of the restrictions in share holding, allowing for wholly owned business by Macao enterprises in majority of the sectors. Besides, the Arrangement also makes the opening of the sectors concerned one to three years earlier than China's WTO commitments. In addition, it will permit Macao professional to sit for professional examinations in the Mainland to obtain the qualifications necessary for related practices.

Macao's service industry is of vital importance to its overall economic structure. From 1991 onwards, Macao's export of services began to surpass the export of goods. Currently, the tertiary industry takes account of more than 90% of local GDP. The implementation of CEPA will strengthen the investment confidence of Macao's investors in Mainland market, expanding the scope of Macao's economic activities. In the long term, while Macao's high value-added manufacturing industries can have steady growth, the service can make use the opportunity to enter into the Mainland market to develop, both beneficial to the adjustment of Macao's economic structure and diversification.

For Mainland China, the service industry's development is relatively backward and is in dire need of capital and related professionals which Macao enterprises can supply. The business operations on Mainland in many places are still largely the extension of the state planned economy, with enterprises highly dependent on the government. So in view of this, Macao enterprises, familiar with the market regulations and international standards, can help Mainland companies to compete in a more orderly manner rather than in some risky and unregulated ways.

Among the 18 sectors opened by CEPA, Macao business people can choose those with relatively lower registration capital and less stringent requirements. In this issue, we will provide information concerning entry requirements of the following several types.

 

Present state

Under CEPA

Approval Procedures

Exhibition and convention services

Foreign enterprises with majority ownership are allowed to conduct exhibition services, but they have to cooperate with appointed organizations in order to organize international exhibitions. Notably, Mainland authorities will assign the exhibition license to the Chinese partners of the joint venture.

Macao companies are permitted to supply convention services on a wholly-owned basis from January 2004.

Report to Planning Commission to register the project and apply to Foreign Trade and Economic Co-operation Department for approval.

Advertising

Foreign companies may operate only as minority ownership JVs. After entered WTO, majority ownership and wholly owned advertising firms are permitted in 2 and 4 years respectively.

Macao companies are allowed to establish wholly owned advertising firms from January 2004, i.e. 2 years ahead of the WTO timeframe.

Submit project proposals, feasibility reports to State Administration For Industry and Commerce for approval; report to Ministry of Commerce about contracts and organization charters.

Distribution
- Retail services
- Franchising

- Only JVs are allowed
- for setting up JV retail enterprises, foreign partners must have average annual turnover for not less than US$2 billion in the 3 years prior to application and asset value of not less than US$200 million in the year before application. Minimum capital requirement of the JV is RMB50 million. (RMB30 million in the central and western China)
- JVs are allowed in 5 Special Economic Zones and all provincial capitals.
- Chain stores with more than 30 outlets selling different types and brands of cars and products subject to state trading from multiple suppliers will be limited to minority-owned JVs; the limitation for cars will be lifted in 5 years.
- Retailing of pharmaceuticals, pesticides, mulching films and processes petroleum will be allowed in 3 years; chemical fertilizers in 5 years.
- Independent legal entities with registered trademarks, company names, products and patents, as well as no less than one year good operation performance are allowed to act as franchisors.
- Foreign retail chain stores are not allowed to expand their networks by franchising.
- A ban on all direct sales enterprises funded by foreign capital shut down or transformed into in-shop sales.

For the setting up of retail commercial enterprises on a wholly-owned, equity joint venture or contractual joint venture basis, 1 Macao service suppliers must fulfil the following conditions:
The average annual sales value of a Macao service supplier in the preceding 3 years will not be less than US$100 million; the minimum assets in the previous year will be US$10 million; the minimum registered capital for setting up an enterprise will be RMB 10 million. For setting up a retail commercial enterprise in the Central and Western Region, the minimum registered capital will be RMB 6 million.
- To allow Macao service suppliers to set up wholly owned retailing enterprises for sale of motor vehicles. 2
- To allow Macao permanent residents with Chinese citizenship to set up, in accordance with the relevant laws, regulations and administrative regulations, individually owned stores in Guangdong to provide retailing services excluding franchising operation, with out being subject to the approval procedures applicable to foreign investments. The sales area of such stores will not exceed 300 square metres.
To allow Macao service suppliers to engage, in the form of wholly-owned operations, in franchising. 3

Ministry of Commerce responsible for project registration, approval of contracts and organization charters.

Management consulting

Majority ownership in JVs are allowed. Wholly-owned subsidiaries are allowed within 6 years of WTO accession

- To allow Macao service suppliers to provide, in the form of wholly-owned operations, management consulting services, including general management consulting services, financial management consulting services (except industrial tax), marketing management consulting services, human resource management consulting services, production management consulting services, public relations services and other management consulting services.
- The minimum registered capital requirement is 0.1 million RMB, according to "Company Law of the People's Republic of China".

Project directly submitted to Foreign Trade and Economic Co-operation Departments for approval (except for legal consulting).

Real Estate Services.
- Real estate services in involving own or leased property
- Real estate services on a fee or con tract basis

- Wholly-foreign owned firms are permitted for own or leased properties except for high standard real estate projects.
- For services on a fee/contract basis, JVs with foreign majority ownership are permitted.

- To allow Macao service suppliers to provide, in the form of wholly-owned operations, high standard real estate project services. 4
- To allow Macao service suppliers to provide, in the form of wholly-owned operations, real estate services on a fee or contract basis.
- To allow Macao service suppliers to provide, in the form of wholly-owned operations, real estate agency services.

Project registration, approval of contracts and organization charters at Foreign Trade and Economic Co-operation Departments. Qualification certificates obtained through Land Administrations and Property Management Departments.

Storage and warehouse services

Majority and wholly-owned subsidiaries are allowed.

Macao companies are permitted to operate on a wholly-owned basis with a minimum registered capital of RMB0.5 million which is the same for mainland enterprises

Project companies submit documents to Foreign Trade and Economic Co-operation Departments for approval.

Tourism and travel related services

1. JVs are allowed to construct, renovate and operate hotel and restaurant
2. JV and wholly-owned travel agencies are allowed to operate in government designated holiday resorts as well as Beijing, Shanghai, Guangzhou and Xian Guangdong residents need to join travel agencies organized package tours in order to travel to Hong Kong and Macau

- To allow Macao service suppliers to construct, renovate and operate, on a wholly-owned basis, hotels, apartment buildings and restaurant establishments.
- There will be no geographic restriction on Macao travel agencies forming joint venture travel agencies whenever the Mainland agencies have majority shareholding.
- To allow residents of Beijing, Shanghai, and Guangzhou, Shenzhen, Zhuhai, Dongguan, Zhongshan, Jiangmen, Foshan and Huizhou of the Guangdong Province to visit Macao individually as tourists, and for the residents of Guangdong Province not later than 1 July 2004.

For restaurants, project companies submit documents to Foreign Trade and Economic Co-operation Departments for approval.
For high-standard hostels, villas, high-standard office buildings, international convention and exhibition centers and travel agencies (all being restricted types), projects have to be registered with State Planning Commission and contracts and organization charters to be approved by Foreign Trade and Economic Co-operation Departments

1. The retailing services provided by Macao service suppliers in the Mainland in respect of books, newspapers, magazines, pharmaceuticals, pesticides, mulching film, chemical fertilizers, staple food, vegetable oil, edible sugar, cotton and processed oil remain subject to Mainland's commitments to members of the World Trade Organization.

2. Chain stores with more than 30 outlets remain subject to Mainland's commitments to members of the World Trade Organization.

3. The respective regulation will be promulgated separately.

4. High standard real estate projects refer to the real estate projects with construction costs per unit two times over the average construction costs per unit in the same city.

CEPA was brought about in a "One country, Two systems" context. The taxation systems of Macao and Mainland China are quite different and the two places tend to have relatively independent interests. In signing CEPA, the Central Government has demonstrated its staunch determination to support and give privileges to its two SARs, making Macao's interests being protected asymmetrically. Under CEPA, Macao's service providers can go into the Mainland market with an equal status with their Mainland counterparts. Hopefully before the WTO commitments take their full effects, Macao enterprises can establish their footholds, thus taking up advantageous positions in the intense competition of the future.

(This article was prepared by IPIM's Research and Information Division.)


 

Hong Kong and Macao Join Hands in Promoting CEPA on the Mainland

(“Macao Image”, Issue No. 40, published in September 2004 by IPIM)

The “Hong Kong and Macao CEPA Mainland Promotion Week” launched in Beijing in January 2004, was one of the key promotion events in the initial stages of the implementation of CEPA. The Mainland, Macao and Hong Kong launched a massive CEPA promotion campaign in Beijing, Guangzhou and Shanghai in January and February 2004. As these are the economic powerhouses of the three most important regional economies on the Mainland, the three cities will certainly “spread the message” far beyond their municipal borders.

Beijing was the first leg of the three-city CEPA promotion tour for the simple but important reason that the metropolis is the capital of China, the seat of the central government and the focus of nationwide and international attention. Beijing is also the place where all foreign embassies are concentrated. Consequently, the promotion campaign in Beijing has not only spread the CEPA message around the metropolis but also in many other cities and provinces on the Mainland, as well as many countries overseas. Shanghai, the economic locomotive of the Yangtze River Delta, was chosen as the second stop of the “roadshow” to promote CEPA in the booming estuary.

On 11 February, 2004, a 191-strong business delegation from Macao took part in the promotion week. The event in Guangzhou included an exhibition of traditional Macao foodstuffs, toys, fabrics and textiles, as well as financial, telecommunication and tourism services and products. Many visitors from different walks of life were drawn to the event.

The Macao enterprises, which already have business ties with the Mainland or acquired the necessary connections or information there, have already rushed to the “zero-tariff shopping centre” in Guangzhou and enjoyed good first-quarter economic returns. Other investors both at home and abroad are vying for the business opportunities opened up by CEPA.

Mr. Liang Wenchao, a native of Huizhou City, went to the exhibition in Guangzhou to gather information on “tariff-free goods” for his stores, so as to jump on the CEPA bandwagon. Mr. Liang said he had come to the Macao exhibition out of pure curiosity. “Inquisitiveness is very important. CEPA is a brand-new business concept, and new business concepts are what people in business are looking for. But we need a good bridge to facilitate decision-making and communication among the various partners.”

Hong Kong Products vis-à-vis Macao products

Mr. Liang is quite familiar with the local markets in Dongguan, Guangzhou and Shenzhen . The eastern part of Guangdong Province did not have many contacts with Macao in the past and, therefore, got little business information about the city. Although Mr. Liang had been told that Macao products are cheaper than Hong Kong’s, he wanted to know what the differences between them were and what made the former cheaper. As Mr. Liang’s understands it, “Manufacturers in Macao mainly process raw materials from the Mainland, process according to the samples and designs from the Mainland, assemble parts for their clients and engage in compensation trade”, so he wanted to know what differentiates the products made in Macao. Visiting the exhibition helped him gather information about more products from Macao. After touring the Macao exhibition, he seemed to be more interested in traditional Macao food.

Another visitor, Mr. Liang Jianming, was from Foshan. Mr. Liang deals in tourism-related goods and has been to Hong Kong and Macao many times. He says he likes Macao’s tourism environment. The city’s attraction as a tourist destination does not only come from its gaming facilities but also more importantly from its centuries-old Portuguese-style architecture and its unique customs and culture plus the kindness and hospitality of the locals. As Foshan and Macao are closely linked by a convenient transport network Mr Liang said he believed there existed many possibilities for co-operation with his counterparts in Macao.

Mr. Liang also welcomed the policy of allowing Mainland residents to travel to Hong Kong and Macao as individual tourists. “We had to apply for short-stay visas to Hong Kong and Macao in the past, which involved a number of complicated procedures. We could only travel as members of a tour group, so there were a lot of restrictions. With this new policy, it is much easier. Once we get the travel documents, we can go. Two hours by car to Zhuhai and on to Macao after clearing the immigration checkpoint, then we can decide for ourselves whether we will spend one or two days in Macao.”

Mr. Liang is more interested in gathering information about the tertiary sector. “Tourism and service industries are strong in Macao. So I will mainly look for information about trade and services, such as the catering industry, the supply of raw materials and other investment possibilities.” Mr. Liang said he was happy with the way he was received by staff at the Macao exhibition and the abundant information and documents that were available.

Local Manufacturers Looking for Co-Operation Partners

Mainland manufacturers hoped to obtain more information at the exhibition. Participating Macao enterprises hoped to promote their products and to find co-operation partners. Mr. Ieong Bengzhong took his product line of children’s wear to display at the exhibition. He said he was also interested in investing on the Mainland and expected to learn more about the Mainland’s CEPA policy, as well as the benefits it could bring.

Most Macao manufacturers do not possess their own sales networks on the Mainland. Neither do they fully understand the Mainland market. Mr. Ieong pointed out some of the concerns of Macao’s manufacturers when they consider opening up the Mainland market by taking advantage of zero tariff. Mr. Ieong took himself as an example: He is a children’s garment manufacturer with more than 20 years of experience and he believes that the Mainland is a promising market for children’s wear. Nevertheless, he is not sure whether only brand name products would be welcomed in the Mainland market. So he hopes to truly understand what the market needs by participating in the exhibition and finding partners to jointly open up the Mainland market. The exhibition was like a “trial balloon” for Mr. Ieong. If his products proved popular on the market in Guangdong Province, he said he would try other Mainland cities.

Mr. Ieong concluded that he had learned a lot from the exhibition, mainly because of the plentiful information that was available. During the exhibition, he got to know some members of the Mainland’s business community. As a follow-up, Mr Ieong said he would draw up his own Mainland investment plan. “Guangzhou consumers have purchasing power, and the consumers are very active. So if Macao can come up with some new garment designs, Mainland customers will welcome our products.


 

Thanks to CEPA, the First Three Batches of Tariff-free “Made in Macao” Goods Arrive on the Mainland

(“Macao Image”, Issue No. 40, published in September 2004 by IPIM)

The first batch of goods made in Macao arrived at Macao’s Lotus Flower Bridge Checkpoint at 10:00 a.m. on 18 February 2004. They entered the Mainland market tariff-free as provided for under the Closer Economic Partnership Arrangement (CEPA). These goods consisted of 4.1 metric tonnes of polythene plastic bags manufactured by a plastic bag manufacturer in Macao. This goes to show that Macao and Mainland China have officially implemented the preferential measures in the category of trade in goods covered by CEPA.

The Closer Economic Partnership Arrangement (CEPA), signed by the Mainland and Macao in 2003, covers three categories, namely, trade in goods, trade in services, and trade and investment facilitation. With CEPA officially having come into force on 1 January 2004, goods “Made in Macao” which meet the set CEPA criteria are given tariff-free access to the Mainland market.

Thanks to the Macao-Mainland Closer Economic Partnership Arrangement (CEPA), the first three batches of “zero-tariff” Macao-made products were delivered to the Mainland Chinese market in the first quarter of 2004. Even though the initial volume remained below expectations, all those benefiting from the new policy agreed that Customs procedures have been considerably simplified and that the preferential measures stipulated in CEPA will further enhance competitiveness. Indeed, the new policies will give a boost to all those manufacturers interested in entering the Mainland market on the back of CEPA’s preferential policies.

Plastic Bags “Made In Macao” Were the First Batch of “Zero-Tariff” Products Exported to the Mainland

The Yiu Wah Plastics Factory has been operating in Macao for more than 30 years. The factory seized the opportunity provided by the signing of CEPA’s zero tariff policy and exported 4.1 metric tonnes of plastic bags to the Mainland, thus becoming the first manufacturer in Macao to have taken advantage of the new measure. According to the factory’s Manager, Mr. Fung Yiusun, the company did not consider opening up the Mainland market before the signing of the Macao-Mainland CEPA. However, “plastic bags” are one of the 273 “zero-tariff” goods listed under CEPA. Consequently, plastic bags qualify for exemption from of 12 per cent import tariff and, thereby, may enter the Mainland market at a lower cost and price. Mr. Fung also said that his factory was fully aware of the huge potential of the vast Mainland market.

Since the Yiu Wah Plastics Factory was the first to apply for CEPA’s zero-tariff treatment, the company did not have much experience to rely on. Mr. Fung acknowledged that his company was actually worried about the complicated procedures involved when applying for a CEPA-related certificate of origin. Much to their surprise, and thanks to close co-operation from government departments on both sides of the border, it only took the company around ten days to get a certificate of origin approved. Mr. Fung said his company was “very happy with the department’s high efficiency,” adding that the Customs services were also very efficient. When the goods reached the Lotus Flower Bridge Checkpoint between Macao’s Taipa Island and Zhuhai’s Hengqin Island for customs clearance, it took only about 10 minutes to complete all the procedures, from submitting all the documents to inspection of the goods.

Mr. Fung pointed out that the tariff exemption for the first batch of plastic bags was valued MOP 2,843, corresponding to more than 10 per cent of the total costs, thus giving the products a more competitive edge on the Mainland market. Lower costs, coupled with better quality, will increase the competitiveness of the company’s products and makes it possible for it to further open up the Mainland market. As a first step, the company will target the Pearl River Delta market.

MM Powerplus Busway Ltd. Is on Its Way to the Mainland Market

The second batch of goods was exported tariff-free by MM PowerPlus Busway from Macao to Shanghai on 20 March 2004. The batch included more than 100 pieces of 300-metre long busways. The Zero-tariff arrangement saved MM Powerplus Busway Ltd. MOP60,000, 20 per cent of the total cost. Unlike the plastic bag plant, MM Powerplus Busway Ltd is not unfamiliar with the Mainland market. The company had, in fact, business contacts with the Mainland before CEPA came into being.

Powerplus Busway is a power distribution system specifically designed for skyscrapers and heavy industries. MM Powerplus Busway Ltd. is the only powerplus busway manufacturer in Macao. Its technical manager, Mr. Garry John Moloney, told Macao Image the company’s products are mostly exported to Taiwan and Hong Kong, as well as Australia, Malaysia, the Philippines, Singapore and Thailand. The company’s Mainland export markets include, among others, Beijing, Chongqing, Guangzhou, Shanghai and Tianjin. However, the Mainland market has so far taken up only five per cent of the total export value of Powerplus Busway.

In view of the opportunities created by CEPA, the company plans to increase its business activities in Mainland China. Mr. Moloney pointed out that the production costs of powerplus busways are rather high since raw materials need to be imported. Zero-tariff access to the Mainland market could nevertheless indirectly cut costs and make the company’s products much more competitive. Consequently, the company plans to expand its business on the Mainland and hopes to raise the share of his company’s total export value on the Mainland to 40 per cent. Mr. Moloney also said that his company had already been in touch with some Mainland provinces to seize more co-operation opportunities in a bid to expand its business to more Mainland cities.

Lower Production Cost for CD-R Manufacturers

Champion Digital Technology Production Ltd. is the only CD-R producer in Macao. CD-R was the third batch of Macao-made goods that entered the Mainland market tariff-free in line with CEPA. The company’s Sales Manager, Mr. Donald Wong, told Macao Image that the first lot of products had been sent to the Mainland “to test the market there.” In fact, there are many competitors on the Mainland and this makes it rather difficult for the company to gain a foothold. On the other hand, Mainland manufacturers need to pay 17 per cent of VAT on any raw-material imports. Moreover, factories operating on the Mainland often face electricity supply problems. Whereas there are no such problems in Macao and zero tariff reduces production costs. For the company’s first batch of goods alone, 4.2 per cent of tariff was exempted.

In the first quarter of 2004, since CEPA came into force on 1 January, the Macao Government Economic Services Bureau received a total of 17 applications for zero-tariff and issued six “certificates of origin for zero-tariff goods”. On top of that, the Bureau received 18 applications for “Macao Service Supplier” certificates and issued 41 such certificates.


 

CEPA Information Centre

(“Macao Image”, Issue No. 40, published in September 2004 by IPIM)

In order to help manufacturers, traders and investors familiarise themselves with CEPA, the Macao Economic Services has set up a CEPA Information Centre at the Macao Business Support Centre to provide the business community with relevant information about CEPA, and to respond to enquiries. Businesspeople are welcome to call or visit the centre. The CEPA Information Centre also handles applications for “Service Supplier” certificates. According to CEPA, 18 service industries in Macao are qualified for preferential conditions when entering the Mainland market, namely management consulting, convention and exhibition services, advertising, accounting services, construction and real estate, medical care and dental services, distribution, logistics, storage, warehousing, transport services, tourism, audio and visual services, legal services, banking industry, securities, insurance and telecommunication. Businesspeople are welcome to visit the CEPA Information Centre for further information and related services if they wish to apply for a “Service Provider in Macao” certificate.

Contact:

CEPA Information Centre
Add: Alameda Dr. Carlos d’ ssumpção, No 263, Edif. China Civil Plaza, 20º andar, Macao
For enquiries, please call (853) 87989708


 

The Mainland and Macao Closer Economic Partnership Arrangement, Its impacts on Macao

(“Macao TradeInvest Information” – Issue No. 211, published in February 2004 by IPIM)

The Mainland and Macao Closer Economic Partnership Arrangement, coming into effect on 2004 January 1, (hereafter referred as CEPA) is an important policy to promote the joint economic prosperity and development of the Mainland China and the Macao Special Administrative Region of China. It was drafted in a process of five working meetings between economic and trade officials of the two sides in a duration of four months and was finally signed on Oct 17, 2003, in Macao, with its content in principle following the Mainland and Hong Kong Closer Economic Partnership Arrangement. The CEPA document comprises the main text and six annexes, constructing a liberalization framework composed of three main areas, namely, trade in goods, trade in services and trade and investment facilitation. CEPA, in fact, is a FTA-like arrangement in nature between two separate customs territories of a single sovereignty state, reflecting the Central Government's unreserved support for its two special administrative regions.

CEPA, according to Mainland tariff codes in 2001, allows 273 items of products made in Macao as fulfilling the rules of origin criteria, to enter the Mainland market with zero tariff. Imported products made in Macao other than these 273 items are eligible for zero tariff not later than 1 January 2006. CEPA also guarantees Macao imports are free from non-tariff barriers, such as anti-dumping, anti-subsidy measures and quota restrictions. Taking into consideration of Macao's particular situation that there is no container port and so most of cargos have to be transported via Hong Kong, CEPA makes special provision so that Macao imports can have transit through Hong Kong.

The 273 items of products include the following categories, Food and Beverages, Chemical Products, Pharmaceutical Products, Cosmetics, Plastic Articles, Paper Articles, Textiles and Clothing, Jewellery, Electrical and Electronic Products, Optical Apparatus, Clocks, Watches and Musical Instruments, and other (including lighting fittings, articles and equipments for sports or outdoor games, gloves, mittens and mitts, footwear, hats and other headgear, buttons, slide fasteners, cement, saddlery and harness for any animal, glass and glassware, table, kitchen and other household articles and parts of stainless steel, refined copper foil, articles of precious metal or of metal clad with precious metal for technical or laboratory use).

Compared with CEPA signed by Mainland and Hong Kong, Macao's CEPA includes some items not included in Hong Kong's CEPA, for instance, cement, noodles(flour products), glass fibres, biscuits, candies, certain types of pharmaceutical products, garments, footwear and hats, as well as some specified electrical appliances. The 273 items also include those products not being currently produced in Macao, but Macao manufacturers have intention or even plans to produce in the future, like electrical appliances, stainless cutlery, movie and digital products, providing space for nurturing and developing new manufactory industries in Macao. Besides, checking against Macao external trade statistics of 2002 to 2003, the 273 items also include 67 items which Macao did not export in the period, like noodles and toasted bread, antibiotics, herbal and traditional medicines, cosmetics, jewellery, down apparels, small electrical appliances, clocks and watches.

The reductions in tariff offered by CEPA are far more substantial than those offered by China's WTO commitment. In addition, the realization of the reductions are also far speedily than other trade arrangement between China and other countries/territories, ASEAN countries for instance. Comparing the zero tariff offered by CEPA with the final tariff specified in China's WTO commitments, the categories with the great differences are: household electrical appliances (18.5%), musical instruments (19.4%), footwear (19.8%), stationery (17.5%), food (19.2%), beverage and wines (21.4%). With Macao being a free port that most of raw materials or semi-products can be imported for free, the cost of production in Macao is greatly reduced. If without the difference in wages, Macao products will be very competitive in Mainland market, not only compared with foreign products, but also with domestically produced goods. Indirectly, this advantage under CEPA is very likely to attract foreign investors (including investors from Mainland China) to Macao.

The textile and garment sector, dominant in Macao's manufacturing industry, is facing the challenge of the global abolition of textile quotas in 2005. CEPA provides a new option of market for the industry apart from the traditional Europe and American markets. With the Zhuhai-Macao Cross Border Industrial Zone in progress, it is believed that the Macao manufacturing industry will experience recovery and further development, and will continue to play a vital role in the area of external trade and employment.

The food industry is quite important to Macao, especially with local food being part of the tourist attraction and 19 items of food are included in CEPA. According to information released by China's Customs, Macao's food exported to China in 2002 only amounted to 7000 USD. Food with strong local features which are very popular among tourists are mostly freshly made food, candies and biscuits. It is therefore feasible to develop food products in this line, suitable for export, like properly packed noodles/flour products and baked food.

Due to the fact that CEPA's preferential treatment will eventually cover all the Macao products, its positive impacts on Macao will be manifold. On one hand, it can help traditional sectors to survive the intense competition and seek development, by speeding up industry upgrading and stimulating the creation of brand names. On the other hand, it also provides a good environment for new industries to emerge and grow, thus improving Macao's industrial structure, which is currently over dependent on tourism and gaming. It is expected in the near future, CEPA's positive effects on the diversification of Macao's export market, the improvement of local industrial structure and on attracting investment will be gradually observed.

On trade in service, there are 18 service sectors that receive market access preferential treatment : legal services, accounting services, architectural services, medical and dental services, real estate services, advertising services, management consulting services, convention and exhibition services, value-added telecommunication services, audio-visual services, construction services, distribution services (including commission agent services, wholesale trade services, retailing services and franchising), insurance services, banking services, securities services, tourism services, transport and logistic services. Macao service providers of these 18 sectors are allowed to enter into the Mainland market by establishing wholly-owned or joint venture business, or as individual professionals.

In terms of detailed requirements, under CEPA, legal and medical professional qualifications obtained in Macao are properly recognized. Sectors in which service providers can establish wholly-owned business are as follows: real estate services, architectural services, advertising services, management consulting services, convention and exhibition services, distribution services (including commission agents, wholesale, retail and franchising, plus individually owned stores in Guangdong province), construction, renovation and operation of hotels, apartment buildings and restaurants, international ship management services, storage and warehousing for international maritime freight, container station and depot services, and non-vessel operating common carrying services, direct non-stop road transportation services between Macao and cities of Mainland, storage and warehouse services, freight forwarding agency services, ordinary road freight services, related information and consultancy services.

For Macao's companies, the majority of which are SMEs. Because of limited resources, if they are interested in exploring the more opened Mainland market, it is very likely that their first choice is Guangdong province. In the Guangdong-Macao co-operation joint meeting held on December 9, 2003, the two parties agreed to focus on co-operation in the following service sectors, in the short term, logistics, freight forwarding agency, storage and warehousing, transport service and retail service. Guangdong encourages and supports Macao business people to set up business in the province, especially chained stores and related delivery service. Macao permanent residents in abiding with related regulations of Mainland can establish individual business, without applying for approval about foreign investment. Concerning management consultant service, freight forwarding agencies on Mainland, storage and warehouses, restaurant businesses, they can directly apply to local commission of foreign trade and economic co-operation of municipal level in the province.

With regard to trade and investment facilitation, CEPA establishes the policy framework, not only smoothing the process of trade in goods and trade in services, but also conducive to the exchange and co-operation between governments and between enterprises. There are seven areas of trade and investment facilitation measures, including trade and investment promotion, customs clearance facilitation, commodity inspection, inspection and quarantine of animals and plants, food safety, sanitary and inspection, certification, accreditation and standardization management, electronic business, transparency in laws and regulations, cooperation between small and medium-sized enterprises, industrial co-operation. In view of enlarging trade and investment of both places, the measures will give substantial support from the administrative and legal sides. It is hoped that through e-technology, standard alignment, regulation harmonization and information exchange, trade and investment can be greatly improved. Furthermore, the agreement of industrial co-operation in Chinese medicine, exhibition and convention, and later in many more industries, will be helpful in attracting more high value added business activities to Macao. The implementation of the measures will reduce considerably the cost of trade and investment related to Mainland, strengthening Macao's status as a regional business centre.

The signing of CEPA, plus the implementation of the "individual travel" policy, all work towards the free flow of goods, services, persons, capital and information between Macao and Mainland. Therefore, exchange and co-operation in trade and investment will be intensified, good for the further integration of the economies involved and hence overall economic efficiency.

For enquiries concerning CEPA like the requirement and application of certificate of origin and service provider, please contact CEPA Information Centre,

Address: MBSC, Alameda Dr. Carlos d'Assumpcao No. 263, Edif. China Civil Plaza, 20th floor, Macao

For Trade in Goods and Trade in Services,

Tel: (853) 87989 708
Fax: (853) 755 011
E-mail: info@economia.gov.mo

For Trade and Investment Facilitation,
Tel: (853) 728 212, 87989 606
Fax: (853) 727 123
E-mail: ipim@ipim.gov.mo

(This article was prepared by IPIM's Research and Information Division.)


 

CEPA Will Help Macao Achieve Sustainable Development

(“Macao Image” – Issue No. 39, published in October 2003 by IPIM)

As pledged at the time of its accession to the World Trade Organisation (WTO), China will gradually open up its market in 2005. When foreign business communities are busily preparing themselves for that moment, CEPA (Closer Economic Partnership Arrangement) will give market access to Hong Kong and Macao ahead of the schedule. The New York Times in the United States and the Financial Times in the United Kingdom both published articles on CEPA, which prompted foreign businessmen to look at CEPA and China's WTO commitments more closely for any contradictions that might exist.

Hong Kong signed its CEPA deal with the Mainland in July 2003 and Macao will conclude its discussions and possibly sign the pact in October. The Closer Economic Partnership Arrangement is scheduled to come into force in January 2004.

This edition of Macao Image highlights CEPA in its cover story, apart from interviews with the Macao Government's Secretary for Economy and Finance, Mr. Francis Tam Pak Yuen, Chairman of the Board of Directors of the Industrial Association of Macao, Mr. Ho Iat Seng, and several representatives of the financial sector. The purpose is to introduce more details of CEPA to our readers and to see what business opportunities it will bring to Macao.

What is CEPA?

The Closer Economic Partnership Arrangement (CEPA) embodies the important preferential polices extended by the Central Government in Beijing to assist in the economic development of Hong Kong and Macao. It has three areas under its umbrella, namely trade in goods, trade in services and trade and investment facilitation.

What is in CEPA?

Macao's CEPA deal is basically identical to the one Hong Kong has signed, except for some minor adjustments in view of Macao's local conditions. As far as the trade in goods is concerned, CEPA between the Mainland and Macao provides for zero-import tariff access of 273 Mainland product codes from Macao to the mainland market.

A total of eighteen sectors are included in CEPA's trade in services, namely management consulting services, convention and exhibition services, advertising services, accounting services, construction and real estate, medical and dental services, distribution services, logistics services, freight forwarding agency services, storage and warehousing services, transport services, tourism services, audiovisual services, legal services, securities, insurance, and telecommunications. For these 18 sectors, entry barriers will be removed or entry thresholds will be lowered. Businesses in Macao can enter the Chinese market by setting up wholly-owned enterprises or take more than 50 per cent stakes in joint ventures.

In terms of trade and investment facilitation, procedures in seven public administration and business fields will be simplified, such as trade and investment promotion and small and medium-sized enterprises' co-operation.

What is the Difference between CEPA and WTO?

The WTO is a formal multilateral international trade regime, while CEPA is a bilateral arrangement within one country similar to free trade area arrangements. As demonstrated below, CEPA offers far more preferential policies than China's WTO commitments.

In management consultancy, with the exception of a handful of management consultancy services, CEPA allows companies from Hong Kong and Macao to set up wholly-owned branches on the mainland. China's WTO commitments in trade in services permit only joint ventures, and this restriction will be abolished only six years after China's accession.
In the retail sector, the WTO deal stipulates that foreign capital can only operate in five special economic zones (Hainan, Shantou, Shenzhen, Zhuhai and Xiamen) and six cities (Beijing, Dalian, Guangzhou, Qingdao, Shanghai and Tianjin) through the setting-up of joint ventures. The number of stores allowed to be set up both in Beijing and Shanghai shall not be more than four and the number for each of the other cities not more than two. Two years following China's WTO accession, foreign investors are allowed to take majority shareholdings in joint ventures. Joint venture retail stores may then be set up in Chongqing, Ningbo and all the provincial capitals. CEPA allows enterprises from Hong Kong and Macao to take part in the distribution services by running wholly owned stores in all of the prefectures nationwide and all the counties in the case of Guangdong Province. Chinese citizens among the permanent residents of Hong Kong and Macao can run self-employed businesses in Guangdong Province.
In the real estate and construction industries, the WTO deal only allows joint ventures with foreign capital taking the majority share. Three years after China's WTO accession, wholly-owned foreign enterprises can be set up with certain restrictions on their business scope. CEPA provides for wholly-owned branches of Hong Kong and Macao enterprises without any restrictions on their business scope. The companies can bid for nation-wide projects. Enterprises from Hong Kong and Macao can even acquire domestic construction firms.
Undoubtedly, CEPA grants early Mainland market access to Hong Kong and Macao and gives more benefits to business communities in both places than to their foreign competitors. For more information, please visit the official website of the Macao Economic Services: www.economia.gov.mo.

CEPA will be launched soon. Related bureau and other entities of the SAR Government have held several rounds of consultations with the Ministry of Commerce in Beijing on certain specific points, such as the definition of principle of origin and the definition of “Macao companies”.


 

CEPA with the Chinese Mainland Will Help Macao Diversify its Industrial Structure

(“Macao Image” – Issue No. 39, published in October 2003 by IPIM)

CEPA is widely seen as a big gift from the Central Government to Hong Kong and Macao. It gives enterprises in Hong Kong and Macao access to the Mainland market two years ahead of the time China is scheduled to open up its market in line with the WTO deal, so that the enterprises may adapt themselves to the Mainland environment and seek out business opportunities there before foreign competitors set in. Macao is a small economy that is heavily dependent on tourism and gaming industries. As a result, the industrial structure is very much based on the tourism and gaming sectors. There do not exist many big enterprises in Macao. How can Macao's enterprises seize the business opportunities resulting from CEPA? Will foreign investors take advantage of Macao's preferential policies? What then does CEPA mean to Macao?

Diversifying the Industrial Structure

Mr. Francis Tam Pak Yuen, Secretary for Economy and Finance of the Macao Government, believes that CEPA means different things to Hong Kong and Macao, namely in the sense that CEPA is very helpful in diversifying Macao's industrial structure and achieving sustainable economic development in Macao.

Mr. Tam says that Macao has clearly defined its economic policy to have the gaming and tourism sectors promote the overall economic growth and development of the other industries. The granting of the new gaming concessions has cleared all the uncertainties. Thus the gaming and tourism industries maintained sustained growth before the SARS outbreak outside Macao earlier this year. The gaming industry grew by 30 per cent in the first quarter this year. The sharp fall in the number of tourists in the second quarter due to the regional SARS epidemic caused the gaming and tourism industries to record negative growth. “We have learned a profound lesson from this. We need to diversify the industrial structure of Macao if we want to maintain economic stability,” Mr. Tam stressed.

As far as the trade in goods is concerned, Mr. Tam points out that 90 per cent of the products manufactured in Macao are covered by CEPA's list of 273 zero-import tariff product codes. Some of the goods on the list are currently not produced in Macao, such as watches, clocks and cosmetics. According to Mr. Tam, some investors outside Macao have indicated their interest in manufacturing those products here. Mr. Tam believes that this can enrich Macao's manufacturing industry.

In an interview with Macao Image, Mr. Ho Iat Seng, Chairman of the Board of Directors of the Industrial Association of Macao, underlined the fact that CEPA was helpful both to the local business community and external investors. Mr. Ho believes that with the Macao-Zhuhai Trans-Border Industrial Park and CEPA, prospects for Macao will be even more promising.

Manufacturers are Keen to Produce Internationally Famous Brands

The “zero import tariff” will definitely add new dynamism to Macao's manufacturing industry. Macao's manufacturing sector, which is mainly focused on processing, does presently not comprise many local brands. So what are the chances in the near future for locally manufactured products, labelled “Made in Macao,” to enter the Mainland market? Mr. Tam admits that production costs in Macao cannot by any means compete with those on the Mainland, so whether Macao's products can successfully be sold in the Mainland market or not will be determined by branding, particularly of internationally known brands. According to Mr. Tam, some manufacturers in Macao are already talking to international brand owners about the setting-up of production facilities in Macao. “Zero import tariff will be effective from January 2004, so manufacturers of these types of products will benefit from it in just two months. And new manufacturers can open plants promptly if conditions are met,” says Mr. Tam.

Mr. Ho provided Macao Image with an objective analysis of the strengths and weaknesses of Macao's manufacturing industry. He believes that the manufacturing industry has the following advantages: Firstly, rents, salaries, transport costs and other operational costs are lower in Macao than in Hong Kong. Secondly, Macao has a sound industrial foundation. “The manufacturing industry used to be the backbone of the local economy. It remains the biggest employer in Macao, employing around 45,000 people generating an output value of more than MOP 20 billion last year. There are 1,100 factories in Macao holding manufacturing licenses,” according to Mr. Ho. Thirdly, Macao is negotiating with Zhuhai to set up a trans-border industrial park, which will benefit both cities. Negotiations are entering the final stage, awaiting final approval from the Central Government.

With regard to its weaknesses, Mr. Ho says that local conditions in Macao in the past resulted in the fact that its industrial structure is “too simple,” with the manufacturing industry taking up 90 per cent of the overall industry. This has also resulted in a lack of professionals in other sectors, such as research and development experts, quality control and marketing professionals.

CEPA is meant to open up the Mainland market. Most manufacturers in Macao do not have their own brands, so co-operating with overseas brand owners is a good way to access the Mainland market.

“Individual Travellers” will Increase Gaming Revenues

In the trade in services, Macao's tourism sector can operate its own travel agencies on the Mainland, according to CEPA. Thanks to the permits allowing Mainland residents to travel to Hong Kong and Macao as individual travellers, a policy that was launched in July 2003, more tourists from the Mainland are now travelling to Macao, which has led to rising casino revenues. The Sociedade de Jogos de Macau / SJM (Macau Gaming Company) recorded 25 per cent more revenue in the first eight months of the year over the same period last year. SJM is expected to pay at least MOP 9 billion in casino gross-revenue tax to the Macao SAR Government this year.

When interviewed by Macao Image, Shen Xiao Qi, General Manager of the newly set-up Macao Branch of the Industrial and Commercial Bank of China (ICBC), said the signing of CEPA would speed up economic integration and the flow of people, goods and capital between Macao and the Pearl River Delta, something that would definitely benefit the financial industry. Mr. Shen says, “Before we came to Macao, we did a survey in Jiangmen, Zhongshan and Zhuhai that have a lot of investments from Macao. The branches of the Industrial and Commercial Bank of China in these three cities combined have three hundred clients from Macao, and most of our clients here in Macao are already clients of our bank on the Mainland. It is very encouraging to see investment from Macao in industry and real estate in the Pearl River Delta. We are confident that the Closer Economic Partnership Arrangement between Macao and the Mainland will give us a bigger role to play.”

In an interview with Macao Image on offshore businesses, Mr. Au Kwok On, HSBC Chief Executive Officer Macau, said that Macao had been doing extremely well following the granting of the new gaming concessions. Mr. Au pointed out that different people will see and seize different business opportunities from CEPA because they place CEPA in a different position in their overall strategy and planning. He also thinks that investment decisions should be made quickly, with due considerations given to their timing and feasibility, so that the size and strength of a particular enterprise will not be the only thing that matters.

Mr. Au says, “Investment decision puts a lot of emphasis on ‘atmosphere.' Macao has very good atmosphere. After the Government has built the framework, it is up to the enterprises to take the initiative, rather than waiting for the Government to tell them what to do.”


 

New Challenges and Opportunities for Macao's SMEs

(“Macao Image” – Issue No. 39, published in October 2003 by IPIM)

The Macau Small and Medium Enterprises Association held a “Forum on Challenges and Opportunities brought about by CEPA to Macao SMEs” in August 2003. Scholars and experts from Guangdong Province, Hong Kong and Macao shed light on the economic outlook and business opportunities after CEPA gets off the ground.

Duty-free Entry into China

The most noteworthy part of Hong Kong's and Macao's CEPA deals provides for duty-free access to the Mainland market of products made in Hong Kong and Macao. Technical consultations are now being held on how to define a product. Some are of the view that CEPA is of little substantial significance since with or without it, all duties currently imposed by China will be removed in two years time, i.e. in 2005, since China will have to fully open its market as it has pledged to do on joining the WTO. However, one of the speakers at the Forum, Pansy Yau, Assistant Chief Economist of the Hong Kong Trade Development Council thinks differently. According to Ms. Yau, China has only pledged to cut the average tariffs on manufactured products to 9.3 % in 2005, but it will keep its high tariffs on consumer goods. So duty-free market entry promised by CEPA can really help Hong Kong and Macao's products to reach the Mainland market.

As to whether CEPA will encourage manufacturers from Hong Kong and Macao manufacturers who moved their production plants to the Mainland to return to the SAR's, Mrs. Yau stressed that not everyone would choose to move back to Hong Kong since it was still more expensive in terms of land prices and labour costs. Ms. Yau said she believed that manufacturers who really needed zero-tariff treatment might be drawn back, while those that compete mainly on low production costs would not find it suitable to move back.

Mr. Stanley Au Chong Kit, Director General of the Macau Small and Medium Enterprises Association, emphasised at the Forum that CEPA had given rise to enthusiastic discussions and responses in Hong Kong, while the same enthusiasm was not seen in Macao. Although Macao is constrained by the small size of its industry, Mr. Au said he was confident that some manufacturers of famous brands from Hong Kong would be attracted to Macao by its lower production costs and sufficient imported labour force, once Macao signs its CEPA deal with the Mainland.

Top-end Production Moves to Macao

Another speaker, Mr. George S K Leung, Chief Economist for the Greater China, Economics & Investment Strategy of The Hong Kong and Shanghai Banking Corporation Limited, compared Hong Kong with Macao. In the case of Hong Kong, if the value added on a certain product were 30%, only when the tariff difference was no less than 15% would it be attractive for manufacturers to move their factories back to Hong Kong since production costs on the mainland are 50% lower. Considering that Macao had the same zero-tariff market access to the Mainland and lower production costs, manufacturers of famous brands or patented goods might transfer their production base to Macao.

Mr. Leung concluded that zero-tariffs would not have a big impact on Hong Kong's manufacturing industry as it was estimated to generate benefits worth HK $ 750 million to HK $ 2 billion, a very small percentage of the economy which is valued at about HK$1.3 trillion annually. The same benefits would mean much more to Macao, given the smaller size of its economy and lower production costs. Mr. Leung stressed, “To put it differently, it is most likely for top-end production to move to Macao, while low-end production will be based on the Mainland. The limited impact of the zero-tariff is the reason why Hong Kong's manufacturing sector's response has been lukewarm.”

Mr. Leung said he believed that Macao could benefit more than Hong Kong from CEPA: “Firstly, Macao is a smaller economy. If Macao can make full use of its advantages within the framework of CEPA and take in the manufacturing industry moving out of Hong Kong, Macao can benefit more from CEPA. Secondly, easing the restrictions on Mainland tourists to Hong Kong and Macao was designed to help Hong Kong tackle its difficulties and generate more jobs for medium and low-income people. At the end of the day, the impact of Macao will be ever more beneficial. Macao's tourism sector stands to benefit greatly even if only one in three Mainland tourists heading for Hong Kong choose to visit Macao as well.”

Mr. Leung also underlined the great potential of Macao's logistics industry. Macao and Zhuhai are the gateway to western Guangdong, where the bulk of the manufacturing industry of the Greater Pearl River Delta is based. Most of the Greater Pearl River manufacturing industry is nowadays concentrated in the west of Shenzhen. However, both Macao and Zhuhai are the gateways to western Guangdong. If Macao can enter western Guangdong and support the area's manufacturing industry, this would greatly benefit its services sector. Consequently, Macao has great potential to develop into a trade and logistics platform to serve western Guangdong.

China has become a global production centre, accounting for 30% of the world's manufacturing. The US takes up 20 % of global manufacturing, which has fuelled the growth of its financial and related service industries and the advancement of New York as a global financial centre. Therefore, if the case of the US is of any guidance, China's booming manufacturing industry will also have insatiable demand for services. With CEPA removing the obstacles for Hong Kong and Macao enterprises to the Mainland market, they will be able to develop the service sector in China and support the growth of the manufacturing industry there.

Beneficial to SMEs

Zero-tariff will make products made in Hong Kong and Macao more competitive on the Mainland market. CEPA will also give a boost to the trade in services.

Another speaker, Mr. Ieong Tou Hong, Vice-President of the Macao Association of Economic Sciences, underlined the benefit of CEPA to trade in services. According to Mr. Ieong, China's reforms and opening-up policies underwent two stages. The first was in the 1970s, when China implemented the policy of “limited opening-up” on a trial basis that was characterised by the restrictions on which industries could avail themselves of foreign investments, how many shares foreign investors could own, as well as the restrictions on the structure of their enterprises and the duration of their operations. China entered the second stage of reforms and opening-up when it became a WTO member. China will further open up its market in line with the timetable set upon its accession. Its policies will also be in line with international practices. CEPA covers more areas than China's WTO commitment. As a result, businessmen from Hong Kong and Macao will qualify for more incentives than foreign investors. SMEs will benefit in particular.

Mr. Ieong said, “The Mainland has a higher threshold for foreign investment than before. For example, there are now more stringent requirements as to the scale of the investment and the content of technology. The Guangzhou Economic and Technology Development District has a minimum requirement of US $ 30 million for any investor interested in moving into the district. This is beyond most of the SMEs. Nevertheless, CEPA has fully accommodated the concerns and interests.” Hong Kong's CEPA deal with the Mainland covers 18 service industries, including management counselling, advertising, and legal, accountancy and distribution industries. Mr. Ieong said he believed that, compared with large-scale infrastructure, high-tech and manufacturing industries, those requiring a high degree of professional expertise are more suitable for SMEs.

Mr. Ieong said he believed that CEPA would bring both challenges and opportunities to Macao's businesses. He pointed out that the gaming industry, the biggest contributor to Macao's industrial structure (generating approximately 40% of its gross domestic product) was barred from entering the Mainland market, adding that enterprises in the manufacturing, construction and retail and wholesale industries were most likely to tap the mainland market. Mr. Ieong estimated that only about 35% of Macao's enterprises in those three industries were equipped to do so, because local enterprises as a whole needed to upgrade their competitiveness. “There will be two-way investment in the environment of an open market. Privately-owned enterprises on the Mainland will also look for opportunities in Macao. Enterprises from the European Union and other foreign countries can use Macao as a launch pad to the Chinese market. In that process, SMEs in Macao can provide business support services, such as market planning, accounting and legal services and logistical support, in a bid to improve Macao's industrial structure.”

Co-operation between Guangdong, Hong Kong and Macao will enter a new stage with the implementation of CEPA and the completion of the planned bridge connecting Hong Kong, Macao and Zhuhai. Mr. Ieong said that with CEPA, the Central Chinese Government would open the Mainland market to Hong Kong and Macao ahead of the WTO timetable, so that enterprises from the two SARs would have two years to learn more about the market to better compete with domestic and foreign enterprises.


 

 

 

  

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