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China Daily Website

36 measure boost Hong Kong's development

Updated: 2012-06-11 13:55
( chinadaily.com.cn)

Following the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in 2003, the Chinese mainland issued 36 measures in 2011 to further strengthen ties, cooperation and integration between the two sides. The supportive measures, it is hoped, will bring new impetus to Hong Kong's economic and social development.

High-profile out

During the visit to Hong Kong in August 2011, Chinese Vice-Premier Li Keqiang announced 36 measures set out by the central government to support Hong Kong's social and economic development.

"The major purpose for my visit to Hong Kong this time is to attend the forum on China's 12th Five-year Plan and to discuss the economic, trade, and financial development between the Chinese mainland and Hong Kong," said Li, adding that the trip is also intended to show the central government's support for Hong Kong's further development in trade and finance.

36 measure boost Hong Kong's development

Chinese Vice-Premier Li Keqiang addresses an economic forum in Hong Kong August 17, 2011. [Edmond Tang/chinadaily.com.cn]

A raft of new measures to boost Hong Kong's economy and deepen cooperation between this Chinese city and the mainland, announced by Vice Premier Li Keqiang, looks to open a new chapter and create more win-win scenarios for two-way cooperation in the service industries, analysts and officials said.

How Hong Kong will benefit

----Finance

The central government encourages Hong Kong to develop creative offshore RMB financial products, seeks to build a sound RMB circulation mechanism, and also encourage mainland-based companies to go public or issue RMB bonds in Hong Kong. These measures will consolidate Hong Kong's status as an international financial center.

As pointed out by Peng Qinghua, director of the Liaison Office of the Central People's Government in the Hong Kong, up to 11 of the 36 measures concern finance, including seven that are meant to promote offshore renminbi trading. These include the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, foreign direct investment (FDI), and Hong Kong-share ETFs.

Among the most eye-catching measures are no doubt the long-awaited plans to allow Hong Kong holders of yuan to buy mainland-listed securities through the qualified foreign institutional investor (QFII) scheme. It will also allow mainlanders to invest directly in the local stock market via the so-called through-train scheme, as well as allow non-financial mainland companies to issue yuan-denominated debt in Hong Kong on a case-by-case basis capped at 25 billion yuan, and to use yuan in cross-border trade settlement.

The revised securities and equities sales regulation announced by the China Securities Regulatory Commission took effect on Oct 1, 2011. It has allowed banks owned by Hong Kong-based institutions to sell mutual funds on the mainland.

On Nov 22, the People's Bank of China renewed its currency-swap agreement with the Hong Kong Monetary Authority for another three years and doubled the total amount to 400 billion yuan. It is a crucial effort aimed at securing Hong Kong's status as an offshore yuan hub.

36 measure boost Hong Kong's development

Yuan notes being counted at a bank in Qionghai, Hainan province. The Chinese central bank says all enterprises with an import-and-export license can settle their foreign trade in yuan if they so desire. Previously, only selected businesses were allowed to do this. [Photo/China Daily] 

These measures, which interact in synergy, have a triple affect.

They boost the growth of Hong Kong as the offshore renminbi center, thus advancing the internationalization of renminbi.

They can reduce the incremental growth of China's US dollar holdings, and more importantly, facilitate "financial liberation" through ETFs and maintaining Hong Kong's status as an international financial center.

Renminbi deposits in Hong Kong have increased substantially and rapidly. Initially, the volume was less than 50 billion yuan, but it had risen to nearly 500 billion yuan by mid-2011.

-----Service sector

In Hong Kong, the added value of the service industry accounts for 93 percent of the GDP.

The mainland, Vice-Premier Li Keqiang said, will take further steps to broaden market access for both traditional and emerging service sectors in Hong Kong, including medical services, construction services, legal services, and testing and certification which are of interest to Hong Kong, and will support Hong Kong travel agencies in setting up businesses on the mainland.

Now the doors to the mainland service market are opening wider and faster to Hong Kong service providers according to the 12th Five-Year Plan as well as the 36 supportive measures in six major development areas.

The promise made by Vice-Premier Li in August 2011 that the mainland service trade will be basically liberalized to Hong Kong businesses by the end of the 12th Five-Year Plan period (2011-15) is being realized one big step after another.

Currently, there are two main barriers hindering the expansion of Hong Kong's service industries into the mainland market. The first is that there are remarkable differences between legal and administrative system of the mainland and Hong Kong. There are difference of examination and approval procedures, qualification certification and the level of economic development. The factors make it difficult for Hong Kong businesses to enter the lucrative mainland market. The second is the time-consuming, expensive red tape involved in government procedures on service projects.

These two major barriers are expected to be removed by the end of 2015, Peng Qinghua said. By then, Hong Kong's industrial, commercial and service businesses will be presented with the huge mainland market and they will also help significantly improve the level of the service industry there, thus giving greater substance to the win-win partnership between the two regions.

The mainland's service industry will have a great development in the period and it will be great business opportunity for Hong Kong.

The renowned medical services will soon appear in provincial capitals and municipality cities of the mainland, and there are already many cases that Hong Kong universities and mainland organizations jointly establish research institutes, laboratories or schools.

----More internationalized

A number of other measures in the 36 supportive policy initiatives, such as supporting Hong Kong in taking part in international and regional economic cooperation efforts as well as helping the city play an important role in Guangdong-Hong Kong cooperation, are at different stages of implementation.

To further strengthen Hong Kong's foreign trade, the Chinese General Chamber of Commerce is pressing for, through the central government, Hong Kong's admission to the Association of Southeast Asian Nations (ASEAN) as an independent customs territory. Hong Kong is a free port that levies no import tariffs, but many ASEAN countries do not provide reciprocal arrangements.

"This is unequal and disadvantageous to Hong Kong," said Jonathan Choi Koon-shum, chairman of the Chinese General Chamber of Commerce

"ASEAN will not listen to us, but we stand a greater chance if the central government negotiates on our behalf. Given Hong Kong's close ties with ASEAN over the decades, it, if successful, will become a bridgehead of investment into China and this will benefit both the country and Hong Kong."

-----Education exchange

Hong Kong students aspiring to study in China's mainland may soon have their exam pressure lessened, as the Chinese central government unveiled relevant measures in August 2011, including pilot open admission programs by some universities.

Sources in local education circle believe the new move, which was one of the 36 measures to promote Hong Kong's economic and social development announced by Chinese-Vice Premier Li Keqiang during his visit on Aug 16-18, will help facilitate local students to seek higher education in the mainland.

“The new measure will definitely increase students' interest in studying in mainland which will do good not only to their personal development, but also to the exchange and integration of the two places," said Principal of Heung To Middle School, Wong Chung Leung, adding that he has met quite a number of local students who had expressed their wiliness to study in mainland universities.

The new policy will help facilitate academic exchange between Hong Kong and the mainland in the long term, said Zou Chong Hua, Head of Division of Academic and Training of Beijing-Hong Kong Academic Exchange Center.

And for students, studying in mainland universities will give them a good opportunity to both broaden their horizon and set up a social network, he added.

The Ministry of Education in Beijing published on Nov 16 the procedure for mainland universities to enroll Hong Kong students on a trial basis starting in 2012. The first group of 63 mainland universities will offer more than 3,000 places to Hong Kong middle school graduates next fall, when a shortage of college places is expected in the city due to the change from three-year higher education to the four-year format.

Utilize the support

With the door open for the city to step up the global economic ladder, how Hong Kong makes use of these win-win opportunities with the mainland is important.

1. The first thing for it to do is to strengthen the city's financial infrastructure as well as its financial security in order to become a full-fledged offshore yuan center.

2. To develop Hong Kong into a successful offshore yuan center, the SAR government needs to strengthen the city's financial hardware capable of handling increasing yuan settlement volume, and its financial software as a safe and reliable trading platform.

3. On tapping into the mainland services market, the SAR government needs to devise a well-thought out plan to nurture and expand the six new industries such as medical services, culture and creative industries, environmental and education services, as well as help local professionals flex their business muscles on the mainland.

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