Here are the latest updates on the Closer Economic Partnership Arrangement (CEPA) 2.0 between Hong Kong and Mainland China. This newly introduced agreement aims to further enhance economic integration and cooperation, providing significant benefits to businesses and investors from both regions. Here are the key highlights:

Shortening of Required Number of Years to Qualify for Benefits

Reduced Qualification Period: CEPA 2.0 shortens the required number of years for Hong Kong businesses to qualify for CEPA benefits. Previously, businesses needed to have been established for at least three years to qualify. Under CEPA 2.0, this period has been reduced to two years, making it easier for newer businesses to take advantage of the benefits offered by the agreement.

Enhanced Market Access

• Wider Scope of Services: CEPA 2.0 expands the range of services covered, allowing more Hong Kong service providers to access the Mainland market. This includes sectors such as film, television, tourism, finance, construction, and related engineering services. For example, Hong Kong service providers can now enjoy national treatment when investing in film production enterprises in Mainland China. Additionally, restrictions on the number of Hong Kong people participating as principal creative personnel in online television dramas have been removed.
• Simplified Procedures: The agreement simplifies the procedures for Hong Kong businesses to set up operations in Mainland China, reducing administrative burdens and costs. This includes easing qualification requirements for Hong Kong professionals and relaxing restrictions on Hong Kong’s service exports to the Mainland market. For instance, Hong Kong professionals in the construction and engineering sectors can now more easily obtain the necessary qualifications to practice in Mainland China.

Investment Facilitation

• Investment Protection: CEPA 2.0 includes enhanced measures for the protection of investments, providing greater security and confidence for investors from both sides. This ensures that investments are safeguarded against unfair treatment and expropriation. The agreement also includes provisions for compensation in cases of expropriation and guarantees the free transfer of investment-related funds.
• Dispute Resolution: The agreement introduces improved mechanisms for resolving investment disputes, ensuring fair and efficient resolution processes. This includes the establishment of clear procedures and timelines for dispute resolution, as well as the option for investors to choose international arbitration. These measures aim to provide a more predictable and stable investment environment for businesses from both Hong Kong and Mainland China.

Trade in Goods

• Tariff Reductions: CEPA 2.0 offers further tariff reductions on a range of goods, promoting increased trade between Hong Kong and Mainland China. This includes zero-tariff benefits for eligible Hong Kong products. For example, various electronic products, textiles and apparel, food and beverages, and pharmaceutical products manufactured in Hong Kong now enjoy zero-tariff access to the Mainland market.
• Customs Cooperation: Enhanced customs cooperation measures are included to streamline cross-border trade and reduce delays. This involves improved coordination between customs authorities and the implementation of more efficient customs procedures. For example, the agreement includes provisions for mutual recognition of Authorized Economic Operator (AEO) programs, which facilitate faster customs clearance for certified businesses.

Financial Services

• Financial Market Integration: The agreement promotes greater integration of financial markets, facilitating cross-border financial services and investments. This includes measures to enhance the connectivity of financial infrastructure and regulatory frameworks. For instance, the agreement supports the development of cross-border financial products and services, such as mutual recognition of funds and cross-border insurance products.
• Regulatory Cooperation: CEPA 2.0 strengthens regulatory cooperation between Hong Kong and Mainland China, ensuring a more stable and transparent financial environment. This involves harmonizing regulations and standards to facilitate smoother financial transactions. The agreement also includes provisions for information sharing and joint supervision of financial institutions operating in both markets.

Innovation and Technology

• Collaboration in Innovation: The agreement encourages collaboration in innovation and technology, supporting joint research and development projects. This includes initiatives to foster innovation in areas such as fintech, biotechnology, and smart city development. For example, the agreement promotes the establishment of joint innovation labs and research centers in the Guangdong-Hong Kong-Macao Greater Bay Area.
• Talent Exchange: CEPA 2.0 promotes the exchange of talent between Hong Kong and Mainland China, fostering a more dynamic and innovative workforce. This includes programs to facilitate the mobility of skilled professionals and researchers. The agreement also supports the development of talent exchange platforms and training programs to enhance the skills and expertise of professionals in both regions.

Conclusion

CEPA 2.0 represents a significant step forward in the economic partnership between Hong Kong and Mainland China. By enhancing market access, investment facilitation, trade in goods, financial services, and innovation collaboration, the agreement aims to strengthen economic ties and promote mutual growth.

For more information, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk .