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Latest Update
Hong Kong> A Decade to Remember -10th Anniversary of Hong Kong's Return to China> Latest Update
UPDATED: June 21, 2007 NO.25 JUN.21, 2007
Hong Kong's Bright Future
Economic cooperation between the Chinese mainland and Hong Kong enhances Hong Kong's economic performance
By LIU XUEQIN
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CEPA lowered the entry standard and Hong Kong businesses can access the mainland market under a much favorable condition, enhancing Hong Kong's confidence in the city's long term and stable economic development. The rapid economic development on the Chinese mainland has also provided golden trade opportunities between the two sides. According to statistics from General Administration of Customs, from 1997 to 2002, the annual trade volume between the two regions grew 4.5 percent. After CEPA was implemented, the annual trade growth rate soared to 25.5 percent from 2003 to 2006. The Hong Kong statistics show that from 1997 to 2002, Hong Kong exports to the mainland grew 3.8 percent year on year, while the rate increased to 9.3 percent from 2003 to 2006. Hong Kong's status as an international trade hub continues to be strengthened.

The expanding service market on the mainland encourages investment from Hong Kong and further deepens the cooperation between the partners in this sector. According to CEPA agreement, the mainland will gradually open its service sector. In sectors such as law, accounting, audio/visual, architecture, distribution, banking, securities, tourism, and transportation where Hong Kong has competitive edge, the mainland will grant favorable treatment and those services provided by Hong Kong can enter the mainland market ahead of other world trade organization members. The immature but potentially huge service market in the mainland provides Hong Kong investors with advantages and allows them to enter the market earlier. By the end of 2006, Hong Kong approved 1,697 applications to set up companies in the mainland including legal services, architecture, health care, real estate, advertising, transportation and logistics. About 60 percent of all the applications were relevant to transportation and logistics, which indicated that the international shipping and logistics hub has extended its services to the mainland. The Hong Kong service sector providers entered the mainland market ahead of other competitors, greatly promoting their competitiveness. According to statistics from Hong Kong, the service industry increased 8.6 percent from the year before.

The implementation of CEPA has strengthened financial cooperation between the two sides and boosted Hong Kong's financial industry. According to CEPA agreement, the mainland expanded the financial sector and reduced the market access restrictions for Hong Kong investors. By the end of June 2006, Hong Kong banks had opened 50 branches and 28 sub-branches on the mainland, accounting for 27 percent and 54 percent of all foreign banks.

The mainland allows Hong Kong banks to operate renminbi services. By the end of 2006, nearly all Hong Kong banks operating renminbi retail businesses in Hong Kong had opened renminbi deposit, exchange, remittance, and bankcard businesses on the mainland. Also by the end of last year, total deposits from Hong Kong banks operating on the mainland reached 22.6 billion yuan. The huge business volume brought Hong Kong banks great development opportunities and have helped boost the Hong Kong banking industry, which grew 20.7 percent in 2006. The booming banking industry has become a highlight of Hong Kong's economic success. Additionally, more mainland companies are listed in Hong Kong. Last year, the initial public offering in Hong Kong collected 325.9 billion Hong Kong dollars, thus making Hong Kong the second largest financial center in the world after London, in terms of collecting money. Meanwhile, the total value of the Hong Kong stock market has surmounted 13 trillion Hong Kong dollars, outpacing the Frankfurt Stock Exchange as the seventh largest stock market in the world.

Individual mainland visitors have boosted the rapid development of the tourism industry in Hong Kong. As an international tourism hub, tourism is one of the major pillar industries of Hong Kong and the mainland visitors are the biggest source of customers. According to CEPA, the mainland has gradually allowed mainland individual visitors to Hong Kong. By the end of 2006, up to 200 million residents from six provinces and municipalities including Beijing, Shanghai and Tianjin have visited Hong Kong. The huge number of mainland visitors greatly promotes the hospitality, retailing and wholesaling, transportation and warehouse industries, growing 9 percent, 4.9 percent, 8.4 percent respectively last year compared with that of 2005. The development of those industries has increased the employment rate and income of the people of Hong Kong and has stimulated growth in local consumption and investment.

Currently, Hong Kong has entered a steady growth period. With the further implementation of CEPA, economic and trade relations between the two sides will become closer and Hong Kong will have more development opportunities.

Brighter future

From 2006 to 2010, the Chinese mainland is expected to grow at a rate of over 8 percent each year, providing huge momentum for Hong Kong economic development. The large scale development of western China, the new plan to develop central China, as well as other projects, have all provided Hong Kong investors golden opportunities.

The service industry is very strong in Hong Kong and has a relatively strong edge. Backed by high quality professionals, an integrated and efficient service chain, the Hong Kong service industry can grab a bigger market share in the mainland service sector. Hong Kong has a large number of financial elites and professionals who can help mainland residents manage their money.

In conclusion, economic and trade cooperation between the mainland and Hong Kong will promote the economic integration of the two sides. Hong Kong's status as an international trade, finance, tourism, and logistics hub will be further enhanced and upgraded. Hong Kong's future is bright.

The author is Director of China's Foreign Trade Research Department, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce

 

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