In order to deepen CEPA and implement the 36 measures announced by Vice Premier Li Keqiang during his visit to Hong Kong, CGCC earlier presented more than 30 follow-up recommendations to Chief Executive-elect Leung Chun-ying. The recommendations included, among others, fostering Mainland and Hong Kong enterprises’ cooperation to go abroad, supporting Hong Kong’s participation in multilateral and regional economic cooperation, helping Hong Kong enterprises in the Mainland to transform and upgrade, strengthening Hong Kong’s role as a financial center, promoting the development of tourism, and enhancing cooperation between the aviation industries in Hong Kong and the Mainland.
These specific recommendations, which were compiled after extensive consultation with our members and players in different industries, would be further refined for proposal to the Central and HKSAR Governments through different channels. Due to length limitation, I would like to just discuss how to enhance Hong Kong’s role as a platform for Mainland enterprises’ overseas expansion and for foreign enterprises’ China venture.
Establish Development Funds
Over the past 30 years, Hong Kong has brought funds, personnel, technologies and management experience into the Mainland, contributing to the country’s reform and opening up. As the Mainland economy develops rapidly, the Central Government has been fuelling the transformation of economic development model and encouraging Mainland enterprises to tap the global market in recent years. As an international financial and trade service center, Hong Kong can draw on its advantages in financial and professional services to provide more comprehensive support for Mainland and Hong Kong enterprises to go overseas together.
We propose that the Central and HKSAR Governments encourage financial service institutions in the Mainland and Hong Kong to jointly set up development funds that foster cooperation between the two places’ enterprises in going abroad. The HKSAR Government can inject partial capital and encourage local organizations and the industry to make capital contribution to the fund. And in response to national development strategies and changes in the global economic scene, specific funds can be set up to, say, support high-tech and new energy industries, or to facilitate enterprises’ venture into emerging economies such as ASEAN, Africa and the Middle East. In this regard, reference can be drawn from the model and experience of the Sino-Portugal Co-operation and Development Fund jointly set up by financial institutions in the Mainland and Macau.
Meanwhile, we recommend the HKSAR Government to explore with the Central Government ways to open up more financing channels for Mainland enterprises’ foreign investment. For example, financial institutions with branches in both the Mainland and Hong Kong can be allowed to offer financing products and services that enable these enterprises to use their assets in the Mainland as collateral against their Hong Kong branches’ borrowing. By doing so, enterprises going abroad can be less vulnerable to credit tightening and the higher loan interest rates in the Mainland.
As a further step, the Central and HKSAR Governments can consider putting in place a mechanism to facilitate Mainland and Hong Kong enterprises going abroad together. For instance, the ministries of the Central Government, as well as provincial and municipal governments, can invite Hong Kong entrepreneurs to participate in their delegations to overseas regions and investment activities. As another example, Hong Kong can invite overseas investment promotion agencies to attend investment promotion events held in Hong Kong by Mainland provinces and cities for negotiation and exchange with Hong Kong and Mainland enterprises - this, by combining inward and outward investment promotion, can provide opportunities for Mainland and Hong Kong enterprises to go abroad hand in hand.
Relax the Definition of “Hong Kong Companies”
Supplement VIII to CEPA not only deepens economic and financial cooperation between the Mainland and Hong Kong, but furthermore encourages Hong Kong's professional services to tap the Mainland market at a faster pace. One of the major breakthroughs in the supplement was the relaxation of the definition of “Hong Kong service providers”, so that more companies can apply for CEPA concessions, and hence expand their Mainland business in a more flexible and diversified manner.
Under the current definition, overseas or Mainland enterprises who wish to enjoy the “Hong Kong company” treatment must have a Hong Kong registered company having operating substantial business here for three to five years, during which the company had also to pay profits tax according to the law and employ up to a certain percentage of Hong Kong employees. We suggest that the Central and HKSAR Governments suitably relax the criteria by lowering the threshold on years of operation for enterprises with higher investments or turnovers and a larger number of local staff, so that they can qualify as a “Hong Kong company” within a shorter period of time. Such a relaxed criteria would not only attract more sizeable international corporations to set up regional headquarters in Hong Kong for their Mainland expansion, but also encourage Mainland enterprises to tap overseas markets via Hong Kong. As more funds would flow into Hong Kong in such cases, this would support the city’s development of a headquarter economy.
In conclusion, CGCC will as always render full support to the HKSAR Government’s ruling according to the law and its efforts in furthering the economic integration between Hong Kong and the Mainland. We will capitalize on CGCC’s superior network to strengthen Hong Kong’s role as a bridge for economic interaction between China and overseas regions. And we would strive to create an ideal environment for businesses and capital in the Mainland and Hong Kong to “go out” while providing support for overseas capital to “come in”. By these efforts, CGCC would make greater contribution to the win-win cooperation between the Mainland and Hong Kong.