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CEPA stands for “Closer Economic Partnership Arrangement between Hong Kong and the Chinese mainland”.

It is a free trade agreement under WTO rules.
It gives preferential access to mainland market for Hong Kong companies and marketers.
It exceeds China’s WTO entry commitments.
It is effective from January 1, 2004.

Benefits for non Hong Kong Companies:
Overseas companies, not based in Hong Kong, can take advantage of Cepa by outsourcing to, or partnering with a Cepa-qualified manufacturer or service provider in Hong Kong.

Overseas manufacturers, you do not need an office in Hong Kong to benefit from Cepa. For your goods to qualify as 'Made in Hong Kong', you need only satisfy simple Rules of Origin. In essence, your products must be "substantially transformed" in Hong Kong. If you are a service-provider, you can partner with, or invest in, a Cepa-qualified company to benefit from easier access to the Chinese mainland.

Knowledge Center:
1. How does the services sector benefit from the CEPA? Are professionals allowed to set up businesses or provide services in the Mainland?

Broadly speaking, the CEPA permits earlier and wider accessibility to the Mainland market. For example, Hong Kong companies in management and consulting services may set up wholly owned company in the Mainland as from 1 January 2004, that is more than three years ahead of China's WTO commitments. For many other sectors such as logistics and transport services, construction and related services, and distribution services, Hong Kong companies may set up wholly owned companies one year ahead of China's WTO timetable. In some sectors like construction and related services, logistics and transportation services, distribution services, tourism, legal services, and audio-visual services, the Mainland's offer will extend beyond its WTO commitments and will allow Hong Kong companies wider access to the various services markets. Since each sector is unique, it is not possible to generalize the benefits. Annex 4 of the CEPA sets out the concessions to Hong Kong companies under each of the 18 services sectors.

2. Some services sectors are not included in the CEPA. Why?

The CEPA just concluded is a very good start. It provides a mechanism for further liberalization measures to be included as and when both parties agree them. The HKSAR will engage the Mainland authorities in discussion of further liberalization and greater market access for Hong Kong companies into the Mainland market in the months ahead.

3. What are the eligibility criteria for "Hong Kong Service Suppliers"?

Generally speaking, "juridical persons" including companies, partnership and sole proprietorship, as well as "natural persons" of Hong Kong will be able to enjoy CEPA benefits provided that they fulfill the conditions stipulated in Annex 5 of CEPA. Unless otherwise specified in CEPA, a "natural person" means a permanent resident of the HKSAR whereas a "juridical person" means any legal entity duly constituted or otherwise organized under the applicable laws of Hong Kong and has engaged in substantive business operations in Hong Kong for three to five years.

4. Will merger or acquisition of an enterprise affecting its eligibility as "Hong Kong Service Supplier"?

If the merger or acquisition is completed on or after the day CEPA comes into effect (i.e. 29 June 2003) and, as a result, over 50% of the enterprise's equity interest has been acquired by a foreign service supplier, the enterprise being merged or acquired will not be regarded as a "Hong Kong Service Supplier" within the first year of the merger or acquisition. If the merger or acquisition was completed before the day CEPA comes into effect, the enterprise's eligibility as a "Hong Kong Service Supplier" will not be affected as long as the enterprise fulfils the eligibility criteria laid down in Annex 5 of CEPA. In applying for the Certificate of HKSS, applicants are required to declare whether there is any change to its controlling equity interest (more than 50%) on or after 29 June 2003. If so, the applicant should provide details of the controlling shareholder.

(Source from HKSAR government and Hong Kong Trade Development Council)

2008 Olympic Games
Beijing has just won the bid to host the 2008 Olympic Games. Beijing has also become the center of national attention, even global attention, with China's imminent entry into the WTO.
Beijing 2008 - A Historic Opportunity for Development
Beijing's successful Olympic bid is not just a cause for celebration for the sports world. It also provides a historic opportunity for the nation to pool its resources and embark on diverse construction programs over the next seven years. While sharing Beijing's delight in its successful bid, Hong Kong also hopes to make its contribution as a support unit and, in 2008, to see the whole world cheer for Beijing and for the country.
Hong Kong - The Heart of Asia
According to the World Investment Report 2001 published by the United Nations Conference on Trade and Development in September this year, Hong Kong is the largest recipient, as well as source, of foreign direct investment (FDI) in Asia. FDI inflows and outflows amount to nearly HK$1 trillion last year. Much of this investment has gone to the mainland via Hong Kong.In other words, Hong Kong is the most powerful FDI pump of Asia, continually absorbing investment from various parts of the world and supplying capital to the mainland. Hong Kong is now the biggest source of foreign investment in Beijing. It is also Beijing's major window to the international financial market. Hong Kong companies and investment accounted for 40% of foreign investment in the capital at the end of 2000. While Hong Kong companies have contributed considerable funds and services towards Beijing's modernization drive, Hong Kong owes its economic prosperity to the mainland’s rapid economic development. Naturally Beijing is also an important force in boosting Hong Kong's economic growth.In order to make Beijing 2008 a success, Beijing will launch a massive program to build the Olympic Village, improve its transportation and telecommunication infrastructure, as well as clean up the environment. With a view to 2008, Beijing and Hong Kong must step up co-operation so that Hong Kong can do a more efficient job raising the necessary funds for these infrastructure projects.
One-stop Solutions for Infrastructure
In addition to funds, Beijing also needs professional expertise in areas such as construction, project consultancy, electrical and mechanical engineering, project planning, project financing, surveying and environmental protection for its infrastructure projects. With its wealth of experience, Hong Kong should be able to work side by side with Beijing in these areas.

(Source from the Fifth Beijing-Hong Kong Economic Co-operation Symposium)
Olympic sponsorship
Olympic sponsorship is a partnership between the Olympic Movement and a corporate entity that is intended to generate support for the Olympic Movement and the Olympic Games. Olympic sponsorship operates on three levels:

The Olympic Partners (TOP) Programme: The worldwide Olympic sponsorship programme managed by the International Olympic Committee (IOC).
Olympic Games sponsorship: The sponsorship programme established within the Olympic Games host country to directly support the staging of the Games, managed by the Olympic Games Organising Committee (OCOG) under the direction of the IOC.
National sponsorship: A sponsorship programme established within a country to directly support an National Olympic Committee (NOC) and its Olympic team, managed by the NOC.
The Rights & Benefits of TOP Partnership
The TOP programme managed by the IOC is the only sponsorship with the exclusive worldwide marketing rights to both Winter and Summer Games, providing support for the OCOGs, all 200 NOCs and their Olympic teams, and the IOC.

Benefits of sponsorship
Sponsorship can provide benefits for the sponsor in the following areas:
· Brand equity: Sponsorship of the Olympic Movement can increase goodwill and esteem toward a sponsor as the ideals and spirit of the Olympic Games are associated with the sponsor's brand.
· Business objectives: Sponsorship of the Olympic Movement can enhance core business objectives such as revenue goals, share goals, or brand awareness.
· Brand repositioning: Sponsorship of the Olympic Movement can assist a sponsor in repositioning itself.
· Internal rewards: Sponsorship of the Olympic Movement and the rights and benefits afforded to sponsors can be used internally to improve morale or motivate employees.
· Showcasing: The Olympic Games, as the world's largest sporting event, provide unmatched opportunities for sponsors to showcase technology, products, or services.
· Defense: Part of a corporation's decision to sponsor the Olympic Games is to benefit from the exclusivity of Olympic partnerships by keeping its competitors out.
· Altruism: Part of a corporation's decision to sponsor the Olympic Movement may be derived from a desire to be a good corporate citizen.
Olympic Marketing Rights
TOP Partners receive exclusive marketing rights and opportunities within their designated product category. Partners may exercise these rights on a worldwide basis, and they may develop marketing plans and campaigns with the various members of the Olympic Family: the IOC, the NOCs, and the OCOGs. In addition to the worldwide marketing opportunities, TOP Partners receive:
· Use of all Olympic imagery, as well as appropriate Olympic designations on products
· Hospitality opportunities at the Olympic Games
· Direct advertising and promotional opportunities, including preferential access to Olympic broadcast advertising
· On-site concessions/franchise and product sale/showcase opportunities
· Protection from ambush marketing
· Acknowledgement of support through a broad Olympic sponsorship recognition programme

(Source from The Olympic Marketing Fact File, International Olympic Committee)

Related Article:
Beijing Olympics in 2008 to spur change in ChinaOn July 13, the International Olympic Committee selected Beijing to host the 2008 Olympic Games. Beijing's successful bid is both a triumph for the Chinese leadership and a boost to national pride. It satisfied China's longing desire for international recognition. Hosting the Olympics will also give an impetus to the growth of the country's capital city in the coming years.

As the host of the 2008 Olympics, the city of Beijing will benefit considerably from the massive investment spending in the pipeline and the numerous job opportunities it will create. The Beijing municipal government has already announced an ambitious plan to spend US$ 20 billion in the next seven years to modernize the city's infrastructure. This translates into an average annual spending of about US$ 3 billion, which is equivalent to 10% of the city's GDP in 2000. The sum will be spent on developing sports facilities, public transportation, and communication networks. Apart from the infrastructure spending, a further US$ 12 billion will be ploughed into environmental protection projects.

Meanwhile, the marketing hype that goes with the Olympics would also have a significant impact on raising the awareness of Beijing, and help accelerate the growth of the city's tourism industry. Judging from the experience in other host cities of the Olympics, tourist arrivals in Beijing could increase by 20% during the year of the Games, which would provide a strong boost to retail sales in the city. According to some rough estimates, increased infrastructure spending and the gain in tourism income would add an average of about 2-3 percentage points per year to Beijing's GDP growth in the next seven years. In 2000, Beijing's economy grew by 11%.

Outside of Beijing, however, the economic impact would likely be much limited other than the spillover effects on the country's tourism industry at large. In the context of China's overall economy, the US$ 20 billion infrastructure spending of the Olympics is less than 2% of the country's GDP in 2000. Meanwhile, as the government would finance the bulk of the spending out of its tight fiscal budget, the gain in investment in Beijing may well mean a reduction elsewhere in the country. Some estimates put the net contribution of the Olympics to China's national GDP growth in the next seven years at only 0.1 percentage points per year. The Chinese economy grew by 8% in 2000.

As a major travel hub to China, Hong Kong will stand to benefit from the take-off of China's tourism business. The hotel and travel industries would be the obvious winners, as tourists stop over Hong Kong when they visit China during the sporting event. Hong Kong's companies may also win a handful of construction contracts, and pick up some production orders for logo-related items of the Beijing Olympics, such as clothing and gift souvenirs. The value of these deals, however, would likely be small compared to the overall business that Hong Kong's companies are now doing across the border. Judging from the experience in other cities hosting the Olympics in the past, contracts of the big infrastructure projects are likely to go to companies in the host countries. Meanwhile, many of the big branding contracts will also probably be awarded to large multinational merchandisers that have a larger budget. The economic benefit of Beijing Olympics to Hong Kong other than the boost to the SAR tourism industry would therefore likely be negligible.

While many are quick to point to the monetary benefits of hosting the Olympic Games, which seem to be quite limited outside of Beijing, the real significance of the sporting event lies beyond economics. In the run up to the Beijing Olympics, China will become more integrated into the global community, not just in terms of sports but also culturally. The hosting of the sporting event will also expose China to greater international scrutiny and foster better understanding about the country. Through engaging China closer with the wider world, the Olympic Games will help strengthen the forces of liberalism in the country and hasten the pace of social, if not political, change.

(Source from International trade and relations)

Go West
Background Information in various Municipals/Provinces/Regions:

1. Market Profile on Chongqing Municipality
Chongqing has a total area of 82,400 Total population stood at 31.0 million based on China’s 2000 population census.

Chongqing is the youngest but the largest centrally administered municipality in China. The establishment of Chongqing municipality represents a major breakthrough of China’s initiatives to speed up economic development in the central and western regions. It is called the locomotive of southern and western China economy. The Yangtze River’s Three Gorges Project will be very important in the development of Chongqing’s economy.

Chongqing is one of the six old industry bases of China. It is one of the four major automobiles and one of the main military production bases of China, at the same time it is one of the nine biggest iron & steel production centers and one of the three major aluminum production bases of China. In terms of output in 2002, the leading industries include automobiles and transport equipment, metallurgical and chemicals. Other major industries include food and food processing, machinery, medical products, textiles, electronics and building materials.

Chongqing’s industry is dominated by heavy industry. While output value of the light industry had just a growth rate of 15.4% in 2002, heavy industry grew by 23.2% to RMB74.9 billion, accounting for 61% of the total. Besides, heavy industry obtained more foreign investment than light industry. In 2002, the ratio of foreign capital to total capital in the heavy industry was 9.5%, and that in the light industry was 5.2%.

Chongqing is the retail center of southern and western China. The retail industry of Chongqing is very competitive, particularly with the establishment of a number of local and foreign retail enterprises including Carrefour from France, Metro from Germany, the local company-Beijing Gome, and the two famous indigenous retailer-Chongqing General Trade Group as well as Chongqing Department Store Co, Ltd.

2. Market Profile on Shaanxi Province

Shaanxi has a total area of 205,800 Total population stood at 36.59 million in 2000 population census.

The northern part of Shaanxi has abundant reserves of coal, natural gas and petroleum. Shenmu and Fugu are major production bases of fine quality coal in China with a total deposit of more than 160 billion tons. Natural gas reserves proven in Shaanxi reach 200 billion cubic meters. The province is also rich in metal and non-metallic mineral reserves. Among the 91 kinds of minerals found in Shaanxi, 27 have reserves that are ranked among the top three in China.

Shaanxi ranks third in terms of overall R&D strength after Beijing and Shanghai. It has more than 2,000 science and technology research institutes, of which 50 are recognized as reaching the advanced level in the country. The largest number of R&D institutes and personnels are concentrated in Xian.

Xian is an historic city with abundant cultural and historical assets that can be developed for tourism. While the terra-cotta army )is highly praised as the eighth world wonder, other popular places of interest include the site of Lantian Ape Man), Xi'an Forest of Steles, Wild Goose Pagoda and Huaqing Pool.

Remarkable economic performance:
· GDP grew by 10.1% in the first five months of 2003
· Value-added industrial output increased by 16.1% in the first seven months of 2003
· Retail sales recovered from SARS epidemic and grew by 9.6% in July 2003
· The largest amount of R&D expenditure by enterprises among all provinces in western China
· The second highest number of private technology enterprises in China

Shaanxi’s current major economic policy focuses include:
· To continue economic structure adjustment
· To encourage development of the private sector
· To develop modern services industries, particularly in tourism
· To strengthen technology innovation
· To raise the income level of farmers
· To expand domestic demand
Xian retail distribution developed rapidly in recent years. Apart from new shopping malls being developed, foreign-invested retail enterprises -- Metro from Germany, Carrefour from France have also set up their presence in Xian.

3. Market Profile on Yunan Province

Yunnan has a total area of 394,000 Total population stood at 42.87 million in 2000 census.

Yunnan is one of the major forest zones in China, its forest area accounts for 24% of the country's total. Yunnan is one of the most popular tourist centers in China, it receives the largest number of tourists in western China.

Yunnan is linked with the ASEAN countries by land, hence, is a major transportation hub of the forthcoming China-ASEAN free trade area. Apart from the highway and rail links that are being built to link up Kunming with Bangkok, Vietnam, and other ASEAN countries, the Lanchangjiang-Mekong River waterway and new air services to ASEAN destinations have also been developed.

Tobacco is the biggest industry in Yunnan, accounting for 36.7% of Yunnan’s industry output in 2002. Furthermore, it is ranked the No.1 in China, accounting for 17.6% of the national total output. Yunnan’s tobacco and cigarettes are famous in China— well known brands include “Hongtashan”, “Ashima” , “Yunyan” and “Hongmei” , which are all among the best in China. Yuxi is one of the most important tobacco production bases in China and the nation’s largest cigarette manufacturer — Hongta Group is located in this city.

Electricity industry is another important economic pillar of Yunnan, which plays a key role in the “West-East Electricity Transmission Project”.

A number of foreign retail enterprises that have invested in Kunming’s growing consumer market, these include Wal-mart from the US, Romate ,Carrefour from France, Puresmart and Trust-mart from Taiwan.

(Source from Hong Kong Trade Development Council)

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