The Chinese mainland and the Hong Kong Special Administrative Region (HKSAR) have taken a significant step towards deeper integration in services trade. On October 9, Paul Chan, Financial Secretary of the HKSAR, and Li Yongsha, Deputy Representative for International Trade Negotiations from China's Ministry of Commerce, signed the second amendment to the Service Trade Agreement under the Closer Economic Partnership Arrangement (CEPA). This new agreement, which builds on the foundations laid in 2003, is set to take effect immediately, with full implementation starting on March 1, 2025.

Expanding Access for Hong Kong Service Providers

The amendment introduces a host of new measures aimed at lowering or removing market access thresholds for Hong Kong service providers across key sectors, including finance, telecommunications, architecture, and tourism. These reforms are expected to facilitate business establishment in mainland China, allowing Hong Kong professionals to obtain mainland qualifications and expand their service offerings across a broader range of markets.

Hong Kong Chief Executive John Lee expressed his gratitude to the central government for its support. “The new measures open more doors for Hong Kong service providers, enabling them to set up businesses more easily in the mainland and contribute to national development through high-quality services,” Lee remarked. The agreement, he added, reinforces the unique advantages of Hong Kong under the "One Country, Two Systems" framework, further integrating its service industry with that of the mainland.

Key Sectors to Benefit from New Opportunities

The revised agreement focuses on sectors where Hong Kong has distinct competitive advantages. Key provisions include:

Finance:The removal of restrictions on Hong Kong financial institutions investing in mainland insurance companies and the relaxation of rules for Hong Kong branches of foreign banks, which will now be allowed to conduct credit card business. The agreement also explores expanding the scope of cross-border financial services, such as REITs (Real Estate Investment Trusts) and optimizing the cross-border Wealth Management Connect scheme.

Architecture and Engineering:Hong Kong companies providing architectural and engineering services will now be able to operate in Guangdong province through a simplified filing process. Moreover, joint ventures with mainland companies will have greater access to project bidding opportunities in the Greater Bay Area.

Television and Film:Restrictions on Hong Kong service providers investing in film production will be lifted. Additionally, television dramas produced by Hong Kong companies will be allowed to air during prime time on mainland broadcast channels, pending approval from the National Radio and Television Administration.

Tourism:Hong Kong service providers will benefit from expanded visa-free policies for foreign tourists entering Guangdong from Hong Kong, allowing for a 144-hour stay. Mainland cruise operators will also be able to enhance connectivity with Hong Kong, promoting more integrated tourism routes.

Institutional Innovations and Legal Flexibility

In addition to sector-specific reforms, the amendment introduces several institutional innovations. For instance, new measures such as "Hong Kong Law for Hong Kong Investors" and "Hong Kong Arbitration for Hong Kong Enterprises" will give businesses more flexibility in choosing legal and arbitration frameworks in the Greater Bay Area. This is expected to reduce operational costs and enhance legal certainty for Hong Kong companies investing in the mainland.

The agreement also brings regulatory transparency and efficiency improvements, aligning mainland service trade regulations with international standards to create a more predictable and streamlined business environment.

High-Quality Development and Regional Integration

The signing of this amendment underscores the commitment of both the mainland and Hong Kong to enhance economic collaboration, particularly in the wake of recent global challenges. By further opening service sectors, the agreement seeks to promote high-quality development and inject fresh momentum into the economies of both regions.

Paul Chan emphasized the role of the amendment in reinforcing Hong Kong's status as a "super-connector" between mainland China and global markets. "This agreement will not only help Hong Kong service providers tap into the vast mainland market but also contribute to the long-term competitiveness of the Greater Bay Area as a hub for professional services," Chan noted.

With its implementation in March 2025, this agreement marks a significant milestone in China's broader strategy to deepen economic ties with Hong Kong, solidifying the territory's role as a critical player in the country’s continued opening-up and economic development.