WRAP/HK-China Free Trade -2: First-Mover Advantage
The deal also gives Hong Kong 'first-mover advantage' ahead of the rest of the world, said Merrill's Wong. China opens up its domestic markets to foreign competition in 2006.
Essentially, many economists said the most concrete gains will be a lift in the morale stakes, as the city deals with the fallout from SARS.
'My general feeling is that this is a gift from the Beijing government - a way to boost the morale of Hong Kong, support its chief executive, and ease social tensions,' Dong Tao, chief economist at Credit Suisse First Boston Corp. (Z.CSF), said.
The agreement, which originated with the Hong Kong General Chamber of Commerce, was first proposed in late 2001, but talks began in earnest late last year.
At one point the agreement looked in doubt due to wrangling over what constitutes a product that is 'made in Hong Kong.'
While Tung said the government's approach to Hong Kong goods and country of origin would be 'flexible and easy to monitor', economists stressed it was an issue that had to be cleared up.
In recent years, as China liberalizes its economy, Hong Kong has seen multinationals move their headquarters out of the territory into mainland cities like Shanghai.
On top of that, if Hong Kong products made in China are counted as Hong Kong content, they could enjoy the tariff exemptions on raw materials and machinery imports accorded to foreign-invested companies in China that are obliged to export everything they produce.
'With the zero-tariff privilege, Hong Kong manufacturers are able to enjoy tariff exemptions and sell domestically,' Wong said.
However, the zero tariff would be less of a benefit if China imposes a more restrictive definition, he said.
The country-of-origin issue is also crucial for service industries.
'We need details on what a Hong Kong company is, and where services are carried out (to constitute a Hong Kong service),' said Hang Seng Bank Ltd. (H.HSB) economist Vincent Kwan. 'If the services can be based in Hong Kong, it will help with job creation and help Hong Kong's economy.'
The services that will be covered by the agreement are: management consultant services, exhibitions and conventions, advertising, legal services, accountancy, medical services, real estate, construction engineering, transport, wholesale distribution, logistics, tourism, audiovisual services, banking, securities and insurance.
香港与中国大陆自由贸易协议-2
