On Oct 9, when a financial frenzy gripped Hong Kong’s roller-coaster stock market, the Hong Kong Special Administrative Region government brought happy tidings of long-lasting impact to the real economy. The good news was that the Ministry of Commerce had agreed to make further amendments to Hong Kong’s trade-in-services agreement with the Chinese mainland. The amendments would bring real benefits to Hong Kong’s service industries through further opening-up of a number of important mainland service sectors to Hong Kong.

The Second Agreement Concerning Amendment to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Agreement on Trade in Services, as it is formally called, was signed on Oct 9, witnessed by Chief Executive John Lee Ka-chiu and senior central government officials.

The CEPA is a free trade agreement concluded between the mainland and Hong Kong in June 2003, as part of the mainland’s effort to boost the Hong Kong Special Administrative Region’s then-sagging, post-epidemic economy. Under this agreement, access to 18 service sectors on the mainland was liberalized.

As Hong Kong is a predominantly service-oriented economy, greater benefits would accrue from opening up more mainland service sectors. The HKSAR sought a trade-in-services arrangement with the mainland, which was signed in November 2015, and implemented in June 2016.

In response to continued requests from Hong Kong for more liberalization, agreement was reached in 2019 to amend the trade-in-services agreement and add new liberalization measures. On the 20th anniversary of the signing of the CEPA in June 2023, the mainland had fully or partially opened up 153, or 96 percent, of its 160 service sectors to Hong Kong.

In spite of such progress, Hong Kong’s service providers have complained that “the big door has opened; but small doors haven’t”. By that, they mean restrictions continued to apply in many sectors, such as construction and related-engineering services, which require service providers to have acquired three years of operating experience before they could commence service provision.

Another example is the film and TV industries, where Hong Kong has an early lead and considerable international recognition. Entry into the mainland’s market was hampered by restrictions on investment and the number of Hong Kong-origin actors or creative personnel allowed to take part in the production.

The latest set of amendments removed restrictions in a number of service sectors where Hong Kong has a competitive edge — namely, construction and related engineering services, film services, television services, tourism services, financial services, and telecommunication services.

The three-year local operating requirement for construction and related engineering services will be removed when the amendments enter into force on March 1, 2025.

Hong Kong’s film industry will be able to invest in enterprises engaged in film production on the mainland; and qualified film service providers will be able to distribute imported buyout Hong Kong movies on the mainland. As for the television industry, the quantitative restriction on Hong Kong residents participating as principal creative personnel in online television dramas, a fast-growing industry on the mainland, will be removed.

The market access improvements in the tourism and financial services sectors are significant. To promote multidestination tourism in the Guangdong-Hong Kong-Macao Greater Bay Area, measures will be introduced to facilitate the entry of foreign group tours to the whole of Guangdong province through more control points in Hong Kong. Mainland visitors participating in international cruise itineraries will be able to make permit-free transit in Hong Kong. This will enable more cruise ships operating from mainland ports-of-call to call at Hong Kong.

Hong Kong people must work hard and innovate to ride the next wave of ascendance of the Chinese mainland’s vast services market. Or they will be left behind

The measures facilitating the entry of Hong Kong’s financial services into the mainland market have been long sought after. The $2 billion requirement for Hong Kong financial institutions investing in shares of insurance companies will be removed. Foreign bank branches established in Hong Kong will be able to conduct bank card services on the mainland. Consideration will be given to extending the scope of eligible products under the “mutual market access” program by including new products such as real estate investment trusts. Continuous improvements will be made to various mainland-Hong Kong “Connect” schemes to enhance connectivity of the capital markets of the mainland and Hong Kong, and to reinforce Hong Kong’s status as a global financial center and offshore renminbi business center.

Hong Kong’s telecommunication service providers will also get a slice of the mainland market. They will be allowed to distribute in the mainland telephone service cards that can be used globally but cannot be activated on the mainland.

In addition to expanding market access, the amendments bring an innovative breakthrough in allowing Hong Kong-invested enterprises on the mainland to adopt Hong Kong law and to choose Hong Kong or Macao as the seat of arbitration should such need arise. Such unprecedented measures will promote the adoption of the common law in commercial areas on the mainland, and enhance Hong Kong’s importance as a regional arbitration center.

The business community warmly welcomed these improvement measures. Immediate action was taken by many foreign chambers of commerce to include details in their websites or newsletters.

In 2022, trade in services between the mainland and Hong Kong amounted to HK$306.2 billion ($39.41 billion), accounting for 28 percent of Hong Kong’s trade-in-services trade. The amendments will not only be beneficial to both mainland companies and Hong Kong enterprises, but also represent another step up in the modernization of mainland China’s service industries, drawing on Hong Kong’s experience.

To bolster Hong Kong’s sluggish economy, many in Hong Kong have pressed for quick fixes like increasing the amount of duty-free goods that mainland visitors can bring home, or allowing those entering under the Capital Investment Entrant Scheme to spend more on property.

Quick fixes have been implemented before, the most prominent being the rapid expansion of the Individual Visit Scheme, which opened the floodgates for mass tourism from mainland China. Such programs did help Hong Kong achieve a fast turnaround, but they skewed the local market, and took away Hong Kong service providers’ incentives to innovate and diversify. Now, many Hong Kong service providers face a rude awakening that they are being left behind.

The amendments provide a framework for Hong Kong service providers to achieve greater access to the mainland’s market. But nothing is a given. Hong Kong people must work hard and innovate to ride the next wave of ascendance of the Chinese mainland’s vast services market. Or they will be left behind. 

The author is convener of the Executive Council and a legislator. 

The views do not necessarily reflect those of China Daily.