China expanded its free trade pact with Hong Kong,
further liberalizing trade in goods and services between the mainland and the
autonomous region.
The new agreement builds on the first three stages of the trade agreement
established in 2003 when Hong Kong was suffering a sharp economic slowdown due
in part to the devastating outbreak of SARS that year.
The fourth phase of the Closer Economic Partnership Arrangement (CEPA), aimed
at giving Hong Kong greater access to mainland markets, was signed by Hong Kong
Financial Secretary Henry Tang and Vice-Minister of Commerce Liao Xiaoqi.
"CEPA has proved to serve as a platform and powerful engine for strengthening
economic and trade ties between the mainland, Hong Kong and (the former
Portuguese enclave of) Macau," said Jia Qinglin, the chairman of the Chinese
People's Political Consultative Conference, in a trade and economic forum in
Hong Kong.
The new provisions, effective from January 2007, will see a further
relaxation of market access conditions in 10 areas including legal services,
construction, tourism and air transport.
Hong Kong chief executive Donald Tsang said the central government are also
studying a further expansion of yuan business and transactions allowed in Hong
Kong.
This would include allowing Hong Kong importers to settle their mainland
bills directly with yuan while mainland financial institutions could issue bonds
denominated in yuan on a pilot basis.
Joseph Yam, chief executive of Hong Kong Monetary Authority (HKMA), the
city's de facto central bank, said while the issuance of yuan-denominated bonds
will help enhance the territory's ability to do yuan business, the process can
be developed only over time.
"There are a host of issues that HKMA needs to thrash out with our
counterpart on the mainland. These include such as who can buy the bonds, how
monies paid for those bonds are to be sent to the mainland and how the
yuan bonds can be rolled over," he told reporters.
Yam said that with mainland having the world's largest foreign exchange
reserves and its economy being the world's fourth largest, it is inevitable for
the yuan to become significant over time in the world economic arena.
He added Hong Kong is playing the role of a testing ground for the gradual
process of the yuan's convertibility into other currencies, as well for as other
reforms in the mainland's financial system.
