Market Analysis: Beijing and Hong Kong: Closer Partnership under CEPA

cctv.com 11-12-2003 16:12

The recently held Beijing- Hong Kong Economic Cooperation Symposium is a good beginning in the direction of closer cooperation between the two cities, under the framework of Closer Economic Partnership Arrangement, or CEPA. Today's market analysis will take a look at the future cooperation opportunities between Beijing and Hong Kong.

Li Yang, Division Chief of Beijing CBD Administrative Commission, said, "In the blue-print of Beijing CBD, there is a construction area of 8-10 million square meters, out of which 50 percent is for office buildings, 25 percent for residential apartments and the remaining 25 percent for commercial use. The current scale of development has reached 3 million square meters. Hong Kong investors are playing a very important role in CBD development. According to statistics, Hong Kong developers have 9 projects in CBD, which is 31% of total number of projects. The total investment from Hong Kong has reached 1 billion US dollars, which is 72 percet of total overseas investment."

Real estate sector is playing a big role in the cooperation between Beijing and Hong Kong, helping the two cities establish a long-term partnership. Right now, Hong Kong is the third largest trading partner of Beijing, and the trade figures are constantly growing. And with the launch of CEPA, this partnership is going to grow from strength to strength, with expanding areas of cooperation.

Roger Chu, Director of Hong Kong Trade Development Council, said, "The service industry is because there is not require on how much capital they have. It's a how much technology and how many skills they have put in. And that's better for Hong Kong's SMEs to particularly. They don't have enough capital investment, however, they have special skills, or even professional qualifications. These are the ones we feel they can come in first."

Hong Kong has rich experience in the service industry, which contributes over 90% of its GDP. A Hong Kong invested building group- the Oriental Plaza, is one of the first overseas investors to introduce a comprehensive service concept to Beijing. With its fine efforts and high quality of service, the Plaza is enjoying a high reputation in Beijing's service sector. The CEPA will provide a bigger market for investors like Oriental Plaza from Hong Kong, who will be the first to enjoy the rules on tariff-free trade.

Lampson Y.C. Lam, GM- Commercial Leasing of The Towers, Beijing Oriental Plaza Co., Ltd., said, "In Oriental Plaza, there are office buildings, shopping malls, apartment buildings, and a hotel. We belong entirely to service industry. CEPA will provide more scope of development to service industry, and will also bring us a lot of business. We will have more new customers for office buildings, more new brands for malls, and more Hong Kong people for renting our apartments. And the hotel will obviously have a good business."

Tourism is another sector that will benefit a lot under the framework of CEPA, as both Beijing and Hong Kong have their distinct advantages and attractions. The Chinese government has relaxed the restrictions on individual tour to Hong Kong, which will increase the number of mainland tourists to the "shopping paradise". Meanwhile, both sides have lowered regional and political barriers in tourism cooperation.

Selina Chou, Chairman of Hong Kong Tourism Board, said, "Hong Kong investors can come to mainland to build hotels, and they can also invest in restaurant business. These are closely related to tourism business. At the moment, they have to go into partnership with mainland investors in setting up travel agents. Hopefully, that, too, will change in the future. Still, at the moment, there is still a lot of room for investment in tourism related business on the mainland."

A growth in the flow of passengers and cargo will put pressure on Beijing's already heavy traffic. As a major financial and tourism center, Beijing needs to develop a strong logistics industry. Hong Kong ranks high in ocean shipping and air ferry in the world. CEPA will create cooperation opportunities in logistics industry as well.

Albert Yau, GM of Hong Kong Dragon Airlines Ltd., said, "Once the CEPA has signed, the cargo flow between Hong Kong and Mainland China will also increase, so for the cargo industry, which falls in the logistics industry, there will also have a tremendous increase in the volume in cargo flow. And so, we can think that this can be very good things to Hong Kong economy as well as win-win situation to both mainland China and Hong Kong as well."

A recently held exhibition demonstrated the future potential of this partnership in several areas. These include cooperation in the manufacturing and trading of Hong Kong's famous retail brands; exchange among high schools; collaboration in the cultural field, especially in the movie and TV program production; in addition to other sectors, such as finance, accounting, insurance, and legal services. In these areas Hong Kong has reached the international standard. With a pool of skilled workers and a developed service industry, Hong Kong companies will enthusiastically penetrate Beijing market. And, Hong Kong is also welcoming Beijing companies in certain areas.

Simon Galpin, Associate Director- General of Invest Hong Kong, said, "Beijing has some real strength in IT. Some of the up and coming IT companies in Beijing will start to go global, we'd like to think they could partner with Hong Kong service providers to raise capital and to gain market expertise internationally."

But the reality is more complex than it seems. Beijing and Hong Kong still have a long way to go before they can make a perfect match under the framework of CEPA. Beijing needs to absorb advanced management concepts of the cooperative joint ventures, before it can reach global level.

Yu Judith, Executive Director of H.K.I. Development Co. Ltd., said, "Efficiency of most of the approval procedures that we have to go through different departments in order for our projects to start. Before construction, actually, there are a lot of departments that we have to visit and sometimes, the approval time is quite long, so I think, hope that actually, in future time, actually, we can speed up this approval procedures or actually can combine them into just one department, if possible."

East Lake Villas, a high-end office and apartment complex in downtown Beijing, has accumulated over 15 years of experience in working with a Hong Kong partner. In the opinion of the developer, certain policies need to be clarified. To allow Hong Kong investors to develop long term plans in Beijing.

Liu Hua, Director of East Lake Villas, said, "Judging from overseas investors, they are always expecting a big return in a short term. However, it takes time to take back investment. But their anxiety is reasonable. Because according to China's current policies on joint ventures, such cooperation relationship is legal in a certain period. When the time is up, it concerns with what and how to do in the following days. According to such problems, our policies should be much clearer on whether the period can be postponed or not."

The both sides are making efforts to offer each other a better environment for business. Last month's Beijing & Hong Kong Economic Cooperation Symposium was a good start of a closer cooperation under CEPA. Besides normal business activities, 2008 Olympic Games will also provide Hong Kong investors more investment opportunities. However, CEPA can only be regarded as an important path that helps take Hong Kong investors to more sites for cooperation. The final success of this arrangement would depend on how the two cities work together on the details of this framework.

Editor:Zhang Wenjie  Source:CCTV.com