Speeches and Presentations



LCQ2: Barriers of entry to the mainland market

Following is a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Andrew Leung Kwan-yuen in the Legislative Council today (May 9):

Question:

Hong Kong's service industries have all along been striving to explore business opportunities on the Mainland. Some members of the industries have pointed out that although the Mainland and Hong Kong Closer Economic Partnership Arrangement has lowered the threshold for Hong Kong's service industries to enter the mainland market, their efforts in developing businesses on the Mainland can only achieve half of the desired results due to the differences in cultural background and mode of market operation between the Mainland and Hong Kong, as well as the fact that Hong Kong's small and medium-sized enterprises are unfamiliar with the vetting and approval procedures for starting up businesses on the Mainland. A community think tank earlier conducted a study on the current situation and difficulties encountered by the service industries in developing the mainland market, pointing out that Hong Kong businessmen face "three main barriers" (including cumbersome vetting and approval procedures for starting up businesses, obstacles in the free flow of information, as well as heavy tax burden and difficulty in obtaining recognition of qualifications). In this connection, will the Government inform this Council:

(a) of its plans to assist Hong Kong businessmen in resolving the difficulties of the "three main barriers", particularly the problems relating to taxation and recognition of qualifications; whether it will reconsider introducing cross-border worker special tax provisions for cross-border workers in Guangdong and Hong Kong on an early and pilot implementation basis under the Framework Agreement on Hong Kong/Guangdong Co-operation, so as to alleviate the tax burden on cross-border workers and enhance the incentive for the working population in the two places to work across the border; and whether it will introduce more mutual recognition of qualifications between the two places in the future so as to facilitate the exchange of talents;

(b) whether it has considered striving with the Central Government and Guangdong Provincial Government to introduce on an early and pilot implementation basis in Qianhai, Hengqin and Nansha in the Pearl River Delta Region various measures (e.g. introducing one-stop service for enterprise registration application, setting up a Mainland-based liaison group to coordinate with the management departments in the three places, as well as progressively relaxing stake limitations on Hong Kong enterprises and their scope of operation, etc.) to assist Hong Kong businessmen; if it has not, how the authorities will assist the local service industries in developing markets in Qianhai, Hengqin and Nansha; and

(c) whether it will consider studying in collaboration with the relevant mainland authorities on levying on Hong Kong businessmen, who frequently travel between Qianhai, Hengqin and Nansha on business, a uniform tax with the standard rate being comparable to Hong Kong's salaries tax rate, issuing special permits to such businessmen, streamlining the entry and exit procedures on the Mainland and in Hong Kong, and setting up additional 24-hour boundary control points; if it will not, of the reasons?

Reply:

President,

Regarding Member's questions and suggestions, we have followed up with the Constitutional and Mainland Affairs Bureau, the Financial Services and the Treasury Bureau, and the Security Bureau. Our consolidated reply is as follows –

Taxation arrangements
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As Hong Kong's taxation system is based on the territorial principle, Hong Kong residents' income derived from the Mainland is not subject to tax in Hong Kong. The proposal of introducing special tax provisions for frontier workers will lead to double non-taxation of their income since most of their services are likely rendered outside Hong Kong. Hence, we and the State Administration of Taxation consider that it is not appropriate to introduce any special tax provisions for frontier workers at this stage.

In addition, there are fundamental differences between the tax system of Hong Kong and that of the Mainland, reflecting our respective taxation principles and considerations. We have no intention at this stage to explore with the relevant Mainland authorities the proposal of unifying the imposition of taxes on Hong Kong businessmen who often travel to and from Qianhai, Hengqin and Nansha. We believe that Hong Kong residents who conduct business or work in the three said places will take into consideration such relevant factors as possible tax liabilities before making their commercial or personal decisions, similar to those Hong Kong people who conduct business or work in other Mainland places or overseas.

Mutual recognition of professional qualifications
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On mutual recognition of professional qualifications, Hong Kong and the Mainland actively promote exchanges among professionals of the two places under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). This includes allowing Hong Kong professionals to take Mainland qualification examinations to obtain relevant professional qualifications in the Mainland. At present, people from over 40 Hong Kong professional or technical disciplines can sit for professional qualification examinations in the Mainland. At the same time, Hong Kong and the Mainland have, through CEPA, reached mutual recognition agreements or made arrangements for exemption of certain examination papers for various professional qualifications in the construction, securities and futures, accounting and real estate sectors. In response to the needs of the trade, the HKSAR Government will continue to liberalise trade in services and pursue mutual recognition of professional qualifications through CEPA.

Vetting and approval procedures for starting up businesses
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Hong Kong enterprises doing business in the Mainland have to follow the relevant procedures in accordance with the Mainland rules and regulations. According to our understanding, the time and application procedures required for business registration in the Mainland may vary depending on factors such as the industry and scope of the business concerned.

We understand that the Mainland authorities have introduced measures to streamline the vetting and approval procedures in recent years. The HKSAR Government will continue to monitor the Mainland economic and trade policies and keep the trade informed of the latest information. We will also maintain close contacts with the relevant Mainland authorities, and reflect and follow up with them the views and suggestions of Hong Kong enterprises on Mainland policies affecting them. If any individual enterprise encounters problems in this regard, it may provide the specific details of the cases to the offices of the HKSAR Government in the Mainland, which would help reflect the issues and follow up with the relevant Mainland authorities as appropriate.

Flow of information
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Although there are views that the mobile roaming charge between the two places is relatively high and hinders information flow, various substitutes (e.g. single-card-multiple-number service, call back service and call forwarding service) are actually available in the market at affordable prices for consumers' selection. Consumers can use these services to make or receive local and cross-border mobile phone calls in the Mainland and Hong Kong at affordable prices. We and the Mainland authorities, including the Ministry of Industry and Information Technology and the Guangdong Communications Administration, share the view that the use of single-card-multiple-number service will promote the integration of telecommunications markets of the two places. How operators in the two places should develop the service to make it a more effective substitute for the expensive mobile roaming service is worth further studying by the governments of the two places. In addition, to keep pace with the economic integration of the Pearl River Delta region, the HKSAR Government and the Guangdong Government have been studying the feasibility of reducing the charges for Guangdong-Hong Kong long distance calls and mobile roaming service with a view to reducing cross-border communications charges.

Qianhai, Nansha and Hengqin development
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Qianhai, Nansha and Hengqin are amongst the seven major co-operation projects among Guangdong, Hong Kong and Macao under the Dedicated Chapter on Hong Kong and Macao in the National 12th Five-Year Plan.

In respect of "Hong Kong/Shenzhen Co-operation on the Development of Modern Service Industries in Qianhai Area", according to the consensus between the two governments, the Shenzhen Municipal Government takes up the leading role and is responsible for the development and management of Qianhai, while the HKSAR Government plays an advisory role by providing comments on the study and formulation of development plan and the related policies. In this respect, the HKSAR Government has been consulting the business sectors through various channels, and reflecting their suggestions (including lowering the entrance requirements for the Hong Kong service providers, simplifying relevant approval procedures and providing preferential tax treatments to Hong Kong enterprises etc.) to the Shenzhen authorities as well as other relevant central ministries. Moreover, the HKSAR Government has been actively complementing the publicity and promotional work of the Shenzhen authorities, by introducing to Hong Kong enterprises, professional sectors and service suppliers the business opportunities brought about by Qianhai. We hope that these efforts could facilitate them to make use of the opportunities provided by Qianhai to tap into the mainland market.

For the development of Nansha, Hong Kong and Guangzhou signed the Letter of Intent between Hong Kong and Guangzhou on Co-operation in Pushing Forward the Development of Nansha New Area in August 2011. The Hong Kong / Guangzhou Co-operation Working Group held its first meeting in December 2011 to exchange views on Nansha's development directions. The HKSAR Government will maintain a close dialogue with the Guangzhou Municipal Government to promote the development of Nansha.

In respect of Hengqin, the National 12th Five-Year Plan positions it as an exemplary zone for pursuing a new mode of co-operation among Guangdong, Hong Kong and Macao. In line with the national direction of deepening regional co-operation, the HKSAR Government will continue to promote the economic development of the region of Guangdong, Hong Kong and Macao under the principles of "complementarity and co-ordinated development" with a view to developing the Pearl River Delta as a world-class metropolitan cluster with enhanced competitiveness.

Qianhai, Nansha and Hengqin are within the service area of the Hong Kong Economic and Trade Office in Guangdong. One of the major tasks of the Office is to liaise with the relevant Mainland authorities to assist Hong Kong enterprises in exploring and developing the Mainland market. Currently, the HKSAR Government does not have any plan to set up a "Mainland-based liaison group" solely responsible for coordinating with the management authorities of Qianhai, Hengqin and Nansha.

In addition, the HKSAR Government will continue to adopt a progressive and incremental approach under CEPA to seek further liberalisation, including relaxing the business scope, reducing geographical restriction, and lowering the capital requirement etc, and will seek to pursue liberalisation on a pilot basis in individual provinces/cities (including Qianhai, Nansha and Hengqin) for services sectors where the conditions are not ripe for nation-wide liberalisation, so as to maximise the business opportunities of the trade.

Immigration procedures and control points
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It has all along been the objective of the Immigration Department (ImmD) to enhance its immigration clearance services through introducing various measures and to provide greater immigration convenience for residents of Hong Kong.

To facilitate the immigration clearance of Hong Kong and Macau residents, the Hong Kong and Macao Special Administrative Region Governments have come to an agreement in 2009 to introduce e-Channel service for Hong Kong and Macao Residents

As regards immigration facilitation measures for entering the Mainland, holders of the Mainland Travel Permit for Hong Kong and Macau Residents (commonly known as the "Home Visit Re-entry Permit") may, after enrollment, use the automated passenger clearance channels at Mainland boundary control points since 2005. Currently, automated passenger clearance channels are set up at immigration control points in major cities including Beijing, Shanghai, Guangzhou, Zhuhai and Shenzhen. The facilities have greatly facilitated immigration clearance of Hong Kong visitors through shortening waiting time.

Meanwhile, eligible non-Chinese Hong Kong permanent residents may apply for the Asia-Pacific Economic Co-operation (APEC) Business Travel Cards through ImmD to enjoy various travel convenience benefits, including multiple visa-free visits to the Mainland, with up to 60 days of stay for each visit, within the validity period of three years. Currently, major cities in the Mainland, including Beijing, Shanghai and Shenzhen, have set up priority lanes for APEC Business Travel Card holders.

As regards suggestions to increase the number of control points providing 24-hour passenger clearance operation, the Lok Ma Chau control point has been providing round-the-clock immigration clearance service since 2003. In the first quarter of 2012, there was an average of about 13 800 passenger trips travelling daily from midnight to 6:30 am at the Lok Ma Chau control point, representing 16% of daily throughput. In recent years, the number of passengers travelling during the overnight period has remained steady. We therefore consider that the current operating hours are adequate to cope with the passenger demand.

The HKSAR Government will continue to exchange views with relevant Mainland authorities on measures to further facilitate Hong Kong visitors, including Hong Kong businessmen travelling between the Mainland and Hong Kong. We will also closely monitor the passenger flow and distribution and review the operating hours of boundary control points as appropriate.

Wednesday, May 9, 2012