Ventures Dialogue

With an aim to actively promote dual development and co-operation between financial services in Hong Kong and Shanghai, Hong Kong and Shanghai signed a Memorandum of Understanding Concerning Advancing Hong Kong-Shanghai Financial Co-operation (MOU).  The MOU allows both places to capitalize on their respective strengths to contribute to financial reform on the Mainland China.

The signing of the  MOU was witnessed by the Financial Secretary of the Hong Kong Special Administrative Region Government, Mr John C Tsang, the Vice-Mayor of Shanghai, Mr Tu Guangshao, and other guests, Hong Kong’s Secretary for Financial Services and the Treasury, Professor K C Chan, and the Director of the Shanghai Municipal Government Financial Services Office, Mr Fang Xinghai.

Speaking at the signing ceremony on January 19th, Professor Chan said: “Hong Kong and Shanghai should step up co-operation for the country’s financial development.  As a highly international, liberal and institutionalized international financial centre, Hong Kong has relatively rich experience and advantages in facilitating Mainland financial institutions to go international step by step, attracting foreign capital and introducing financial innovation. On the other hand, Shanghai enjoys a prestigious position in mobilizing capital, talent and financial institutions on the Mainland.”

According to the MOU, the two cities would strengthen financial co-operation under the framework of the Hong Kong/Shanghai Economic and Trade Co-operation Conference and with the advice and support of the state’s financial authorities. 

The  MOU outlines three directions for advancing co-operation. Firstly, the MOU set out the overall objectives for advancing financial co-operation between Hong Kong and Shanghai, which would strengthen the international competitiveness of China’s financial services industry.  Secondly, the MOU sets out priority areas for advancing financial co-operation between Hong Kong and Shanghai, which would strengthen ties between their financial organizations under their respective regulatory frameworks.  Thirdly, the MOU advances co-operation concerned improving the dialogue and exchanges between the financial services of Hong Kong and Shanghai. 

With the signing of the MOU between Hong Kong and Shanghai, Professor Chan hoped both places could make joint efforts, advance exchanges, further complement each others’ competitive edges and advance strategic collaboration, to promote the development of the country’s financial services industry.

Hong Kong-based global consumer goods exporter Li & Fung Limited  and the Hudson’s Bay Trading Company  announced a global sourcing strategic partnership for Hudson’s Bay Trading Company’s four main retail banners, the Bay, Zellers, Home Outfitters and Lord & Taylor.

According to Jeff Sherman, Chief Executive Officer, Hudson’s Bay Trading Company, the consolidation of the company’s global sourcing requirements and activities into one North American shared services group with a best-in-class partner will accelerate the company’s overall business strategy to integrate and improve operating effectiveness of each of the retail brand merchandising entities.

“The signing of buying agency agreement with Li & Fung complements our shared services strategy to consolidate and align global sourcing needs into one group for all of our banners. By partnering with the world’s leading consumer goods sourcing company, we will be able to leverage Li & Fung’s scale and expertise,” said Mr. Sherman.

Mr. Bruce Rockowitz, President of Li & Fung (Trading) Company, said, “We are delighted to see the execution of this outsourcing deal with one of the oldest companies and one of the leading retail groups in North America. We are very excited about this strategic relationship as the four main retail banners are well-established and we see great potential in them. With our strong network of offices in over 40 economies, we are confident that we will be able to contribute to the long term success of Hudson’s Bay Trading Company in North America.”

The new buying agency arrangement with Li & Fung will go into effect in 2010.

Canadian shoe retailer ALDO entered the Hong Kong market with the opening of its first flagship store on May 25th at the IFC mall, Central which houses over 100 international brands.

ALDO, the ALDO Groupe’s flagship brand, delivers total high fashion at prices that make keeping up with seasonal style a luxury within reach. ALDO footwear, handbags, and accessories are young in sprit, urban in mindset, and on the cutting edge of international style. Bursting with personality, ALDO is the lifestyle brand for people stepping up in the world.

The ALDO store at the IFC mall, which is the brand’s first foray into the Hong Kong retail market, will offer a wide product range of women’s and men’s footwear, handbags, and accessories to cater to every consumer’s fashion needs. Continue reading ‘Canadian fashion footwear giant ALDO puts best foot forward in the Hong Kong retail market.’

Currently, if you wanted to get from Hong Kong to Shanghai or Beijing by train, it will take about 20 and 24 hours, respectively.  In about seven years, however, travel time will be cut down to eight and 10 hours, a definite improvement.

Scheduled for completion in 2014-2015, Hong Kong SAR’s Executive Council has given the go ahead for a HK$39.5 billion ($5.2 billion CAD), 26 km underground high-speed railway link.  It will fully connect with mainland China’s rail network.   Travel between Hong Kong and Guangzhou, on the mainland, will be halved to just under 50 minutes.  In essence, Guangzhou will become a regional railway hub, linking the express rail network, and billed as a gateway into mainland China.

The Hong Kong government will pay for the initial construction cost, but the Mass Transit Railway Corporation Limited (MTRCL) will operate the line for 50 years with annual concession fees under a build-operate-transfer arrangement.  A similar arrangement was reached for the Shatin to Central link (SCL).  Guangzhou already boasts the terminus at Shibi, one of the four biggest passenger transport centers in China.

Along with the new link and transportation hub in West Kowloon, Eva Cheng Yu-wah, Secretary for Transport and Housing said the area would also be built into a commercial center.  Expecting to facilitate 10 trains in both directions, Cheng expects that 37 percent of travelers would be new transit passengers and the other 63 percent would be from commuters who already using either the train, cross-boundary coaches or other means of transport.  Although funding approval from the Legislative Council is still required before any work can begin, the project is expected to break ground next year.  A total of 15,000 jobs, which includes 5,000 construction jobs are expected to be created.  It is estimated that the project will boast around 100,000 passengers a day in 2020 and 120,000 in 2030.  In the next 50 years, this is expected to bring a $83 billion ($10 billion CAD) economic benefit in terms of travel time saved.

The Executive Council approved planning for the previously mentioned SCL and the Kwun Tong Line Extension, also by MTRCL in March of this year.  The former will have nine stations linking existing railway lines, and thereby creating east-west and north-south train corridors.  It is expected to facilitate one million passengers a day by 2021 and produce $4 billion ($500 million CAD) in time saving economic benefit.  Construction costs for SCL is HK$37.4 billion ($4.9 billion CAD)

The China-Hong Kong Closer Economic Partnership Arrangement (CEPA) was first introduced in January 2004 to increase the level of economic trade and cooperation between Hong Kong Special Administrative Region (SAR) and the Chinese mainland. 

Essentially, CEPA is a free trade agreement (under World Trade Organization (WTO) rules) which allows easier access to China’s market for Hong Kong made products and Hong Kong based service companies.  CEPA is China’s first bilateral trade agreement.  

Since 2004, there have been four supplements, with the most recent implemented in January 2008 (CEPA V). 

CEPA covers three broad categories: 

1. Trade in Goods - All classified “Made in Hong Kong” goods that meet CEPA rules of origin (ROO) from approved local manufacturers are imported, tariff free, into mainland China.

There are 1,502 tariff codes outlining the ROO criteria for classification as a Hong Kong made product.  Foreign products must be substantially transformed to meet CEPA standards. The major criteria are:

• Value-Added Content- This applies to about 11% of the 1,502 tariff codes. This origin rule requires the total value of labour, product development, component parts and raw materials to more than or equal to 30% of the free-on-board value of the goods.
• Manufacturing or Processing Operations- This applies to about 72% of the 1,502 tariff codes. This origin rule requires the principal manufacturing or processing operations which confer the essential characteristics to the final product are carried out in Hong Kong.
• Change in Tariff Heading- This applies to about 11% of the 1,502 tariff codes. This origin rule requires the processing and manufacturing of non-originating materials to be carried out in Hong Kong and resulting in a product of a different four-digit tariff heading under the “Product Description and Harmonized System Codes.” manufacturing or processing operations, and change in tariff heading.

Each shipment of goods exported to mainland China must be have a Certificate of Hong Kong Origin- CEPA (CO(CEPA)). Applicants must comply with 11 criteria to be issued a CO(CEPA) by the Trade and Industry Department (TID) or one of the five Government Approved Certification Organizations:

• The Hong Kong General Chamber of Commerce
• Federation of Hong Kong Industries
• The Chinese Manufacturers’ Association of Hong Kong
• The Chinese General Chamber of Commerce
• The Indian Chamber of Commerce, Hong Kong

Before applying for CO(CEPA), the Hong Kong manufacturer must apply for a Factory Registration (FR) with the TID. A FR validates that its factory has the capabilities to produce the goods for export.

2. Trade in services - Hong Kong service suppliers are given preferential treatment in entering into mainland China in many service sectors. Professional bodies of Hong Kong and the regulatory authorities in China have also signed a number of agreements or arrangements on the mutual recognition of professional qualification.

There are 28 service sectors in which geographical, financial, and ownership restraints are either reduced or removed. Any company, foreign or domestic, can apply as a Hong Kong company and take advantage of CEPA, provided that it meets the following criteria:

• Incorporated in Hong Kong
• Has operated for three to five years (depending on the sector)
• Is liable to pay Hong Kong profits tax

[A company (domestic or foreign/ Hong Kong or foreign) must pay profits tax if it carries on a trade, profession or business in Hong Kong and has profits arising in or derived from Hong Kong.] 

• Employs 50% of its staff locally

3. Trade and investment facilitation - Both China and Hong Kong have agreed to enhance cooperation in eight core trade and investment areas: 

• Customs Clearance Facilitation
• Quarantine and Inspection of Commodities, Quality Assurance and Food Safety
• Cooperation of Small and Medium-Sized Enterprises
• Cooperation in Chinese Medicine and Medical Products
• Electronic Commerce
• Trade and Investment Promotion
• Transparency in Laws and Regulations
• Protection of Intellectual Property

For more information about CEPA:

Trade and Industry Department of Hong Kong (SAR) http://www.tid.gov.hk/english/cepa/index.html 

Hong Kong Economic & Trade Office http://www.hketo.ca/invest/cepa.html