Economic Integration Advances through Pact: Analysis

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Last updated at: (Beijing Time) Monday, June 30, 2003

Economic Integration Advances through Pact: Analysis

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The Closer Economic Partnership Arrangement between the Chinese mainland and the Hong Kong Special Administrative Region was signed yesterday in Hong Kong. Chinese Premier Wen Jiabao attended the signing ceremony to highlight the vital importance the central government attaches to closer economic ties between the two sides.

As a special arrangement under the "one country, two systems" principle and the World Trade Organization framework, the pact is believed to open up new and exciting business opportunities on the mainland for Hong Kong. It is also part of China's pursuit of regional economic integration.

The new arrangement, announced shortly after the removal of Hong Kong and the mainland from the World Health Organization's list of SARS-affected areas, will surely be a timely morale-booster to the people of both parts of China as they recover from the once devastating killer epidemic.

This free-trade agreement, the first between the mainland and Hong Kong, will create immense potential for Hong Kong to hold onto its position as a centre of finance, commerce and high value-added manufacturing for a vast domestic market of about 1.3 billion people.

Under the arrangement, many Hong Kong products will enjoy a zero tariff rate in the mainland market, while Hong Kong companies providing high-quality services will obtain greater access to the mainland market, in such sectors as exhibitions and conventions, advertising, banking, securities and insurance.

With such substantial preferential policies giving Hong Kong products the edge in the mainland market, the pact clearly demonstrates the central government's firm support for Hong Kong's stability and prosperity.

This has been the consistent policy of the central government towards Hong Kong since China resumed the exercise of sovereignty over Hong Kong on July 1, 1997.

Likewise, the Southeast Asian financial crisis of that time bore full witness to the mainland's role as a responsible stabilizing force for the Hong Kong economy, as people still remember when the central government stood firmly behind the Hong Kong administration's breathtaking but successful fight against international speculators.

Now, in the run-up to the sixth anniversary of Hong Kong's return to its motherland, this new free-trade pact with the mainland will undoubtedly further enhance local people's confidence in steering their economy out of its temporary difficulties.

The pact will also benefit the mainland in accelerating its economic integration with the outside world.

With more than two decades of speedy economic growth, the Chinese mainland has made a valuable contribution to the world economy.

Yet China's commitment to the World Trade Organization requires widening market access for competitors from the outside world. The mainland has yet to further accelerate its economic restructuring and reform its enterprises to meet the new challenges.

A close partnership with Hong Kong will allow mainland companies and market regulators to better learn the world standards and practices for doing business with the outside.

Thus it is believed that the pact will be a win-win arrangement for both the mainland and Hong Kong, with the mainland being Hong Kong's largest trading partner and Hong Kong being the mainland's largest investor. The trade-liberalization pact is also expected to be gradually enriched by the closer economic co-operation between Hong Kong and the mainland.

May this new arrangement yield more substantial fruit for regional economic integration in the near future.

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