Hong Kong's tariff-free exports to the mainland hit US$127 million last year, the first year of the Closer Economic Partnership Arrangement (CEPA) between the two sides.

Tariffs have been waived to the tune of 66.43 million yuan (US$8.08 million) under the CEPA agreement, according to statistics from the General Administration of Customs (GAC).

A total of 67 mainland tariff codes, on items such as medicines, textiles, garments, flavourings and jewellery, enjoy zero tariffs when exported from Hong Kong.

Traditional Chinese medicine is the biggest beneficiary of CEPA, with tariffs on its exports cut by 13.60 million yuan (US$1.64 million) last year, accounting for 20.5 per cent of the total amount.

It is followed by exports of polystyrene and flavourings.

A customs official said the GAC has been working closely with its counterparts in Hong Kong to guarantee a smooth and fast customs process.

The customs at Shenzhen and Beihai, the main ports for trade with Hong Kong, have set up special counters for CEPA-related products.

Related customs procedures have also been simplified.

Hong Kong manufacturers have so far been granted 2,577 certificates of origin to allow them to enjoy tariff-free treatment.

Under CEPA, Hong Kong's hinterland is no longer limited to the Pearl River Delta area but is extended to the entire mainland with its population of over 1.3 billion.

Hong Kong has been encouraged to improve its industrial structure as a result of this huge market and preferential duty policies, reinforcing the position of its manufacturers.

Purchases of manufacturing equipment, especially for the textile and garment sector, increased by 33 per cent year-on-year in the first three quarters of 2004.

The CEPA has also stimulated foreign investment in Hong Kong, reaching US$24.8 billion in the first three quarters of 2004, compared with US$13.6 billion for the whole of 2003, according to statistics from InvestHK, a Hong Kong government department for investment promotion.

Out of the 167 new foreign companies in Hong Kong, 20 per cent said they invested in the special administrative region directly as a result of CEPA.

CEPA II, the next stage of the agreement between the mainland and Hong Kong, took effect at the beginning of this year.

More goods and services will fall under CEPA, and the benefits for many of the existing CEPA services will be broadened.

Under CEPA II, there are a broad range of liberalization measures including tariff-free preferential treatment to products under 713 Chinese mainland tariff codes, as well as the liberalization of the 19 service sectors.

Last year was also the first year of the CEPA agreement between the mainland and Macao.

Macao's exports to mainland under CEPA were US$232,200 last year, and the tariffs reduced in line with CEPA were 122,000 yuan (US$14,842).

A total of 61 certificates of origin have been issued to Macao-based manufacturers.

(China Daily January 25, 2005)