The new supplement to the Closer Economic Partnership Arrangement, commonly known as CEPA III, will be extended to Hong Kong's film sector, said industry players and analysts.

Signed between the Chinese mainland and Hong Kong late last month, CEPA III will exempt Hong Kong-made Chinese-language movies from the import quota regime that is imposed on foreign movies. Under the World Trade Organization commitments, the mainland agreed to import no less than 20 foreign movies annually.

Additionally, an agreement, effective from January 1, will allow Hong Kong service providers to set up wholly-owned subsidiaries to construct, renovate and operate more than one cinema in different places on the mainland.

Golden Harvest, one of the biggest film distributors and cinema operators in Hong Kong, has moved its production sector to Shanghai to take advantage of CEPA.

"This will help us better expand our distribution and presence," said Alvina, a spokeswoman for Golden Harvest.

Lai Wai-shing, associate director from Hantec Investment Holdings, said that the agreement will enormously stimulate the city's otherwise shrinking film market by expanding distribution on the mainland.

"Hong Kong only has 7 million people. The market is quite limited," he said. "But the mainland offers a perfect marketplace for Hong Kong film firms. It has a 1.3 billion population and many of its youths are fans of Hong Kong movies and stars."

"Indeed, distribution and exposure to the market are of vital importance for film producers. Thanks to the agreement, Hong Kong filmmakers will embrace a larger distribution and exposure across the border," said Lai.

Also, the deregulations offer wider opportunities for Hong Kong film makers to hire mainland professionals. That is of particular importance as Hong Kong now faces a talent shortage since the industry reached its peak back in the 1990s, Lai said.

Under the CEPA III, a movie will still be regarded as "made in Hong Kong", so long as Hongkongers account for more than 50 per cent of the principal personnel in producing the movie.

"The mainland is abundant with film-making professionals and film colleges, whereas Hong Kong has a much smaller pool of actors, directors and other movie-related personnels," said Andes Cheng, associate director from South China Research Ltd.

That will help reduce costs as mainlanders usually ask for lower remuneration and therefore improved variety as critics have long been complaining there are few new faces on the screen, Cheng added.

However, analysts warned that local firms must have clear knowledge that all audiovisual services imported to the mainland must obtain the approval of the relevant authorities.

"Hong Kong pop singers and movie stars as well as film makers, should adjust to meet the local authorities' policy, this would be a wise move, and applies to markets all over the world," said Lai from Hantec Investment Holdings.

(China Daily November 1, 2005)