On 28 June 2017, Hong Kong and mainland China signed two new agreements under the Closer Economic Partnership Arrangement CEPA ("CEPA"), a step that has been described by the Hong Kong General Chamber of Commerce as marking a milestone in CEPA’s development. 

The first of the two agreements is the Investment Agreement which extends investment access for Hong Kong investors to the non-services sectors, including manufacturing, mining and investment.  Before the Investment Agreement, CEPA provisions covered only services sectors. The Investment Agreement grants most preferential investment access to non-services using a ‘negative list’ approach; it is presumed that a sector is captured by the new provisions if it does not fall within one of the 26 categories listed in the negative list. Exceptions include the manufacture of transportation carriers and exploitation of natural gas and radioactive mineral resources. Under the Investment Agreement, Hong Kong businesses can also expect better investment protections in the form of uniform procedures to approve investments within a reasonable timeframe and the implementation of a dispute resolution mechanism under article 20 of the Investment Agreement. The Investment Agreement can be found here.

The Economic and Technical Cooperation Agreement has also been executed. This is intended to promote cooperation under the CEPA framework and incorporates economic and trade collaboration under China’s ambitious Belt and Road Initiative. The Economic and Technical Cooperation Agreement can be found here.

The two agreements together are seen to facilitate bilateral investments between Hong Kong and mainland China in that they claim to have the purpose of deepening cross border economic, trade and investment activity. The initial response from local businesses has been positive, with a recognition that investing in China should now prove easier. However, some have identified that any perceived benefits are limited given that restrictions in the region are being eased on foreign investors generally. Nevertheless, it is generally accepted that the recent deal might encourage foreign investors in the non-services sectors to set up subsidiaries in Hong Kong first with a view to entering the mainland market as a qualified entity under CEPA.

Matthew Weiniger QC

Partner, London
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Sadie Buls

Managing PSL
+4420 7456 4008
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