Second Agreement Concerning Amendment to CEPA Agreement on Trade in Services to be implemented on 1 March 2025

05/03/2025

A. Background on CEPA

In 2003, Mainland China and Hong Kong signed the “Mainland and Hong Kong Closer Economic Partnership Arrangement” (“CEPA“) to open up the China market for Hong Kong goods and services. Subsequently, the two sides broadened and further developed the scope of CEPA by signing ten Supplements between 200 4 and 2013, which further expanded market liberalisation and facilitated trade and investment.

To enhance the already close economic cooperation and integration between the two regions, Mainland China and Hong Kong signed new agreements in the following four areas under the framework of CEPA between 2015 and 2018, in particular:-

1. Agreement on Trade in Services (signed in 2015);
2. Investment Agreement (signed in 2017);
3. Agreement on Economic and Technical Cooperation (signed in 2017); and
4. Agreement on Trade in Goods (signed in 2018).

All the Supplements and new Agreements form part of the consolidated CEPA rules. Over time, as the market has evolved, CEPA rules, especially the Agreement on Trade in Services have experienced further amendments. The latest amendment took place on 9 October 2024 when Mainland China and Hong Kong signed the second amendment to the Agreement on Trade in Services (“Amended Agreement II“), which is set to be implemented on 1 March 2025.

B. Changes to CEPA Rules

Amended Agreement II introduces new liberalisation measures in many service sectors where Hong Kong has particular advantages, such as film, television, tourism, finance, construction, and related engineering services. These measures include removing or relaxing restrictions on equity ratios and business scope for enterprises, easing qualification requirements for Hong Kong professionals, and relaxing restrictions on Hong Kong’s service exports to the Mainland market. Most of these liberalisation measures apply nationwide, with some being piloted in the nine cities of the Pearl River Delta in the Guangdong-Hong Kong-Macao Greater Bay Area. Specific changes include:-

1. Film:

• Hong Kong service providers can now enjoy national treatment when investing in enterprises engaging in film production.
• Hong Kong service providers approved by Mainland authorities can establish distribution companies  to handle the distribution of Hong Kong films in the Mainland  acquired on a buyout basis (“买断形式”).

2. Television:

• To remove the restriction on the number of Hong Kong people participating as principal creative personnel in online television dramas.
• To allow imported dramas produced in Hong Kong to be broadcast during prime time on Mainland television stations after obtaining approval from the National Radio and Television Administration.

3. Advertising:

• Hong Kong service providers are allowed to deliver advertising services[1] cross-border.
• More favourable treatment[2] is provided for Hong Kong service providers entering the Mainland to develop online media agency businesses.

4. Tourism:

• The visa-free policy for foreign tour groups (citizens of 53 countries who are covered by the visa-free transit regime) entering Guangdong from Hong Kong for a 144-hour stay has been optimised. This includes increasing entry points and expanding the stay area to the entire Guangdong Province.
• Mainland travel agencies are facilitated in meeting tour groups at the West Kowloon Station of the high-speed rail. Cruise companies are supported in arranging international cruise routes that call at Mainland ports. Mainland tourists participating in these cruise routes can travel to Hong Kong with their passports and relevant cruise itinerary documents to join the entire cruise journey.

5. Financial services:

• The requirement for Hong Kong financial institutions to have total assets of no less than USD 2 billion at the end of the previous year to invest in insurance companies has been removed.
• The restriction on foreign bank branches established by Hong Kong service providers from engaging in credit card business has also been lifted.
• The scope of mutual market access is being explored, including REITs (Real Estate Investment Trusts). The pilot program for cross-border wealth management and the mutual recognition of funds between the Mainland and Hong Kong are being continuously promoted and optimised.
• The mutual listing of ETFs (Exchange-Traded Funds) between the Mainland and Hong Kong, as well as the “Southbound” and “Northbound” Bond Connect, are being advanced.

6. Construction and related engineering services:

• Hong Kong surveying enterprises are allowed to provide professional services in Guangdong Province through a filing system.
• Registered Hong Kong engineering consulting firms can participate in bidding for project consulting services in the nine cities of the Pearl River Delta in the Guangdong-Hong Kong-Macao Greater Bay Area as a consortium.

C. Institutional Innovations

1. The introduction of “Hong Kong Law for Hong Kong Enterprises” and “Hong Kong Arbitration for Hong Kong Enterprises” as measures to facilitate Hong Kong investors. These measures support Hong Kong enterprises registered in pilot cities in the Guangdong-Hong Kong-Macao Greater Bay Area in choosing Hong Kong or Macau law as the applicable law for contracts. Additionally, they support Hong Kong enterprises registered in the nine cities of the Pearl River Delta in selecting Hong Kong or Macau as the place of arbitration. These measures provide flexibility and convenience for Hong Kong enterprises, helping them invest and develop their businesses in the Mainland.
2. The commitment to “local regulation” ensures the transparency, predictability, and efficiency of service trade rules, aligning with high international standards. This reduces cumbersome regulations and lowers trade costs, facilitating service trade.
3. The requirement for Hong Kong service suppliers to operate in Hong Kong for three years in order to qualify as a service supplier under CEPA has been removed for most sectors. This change allows Hong Kong start-ups to access preferential treatment under CEPA more quickly, attracting global enterprises and talents to establish a presence in Hong Kong and explore the Mainland market, thereby increasing local employment and promoting economic development.

D. Benefits to Hong Kong

• Several of Hong Kong’s advantageous industries will gain new opportunities. For instance, the television and film industries will benefit from the lifting of restrictions on the number of Hong Kong personnel participating as key creators in online dramas, as well as the removal of restrictions on Hong Kong service providers investing in film production.

• Another significant benefit lies in institutional innovation. The amendment introduces measures such as “Hong Kong Law for Hong Kong Enterprises” and “Hong Kong Arbitration for Hong Kong Enterprises” to facilitate Hong Kong investors. These measures provide flexibility and convenience for Hong Kong enterprises investing and developing in the Mainland, allowing them to use familiar laws as the applicable law for contracts and to choose Hong Kong as the place of arbitration.

• Additionally, it leverages Hong Kong’s strengths in legal and dispute resolution services, helping the Greater Bay Area establish a more international business environment.

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[1] It is a service category under the WTO General Agreement on Trade in Services (GATS) Services Sector Classification GNS/W/120. Amended Agreement II follows the same categorisation method as the WTO.

[2] According to the Panel on Commerce, Industry, Innovation and Technology Meeting on Tuesday, 18 February 2025, it did not explain specifically what “more preferential treatment” entails – it only stated that the measure would be a facilitation measure, helping HKG enterprises and professionals to develop their business in the Mainland.