Research | Regional and economic development | 2012-02-21

Promoting the Development of Hong Kong Service Industries in the Pearl River Delta

The Bauhinia Foundation Research Centre has recently commissioned a study to examine the preferred business environment in the Pearl River Delta (PRD) from the perspective of Hong Kong’s services sector.

With a view to recommending early and pilot measures aimed at attracting HK service providers to set up business in the PRD region, the study involved in-depth interviews with 24 representatives from nine different service industries, focus group discussions as well as peer review by Mainland specialists.

Noting the ample opportunities arising from further liberalisation of the Mainland’s service industries and the emergence of new cooperation platforms between Guangdong and Hong Kong, Chairman of the Centre Anthony Wu said, “Clearly, Hong Kong has a key role to play in enhancing the overall standard of the service industries in the Mainland. The creation of a preferred business environment will further facilitate the penetration of Hong Kong’s services sector in the PRD and bring win-win benefits to development on both sides.”

The report has put forth nine key recommendations to eliminate the existing barriers through improving the situation of ‘gates open but doors remain closed’, facilitating communication and the flow of people and goods, as well as modifying the examination and tax systems.

To improve the situation of ‘gates are open but doors remain closed’

Among other things, the report recommends the Guangdong government to establish self-financed, market-driven institutional units in Qianhai, Hengqin and Nansha, on an early and pilot implementation basis, to streamline the business registration process and provide Hong Kong entrepreneurs with one-stop services.

“Though CEPA has set up many favourable conditions for Hong Kong businesses, the complicated and time-consuming business registration process still poses a hindrance tostarting a business in the Mainland. A one-stop business registration system can create a lot more convenience – and incentive – for Hong Kong enterprises to invest in the region,” Mr Wu said.

At the same time, the Hong Kong government should set up a dedicated liaison group based in the Mainland as a counterpart to provide Hong Kong enterprises with the most up-to-date information for their investment decisions.

With regard to the current restrictions of certain service segments that limit ownership of Hong Kong investors to no more than 50% of the company shares, the report calls for a relaxation of stake limitations with the ultimate goal of enabling Hong Kong investors to, on an early and pilot implementation basis, fully own companies in all service industries that pose no threat to national security.

On the same basis, the report also recommends further opening up currently restricted business areas, such as asset management services involving A-shares to Hong Kong enterprises, and allowing banks from Hong Kong to register more than one branch office at a time.

To provide Hong Kong businesses with concrete legal protection, the report proposes introducing relevant policies to encourage businesses to include a clause in their commercial contracts specifying clearly either Mainland or Hong Kong as the designated place for judicial proceedings when contract-related disputes arise. Detailed and clear guidelines should also be formulated to help ensure that court verdicts reached in the designated place would be enforced by the local authorities.

To facilitate communication and the flow of people and goods

The report highlights the importance of 24-hour cross-boundary clearance in facilitation the flow of people, especially at Lo Wu Control Point. The report also calls for the issuance of a ‘special permit’, to be used at designated counters or vehicle kiosks, to Hong Kong residents who need to travel frequently to Qianhai, Hengqin or Nansha for work or business.

“It is worth considering different measures that can make frequent travel more convenient. The goal in the long run is to have one machine processing immigration clearance for both jurisdictions,” Mr Wu added.

The report also looks at the flow of goods, which are currently processed at two different locations, once for each customs jurisdiction. Standardised customs declaration systems, common standards for radio frequency identification technology and mobile customs inspection services are amongst the measures proposed to speed up the clearance process.

“Moving forward, it is important to promote barrier-free telecommunication services between Hong Kong and the three areas through exempting international direct dialling charges,” Mr Wu said.

To modify the examination and tax systems

The report also recommends introducing, on an early and pilot implementation basis in Qianhai, Hengqin and Nansha, ‘tailor-made examination’ for Hong Kong professionals who meet certain minimum experience and seniority requirements, and allowing ‘limited registration’ for those who pass the assessments. The aim is to reduce examination contents that are irrelevant to their permitted scope of practice in the Mainland.

Having regard to the complex tax schemes and rates in the Mainland, the report advocates standardising all the various local taxation items in the three areas, with the assessment criteria clearly set out, to enable Hong Kong enterprises to estimate their overall tax liability more accurately.

Mr Wu said, “In order to attract talents from Hong Kong, Hengqin and Nansha may consider adopting a scheme similar to that for Qianhai, which provides preferential personal income tax rate to Hong Kong residents.” adopting a scheme similar to that for Qianhai, which provides preferential personal income tax rate to Hong Kong residents.”


Full Report (Chinese only)
Presentation Materials