CEPA II: A Song of Sixpence?

By Claudio de Bedin, Partner, and Susan Lavender, Associate, Dibb Lupton Alsop, Hong Kong

Arriving unexpectedly during the last quiet days of summer, and before the onset of the frenzied return to work in the autumn, the signing of the Record of Consultations on Further Liberalization under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA II) on August 27 2004 by the mainland and Hong Kong governments (the Sides) took Hong Kong's business community somewhat by surprise. Some consider that CEPA II's timing, just two weeks before Hong Kong's general elections on September 12 2004, suggested a pre-election gift from China and a demonstration of China's ongoing solicitude for Hong Kong. Observers opine that this attitude remains subject always to Hong Kong's reciprocation through its ongoing loyalty to the motherland.¹

Providing further liberalization and mainland market access for Hong Kong goods and services, CEPA II is a manifestation of the "building block approach" adopted for ongoing extension of the concessions granted by CEPA and its Annexes, as signed respectively on June 29 2003 and September 29 2003 (CEPA I). While CEPA II was signed on August 27 2004, its Annexes remain subject to completion, and to being supplemented and signed by December 1 2004. Most of CEPA II's concessions come into effect from January 1 2005.