21.     China has attracted worldwide attention as a rapidly-growing, emerging market gradually undergoing further reforms.  The Government's role in tapping into this market is to reduce any policy obstacles so as to attract investment from the Mainland, and facilitate market access for Hong Kong businesses and professionals.  This is beneficial to Hong Kong and meets the development needs of the Mainland economy.  The Closer Economic Partnership Arrangement (CEPA) Phases I and II, signed by Hong Kong and the Mainland in 2003 and 2004 respectively, are key milestones in this process.  Under both phases of CEPA, a total of 1 108 products have been granted tariff-free treatment.  Taken together with the Mainland's commitment on accession to the World Trade Organisation, about 95 per cent of Hong Kong 's domestic exports to the Mainland are now entitled to such treatment.  Under Phase II, the liberalisation of trade in services has been extended to 26 sectors.  Both sides have also agreed to enhance co-operation on trade and investment facilitation in seven areas.  The economic benefits of CEPA are gradually being realised.  By the end of February this year, products with a total value of $1.4 billion were exported tariff-free under CEPA from Hong Kong to the Mainland.  According to the initial findings of the Government's economic benefit analysis, we expect to see the creation of more than 28 000 new jobs in the first two years of implementing CEPA.  The Individual Visit Scheme, for instance, has led to the creation of about 16 500 new jobs in 2004 and generated an additional $6.5 billion in tourist spending during the year.

22.     CEPA provides a useful framework for Hong Kong companies to promote their businesses in the Mainland, and for Mainland companies to invest and identify suitable business partners in Hong Kong , which will then assist them to extend their business networks overseas.  In late August last year, the Mainland authorities introduced a new investment facilitation policy for Mainland enterprises to invest and to establish their businesses in the Hong Kong and Macau SARs.  These are important steps under CEPA to facilitate investment.  The new policy encourages and supports investment by Mainland enterprises in Hong Kong and expedites the decision-making process in respect of such investment.  In response to it, Invest Hong Kong has introduced nvest Hong Kong One-stop Services?to provide a convenient free service for Mainland enterprises that intend to use Hong Kong as the platform for their global business.  To facilitate the development of further business by Mainland enterprises in Hong Kong , the Commerce, Industry and Trade Bureau will keep the existing support measures under review, and step up its co-ordination and promotion work.

23.     Our objective is to develop and expand CEPA still further.  To this end, the Government is now soliciting the views of relevant business sectors and will be holding discussions with the appropriate ministries of the Central Government.

24.    Since the opening up of the Mainland, we have continuously been broadening and deepening our economic relationship with it.  The Mainland is our largest trading partner and our second-largest source of foreign direct investment, while Hong Kong is its largest source of foreign investment.  In the Pearl River Delta (PRD) region alone, for example, our manufacturing industry employs about 11 million workers, over three times the Hong Kong workforce.  Furthermore, around 240 000 Hong Kong residents regularly work in the Mainland.  In recent years, the Mainland economy has been upgrading gradually.  Its structure is also becoming more diversified.  Such developments do pose constant challenges, but they also open up new opportunities for Hong Kong .

25.     As a long-term strategy, Hong Kong needs to continue strengthening its economic ties with Guangdong and other Mainland provinces and cities.  This will extend our co-operation with the Mainland, complement its further development and reinforce our own position as the region's premier bi-directional business platform.  A good example of this is the Mainland/Hong Kong Science and Technology Co-operation Committee which was established late last year.  The Committee has agreed to set up a working group to draw up specific plans for co-operation in four selected areas, namely, automotive parts and accessory systems, radio frequency identification technologies, Chinese medicine, and integrated circuit design.  We are also working in collaboration with leaders of the relevant Mainland provinces and regions to promote Guangdong/Hong Kong co-operation and Pan-PRD co-operation under the ?+ 2?/st1:chmetcnv> , in order to enhance our regional economic hinterland and efficiency.  This will help promote Hong Kong as a base for overseas enterprises to invest in the Mainland and as a platform for Mainland enterprises hoping to enter the international market.  This will create a in-win-win?situation for Mainland, Hong Kong and overseas enterprises.

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