Under the regulation, the scope of which "Foreign-invested Commercial Enterprises" (FICE) can do business has also been considerably expanded, Becky Lai, PRC Tax Partner for PricewaterhouseCoopers said at the Chamber's CEPA roundtable luncheon on June 4.

For wholesale, businesses can now act as commission agents, import and export merchandise and other auxiliary services. For retail, businesses can import merchandise on their own account, procure domestic merchandise for export and other auxiliary services. For franchise, businesses can grant third-party franchise rights to open shops.

Some of the liberalisation came into effect on June 1, while some will be effective from December 11, 2004, the date that China promised in its WTO commitments to greatly open its commercial sector to the world.

Hong Kong companies qualifying for a Certificate of Hong Kong Service Supplier (HKSS) under CEPA have an even greater advantage as they can now move goods -- upon meeting FICE requirements -- across borders with one license.

Previously, a CEPA company wishing to move goods across the border in Shanghai, for example, would have had to obtain a foreign trading license, a wholesale license, and if it wanted to set up shop it would have needed to get a retail license, Ms Lai explained.

"Under the new regulation, if we qualify under FICE enterprise law, we would need just one license to move goods from outside China to the end consumer in the Mainland. This greatly simplifies application procedures," she said.

Carrie Yu, Assurance Partner, Retail & Consumer Leader, China and Hong Kong, PricewaterhouseCoopers, who also spoke at the luncheon, said most of the regulatory hurdles have now been removed for the distribution sector in China.

"Also, retailers can now set up business without Chinese joint venture partners and can freely expand according to their business strategy," she said. "Moreover, foreign companies do not need to rely on Chinese distribution companies and can have greater control of the supply chain."

Because the import and export of goods are no longer dependent upon Chinese-approved import and export companies, businesses are also relieved of the worry that taxes have been properly levied.

She explained that the measure is particularly beneficial to Hong Kong's retail and trading SMEs who previously were unable to fulfil the CEPA entry requirements, because now they can apply under the new HKSS rule.

Moreover, companies not meeting the previous HKSS criteria can now explore the options available under the "group of companies" arrangement, announced by the Trade and Industry Department on May 20.

Some companies in Hong Kong are now operating in the form of "group of companies" in accordance with the Companies Ordinance. With the agreement of the Mainland, eligible companies which have engaged in substantive business operations in Hong Kong in the form of "group of companies" may now apply for the HKSS certificate and enjoy the preferential treatment under CEPA.

Although the door to China's retail market is expected to be flung open to all foreign companies by December 11 this year, Ms Yu said Hong Kong companies have a clear six-month time advantage to use HKSS and CEPA.

"CEPA has and will continue to open new opportunities for Hong Kong businesses," she said. "Those who can unlock the value of CEPA will have a competitive edge in the race."