On 29 June 2006, the Government of the Hong Kong Special Administrative Region (HKSAR) and the Central Government of the People's Republic of China (PRC) signed the third supplementary agreement of the "Mainland/Hong Kong Closer Economic Partnership Arrangement" (CEPA) (hereinafter called "the third supplementary agreement for CEPA").

In relation to the original CEPA, supplemental agreement for CEPA, second supplemental agreement for CEPA, this third supplemental agreement for CEPA is also referred to as "the fourth stage of CEPA".

The essence of the third supplementary agreement for CEPA is that, starting from 1 January 2007, the Central Government of the PRC has promised to lower the threshold for admitting the services and trade sectors into the Chinese market. The fields to benefit from the arrangement range from professional services such as legal services, construction quotation, information technology, exhibition and convention, audio-visual, distribution, tourism, transportation, and self-employed business.

For legal services, the third supplementary agreement for CEPA relaxed the previous restrictions regarding the number of staff for Mainland solicitor firms which operate jointly with Hong Kong solicitor firms; abolishing the previous requirements for the Hong Kong representatives to stay for a minimum period at the Mainland solicitor firms; allowing Hong Kong residents who have obtained Mainland solicitor qualification or legal profession qualification with practicing certificate in the Mainland to deal with matters of matrimonial proceedings and inheritance; allowing Hong Kong barristers to act as civil litigation agents in Mainland China in the capacity of civilians; allowing Hong Kong residents who have attained Mainland solicitor qualification or legal profession qualification to practrise in the branch office of Mainland solicitor firm in Hong Kong for obtaining the practrising certificate of the Mainland solicitor.

The third supplementary agreement for CEPA also allows the Hong Kong travel agency in Guangdong province to apply for running travel tours for Guangdong residents visiting Hong Kong and Macau, in either the capacity of sole proprietor or partnership.

For self-employed businesses, the third supplementary agreement for CEPA also allows the Chinese citizens having the status of Hong Kong permanent residents to establish self-employed businesses in various provinces, autonomous areas and municipalities directly under Central control without approval from relevant local authorities for foreign investment; those self-employed business are restricted to scope of business in agriculture, poultry, computer maintenance services, technology transfer, advertising and promotion, but not including franchise services. The maximum number of staff for the self-employed business is restricted to eight.

Apart from the services sectors, the Chinese Government came to agreement with HKSAR Government in the trading sector as well. In the second supplementary agreement for CEPA, it is agreed that starting from 1 January 2006, Hong Kong manufacturers can enjoy zero tariff benefits in relation to Hong Kong products which satisfied the rule of originality as formulated by the CEPA upon successful application. For those products having no agreed rules on originality, Hong Kong manufacturers can apply for admitting them into negotiation which is held twice every year. At the time of signing of the third supplementary agreement for CEPA, both parties came to agreement regarding rules on originality in respect of 37 Hong Kong products. Up to now, the number of products attaining the standard of goods of originality has been increased from 1,370 to 1,407. Hong Kong traders can thus enjoy zero tariff benefits commencing on 1 July 2006 if their products have complied with the prescribed rules for products importing to the Mainland.

On trade and investment facilitation, the third supplementary agreement for CEPA has formulated rules for the protection of intellectual property. According to these arrangements, both parties agreed to strengthen the cooperation and communication of information regarding protection of intellectual property. For achieving such a goal, the Mainland counterparts will establish a coordination centre for handling affairs in this area.

The third supplementary agreement for CEPA was signed on the occasion when Mr. Jia Xianlin, the Chairman of Political Bureau, visited Hong Kong for attending the forum on financial and trading cooperation between China, HKSAR and Macau. Before the arrival of Mr. Jia, different sectors in Hong Kong have contemplated that Mr. Jia would bring good news for Hong Kong, including but not limited to enlarging the scope of business of Reminbi. However, the third supplementary agreement for CEPA which was later pronounced did not include this aspect. The HKSAR Government only announced that, the State Council was conducting studies on the scope of operating Reminbi business in Hong Kong. These include the permission of payment of imported products into Hong Kong by Reminbi and the trial issuance of bonds in Hong Kong by the Mainland financial institutions. Since the task is quite complicated, the State Council is actively prescribing management rules concerning these businesses in implementing the measures. To facilitate the preparatory works for the measures and to warrant the early commencement of these two types of businesses, the HKSAR Government promised to continue active communication with the relevant Chinese authorities from time to time.

In view of the fact that CEPA is an open and developing platform, the HKSAR Government promised to negotiate with the Central Government at appropriate time in respect of further opening of services and trade sectors. The services sectors of Hong Kong have been more competitive in comparison with the Mainland. Thus, we expect that the HKSAR Government is capable of obtaining more beneficial arrangements for the service sectors in Hong Kong.

In addition, while continuing negotiations with Mainland China on beneficial arrangements and developing new phase for CEPA, it is equally important for the HKSAR Government and the relevant industries to make good use of the signed CEPA agreement and to implement the already established beneficial arrangements. As a trading arrangement between the Central Government and HKSAR Government, the smooth and efficient implementation of CEPA depends on the Central Government, especially support and recognition of the local Government. This also depends on the implementation system to be set up and the commitment to find solutions for problems and inconsistencies arising out of its implementation by all parties concerned.