CEPA will have little influence, MAC says

By Michelle Hsu The China Post

Regarding the agreement signed by Chinese mainland and Hong Kong last Friday for them to enter the second phase of the Closer Economic Partnership Agreement (CEPA) on January 1 next year, Taiwan’s Mainland Affairs Council (MAC) Vice Chairman Chiu Tai-shan commented that it won’t make a serious impact on Taiwan’s exports. Though a local Chinese newspaper quoted a report of the Taiwan Institute for Economic Research (TIER) as saying that the agreement could lead to a decrease of 0.07 percent in Taiwan’s GDP. Among all the manufacturing industries, the textile sector may suffer the most as its annual production value is expected to shrink 1.24 percent. The first phase of CEPA, an agreement to help boost the economy in Hong Kong, has been in practice from the beginning of this year. “So far, we have not seen any apparent influence of this agreement on Hong Kong’s economy,” said Chiu. Hong Kong goods with a privilege of zero tariff duty for entering the mainland market actually take up only 10 percent share of the mainland market.

The incentives offered by the mainland authority in accordance with the agreement for encouraging investments by Hong Kong companies, however, seemed to have seen positive result as the Hong Kong companies registered with the mainland authority have increased by 32.26 percent during the first six months.

Wu Fu-cheng, a research associate at the TIER, quoted his quantitative research as saying that the CEPA could lead to a shrinkage of 0.07 percent in Taiwan’s annual GDP. “The textile exports to the mainland may drop as a most of the textile products made in Hong Kong enjoy the privilege of zero tariff for entering the mainland market,” Wu analyzed.

Under the agreement signed last Friday, the mainland will add 710 new items to the list of zero-tariff goods shipped from Hong Kong, making the list to include a total of 1,087 items of goods. Meanwhile, the mainland authority will relax the restrictions on the investments by the companies from Hong Kong in the service sectors such as shipping, transportation, financial and insurance businesses.

Though the CEPA has not imposed apparent influence on Taiwan’s economy in its first year, Wu urged the government to be alert on the long-term impact of the closer economic relations between the Chinese mainland and Hong Kong.