Unlocking Opportunities: The Closer Economic Partnership Agreement (CEPA) between Hong Kong and Mainland China

Author: Yami Ng, Trainee Solicitor

First established in 2003, CEPA is Hong Kong’s very first FTA (Free Trade Agreement) since its handover to Mainland China. It is designed to enhance economic cooperation and integration between Hong Kong and the Mainland market. Although part of China, Hong Kong has always maintained a hard customs boundary, as such, different regulations and tariffs apply. CEPA smoothens out these variations.

Hong Kong has been often recognized as the world’s freest business market, enjoying numerous competitive advantages over, among others, the Mainland. Freedom of capital movement and low taxation make it an attractive destination for investment and trade. The CEPA framework comprehensively covers the trade and economic relationship between Hong Kong and the Mainland, focusing on four key areas: trade in goods, economic and technical cooperation, trade in services and investment.

Key Features of CEPA

A standout feature of CEPA is its nationality‑neutral approach, which imposes no restrictions on the source of capital, thereby allowing capital to be sourced from various origins.

For instance, products made in Hong Kong that meet CEPA’s rules of origin can benefit from zero‑tariff preferences upon importation into the Mainland, enhancing the competitiveness of Hong Kong goods.

Moreover, CEPA provides preferential access to enterprises and individuals recognised as Hong Kong Services Suppliers (HKSS) in most services sectors in the Mainland market. Such advantages position Hong Kong as a strategic gateway for international investors.

Expanding Horizons

As markets develop and business needs evolve, FTAs like CEPA must also evolve. Amendment Agreement II was signed in October 2024 by the Ministry of Commerce and the Hong Kong Government and is expected to be implemented in March 2025.

This expansion focuses on trade in services, offering Hong Kong enterprises and professional sectors more preferential treatment when tapping into the Mainland market.

The Amendment introduces new liberalisation measures across several sectors, including removal of equity shareholding restrictions, relaxed business scope requirements, and eased professional qualification criteria.

Sector‑Specific Liberalisation

 The new measures cover sectors such as tourism, financial services, construction and related engineering services, film services, television services, and telecommunication services.

Tourism

CEPA optimises the 144‑hour visa exemption policy for foreign travellers entering Guangdong via Hong Kong by adding 21 inbound control points and expanding permitted travel areas within Guangdong Province. Eligible travellers may stay up to 240 hours.

Financial services

CEPA removes the USD 2 billion asset requirement previously imposed on Hong Kong financial institutions investing in Mainland insurance companies and lifts restrictions preventing foreign bank branches established by HKSS from providing bank card services.

Institutional Innovation and Collaboration Enhancement

The Amendment Agreement II also introduces institutional innovations, including:

• Allowing Hong Kong‑invested enterprises to adopt Hong Kong law

• Choice of arbitration seated in Hong Kong

These measures allow Hong Kong investors to select legal regimes and arbitration seats with which they are most familiar.

Additionally, CEPA removes the three‑year substantial business operations requirement for HKSS in most services sectors, enabling Hong Kong start‑ups to benefit from CEPA more quickly.

CEPA Supporting Hong Kong as a Gateway for EU Investors

Hong Kong continues to play an important role in linking China and the European Union. EU companies may establish manufacturing operations in Hong Kong, qualify products under CEPA rules of origin, and export tariff‑free to the Mainland.

By leveraging intellectual property protection in Hong Kong, EU businesses can optimise manufacturing and cross‑border trade efficiencies.

Strengthening Economic Ties Through CEPA

CEPA not only reinforces economic cooperation between Hong Kong and Mainland China, it also provides a robust platform for foreign investors. Ongoing enhancements ensure competitiveness and reinforce Hong Kong’s role as one of the most liberal FTAs of the Mainland.

How Ravenscroft & Schmierer Can Help?

The CEPA framework between Hong Kong and Mainland China creates significant opportunities but also raises complex legal, regulatory, and structuring considerations for international businesses. Ravenscroft & Schmierer advises companies and investors on CEPA eligibility, HKSS qualifications, cross‑border structuring, and regulatory risk management.

If you are considering using Hong Kong as a gateway to the Mainland market, contact us to discuss your circumstances and available options.

FAQ: CEPA Hong Kong Mainland China

What is CEPA?

CEPA is a Free Trade Agreement between Hong Kong and Mainland China aimed at enhancing economic integration.

Who can benefit from CEPA?

Hong Kong companies, HKSS, and foreign investors using Hong Kong structures may benefit.

What is HKSS?

HKSS refers to Hong Kong Services Suppliers recognised under CEPA.

Does CEPA provide zero tariffs?

Yes, for qualifying goods meeting CEPA rules of origin.

What changes does Amendment Agreement II introduce?

It expands service liberalisation and reduces entry barriers in several sectors.

How can Ravenscroft & Schmierer assist with CEPA structuring?

Ravenscroft & Schmierer advises on CEPA eligibility, HKSS certification, and cross‑border commercial structuring.

Does Ravenscroft & Schmierer assist foreign investors using Hong Kong as a gateway?

Yes. We advise EU and international businesses on leveraging CEPA for Mainland market entry.

Can Ravenscroft & Schmierer advise on regulatory compliance under CEPA?

Yes. We advise on compliance, sector‑specific requirements, and risk assessment.

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Disclaimer: Whilst every effort has been made to ensure the accuracy of this article it is general in nature and does not constitute legal advice of any kind. You should seek your own personal legal advice before taking legal action. We accept no liability whatsoever for loss arising out of the use or misuse of this article.

For specific advice about your situation, please contact:

Yami Ng

Trainee Solicitor

+852 2388 3899

yng@rs-lawyers.com.hk