The Research On The Service Trade Liberalization Of The Mainland And Hong Kong Under The Framework Of CEPA

As an international and regional financial center, shipping center and trade center,Hong Kong has a highly developed service sector. Hong Kong also has closelygeopolitical relations and highly complementary factor endowments structure withChina Mainland. The implementation of CEPA implied that the economic and tradecooperation of China Mainland and Hong Kong had entered a new phase,transforming from the cooperation based on manufacturing sector to the one based onservice sector, achieving regional services trade liberalization gradually.Based on Hoekman Index, this paper measures the service trade liberalizationbetween Hong Kong and the Mainland before and after the implementation of CEPA,and examines the effect of CEPA on services trade. The results show that theimplementation process of CEPA is relatively slow, and the promises coverage are nothigh in previous agreement. Compared to the promises coverage before CEPA, theservice trade liberalization between Hong Kong and the Mainland has improved tosome extent both in breadth and in depth. Larger concessions have been made onhighly complementary departments, but the opening on finance, communication andother sensitive sectors are still relatively conservative. Overall, as of the signing ofCEPA10, the service trade liberalization between Hong Kong and the Mainland isstill low. The result of empirical analysis shows that effect of CEPA on service trade isnot so significant as the effect on service investment, and there is little trade creation.Currently, the low level of openness and some hidden factors are still large obstaclesto services trade liberalization between Hong Kong and the Mainland. Mainland cangradually explore appropriate open mode by the way of small-scale pilot, andtransform CEPA from positive list to negative list. And the hidden obstacles can beovercome by reducing approval process and improving administrative efficiency. Abetter service promotion system should be established to provide a good businessenvironment for Hong Kong’s service industries into the Mainland.