Mainland and Hong Kong Sign CEPA Investment Agreement and Ecotech Agreement

On 28 June 2017, representatives of MOFCOM and the Hong Kong government signed two new agreements under the Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”):

  • Investment Agreement.
  • Agreement on Economic and Technology Cooperation (“Ecotech Agreement“).

Both agreements took effect upon signing, though the Investment Agreement will be officially implemented from 1 January 2018.

The agreements are aimed at expanding market liberalisation and facilitating trade and investment between the Mainland and Hong Kong.

The Investment Agreement is the first investment agreement adopted by the Mainland with pre-establishment national treatment commitments made through the negative list approach to regulating foreign investment.

The Investment Agreement:

  • Covers investments in non-services sectors (including manufacturing, mining and investment in assets) which are outside the scope of the Agreement on Trade in Services that was already effective from June 2016.
  • Commits the Mainland to provide national treatment to Hong Kong investments and investors on par with the Mainland investments and investors, except for the 26 special measures listed in the agreement.
  • Commits each side to provide non-discriminatory treatment in relation to matters such as restrictions on expropriation of investments, compensation for losses, and transfer abroad of investments and returns.

The Ecotech Agreement:

  • Strengthens previous CEPA economic and technical commitments in various sectors.
  • Provides a basis for co-operation in relation to the Belt and Road Initiative.
  • Updates the co-operation activities of the two sides in various sectors, including finance, dispute resolution, technology, e-commerce, intellectual property and product quality.
  • Systematises sub-regional co-operation in relation to the Pan-Pearl River Delta region, the Mainland’s pilot free trade zones, and the districts of Qianhai (in Shenzhen), Nansha (in Guangzhou) and Hengqin (in Zhuhai).

Action Items

General Counsel for any company interested in investing or expanding in any of the non-services sectors covered by the investment agreement will want to closely examine the agreement to identify specific opportunities. If the client lacks a qualified presence in Hong Kong, counsel may wish to consider taking advantage of an opportunity by acquiring an existing CEPA-qualified entity.