The new Closer Economic Partnership Arrangement (CEPA) builds on the trade agreement established in 2003 when Hong Kong was suffering a sharp economic slowdown due in part to the devastating outbreak of SARS that year.

It will further relax conditions for Hong Kong businesses operating in China’s banking, tourism, exhibitions and medical services sectors.

The pact, which will come into force on Jan. 1, 2008, has also been expanded to cover services for the elderly, environmental services and public utilities.

It was signed by Chinese Vice-Minister of Commerce Liao Xiaoqi and Hong Kong Financial Secretary Henry Tang.

Tang said CEPA had played an important role in the economic development of both Hong Kong and the mainland and would open up further opportunities.

The new provisions will make it easier for Hong Kong banks to set up branches in certain parts of the mainland and encourage Chinese banks to set up subsidiary operations in Hong Kong.

A pilot scheme will allow Hong Kong companies to organize exhibitions in the southern Chinese city of Guangdong and Shanghai, the commercial center.

The minimum turnover threshold for Hong Kong tourism companies wanting to set up operations in mainland China has also been reduced.

Hong Kong companies service providers will also be allowed to provide environmental services on the mainland and to set up construction operations for gas, heating, water supply and water drainage for medium-sized Chinese cities.

The Hong Kong government said CEPA had generated 36,000 jobs for its residents and 16,000 for people on the mainland since its signing.

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