What does one country two systems brought to China---Case of Hong Kong’s Economy
Name: Student ID：
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
Abstract
This paper examines economic integration under one country two system between Mainland and the one of the most important Special Administrative Regions, namely, Hong Kong.
It analyzes the interaction between Mainland and Hong Kong in two angels: positive and negative. And the paper is focusing mainly on three issues: positive impact to Mainland; positive impact to Hong Kong; negative impact to Hong Kong.
This paper finds that one country two system bring more benefit to Mainland than Hong Kong on economy.
Key words：
Handover; CEPA; Economy; Regional economic cooperation
1. Introduction
1997 is the first year of implementation of the official one country, two systems. One country, two systems is not only the implementation of a Chinese progress, is also the focus of world attention. It brought a great change to China, especially in the economic area.
June,2003, The government of The Hong Kong Special Administrative Region signed<arrangement about establishment a closer trade relation between Inland and Hong Kong>(refers to as “CEPA”)with central authorities, and has further signed 6 implementation detail appendix in September. Hereafter, The government of The Hong Kong Special Administrative Region and central authorities signed the CEPA subsidiary agreement(The second stage, the third stage of CEPA) separately in October, 2004 and in October, 2005.By implementation of CEPA’s 1st ,2nd stage, and CEPA each stage arrangement , will eliminate barrier between inland and Hong Kong the resources essential factor and the enterprise product unrestricted flow ,Achieves the produce market integration and the investment market liberalization gradually provides the safeguard. Although CEPA is not a typical free-trade zone, but a economical relationship establishes between two independent customs duty areas in a sovereign state, But looked from the frame content, may regard as has the free-trade zone nature.[1]
CEPA makes the financial relationship between mainland and Hong Kong becoming closer. One country two system did bring a lot of benefit to mainland and Hong Kong, but it brings more benefit to mainland.
2. Positive impact to mainland
Return of Hong Kong from both mainland and other countries view is brought a great change for mainland’s economy system.
2.1 Hong Kong gives lots of experiences to mainland.
Since the implementation of reform and opening, Hong Kong has always been the main channel of Mainland soliciting overseas capital, technology and management, and other production elements. Hong Kong gives a lot of important experiences to mainland. CEPA saved Mainland export delivery time, and increase efficiency, so as to promote the export of products with the Mainland. CEPA makes exchange of talent and more convenient, to the mainland to attract more Hong Kong talents to work in the Mainland to enhance the management level and the professional level of service.
The China manufacturing industry undergoes more than 50 years, specially since the reform and open policy, many areas already develop to important manufacturing industry base, has the strong international competitiveness at producing and the assembly aspect. Compares with this, Industrial like transportation、goods distribution、retailing、financial service and commercial service didn’t support service industry very well.
For example, in the logistics industry, most Chinese mainland enterprises on the traditional use of internal self-service-based model, from the purchase of raw materials to product sales in the course of a series of logistics activities rely mainly on their own to complete, the low degree of specialization, not conducive to enterprise development Core business and reduce logistics costs.[2]
Even those who specialize in the logistics services business, most of them only can provide transportation (shipping) and warehousing services, in the flow of processing, logistics information services, inventory management, cost control, and other logistics services to value-added logistics services limited capacity.[3]
The supporting services of Industry and Commerce of Hong Kong are not only very wide range; they are also good at flow management, stock, distribution, creation of mark and promotion of production chain. CEPA's integration arrangements on trade in services allow the combination of Capital, technology, knowledge-intensive advantages of Hong Kong service industry with low labour cost, large scale of marketing service, big potential and the advantage of a relatively rich resource of mainland service industry which will enable Hong Kong companies to provide a high level of manufacturing production services, but also improve the mainland service industry, to make it more efficient and provide comprehensively supporting services for the industry, enhance operational efficiency of the manufacturing sector, improve internal management and production processes in order to further improve profitability, to form the interaction of the development of manufacturing and the modern service industry, and make China's manufacturing industry more competitive in international market.
2.2 Hong Kong becoming the weapon for anti- dumping.
CEPA also contribute to the promotion of the manufacturing exports of the mainland. Although it is recognized one of the world's manufacturing base, but the export market over-concentration in Europe and the United States and the Japanese market, anti-dumping cases often arise. In recent years, China's export products, export company have continuously "anti-dumping" by foreign enterprises , these anti-dumping not only from the European Union, the United States and other developed countries, in some developing countries such as India, Argentina, Turkey, South Africa, Egypt and other countries, this anti-dumping trend against China is still growing. China's textiles, clothing, footwear, ceramics, furniture, chemicals and other export industries have become the "hardest hit."
The "third country certificate of origin" for foreign importers which avoid foreign government against Chinese products anti-dumping customs clearance documents, is a very flexible contingency measure.
This transit method is shipped from China's export goods, not directly to the port of destination, but pass by a transit port where the completion counter, supporting a full range of other countries in the certificate of origin and export documents for the purpose of the customers Clearance document will be done, so that made-in-China products will successfully avoid those high anti-dumping duties against chinses products.
In case that the export companies are not familiar with the use of the circumstances, they will depend on more products agent companies which have more international transport of goods experiences to promote more exports, to expand our share of the export products.
The implementation of CEPA makes a number of mainland enterprises start making some manufacturing processes in Hong Kong, use the "Made in Hong Kong" origin status to circumvent Western countries on the mainland products discriminatory policies and trade protection measures. Moreover, the investment facilitation of CEPA help Mainland's exports greatly saving delivery time and improve efficiency, thus promoting the mainland's export products
2.3 Today, Hong Kong is believed to be "China's Wall Street"
Hong Kong have an open financial markets, it has a great number of financial institutions, ranked third in the world. It is the world fourth largest gold market, one of the world's top ten stock markets.
In addition, Hong Kong still have a well-developed financial derivatives market and a great money changing market. The legal system is reasonable and they have modern communications equipment and settlement system. These funds are providing a favorable environment for economy.
Operating in the financial sector, Hong Kong's geographical location is perfect .The time zone of Hong Kong is between Central America and the European market , so it becoming an important stations of international financial market for 24-hour operation. This international financial business is very favorable.
Based on all this Advantage, at the end of last year, a total of 367 mainland enterprises listed in Hong Kong. In 2005, 37 companies listed in Hong Kong stock market, the total number of newly listed companies 55%.[4]
Since the 1990s, with funding in the context of H-shares and red chips listed in Hong Kong capital market financing more than 243.1 billion HK shares placement financing also 103.3 billion Hong Kong dollar, these two stocks account for the transaction amount a total of 1.65 trillion Hong Kong million (to the end of March 2002), the Hong Kong stock market accounted for 40% of GDP.[5]
2.4 Hong Kong to China that most directly affect the performance of the form of cash, a bucket of cash
Hong Kong is the largest direct investors for mainland. Hong Kong to the Mainland direct investment has reached 78.6 billion U.S. dollars, accounting 58% for all of China's foreign direct investment.
In 1995, Hong Kong to the Mainland directs investment of nearly 20 billion U.S. dollars.
Hong Kong's investment on the mainland is not only reflected in the Government, there are many individuals have begun investing in the Mainland.
Guangdong Province now has 57,500 factories. These factories were build by Hong Kong entrepreneurs to invest in production or products for Hong Kong enterprises.[6]
Yingxiang Hu, a business tycoon builde the first expressway of mainland, 120 kilometers long, Guangzhou - Shenzhen Expressway, as well as other major highway in Guangdong Province chief of more than 160 km.[7]
3. Positive impact to Hong Kong
In fact， one country two systems to Hong Kong economy is played a role in enhancing. Comparing with mainland, Hong Kong’s economy development shows more on the number. Bu t not in other way.
One country two system promote the long-term development of the two places, open development space in mainland for Hong Kong businessmen. [...]
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