China’s pact with Macau, HK marginalizes Taiwan

Taipei Times, Taiwan

30 August 2004

China’s pact with Macau, HK marginalizes Taiwan

CNA , TAIPEI

Taiwan-based companies is likely to face increased competition next year as a result of of the Closer Economic Partnership Arrangement (CEPA) signed between (mainland) China, Hong Kong and Macau, an analyst said yesterday.

According to Wu Fu-cheng, a researcher at the Taiwan Institute of Economic Research (TIER), the CEPA will more seriously impact Taiwan’s economy from 2005 after the mainland concludes talks with Hong Kong on providing greater market access to Hong Kong products and services.

Beijing and Hong Kong are scheduled to complete negotiations on the CEPA by the end of next month. The deal will allow the entry of an additional 710 Hong Kong products to the mainland market without tariff duties, Wu said.

Some 1,087 items will then enjoy preferential treatment in China, Wu said.

CEPA talks are focusing on a further market opening for Hong Kong-based shipping and surface transportation services, as well as liberalization in the financial and insurance sectors, allowing Hong Kong companies to do business in the vast mainland market, Wu said.

The CEPA will help push Hong Kong’s gross domestic product (GDP) up by 2.64 percent, he said.

The CEPA may lower Taiwan’s GDP by 0.07 percent, with the textile industry suffering a 1.24 percent drop in its production value, Wu said.

Under the CEPA framework, Hong Kong and Macau may join forces with the mainland in pressing ahead on free trade agreements (FTAs), Wu said.

China is planning to establish an FTA zone composed of Russia, Japan, South Korea and countries in Southeast Asia by 2010, while at the same time keeping Taiwan on the sidelines of such agreements, Wu said.

As a result, Taiwanese business groups will need to formulate strategies to remain competitive in the region, he said.

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