Currently treated as overseas investment, Hong Kong enterprises are facing limitations in accessing certain industries and difficulties in financing, said Chan King-wai, chairman of the Hong Kong China Chamber of Commerce.

He called for Hong Kong enterprises to be offered national treatment to allow them to integrate better into the country’s economic development.

As of the end of last year, there were about 136,100 Hong Kong-funded enterprises operating on the mainland, accounting for 28 per cent of the total number of overseas-invested enterprises, according to official statistics. Investment by Hong Kong enterprises took up 49.5 per cent of total overseas direct investment on the mainland, according to the Hong Kong Trade Development Council.

Financing and marketing are two major challenges for Hong Kong enterprises operating on the mainland, said Zhang Yuge, director of the Economic and Social Development Research Center at Shenzhen-based think tank China Development Institute.

“Although they are now able to enter the mainland market, many of them don’t know how to promote their products or services there,” he said.

“It is quite necessary to provide national treatment to Hong Kong enterprises. That’s a move with both economic and political meanings. Since we’re adopting the ‘One Country, Two Systems’ principle, Hong Kong is part of our country. Therefore, it’s well-reasoned for Hong Kong enterprises to get national treatment,” he noted.

But the problem lies in what kind of national treatment should be granted to them. “Even mainland enterprises are subject to different levels of national treatment. In terms of financing, for example, treatment for State-owned enterprises and private ones is different,” said Zhang.

According to a 2015 agreement on liberalising mainland trade in services to Hong Kong, SAR (Special Administrative Region) enterprises can gain access to all service sectors on the mainland as long as they are not on the negative list. That means they are able to enjoy pro-establishment national treatment on the mainland.

“But when it comes to national treatment in the operation process, it becomes an issue concerning regulations and management of overseas investment of a (region). A number of changes, for example, overseas investment law, have to be made before Hong Kong enterprises can fully be treated as mainland enterprises,” pointed out Mao Yanhua, deputy head of the Free Trade Zone Research Institute at Guangzhou’s Sun Yat-sen University.

However, the government is making efforts in that direction, he added.

Under the Shenzhen-Hong Kong cooperation program of the Qianhai special zone, released in December 2014, Qianhai said it was exploring ways to treat eligible Hong Kong enterprises the same as mainland enterprises. The policy was widely taken as a step toward granting national treatment to Hong Kong enterprises.

“‘National treatment’ can first be carried out in specific areas like Qianhai as a pilot program. But it needs more time and effort before it can be implemented on a national scale,” Mao said.SAR firms urged to adopt new strategies to fit mainland rules

As Hong Kong services trade providers secure an equal footing with their Chinese mainland peers, they’ve been urged to carve out new business strategies to suit the cultural tastes of mainland customers to enable their businesses to expand.

The accounting industry is one of the services sectors that’s liberalised under the Guangdong Agreement under the framework of CEPA — the Closer Economic Partnership Arrangement between Hong Kong and the mainland — with national treatment and a negative list with restrictive measures granted for Hong Kong-based accounting firms.

The Guangdong Agreement, known as the “Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong”, came into effect in March last year. It adopted national treatment and a negative-list approach to facilitate market access for Hong Kong services suppliers in Guangdong province.

“The national treatment clause creates new mainland market opportunities for Hong Kong-based small and medium-sized accounting firms,” said Ivan Au, divisional deputy president for Greater China at CPA Australia.

“Even these accounting firms are now granted a level playing field in the mainland market — they must be fully aware of the operational requirements, such as the internal control process and composition of auditors, in order to establish their business offices on the mainland,” Au told China Daily. “More small and medium-sized enterprises, technological startups and cross-border e-commerce companies on the mainland have tremendous demand for professional accounting services provided by Hong Kong-based small and medium-sized accountants,” he said.

National treatment under the context of the Guangdong Agreement stipulates that Hong Kong service providers operating on the mainland are accorded the same rights as mainland companies provided they comply with all mainland rules and regulations.

In the context of an international agreement, a negative list refers to a list of business items to which the agreement will not apply, with a commitment to apply it to everything else.

“Once Hong Kong service providers gain a level playing field with their mainland competitors through national treatment, they should try to suit the tastes of mainland customers to gain more market share while keeping prices of services reasonable,” said Simon Lee Siu-po, senior lecturer at the Chinese University of Hong Kong’s Faculty of Business Administration.

Following the signing of the Guangdong Agreement in 2014, Hong Kong and the mainland signed the Agreement on Trade in Services in November last year — a standalone and subsidiary agreement relating to trade in services under the CEPA framework that will basically achieve liberalization of trade in services between the two parties. The agreement, to start from June 1, allows 153 sectors to be opened up to Hong Kong’s services industry.

Regarding the mode of commercial presence, it extends national treatment to 62 sectors in the SAR, and implements a negative list covering 134 service trade sectors while reserving 120 restrictive measures that are inconsistent with the obligation of national treatment.