Week 5 Economic Dimension

Economic Dimension
What is Economics?
Economics is the study of the production and
distribution of goods and services, it is the
study of human efforts to satisfy unlimited
wants with limited resources
It studies how agents allocate scarce resources
amongst alternatives to meet unlimited human
wants
The Hong Kong Polytechnic University
Allocation of resources
Process occurs at many levels
Consumers
Firms
Government
Market System
Allocation decisions impact natural environment
Want decisions to be based upon incentives that reflect
true value to society
Unfortunately decision makers do not consider true value
i choices
in
h i
Need for policy intervention to overcome such market
failure
Scarce resources and production

Resources are the basic categories
g
of inputs
p
organised
g
by
y entrepreneurship
p
p
(a special type of labour) to produce goods and services. Economists divide
resources into the three categories of land, labour and capital.
Land
Labour
Capital
Entrepreneurship
organises resources
to produce goods
and services
Reference: A. Layton, R. Robinson and I.B. Tucker, Economics for today, Thomson 2002
Contemporary Economics
Macroeconomics Aggregated analysis
John Maynard Keynes in 1936 and 1940
Choices of government
Monetary Policy - Federal Reserve
Fiscal Policy Taxes and Spending
Macroeconomic targets
Income Levels
Inflation
Employment
Contemporary Economics
Mi
Microeconomics
i Disaggregated
Di
t d analysis
l i
Adam Smiths Wealth of Nations in 1776
Choices of consumers (households) and producers (firms)
Two types of Markets
Factor Markets Consumers sell inputs used in
production
d i to firms
fi
Product Markets Firms sell final output to consumers
Three types of analysis
Partial Equilibrium Focus on single factor or good
p amongst
g key
y
Multi-Market Interrelationships
fundamental markets
General Equilibrium Economy as a whole
Macro vs micro
micro-economics
economics
Microeconomics
Examining individual trees rather
than the wood
Studies decision making by single
individual, household, firm or
industry
Focus on behaviour of small
economic units
E.g. egg industry, will suppliers
decide to supply more less or the
same amount of eggs to the
market
k in
i response to price
i
changes? Will individual
consumers decide to buy more,
gg
less or the same amount of eggs
at new price?
Macroeconomics
Surveys the wood
Studies decision-making for the
economy as a whole
Examines economy-wide
variables, e.g. inflation,
unemployment, money supply,
flows of experts/imports and
international financial capital
Macroeconomic decision makings
considers big picture policies as
the
h effect
ff
off balancing
b l
i the
h ffederal
d l
budget on unemployment, the
effect of changing the money
pp y on p
prices and the effect of
supply
strong economic growth on the
value of the currency.
10
Economic Theory of Value

V
Value
l iis reflected
fl t d in
i prices
i
determined
d t
i d through
th
h interaction
i t
ti off
supply and demand
Supply (demand) reflects trade-offs firms (consumers) make
when producing (buying) goods and services
Abundance implies lower prices
Scarcity implies higher prices
Conceptually market forces reflect true

true value to society,
society but
there are reasons why markets may fail
Externalities
Public
bli Goods
d
Property Rights
11
Keynesian Economics
An economic theory stating that active
government intervention in the marketplace
g
p
and monetary policy is the best method of
ensuring economic growth and stability.
stability
John Maynard Keynes (1883 1946)

12
Supply
pp y and Demand
A competitive market is a market in which there are
many buyers and sellers
of the same good or service.
The supply and demand model is a model of how a
competitive market works.
Five key elements in this model:
The demand curve
The supply curve
The set of factors that cause the demand curve to shift, and
th sett off ffactors
the
t
th
thatt cause th
the supply
l curve tto shift
hift
The equilibrium price
The way the equilibrium price changes when the supply and
demand curves shift
Demand Schedule
A demand
d
d schedule
h d l shows
h
how
h
much
h off a
good or service consumers will want to buy
at different prices.
Demand Schedule for Tickets
Price
($ per ticket)
Quantity
demanded
(tickets)
350
5,000
300
6,000
250
8,000
200
11,000
150
15,000
100
20,000
A demand curve is the graphical representation of

the demand schedule; it shows how much of a good
or service consumers want to buy at any given price.
The quantity demanded is the actual amount

consumers want to buy at some specific price
price.
If the scalpers are
charging $250 per ticket,
8 000 tickets will be
8,000
purchased.
8,000
That is, 8,000 is the quantity demanded at a price of $250.
The law of demand says that a higher price for a

good other things equal
good,
equal, leads people to demand a
smaller quantity of the good.
If the price drops to $100,
20,000 fans want to buy

tickets.
At $250, only 8,000 tickets
are demanded.
This
Note
The reflects
law
that of
thethe
demand
demand
general
curve
points
proposition
to
slopes
thethat
inverse
a higher
downward.
price reducesbetween
the number
relationship
price
andpeople
of
the quantity
willing to buy a
demanded.
good.
Shifts of the Demand Curve
A change in the quantity demanded at any given price,

price
represented by the replacement of the original demand
curve with a new demand curve.
Michael
Jordan is
retiring!!!
The
Announcement
Thisincrease
event is in
represented
of
demand
Gretzkys
shifts
byretirement
the
thetwo
demand
demand
generates
curve
schedules:
to
anthe
increase
right. in
demand,
Demand
an increase
before the
in the
announcement
quantity demanded at any given
price.
Demand after the announcement
Movement Along vs. Shift of the Demand Curve

A movement along the demand curve is a change in the
quantity demanded of a good that is the result of a change in that
goods price.
from
from
it
point
point
AA to
toofofa
Itisisthe
theresult
result
point
fall
C:
B:
theincrease
price
ofin
an in
increase
in the
the
quantity
good
good.demanded
quantity
reflects
a shift
of
demanded
at any
movement
the
demand
given
price. along
curve
the
demand
curve
Shifts of the Demand Curve (continued)
andecrease
A
increaseinin
demand
demand,means
meansa a
leftward
l i f h d dshift
rightward
hif
shift
hifoffoffthe
h
demand
the demand
curve.
curve:
At
at
any given price,

consumers demand
a smaller
larger quantity
quantity
than before. (D1
(D1)D3)
D2)
What causes a demand curve to shift?
Changes in the Prices of Related Goods
one of the goods makes consumers less willing to buy the other
good. Ex.: muffins and donuts.
Complements: Two goods are complements if a fall in the
price of one good makes people more willing to buy the other
good. Ex: squash balls and squash racquets.
Ch
Changes
in
i Income
I
Substitutes: Two goods are substitutes if a fall in the price of
Normal Goods: When a rise in income increases the demand
goodthe normal casewe sayy that the g

good is a normal
for a g
good.
Inferior Goods: When a rise in income decreases the demand
good,, it is an inferior g
good. Ex: instant noodles.
for a g
Changes in Tastes
Changes in Expectations
Supply Schedule
A supply schedule shows how much of a good
or service would be supplied at different prices.
Supply Schedule for Tickets
Price
($ per ticket)
Quantity
supplied
(
(tickets)
)
350
8,800
300
8 500
8,500
250
8,000
200
7 000
7,000
150
5,000
100
2 000
2,000
A supply curve shows graphically how much of a good

or service p
people
p are willing
g to sell at anyy given
g
price.
p
orhigher
Just
The
as
for
g demand
that
the
curvesbeing
price
matter,
normally
the more
slope
offered,
of
any good
the more
they
d ll be
downwards,
people
will
bl willing
will
dll be
b to
supply
willing
sell. to
curves
part
normally
with
theirslope
hockey
upwards
tickets, :
Shifts of the Supply Curve

A shift
hift off th
the supply
l curve is
i a change
h
in
i the
th quantity
tit
supplied of a good at any given price.
Michael
Jordan is
retiring!!!
of Gretzkys
retirement
a decrease
in supply,
The decrease
in supply
shiftsgenerates
the supply
curve
to thea left.
Announcement
decrease in the quantity supplied at any given price.
Movement Along vs. Shift of the Supply Curve

A movement along the supply curve is a change in the
quantity supplied of a good that is the result of a change in that
goods price.
g
p
from
frompoint
pointAAtotopoint
point
C:
B:the
thedecrease
decreaseinin
It
it is
is the
the
result
result of
of aa
quantity
quantity
supplied
supplied
fall in the
decrease
in
price
theof
of the
the
reflects
reflects
aashift
movement
good. the
quantity
supplied
supply
along
curve
supplyat
any
given price.
curve
Shifts of the Supply Curve (continued)

The
Any principal
decrease
increase in
in
factors that
shift the
supply
means
a
supply
curve:
l i fh l d
rightward
leftward
dshift
hif
shift
hifoffoffthe
h
supply
curve:
the
supply
curve:
changes
in the
price of an input
at any given price,

changes
in
there
is a
andecrease
increase
intechnology
the quantity
supplied.
(S1
S2)
changes
in S3)
expectations
p
.
What causes a supply curve to shift?
Changes in Input Prices
An input is a good that is used to produce

another good.
Changes in Technology
Ch
Changes
in
i Income
I
Changes in Expectations
Supply Demand
Supply,
Demand, and Equilibrium
Equilibrium in a competitive market: when the
quantity demanded of a good equals the quantity
supplied of that good.
The price at which this takes place is the equilibrium

price (a.k.a market-clearing price):
Every
y
buyer
y finds a seller and vice versa.
The q
quantityy of the good
g
bought
g and sold at that price
p
is the equilibrium quantity.
Finding the Equilibrium Price and Quantity
IIn
In
this
ki t th
the
M thi
Market
equilibrium
k put
tmarket
ilibthe
Lets
equilibrium
price
is
the
equilibrium
quantity
occurs
supply
curve
and
$250
at
demanded
E,
E where
iscurve
equal
thepoint
demand
the
toAnd
the
supply
quantity
curve
the
for
that
market
on
equilibrium
supplied
and
supplied.
the
demand
the
sameisdiagram.
quantity
8,000
curve intersect.
tickets.
Why do all sales and purchases in a market

t k place
take
l
att the
th same price?
i ?
Suppose that a seller offered a potential buyer a price

noticeably above what she knew other people to be paying.
The buyer
y would clearlyy be better off walking
g awayy from this
particular seller and trying someone elseunless the seller
was prepared to offer a better deal.
Conversely, a seller would not be willing to sell for
significantly less than the amount he knew most buyers
were paying; he would be better off waiting to get a more
reasonable customer.
Thus in any well-established,
well-established ongoing market,
market all sellers
receive and all buyers pay approximately the same price.
This is what we call the market price.
Why does the market price fall if it is above

th equilibrium
the
ilib i
price?
i ?
Lets
L say the
h market
k
price of $350 is above

the equilibrium
q
price
p
of
$250
This
creates a surplus
This
surplus will push

the price down until it
reaches
eaches the eq
equilibrium
ilib i m
price of $250.
There is a surplus of a good when the quantity supplied exceeds

the quantity demanded. Surpluses occur when the price is above
its equilibrium level.
Why does the market price rise if it is

b l
below
the
th equilibrium
ilib i
price?
i ?
Lets
L t say th
the market
k t
price of $150 is below

the equilibrium price of
$250.
$250
This
creates a
shortage.
shortage
This
shortage will push

the price up until it
reaches the equilibrium
price of $250.
There is a shortage of a good when the quantity demanded

exceeds the quantity supplied. Shortages occur when the price is
below its equilibrium level.
Opportunities in China and

Hong Kong
Discuss economic opportunities available to
HK e
HK,
e.g.
g those provided through
WTO
PPRD development
CEPA
FDI
[Please refer to notes given].
13
WTO
The
Th World
W ld Trade
T d Organization
O
i ti (WTO)
is the only global international organization dealing with the
rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the worlds
trading nations and ratified in their parliaments. The goal is to
help producers of goods and services, exporters, and importers
conduct their business. - WTO
Hong Kong joined WTO on 1 Jan 1995
http://www.wto.org/english/thewto_e/countries_e/hong_kong_china_e.htm
Mainland China joined WTO on 11 December 2001

http://www.wto.org/english/thewto_e/countries_e/china_e.htm
14
WTO
Location:
L
ti
G
Geneva,
Switzerland
S it l d
Established: 1 January 1995
Created by: Uruguay Round negotiations (198694)
Membership: 150 countries (since 11 January 2007)
Budget: 175 million Swiss francs for 2006
Secretariat staff: 635
Head: Pascal Lamy (director-general)
Functions:
Administering WTO trade agreements
Forum for trade negotiations
Handling trade disputes
Monitoring national trade policies
Technical assistance and training for developing countries
Cooperation with other international organizations
15
WTO
Ch
Challenges
ll
for
f Hong
H
Kong
K
Despite all the opportunities, a more open mainland
China market will not automatically benefit Hong Kong
Kong.
Hong Kong businesses need to overcome the
challenges
g that lie ahead.
For example, foreign banks must currently fulfill the asset
requirement of US$20 billion and various other funding
requirements for setting up a branch in China.
To set up a joint venture commercial retail business in China,
foreign enterprises need to have an annual turnover of more
than US$2 billion and assets of no less than US$200 million.
Th assett requirement
The
i
t for
f joint
j i t venture
t
wholesale
h l
l b
business
i
iis as
high as US$300 million.
16
WTO
IIncreased
d Competition
C
titi
Market liberalization will bring in more outside players, and
thus increase competition
competition, not only from multinationals but
also from the Mainland's own developing indigenous
business sector.
Diminishing Gateway Function
With a more transparent trade regime in the Mainland, Hong
K
Kong's
' gateway
t
function
f
ti will
ill di
diminish
i i h gradually
d ll as more
foreign companies may try to go to mainland directly,
as mainland itself catches up
p through,
g , among
g other things,
g ,
advancement in telecommunications and information
technology.
H
Hong
K
Kong ttrading
di fifirms th
thatt match
t h sellers
ll
and
db
buyers without
ith t
adding any significant value to the process will be faced with
a trend toward more direct dealing
g between customers and
manufacturers in the future.
17
WTO
Hong Kong's Competitiveness
Besides external factors, Hong Kong businesses are
facing internal challenges and weaknesses as well.
A major factor that can erode Hong Kong's
competitiveness is our high operating cost.
High salaries and property prices are the two biggest cost items
for many Hong Kong businesses -- the textiles sector being an
obvious example.
Costs for professional services are also high.
In addition, there are concerns over the inherent

weakness
k
off Hong
H
K
Kong's
' education
d
ti system.
t
18
WTO
What Hong Kong Businesses Can Do
Whether Hong Kong can remain competitive and take

advantage
g of the liberalization in the Mainland will
depend on how Hong Kong positions itself.
Hong Kong businesses should rethink their role, and
this will call for restructuring, diversification and
upgrading.
Alth
Although
hH
Hong K
Kong iis now partt off Chi
China, it iis
extremely important for the business community to
maintain its international character
character.
We must play up our role as the "Value-added, Twoway Bridge
Bridge" to and from mainland China.
19
PPRD
HK can bridge PPRD, Asean
Chief Executive Donald Tsang says Hong Kong possesses
unparalleled strengths and unique features in bridging the
Pan-Pearl River Delta and the Association of Southeast
Asian Nations.
Speaking with Asean business officials in Changsha,
Hunan on June10, 2007, Mr Tsang said Hong Kong's
extensive trade connections with the Mainland provinces
and Asean countries have facilitated import and export
trade between the two regions.
g Kong
g provides
p
As an international financial centre,, Hong
Asean and PPRD enterprises with a diversified and
effective market for raising funds, he added.
20
PPRD
Noting the city has extensive global connections
and can facilitate trade between Asean and
PPRD Mr Tsang said PPRD and Asean
PPRD,
enterprises can effectively network with
overseas enterprises by setting up offices in
Hong Kong.
21
With the implementation

of CEPA
Wh t are th
What
the opportunities
t iti offer
ff
to you?
22
63,000 Hong Kong

Manufacturing & Trading
firms active in PRD
emplo ing around
employing
aro nd
11 million workers
Department of Industrial and Systems Engineering

The Hong Kong Polytechnic
University
23
CEPA Update
The Hong Kong Special Administrative
g
Government and the Central
Region
People's Government on May 9, 2009
agreed on further services liberalisation
and trade co-operation under the Mainland
and Hong Kong Closer Economic
Partnership Arrangement (CEPA).
24
CEPA
The Mainland and Hong Kong Closer Economic
Partnership Arrangement (CEPA) is the first free trade
agreement ever concluded by the Mainland of China and
Hong Kong. The main text of CEPA was signed on 29
June 2003.
CEPA opens up huge markets for Hong Kong goods and
services, greatly enhancing the already close economic
cooperation and integration between the Mainland and
Hong Kong.
25
CEPA
For Hong Kong, CEPA provides a window of opportunity
for Hong Kong businesses to gain greater access to the
Mainland market
market. CEPA also benefits the Mainland as
Hong Kong serves as a perfect "springboard" for
Mainland enterprises
p
to reach out to the g
global market
and accelerating the Mainland's full integration with the
world economy. Foreign investors are also welcome to
establish
bli h b
businesses
i
iin H
Hong K
Kong to leverage
l
on the
h
CEPA benefits and join hands in tapping the vast
opportunities of the Mainland market
market.
26
CEPA Implementation
CEPA covers 3 broad areas:
Trade in goods - All goods of Hong Kong origin importing into
the Mainland enjoy tariff free treatment, upon applications by
local manufacturers and upon the CEPA rules of origin
(ROOs) being agreed and met.
Trade in services - Hong Kong service suppliers enjoy
preferential treatment in entering into the Mainland market in
various service areas. Professional bodies of Hong Kong and
the regulatory authorities in the Mainland have also signed a
number of agreements or arrangements on mutual recognition
of professional qualification.
Trade and investment facilitation - Both sides agreed to
enhance co-operation in various trade and investment
facilitation areas to improve the overall business environment
environment.
27
CEPA Update
Under Supplement VI to the CEPA, the Mainland will
introduce 29 liberalisation measures covering
g 20
service sectors, including two new sectors (research
and development, and rail transport). Thus, the total
number of service sectors covered by CEPA will be
expanded from 40 to 42. Among them, the noteworthy
liberalisation measures are:
On tourism, Mainland travel agents authorised to operate
group tours to Taiwan can organise group tours for
Mainland residents, who hold a valid exit/entry permit for
travelling to and from Taiwan and travel endorsement, to
enter and remain in Hong Kong in transit. This measure
aims to facilitate the travel trade in the Mainland and
H
Hong
K
Kong tto develop
d
l multi-destination
lti d ti ti ttour products.
d t
28
CEPA Update
On telecommunications services, HK Service Suppliers
((HKSS)) can distribute in Guangdong
g
g Province
fixed/mobile telephone service cards which can only be
used in Hong Kong.
On audio-visual services, Hong Kong service suppliers
(HKSS) can provide videos and sound recording
(i l di motion
(including
ti picture
i t
products)
d t ) di
distribution
t ib ti services
i
on the Mainland in the form of wholly-owned operations.
Regarding research and development services
services, which is
also a newly added sector, HKSS can set up whollyowned enterprises on the Mainland to provide
research and experimental development services in
the natural sciences and engineering.
29
CEPA Update
Mutual recognition of professional qualifications:
Supplement VI to CEPA also includes a number of
measures to encourage mutual recognition of
professional q
p
qualifications as well as technical exchange
g
work among professionals from the accounting,
construction, real estate and printing sectors.
On medical and dental services, Hong Kong pharmacists
can sit for examination and register on the Mainland.
These
Th
measures will
ill provide
id greater
t b
business
i
opportunities for the trade and facilitate the upgrading of
the professional standards of the two places
places.
30
CEPA Update
O
On the
th whole,
h l th
the new measures can h
help
l enhance
h
HKSS' competitiveness in the Mainland.
Such measures will not only help enterprises overcome the
current financial crisis,
but will also promote the long-term economic development of
both sides.
Details on CEPA including the newly agreed

liberalisation and co
co-operation
operation measures will be
uploaded to the Trade and Industry Department's CEPA
website: www.tid.gov.hk/english/cepa/index.html
31
Latest Developments of the Greater

Pearl River Delta, 2010-2012
The Greater Pearl River Delta region comprises

nine major cities in Guangdong, namely Guangzhou,
Foshan,, Zhaoqing,
q g, Shenzhen,, Dongguan,
gg
, Huizhou,,
Zhuhai, Zhongshan and Jiangmen, as well as two
special administrative regions, namely, Hong Kong
and Macao.
The region,
g
, a manufacturing
g hub of national
importance, contributed 79% to total GDP of
Guangdong in year 2010. Meanwhile, the region also
accounted for a 72.4% share of total retail sales of
consumer goods of Guangdong in 2010.
As the blueprint
p
of the development
p
of
Guangdong in the next five years, the 12th Five-Year
Plan (2011-2015) of Guangdong sets out a number of
development goals. By 2015, GDP of Guangdong
will increase from RMB 4.5 trillion in 2010 to RMB
6 7 trillion,
6.7
t illi
growing
i
att an annuall rate
t off 8%.
8%
Per capita GDP will increase from RMB 47,000 to
RMB 66,000 with an annual growth rate of 7%.
Besides, Guangdongs total retail sales of consumer
goods will reach RMB 3.5
3 trillion and total imports
and exports will exceed USD 1 trillion in 2015.
In 2010, Guangdong registered a GDP of RMB 4.5 trillion with a

year-on-year growth
h off 15.2%.
15 2% It
I is
i forecasted
f
d that
h the
h totall GDP will
ill
reach RMB 6.7 trillion by 2015, with an annual growth rate of 8%.
The GDP per capita of Guangdong has increased from RMB 370
i 1978 to RMB 47,000
in
47 000 in
i 2010,
2010 representing
i
an annuall growth
h off
14.2%. It is expected that the GDP per capita will increase to RMB
66,000 by 2015, with an annual growth rate of 7%.
Total imports and exports of Guangdong were USD 784.9 billion

i 2010.
in
2010 The
Th imports
i
were USD 331.7
331 7 billion
billi
and
d totall exports were
USD 453.2 billion (a total trade surplus of USD 121.5 billion). In 2010,
Guangdong accounted for 26.3% of the total national imports and
29.6% of the total national exports. By 2015, the total imports and
exports will exceed USD 1 trillion.
Since the opening up of China in late 1970s,

1970s
Guangdong has been serving as a testing field for
exploring a new direction for the economic
development of China and also as a role model
showcasing
g the benefits of the opening
p
g up
pp
policy.
y
The Qianhai area in Shenzhen and Nansha in
Guangzhou have been chosen as the major
cooperation zones between Guangdong and Hong
Kong for seeking breakthroughs in innovative
domains.
The Outline of the 12th Five-Year Plan for

National Economic and Social Development of the
Peoples Republic of China (the 12th Five-Year
Plan) was officially promulgated on 16 March 2011.
For the first time, an individual chapter entitled
M i t i i
Maintaining
th Long-term
the
L
t
P
Prosperity
it and
d Stability
St bilit
of Hong Kong and Macao was dedicated to Hong
Kong and Macao.
Macao
The dedicated chapter clearly set out the Central
A th iti supportt for
Authorities
f
H
Hong
K
Kong
t deepen
to
d
economic cooperation with the Mainland and
continue to implement CEPA.
CEPA
It also confirmed the significant functions and

positioning of Hong Kongs cooperation with
Guangdong under the Framework
Framework Agreement on
Hong Kong/Guangdong Cooperation, including the
establishment of a financial cooperation
p
zone and a
world class metropolitan cluster with Hong Kongs
financial system taking the lead, and the support for
Guangdong to open up its service industries for
Hong Kong on a pilot basis and extending the pilot
scheme
h
t other
to
th regions
i
gradually.
d ll
Hong Kongs role in Pan Pearl River Delta

Development
1. Pan-Pearl River regional co-ordination in blueprint
In the vast areas south of the Yangtze River, local economies should be consolidated to
form a better co-ordinated economic area called the "Pan-Pearl River Delta Region",
which actually covers eight provinces, one autonomous region and two special
administrative regions plus one municipality directly under the central government.
That is the vision conceived by Guangdong Governor Zhang Dejiang and will be
explored in detail at a forum scheduled to be held early next month.
Liang Guiquan, president of the Guangdong Academy of Social Sciences, the organizer
of the forum as well as the consultant on the notion, talked to China Daily to elaborate on
his win-win theory for economic co-operation on such a vast scale.
Liang explained that every economy has its own unique pace. When a market is fully
developed, one naturally looks outward for further growth. It usually starts with
merchandise, and then graduates to capital.
"Made-in-Guangdong" products have always been popular in neighbouring provinces,
and "in my opinion, we have reached the stage when we will export capital to these
places", said Liang.
Industrial expansion means there will be need for more space. Wherever a market
emerges, manufacturing will follow to better serve this market. Guangdong is actively
developing its service industries now, but eventually that will mature, too. So, in the next
20 years, Guangdong's economic clout will "spill over" to its neighbours and stimulate
the growth in those places.
Liang said that two years ago there was a palpable sense of rivalry of "I grow and you
remain stagnant and that will make me look good". For example, Guangxi was quite wary
of its eastern neighbour and pushed for its own port in the south.
"If you compare the traffic on the two highways, you'll instantly know that economic
growth defies administrative meddling. It has its own logic. The highway from Guangxi
to Guangdong is much busier than the north-south artery inside Guangxi. An economic
bright spot naturally attracts those around it," asserted Liang.
He further maintained that the less-developed areas have to be "pulled along" in growth,
otherwise you won't have a new market or new resources because consumers in those
places would not be able to afford your products and services.
"I used to suggest to provincial-level leaders that when we plan for Guangdong's future,
we will have to keep in mind the surrounding provinces. It's for the benefit of sustainable
growth. Americans don't seem to realize that as they always find trouble with China's
growth," he said, referring to the wave of protectionism and China-bashing in the US.
"This is a situation of interdependence," Liang clarified. "Since Guangdong took off
economically ahead of others, we have the responsibility to bring others along with us.
This does not mean we will dominate them or we'll call the shots. It only means that we'll
take the initiative to serve them in a more co-ordinated manner."
Some of these "neighbours" are members of the "Pan-Pearl River Delta Economic
Region", which, still on the drawing board, comprises Guangdong, Guangxi, Fujian,
Hunan, Hainan, Jiangxi, Yunnan, Guizhou, Sichuan, Chongqing, Hong Kong and Macao.
According to Li Chunhua, who is co-ordinating the meeting, provinces as far away as
Gansu want to come to the forum and discuss the possibility of being included in the
"master plan". "But it would be too far-fetched to call Gansu part of Pearl River Delta
anything," Li said.
Liang cited the example of Hunan Province, where power costs much less than Guangdong.
"If we have this system of co-operation, we can move some of our power-consuming
plants there to take advantage of the cost benefit. Another example is Guizhou, rich in
3
water and coal. It can export power to Guangdong. Yet Guangdong may fear that it has
no control over utility sources. That's why we will need a mechanism to smooth out
wrinkles and guarantee it will benefit everyone."
Liang Guiquan applied the same reasoning to Hong Kong's relations with the rest of
China. "Hong Kong is far ahead of Guangdong. It has already found itself in the dilemma
of economic restructuring, something that Guangdong will encounter down the road."
Liang feels that Hong Kong people, in general, have not adjusted very well.
"They tend to whine a lot as if they were spoilt children. Maybe they have lived the good
life for too long. Everyone knows Hong Kong's strength lies in its service sector. So some
people are saying Guangdong should not develop its service industry, such as ports, so
that there will be no direct competition. They even propose to lure back some of the
manufacturers back to Hong Kong. Nothing could be more foolish than that."
Liang suggested that Hong Kong first broaden its service area to include southern China.
"Just imagine that all the provinces south of the Yangtze River reach the economic level
of Guangdong in the mid-1990s. What a mammoth market that will be for Hong Kong's
service providers."
Liang also said Hong Kong should "upgrade" its service to meet the demands of an everincreasing manufacturing sector on the mainland.
"Better be Jack of all trades than a one-trick pony that can offer only so much," he said.
Hong Kong's strategy should not be to compete with Guangdong, but to join hands with
its northern neighbour in a concerted effort to hasten the development of the vast
surrounding region.
"That will be beneficial to Hong Kong, to Guangdong, and to the whole nation," Liang
expounded.
"Of course, Hong Kong does not need to limit its sights to only one market. It should
look to serving the entire country and playing a major role in its growth," Liang said.
"Hong Kong really needs to be forward-looking. As long as fast growth in South China is
guaranteed for the next 20 years, the positions of Hong Kong and Guangdong will be
rock solid because products will flow through the ports here to the world market. Hong
Kong is irreplaceable. Neither Guangdong nor Shanghai can take its place."
2. HK to Play More Important Role in Pan-Pearl River Delta Cooperation

Hong Kong will play a more important role in the cooperation among the Pan-Pearl River
Delta, and in the building of an all-around well-off society undertaken by the Chinese
mainland, said Zhang Dejiang, member of the Political Bureau of the Communist Party
of China (CPC) Central Committee in Hong Kong Monday.
Zhang, also secretary of the Guangdong provincial committee of the CPC, who came to
Hong Kong Monday, will attend Tuesday's opening ceremony of the Pan-Pearl River
Delta Regional Co-operation and Development Forum, at the invitation of Chief
Executive of the Hong Kong Special Administrative Region (HKSAR) Tung Chee Hwa.
Zhang said he has great confidence in Hong Kong's future and Hong Kong's role as a
regional financial, shipping and information center is irreplaceable.
During the day, Zhang visited the Hong Kong Exchanges and Clearing Limited (HKEx),
Tsing Ma Bridge, the University of Hong Kong, and the world's largest container port in
Kwai Chung.
At the HKEx, Zhang listened to the briefing by the Financial Secretary of the HKSAR
government Henry Tang. Zhang said that Hong Kong will continue to play its role as a
regional financial center, as the HKEx strictly observes relevant trading rules, enjoys
large quantity of exchange volume and has a bright future.
During his visit to the container port, Zhang pointed out that the development of Hong
Kong's shipping industry serves as an impetus to the economic growth of the Chinese
mainland.
Addressing a forum attended by representatives from Hong Kong industry and
commercial community, Zhang said the central government firmly supports the proposal
on forming the pan-Pearl River Delta Region. With the rapid economic development of
the Chinese mainland, Hong Kong's role will be more and more important.
Zhang hoped that Hong Kong will seek the opportunity brought about by the pan-Pearl
River Delta cooperation to enhance its economy and improve the livelihood of Hong
Kong people.
Pan-Pearl River Delta Region includes provinces of Guangdong, Hainan, Guizhou,

Jiangxi, Yunnan, Sichuan, Hunan and Fujian and Guangxi Zhuang Autonomous region,
as well as Hong Kong and Macao.
3. HK Could Lead Delta Region

Hong Kong, as an international trade and finance center with a well-developed service
industry, could lead the pan-Pearl River Delta region in its drive to embrace the world
market. Guangdong Governor Huang Huahua said this on the sidelines of the second
meeting of the Pan-Pearl River Regional Co-operation and Development Forum held
Wednesday. "Hong Kong excels as a service provider and has long been a world center
for finance, trade, shipping and information. This is the city's greatest advantage," Huang
said. He said Hong Kong could be a "dragon head" in leading the pan-delta region
towards international co-operation in economic, science and technology sectors. Chief
Executive of Macao Edmund Ho Hau-wah stressed that co-operation in the pan-delta
region will help promote economic integration. "Economic co-operation in the region
conforms with emerging trends and will push forward complementary economic
development," Ho told the forum. He said Macao's government will actively participate
in co-operative efforts under the pan-delta framework. Chief executives of Hong Kong
and Macao, along with the governors of the nine areas in the region, were joined by
speakers from Macao's academic and business sectors. The guest speakers identified new
opportunities for Macao and its role in the economic integration of the pan-delta region.
With the implementation of the Closer Economic Partnership Arrangement and the
China-ASEAN free trade zone, Macao is poised to play an important role in regional cooperation, said Hoi Sai-lun, President of the Macao General Association of Trade. "Pandelta economic co-operation will give added impetus to the city's gaming and tourism
industries, while encouraging political stability and consolidating the territory as a
premier entertainment capital in the region," Chairman of the Macao Association of the
Catering Industry Chan Chak-mo said. Meanwhile, academics gave recommendations for
the implementation of the Pan-Pearl River Delta concept. "The 11 areas in the Pan-delta
group must establish a co-ordinating mechanism to foster economic partnership," said
Professor Leong Tou-hong from the Macao Polytechnic Institute. A common platform in
the region for forging closer ties and eliminating territorial barriers will benefit regional
integration, he added. The pan-delta region should also enhance collaborative efforts in
science, education and cultural development, said Liu Renhuai, president of the
Guangzhou Jinan University. The first Pan-Pearl River Delta forum will close in
Guangzhou today. Provincial leaders will sign a joint-agreement covering infrastructure,
agriculture, investment, technology and tourism. The forum advocates the concept of
forming a common economic market spanning 11 areas in the region, also known as "9-2". It encompasses the provinces of Fujian, Jiangxi, Hunan, Sichuan, Guizhou, Yunnan
and the special administrative regions of Hong Kong and Macao.(China
Daily)(06/03/2004)
4. HK urged to assume leading role in 'pan-delta'
Hong Kong and Guangdong Province should join hands to take on a leading role in the
creation of a new regional economic bloc.
Frederick Lam, executive director of the Trade Development Council, said this yesterday
at a government discussion forum on regional economic co-operation.
'Hong Kong has many distinct advantages, but it must join forces with neighbouring
Guangdong Province to lead the economic development of the Pan-Pearl River Delta
region,' Lam said.
The SAR or the Guangdong Province alone cannot be the 'dragon heads' of the region,
they must combine their strengths, he stressed.
Lam added that the territory's integration with the pan-delta region is in accordance with
world economic trends.
'With a population of 450 million, the region is comparable to the European Union and
NAFTA, and the pan-delta concept can also be compared to these economic entities,' he
added.
The Pan-Pearl River Delta concept, proposed last year by Guangdong provincial Party
secretary Zhang Dejiang, aims to further economic integration in the region.
The concept involves nine provinces and two special administrative regions, namely
Guangdong, Jiangxi, Fujian, Guizhou, Guangxi, Sichuan, Yunnan, Hunan, Hainan, Hong
Kong and Macao.
Chairman of Hopewell Holdings Gordon Wu said Hong Kong must seize the opportunity
to further integrate with the pan-delta group, which is a burgeoning economic force.
'I believe co-operation with the region is essential for the territory's long-term economic
prosperity. With this new arrangement, we can maximize our advantage as the pan-delta's
window to the world,' Wu said.
Chairman of the Federation of Hong Kong Industries Andrew Leung said Hong Kong
must transcend the concept of being a single city. 'We must eliminate local protectionism,
which is a hindrance to economic integration. When transport and economic barriers are
removed, Hong Kong's businesses will have better access to the region's raw materials,
facilities and talents, furthering collaboration efforts,' Leung said.
To push forward the proposal, the first meeting of the Pan-Pearl River Delta Regional
Co-operation Forum will be held in the territory on June 1. The chief executives of Hong
Kong and Macao and leaders of the nine provinces are expected to attend.
5. A Brief Review
It has ben 23 years since Guangdong designated the 14 cities and counties that make up
the Pearl River Delta as a single geographic entity, which is the subject of the Fourth
Annual Pearl River Delta Conference, "Growth and its Consequences", to be held today
and tomorrow at the Garden Hotel in Guangzhou.
It was in 1992 that party boss Lin Ruo, realising the entire province could not be
urbanised simultaneously, asked that major cities be identified to spearhead the
urbanisation drive so that they could provide the impetus for growth in east and west
Guangdong.
The resulting area covering 41,500 sqkm with a population of 35million people has
witnessed meteoric but patchy growth, with the Four Tigers - Zhongshan, Dongguan,
Nanhai and Shunde - sprinting ahead while backwaters Huizhou, Jiangmen and Zhaoqing
loll in sub-tropical languor.
A decade following its creation, Governor Huang Huahua called for the creation of a
Greater Pearl River Delta in April 2003 as the Yangtze River Delta - which has fewer coordination problems as it is comprised of fewer cities and has a more transparent
investment environment - emerges as a potent threat to the Pearl River Delta's economic
powerhouse position.
Bringing in Hong Kong and Macau was aimed at giving the southern delta an
international edge that could not be matched by the Yangtze River Delta.
Before that there had been calls to attract more Fortune 500 companies, of which 300
have come to Guangdong compared with 400 in Shanghai, although these calls were
viewed negatively by Hong Kong and Macau.
Zhou Yunyuan, a scholar at Sun Yat-sen University's Centre for Hong Kong, Macau and
Pearl River Delta Studies, said: "They felt that Guangdong no longer cared about
investment from Hong Kong and Macau and only wanted to draw the top 500 companies.
They felt used and then discarded."
A few months later in July, Party Secretary Zhang Dejiang asked experts to think about
extending the Pearl River Delta to cover neighbouring provinces.
Despite grand designs, Pearl River Delta experts said the delta was still hamstrung by a
lack of co-ordination that resulted in wasteful duplication, while suggestions to make the
area more dynamic had fallen on deaf ears.
Zhuhai's white elephant airport is a classic case of poor co-ordination and rivalry among
delta cities - but there are more recent examples of their inability to work together.
The construction of a wastewater treatment plant to serve residents in border areas of
Foshan and Guangzhou has been held back because both cities want to build their own
plant even though it does not make economic sense.
Even the integration with Hong Kong has run into a snag recently from Guangdong's
point of view because the city is seen as being high-handed in making unilateral decisions
on the Hong Kong-Macau and Zhuhai bridge.
Zheng Tianxiang, a former director of the research centre, said: "The bridge has alienated
Guangdong's middle- and high-ranking officials because they feel that Hong Kong made
all decisions unilaterally, including choosing landing points."
Escalating cost estimates and a feeling that Hong Kong and Macau were imposing their
wishes on Guangdong were threatening to keep the long-awaited bridge sitting on the
drawing boards, he said.
"They do not understand why [Hong Kong] did not take cost into consideration and now
it is costing 60 billion yuan. It was supposed to be a Build Operate and Transfer project.
Now they want the central government to foot 30 per cent of the cost," he said.
As early as 1995, Professor Zheng advocated the creation of a commission for regional
management but the idea was shot down by the nine mayors who did not want to
relinquish their power.
Guangdong's administrative structure, as in other parts of the mainland, is such that the
vice-governors have responsibilities for different sectors of the economy. There is no one
vice-governor in charge of regional matters, which means regional issues have to be
handled by the governor.
From time to time, the governor may designate a vice-governor to hold a regional
meeting to address a problem but the vice-governor often does not study the problem
leaving his responsibilities poorly discharged.
An informal mayors' forum was created but they met irregularly and have no voting or
veto rights, giving rise to a situation where there are more disputes than solutions.
Professor Zheng suggested setting up a common fund for environmental conservation,
agriculture and basic infrastructure projects but no one was concerned about taking a
regional approach to these projects.
"Each mayor is concerned only with his own city. They are very provincial and do not
understand what it means to be in a win-win situation," he said.
With Hong Kong's and Macau's participation, however, matters improved because when
proposals from Hong Kong and Macau leaders were made to the State Council, it was
relayed to local governments and they accepted such suggestions, Professor Zheng said.
"I feel that there should be more proposals from National People's Congress delegates
from Hong Kong and Macau [because their voices carry weight].
Professor Zheng called for the creation of a commission for exchange of information
among experts from the three areas so that experts' views had a better chance of being
heard by policymakers.
An advisory commission of 118 experts set up recently by the Guangdong government
could be expanded to include Hong Kong and Macau experts, he said.
The Pearl River Delta may have reached a stage where it has to pay serious heed to the
voices of experts because boom cities such as Shenzhen and Dongguan have run out of
land and ideas to sustain their prosperity.
Meanwhile, labour costs have risen but discussions on merging Shenzhen with Dongguan
and Huizhou to strengthen their competitive edge have fallen flat.
Merger experience elsewhere has not given them cause to embrace the idea with
enthusiasm.
Leaders of Nanhai and Shunde still rue the day their cities were forced to merge with
Foshan and claim that their economic growth shrank as a result of the merger.
Despite the poor co-ordination record, Professor Zheng believed that delta officials were
now more mature and more inclined to take a regional view on things.
Professor Zhou remained optimistic about the Pearl River Delta.
He said its track record kept foreign investors interested while more information about
the delta was filtering out.
"I predict that the Pearl River Delta can still sustain a growth rate of 10 to 12 per cent,"
he said.
10
CEPA - EASIER ACCESS TO CHINA THROUGH HONG KONG

Cepa' is China's free trade agreement with Hong Kong. It grants easier access to China
markets for Hong Kong-made products, and Hong Kong-based service companies.
1. Duty-free export to China for Hong Kong-made products
1087 categories of 'Made in Hong Kong' products will be exempt from tariffs when
exported to the Chinese mainland. More information.
2. Easier market entry for Hong Kong-based service providers
Cepa covers 26 service sectors and reduces, or removes geographical, financial and
ownership restraints. Any nationality company can apply if it:
Is incorporated in Hong Kong

Has operated for 3 to 5 years (depending on the sector)
Is liable to pay Hong Kong profits tax
Employs 50% of its staff locally
More information.
Cepa Update Summary by Susan Lavender,

Alsop (European-based law firm in Hong Kong)
Associate,
Dibb
Lupton
BENEFITS FOR NON-HONG KONG COMPANIES

Overseas companies, not based in Hong Kong, can take advantage of Cepa by
outsourcing to, or partnering with a Cepa-qualified manufacturer or service provider in
Hong Kong.
Overseas manufacturers, you do not need an office in Hong Kong to benefit from Cepa.
For your goods to qualify as 'Made in Hong Kong', you need only satisfy simple Rules of
Origin. In essence, your products must be "substantially transformed" in Hong
Kong. More information.
If you are a service-provider, you can partner with, or invest in, a Cepa-qualified
company to benefit from easier access to the Chinese mainland. More information.
SECTOR-SPECIFIC REPORTS
Manufacturing
Services
CEPA FEATURES
- Italian firm qualifies as Hong Kong service supplier
- More business opportunities for overseas firms under Cepa II
Global logistics provider taps Cepa opportunities

'Big four' gear up for post-Cepa rush
World banks localise for first-mover advantage in China
HK & EU business leaders hail Cepa opportunities
Luxury goods group sees Cepa as business generator
CEPA and Opportunities for Hong Kong

Introduction
Following the signing of the main parts of the Closer Economic Partnership
Arrangement (CEPA) on 29th June 2003, Hong Kong and the Mainland signed the six
Annexes to the main text of the Arrangement on 29th September 2003, setting out the
implementation details. To be implemented from 1st January 2004, the Arrangement is to
ensure Hong Kong will be "economically interlocked" with the Mainland and that
smaller Hong Kong companies will benefit from the opening-up and liberalisation on the
Mainland beyond China's commitments in its WTO accession. With CEPA, 90% of Hong
Kong domestic exports to the Mainland can enjoy zero tariffs. Also, CEPA opens up 18
service industries to Hong Kong companies. More important, CEPA provides long-term
opportunities for Hong Kong people to establish business or work on the Mainland.
CEPA - A Special Arrangement Abiding by International Practices

CEPA is the first bilateral Free Trade Agreement (FTA) for both the Chinese Mainland
and Hong Kong. It abides fully by the WTO's requirements on FTAs. While the
Agreement eliminates substantial trade and investment barriers between Hong Kong and
the Chinese Mainland, it does not raise any obstacles for other economies' access to the
two markets. Consistent with the provision of the General Agreement of Trade in
Services (GATS), companies in Hong Kong with substantive activity are qualified as
Hong Kong companies for the entitlement of the benefits under CEPA.
Opportunities in Trade in Goods

Starting from 1st January 2004, 273 types of products made in Hong Kong can be
exported to the Mainland free of tariff. This, together with China's commitments upon
accession to the WTO, will allow about 90% of Hong Kong domestic exports to the
Mainland to enjoy zero tariffs. The annual savings in tariffs are estimated to be HK$750
million. Moreover, zero tariffs will also be applied latest by January 2006 upon
applications by manufacturers in Hong Kong to other products made in Hong Kong for
accessing the Mainland market.
A product is qualified as "made in Hong Kong" if it fulfills the rules of origin under
CEPA. For 70% of the 273 types of products covered in the initial phase for tariff-free
importation, Hong Kong's existing origin rules using the "specific manufacturing
process" criterion will be adopted as the CEPA origin rules. For the rest, either the
"change in tariff heading" approach or the "30% value-added" requirement will be used.
The 30% value-added rule compares favourably with other free trade areas' thresholds,
which range from 40% to 60%.
Apart from zero tariffs enjoyed by products made in Hong Kong, products made by Hong
Kong and/or traded by Hong Kong will also benefit from CEPA in other ways. Upon
China's WTO accession, many Hong Kong manufacturers with production on the
Mainland would like to develop China as their domestic market. However, their market
penetration efforts have been somewhat hindered by the underdeveloped distribution
system on the Mainland. Many hazards in developing the China market such as payment
problems and intellectual property rights protection now facing Hong Kong
manufacturers can hopefully be alleviated as more Hong Kong players will be allowed to
engage in distribution business on the Mainland under CEPA.
The immediate benefit of the trade in goods is the saving in tariffs, thus increasing the
price competitiveness of Hong Kong's domestic exports of consumer products into the
Mainland. Industries that are more likely to be benefited include fashion, jewellery and
high-end watches.
A longer-term effect of the zero-tariff agreement is the potential for attracting more high
value-added manufacturing activities to be located in Hong Kong, and promoting
development of brand products made in Hong Kong to emerging middle-class consumers
on the Mainland.
Capitalising on the advantage of Hong Kong in intellectual property rights protection,
free trade and investment environment, and reputation in cosmopolitan design, Hong
Kong is in a good position to develop high intellectual property (IP) value industries that
target the Mainland market.
For high-end products such as designers' clothing and fashion accessories, and industries
that involve proprietary technology (since the IP input accounts for a much larger share
than labour and other inputs in the total cost structure), production in Hong Kong may
still be justifiable. However, since the high IP value industries are knowledge-based and
would not be massive in scale, the effect of job creation in Hong Kong, especially for
unskilled workers, would only be moderate.
Opportunities in Trade in Services

CEPA provisions on market access cover a total of 18 service industries. These include:
management consulting, convention and exhibition, advertising, accounting, construction
and real estate, medical and dental, distribution, logistics, freight forwarding, storage and
warehousing, transport, tourism, audio-visual, legal, banking, securities, insurance, and
value-added telecommunications services.
To be entitled to the benefits of CEPA, a service company, regardless of the nationality

of its investors or shareholders, must have substantive business activity in Hong Kong by
fulfilling the following criteria:
(1) the company must be incorporated under the laws of Hong Kong;
(2) the company must be liable to pay profits tax in Hong Kong;
(3) the company must employ in Hong Kong 50% or more of its total staff.
In addition, companies in different service industries have to meet different extra criteria
to ensure that they have been engaging in substantive business operations in such an
industry for a minimum period (usually three to five years) in Hong Kong. Although the
exact requirements for a company to be qualified vary by industries, the assessment will
be on a non-discriminatory and objective basis. Foreign companies can be regarded as a
"Hong Kong company" one year after acquiring majority shares in a Hong Kong
company through merger or acquisition.
Although the liberalisation measures vary from industry to industry, China has taken into
account the special niche of Hong Kong as CEPA commitments go beyond the country's
WTO accession protocol, for example, the opening-up of exhibition business to Hong
Kong companies.
Besides the exhibition industry, Hong Kong's niche in the audio-visual industry is well
recognised. With the quota free access to the Mainland of Chinese language films
produced in Hong Kong and the relaxation on the co-production requirements, CEPA
paves the way for the recovery of Hong Kong's film industry by creating great potential
in the Mainland market. More important, it provides a very good avenue for Hong Kong
to post itself as a modern and dynamic metropolis before Mainland's consumers.
The framework of CEPA is intentionally designed to help smaller companies, whether
they be indigenous or foreign-owned, in Hong Kong. Under China's WTO protocol, the
thresholds of entry to the Mainland's service sector are too high for Hong Kong
companies in most service industries. CEPA lowers the thresholds for Hong Kong
companies, allowing them an "effective" market access to the Mainland's service sector.
Lowering the thresholds for Hong Kong banks to expand on the Mainland and allowing
Hong Kong law firms to share offices with their Mainland counterparts are significant
measures to increase the feasibility of Hong Kong service providers to do business on the
Mainland.
Not only Hong Kong products or Hong Kong companies but also Hong Kong
professionals and residents will benefit from CEPA. Hong Kong professionals in the
securities and insurance industries can apply to practise on the Mainland and Hong Kong
permanent residents with Chinese citizenship are permitted to sit the legal qualifying
examination on the Mainland. Moreover, Hong Kong permanent residents with Chinese
citizenship are formally permitted to engage in retail activity in Guangdong. All this
suggests that in future more Hong Kong people are likely to seek employment and
business opportunities on the Mainland.
Hong Kong as a Financial Centre and Its Special Relations with the Pearl River
Delta
CEPA will strengthen Hong Kong's role as an international financial centre for China and
the region. Under CEPA, the Mainland supports Chinese banks in re-locating their
international treasury and foreign exchange trading centres to Hong Kong. They are also
encouraged to expand their banking business in Hong Kong through acquisition. In the
process of financial reform on the Mainland, the financial intermediaries in Hong Kong
will be fully utilised.
Given the proximity of Hong Kong to the Pearl River Delta (PRD), CEPA has a special
meaning to the closer co-operation of the two places. With CEPA, the PRD will continue
to grow from strength to strength as the world's manufacturing centre, fully supported by
the business services provided by Hong Kong companies. Waiving Hong Kong lawyers'
residency requirements for operating in the PRD is just an example of the special
convenience provided by CEPA to enhance the partnership of the Greater PRD.
Overall Impact on Hong Kong

CEPA will leverage on the institutional strengths of Hong Kong and the huge market
potential on the Mainland under the "one country, two systems" principle for revitalising
the Hong Kong economy and modernisation of the Chinese Mainland. Given the eased
market access to the Mainland and the stringent protection of intellectual property rights
in Hong Kong, the city will be the first choice to supply products and services with "high
content of intellectual property" for the Mainland market. Creativity will be the key
determinant for Hong Kong people and companies to succeed on the Mainland while
developing into a "knowledge-intensive" service hub is the future of this territory.
CEPA indeed creates the "environment" for Hong Kong products, Hong Kong companies
(particularly medium-sized companies), Hong Kong professionals and residents to have
an "effective" access to the Mainland. It does not provide them with "privileges" to enjoy
exclusive rights in the Mainland market. They have to face intensifying competition in
this large market from both local suppliers as well as multinational players. As China will
continue to open up on schedule in accordance with its WTO commitments, the window
of first mover advantage for Hong Kong players is brief.
The impact of CEPA on the service sector is likely to be greater than that on the
manufacturing sector. This is particularly true when services, accounting for only 34% of
China's GDP, have become a constraint on the country's economic development.
Contributing 87% to the domestic economy, services are well developed in Hong Kong
and will be able to contribute more to the modernisation of the Mainland under CEPA.
Although the immediate benefit of CEPA for industrial employment in Hong Kong may
only be moderate, much more future employment opportunities in the service sector will
be created across the boundary. The overall effect on total employment could be
significant.
Immediate trade and employment creation is, of course, important to Hong Kong, but the
long term effect of CEPA is much more substantial. Indeed, the pace of Hong Kong's
economic restructuring will accelerate under CEPA. While the impact will evolve over
time, it is likely to be reflected more in Hong Kong's GNP than in its GDP. The
opportunities arising from CEPA are not limited to activities within the HKSAR but go
much farther into the Mainland

Latest Developments of the Greater Pearl River Delta
This chapter is divided into 6 parts. Part I, II and III will give the
general economic overview of Guangdong as well as the Greater
Pearl River Delta region. Key development goals for Guangdong
and latest updates of the cooperation zones between Hong
Kong and Guangdong will be covered in Part IV and Part V. Part
VI will introduce the major government initiatives and recent
infrastructure projects in the Greater Pearl River Delta region.
I.
I. Economic Overview of Guangdong
2011
Guangdong is the most populous province in China.

Encompassing a total land area of 179 812.7 sq. km, the province
had a 104.4 million permanent population by the end of 2010,
according to the Guangdong Statistical Yearbook 2011.
1.044
179 812.7
21
2010
79%
72.4%
Located on the southern coast of China, Guangdong is composed

of 21 cities at prefecture level. Of which, Guangzhou, Foshan,
Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan
and Jiangmen are the 9 major cities forming a region commonly
known as the Pearl River Delta. The Pearl River Delta region, a
manufacturing hub of national importance, contributed 79% to
total GDP of Guangdong in year 2010. Meanwhile, the region also
accounted for a 72.4% share of total retail sales of consumer
goods of Guangdong in 2010.
23
1.
1. GDP of Guangdong
201045,472.8
In 2010, Guangdong registered a GDP of RMB 4.5 trillion with a

year-on-year growth of 15.2%. It is forecasted that the total GDP
will reach RMB 6.7 trillion by 2015, with an annual growth rate of
8%.
15.2%2015
66,800
8%
GDP of Guangdong (1978-2015*)
80,000
66,800.0
RMB 100m
70,000
60,000
45,472.8
50,000
39,482.6
35,696.5
40,000
31,084.4
30,000
22,366.5
20,000
10,000
0
GDP
10,741.3
185.9
1,559.0
1978
1990
5,933.1
1995
2000
2005
2007
2008
2009
2010
2015*
Year
2011
* 2015
Source: Guangdong Statistical Yearbook 2011

* The figure of 2015 is projection
2.
2. GDP Per Capita
Since China adopted the economic reform and opening-up policy,

the GDP per capita of Guangdong has increased from RMB 370
in 1978 to RMB 47,000 in 2010, representing an annual growth
of 14.2%. It is expected that the GDP per capita will increase to
RMB 66,000 by 2015, with an annual growth rate of 7%.
1978370
201047,000
14.2%201566,000
7%
GDP per capita of Guangdong (1978-2015*)
80,000
66,000.0
70,000
RMB
60,000
47,000.0
50,000
37,589.0
40,000
33,151.0
30,000
24,438.0
20,000
10,000
0
GDP per capita of

Guangdong
12,736.0
8,129.0
370.0
1978
2011
* 2015
24
41,166.0
2,484.0
1990
1995
2000
2005
2007
2008
2009
2010

2015*
Year
3.
3. Retail Sales of Consumer Goods
In line with the income growth, the amount of retail sales of

consumer goods has increased from RMB 8.0 billion in 1978
to RMB 1.7 trillion in 2010 with an annual growth of 16.9%. By
estimation, the figure will reach RMB 3.5 trillion by 2015.
197879.9 2010
17,414.7
16.9%201535,000
Retail sales of consumer goods (1978-2015*)
40,000
35,000.0
RMB 100m
35,000
30,000
25,000
17,414.7
20,000
14,891.8
12,772.2
15,000
7,882.6
10,000
5,000
0
Total retail sales of

consumer goods
10,598.1
79.9
667.4
1978
1990
2,478.4
4,379.8
1995
2000
2005
2007
2008
2009
2010
2015*
Year
2011
* 2015

4.
4. Total Exports and Imports
20107,849.0
Total imports and exports of Guangdong were USD 784.9 billion

in 2010. Of which, total imports were USD 331.7 billion and total
exports were USD 453.2 billion, representing a total trade surplus
of USD 121.5 billion. In 2010, Guangdong accounted for 26.3% of
the total national imports and 29.6% of the total national exports.
By 2015, the total imports and exports will exceed USD 1 trillion.
3,317.1
4,531.91,214.8
2010
26.3%29.6%2015
1
International trade (1990-2010)
9,000
8,000
USD 100m
7,000
6,340.4
7,849.0
6,834.9
6,111.2
6,000
5,000
Total exports and

imports
4,280.0
4,000
Imports
3,000
1,701.1
2,000
1,000
0
1,039.7
Exports
419.0
1990
2011
1995
2000
2005
2007
2008
2009
2010
Year
25
II. Major Economic Indicators of the Pearl

River Delta* (2009-2010)
II. *
(2009-2010)
2009
Nine cities in PRD
Percentage to the
Guangdong province (%)
2010
Year-on-year growth Percentage to the

rate (%)
Guangdong province (%)
Basic information
Land Area (sq.km)
54 733.0
30.4
54 733.0
30.4
Permanent Population at the Year-end

(10 000 persons)
5 361.7
52.9
5 616.4
4.8
53.8
Urban Population (10 000 persons)
4 336.6
67.5
4 646.0
7.1
67.2
Employed Persons at the Year-end

(10 000 persons)
3 261.0
57.7
3 377.4
3.6
58.7
Regional GDP (RMB 100 million)
32,147.0
79.4
37,673.3
17.2
79.0
Primary Industry
723.6
35.7
809.8
11.9
35.1
Secondary Industry
15,427.5
80.0
18,313.5
18.7
79.3
Tertiary Industry
15,995.9
83.4
18,550.0
16.0
83.2
Production data
Ratio of Industries to the Gross Domestic

Product (%)

Primary Industry
2.3
2.1
-0.2
Secondary Industry
48.0
48.6
0.6
Tertiary Industry
49.8
49.2
-0.6
61,231.0
68,633.3
12.1
Total Investment in Fixed Assets

(RMB 100 million)
9,603.6
71.9
11,355.8
18.2
70.5
Total Amount of Retail Sales of Consumer

Goods (RMB 100 million)
10,834.7
72.8
12,613.2
16.4
72.4
Total Exports (USD 100 million)
3,417.8
95.2
4,318.0
26.3
95.3
Total Imports (USD 100 million)
2,430.5
96.4
3,195.0
31.5
96.3
Realised Foreign Direct Investment

(USD 100 million)
175.1
89.6
183.5
4.8
90.5
GDP per capita (RMB)

Domestic Economy
External Economy
2011
*
26

* Includes Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan
and Jiangmen
III.
(2010)
III. Basic Facts and Figures of the Greater

Pearl River Delta, 2010
The Greater Pearl River Delta comprises nine major cities in

Guangdong, namely Guangzhou, Foshan, Zhaoqing, Shenzhen,
Dongguan, Huizhou, Zhuhai, Zhongshan and Jiangmen, as well
as two special administrative regions, namely, Hong Kong and
Macao. The exhibit below shows the basic facts and figures of the
respective cities.
1) 53.7 ( 10 000 persons)

2) 384.5 ( RMB 100 million)
3) 26.0 ( RMB 100 million)
4) 16,832.0 ( RMB)
5) 12,164.0 ( RMB)
1) 370.9 ( 10 000 persons)

2) 5,651.5 ( RMB 100 million)
3) 1,687.1 ( RMB 100 million)
4) 27,245.0 ( RMB)
5) 21,995.0 ( RMB)
Zhaoqing
Foshan
1) 149.2 ( 10 000 persons)

2) 1,850.6 ( RMB 100 million)
3) 648.1 ( RMB 100 million)
4) 25,357.0 ( RMB)
5) 18,833.0 ( RMB)
1) 138.2 ( 10 000 persons)
2) 883.8 ( RMB 100 million)
3) 282.6 ( RMB 100 million)
4) 21,153.0 ( RMB)
5) 15,561.0 ( RMB)
1) 104.7 ( 10 000 persons)

2) 1,208.6 ( RMB 100 million)
3) 486.0 ( RMB 100 million)
4) 25,382.0 ( RMB)
5) 20,370.0 ( RMB)
2011

1) 664.3 ( 10 000 persons)

2) 9,879.4 ( RMB 100 million)
3) 4,242.6 ( RMB 100 million)
4) 30,658.0 ( RMB)
5) 25,012.0 ( RMB)
1) 181.8 ( 10 000 persons)
2) 4,246.5 ( RMB 100 million)
3) 1,108.1 ( RMB 100 million)
4) 35,690.0 ( RMB)
5) 25,733.0 ( RMB)
Guangzhou
Dongguan
Huizhou
Zhongshan
Shenzhen
Jiangmen
Zhuhai
1) 133.9 ( 10 000 persons)

2) 1,130.5 ( RMB 100 million)
3) 355.8 ( RMB 100 million)
4) 23,565.0 ( RMB)
5) 19,741.0 ( RMB)
1) 259.9 ( 10 000 persons)
2) 9,581.5 ( RMB 100 million)
3) 3,000.8 ( RMB 100 million)
4) 32,381.0 ( RMB)
5) 22,807.0 ( RMB)
Hong Kong
Macao
1) 710 ( 10 000 persons)

6) 17,438.6 ( HKD 100 million)
7) 246,733.0 ( HKD)
8) 3,249.7 ( HKD 100 million)
1) 55.2 ( 10 000 persons)

2) 2,173.2 ( MOP 100 million)
7) 398,071.0 ( MOP)
8) 298.5 ( MOP 100 million)
city
1)
2)
3)
4)
5)
6)

7)
8)
1)
2)
3)
4)
5)
6)

()

Population with residence registration

GDP
Retail sales of consumer goods
Per capita disposable income
Per capita consumption expenditure
GDP at current price
7) GDP per capita

8) Retail sales

Census and Statistics Department of Hong Kong

Statistics and Census Service of Macao
27
IV.
IV. Key Development Goals of the Three

Economic Circles in Guangdong
2009
20082020
2009
()
()(
)
In response to the Outline of the Plan for the Reform and

Development of the Pearl River Delta (2008 to 2020) released
by the National Development and Reform Commission in early
2009 and the Guiding Opinions on Expediting the Economic
Integration in the Pearl River Delta Region promulgated by
the Government of Guangdong province in mid 2009, the nine
cities of Pearl River Delta had one after another entered into a
cooperation framework agreement on regional integration. The
aim was to integrate resources and strengthen collaboration with a
view to further urban integration, a process which has given rise to
the formation of three economic circles, namely the GuangzhouFoshan-Zhaoqing Economic Circle with Guangzhou as its core
city; the Shenzhen-Dongguan-Huizhou Economic Circle, which
encompasses the eastern Pearl River Delta region with Shenzhen
as its core city; and the Zhuhai-Zhongshan-Jiangmen Economic
Circle comprising the western Pearl River Delta region with Zhuhai
as its core city.

Key development goals of the three economic circles set out by
the Guangdong Government are listed in the exhibit below.
(20112012)
Key Development Goals of the Pearl River Delta Region in 2011 and 2012
ShenzhenDongguanHuizhou Economic
Circle
GuangzhouFoshanZhaoqing Economic
Circle
ZhuhaiZhongshanJiangmen Economic
Circle
28
City
Year

()
GDP per
capita (RMB)
Service
industry as
a share of GDP (%)
Urbanisation
rate (%)
Shenzhen
2011
2012
113,129
121,048
56
58
100.0
100.0
34,100
36,800
Dongguan
2011
2012
72,000
80,000
47
48
87.2
87.5
37,476
39,537
15,238
16,457
Huizhou
2011
2012
44,182
50,000
37
38
62.2
62.5
25,200
27,500
8,682
9,200
Guangzhou
2011
2012
97,900
103,700
63
65
83.0
83.2
32,800
35,800
13,148
14,332
Foshan
2011
2012
92,000
102,000
38
40
93.5
94.4
28,900
31,800
12,480
13,478
Zhaoqing
2011
2012
25,500
30,000
44
45
48.5
50.0
17,733
19,152
7,235
7,799
Zhuhai
2011
2012
81,000
85,200
48.7
51
85.7
86.1
26,900
29,600
9,818
10,505
Zhongshan
2011
2012
74,000
80,000
41
43
87.5
88.0
25,810
27,230
14,034
15,000
Jiangmen
2011
2012
37,700
40,500
38
40
50.6
50.9
22,474
24,609
8,786
9,488
Source: Guangdong Government
() ()
Urban household
Rural net income per
disposable income
capita (RMB)
per capita (RMB)
V.
V. Major Cooperation Zones between Hong

Kong and Guangdong
Since the opening up of China in late 1970s, Guangdong has

been serving as a testing field for exploring a new direction for
the economic development of China and also as a role model
showcasing the benefits of the opening up policy. Three decades
on, Guangdong is once again endowed with an opportunity to
test-run the concepts of Early and Pilot Implementation. It is
noteworthy that the Qianhai area in Shenzhen and Nansha in
Guangzhou have been chosen as the major cooperation zones
between Guangdong and Hong Kong for seeking breakthroughs
in innovative domains.
Cooperation zones
between Hong Kong
and Guangdong
Area
Major industries
Development goals
Major development plans
Qianhai,
Shenzhen
15
15 sq.km
Focusing on the
development of modern
service industries such
as finance, logistics and
information technology
2020
To become a prominent producer

service centre in the Asia-Pacific
region and a world-class trading
service base by 2020
Overall Development Plan of

Qianhai for the Cooperation
between Shenzhen and Hong
Kong in Modern Service
Industry
Nansha,
Guangzhou
803
570
803 sq.km
with land area
of 570 sq.km
Promoting the development

of intellectual industries such
as the internet of things, and
exploring the development
of a bulk commodity trading
centre and a major logistics
base in South China in the
vicinity of Nansha Bonded
Port Area
Four functions: a new platform

for comprehensive cooperation
between Guangdong, Hong
Kong and Macao, a new worldclass logistics hub in the Pearl
River Delta region, a new engine
of scientific development in
South China, a new base for the
implementation of the national
maritime strategy
Comprehensive Proposal for

the Overall Conceptual Plan
of Nansha, Guangzhou
Source: Development Plans for Qianhai and Nansha
29
VI.
1.
2011316
CEPA
30
VI. Major Policy Initiatives and Infrastructure

Constructions
Major Policy Initiatives
1. The 12th Five-Year Plan
The Outline of the 12th Five-Year Plan for National Economic
and Social Development of the Peoples Republic of China (the
12th Five-Year Plan) was officially promulgated on 16 March 2011.
For the first time, an individual chapter entitled Maintaining the
Long-term Prosperity and Stability of Hong Kong and Macao
was dedicated to Hong Kong and Macao. The significant
functions and positioning of the Hong Kong Special Administrative
Region in the national development strategy were elaborated.
The dedicated chapter clearly set out the Central Authorities
support for Hong Kong to deepen economic cooperation with the
Mainland and continue to implement CEPA. It also confirmed the
significant functions and positioning of Hong Kongs cooperation
with Guangdong under the Framework Agreement on Hong
Kong/Guangdong Cooperation, including the establishment
of a financial cooperation zone and a world-class metropolitan
cluster with Hong Kongs financial system taking the lead, and the
support for Guangdong to open up its service industries for Hong
Kong on a pilot basis and extending the pilot scheme to other
regions gradually.
2.
2. 12th Five-Year Plan of Guangdong
As the blueprint of the development of Guangdong in the next

five years, the 12th Five-Year Plan (2011-2015) of Guangdong
set out the following goals including steady and fast economic
growth, optimised and upgraded industrial structure, improvement
of innovation capability, reduction of regional development
disparity, accelerated growth of urban and rural residents
income, comprehensive development of social undertakings
and significant improvement of ecological environment. After
three decades of astonishing double-digit economic growth,
Guangdong proposed to lower its targets of annual GDP growth
and per capita GDP growth to 8% and 7% during the 12th FiveYear Plan period (2011-2015); instead, the province placed
huge emphasis on the quality of growth in order to achieve real
happiness (well-being) for its people.
20112015
8%7%
Key Development Goals of Guangdong by 2015
Indicators
()
GDP
(RMB 100 million)

()
GDP per capita
(RMB)
Contribution of
service industry to
GDP
Urbanisation rate

()
Urban household
disposable income
per capita (RMB)

()
Rural net income
per capita (RMB)
2010
45,473
47,000
44.6%
64%
23,898
7,890
2015
66,800
66,000
48%
68%
35,100
11,600
Annual growth
rate (%)
8
8 or above
7
7 or above
Source: 12th Five-Year Plan of Guangdong
31
3.
(2008-2020)
3. The Outline of the Plan for the Reform and

Development of the Pearl River Delta (2008-2020)
2009
In early 2009, the State Council approved after examination the

Outline of the Plan for the Reform and Development of the Pearl
River Delta (2008 to 2020) (Outline) compiled by the National
Development and Reform Commission. The Outline elevated
the Pearl River Delta development to the level of national strategy,
confirming Guangdong-Hong Kong-Macao cooperation as an
important part of the strategy for overall national development.
20082020(
)
2012
80,000
53%
2020GDP
135,000
60%
CEPA
32
The Outline put forward a target for the GDP per capita of the
Pearl River Delta to reach RMB 80,000 and its services industries
to account for 53% of the regional GDP by 2012. And by 2020,
the GDP per capita of the Pearl River Delta was targeted to reach
RMB 135,000 and its services industries to account for 60% of
the regional GDP.
The Outline also mentioned the direction for the Pearl River
Delta to forge closer cooperation with Hong Kong and Macao.
Relevant measures included major infrastructure projects that
aimed to achieve connection among the rail transport and
information networks of the three places; support for Hong Kong
and Macao processing trade enterprises operating in the Pearl
River Delta to extend their industrial chain by transforming and
upgrading themselves into enterprises of modern services and
advanced manufacturing industries; support for labour-intensive
enterprises to achieve smooth transition in their restructuring
and for Hong Kong enterprises to access the Mainland domestic
market; more in-depth measures for CEPA implementation and
preparation for implementing the early and pilot implementation
arrangements for Hong Kong and Macao; and co-building a
quality living area, encouraging the Pearl River Delta, Hong Kong
and Macao to work together in the areas of education, healthcare,
social security, emergency management and intellectual property
protection with a view to providing convenience to people of Hong
Kong and Macao working and living in the Mainland.
20122020
Development Goals of the Pearl River Delta Region by 2012 and 2020
Development goals
2012
By 2012
80,000
GDP per capita to reach RMB 80,000
53%
Service industries to account for 53% of the GDP
80%
Urbanisation level to exceed 80%
2020
By 2020
A sound system of socialist market economy will be established
The Pearl River Delta to become one of the worlds mega metropolitan regions
2012
The income levels for the urban and rural residents to double compared with the levels of 2012
135,000
GDP per capita to reach RMB 135,000
60%
Service industries to account for 60% of the GDP
85%
Urbanisation level to exceed 85%
(2008-2020)
Source: The Outline of the Plan for the Reform and Development of the Pearl River Delta
(2008-2020)
33
4.
4. Five Integration Plans
2010
In 2010, the Guangdong Provincial Government initiated five

integration plans, namely the Integration Plan for Public Services
of the Pearl River Delta, the Integration Plan for the Industrial
Layout of the Pearl River Delta, the Planning for Urban-Rural
Integration of the Pearl River Delta, the Integration Plan for
Environmental Protection of the Pearl River Delta and the
Integration Plan for Infrastructure Construction of the Pearl
River Delta. The aim was to integrate resources, strengthen
cooperation and coordination, and enhance economic strength
with a vision to forming three economic circles, namely the
Guangzhou-Foshan-Zhaoqing Economic Circle with Guangzhou
as its core city; the Shenzhen-Dongguan-Huizhou Economic
Circle, which encompasses the eastern Pearl River Delta region
with Shenzhen as its core city; and the Zhuhai-ZhongshanJiangmen Economic Circle comprising the western Pearl River
Delta region with Zhuhai as its core city, and materialise a onehour inter-city circle by three circular and eight outbound routes
which connect all the Pearl River Delta cities above county level
via inter-city rail network.
Guangzhou-FoshanZhaoqing Economic Circle
Shenzhen-DongguanHuizhou
Economic Circle
ZhuhaiZhongshanJiangmen
Economic
Circle
34
5.
5. Tapping the Mainlands Domestic Market
To facilitate processing factories to explore the domestic market,

Guangdong issued a Decision Relating to Implementation
Strategies to Stimulate Domestic Consumption in July 2010
with a plan to build more than 8 sales centres to help Guangdong
factories to sell products nationwide. It was also stated in the
Opinions Relating to Expediting the Change of Economic
Development Mode of Guangdong to step up efforts on
promoting domestic sales. Measures included the promotion
of selling Guangdong products nationwide and online sales
of Guangdong products, and building sales platforms such as
Guangdong Business and Trading Centre and Guangdong
Merchandise Direct Sales Centre.
20107
Besides, the Mainland Government introduced a Notice on

Implementing Pilot Works on Upgrade and Transformation of
Processing Trade in November 2010, choosing Dongguan
and Suzhou as the pilot cities to restructure and upgrade their
industrial structure in the coming years.
201011
6.
20126
6. Regional Cooperation Plan on Building a Quality

Living Area
Hong Kong, Guangdong and Macao jointly announced the
publication of the Regional Cooperation Plan on Building a
Quality Living Area in June 2012. This is the first regional plan
jointly compiled by Hong Kong, Guangdong and Macao. The
Plan covers long-term cooperation in five major areas, namely
environment and ecology, low-carbon development, culture
and social living, spatial planning, and green transportation
systems. The three governments will make full use of institutional
mechanisms already in place, including the Hong Kong/
Guangdong Cooperation Joint Conference and the Guangdong/
Macao Cooperation Joint Conference, to take forward the various
initiatives in the Plan. Specific cooperation proposals will also
be taken up and discussed by relevant expert groups, and there
will be coordinated implementation. Established mechanisms
and procedures for programme approval and consultation will be
observed.
35
7.
()
()(CEPA 9)2012
629CEPA 943
22
37
7. CEPA 9
Supplement IX to the Mainland and Hong Kong Closer Economic
Partnership Arrangement (CEPA 9) was signed on 29 June 2012.
CEPA 9 provides for a total of 43 services liberalisation and trade
and investment facilitation measures, including 37 liberalisation
measures in 22 service sectors. It also strengthens cooperation in
areas of finance and trade and investment facilitation, and further
promotes the mutual recognition of professional qualifications of
the two places. Deepening implementation of CEPA will further
promote the development of service and other industries in the
two places.
CEPA
Infrastructure Constructions
1.
1. Hong Kong-Zhuhai-Macao Bridge
200910
In October 2009, the State Council approved the feasibility study

report of the Hong Kong-Zhuhai-Macao Bridge (HZMB) Project.
The Governments of Hong Kong, Guangdong and Macao have
commenced the construction of the HZMB Main Bridge in late
2009 for completion by 2016. When completed, western Pearl
River Delta will fall within a reachable three-hour commuting
2009
2016
36
2011
radius of Hong Kong, thereby enhancing the connection between

Hong Kong and western Pearl River Delta. The local works within
Hong Kong waters commenced in late 2011 and will dovetail with
the works of the Main Bridge to complete in 2016.
2016
2. ()
()
140
100
48()2010
2015
2. The Hong Kong Section of the GuangzhouShenzhen-Hong Kong Express Rail Link
The Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL)
is an express rail link connecting Hong Kong, Shenzhen and
Guangzhou. The XRL will span about 140 kilometres with the
Hong Kong terminus at West Kowloon. With the XRL, the journey
time between Hong Kong and Guangzhou will be reduced from
about 100 minutes as at present to 48 minutes. The construction
of the Hong Kong section of the XRL was commenced in January
2010 for completion in 2015. Upon completion, XRL will provide
direct access to the Shibi terminus in Guangzhou via Futian,
Longhua and Humen, materialising a one-hour living circle
covering Hong Kong and major Pearl River Delta cities.
37
3.
3. Beijing-Guangzhou High-Speed Line
201212
The Beijing-Guangzhou High-Speed Line was officially

commissioned in December 2012. It is a high-speed passenger
line connecting the northern, central and southern parts of China.
Measuring 2 298 kilometres in length, it spans over six major
cities and provinces, namely Beijing, Hebei, Henan, Hubei, Hunan
and Guangdong, covering a total population of more than 380
million. The journey time between Beijing and Guangzhou by this
high-speed line is eight hours only, cutting nearly 13 hours from
the former rail ride. Soon Beijing will be just less than nine hours
away from Hong Kong by train when the Guangzhou-ShenzhenHong Kong Express Rail Link also comes into operation in 2015.
2 298
3.8
132015
38
4.
4. Three Circular and Eight Outbound Routes
In December 2009, the National Development and Reform

Commission approved the Inter-city Rail Transport Plan for Urban
Integration of Pearl River Delta. According to Guangdongs
transport planning, an inter-city rail transport network featuring
three circular and eight outbound routes will be built by 2020.
The network will connect all Pearl River Delta cities above county
level and thus materialise a one-hour inter-city circle.
200912
2020
-
-
-
----
--
Circular Route One is the Guangzhou-Foshan route, which will

enlarge the accessible area from major passenger nodes like the
Guangzhou Baiyun International Airport and New Guangzhou
Station and connect closely with the rail network radiating from
Guangzhou. Circular Route Two combines three inter-city rail
lines (Guangzhou-Dongguan-Shenzhen line, Zhongshan-NanshaHumen line and Guangzhou-Foshan-Zhuhai line) into a mid-level
circular route that travels along the Pearl River Estuary. Circular
Route Three is the major circular route that encircles the Pearl
River Estuary by combining the Guangzhou-Dongguan-Shenzhen
line, the Shenzhen-Zhuhai line and the Guangzhou-FoshanZhuhai line. The eight outbound routes include the GuangzhouFoshan-Zhaoqing, Guangzhou-Qingyuan, Guangzhou-Huizhou,
Dongguan-Huizhou, Shenzhen-Huizhou, Zhuhai-Doushan,
Jiangmen-Enping and Zhaoqing-Gaoming routes.
39
4. Analysis of Chinas Accession to the WTO

4.1 Advantages for China
The advantages of accession to the WTO for China are large, encompassing almost
every aspect of the Chinese economy. To begin with, admission to the WTO will
give the reform process a much-needed impetus and encourage FDI, which has
become the driving engine of Chinas economy, currently accounting for some 20%
of GDP growth. In addition, trade and foreign investment reforms are "firstgeneration" reforms, necessary for the precipitation of later advancements in
judicial reform, regulatory reform, large-scale privatization and the reform of labor
markets and central-local government relationships.
Overall, the Chinese economy will prosper and grow due to the new opportunities
and technology that WTO membership will bring. The USITC (United States
International Trade Commission) estimates that as a result of joining the WTO
under the terms offered by Premier Zhu in April of 1999, Chinas GDP would
increase by 4.1% and Welfare (Consumption) would increase by 2.1%. Incomes in
China will also increase (due to growth effects and technology), offsetting some of
the hardships that will inevitably be encountered as SOEs are shut down or made
more competitiveit is estimated that GDP growth from accession will add 2.5-5.0
million jobs per year.
In addition, Chinas trade and interaction with the rest of the world will increase:
exports are expected to increase by 12.2%, and imports by 14.3%. Total trade is
projected to increase from $324 billion (1998) to $600 billion (2005). As of 1996, it
is estimated that trade is responsible for approximately 36% of GDP. In particular,
China will find itself in a better position to exercise its comparative advantage in
labor, attracting low-skilled labor intensive manufacturing jobs away from other
Asian countries, as well as medium-skilled value added jobs (such as assembling),
particularly in the technology sector.
Many of the SOEs that have been enjoying subsidies and protections from the state
are finding themselves forced into a position where they will either become
efficient or go bankrupt. Chinas accession to the WTO will only hasten this
process. The central government will end the subsidies and support given to most
SOEs, and modernize the banking system that gave the loss-making SOEs easy
access to credit and loans. Although this has serious social consequences for
unemployment and social health (discussed in section 4.2), it will allow the
industries currently dominated by the SOEs to move forward, by allowing DPEs to
come in when the SOEs fail, and by stimulating growth and development through
foreign competition and the use of new technology that FOEs/JVs will bring.
In addition to the advantages of increased efficiencies and growth, China will also
gain access to foreign markets for its exports, as well as Normal Trade Relations
with the United States. This is particularly important for China in the area of
clothes/footwear and FDI.
Giving China permanent NTR status will assist it in securing the additional FDI it
needs to continue its growth. Without permanent NTR status, U.S. companies will
be less likely to make large investments into China due to the inherent
unpredictability of the yearly NTR waiver process, and the possibility of disruption
should there ever be a non-renewal. FDI is projected to increase from $45 billion
(1998) to $100 billion (2005) and will provide 18 million additional jobs.
In the area of textiles, apparel, and footwear (all labor-intensive products), China
enjoys significant comparative advantage and accounts for over 12% of world
exports in textiles and apparel. Any liberalization of the U.S. textile markets that
10
WTO membership might bring will have an immediate and profound impact on
China.
Access to advanced technology is also likely to increase with WTO membership, as
the U.S. is more likely to ease its restrictions on advanced technology export
controls to China, and China will gain more contacts with additional suppliers of
advanced technology. When the U.S. government sees that China is able to acquire
high technology from other nations (in spite of Washingtons disapproval), allowing
U.S. domiciled companies access to the Chinese market will become a political
reality.
Finally, by joining the WTO China is able to increase its international presence and
stature. By joining the bargaining table, China will also be able to have a voice in
future negotiations, and policymaking. China will also be in a better position to
defend its own policies, be less likely to suffer trade and other economic sanctions
for its policies, and have access to remedies should it find itself in an intolerable
situation.
4.2
Disadvantages for China

China is primarily concerned with maintaining social stability. With the reforms of
the SOEs, it is projected that 30 million urban workers could become unemployed.
And while some of these workers will quickly find reemployment with DPEs
(Domestic Private Enterprises) or FOEs/JVs, past evidence indicates that some 25%
of the laid-off workers will join the ranks of the chronically unemployed. The
central government views this situation with great concernnervous that too much
labor unrest could lead to widespread opposition and difficulties for the Communist
Party.
But labor issues are not confined to the cities. The concessions offered by Premier
Zhu included rolling back tariffs and Tariff Rate Quotas (TRQs) as well as allowing
private enterprise access to and trading rights in numerous agricultural commodities,
including: rice, wheat, soybeans, and corn. China has also agreed to allow the
importation of agricultural products that it had previously banned for sanitary
reasons. These access commitments are quite sweeping; upon accession they will
bring increased imports of agricultural commodities, and lower the prices Chinese
consumers pay for food. But as the market prices decline, the incomes of farmers
will also decline, causing some farmers to quit or go out of businessadding to the
unemployment. Furthermore, these under/unemployed rural workers (in aggregate)
travel to the urban areas to look for work, creating over-crowding and the potential
for social instability if they are not appeased and employed.
Joining the WTO will also mean reforming Chinas troubled financial sector. In
banking, old non-performing loans to SOEs must be removed from the books, and
the banks must be re-capitalized to maintain depositor confidence. Investment trusts
must be reigned in, and the exchanges will need to institute more regulations to
11
protect investors. These changes will be difficult and painful, but are necessary if
China is to compete with foreign insurers and banks within 5 years.
Chinas balance of trade would likely turn negative as a result of WTO membership.
In the years immediately following accession, imports will increase faster than
exports, but this trend is expected to reverse after China makes its initial
technology/equipment acquisitions.
In summary, China stands to gain from WTO membership both politically and
economically in numerous ways, but risks serious political fallout if it cannot
properly manage the transitional unemployment problems it will be faced with.
4.3
Advantages for the United States

Consumers and businesses in the United States stand to gain from Chinas entry
into the WTO. The removal of Non-Tariff Barriers (NTBs), market access
restrictions, tariff reductions, TRQ revisions, and investment liberalization all
combine to offer U.S. businesses an unprecedented amount of access to the last and
largest market on Earth. In addition, U.S. consumers will benefit from the loosening
of import restrictions on Chinese goods, particularly in the form of lower priced
footwear and apparel/textiles.
4.3.1
Economy Wide
The USITC estimates that as a result of China reducing its tariffs as per the terms of
Zhus April 1999 offer, the U.S. would experience gains in: GDP ($1.7 Billion),
Welfare ($3.3 Billion), Total Exports ($1.9 Billion), and Exports to China ($2.7
Billion). The agricultural sector in particular would experience a surge in exports:
Cotton (67.7%), Vegetable Oils (154.1%), Beverages & Tobacco (127.3%), Wheat
(20.8%), and Other Grain (33.6%). Although the national trade balance would
likely grow in Chinas favor ($586 Million), it is estimated that the overall world
trade balance would grow in the U.S.s favor by some $674 Million, primarily due
to increased exports to other east Asian countries.
4.3.2
Non-tariff Barriers on Goods

Non-tariff barriers are a pervasive element of Chinese business, preventing or
reducing the importation of foreign goods and services even though a low (or no)
tariff exists. Although it is difficult to measure the impact of NTBs on trade, a small
amount of research has indicated that if the non-tariff barriers on trade in goods
were converted to an ad valorem equivalent, the taxes would be substantial: Sugar
(111.4%), Wheat (72.4%), Soft Drinks (40.6%), Automobiles (24.2%), Plywood
(26.1%), etc. Although this study surveyed only part of the Chinese economy, it
shows how important the removal of NTB restrictions is to U.S. and foreign
business in China, and gives some indication that the removal of these restrictions
will give the U.S. a significant opportunity to increase exports.
12
4.3.3
Non-tariff Barriers on Services

The removal of non-tariff barriers to trade in services is also an essential component
of Chinas concessions for membership in the WTO. Premier Zhu made
commitments in April, 1999 (see summary above in section 3.2.4 for an indication
of the scope and breadth of the commitments), that reduce non-tariff barriers in
several sectors: distribution services (wholesaling, retailing, and auxiliary
distribution services), accounting and management consulting services, motion
picture and sound recording distribution services, courier services, financial
services (insurance, banking and securities), and telecommunication services (basic
and value-added).
In a survey conducted by the U.S.-China Business Council, U.S. businesses
indicated that the removal of restrictions on distribution would have the single most
beneficial impact on future business prospects in China. It would allow U.S.
businesses to have more control over the way their products are marketed and sold
in China by allowing them to own and control their own warehouses and
distribution networks. Concessions increasing opportunities in auxiliary distribution
services (maintenance and repair, rental and leasing, technical testing, analysis,
freight inspection, storage and warehousing) would lead to increased sales and
investment in the retailing and wholesaling sectors and increased participation by
U.S. wholesalers and retailers in the Chinese market.
In the accounting and management consulting services, motion picture and sound
recording distribution services, and courier services, NTBs would be rolled back to
allow increased access and foreign participation in the markets. In financial and
telecommunication services, significant progress has been made to repeal the
outright bans on foreign investment, as well as easing of stringent capitalization and
geographical marketing restrictions.
The removal of many of Chinas most onerous NTBs paves the way for an increase
in foreign exports to the Chinese market, but it is also interesting to note that with
the removal of NTBs, FDI in certain sectors may actually decline as foreign
exporters are no longer compelled to set up FOEs/JVs to have access to the Chinese
marketthey are now able to service China through exports. However, FDI will
likely increase in aggregate, as foreign firms will be more likely to invest once the
NTBs are removed and the investment liberalization policies are phased in. Foreign
firms will feel more comfortable coming to China if they know that they will be
able to control their equipment, products, intellectual property and technology
transfers, rather than having such decisions imposed upon them.
4.3.4
Investment Liberalization
China has also liberalized its investment policies. Immediately after accession, the
ban on foreign ownership of telecommunications firms will be repealedup to 49%
foreign ownership will be allowed, increasing to 50% within 3 years. This will have
13
a positive effect for the United States telecommunications and technology firms that
hope to compete in China. Restrictions on foreign investment in the Internet have
also been removed, paving the way for more technology and information
investment. Hotel and tour companies will be allowed 100% foreign ownership
within 3 years, giving U.S. hotel chains more control and incentive to invest in
China.
4.3.5
TRQ Revisions & Tariff Reductions

Other large commitments were made by the Chinese to revise its TRQs and reduce
average tariff rates. Industrial tariffs will fall about 60% to an average of 9.4% in
2005 and in U.S. priority areas, China will reduce tariffs even further and fasterto
7.1% by 2003. Tariffs on information technology products will be completely
removed (0%) by 2005, and tariffs on agricultural commodities will fall about 54%
to 14.5% by 2004. TRQs for agricultural products will incorporate increases in
quota amounts that should nearly or completely cover the amount of estimated
future exports for numerous agricultural commodities.
4.3.6
Agriculture
Chinas offer to reduce tariffs and allow private trading in agricultural commodities
is a boon to the United States. Currently, "the prices of many Chinese farm products,
including wheat, corn, soybeans, cotton, edible oil and sugar, are 20% to 50%
above world market prices and imports are expected to flood the domestic market
once tariff barriers are lifted." The USITC estimates that wheat and grain exports
could soar once China joins the WTO: Cotton (67.7%), Vegetable Oils (154.1%),
Beverages & Tobacco (127.3%), Wheat (20.8%), and Other Grain (33.6%).
Agricultural exports, lead by oilseeds, will be one of the main contributors to the
U.S. balance of trade.
4.4
Disadvantages for the United States

Although U.S. consumers and businesses will (in aggregate) benefit from Chinas
WTO membership, there will be a few industries that will lose their comparative
advantage and be forced into downsizing or liquidation. Any industry that is
dependent upon a large amount of unskilled labor is at risk. The most severe case is
the U.S. textile/apparel/footwear industries.
Chinas comparative advantage in labor is just too great for the U.S.
textile/apparel/footwear industries to compete. Some of the more technically
complicated or scientifically advanced manufactured products will continue to be
made in the United States, but substantially all of the low-skilled jobs will move
offshore (if they havent already), and many of those jobs will end up in China.
Politically, the United States is also losing a great deal of leverage over China by
allowing it WTO membership. For the past 13 years, the United States has been
14
able to use the WTO membership as a carrot to induce China to make reforms,
policy changes and concessions on almost any subject the U.S. desired. Also, after
China obtains WTO membership, the U.S. will lose its ability to deny China NTR
status (something that the U.S. Congress uses as a stick to pressure China into
compliance with its desires), and is restricted somewhat in its ability to impose
sanctions. After China joins the WTO, the U.S. will no longer be able to use these
economic pressures and threats to compel China to address human rights concerns
that the U.S. may have.
Some U.S. jobs may also shift to China once WTO membership is obtained.
Chinas comparative advantage in labor extends to not only the low-skilled and
semi-skilled workers, but also includes a technical, highly skilled and professional
workforce that can threaten U.S. jobs. Already U.S. automotive manufacturers
actively recruit and train engineers to design for the Chinese market; Boeing
assembles pieces of its 737 aircraft in China, and with the acquisition of
McDonnell-Douglas, it now owns a complete jet aircraft production facility. Once
tariffs have been reduced, and/or bounded, the stability that U.S. corporations need
to outsource their production facilities will have arrived, and we should expect more
U.S.China job shifts.
4.5
Advantages for Washington State

Chinas accession to the WTO will benefit Washington State in several industries:
Agriculture (apples and wheat), Shipping, Air/Space (Boeing), and Intellectual
Property (Microsoft and other software developers).
In agriculture, China has agreed to eliminate the phytosanitary ban on Pacific
Northwest wheat containing TCK smut. It has always been the contention that
Chinas ban on Northwest wheat was based not upon "sound science" but because
of its desire to restrict imports of wheat. Eliminating this ban removed a roadblock
in the bilateral negotiations with the U.S., and is especially important to
Washington State. Wheat is amongst the three largest crops in Washington State,
valued at about $700 Million annually and with approximately 85% of the harvest
being exported, "[ending the wheat ban] could mean as much as $200 Million in
business for growers."
China has also agreed to reduce the tariffs on apples, pears and cherries from 30%
to 10% upon accession. The Washington Apple Commission is confident that the
reduction in tariffs will result in a sizable increase of apple exports, as both Taiwan
and Hong Kong are already major consumers of Washington State apples.
Washington State also stands to benefit from Chinas WTO accession through
increasing trade with China, as the ports of Seattle/Tacoma enjoy the unique
geographical advantage of being the closest U.S. mainland ports to Asia.
Washington shippers will benefit not only from an increase in Washington State
origin/destination trade, but also trade involving other states (and provinces of
15
Canada). As of 1997, China was already the Port of Seattle/Tacomas second

largest trading partner, accounting for some $6 and $2 Billion in imports and
exports, respectively., With trade set to increase once China joins the WTO, the
Ports of Seattle/Tacoma (already the second largest container load center in the
United States) will likely see their marine container traffic increasebringing
additional jobs and revenues to the state of Washington.
Boeing is also likely to benefit from Chinas accession to the WTObut not
immediately, as Boeing doesnt experience the type of non-tariff barriers and trade
restrictions that other Washington State and foreign products face. China is already
a major customer of Boeing aircraft, and represents a large future market:
In the past five years, 1 in every 10 Boeing commercial planes - or an average of $2
billion worth of aircraft each year - has been sold to China. Over the next 20 years,
Boeing officials estimate that China will purchase an additional $125 billion in new
airplanes [1600 new airplanes], becoming the largest market for planes outside the
United States.
Boeings impact on the U.S.China trade balance should not be underestimated:
according to the U.S. Department of Commerce, exports of aircraft and associated
equipment to China accounted for approximately 25% of total exports from the
United States to China (1998). In addition, WTO membership would likely induce
Boeing to outsource more of its production to Chinese firms and subsidiaries,
creating larger profits for Boeing at the expense of U.S. jobs (discussed in section
4.6 below).
Microsoft also stands to gain from Chinas membership in the WTO. As one of the
fastest growing PC and Internet populations, China represents huge market potential
for Microsoft products and services. WTO membership for China will help to bring
that potential closer to reality by raising the standard of living in China, thereby
making computers more affordable and desirable to the average consumer. By the
year 2005, China will also have repealed its tariffs on information technology
products, making Microsofts software and services that much more affordable and
attractive to the Chinese consumer.
Microsoft will also benefit from the increase in Intellectual Property Protection (IPP)
that is mandated by WTO rules, and will have access to the Dispute Resolution
Process (through the U.S. ambassador to the WTO) to keep the pressure on Chinas
government to crack down on software piracy.
4.6
Disadvantages for Washington State

It is estimated that some 25,000 jobs could be lost if Boeings outsourcing trends
continue. While it is impossible to predict where these jobs will go, or when they
will go, it is reasonable to assume that Chinas entry into the WTO will further
hasten any plans Boeing may have to outsource. With a large supply of unskilled
16
and semi-skilled labor, as well as relatively inexpensive skilled, technical and

engineering labor, China is ready to replace many of Boeings U.S. based jobs.
5. Conclusion
Although the benefits of Chinas joining the WTO are numerous, we cannot
expectnor do we want overnight change. Some are even skeptical over Chinas
ability to continue its reforms, or intention to abide by the WTOs rules once it
accedes. Others argue that the WTO is a "Western" system and will not be
compatible with "Eastern" members economies and business practices. Some even
think that it is the WTOnot Chinathat will have to change. As a world trade
organization, the WTO will find itself responsive to its members needs and wishes.
Chinas accession to the WTO represents a historic opportunity to integrate the last,
largest remaining population and economy into the realm of market based free trade.
It is hoped that membership in the WTO will continue to encourage liberalization
and the flowering of democratic principles, as well as raise the standard of living for
some 1.2 billion people. Chinas integration into the world is by no means complete
once it accedes; on the contrary, its journey will have just begun.
6. References
6.1 Books
OKrueger, Anne O., The WTO as an International Organization. ISBN: 0-22645487-8.
Zhang Shuguang, Zhang Yansheng, Wan Zhongxin. Measuring the Costs of
Protection in China, Institute for International Economics, 1999.
Mark A. Groombridge, Claude E. Barfield, Tiger by the Tail , 1999.
6.2 Internet
6.2.1 Useful Websites
http://www.yahoo.com
http://www.latelinenews.com/topics/China_WTO/index.shtml
http://www.wto.org
6.2.2 News Articles
"China may tolerate more food imports." Journal of Commerce 17 September
1999:4.
"ITC says US farm sales to China to soar under WTO."
http://biz.yahoo.com/rf/990903/yk.html
17
"Zhu Rongjis team relieved from WTO talks, Hong Kong paper says." Deutsche
Presse-Agentur. 17 September, 1999.
"China-US WTO Negotiations in Jeopardy."
http://www.stratfor.com/asia/specialreports/special70.htm
"China Cold on US Demand for More Concessions." Reuters 9 September, 1999.
http://www.insidechina.com/
"U.S., China to Resume WTO Talks." Associated Press 9 September, 1999.
http://www.nytimes.com
"Clinton Should Press China on Human Rights, Group Says." Agence France Presse
9 September, 1999. http://www.insidechina.com
"U.S. to Resolve Differences With China on WTO Bid." Reuters 9 September, 1999.
http://www.insidechina.com
"Clinton Has a Big Job in New Zealand: Repairing China Ties." 9 September, 1999.
"Last Chance for Chinese WTO Membership." BBC 9 September, 1999.
http://news.bbc.co.uk
"Focus-US, China to Jumpstart WTO Talks." 9 September, 1999.
http://biz.yahoo.com
"China Seeks Entry to WTO." Associated Press 9 September, 1999.
http://dailynews.yahoo.com
"Analysis-US and China turn Focus on Trade." Reuters 9 September, 1999.
"Focus-US says China Running Out of Time on WTO." Reuters 9 September, 1999.
"Minister Wants China in World Trade Body." 8 September, 1999.
http://www.yahoo.co.uk
"Interview-Britain Sees Speedy Sino-EU Trade Deal." Reuters 8 September, 1999.
"Interview-WTO Chief Sees Great Day When China In." Reuters 7 September,
1999. http://biz.yahoo.com
18
"Despite Strain, Taiwan Voices Support for China WTO Entry." Reuters 7
September, 1999. http://www.insidechina.com
"Focus-APEC officials boost China, Taiwan WTO bids." Reuters 7 September,
1999. http://biz.yahoo.com
"Britain Says it Wants China in the WTO." Reuters 5 September, 1999.
"Its Down To The Wire For US, China WTO Talks." 3 September, 1999.
"China Says Needs To Join WTO." Reuters 2 September, 1999.
http://dailynews.yahoo.com
"World Trade Conflicts Intensify" World Socialist Website 18 August, 1999.
http://www.wsws.org/articles/1999/aug1999/wto-a18.shtml
"Chinas WTO Hopes on Table." The Australian 4 March, 1999.
http://www.theaustralian.com.au/finance/4335939.htm
"Comment: WTO as a World Government." WWF 10 September, 1999.
http://www.panda.org/
"US Trade by Commodity with China" USIA 10 September, 1999.
http://www.usia.gov/regional/ea/uschina/prctrade.htm
"US Daley Says Deal on China WTO Entry Absolutely Do-Able by December."
AFX 21 September, 1999.
"Why Chinas Trade Status Matters to You." Los Angeles Times 12 September,
1999.
"To Trade Is Glorious." San Francisco Examiner 9 September, 1999.
"Three Good Reasons for US to Say Yes to Chinas Entry into WTO." The Boston
Globe 11, September, 1999.
"China and the WTO: Dont Rush to Make a Bad Deal." Business Week 20
September, 1999.
"China Points to Gulf in WTO Talks." Financial Times 17 September, 1999.
"Foreign Trade Barriers" USIA 3 October, 1999.
http://www.usia.gov/regional/ea/uschina/prcnte99.htm
19
"Highlights of Chinas Agreements to Ease WTO Bid." 2 October, 1999.

"Chinas WTO Membership." Policy Brief #47. April, 1999.
http://www.brook.edu/comm/policybriefs/pb047/pb47.htm
"Chinas No Renegade Mercantilist Trader." The Wall Street Journal 7 February,
1996. http://www.brooks.edu
"China and the WTO." Policy Brief #10. November, 1996.
http://www.brook.edu/pa/policybriefs/pb010/pb10.htm
"Chinas WTO Accession Would Herald New Era For Hong Kong." TDC News
Releases & Speeches 30 April, 1999.
http://www.tdc.org.hk/tdcnews/9904/99043001.htm
"Taiwan Speeds Toward WTO Membership; PRC Lags."
http://www.taiwaninformation.org/policy/wto/wto061798.html
"China Says WTO Entry to Benefit Auto Industry." Muzi Lateline News 30
September, 1999. http://www.latelinenews.com
"Market Access and Protocol Commitments" USTR April, 1999.
http://www.ustr.gov/releases/1999/04/ch-memo.html
"AOC Letter to President Bill Clinton Regarding Chinas WTO Accession." AOC
News 19 June, 1999. http://www.oilseeds.org/aoc/chinawto.htm
"China and the World Trade Organization: An Economic Balance Sheet" Institute
of International Economics June 1999. http://www.iie.com/NEWSLETR/news996.htm
"Key Article Throws Weight Behind Pact." South China Morning Post 16
September, 1999.
"China to WTO sans Favors." The Boston Herald 5 September, 1999.
"China says WTO Talks With EU to Resume Soon, Talks With US Difficult."
Agence France Presse 20 September, 1999.
"China Newspaper Touts Benefits of WTO Entry." Reuters 13 October, 1999.
"China Bites US Apple, Spits out if." Seattle Post-Intelligencer. 15 April, 1999.
"Wheat Growers Welcome Opening of China Market." Seattle Times 9 April, 1999.
20

Week 5 Economic Dimension

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Week 5 Economic Dimension

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Economic Dimension

The Hong Kong Polytechnic University

Scarce resources and production

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

Economic Theory of Value

Conceptually market forces reflect true

The Hong Kong Polytechnic University

John Maynard Keynes (1883 1946)

A demand curve is the graphical representation of

The quantity demanded is the actual amount

That is, 8,000 is the quantity demanded at a price of $250.

The law of demand says that a higher price for a

If the price drops to $100,

20,000 fans want to buy

Shifts of the Demand Curve

A change in the quantity demanded at any given price,

Movement Along vs. Shift of the Demand Curve

Shifts of the Demand Curve (continued)

any given price,

What causes a demand curve to shift?

Changes in the Prices of Related Goods

Substitutes: Two goods are substitutes if a fall in the price of

Normal Goods: When a rise in income increases the demand

goodthe normal casewe sayy that the g

A supply curve shows graphically how much of a good

Shifts of the Supply Curve

decrease in the quantity supplied at any given price.

Movement Along vs. Shift of the Supply Curve

Shifts of the Supply Curve (continued)

at any given price,

What causes a supply curve to shift?

Changes in Input Prices

An input is a good that is used to produce

The price at which this takes place is the equilibrium

Finding the Equilibrium Price and Quantity

Why do all sales and purchases in a market

Suppose that a seller offered a potential buyer a price

Why does the market price fall if it is above

price of $350 is above

surplus will push

There is a surplus of a good when the quantity supplied exceeds

Why does the market price rise if it is

price of $150 is below

shortage will push

There is a shortage of a good when the quantity demanded

Opportunities in China and

Mainland China joined WTO on 11 December 2001

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

In addition, there are concerns over the inherent

The Hong Kong Polytechnic University

Whether Hong Kong can remain competitive and take

The Hong Kong Polytechnic University

With the implementation

63,000 Hong Kong

Department of Industrial and Systems Engineering

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

The Hong Kong Polytechnic University

Details on CEPA including the newly agreed