ENG-2004 — Page 127

Financial and Monetary Affairs | 97

it possible for Hong Kong banks to make early preparation for conducting RMB business.

Under CEPA I, when applying to conduct RMB business, Mainland branches of Hong Kong banks are only required to have been operating in the Mainland for more than two years vis-à-vis three years for other foreign banks. More importantly, the relevant authorities will base their profitability assessment on the overall profitability of all branches of the Hong Kong bank in the Mainland vis-à-vis the profitability of individual branches for a foreign bank. By the end of 2004, two Mainland branches of Hong Kong banks applied for such preferential treatment under CEPA I and were allowed to conduct RMB business in the Mainland.

The signing of CEPA II helped further expand the business scope of Hong Kong banks in the Mainland. Under CEPA II, Mainland branches of Hong Kong banks are allowed to act as agents for insurance products after obtaining approval from relevant authorities, with effect from November 1, 2004.

With their long-established financial relationship with the Mainland and their well-developed global financial expertise, Hong Kong banks should be able to further expand their scope of business in the Mainland and to help satisfy the financial needs of the Mainland market.

CEPA also provides special advantages for the insurance sector. Hong Kong has taken a great step forward by raising the maximum allowed equity participation by Hong Kong insurers in a Mainland insurance company to 24.9 per cent, compared with 10 per cent for other foreign insurers. Hong Kong insurance companies also have greater opportunities to enter the Mainland insurance market through the formation of groups. CEPA also allows Hong Kong residents to engage in the relevant insurance services after obtaining the Mainland's insurance qualifications and being employed or appointed by a Mainland insurance institution.

The Government signed a cooperation agreement with the CIRC in February 2004 to allow Hong Kong residents to enroll in Hong Kong to take the Mainland qualifying examinations for insurance intermediaries in Shenzhen. Both parties also agreed in principle to establish an examination centre in Hong Kong for conducting the examinations. Details of the arrangements will be promulgated in due course.

In the accounting sector, the Government welcomed the arrangements that Hong Kong accountants who have already qualified as Chinese Certified Public Accountants (CPAs) and practised in the Mainland (including partnership) are treated on a par with Chinese CPAs in respect of the requirement for annual residency in the Mainland. The validity period of the 'Temporary Auditing Business Permit' applied by Hong Kong accounting firms to conduct temporary auditing services in the Mainland has been extended from six months to one year.

The Government also signed an agreement for the exemption of professional examination papers, in respect of the qualification programmes of the Hong Kong Institute of Certified Public Accountants (HKICPA) and the Chinese Institute of Certified Public Accountants, with the Mainland's Ministry of Finance in August 2004.