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What Free Trade Agreements Can Hong Kong Businesses Capitalise On?
Hong Kong's position as a global financial hub is further bolstered by its extensive network of free trade agreements (FTAs). These agreements act as bridges, connecting Hong Kong businesses to lucrative markets worldwide and simplifying cross-border trade.
Let's delve deeper into some key agreements and explore the specific benefits they offer to various industries.
A Closer Look at Key Trade Agreements
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In this article, we will be focusing on the first five FTAs due to their greater economic significance.
China
The Mainland and Hong Kong Closer Economic and Partnership Arrangement (CEPA) is the first and potentially most important FTA signed by Hong Kong. The FTA covers four key areas:
- Trade in goods
- Trade in services
- Investment
- Economic and technical cooperation
One of the most significant benefits of CEPA is the elimination of tariffs on most goods manufactured in Hong Kong that meet the agreement's rules of origin. This translates to increased competitiveness for Hong Kong businesses, as they can now offer their products to mainland China customers without the burden of import duties.
Additionally, CEPA simplifies customs procedures and reduces trade barriers, saving businesses time and money when shipping goods across the border.
Beyond facilitating the export of goods, CEPA opens doors for Hong Kong service providers in a wide range of industries. The agreement grants access to mainland China's service sector in areas like finance, legal services, and tourism. This allows Hong Kong businesses to tap into a vast and lucrative market, offering their expertise and services to a wider customer base.
CEPA opens a door to the vast Chinese market for a wide range of Hong Kong stakeholders. Manufacturers can export goods tariff-free if their products meet the agreement's rules of origin requirements.
Service providers and professionals are among the most well-positioned as CEPA provides access to new sectors and smoother entry procedures, allowing them to tap into a massive customer base. Meanwhile, foreign investors can establish companies in Hong Kong to enjoy CEPA advantages for both goods and services trade.
It is worth highlighting that CEPA isn't just limited to Hong Kong companies. Companies incorporated in Hong Kong by investors from outside the region can also benefit from the agreement's provisions, opening doors for international businesses looking to access the Chinese market through a Hong Kong base.
🔑 Read More: How To Make HKD To RMB Payments From Hong Kong
European Free Trade Association States
In 2011, Hong Kong and the European Free Trade Association (EFTA) consisting of Iceland, Lichtenstein, Norway and Switzerland signed a landmark free trade agreement covering trade in services and goods, investment, protection of intellectual property and more – creating a significant boost for businesses on both sides.
A key advantage lies in the expanded access for Hong Kong service providers. The agreement covers a wide range of industries, from finance and professional services to communication and tourism.
With zero restrictions on foreign capital, the value of service transactions, number of persons employed, or joint venture requirements for various service sectors, Hong Kong businesses can establish a strong presence and compete effectively within the EFTA markets. Additionally, streamlined procedures for temporary entry of professionals and business visitors further facilitate the trade of services between Hong Kong and EFTA member states.
Another major benefit is duty-free access for goods. Hong Kong manufacturers can export most industrial goods and processed agricultural products tariff-free to Iceland, Liechtenstein, Norway, and Switzerland.
Manufacturers and exporters will also be exempted from anti-dumping duties, which is determined by the difference between the goods’ export price and its local price in Hong Kong. The EFTA simplifies customs procedures which means Hong Kong businesses will face less administrative work and enjoy faster movement of goods across borders.
ASEAN
While FPS may suit the needs of smaller businesses or merchants, it will not be sufficient for a larger business that makes frequent payments of either HKD or RMB,
The ASEAN-Hong Kong Free Trade Agreement (AHKFTA) presents a game-changer for Hong Kong businesses, particularly those dealing in goods and services. This agreement streamlines trade procedures, eliminates or reduces tariffs, and opens doors to new markets within all ASEAN member countries.
One of the most significant advantages of the AHKFTA is the substantial reduction or elimination of customs duties on traded goods. Hong Kong and Singapore committed to eliminate customs duties on all products upon the FTA coming into force, while Brunei, Malaysia, the Philippines, and Thailand adopted a phased approach, committing to eliminate 85% of all tariff lines within 10 years. Indonesia and Vietnam have pledged to remove 75% of all tariff lines in the same period.
🔑 Read More: The Wallex Country Report: Vietnam
Customs administration is another feature of the AHKFTA. It seeks to ensure consistent and predictable procedures across borders, reducing red tape and expediting the movement of goods. Businesses no longer have to navigate a complex web of varying customs regulations depending on the specific ASEAN country they are trading with.
Additionally, traders can obtain written advance rulings on issues like product classification and origin, which were previously inconsistent and highly dependent on the Customs offices or authorities in question. This initiative offers more certainty, predictability, reliability and consistency in exporting and importing goods between ASEAN and Hong Kong, allowing businesses to plan their logistics and pricing strategies more effectively.
Chapter 8 of the AHKFTA aims to expand trade in services among member countries through the removal of restrictive measures affecting trade in services. Such steps are especially important to manufacturers and traders of goods who likely need to undertake services-related activities to support their international business.
Specifically, these rules require all parties to treat local and foreign suppliers equally in similar circumstances, and provide access to foreign service suppliers. Examples for the latter include the removal or reduction of restrictions on foreign capital participation, the value of service transactions, or the number of persons employed.
Key ASEAN member state have made some significant commitments market access under AHKFTA. Here’s a few of them:
- Indonesia: Allows foreign equity participation not exceeding 51% (higher than the WTO’s 49%) for construction and related engineering services
- Malaysia: Opens urban planning and landscape architectural services and maritime freight forwarding services
- Philippines: Opens ship building services; allows foreign nationals in the financial leasing sector to own up to 50% of the voting stock
- Thailand: Opens arbitration services allowing foreign arbitrators to provide services in Thailand under domestic laws and regulations
🔑 Read More: The Wallex Country Report: Indonesia
Australia
The Australia-Hong Kong Free Trade Agreement, along with the accompanying Investment Agreement, offers significant advantages for Hong Kong businesses. In particular, Hong Kong exporters are well-positioned to benefit from the FTA as it eliminates tariffs on a vast majority of goods entering the Australian market, effectively providing duty-free access for goods.
In the services sector, Australia has moved to liberalise the full range of arbitration, conciliation and mediation services and certain rail transport services. These are significant as Australia has not offered such commitments to its other FTA partners, except New Zealand. Australia has also made service commitments in sectors such as business, finance, and telecommunications, which are areas where Hong Kong has strengths for further development.
Professionals can travel freely between Hong Kong and Australia under the FTA, which allows businesses to deploy specialists for temporary on-site work on projects in Australia, such as engineers or financial consultants. Procedures for temporary entry and stay have been streamlined, allowing businesses to manage their workforce needs with greater ease.
Hong Kong investors in Australia will receive robust protections as well, with guarantees of non-discriminatory treatment for investments, fair and equitable treatment, and protection against expropriation. Investors can also freely transfer their investments and returns.
New Zealand
The New Zealand-Hong Kong Closer Economic Partnership Agreement (CEP Agreement) is very similar to the Australia-Hong Kong Free Trade Agreement. For instance, it eliminates tariffs on all originating products from Hong Kong that comply with the preferential rules of origin and relevant procedures.
Provisions are also in place to minimise the use of trade remedies, promote competition, ensure effective protection of intellectual property rights, and facilitate access to each other's government procurement markets.
Market access across a wide range of service sectors is enhanced under the FTA, allowing Hong Kong service providers to operate with much more freedom and flexibility. This includes
- being treated no less favourably than their New Zealand counterparts in similar circumstances;
- being exempted from restriction in the form of limitations on foreign capital, value of service transactions or number of persons employed;
- not being required to establish or maintain any form of enterprise, or to be resident, in New Zealand as a condition for the supply of cross-border trade in services
- automatically enjoying liberalisation measures that New Zealand undertakes in future FTAs with other trading partners
Service sectors of traditional importance to Hong Kong are covered under these commitments, which include:
- Education services
- Medical services
- Testing and certification services
- Maritime transport services
- Logistics and related services
- Audiovisual services
- Business services (accounting, auditing, bookkeeping, computer services, management consulting, services incidental to manufacturing)
The CEP Agreement also includes a set of robust disciplines on domestic regulation. It ensures that measures affecting trade in services are transparent, administered in a reasonable, objective and impartial manner, and do not become unnecessary barriers to trade.
🔑 Read More: Choosing the Best Multi-Currency Account for Businesses
Capitalise on Hong Kong’s FTAs with Wallex
As shown above, there are no shortage of ways to make payments of HKD to RMB. Still, each method has its own pros and cons and switching between different platforms to perform payments which give you the best fees or FX rates can get tedious quickly.
Wallex is designed to help businesses like yours to receive, hold, convert and pay with better speed, support and savings. Our fully digital platform makes payments to Hong Kong’s FTA partners fast and seamless, whether you’re converting HKD to CNH, HKD to PHP, HKD to EUR, or other currencies.
Settlements take no more than one business day and with our global network of liquidity providers you’ll get the most competitive FX rates, zero hidden fees, and maximum savings.
What truly makes Wallex the ideal partner for your cross-border needs is the support you’ll enjoy from your dedicated Account Manager. They will always be ready to support your business’s needs, assist to expedite urgent transactions, and address any issues you face.
Are you ready to do business beyond Hong Kong? Speak to us today!
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HMNS Boosts Savings and Operational Efficiency with Wallex
The Background
HMNS (pronounced “humans”) is a perfumery brand founded in 2019, primarily engaged in the manufacturing & retail of local perfumes, distributing them within the region.
To streamline their international transactions, particularly for sending payments to China and Malaysia, HMNS has leveraged the efficient services of Wallex, ensuring smooth and secure transactions that support their expanding business needs.
� Read More: Inside Look: Businesses Who Transformed Their Cross-Border Payments Experience With Wallex
The Challenge
Before switching to Wallex, HMNS faced significant challenges with a local bank, their previous payment provider.
Given that a substantial portion of their business relied on making international transactions, particularly sending payments to China and Malaysia, the continued challenges made it untenable for HMNS to operate efficiently, ultimately impacting their growth and process optimisation efforts.
Complicated processes
The banking processes HMNS had to navigate were cumbersome and time-consuming. Sending money to overseas partners and suppliers involved numerous steps and required extensive documentation, leading to inefficiencies and delays.
This complexity hindered HMNS’s ability to operate smoothly and respond swiftly to business needs.
Transaction delays
Slow transfer speeds were a persistent issue, with funds often getting "hung in the air" during each transaction, and take an extended time to reach the beneficiary. This delay, sometimes lasting up to three days, disrupted HMNS’s operational flow and caused significant frustration.
The unpredictability of when funds would land in the beneficiary's account created additional challenges in managing cash flow and meeting payment deadlines.
� Read More: La Cosecha Maintains A Healthy Cash Flow With Wallex
Lack of transparency
The bank's lack of accountability and transparency compounded these issues. HMNS frequently encountered situations where there was no clear explanation for transaction delays or problems.
The absence of straightforward communication and clarity from the bank left HMNS in the dark, unable to understand or resolve issues promptly, further exacerbating operational inefficiencies.
The #SwitchtoWallex
These challenges underscored the need for HMNS to source for a more convenient and time-efficient solution for the cross-border payment needs. The following includes a glimpse of the considerations behind why HMNS made the strategic decision to switch to Wallex.
Clarity of information
HMNS received clear and detailed information from the outset, including comprehensive insights into Wallex's offerings and the benefits they brought to the business. This transparency assured HMNS that they could effectively streamline their cross-border payment processes with Wallex.
Seamless platform interface
The Wallex platform offered an easy and intuitive transaction process. There were no complicated procedures or commitment fees when signing up, making the overall process straightforward and user-friendly for HMNS.
Highly responsive support team
HMNS experienced unparalleled support at every touchpoint from Wallex's highly responsive team. The level of support provided exceeded that of any other competitor HMNS had considered, giving them the peace of mind that switching to Wallex would ensure they were well supported.
� Read More: PT Intralab Ekatama Maximises Savings and Enhances Productivity with Wallex
The Result
Savings of up to 80% in transfer fees
Switching to Wallex resulted in savings of up to 80% in transfer fees for HMNS.
What was once IDR 400,000 per transaction became just IDR 80,000, dramatically reducing their expenses and significantly impacting their overall business cost savings.
International transactions settled within 24 hours
With Wallex, international transactions are settled within 24 hours, eliminating the need to wait more than a day for payments to process.
This efficiency in payment processing ensures that HMNS can maintain smooth and timely operations.
Highly competitive FX rates
Wallex provided HMNS with a competitive edge through favourable exchange rates, especially for MYR and USD.
These highly competitive FX rates contributed to substantial savings, enhancing the cost-effectiveness of their international transactions.
Hassle-free transaction experience
Here is a customer testimonial from Mrs Dina, Finance Accounting Manager of HMNS:
“Making a transaction on the Wallex platform is easy. We have never faced any issue when making our transactions.”
Experience the Wallex Difference
Wallex is recognised as a leading and secure payments solution tailored for businesses across industries. Trusted by companies of all sizes, Wallex facilitates seamless international payments in 46 currencies, spanning over 180 countries.
Our platform empowers customers to efficiently plan, manage, and hedge their FX needs, all through a secure interface, ensuring peace of mind during each cross-border transaction.
Embracing a forward-thinking approach, top-tier companies such as Investree, Style Theory, CodaPay, Ismaya Group, Marugame Udon, and 40,000+ customers in Asia have made the switch to Wallex, collectively trusting us with over SGD $10 billion in customer funds to transfer across borders.
To explore how Wallex can elevate your business's cross-border payment experience, speak to us today!
How Could De-dollarisation Disrupt the Global Economy?
While it has yet to happen on a significant level, there are murmurs of de-dollarisation among nations who want to reduce their reliance on the US dollar. If such a movement were to gain momentum it could have significant implications for the global economic situation.
In this article, we will take a look at what some of these implications may be, how it affects other currencies, the way nations and businesses transact, and more.
Key Takeaways:
- De-dollarisation is the process of a country reducing its reliance on the USD in international transactions
- Such strategies may be motivated by concerns over the United States’ fiscal policies, economic performance, and geopolitical hostilities
- De-dollarisation could trigger market instability and shift the dynamics of cross-border trade
Understanding de-dollarisation
De-dollarisation refers to the process in which countries reduce their dependence on the US dollar and diversify their currency reserves. This movement has already gained some traction in recent years, with several countries taking steps to shift away from the USD in their economic dealings.
However, the US dollar has been the world’s reserve currency for over 70 years. Why would a country want to take the potentially risky decision to move away what is traditionally considered to the a safe haven?
Let's look at some key reasons.
1. Fears over stability
As it stands, the USD is the dominant currency in the world, and was used in nearly 80% of global trade between 1999 and 2019. This gives the US a huge amount of power when it comes to setting interest rates, trade policies and other economic factors. But this, alongside concerns over inflation and the United States' budget deficit, may create large fluctuations in its value, which can be concerning for countries who hold significant amounts of USD.
2. Geopolitical tensionand hostilities
Among other tensions, the United States and its partners such as the EU are often at loggerheads with countries such as China, Iran and Russia, which typically result in trade sanctions being levied. Countries on the receiving end of these sanctions would have reduced access global markets, causing economic disruption.
3. Rising economic competition
Being the second largest economy in the world has made the Chinese yuan one of the biggest threats to the USD, and the country is also actively leading heading efforts to accelerate the movement, particularly alongside its peers in the BRICS (Brazil, Russia, India, China South Africa) nations, who account for 26% of the global economy. Increasingly, more countries such as Saudi Arabia, Iran, and Indonesia are also looking to join the bloc.
4. Cryptocurrencies
Another factor catalysing de-dollarisation is the emergence of cryptocurrencies, which many feel may potentially be an alternative to fiat. Some, like Bitcoin, are fully decentralised and insulated from interference by institutions like central banks, making them an attractive alternative. Already, countries like Venezuela have fully embraced Bitcoin in their bid to de-dollarise, and Honduras has set up a special economic zone where Bitcoin is accepted as legal tender.
Potential impacts of de-dollarisation on the global economy
No one can say for certain what can happen in a world where the USD is not the de facto currency because there are many variables to consider, such as the extent of de-dollarisation, and which currencies emerge to take its place, if any.
In the hypothethical event that the US dollar is ever dethroned, there is little doubt that global financial markets will be thrust into turmoil, with the scenarios below being potential outcomes.
Reshape hierarchy between currencies
De-dollarisation could fundamentally alter the balance of power among different currencies in the global financial system. Should nations ever actively distance themselves from the USD, currencies from some of the largest economies or blocs could gain greater prominence in international transactions, particularly those of major economies such as the euro, yen, and yuan.
- Euro: The euro could become the primary currency for trade within the European Union and could also gain greater acceptance for international transactions.
- Yen: The yen may benefit from Japan's position as a major creditor nation and its role as a hub for financial markets in Asia.
- Yuan: The yuan could become a more widely used currency for international transactions, particularly in Asia, as China seeks to strengthen its economic and financial influence.
Currently, the USD, the euro, the yen, the pound sterling, and the Swiss franc are the primary reserve currencies, with the USD making up nearly 60% of total global foreign exchange reserves. If the de-dollarisation movement ever gains pace, other currencies may take its spot. For instance, China's yuan has become increasingly popular in international payments and could emerge as a viable substitute.
The transition to alternative reserve currencies could lead to changes in the structure of the international monetary system. Multilateral efforts might arise to create mechanisms for stabilising and coordinating different reserve currencies. These efforts could involve the International Monetary Fund (IMF) and other international organisations coming together to ensure the stability and liquidity of the global financial system in the absence of a single dominant currency.
🔑Read more: Foreign Exchange (Forex) Rates: How Do They Actually Work?
Introduce market volatility and instability
Exchange rate fluctuations between the USD and other currencies could trigger significant movements in currency markets, impacting international trade competitiveness, cross-border investments, and even triggering speculative trading. Such exchange rate volatility can create uncertainty for businesses and investors, affecting their risk management strategies and decision-making processes.
Capital flows would almost certainly be affected as investors reassess their portfolios in response to changing currency dynamics.
Financial institutions and governments are likely to respond by developing new risk management frameworks. Hedging mechanisms such as currency swaps, options, and forward contracts, might become more prominent, and new financial instruments may even emerge.
Shift dynamics of cross-border trade
Almost immediately, there would be newfound complexities over the way nations approach existing trade agreements and frameworks. Without a standard underlying currency, they would have to renegotiate, redraw, or even reconsider these contracts, which could hurt employment, agricultural output, manufacturing and more on both sides of the equation.
Businesses might also have to prepare themselves for higher transaction costs because now, they would need to convert currencies more often and navigate more complex payment systems. The use of multiple currencies and settlement systems could also make international transactions more complex and less efficient.
Complications are likely to arise in the commodities market where oil, gold, grain, and others are usually quoted in USD. The shift to another currency may make trading difficult, with other consequences that range from trade imbalances to supply chain shortages and even food security concerns.
One bright spot that de-dollarisation shines on trade is that it could potentially open up new markets and opportunities for countries that have never been heavily reliant on the USD. Gaining new access to diverse currency markets could promote economic growth and diversification for these countries and pave the way for stronger financial inclusion worldwide.
Accelerate adoption of cryptocurrencies
In a world where the dollar is no longer king, there is a possibility that digital currencies will play an important role in international transactions. One of the primary advantages of cryptocurrencies like Bitcoin is its decentralised nature, making it less susceptible to government or central bank interference.
Bitcoin has already emerged as a potential alternative to traditional fiat currencies in international transactions. In recent years, many cryptocurrency exchanges have begun offering services to facilitate cross-border payments, allowing users to send and receive funds in various digital currencies, making it a viable option for those seeking to reduce their reliance on traditional banking systems and fiat currencies.
Moreover, cryptocurrencies may also provide a solution to the challenges posed by fluctuating exchange rates and the costs associated with currency conversion. As digital currencies become more widely accepted, they could help to streamline international transactions and reduce overhead costs for businesses.
Drive up debt that has been issued in dollars
Nations and companies that have issued dollar-denominated debt might face challenges as the value of their domestic currency may depreciate relative to the dollar, drastically increasing the cost of servicing the debt.
For emerging market economies, the risk and costs involved will be more severe as a further weakening of their currency against the USD could lead to budgetary pressures, economic instability, and potential sovereign default risks.
Investors are likely to reassess their appetite for dollar-denominated debt from countries undergoing de-dollarisation as well. Faced with higher currency risk, investors will demand higher yields as compensation, making it more expensive for these countries to access international capital markets. This could limit their ability to raise funds for development and investment projects.
Could de-dollarisation really happen?
One thing to note is that the scenarios listed above are just possibilities, which means it is unlikely to happen in the near future. While there have been efforts by countries like China and Russia to promote the use of their own currencies, the USD still accounts for the majority of cross-border payments.
The pace of de-dollarisation efforts is also uncertain, with some countries and regions moving faster than others. The success of these efforts will depend on a variety of factors, including political stability, economic growth, and technological advancements.
While there may be growing interest in diversifying currency reserves, concerns about the viability and readiness of alternative currencies persist. The complexities and uncertainties surrounding alternative currencies, combined with the intricate web of global financial relationships, indicate that a complete de-dollarisation in the near future is highly improbable.
Hedge against currency volatility with Wallex
Fluctuations in currency values are a given, and the best way to hedge your risk is to diversify your currency holdings. Wallex lets you do just that with its Multi-Currency Account, allowing you to hold 13 top global and Asian currencies including the GBP, EUR, SGD, CHF, and JPY.
The Multi-Currency Account also makes it possible for you to hold currencies for as long as you want, so you can easily manage your currencies and time your conversions to when rates are favourable.
Wallex, however, does more than help you hedge against currency volatility. Our platform takes away the complexities and costs that businesses face when moving money across borders. Payments are faster and easier with Local transfers, collections can be made in 36 different currencies, and you can enjoy round-the-clock support from a dedicated Account Manager should you encounter any issue.
Learn more about Wallex here or get in touch today!
What Free Trade Agreements Can Hong Kong Businesses Capitalise On?
Hong Kong's position as a global financial hub is further bolstered by its extensive network of free trade agreements (FTAs). These agreements act as bridges, connecting Hong Kong businesses to lucrative markets worldwide and simplifying cross-border trade.
Let's delve deeper into some key agreements and explore the specific benefits they offer to various industries.
A Closer Look at Key Trade Agreements
In this article, we will be focusing on the first five FTAs due to their greater economic significance.
China
The Mainland and Hong Kong Closer Economic and Partnership Arrangement (CEPA) is the first and potentially most important FTA signed by Hong Kong. The FTA covers four key areas:
- Trade in goods
- Trade in services
- Investment
- Economic and technical cooperation
One of the most significant benefits of CEPA is the elimination of tariffs on most goods manufactured in Hong Kong that meet the agreement's rules of origin. This translates to increased competitiveness for Hong Kong businesses, as they can now offer their products to mainland China customers without the burden of import duties.
Additionally, CEPA simplifies customs procedures and reduces trade barriers, saving businesses time and money when shipping goods across the border.
Beyond facilitating the export of goods, CEPA opens doors for Hong Kong service providers in a wide range of industries. The agreement grants access to mainland China's service sector in areas like finance, legal services, and tourism. This allows Hong Kong businesses to tap into a vast and lucrative market, offering their expertise and services to a wider customer base.
CEPA opens a door to the vast Chinese market for a wide range of Hong Kong stakeholders. Manufacturers can export goods tariff-free if their products meet the agreement's rules of origin requirements.
Service providers and professionals are among the most well-positioned as CEPA provides access to new sectors and smoother entry procedures, allowing them to tap into a massive customer base. Meanwhile, foreign investors can establish companies in Hong Kong to enjoy CEPA advantages for both goods and services trade.
It is worth highlighting that CEPA isn't just limited to Hong Kong companies. Companies incorporated in Hong Kong by investors from outside the region can also benefit from the agreement's provisions, opening doors for international businesses looking to access the Chinese market through a Hong Kong base.
🔑 Read More: How To Make HKD To RMB Payments From Hong Kong
European Free Trade Association States
In 2011, Hong Kong and the European Free Trade Association (EFTA) consisting of Iceland, Lichtenstein, Norway and Switzerland signed a landmark free trade agreement covering trade in services and goods, investment, protection of intellectual property and more – creating a significant boost for businesses on both sides.
A key advantage lies in the expanded access for Hong Kong service providers. The agreement covers a wide range of industries, from finance and professional services to communication and tourism.
With zero restrictions on foreign capital, the value of service transactions, number of persons employed, or joint venture requirements for various service sectors, Hong Kong businesses can establish a strong presence and compete effectively within the EFTA markets. Additionally, streamlined procedures for temporary entry of professionals and business visitors further facilitate the trade of services between Hong Kong and EFTA member states.
Another major benefit is duty-free access for goods. Hong Kong manufacturers can export most industrial goods and processed agricultural products tariff-free to Iceland, Liechtenstein, Norway, and Switzerland.
Manufacturers and exporters will also be exempted from anti-dumping duties, which is determined by the difference between the goods’ export price and its local price in Hong Kong. The EFTA simplifies customs procedures which means Hong Kong businesses will face less administrative work and enjoy faster movement of goods across borders.
ASEAN
While FPS may suit the needs of smaller businesses or merchants, it will not be sufficient for a larger business that makes frequent payments of either HKD or RMB,
The ASEAN-Hong Kong Free Trade Agreement (AHKFTA) presents a game-changer for Hong Kong businesses, particularly those dealing in goods and services. This agreement streamlines trade procedures, eliminates or reduces tariffs, and opens doors to new markets within all ASEAN member countries.
One of the most significant advantages of the AHKFTA is the substantial reduction or elimination of customs duties on traded goods. Hong Kong and Singapore committed to eliminate customs duties on all products upon the FTA coming into force, while Brunei, Malaysia, the Philippines, and Thailand adopted a phased approach, committing to eliminate 85% of all tariff lines within 10 years. Indonesia and Vietnam have pledged to remove 75% of all tariff lines in the same period.
🔑 Read More: The Wallex Country Report: Vietnam
Customs administration is another feature of the AHKFTA. It seeks to ensure consistent and predictable procedures across borders, reducing red tape and expediting the movement of goods. Businesses no longer have to navigate a complex web of varying customs regulations depending on the specific ASEAN country they are trading with.
Additionally, traders can obtain written advance rulings on issues like product classification and origin, which were previously inconsistent and highly dependent on the Customs offices or authorities in question. This initiative offers more certainty, predictability, reliability and consistency in exporting and importing goods between ASEAN and Hong Kong, allowing businesses to plan their logistics and pricing strategies more effectively.
Chapter 8 of the AHKFTA aims to expand trade in services among member countries through the removal of restrictive measures affecting trade in services. Such steps are especially important to manufacturers and traders of goods who likely need to undertake services-related activities to support their international business.
Specifically, these rules require all parties to treat local and foreign suppliers equally in similar circumstances, and provide access to foreign service suppliers. Examples for the latter include the removal or reduction of restrictions on foreign capital participation, the value of service transactions, or the number of persons employed.
Key ASEAN member state have made some significant commitments market access under AHKFTA. Here’s a few of them:
- Indonesia: Allows foreign equity participation not exceeding 51% (higher than the WTO’s 49%) for construction and related engineering services
- Malaysia: Opens urban planning and landscape architectural services and maritime freight forwarding services
- Philippines: Opens ship building services; allows foreign nationals in the financial leasing sector to own up to 50% of the voting stock
- Thailand: Opens arbitration services allowing foreign arbitrators to provide services in Thailand under domestic laws and regulations
🔑 Read More: The Wallex Country Report: Indonesia
Australia
The Australia-Hong Kong Free Trade Agreement, along with the accompanying Investment Agreement, offers significant advantages for Hong Kong businesses. In particular, Hong Kong exporters are well-positioned to benefit from the FTA as it eliminates tariffs on a vast majority of goods entering the Australian market, effectively providing duty-free access for goods.
In the services sector, Australia has moved to liberalise the full range of arbitration, conciliation and mediation services and certain rail transport services. These are significant as Australia has not offered such commitments to its other FTA partners, except New Zealand. Australia has also made service commitments in sectors such as business, finance, and telecommunications, which are areas where Hong Kong has strengths for further development.
Professionals can travel freely between Hong Kong and Australia under the FTA, which allows businesses to deploy specialists for temporary on-site work on projects in Australia, such as engineers or financial consultants. Procedures for temporary entry and stay have been streamlined, allowing businesses to manage their workforce needs with greater ease.
Hong Kong investors in Australia will receive robust protections as well, with guarantees of non-discriminatory treatment for investments, fair and equitable treatment, and protection against expropriation. Investors can also freely transfer their investments and returns.
New Zealand
The New Zealand-Hong Kong Closer Economic Partnership Agreement (CEP Agreement) is very similar to the Australia-Hong Kong Free Trade Agreement. For instance, it eliminates tariffs on all originating products from Hong Kong that comply with the preferential rules of origin and relevant procedures.
Provisions are also in place to minimise the use of trade remedies, promote competition, ensure effective protection of intellectual property rights, and facilitate access to each other's government procurement markets.
Market access across a wide range of service sectors is enhanced under the FTA, allowing Hong Kong service providers to operate with much more freedom and flexibility. This includes
- being treated no less favourably than their New Zealand counterparts in similar circumstances;
- being exempted from restriction in the form of limitations on foreign capital, value of service transactions or number of persons employed;
- not being required to establish or maintain any form of enterprise, or to be resident, in New Zealand as a condition for the supply of cross-border trade in services
- automatically enjoying liberalisation measures that New Zealand undertakes in future FTAs with other trading partners
Service sectors of traditional importance to Hong Kong are covered under these commitments, which include:
- Education services
- Medical services
- Testing and certification services
- Maritime transport services
- Logistics and related services
- Audiovisual services
- Business services (accounting, auditing, bookkeeping, computer services, management consulting, services incidental to manufacturing)
The CEP Agreement also includes a set of robust disciplines on domestic regulation. It ensures that measures affecting trade in services are transparent, administered in a reasonable, objective and impartial manner, and do not become unnecessary barriers to trade.
🔑 Read More: Choosing the Best Multi-Currency Account for Businesses
Capitalise on Hong Kong’s FTAs with Wallex
As shown above, there are no shortage of ways to make payments of HKD to RMB. Still, each method has its own pros and cons and switching between different platforms to perform payments which give you the best fees or FX rates can get tedious quickly.
Wallex is designed to help businesses like yours to receive, hold, convert and pay with better speed, support and savings. Our fully digital platform makes payments to Hong Kong’s FTA partners fast and seamless, whether you’re converting HKD to CNH, HKD to PHP, HKD to EUR, or other currencies.
Settlements take no more than one business day and with our global network of liquidity providers you’ll get the most competitive FX rates, zero hidden fees, and maximum savings.
What truly makes Wallex the ideal partner for your cross-border needs is the support you’ll enjoy from your dedicated Account Manager. They will always be ready to support your business’s needs, assist to expedite urgent transactions, and address any issues you face.
Are you ready to do business beyond Hong Kong? Speak to us today!
Wawasan Industri Wallex: Tekstil & Garmen di Vietnam
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