Hong Kong businesses, especially those from the securities and insurance industries, have enthusiastically welcomed a government agency proposal to emulate the negative list concept and CEPA as the regulatory basis for the future Guangdong-Hong Kong-Macau Free Trade Zone (FTZ).

Aside from benefiting from the negative list concept which refers to all activities other than those on the list that are allowed in principle, the proposed Guangdong-Hong Kong-Macau FTZ will also benefit from its close proximity to Hong Kong's financial professionals and information technology infrastructures.

"We believe that, with the effective implementation of a negative list within the CEPA framework, the potentials of the Guangdong-Hong Kong-Macau FTZ could be maximized, and the entire free trade zone, including Hong Kong, would benefit accordingly," said a Financial Services Development Council (FSDC) report.

According to Anton Liu Ting'an, council member of the FSDC, the negative list concept could be implemented within two years, but he agreed that it was also possible the timing could be shortened to one year.

"Negative list concept within CEPA tops the agenda for Hong Kong as its well-developed financial service companies should seize the opportunities in the spring tide of China's financial reform," he said, adding that, "It is possible for Guangdong province to prioritize and carry out the negative list policy within CEPA next year."

Asked about the views of the negative list concept from executives from securities, insurance and financial services, there was a rising consensus in the Hong Kong market that the adoption of negative list policy within the CEPA framework will significantly lower the threshold for Hong Kong's finance industry entering the mainland.

Peter Lai, director of DBS Vickers Securities expressed, "Currently, it is illegal for us (Hong Kong securities companies) to open accounts for customers on the mainland. I believe that prohibition is the biggest block for Hong Kong securities industry stepping into the mainland."

"I expect the restriction will be canceled in the near future with negative list concept being implemented within CEPA. If negative list loosens up restriction of opening accounts on the mainland, I believe Hong Kong securities companies can make great progress on the mainland business development," he said.

Mark Mak, the Deputy CEO of Convoy said, "The difficulty in acquiring mainland license is seriously hindering Hong Kong insurance companies in expanding their mainland business." Mak added that,"The emulation of negative list is not necessarily the magic bullet for solving (our) license problem, but it can provide explicit forbidden terms for us (Hong Kong insurance companies)."

"A clear regulatory framework derived from negative list policy will offer great convenience in developing the mainland business for us," Mak said.

The beneficiaries will not only be Hong Kong's existing financial service and products, but also innovative ones that run into trouble when they step into the mainland with the current positive list policy within CEPA.

The positive list is opposite to the negative list, and it only allows activities on the list and those that are currently adopted by the mainland ratification system.

As an international financial center, innovation is lifeblood of Hong Kong to keep its status. "With the current positive list policy within CEPA, it is impossible for Hong Kong financial service companies to introduce innovative financial products into the mainland as what does not exist on the mainland cannot appear on the positive list," said Pansy Yau, deputy director of research from Hong Kong Trade Development Council.

"We expect the negative list policy can be implemented as soon as possible, but its timetable depends on the negotiation between Beijing and Hong Kong as the financial industry is sensitive on the mainland," Yan added.

"The precedent case in Shanghai Free Trade Zone set an example for future negative list negotiations within CEPA. Negative list policy in Shanghai is an intricate case compared with the one within CEPA, as most provinces are looking forward to receive duplicate copies from the Shanghai negative list.

"While what Hong Kong receives is not hard to duplicate on the Chinese mainland as Hong Kong is a Special Administrative Region, Hong Kong could expect the negative list within CEPA to be shorter and will be implemented sooner," Liu added.