VZCZCXRO3253
RR RUEHCN RUEHGH RUEHVC
DE RUEHHK #0159 0230727
ZNR UUUUU ZZH
R 230727Z JAN 09
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 6749
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS HONG KONG 000159 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECPS ETRD USTR HK
SUBJECT: TELECOM TRADE AGREEMENTS 2009 REVIEW 
 
REF: STATE 4730 
 
¶1. This cable responds to the action request in reftel: "What 
are the conditions under which a foreign-affiliated company 
(i.e. a 50-50 joint venture with a Chinese partner) could 
claim a benefit under the CEPA to offer services such as 
IP-VPN in China, as a value-added service supplier?" 
 
¶2. 2007 amendments to the Closer Economic Partnership 
Arrangement (CEPA) between the PRC and Hong Kong give Hong 
Kong-based Internet Protocol - Virtual Private Network 
(IP-VPN) operators national treatment.  The CEPA imposes no 
geographic restrictions on the operators; they can establish 
joint ventures with Mainland Chinese partners in any province 
or city in the PRC.  The Hong Kong IP-VPN's shareholding 
should not exceed 50 percent.  The operator is allowed to 
either set up a new joint venture in China, or form a joint 
venture through merging or acquiring the shares of existing 
Mainland telecommunications service providers. 
 
¶3. In order to enjoy national treatment granted under CEPA, 
the IP-VPN operator should be either a registered legal 
entity in Hong Kong (defined as a business duly constituted 
or otherwise organized under the applicable laws of Hong 
Kong, and which has engaged in substantitve IP-VPN operations 
in Hong Kong for three to five years), or a "natural person" 
of Hong Kong (defined as a Hong Kong permanent resident). 
Permanent residents of Hong Kong who obtain CEPA treatment as 
a "natural person" are not required to present a Certificate 
of Hong Kong Service Supplier (HKSS), but must provide to PRC 
authorities proof of permanent residence status in Hong Kong, 
and must also provide a Home Visit Permit (if a Chinese 
citizen) or a HKSAR passport.  An IP-VPN registered as a 
legal entity should apply to the Hong Kong Trade and Industry 
Department for a Certificate of HKSS, before applying to the 
relevant Mainland authorities to receive preferential 
treatment under CEPA. 
DONOVAN