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Relaxing Restrictions on Hong Kong and Macau Contractors in The Mainland

On 17 February 2005, the PRC Ministry of Construction ("MOC") issued a Circular (the "Circular") concerning Relevant Matters with respect to the Supplementary Agreement to the Closer Economic Partnership Agreement between the Chinese Mainland and Hong Kong and the Supplementary Agreement to the Closer Economic Partnership Agreement between the Chinese Mainland and Macau (collectively "CEPA"). The purpose of this new Circular is to encourage Hong Kong and Macau service providers to engage in construction-related activities in China and thus to further implement CEPA. The Circular became effective from 17 February 2005. However, this Circular was not put on MOC's website. Therefore, it is likely that many affected enterprises are not aware of the existence of this Circular.

Much of the Circular repeats what has already been provided in MOC's previous decrees and circulars, particularly MOC Circular NO.1591 However, the Circular assists foreigninvested construction enterprises ("FICEs") set up by Hong Kong and Macau service providers (i.e. those companies that have obtained certification as such under CEPA), by saying when they apply for a construction enterprise qualification in China, projects undertaken by them both inside and outside China may be taken into account in determining the qualification level of the FICE.

The other important aspect is a statement that Hong Kong or Macau residents who take up technical or managerial posts in a FICE are not subject to any requirements with respect to the duration of their stay in mainland China in any given year. This is a significant relaxation of the requirement under MOC Decree 113 which requires foreign technical, engineering and management personnel working in FICEs to stay in China for a minimum period of three months in each year.

These measures may encourage international contractors of all nationalities to consider using established Hong Kong or Macau construction entities as their spring boards for business in China. It should also mean that Hong Kong and Macau construction professionals are better placed to secure employment in respect of Mainland projects.

Lovells Newsletter
June 2005

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