By Gang Ji and Yao Lan

　　HONG Kong and Shanghai, competing to be the economic centre of China, agreed to cement economic ties during the visit of a delegation headed by Mayor Han Zheng to the Hong Kong Special Administrative Region this week.

　　Han's two-day visit was described by the Hong Kong-based Wen Wei Po as the biggest event since the successful launch of Shenzhou V.

　　The high-level of the municipal delegation, including three deputy mayors Zhou Yupeng, Jiang Sixian and Yang Xiong, also attracted great attention. The newspaper said such a high-level team showed how much emphasis was being placed on co-operation between the two cities.

　　The delegation arrived in Hong Kong on October 26, Han and Hong Kong's Chief Executive Tung Chee-hwa presented the first session of the Hong Kong-Shanghai Economic and Trade Co-operation Conference on October 27, and then the two met reporters in the afternoon.

　　During Han's visit, both governments agreed to strengthen economic relations in eight sectors.

　　The sectors are construction and management of airports and ports, the World Expo to be held in Shanghai in 2010, tourism and exhibitions, investment and commerce, education, health and sport, financial services, and talent exchange.

　　Shanghai also exhibited its business opportunities by offering 1,015 jobs and encouraging Hong Kong firms to invest in its Pudong New Area.

　　Mutual benefits

　　Although admitting competition is inevitable in a market economy, both Han and Tung stressed that co-operation and common development constituted the main theme in the relations of the two cities.

　　Describing Hong Kong-Shanghai economic co-operation as mutually beneficial, both said the space for such initiatives was set to expand under the mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA), which was signed last June and will comesintoseffect next year.

　　It is believed that CEPA, which was seen as "a big gift to Hong Kong", will add impetus to Hong Kong's economic resurgence due to the many preferential policies it included.

　　According to the Wen Wei Po, Kowk Ping-kwong, deputy chairman of Sun Hung Kai Properties Limited, said this affirmation of co-operation between Shanghai and Hong Kong was a milestone, and Hong Kong businesspeople would increase their investment in Shanghai in the future.

　　Li Ka-shing also said he would continue his investment in Shanghai.

　　Strategic co-operation

　　"The focus of the two cities is co-operation," said Jiang Xiaoxin, editor-in-chief of Shanghai and Hong Kong Economy, a magazine launched in 1985 to promote co-ordination between the two cities.

　　"Although Shanghai has sustained double-digit growth for over a decade, there is still a big gap between Shanghai and Hong Kong," he said. "Shanghai's GDP per capita was US,000 last year, while Hong Kong's was US,000."

　　He stressed that, in fact, Shanghai and Hong Kong had been closely connected over recent decades.

　　You Anshan, an economist from the Shanghai Academy of Social Sciences echoed Jiang.

　　"Capital from Shanghai greatly fuelled Hong Kong's economy in the 1950's," You said. "Over the past two decades, Hong Kong's trace could be found in every step of Shanghai's development."

　　It is widely known that Shanghai's first foreign investment was from Hong Kong.

　　"Capital from Hong Kong for quite a long time accounted for half all overseas investment in Shanghai," Jiang explained. "In recent years, Hong Kong investment in Shanghai still accounted for about one third."

　　Statistics showed that by the end of September 2003, Hong Kong had pumped some US.85 billionsintos9,967 projects in Shanghai. The trade volume in the first nine months of this year between the two cities totalled US.61 billion, up 30.8 per cent over the same period of last year.

　　Service matters

　　For Shanghai's future development, Jiang and You both stressed Shanghai's service sector.

　　Of the 1,015 positions offered in Hong Kong during the visit, 659 are for jobs in the service sector.

　　"Shanghai has a robust economy, yet its tertiary industry is relatively weak," Jiang said. "Shanghai can learn from Hong Kongswheresthe sector has been fully developed. For instance, Hong Kong has excellent law firms and accounting firms."

　　You said Hong Kong has an unfavourable balance in its visible trade, yet it has a favourable balance in the invisible trade based on its service sector.

　　"Hong Kong's service sector accounts for about 86 per cent of its GDP," he added. "This reveals Hong Kong's strength in this field."

　　Furthermore, the two also believed that Hong Kong's large capital stocks can make a major contribution to Shanghai's economy. Shanghai can also learn from Hong Kong's rich experience accumulated by frequent contacts with the international community.

　　"Shanghai's internationalization to some extent can start from its ties with Hong Kong," You said.

　　Of Hong Kong's outlook, the two experts expressed optimism that it would be propelled forward by CEPA.

　　The preferential policies which will comesintoseffect in 2004 should help Hong Kong investors enter the mainland market one year earlier than foreign countries, as World Trade Organization rules allow.

　　According to You, some may argue that the zero tariff policy was of little help to Hong Kong because its manufacturing sector only accounted for a small percentage of its GDP.

　　"Some experts have calculated that the new tariff policy will only help Hong Kong cut costs totalling HK million," You said. "However, such a policy can also attract more foreign companies to pump investmentsintosHong Kong manufacturing, which will greatly benefit the city."