China has been actively tightening control over its product quality and food safety systems in a move to enhance economic efficiency. Meanwhile, the general public is paying increasing attention to health and safety issues concerning products and food. In view of this, the Chinese government has been devoting great efforts to improving the China Compulsory Certification (generally known as CCC) system for product quality control, while enhancing its food certification, supervision and increasing the number of random inspections to allay the public’s health and safety fears. It is also taking steps to encourage voluntary product certification, especially for green products, as part of its drive to save energy and protect the environment in response to the rise of green consumerism.
In order to comply with the relevant mandatory regulations and to achieve the relevant marketing objectives through voluntary certification, a number of enterprises have been seeking to ensure high standards of their product quality and environmental management systems. In line with this, in May 2014, the State Council resolved that preferential policies aimed at expediting the development of inspection, testing and certification services would be implemented. Moves were also announced to refine the food safety system, ensuring that it would be both further tightened and improved. All of these factors are acting to bolster China’s demand for testing and certification services and are proving a significant boost for the long-term development of the market.
Many Hong Kong companies are well-versed in the testing technologies and regulations of advanced countries. As a result, a number of them have, for some time, been helping Chinese mainland businesses meet the more stringent product safety specifications and environmental requirements of various overseas economies, notably the United States, European Union and Japan.
As such, they have built a good reputation on the mainland and this, coupled with the facilitation measures offered under CEPA, has given Hong Kong companies a great advantage in the mainland testing services sector. Even so, such companies should take note of the relevant market entry requirements, including the fact they may have to obtain the necessary accreditation on the mainland and establish principal-agent relationships with mainland certification agencies before they can effectively enter the market.
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Demand for testing services is on the rise in China (1)Demand for testing services is on the rise in China (2)
Public concern about product quality and safety
While China’s economy continues to boom, food safety and environmental protection issues need to be addressed. As a matter of fact, consumers are increasingly concerned with product safety and health problems brought about by general consumer goods as well as electronic and electrical products. Food quality incidents that have been occurring frequently in recent years have also made food safety a hot topic in society.
On the other hand, as the government attaches great importance to the impact these issues have on the country’s economic and social development, it has responded by seeking to improve quality control and testing, as well as its system of environmental protection certification. In a March 2014 Government Work Report, the authorities underlined the importance of raising the quality and benefits of economic development, regulating the market, establishing a whole-process supervision mechanism and a traceability system that spans production, processing, distribution and consumption, in addition to improving the food safety supervision system[1].
The government has also looked to improve different product quality control and certification systems, including establishing and introducing a unified compulsory product certification system – or 3C system[2] – that imposes compulsory testing and certification requirements on products listed in the CCC catalogue.
The government is equally determined to strengthen its food and agricultural products certification, while its quality supervision and inspection departments are tightening their inspections of food products and increasing the number of random checks aimed at improving food safety and protect the health of the general public. Moreover, the government’s certification and supervision departments are looking to work with certification agencies to offer voluntary product certification for a variety of items, including organic foods and green products (such as energy-saving and water-saving devices). This is seen as likely to encourage the trend towards green consumerism, energy saving initiatives and the promotion of environmental protection undertakings.
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Increasing demand for testing services
In a bid to meet the mandatory requirements for product quality and in order to meet voluntary standards as part of their marketing strategies, a number of enterprises have sought out certification that provides a guarantee of their product quality and environmental management systems. Where mandatory product certification is required, enterprises now need to work with accredited laboratories to perform the necessary tests.
Apart from getting new products tested, manufacturers may also be required to re-test different batches of their products – or different versions of the same product – in order to meet certain certification requirements. Manufacturers and food producers must also pass random checks conducted by the relevant quality supervision departments. This means there is an increasing demand of such enterprises and manufacturers for product testing services.
In 2012, some 334,161 products liable to compulsory certification possessed valid certificates, with this number increasing by about 25,000 to 359,076 by the end of 2013. Added to these, there were more than 30,000 products subject to compulsory certification that were sent for testing in 2013, including products that had been suspended, revoked or whose certification had expired and required re-testing. In addition, there were other products with certificates that required regular inspection and testing to ensure they came up to standard.
Meanwhile, the demand for certification of products subject to voluntary certification is also rising steadily. Aside from organic products, pollution-free agricultural products and green foods are also subject to voluntary certification. Other green products that have the option of voluntary certification include electronic information products[3], energy-saving devices, water-saving products, renewable-energy and low-carbon products – all of which have created further demands for testing services.
Driven by market demand, the number of accredited laboratories in the mainland has increased annually. As of the end of 2013, there were 5,790 accredited laboratories in China, an 8.2% rise over 2012. In the first quarter of 2014, the number shot up to 5,980, of which the majority were testing laboratories (85% of the total[4]).
The number of accredited laboratories in China is increasing rapidly. |
At the State Council executive meeting held in May 2014, it was decided that the producer services sector would be developed. Enterprises engaged in producer services (such as inspection, testing and certification, energy saving and environmental protection), may apply for recognition as new- and high-tech enterprises and thereby benefit from a 15% preferential income tax rate. Additionally, steps will be taken to encourage service outsourcing and accelerate the development of inspections, as well as the testing and certification services provided by subcontractors[5]. At the same meeting, the Food Safety Law (Revised Draft) was passed. This aims to improve the management of production, and sales and catering services, while fine-tuning food safety standards and systems[6].
As the general public is increasingly concerned with food quality and safety, the government is promoting the development and liberalisation of inspection, testing and certification services, in addition to tightening up management of food and other product safety. Industry insiders estimate the value of China’s product quality inspection and testing market exceeded the Rmb100 billion mark in 2013[7]. Apart from testing services for compulsory product certification, food safety testing is also the focus of attention in the market. Meanwhile, demand for testing products subject to voluntary certification is also climbing gradually.
Advantages of Hong Kong’s testing services sector
The testing and certification sector plays an important role in Hong Kong people’s daily lives and in Hong Kong’s external trade. For instance, the sector provides medical testing services in support of diagnosis as well as testing services for food and medicine standards and regulations. Moreover, companies in the trade also provide testing and inspection services for the export products produced in Hong Kong, the Pearl River Delta and other regions in the mainland, as well as provide certification services for quality control and environmental management systems.
Latest figures show that the value-added of Hong Kong’s testing and certification sector in 2012 rose 8.6% year-on-year to HK$5.8 billion (accounting for 0.3% of Hong Kong’s GDP). In the same year, the number of people employed in the sector was 12,780 (accounting for 0.3% of total employment)[8]. According to figures released by the Hong Kong Council for Testing and Certification, currently there are about 705 organisations in Hong Kong engaged in testing, inspection and certification activities, 600 of which are private organisations[9].
As for international trade, Hong Kong testing services companies are well versed in the relevant technologies and regulations of advanced countries, and they also excel when it comes to internationally-recognised certification procedures. For many years, they have served Hong Kong and mainland enterprises and assisted them in meeting the safety regulations of the US, EU and Japan. Equally they have helped meet various environmental requirements, such as the EU’s Waste Electrical and Electronic Equipment Directive (WEEE) and Restriction of Hazardous Substances Directive (RoHS). They have a good reputation on the mainland and have established an extensive market network. The city, then, possesses considerable advantages when it comes to the mainland’s burgeoning testing and certification market. [More …]
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CEPA advantage of Hong Kong companies
The Closer Economic Partnership Arrangement (CEPA) signed between the mainland and Hong Kong facilitates Hong Kong companies in entering the mainland inspection and testing services market.
- Under CEPA Supplements VII and VIII, those Hong Kong testing agencies accredited by Hong Kong Accreditation Service (HKAS) may cooperate with designated mainland agencies to perform CCC testing for all those products processed in Hong Kong that require CCC certification.
- According to CEPA Supplement IX, the scope of certification services undertaken by Hong Kong testing agencies will be extended to include food products in Guangdong province on a pilot basis.
- According to CEPA Supplement X, which became effective in January 2014, on a pilot basis in Guangdong, the scope of testing services has been extended from food to other products subject to voluntary certification. Joint venture or wholly-owned certification organisations, testing agencies and laboratories set up by Hong Kong service suppliers in the mainland may also receive the same treatment as their mainland counterparts. Moreover, Hong Kong testing and certification agencies are allowed to cooperate with mainland testing and certification agencies in developing test data (findings). Hong Kong service suppliers are also allowed to employ contract-based suppliers to provide services in the mainland by way of the movement of natural persons. (Remark: For details on CEPA, please visit the HKSAR Trade and Industry Department website)
Points to note in entering the mainland market
- Market factors
Under CEPA, Hong Kong testing agencies are allowed to provide services for all products processed in Hong Kong for CCC certification. They are also allowed to provide testing services for the certification of food products and other products subject to voluntary certification in Guangdong province on a pilot basis. These measures offer an entry point for those businesses wishing to enter the mainland market.
Where CCC certification and testing are concerned, from the time that the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and Certification and Accreditation Administration of the PRC (CNCA) published the First Catalogue of Products Subject to China Compulsory Certification in 2002, the mainland authority has been adjusting the types and numbers of products listed in the CCC catalogue, according to the actual condition of their implementation on the mainland. Currently, the catalogue is divided into 20 product categories, which are further subdivided into 149 types of products covering a specific product range. This product range is continually broadening, which boosts demand for CCC certification and testing services and continues to expand the testing services market for new entrants.
- Food and green products
In recent years, AQSIQ, health departments and the Family Planning Commission, among others, have stepped up the level of random inspections and quarantine measures. This has, in turn, increased the demand for food testing services by mainland food producers and related enterprises in order to meet health and food safety requirements. At the same time, in order to enhance consumer confidence in their food products, many enterprises are seeking voluntary food certification. This has further piqued market demand for testing and certification services.
Voluntary certification for products, other than those concerning the railway and transportation industries, tend to be related to energy saving and environmental protection products, such as green electronic information devices, energy-saving and water-saving products. Green consumerism, it seem, is driving demand for certified green products. As a result, more manufacturers are seeking testing services that can certify their goods as green. This has in turn created fresh opportunities for newcomers to the testing services market. [More …]
- Market access
Though the overall picture is good, accredited testing agencies in Hong Kong should take note of other restrictions on market access. Under CEPA, Hong Kong testing service providers wishing to provide testing services for certification purposes on the mainland must meet the requirements of the Hong Kong Accreditation Service (HKAS) and become accredited Hong Kong testing agencies. At the same time, they must also negotiate with certification agencies in the mainland possessing the relevant certification qualifications, establish principal-agent relationships with mainland certification agencies, and apply to CNCA for filing as a designated testing laboratory. It is only then that their testing results and reports would be accepted, and the mainland certification agencies would certify the relevant products on the basis of their test reports. At present, there are only 13 designated CCC certification agencies in the mainland.
Currently, with regard to CCC certification, under CEPA, Hong Kong testing agencies are only allowed to perform tests on products processed in Hong Kong. As for testing of other products for CCC certification, at the moment this can only be performed by those testing agencies that are accredited by China National Accreditation Service for Conformity Assessment (CNAS) and possess the qualification of China Metrology Accreditation (CMA).
As for certification of food products and other products subject to voluntary certification, under CEPA, Guangdong has been designated as a pilot province where Hong Kong testing agencies are allowed to provide services. However, outside Guangdong, the relevant CCC certification requirements will apply to the testing and certification of food products. In other words, food products must be tested and certified by testing agencies approved by CNAS and granted CMA qualifications for food testing.
Outside Guangdong, similar requirements may apply to testing services for voluntary product certification, depending on the relevant regulations governing the various voluntary product certification schemes. Additionally, the tests have to be performed by individual laboratories that have partnered with the relevant certification agencies.
[1] Source: Government Work Report (released at the 2nd plenary session of the 12th National People’s Congress on 5 March 2014) [2] Also known as CCC, or the China Compulsory Certification system [3] This includes electronic information products subject to voluntary pollution control certification [4] Source: China National Accreditation Service for Conformity Assessment [5] For details, please see HKTDC’s Business Alert-China article “Preferential Policies for Producer Services” [6] The revised draft will be submitted to the National People’s Congress after further amendments are made. For details in Chinese, please see China’s government website at: http://www.gov.cn/guowuyuan/2014-05/14/content_2679724.htm [7] Source: qianzhan.com 2014-05-15 (in Chinese) [8] Source: Census and Statistics Department, Hong Kong [9] Source: Hong Kong Council for Testing and Certification 2013-2014 Annual Report
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