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Economic cooperation between Hong Kong and Mainland China, especially Guangdong province, has flourished since the establishment of the Hong Kong Special Administrative Region (HKSAR) in 1997. The landmark in this process was the conclusion of the free trade agreement (FTA) between the two areas in 2003. The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland cover liberalization of trade in goods, liberalization of trade in services, mutual recognition of professional qualifications, and other trade facilitation measures. This paper argues that a collaborative governance regime based on network coordination is emerging under "One Country, Two Systems" (OCTS) and the collaborative approach will be used to explain the intensifying Hong Kong-Mainland economic cooperation. This paper has three parts. Part one provides an overview of the evolution of intergovernmental mechanisms between Hong Kong and the Mainland and introduces the analytical framework. Part two discusses how the framework can be applied to the intergovernmental mechanisms on CEPA and part three analyzes the key provisions of CEPA and its implications. [ABSTRACT FROM AUTHOR]

Why do policymakers respond differently to speculative exchange market pressure on their cur-rencies? When deciding about defending or depreciating their currencies against such pressure, policymakers consider private sector vulnerabilities to a depreciation and monetary tightening. These vulnerabilities differ between periods of mild and severe pressure. Faced with mild pres-sure, interest groups evaluate the effects of the two policy options based only on their vulnerabil-ity to depreciation. Only when pressure intensifies, they increasingly take the trade-off between their depreciation vulnerability and their vulnerability to interest-rate increases into account. High interest-rate vulnerabilities can result in a re-assessment of the preferred policy response, leading groups that initially preferred a defense to prefer a depreciation when the pressure intensifies. Comparative case studies of speculative attacks on the currencies of Hong Kong, Korea, Thailand and Taiwan support the argument's empirical implications. The case studies show that policy-makers strongly defended their currencies against mild pressure when the private sector's vulner-ability to depreciation was high. In countries, where interest group vulnerabilities to interest-rate increases exceeded the potential costs of a depreciation, these defenses were subsequently aban-doned when pressure intensified. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]