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Press Releases

Mr Joseph Yam proposes strategy for maintenance of
the status of Hong Kong as an international financial centre

In a speech titled "A financial development strategy for Hong Kong" delivered at the Pan-Pearl River Delta Financial Services Forum today (Thursday), Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, proposed a five-pronged financial development strategy for the maintenance of the status of Hong Kong as an international financial centre:

1. Hong Kong financial institutions to go into the Mainland to provide services;

2. Hong Kong to serve as a gateway for Mainland funds to come out;

3. Financial instruments issued in Hong Kong, particularly those issued by Mainland enterprises, to be made available on the Mainland;

4. To enhance the capability of Hong Kong's financial system to handle renminbi-denominated transactions; and

5. To strengthen financial-infrastructure linkages between Hong Kong and the Mainland.

Mr Yam said, with the vast opportunities offered by the Mainland, Hong Kong financial institutions should go into the Mainland proactively and expand the scope of on-location services such as retail banking. The presence of Hong Kong financial institutions on the Mainland would allow transfer of technical know-how and provide enterprises and households with greater choice of financial instruments and services.

Mr Yam said that Hong Kong should serve as a gateway for Mainland funds to be invested overseas. Given that Mainland investors are more familiar with the markets in Hong Kong than markets elsewhere, consideration could be given first for them to invest primarily in equity and debt instruments issued in Hong Kong by Mainland enterprises. This would meet the objective of ensuring orderly outflows from the Mainland and at the same time satisfy the financing needs of Mainland enterprises listed in Hong Kong, while opening up an effective channel in Hong Kong of financial intermediation between Mainland investors and Mainland fund-raisers.

With a view to facilitating investments by Mainland residents in enterprises listed in Hong Kong, Mr. Yam proposed to make financial instruments in Hong Kong (particularly those issued by Mainland enterprises) available for sale on the Mainland, when permitted by the relevant Mainland regulations. There could be a number of specific ways to implement this proposal, but in all cases, it will be necessary to introduce an arbitrage mechanism to equalise the prices of the same shares in the two markets.

Mr Yam said that, because the renminbi is the currency used by Mainland investors and fund raisers, it would be necessary for Hong Kong to enhance the capability of its financial systems to handle renminbi-denominated transactions to meet better the Mainland's financial intermediation needs. He stressed that further expansion of renminbi business would not only raise Hong Kong's status as an international financial centre, but also provide a testing ground for the gradual move towards full convertibility of the renminbi.

Mr Yam also pointed out that financial-infrastructure linkages between Hong Kong and the Mainland should be strengthened. He noted that there were already several cross-border linkages in clearing, settlement and custodian systems, and further expansion of linkages (including the central clearing systems for bonds and equities) was also being studied.

Mr Yam warned against complacency. To maintain the status of Hong Kong as an international financial centre, Hong Kong must move with the times. Otherwise, Hong Kong risked being marginalised as financial reform on the Mainland gathers pace and financial markets become increasingly globalised. Financial co-operation between Hong Kong and the Mainland, if pursued along this five-pronged strategy, would make financial intermediation on the Mainland more efficient, while meeting the requirement of Article 109 of the Basic Law on the maintenance of the status of Hong Kong as an international financial centre.

For further enquiries, please contact:
Jasmin Fung, Manager (Press), at 2878 8246 or
Hing-Fung Wong, Resource Co-ordinator, at 2878 1802

Hong Kong Monetary Authority
23 March 2006

Last revision date: 1 August 2011
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