G.F. 326
36
(c) China's stake in Hong Kong's financial
sector
43.
In addition to financial transactions
between Hong Kong and China, China has also built up an important degree of control and influence in Hong Kong's financial sector which has grown rapidly in
the past few years. While the number of China state-controlled banks (CSCBs) has long remained at 13, the number of their branches has increased sharply, from 119 at the end of 1977 to 230 at the
end of 1982. Now, the CSCBS are the second largest banking group in Hong Kong after the Hongkong Bank Group in terms of the number of retail outlets.
44.
Prior to 1970, the CSCBS generally confined themselves to China-related banking and fiscal business such as financing China's trade with Hong
Kong and other countries, dealing in foreign exchange, handling remittance from Hong Kong residents and overseas Chinese, offering deposit
facilities denominated in Chinese currency (Rmb),
assisting and liaising with foreign businessmen and bankers wishing to do business with China, and acting
as China's fiscal agents. Although accepting Hong Kong dollar deposits was an important part of their business, only a small part of these funds was re-cycled to finance Hong Kong business activities unconnected with China. Because of the huge trade
surplus with Hong Kong, and the absence of any exchange control in the territory, one important task of the CSCBS was, and still is, to convert such trade earnings into hard currency and gold to finance China's import purchases from other countries and to build up her foreign exchange and gold reserves.
CONFIDENTIAL #B