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19
(b)
Loan business to China
42.
China has been borrowing from abroad to meet its
trade deficit and to finance its modernisation programme.
While estimates vary, some bankers have suggested that
China may need as much as US$200 billion in foreign currency loans over the next 15 years to accomplish its economic development goals. Borrowing for the Seventh Five-Year Plan, which started in 1986, is expected to
reach about US$40 billion by 1990. Many multi-national banks have set up branches or representative offices in Hong Kong, not only to establish a base for their regional operations but also apparently in the hope of taking a share of this financing requirement. Many of them have chosen to set up offices in Hong Kong instead of in China, because of the much higher cost of operating an office of similar size in the main Chinese cities like Beijing and
Shanghai, and because of the problems of doing other regional business from within China. The arrival of these
foreign banks has contributed to Hong Kong's development as a major financial centre in the east Asian region. However, if business opportunities in China turn out to be significantly below expectations, this would probably have an unfavourable impact on Hong Kong's role and status as a regional financial centre.
43.
Up to now, most of the bonds issued by China
In have been floated in Japan and denominated in Yen. future, China may find it more attractive to float bonds
denominated in Hong Kong dollars in Hong Kong, as the Hong Kong dollar remains stable against the US dollar under the linked exchange rate system and if Hong Kong dollar
G.F. 326
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