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THE ECONOMY
electronics (from 12 per cent in 1975 to 21 per cent in 1985), and watches and clocks (from three per cent in 1975 to seven per cent in 1985).
Market diversification, partly as a result of the promotion efforts financed by the government, has long ended the predominance of the United Kingdom and Common- wealth countries as Hong Kong's main export markets. Since the establishment of the 'certificate of origin' system in the late 1950s, the United States has become Hong Kong's largest export market. Gradually, the share of exports going to other countries such as the Federal Republic of Germany, Japan, Canada, Australia and those in Southeast Asia has also increased. In recent years, Hong Kong has also diversified into new markets, particularly China, which is now the second largest market for Hong Kong's domestic exports, and also countries in the Middle East, Eastern Europe, Latin America and Africa.
Nature and Relative Importance of the Financial Sector
The financial and related services (excluding real estate services) sector, apart from growing in domestic importance as indicated by its rising contribution to the GDP, from 9.8 per cent in 1980 to 10.2 per cent in 1983, has also continued to enhance its international importance. Banks and deposit-taking companies, insurance companies, pension funds, unit trusts and similar operations, foreign exchange and money brokers, stock and commodity brokers, other financial organisations and ancillaries such as international firms of lawyers and of accountants, combine to provide a wide range of financial and related services to both local and international customers. The government has continually worked towards providing a favourable environment, with sufficient regulation to ensure, as far as possible, sound business standards and confidence in the institutional framework, but without unnecessary impediments of a bureaucratic or fiscal nature. The favourable geographical position of Hong Kong, which provides a bridge in the time gap between Japan and Europe, together with the traditionally strong links with Southeast Asian countries and assisted by excellent communications with the rest of the world, has helped to develop the territory into one of the world's leading international financial centres.
Unlike most major economies, Hong Kong has no central bank. Most of the functions which might typically be performed by one such as prudential supervision of financial institutions, managing official foreign exchange reserves, certain open market operations, issuing banknotes or providing banking services to the government are carried out by different government offices or by selected commercial banks.
The deposit-taking sector in Hong Kong, under the three-tier structure established since 1981, is made up of three distinct classes of institutions: licensed banks, licensed deposit- taking companies and registered deposit-taking companies.
Banking licences are granted at the absolute discretion of the Governor in Council in accordance with the provisions of the Banking Ordinance. At present, a domestic company (that is, a company incorporated in Hong Kong and predominantly beneficially owned by Hong Kong interests), in order to be considered for a banking licence, must have a paid-up capital of at least $100 million, have been in the business of taking deposits from and granting credit to the public for at least 10 years, and have at least $1,750 million of deposits from the public and total assets of at least $2,500 million. A bank incorporated outside Hong Kong wishing to apply for a banking licence is required to satisfy a separate set of criteria: it must show total assets (net of contra items) of at least US$12,000 million, and its country of incorporation must apply an adequate form of prudential supervision and offer some acceptable form of reciprocity to banks in Hong Kong. At the end of 1985, there were 143 licensed banks in Hong Kong, 35 of them being locally incorporated. They maintained