THE ECONOMY
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advisers, investment advisers' partnerships and representatives, and enabling trading practices in securities to be regulated. It also provides, inter alia, for the investigation of malpractices and for the maintenance of a Compensation Fund to compensate clients of defaulting stockbrokers. During the year, amendments were made to the ordinance imposing new financial and qualification requirements for compliance by registered dealers. The Securities (Stock Exchange Listing) Rules 1986, which require the disclosure of shareholdings by directors and chief executives of public listed companies and of other company information, also came into force. These legislative changes bring the practices in Hong Kong, in this regard, into line with those of other major financial centres.
The Protection of Investors Ordinance prohibits the use of fraudulent or reckless means to induce investors to buy or sell securities, or to take part in investment arrangements, and regulates the issue of publications related to investments.
The Commodities Trading Ordinance provides a regulatory framework within which the Futures Exchange operates, and within which dealers, commodity trading advisers and representatives and their trading practices are regulated. It also provides, inter alia, for the maintenance of a Compensation Fund to compensate clients of defaulting commodity dealers.
Increasing Economic Links Between Hong Kong and China
China's adoption of an open door economic policy since 1979 in support of its modernisa- tion programmes has given rise to increased economic links between Hong Kong and China, which have had a significant impact on the growth and development of the Hong Kong economy.
The most conspicuous development has been the rising importance of China as a trading partner of Hong Kong. From a relatively low base in 1979, Hong Kong's trade with China has grown by 724 per cent in value terms in the past seven years. Since 1985, China has been Hong Kong's largest trading partner. In 1986, the value of visible trade between Hong Kong and China amounted to $141 billion. China was the largest supplier of goods to Hong Kong (accounting for 30 per cent of Hong Kong's total import value in 1986), and the second largest market for Hong Kong's domestic exports (accounting for 12
per cent of the total domestic export value). In respect of Hong Kong's entrepôt trade, China was Hong Kong's largest re-export market as well as the largest source of goods re-exported through Hong Kong. In 1986, more than three-quarters of Hong Kong's entrepôt trade was related to China, either as a market or as a source of supply. Although the growth rates of some of these trade flows slowed down in 1986 as a result of China's tightening of control on imports in early 1985, trade with China still occupied an important position in the Hong Kong economy.
Besides merchandise trade, various forms of invisible trade between Hong Kong and China also increased. These included tourism and travel services, transport services, financial services, and professional and other business services.
In 1986, 11.9 million trips were made to China by Hong Kong residents. Another 0.7 million trips were made to China through Hong Kong by foreign visitors, reflecting Hong Kong's position as a convenient gateway to China for business and tourism.
In line with the growth in trade and in passenger movements, the demand for transport services connecting Hong Kong with China has grown substantially in recent years. For cargo transport, the average annual growth rates in tonnage terms between 1979 and 1986 were about 12 per cent for inward cargo from China and about 55 per cent for China-bound outward cargo. Part of these cargo movements were transhipments. Most of the cargo was