FINANCIAL AND MONETARY AFFAIRS
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between the security of scheme assets and efficiency in scheme operations. It is to serve the best interests of the community.
The draft legislation on MPF has been submitted to the Provisional Legislative Council for enactment. The government's target is to put the MPF System in place by 1998. An MPF Schemes Authority will be established to supervise the operation of the system.
Increasing Financial Links Between Hong Kong and the Mainland
Hong Kong has been serving as the Mainland's primary channel for international fund-raising but the cross-border capital flows have by no means been one-way. Direct investment and inter-bank fund flows in both directions have grown rapidly. Hong Kong banks have also stepped up their business activities in the Mainland.
Hong Kong has facilitated the Mainland's overseas fund-raising activities via our equity and debt markets. At the end of 1997, 39 Chinese state-owned enterprises were listed in Hong Kong through the issuance of H-shares, raising a total of more than $58.9 billion.
Cross-border fund flows among financial institutions have also grown rapidly. Over the years, the Mainland has accumulated a substantial amount of funds in Hong Kong dollars from trading activities and inward investment. These funds are placed with financial institutions in the Mainland and subsequently channelled back to Hong Kong through the inter-bank market.
Since 1980, external liabilities of authorised institutions in Hong Kong to financial institutions in the Mainland have grown at an average rate of over 37 per cent per annum to $290 billion by December 1997. Over the same period, claims on financial institutions in the Mainland by authorised institutions in Hong Kong registered an annual growth of about 24.5 per cent to $338 billion.
Many banks from Hong Kong have expanded their businesses in the Mainland. A total of 18 locally incorporated banks had established 34 branches and 31 representative offices there at the end of 1997.
Portfolio investment in the form of 'China funds' has also become increasingly popular. By the end of 1997, 28 such funds, amounting to some US$1.3 billion, had been authorised by the SFC investing in B-shares listed on the Shanghai and Shenzhen stock exchanges as well as H-shares listed in Hong Kong.
Developments in Financial Infrastructure
The government is committed to improving Hong Kong's position as a premier financial centre by, inter alia, providing state-of-the-art financial infrastructure. Consultants will be engaged to examine how to set up a secure intranet linking regulators and regulated institutions as a first step towards straight through processing across the financial system, how to link the securities clearing system to the banking clearing system, and explore the feasibility of setting up a single clearing corporation for both stocks and futures to reduce risks and increase efficiency. Subject to funding approval, consultancy studies will commence in 1998.
The HKMA has also worked closely with the banking community to enhance the robustness of Hong Kong's interbank payment system. With the effort of the HKMA and the banking industry in the past few years, Hong Kong's interbank payment