TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 81

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The

became a net debtor until the second quarter of 1985.

trend reversed again at that time, so that by the end of June 1986, the financial sector of Hong Kong had net

claims of US$1.9 billion (HK$14.7 billion) on China.

39.

Apart from being a source of funds, Hong Kong is

also an access point to the world's major financial

markets. Initially China was a net lender but recently it

became a net borrower. This is mainly because of the need

to finance its trade deficit, which became very large in

1985 and 1986, and of the need to provide foreign exchange

for its development projects. Hong Kong as a leading

financial centre in the south east Asian region is able to provide the expertise and financial services needed by

China in arranging these credit facilities. Thus, Hong

Kong has become a base from which China's borrowings from

elsewhere are negotiated and organized.

(ii) China's presence in Hong Kong's

financial sector

40.

China's presence in Hong Kong's financial sector is represented mainly by the 13 state-owned banks in Hong Kong, commonly referred to as the Bank of China (BOC) Group (Table 14). The Group has expanded very

substantially in recent years, in line with China's modernization programme and the growth in trade, as well as with the need to raise domestic and international capital. Locally, this expansion is partly a result of the competitive pressures imposed on it by other financial institutions in Hong Kong, and partly a reflection of its objective in making profits and enlarging its market share. Assisted by computerization, the retail banking network of the BOC Group has expanded substantially since.

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