TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 211

ར ར ༢anaཀུས"""་

CONFIDENTIAL # 3

13

28.

For most foreign banks, the cost of operating a

branch or a representative office in China is extremely

high. Coupled with the restrictions imposed on their

business activities, most branches and representative

offices of foreign banks in China are operating at a

loss. It seems likely that they will undergo some

streamlining and consolidation in the near future.

Developments in China's non-bank financial sector

29.

As a

Most of the developments in China's non-bank

financial sector are related in one way or another to

fund-raising activities by local governments and

enterprises. With decentralisation of the economic system forming an important part of the economic reforms, local

governments and enterprises cannot continue to rely solely on the funds allocated by the central government.

means to tap alternative sources of finance, many local governments and enterprises have issued "stocks" to raise

funds. It was reported that, up to mid 1986, shares

amounting to a total value of Rmb 370 million had been

issued by 200 companies in Guangdong alone. In Shanghai,

more than 1 400 firms have reportedly issued shares and

bonds, amounting to more than Rmb 225 million. However,

secondary trading in these stocks is scanty(1).

(1)

There is no stock exchange in Guangdong. The stock exchange in Shanghai is established only recently, with less than ten items of stocks being listed. Secondary trading off the exchange is very much inhibited by the lack of market information and trading facilities.

CONFIDENTIAL #