TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 136

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adjustment centres in order to further activate the market

for foreign exchange

23.

(17)

Financial institutions (both local and foreign)

are not allowed to trade foreign currencies in the foreign

exchange adjustment centres. Instead there exists an

inter-bank market in some large cities like Shanghai for

foreign exchange dealings at rates other than the official

rate. Foreign interest banks are sometimes allowed to

trade in these markets. This helps to explain how large

amounts of foreign currencies can be traded for Renminbi

at rates other than the official rate.

24.

An illustration of the widespread acceptance of Hong Kong dollar notes in China was the floating of Hong Kong dollar bonds of $10 million in Fujian by the Fujian Enterprise Investment Corporation in November. These

bonds offer an annual interest rate of 5% and are of small

denominations.

25.

(iv) China's external borrowing

The following cases of China's overseas

borrowings (other than those raised in Hong Kong) were reported in the press recently.

Bank of Communication floated five year

bonds involving a total of US$100 million

in Singapore.

(17) But in both cases, individuals can only sell, but not buy, foreign exchange in the adjustment centres.

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