TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 99

OF 200

CONFIDENTIAL

5

機密

and not

satisfactorily

regulated.

Lacking a greater

variety of sound financial assets to meet the purposes of capital raising by enterprises and wealth accumulation by

individuals, the channelling of savings to investment remains concentrated in the banking system and to a lesser

extent in the state issue of bonds.

11.

There is also the problem of regional disparity

in financial development in China. The financial markets

in the coastal areas are generally better developed than

those in the inner provinces. Virtually all the new

financial products and markets

established in the coastal cities. This disparity further

differentiates the pace of economic development in

different regions of China.

12.

China

are experimented and

Foreign participation in the banking sector in is severely limited. Up to now foreign banks are

primarily involved in foreign currency loans and businesses with foreign-funded enterprises, and domestic banking

businesses are completely shielded off. In the absence of competition from foreign banks, efficiency of the local banks is low and they are slow in taking on innovations, let alone gaining any exposure to the outside world.

13.

As to the foreign exchange market, currently the

exchange rate of the Renminbi comprises a diversity of

quotations including the official rate, the swap market

rates, and the black market rates. Coupled with the

various exchange control measures still in place, this

causes inconvenience and uncertainty in doing business in

China.

The present stated intention of the Chinese

government is to unify the exchange rate quotations on the different swap centres by early next year, and to unify the

official and the swap market rates in five years' time.

Making the Renminbi fully convertible with other currencies

is, however, only a long-term goal.

CONFIDENTIAL

機密