ENG-1983 — Page 69

40

THE ECONOMY

Market diversification, partly as a result of the promotion efforts of the government, has long ended the predominance of the United Kingdom and British Commonwealth coun- tries as Hong Kong's main export markets. Since the establishment of the 'certificate of origin' system in the late 1950s, the United States has become Hong Kong's largest export market. Gradually the share of exports going to other countries such as West Germany, Japan, Canada, Australia, and those in Southeast Asia, has also increased. In recent years, Hong Kong has also diversified into new markets, particularly China but also countries in the Middle East, Eastern Europe, Latin America and Africa.

Nature and Relative Importance of the Financial Sector

The financial sector has also grown rapidly in both domestic and international importance in recent years. Hong Kong now ranks as one of the world's leading international financial centres. Banks and other deposit-taking institutions, insurance companies, pension funds, unit trusts and similar operations, foreign exchange and money brokers, stock and commodity brokers, and other financial organisations combine to provide a wide range of financial services to both local and international customers. While Hong Kong's links with Southeast Asian countries are traditionally strong, its position as a bridge in the time gap between Japan and Europe, assisted by its excellent communications with the rest of the world, has given the territory an important role to play in the world money market. But the emergence of Hong Kong as a financial centre has not simply been a matter of geography. The government has continually worked towards developing a favourable environ- ment, with sufficient regulation to ensure, as far as possible, sound business standards and confidence in the institutional framework but without unnecessary impediments of a bureaucratic or fiscal nature.

Unlike most major economies, Hong Kong has no central bank. Those functions which might typically be performed by one - such as supervising financial institutions, managing official foreign exchange reserves, or providing banking services to the government – are carried out by various different government offices or by the note-issuing banks. Since the government has not needed to issue any conventional government debt in recent years because of consistent budget surpluses, and since there are no controls on foreign exchange dealing in Hong Kong, the range of central bank functions that has to be undertaken is narrower than in many other economies.

The financial sector in Hong Kong is now characterised by its newly established three-tier structure, which comprises three distinctive classes of deposit-taking institutions: banks, licensed deposit-taking companies and registered deposit-taking companies.

Banks may accept deposits from the public of any size and any maturity, but the interest rate rules of the Hong Kong Association of Banks result in the setting of maximum rates payable on bank deposits of original maturities up to 15 months less a day, the only exception being deposits of $500,000 or more for terms of less than three months, for which banks may compete freely. As at the end of 1983, there were 136 licensed banks in Hong Kong, of which 35 are local companies. They maintained a total of 1 531 offices in Hong Kong. In addition there were 115 representative offices of foreign banks.

Apart from banks, no company may take deposits from the public unless licensed or registered under the Deposit-taking Companies Ordinance. Licensed status, which is granted at the discretion of the Financial Secretary, is reserved for larger companies which have a minimum issued share capital of $100 million and paid-up capital of $75 million, and which meet certain partially subjective criteria regarding size, ownership and quality of management. Licensed deposit-taking companies may take deposits of any maturity from