ENG-2002 — Page 123

FINANCIAL AND MONETARY AFFAIRS

accordingly. Proactive inspections are carried out at business premises to ensure compliance of employers in enrolling their employees in MPF schemes and making contributions. The MPFA also educates the public on the need for retirement protection and on the MPF System, with an emphasis on investor education. Some of the educational activities were held in conjunction with other bodies (e.g. the Hong Kong Investment Funds Association and labour unions).

The MPFA also acts as the Registrar of Occupational Retirement Schemes.

Recent Developments

In order to further enhance the effectiveness and efficiency of the MPF System, the MPFA continues to review the MPF legislation in the light of operational experience. The Mandatory Provident Fund Schemes (Amendment) Ordinance 2002, containing amendments related to certain operational and technical issues of MPF schemes, was enacted in February 2002.

As a new system affecting over two million employers, employees and service. providers, the MPFA considers it necessary to review regularly the operational aspects of the MPF System to ensure that the system is efficient, effective and user-friendly. Towards this end, the MPFA established the MPF Schemes Operation Review Committee in August 2001. The Review Committee comprises representatives of employer and employee bodies, service providers, professional organisations, the Government and the MPFA. It completed the first phase of its work in end-2001 and proposed a number of legislative amendments, including setting up a mechanism to review the minimum and maximum levels of relevant income for the purpose of making MPF contributions and the adjustment of the minimum level of monthly income from $4,000 to $5,000. These proposals were incorporated into the Mandatory Provident Fund Schemes (Amendment) (No. 2) Ordinance 2002, enacted in July. The Review Committee has started the second phase of its work in 2002 and will continue to review the operation of the MPF System, including the investment regulation, in 2003.

During the year, the MPFA also completed a review of the ORSO legislation. The proposed legislative amendments were being considered by the Government.

Financial Links between Hong Kong and the Mainland

Hong Kong provides Mainland entities with an efficient access to international capital through its banking, equity and debt markets. Nevertheless, the cross-boundary capital flows have by no means been one-way. Direct investment and inter-bank fund flows have developed in both directions. Hong Kong's banks have maintained a strong presence in the Mainland. The financial links between Hong Kong and the Mainland will be further strengthened with China's accession to the World Trade Organisation (WTO), which will generate increasing demand for a wide range of financial support services for increasing trade and investment flows between the Mainland and the rest of the world.

Cross-boundary funds were flowing steadily among financial institutions in both places. Over the years, the Mainland has accumulated a substantial amount of funds in Hong Kong dollars from trading activities and inward investment. These funds are placed with financial institutions in the Mainland and are subsequently channelled back to Hong Kong through the inter-bank market.

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