ENG-2003 — Page 126

FINANCIAL AND MONETARY AFFAIRS

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cheques issued by banks in Hong Kong and presented in Guangdong. This was the second agreement of its kind: a similar cheque clearing facility was established between Hong Kong and Shenzhen in January 1998. In September 2001, an agreement was reached for the cross-boundary joint clearing facility for Hong Kong dollar cheques, drawn upon banks in Hong Kong and presented in Guangdong (including Shenzhen), to be extended to cover cashier's orders and demand drafts.

In June 2002, the joint cheque clearing facility was further extended to clear Hong Kong dollar cheques drawn on banks in Guangdong, including Shenzhen, and presented in Hong Kong. Under this arrangement, the time required for clearing is reduced to two working days. In 2003, about 250 000 cheques totalling $22 billion. were cleared through the two-way joint clearing facilities. Furthermore, in order to expedite cross-boundary payments between Hong Kong and Shenzhen, Hong Kong dollar and US dollar RTGS links between Hong Kong and Shenzhen to enable banks on both sides to make Hong Kong dollar and US dollar RTGS payments were implemented on December 12, 2002 and November 17, 2003 respectively.

The Chief Executive announced on November 18, 2003 that, following approval from the State Council, the PBoC had agreed to provide clearing arrangements for personal RMB business in Hong Kong. The scope of such RMB business includes. deposit-taking, exchange, remittances and RMB cards. This arrangement will help promote economic integration between Hong Kong and the Mainland, and facilitate cross-border tourist spending. In addition to meeting the demands of the market and the public, the Hong Kong banking sector will also be able to develop new areas of business. This will enhance the competitiveness of the banks in Hong Kong and the attractiveness of Hong Kong as an international financial centre.

Portfolio investment in the form of ‘China funds' is popular. By year-end, 79 China or Greater China equity funds had been authorised by the SFC and they invested in Hong Kong companies, H-shares, red-chips listed on the Hong Kong Stock Exchange, B-shares listed on the Shanghai and Shenzhen Stock Exchanges, Taiwanese companies listed on the Taiwan Stock Exchange, or other Greater China related securities listed in overseas markets.

Hong Kong as an International Capital Formation Centre for the Mainland

The Government is committed to making full use of the favourable conditions of the Hong Kong market, including higher liquidity, a robust legal system, efficient information flow, availability of professional expertise, and closer proximity to the Mainland market to provide better services to Mainland enterprises seeking listing in an international financial centre.

The rapidly expanding Mainland market represents a massive opportunity. The presence of Mainland issuers has increased both the breadth and depth of Hong Kong's securities and futures markets. Hong Kong's equity market has evolved from one highly concentrated in properties and finance businesses into a market with a great diversity of constituent stocks and a wide range of products.

Hong Kong has established itself as the most important international fund-raising centre for Mainland enterprises. At year-end, about 260 Mainland enterprises were listed in Hong Kong. Significantly, 92 out of the 93 Mainland-incorporated enterprises which had listed outside the Mainland (H-shares) have chosen to list on

Excluding guaranteed funds, hedge funds, index funds, money market funds, etc., that invest in Greater China.