ENG-2003 — Page 127

FINANCIAL AND MONETARY AFFAIRS

the SEHK. These 92 enterprises had raised a total of more than $195.3 billion directly and indirectly through Hong Kong as at end-2003, including $48.3 billion raised in 2003.

In 2003, the three largest IPOs on the SEHK all concerned Mainland issuers. These three IPOs alone already accounted for 62 per cent of funds raised in the whole year. In particular, the China Life Insurance Company Limited was reported to be the largest IPO in the world in 2003 and was the third largest in Hong Kong's history.

Apart from the equity market, Mainland enterprises raise capital in Hong Kong through issuance of bonds, project financing and loan syndication. Mainland enterprises also have easy access in Hong Kong to investment banking services such as mergers and acquisitions, and consultancy on restructuring.

In a bid to further strengthen communication and enhance cooperation, the SFC had regular meetings with the China Securities Regulatory Commission (CSRC), the two exchanges in Shanghai and Shenzhen, and the HKEx to discuss issues of mutual interest.

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

The signing of the main parts of CEPA and its Annexes, in June and September 2003 respectively, has offered greater market access and flexibility for Hong Kong's financial services suppliers and professionals in the Mainland. It is envisaged that the coming into operation of CEPA on January 1, 2004 will not only enhance Hong Kong's attractiveness to market users, but also strengthen its competitiveness as an international financial centre and the premier capital formation centre for Mainland enterprises.

In the banking sector, the substantial lowering of the total asset requirement from US$20 billion to US$6 billion would enable seven additional Hong Kong banks to set up branches in the Mainland. This makes it possible for Hong Kong banks to set up branches in the Mainland as early as 2004 to become acquainted with the Mainland market and to make early preparation for conducting renminbi business.

Under CEPA, when applying for conducting renminbi business, Mainland branches. of Hong Kong banks are only required to demonstrate profitability for two consecutive years vis-à-vis three years for other foreign banks. More importantly, in conducting profitability assessment the relevant authorities will base their assessment on the overall profitability of all branches of the Hong Kong bank in the Mainland vis-à-vis the profitability of individual branches for a foreign bank.

CEPA also provides special advantages for the insurance sector. Hong Kong has taken a great step forward by raising the maximum allowed equity participation by Hong Kong insurers in a Mainland insurance company to 24.9 per cent, compared with 10 per cent for other foreign insurers. Besides, Hong Kong insurance companies would have greater opportunities to enter the Mainland insurance market through the formation of groups. CEPA also allows Hong Kong residents to engage in the relevant insurance services after obtaining the Mainland's insurance qualifications and being employed or appointed by a Mainland insurance institution.

In the accounting sector, the Government has welcomed the arrangements that Hong Kong accountants, who have already qualified as Chinese Certified Public Accountants (CPAs) and practised in the Mainland (including partnership), are

91