ENG-2003 — Page 81

THE ECONOMY

enterprises take up a significant role in such major economic sectors as banking, insurance, shipping and tourism, reportedly accounting for about 25 per cent of the market shares in those sectors. Mainland enterprises also maintain high investment stakes in other lines of business such as the import/export trade, the wholesale/retail trade, warehousing, real estate and infrastructure development.

In tandem with the upsurge in cross-boundary business activities, financial links between Hong Kong and the Mainland have strengthened substantially over the past years. Hong Kong's authorised institutions' external claims on and liabilities to entities in the Mainland were generally on the rise over the period. Comparing end- 2003 with a year earlier, external liabilities of Hong Kong's authorised institutions to entities in the Mainland grew by 13 per cent to $326 billion, and their external claims. on entities in the Mainland even faster by 41 per cent to $179 billion.

The Bank of China (Hong Kong) Limited is the second largest banking group in Hong Kong, after the HSBC Group. It is also one of the note-issuing banks in Hong Kong, besides the Hongkong Bank and the Standard Chartered Bank. As to the other three state-owned commercial banks, namely the China Construction Bank, the Agricultural Bank of China, and the Industrial and Commercial Bank of China, they have all been granted banking licences to operate in Hong Kong since 1995. On the other hand, the HSBC Group, the Bank of East Asia and the Standard Chartered Bank are amongst the best-represented foreign banks in the Mainland.

Hong Kong has been serving as a major funding centre for the Mainland. Besides being a direct source of funds, it also provides a window through which foreign funds can be channelled efficiently into the Mainland for financing development projects there. While syndicated loans remain the most important means for Mainland-related enterprises to raise funds in Hong Kong, issuance of securities has become increasingly popular in the more recent years. In 2003, listing activities by Mainland enterprises continued to be a prominent feature in Hong Kong's stock market, especially so in the latter part of the year when the market staged a visible upturn amidst improved investor sentiment. By end-2003, a total of 64 state-owned enterprises in the Mainland had been listed on the Main Board of Hong Kong's stock market, raising a total equity capital of $191.3 billion. Amongst them, 10 were listed in 2003, raising $46.8 billion. In addition, another 72 non-state-owned Mainland enterprises had likewise been listed by end-2003, raising a total equity capital of $590.4 billion. Of these, one was listed in 2003, raising $4.7 billion. On the Growth Enterprise Market, there were 28 state-owned enterprises, raising a total equity capital of $4.0 billion. All these listings have helped broaden the base of Hong Kong's stock market, and entrench further Hong Kong's position as a major fund raising centre in the region.

The signing of CEPA on June 29, followed by the signing of its six Annexes on September 29, serve to expand further business opportunities between Hong Kong and the Mainland, by enlarging the scope for cross-boundary trade, service and investment flows. Under CEPA, the Mainland will accord zero tariff as from January 1, 2004 for exports from Hong Kong meeting the rules of origin requirement in 374 Mainland product codes. On services, Hong Kong companies will be allowed to have earlier entry and wider market access, as well as to form wholly-owned or majority-owned subsidiaries in 18 service sectors in the Mainland. CEPA also facilitates trade and investment between Hong Kong and the Mainland through promoting cooperation in customs clearance, electronic commerce, transparency in laws and regulations, and other procedures.

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