ENG-2004 — Page 126

96 | Financial and Monetary Affairs

enterprises also have easy access in Hong Kong to investment banking services such as mergers and acquisitions, and consultancy on restructuring.

As a renowned international financial centre, Hong Kong possesses a superb financial infrastructure, modern financial facilities and a regulatory regime in line with international standards. Hong Kong is also one of the most prominent asset management centres in Asia. Most important is the pool of local and overseas financial services talents who possess ample knowledge, experience and exposure in the international market. Coupled with their rich experience in servicing Mainland enterprises, these professionals are well qualified to provide professional advice to the Mainland insurance industry on asset management, including risk management and diversification of investment.

In addition to providing quality professional advice and services to the Mainland insurance industry on asset management, Hong Kong's well-developed and liquid financial market could also serve as a desirable investment platform for the Mainland insurance industry. Hong Kong's financial market provides many products of high quality and liquidity, including securities, derivatives, warrants, bonds, unit trusts/mutual funds, securities funds, bond funds, index funds, guaranteed funds, hedge funds, currency funds, equity linked instruments and exchange traded funds. This array of products enables investors to choose the best investment portfolio on the basis of their preference with regard to risk and returns. More importantly, Mainland investors can use Hong Kong as their base for undertaking global investment to enhance investment returns and diversify risks, utilising a well- developed financial system, modern financial infrastructure and a pool of professional talent.

To further strengthen communication and enhance cooperation, the SFC has regular meetings with the China Securities Regulatory Commission (CSRC), the stock exchanges in Shanghai and Shenzhen, and HKEX to discuss issues of mutual interest.

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

Following the implementation of CEPA on January 1, 2004 (CEPA I) and the signing of the 'Supplementary Agreement to the Mainland and Hong Kong Closer Economic Partnership Arrangement' on October 27, 2004 (CEPA II), Hong Kong's financial services suppliers and professionals have enjoyed greater market access and flexibility for their operations in the Mainland. Implementation of CEPA has not only enhanced Hong Kong's attractiveness to market users, but also strengthened its competitiveness as an international financial centre and the premier capital formation centre for Mainland enterprises.

In the banking sector, more banks from Hong Kong are qualified to establish branches in the Mainland following the implementation of CEPA I, which substantially lowered the total asset requirement from US$20 billion to US$6 billion. By the end of 2004, four Hong Kong banks have taken advantage of the lower asset requirements to open branches in the Mainland. With these new entrants, the number of locally incorporated banks with a presence in the Mainland rose to 16. Together, they have established 54 branches and 28 representative offices as at the year-end. CEPA makes