ENG-2005 — Page 119

Financial and Monetary Affairs | 89

Renminbi Business in Hong Kong

Since its launch in early 2004, renminbi business in Hong Kong has developed in a steady and orderly manner and it expanded further in 2005. By the end of the year, the outstanding renminbi deposits in Hong Kong had reached RMB22.6 billion. The use of renminbi debit and credit cards by Mainland tourists in Hong Kong has grown. steadily, with the cumulative total of credit/debit card spending and cash withdrawal amounting to $9.4 billion at year-end. The average transaction size of credit/debit card spending was about $3,000.

In October 2005, the Chief Executive announced in his Policy Address that the Central Government had agreed in principle to the expansion of renminbi business in Hong Kong. The details of the expansion were announced subsequently. In December, the definition of designated merchants was widened, and designated merchants were allowed to open renminbi deposit accounts in addition to conducting one-way exchange of their renminbi receipts into Hong Kong dollars. Limits for exchange and remittance of renminbi by individuals were relaxed and the cap on credit limits for renminbi cards issued by participating banks was removed.

Capital Formation Centre and Global Investment Platform for the Mainland

Hong Kong's fundamental strengths, including high market liquidity, a robust regulatory system, efficient information flow, a rich pool of financial professionals and proximity to the Mainland market, mean that it is well placed to provide excellent services to Mainland enterprises seeking listing in an international financial centre.

The rapidly expanding Mainland market provides abundant opportunities. 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 with a high concentration of property and finance businesses into a market with a great diversity of constituent stocks and a wide range of products.

Hong Kong has developed into the premier international fund-raising centre for Mainland enterprises. At year-end, 335 Mainland enterprises were listed in Hong Kong, raising a total of $1,097 billion since 1993. Most of the Mainland enterprises listed outside the Mainland chose to list on the SEHK. The 10 largest IPOS of all enterprises listed on the SEHK were all from the Mainland.

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

Hong Kong, with its financial facilities, experts and first-rate regulatory regime, already has all the right ingredients to develop its asset management business even further. The Mainland authorities take steps to allow outside investment. For instance, the authorities have allowed qualified Mainland insurance companies to invest part of their foreign exchange insurance funds in capital markets outside the Mainland. Hong Kong professionals are well qualified to provide professional advice