ENG-2008 — Page 126

82 | Financial and Monetary Affairs

substantial amount of funds in Hong Kong dollars from trading activities and inward investment. These funds are placed with financial institutions in the Mainland and are subsequently channelled back to Hong Kong through the inter-bank market.

By the end of 2008, Als' external liabilities to banks on the Mainland amounted to $390.6 billion, while their claims on banks in the Mainland totalled $333.2 billion. The amounts represented 14.8 per cent and 6.9 per cent respectively of Als' total liabilities to and claims on banks outside Hong Kong.

The use of cross-boundary links with Guangdong Province and Shenzhen reflected increasing economic integration between the Mainland and Hong Kong. In 2008, the RTGS system links with Shenzhen and Guangdong handled more than 26 000 transactions, with a total value equivalent to $360 billion.

In light of the potential of the fund management industry in the Mainland, Hong Kong-based fund managers, who are recognised for their knowledge and experience in asset management, have successfully established joint ventures with Mainland fund managers. Hong Kong managers have also embarked on ways to enable investors to capture investment opportunities in the Mainland. At year-end, there were 26 SFC-authorised funds with significant exposure to the A-share market in the Mainland. These included the first equity fund that directly invests in A-shares via the fund manager's own Qualified Foreign Institutional Investment (QFII5) quota and an ETF that tracks the A-share market, funds that invest indirectly in A-shares via equity-linked investments issued by qualified foreign institutional investors, and guaranteed funds with their upside potential returns linked to the A-share market performance.

Renminbi Business in Hong Kong

Renminbi business in Hong Kong has developed in a steady and orderly manner. At the end of 2008, the outstanding Renminbi deposits in Hong Kong exceeded RMB 56 billion. Four Renminbi bond issues were made in 2008, following the three successful ones in 2007, bringing the total amount of outstanding Renminbi bonds in Hong Kong to RMB 22 billion.

Capital Formation Centre and Global Investment Platform for the Mainland

Hong Kong's fundamental strengths, including its high market liquidity, a robust regulatory system, efficient information flow, a rich pool of financial professionals and proximity to the Mainland market, mean 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 the breadth and depth of Hong Kong's securities as well as its futures markets. Hong Kong's equity market has evolved from

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Foreign institutions approved by the China Securities Regulatory Commission as Qualified Foreign Institutional Investors (QFIls) may invest in China A shares and other Renminbi-denominated securities in the Mainland subject to the grant of investment quotas by State Administration of Foreign Exchange.