ENG-2009 — Page 127

Financial and Monetary Affairs | 79

The HKEX signed Closer Co-operation Agreements with its counterparts in Shanghai and Shenzhen in January and April respectively. The accords commit the three bourses to work closely to achieve their common goal of meeting the domestic and international fund-raising needs of Chinese enterprises to enable them to continue contributing to China's greater economic development.

In August, the SEHK consulted the Hong Kong market on the acceptance of Mainland accounting and auditing standards and auditors for Mainland-incorporated companies listed in Hong Kong. The proposal was made jointly by Hong Kong and Mainland regulators. This would mean more timely disclosure of information to investors and increased market efficiency. It would also reduce compliance costs for Mainland incorporated issuers.

Mainland and Hong Kong Closer Economic Partnership Arrangement

The Closer Economic Partnership Arrangement (CEPA) between the Mainland and Hong Kong which went into force in 2004, gives Hong Kong's financial services suppliers and professionals greater market access and flexibility for their operations in the Mainland. It has also enhanced Hong Kong's attractiveness to market users and strengthened the city's competitiveness as an international financial centre and the premier capital formation centre for Mainland enterprises.

Supplement VI to CEPA was announced on May 9, 2009. To strengthen further co-operation between the Mainland and Hong Kong in the securities sector, it was agreed that the Mainland shall allow qualified Mainland securities companies, approved by the China Securities Regulatory Commission, to set up subsidiaries in Hong Kong in accordance with the relevant requirements.

A further major breakthrough introduced under Supplement VI allows Hong Kong and Mainland securities companies to set up joint venture securities investment advisory companies (JV firms) in Guangdong. (The JV firm shall be a subsidiary of the Mainland securities company while the Hong Kong company's shareholding in the JV must not exceed one-third of the JV company's total shareholding). Supplement VI also allows both sides to study the introduction of open-ended index- tracking ETFs, the portfolios of which are constituted in Hong Kong listed stocks, in the Mainland.

A new measure for the banking sector under Supplement VI came into effect on October 1, 2009, allowing Hong Kong banks, through their branches or wholly owned subsidiaries in the Mainland to set up 'cross-location' sub-branches in Guangdong, but outside the municipality where the original branch is situated. The measure enables Hong Kong banks to expand their branch networks in Guangdong in a more cost-effective way.

The accounting sector also benefits from Supplement VI which enables Hong Kong residents who have formally become members of the Hong Kong Institute of Certified Public Accountants (HKICPA) on or before March 31, 2009 to be exempted from taking the test on Finance and Accounting in the Mainland's Certified Tax Agent qualification examination.