ENG-2009 — Page 96

48 The Economy

direct investment in the Mainland reached US$396 billion at end-2009, accounting for 41 per cent of the total inward direct investment there. Over the years, the composition of Hong Kong's direct investment in the Mainland has shifted gradually from industrial processing to a wider spectrum of business ventures, such as hotels and tourist-related services, real estates, retail trade, infrastructure construction, and various business and communications services.

Hong Kong has closer economic links with Guangdong than other places in the Mainland. By the end of 2009, the cumulative value of Hong Kong's realised direct investment in Guangdong was US$143 billion, accounting for 61 per cent of its total inward direct investment.

Hong Kong's huge direct investment in the Mainland has contributed to the latter's industrialisation and, at the same time, facilitated the rapid structural change in the Hong Kong economy.

The Mainland is likewise Hong Kong's largest source of foreign direct investment. By the end of 2008, the Mainland had invested a total of US$298 billion in Hong Kong, accounting for 37 per cent of the total external direct investment. Mainland companies also maintain a strong presence in Hong Kong. In mid-2009, 223 and 527 Mainland companies had established regional headquarters/offices and local offices respectively in Hong Kong. All these reflected Hong Kong's position as the region's business hub.

Hong Kong is also a major funding centre for Mainland enterprises. A total of 524 Mainland enterprises were listed on Hong Kong's stock market by the end of 2009, of which 48 were listed in 2009. Driven by the Mainland's strong economic recovery, a total of $356 billion of equity fund was raised by Mainland enterprises during the year. These listing and fund-raising activities further consolidated Hong Kong's position as a major fund-raising centre in the region.

In addition, the development of Renminbi business in Hong Kong made marked advances in 2009. At the end of 2009, a total of 60 licensed banks engaged in Renminbi services business, with outstanding Renminbi deposits reaching RMB62.7 billion, equivalent to 2.4 per cent of total foreign currency deposits in Hong Kong. To support the further development of the Renminbi bond market in Hong Kong, the Mainland authorities agreed to allow Hong Kong banks on the Mainland to issue Renminbi bonds in Hong Kong.

By the end of 2009, Renminbi bonds totalling RMB38 billion had been issued in Hong Kong, including bonds issued by the Ministry of Finance and those issued by the Mainland subsidiaries of the Hong Kong banks. Moreover, from July 2009, qualified enterprises were allowed to settle their trade obligations in Hong Kong in Renminbi. The rapid expansion of Renminbi business in Hong Kong signified the Mainland's recognition of Hong Kong as its premier international financial centre.

Economic co-operation and integration with the Mainland has been fostered through the Mainland and Hong Kong Closer Economic Partnership Arrangement