ENG-2011 — Page 120

84 | Financial and Monetary Affairs

Financial Links with the Mainland

Strengthening Hong Kong's financial co-operation with the Mainland is vital for the city's financial services sector, which is best placed to contribute to the modernisation of the Mainland's financial system.

There has been a steady flow of funds between financial institutions on both sides of the border over the years. At the end of 2011, the external liabilities of Als to banks in the Mainland amounted to $343.4 billion, while their claims on banks in the Mainland totalled $1,514.9 billion. These sums represent 9.5 per cent and 28.7 per cent respectively of Als' total liabilities to and claims on banks outside Hong Kong.

Hong Kong continued to be the springboard to the Mainland market for gaining investment exposure there. At the end of 2011, there were 40 unlisted SFC- authorised funds with significant exposure to A-shares either by direct investment in A-shares via the investment quota granted to qualified foreign institutional investors (QFII) or investment in market access products issued by QFII or their affiliates that are linked to A-shares. There were 24 Exchange-traded Funds (ETFs) that track the A-share market, and one listed close-ended fund that invests directly in A-shares via QFII quota at the end of the year.

Capital Formation Centre and Global Investment Platform for the Mainland

Hong Kong's fundamental strengths make it an ideal provider of top class services to Mainland enterprises seeking listing in the city. The growing presence of Mainland issuers in turn has increased the breadth and depth of Hong Kong's securities and futures markets through a great diversity of constituent stocks in the equity market and a wider range of products.

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

To further enhance financial co-operation with the Mainland, the HKEX will, in conjunction with the Shanghai Stock Exchange and the Shenzhen Stock Exchange, establish a joint venture company. Possible areas of business operation of the joint. venture company include, but are not limited to, development of index and other equity derivative products and compilation of new indices.

National 12th Five-Year Plan and Vice-Premier Li Keqiang's Announcement of Central People Government Measures to Support the Financial Development in Hong Kong

The Outline of the 12th Five-Year Plan for the National Economic and Social Development promulgated in March 2011 includes a dedicated chapter on Hong Kong and Macao, which emphasises the Central Authorities' support for Hong Kong to develop into an offshore RMB centre and an international asset management

centre.

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