ENG-2013 — Page 103

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Financial and Monetary Affairs

Limited (an HKEx joint venture with the Shanghai and Shenzhen stock exchanges) was listed on the SEHK. In November, the first RQFII A-share ETF managed by a local financial institution was launched and listed on the SEHK. At the end of 2013, there were 26 SFC-authorised RQFII unlisted funds with an aggregate net asset value of RMB13.2 billion and 11 SFC-authorised RQFII A-share ETFs adopting dual counter trading arrangements (ie RMB and HKD trading counters) with an aggregate net asset value of RMB36.8 billion. The scheme continues to promote the development of a broader range of RMB investment offerings in Hong Kong and to reinforce the city's role as the leading offshore RMB centre.

Other RMB-based product developments in 2013 included RMB-denominated money market. funds for investment by mandatory provident fund schemes; dual-counter RMB 'dim sum bond' index ETFs; equity-linked investments with RMB features; and an RMB share class offered by an SFC-authorised fund with underlying investments mostly in non-RMB denominated assets.

Since the pilot scheme for eligible institutions to invest in the Mainland's interbank bond market was extended to insurance companies in Hong Kong in 2012, 11 Hong Kong insurance companies have been permitted to invest in the Mainland's interbank bond market.

Hong Kong's role as a platform to support global RMB payments has been deepening. In December 2013, the average daily turnover of Hong Kong's RMB RTGS system amounted to RMB500 billion. At the end of 2013, there were a total of 216 banks participating in the RMB clearing platform in Hong Kong, of which 191 were branches and subsidiaries of foreign banks and overseas presence of Mainland banks, forming a global RMB payment network covering some 40 countries and regions. According to statistics from the Society for Worldwide Interbank Financial Telecommunication (or SWIFT), Hong Kong handled around 70-80 per cent of global RMB payments.

Mutual recognition of funds between the Mainland and Hong Kong

The SFC has been working with Mainland authorities on a proposed arrangement for mutual recognition of funds between the Mainland and Hong Kong. Under the proposed arrangement, qualified SFC-authorised funds which are domiciled in and operating from Hong Kong would enjoy the status of 'recognised Hong Kong funds' and qualified Mainland funds would enjoy the status of 'recognised Mainland funds. These funds could then obtain authorisation subject to a streamlined vetting process and be sold directly in each other's market. When implemented, a mutual recognition arrangement would bring new opportunities to investors and fund managers both on the Mainland and in Hong Kong.

Mainland and Hong Kong Closer Economic Partnership Arrangement

The Closer Economic Partnership Arrangement (CEPA) between the Mainland and Hong Kong, which came into force in 2004, gives Hong Kong's financial service providers and professionals greater market access and flexibility for their Mainland operations. 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.

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