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The Economy

Hong Kong remains the largest external investor in the Mainland. According to the Mainland's statistics, the cumulative value of Hong Kong's realised direct investment in the Mainland reached US$747 billion as at the end of 2014, accounting for as much as half of the total.

Reciprocally, Hong Kong is the first port of call for the Mainland's outward direct investment. Based on the Mainland's statistics, the Mainland's stock of outward direct investment to Hong Kong accounted for 57 per cent of its total outward direct investment as at the end of 2013, reflecting Hong Kong's role as a platform for Mainland companies to reach out and go global. Meanwhile, based on Hong Kong's statistics, the Mainland is Hong Kong's second largest source of foreign direct investment, accounting for about one-third of Hong Kong's total inward direct investment. Mainland companies have also maintained a strong presence in Hong Kong. As at mid-2014, Mainland companies had established a total of 957 regional headquarters, or regional or local offices in Hong Kong, up from 635 a decade ago.

Due to proximity, Guangdong's economic links with Hong Kong are understandably the closest amongst all provinces in the Mainland. Based on the Mainland's statistics, the cumulative value of Hong Kong's realised direct investment in Guangdong was US$218 billion as at end 2014, accounting for 62 per cent of its total inward direct investment. The substantial direct investment from Hong Kong did not only contribute to the Mainland's rapid industrialisation in the past decades, but also facilitated the structural transformation of the Hong Kong economy.

Thanks to the increasing cross-boundary economic activities and the Central People's Government's policy to enhance the position of Hong Kong as an international financial centre, financial links between Hong Kong and the Mainland have strengthened substantially over the years. As a major funding centre for Mainland enterprises, 876 Mainland enterprises were listed on the Hong Kong stock market as at the end of 2014 (84 of these listing in 2014, raising $199.8 billion in equity funds), with $700.5 billion in aggregate funds raised from IPOs and secondary financing. In addition, the Shanghai-Hong Kong Stock Connect scheme, launched in November 2014, supports mutual stock market access between the Shanghai Stock Exchange and the Stock Exchange of Hong Kong, signifying a breakthrough in the opening up of Mainland China's capital markets and marking an important step in the internationalisation of Renminbi (RMB).

Meanwhile, offshore RMB business in Hong Kong grew strongly in 2014. The value of RMB trade settlement handled by banks in Hong Kong surged by 63 per cent in 2014 to another record high of RMB6,258 billion. The total amount of RMB customer deposits and outstanding RMB certificates of deposit issued increased 10 per cent over the previous year to RMB1,158 billion as at the end of 2014 and the outstanding amount of RMB loans also leapt to RMB188 billion over the same period. Outstanding RMB bonds rose by 23 per cent to RMB381 billion as at the end of the year. In November 2014, the RMB conversion limit for Hong Kong residents of RMB20,000 per day was removed, making it more convenient for Hong Kong residents to participate in RMB financial transactions and facilitating the development of RMB investment products in Hong Kong.

Hong Kong remained the largest offshore RMB investment product market in 2014. At the end of 2014, there were 65 SFC-authorised RMB Qualified Foreign Institutional Investor Scheme (RQFII) unlisted funds with an aggregate net asset value of RMB30 billion, and 18 SFC-authorised

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