ENG-2018 — Page 117

4.

Financial and Monetary Affairs

reviews and regulates the professional conduct and standards of members; sets and maintains financial reporting, auditing and ethical standards for the profession; and conducts training and qualifying examinations.

Statistics on CPAs, CPA Firms and Corporate Practices

2016

2017

2018

Total number of CPAs

40,806

42,237

43,585

Number of practising CPAs

4,598

4,735

4,869

Number of practising CPA firms.

1,284

1,292

1,288

Number of corporate practices

524

555

591

The institute issues the Hong Kong Financial Reporting Standards, which apply the International Financial Reporting Standards. This is beneficial to Hong Kong because international investors and financial analysts are well acquainted with these standards.

Monetary Policy

The objective of Hong Kong's monetary policy is currency stability, defined as a stable external exchange value of the HKD, in terms of its exchange rate in the forex market against the USD, at around HK$7.80 to US$1. This objective is achieved through the Linked Exchange Rate System introduced in 1983. The government is fully committed to maintaining this system, which is a cornerstone of Hong Kong's monetary and financial stability, and observing the strict discipline of the system's currency board arrangements.

The system is characterised by currency board arrangements requiring the HKD monetary base to be at least 100 per cent backed by - and changes in it to be 100 per cent matched by corresponding changes in - USD reserves held in the Exchange Fund at the fixed exchange rate of HK$7.80 to US$1. In Hong Kong, the monetary base includes the amount of currency notes and coins issued, the aggregate balance' and the outstanding amount of EFBNs. Under the currency board system, HKD exchange rate stability is maintained through an interest rate adjustment mechanism and the HKMA's commitment to honour Convertibility Undertakings. In particular, the HKMA undertakes to buy USD from licensed banks at HK$7.75 to US$1 (strong- side Convertibility Undertaking) and sell USD at HK$7.85 to US$1 (weak-side Convertibility Undertaking). The expansion or contraction in the monetary base arising from these currency board operations will cause interest rates for the domestic currency to fall or rise respectively, creating the monetary conditions that automatically counteract the original capital movements and ensuring exchange rate stability.

The Currency Board Sub-Committee under the EFAC monitors and reports on the Currency Board system, and recommends to the Financial Secretary measures to enhance the robustness and effectiveness of the Currency Board arrangements.

10 Aggregate balance is the sum of the clearing balances of banks held with the HKMA for the purpose of effecting the

clearing and settlement of transactions among the banks themselves and also between the HKMA and banks.

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