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1 Area 6 of Rotary International District 3450 — “China & WTO - The Economic Synergy with Hong Kong” WTO and Capital Formation — Opportunities and Challenges Mr Lawrence Fok Deputy Chief Operating Officer Hong Kong Exchanges and Clearing Ltd 31 August 2001
2 Implications for Mainland Stimulate market reforms Open up in more rapid pace and broader scope Greater foreign competition Fairer trading environment Wider access to international markets Reaffirms government’s commitment to reform
3 WTO Commitments Banking Full market access by foreign companies Allow local currency business with local enterprises and individuals Insurance No limit on license number Eliminate Geographical limitations Relax foreign ownership restriction
4 WTO Commitments Securities Allow minority foreign-owned JV to engage in fund management Allow foreign ownership to increase 49% in 3 years Allow minority foreign-owned JV to underwrite domestic equity issues Allow minority foreign-owned JV to underwrite and trade international equity, corporate and government debts
5 Reforms in Mainland Banking Sector Reformed financial administration system Regional branches replaced provincial branches Increased capital adequacy ratio Reduced policy intervention Introduced modern management systems Merged state-owned banks
6 Reforms in Mainland Securities Sector Established institutional investor base Allowed insurance companies to enter securities market and promoted securities investment funds Allowed financial institutions to list Introduced professional standards for intermediaries Introduced more financing channels for securities firms Promoted formation of large securities firms Reduced proportion of state-owned shares
7 Implications for Hong Kong Opportunities to serve as leading capital formation and listing centre for Mainland enterprises Important role to raise funds for Taiwan companies to penetrate into the Mainland market Hong Kong’s securities market offers efficient and cost effective means of raising funds for Mainland and Taiwan enterprises
8 Hong Kong’s Advantages One of largest concentration of international financial expertise in Asia A large number of commercial banks, securities houses, fund management firms, professional service personnel and IT providers Advanced financial market technology
9 Hong Kong’s Advantages Growing commercial and social integration with Mainland Geographic proximity with Mainland Understands both Western and Chinese systems and acts as effective link for global investors Minimal language and cultural barriers
10 Over 70% funds raised in 2000 - 2001 were on China enterprises As at 31/7/2001, 54 H Shares and 68 red chips, accounting for 30% of total MC For Jan-July 2001, turnover of H Shares and red chips accounted for over 40% of market turnover Over 80% of total turnover of H Shares dually listed in New York and Hong Kong was recorded in Hong Kong 3 out of 10 listed companies with largest MC were China enterprises as at end of July 2001 Hong Kong — Capital Formation Centre for Mainland Enterprises
11 Challenges High levels of entry requirements and operational restrictions Re-adjust to new style of doing business Increased competition from multinationals and Mainland’s business sector Diminishing gateway function
12 The Strength of Hong Kong Freedom of capital flow, rule of law, level playing field, corporate governance, flexibility to changes Hong Kong’s software infrastructure provides a firm ground for future opportunities Hong Kong’s regulatory standards have gained confidence of international institutions Integral in maintaining Kong Kong’s key financial position
13 The Way Forward for HKEx Strengthen the role of primary international capital formation centre for Mainland Step up marketing efforts among Mainland enterprises Set up a liaison office in Mainland Work closely with financial regulators and operators in Mainland Focus future developments of Hong Kong stock market on China dimension
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