The securities authorities of the Chinese mainland and Hong Kong will join hands to encourage more mainland enterprises to raise funds in the territory, officials from both sides said Monday.

Hong Kong will amend the regulatory system and expand the baseline so that more mainland firms can list H shares, Andrew L T Sheng, chairman of the Securities and Futures Commission (SFC) of Hong Kong, told a forum in Beijing Monday.

Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC), said that the market watchdog would also enhance communication with Hong Kong's securities regulators to provide a more favourable environment for the overseas listing of mainland firms.

Hong Kong Financial Secretary Henry Tang (right) and State Councillor Tang Jiaxuan unveil a plaque during the opening ceremony for the Hong Kong Exchanges and Clearing Ltd (HKEx) Representative Office in Beijing November 17, 2003. The setting up of the office in Beijing is one of the specific commitments on liberalization of trade in services for the financial sector under the Closer Economic Partnership Arrangement between Hong Kong and the mainland. [AFP]

Co-operation between the two stock markets should reach a higher and broader level, Shang said.

Sponsored by the Hong Kong Exchanges and Clearing Ltd (HKEx), the forum was to review the fund-raising activities of mainland firms in the Hong Kong stock market, the second biggest in Asia, over the past decade.

HKEx also inaugurated its representative office in Beijing Monday, the first it set up on the mainland.

The opening of the office will enable HKEx to provide better information services to mainland companies and help them have a better understanding of the Hong Kong market, said Charles Y K Lee, chairman of HKEx.

It is also part of the efforts made by Hong Kong to facilitate the listing of more mainland companies and shorten the time of preparations, he said.

H shares are mainland-registered companies listed in Hong Kong. Since the creation of the first H share, Tsingtao Beer, in June 1993, Hong Kong had embraced 82 H shares by the end of September, which accounted for 8 per cent of listed companies in Hong Kong.

The H-share companies have raised US$20 billion from the Hong Kong market, their market capitalization accounting for 5 per cent of the market's total and turnover at 17 per cent.

While Hong Kong helped the mainland companies access foreign capital, it also pushed them to upgrade management and accounting standards and increase transparency, said Lee.

For international investors, the platform gave them access to mainland companies, which have attracted a large group of investment bankers, analysts and fund managers to Hong Kong, said Lee.

With the expected implementation of CEPA next year, which will facilitate wider economic co-operation between Hong Kong and the mainland, the two economies will further integrate, said Henry Tang, Hong Kong's financial secretary.

Meanwhile, for the mainland, such co-operation will promote its economic reform. Many State-owned enterprises (SOEs) are undergoing restructuring and trying to adopt the shareholding structure. The sound legal framework and investment environment in Hong Kong made it an ideal place for mainland companies to learn and catch up, said Shang.

Even after they get listed overseas, mainland companies still have to enhance corporate governance and efficiency and learn to maintain good investor relationships.

Experts noted other problems that should be tackled. The large ratio of State holdings in many listed companies, for example, should be changed gradually.

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