General Secretary Hu Jintao, in his report to the 18th National Congress of the Communist Party of China (CPC), expressed the hope that Hong Kong will "focus on economic development" and reiterated that the central government supports Hong Kong's long-term prosperity and stability. This is great news for Hong Kong's financial industry.

Financial cooperation between Hong Kong and the mainland has been going on for a long time. The first mainland branch of a Hong Kong bank was opened back in the early 1980s, and local banks have been expanding their business operations on the mainland ever since. They are lending useful experience and methods to their mainland counterparts, as well as significantly contributing to cross-boundary economic cooperation.

Since the beginning of the 21st century, financial cooperation between Hong Kong and the mainland has expanded markedly. After the threshold for entering the mainland market was lowered, most Hong Kong-based banks have opened branches and/or representative offices on the mainland; while mainland banks have expanded their business operations in Hong Kong directly or by acquiring local banks to set up their own service networks.

The four leading specialized banks and some of the commercial banks are now listed on the Hong Kong Securities Exchange as H-shares, and some have become components of the Hang Seng Index. In 2004 the People's Bank of China (PBoC), the country's central bank, turned a new leaf in Hong Kong-mainland financial cooperation by allowing Hong Kong banks to offer customers renminbi deposits, wire transfers, foreign exchange transactions and credit card services, making the SAR a pilot in yuan internationalization.

On June 30 this year, the central government announced a basket of policies and measures designed to boost cross-boundary cooperation. Among them, 15 are related to finance, a testimony to the importance of this industry in the central government's view. In terms of advancing Hong Kong's offshore yuan trade, the new measures include promoting cross-boundary business transactions being cleared in yuan, exploring yuan trade financing, renminbi account financing and project financing in yuan. There is also direct renminbi investment in Hong Kong and expanding issuance of yuan bonds in the SAR. Those issuances are taking place on an increased scale, with a larger number of institutions authorized to sell yuan bonds.

On the eve of the 15th anniversary of the HKSAR on July 1, the Ministry of Finance in Beijing issued 30 billion yuan worth of treasury bonds; while the PBoC has relaxed the limit on the annual volume of yuan investments by RQFIIs. All these measures demonstrate the significant role Hong Kong plays in boosting cross-boundary use of renminbi. It is believed that Hong Kong's status as an offshore center, catering to customers around the world for yuan trade clearance, financing and asset management, will no doubt grow larger and more mature as these measures are implemented.

There is no question that financial cooperation between Hong Kong and the mainland will not be smooth sailing all the time, and specific glitches will emerge as the two sides continue to fine-tune the process. In the past few years, central authorities have made policy adjustments and introduced new measures at different stages of cooperation, in response to suggestions by Hong Kong's financial industry. Personally I hope such practice will continue in the years to come, and relevant authorities in Hong Kong will observe the process closely and cooperate with local businesses as well as the central government through constant communication.

If all parties concerned do their best to play Hong Kong's experience in finance and the mainland's growing market to their full potentials, I believe it will result in a win-win situation on both sides of the border.

The author is a HK member of the CPPCC and a Legislative Council member of the HKSAR.

(HK Edition 11/13/2012 page3)