The Mainland/Hong Kong Closer Economic Partnership Agreement (CEPA), signed late last year and implemented on January 1, will create more funding opportunities for the Chinese mainland's enterprises, suggest experts.

"Enterprises on the mainland will see CEPA as a fast lane to access Hong Kong's capital markets," said Han Ping, head of China Securities and Regulatory Commission's (CSRC) International Department.

"Under CEPA, we will simplify our approval procedures for enterprises to list their shares in Hong Kong. And we will give them our support."

Some 164 enterprises from the Chinese mainland have listed their shares in Hong Kong in the past 10 years since Tsingtao Beer, the mainland's largest beer producer, became the first H-share stock on the island, Han said.

CSRC officials last year gave 33 Chinese mainland enterprises approval to issue H-shares in Hong Kong. In 2002, CSRC approved 28 applications.

"Definitely, more enterprises will go there this year," she said.

Large, blue-chip enterprises, especially State-owned ones undergoing ownership reforms, will continue to be favoured by international investors, Han added.

China Life, the financial giant that controls 80 per cent of the Chinese mainland's insurance market, steamed into Hong Kong late last year. It issued more than 3 billion yuan (US$362.3 million) worth of shares.

Small and medium-sized enterprises (SMEs), which lack funding opportunities on the mainland, will continue to see Hong Kong's Growth Enterprise Board as the best way to meet their financial needs and to access international capital markets, Han said.

"We will provide support, as much as possible, to SMEs in line with CEPA," she said.

Many mainland enterprises have bypassed the CSRC to tap Hong Kong's capital market, said Wang Yuan, a senior consultant with the Securities and Futures Commission of Hong Kong.

"The number of mainland enterprises that have listed their shares in Hong Kong, if those registered overseas are included, exceeds 250," she said.

"The number is growing fast."

Hong Kong has long been a magnet attracting mainland enterprises' initial public offerings (IPOs), due to its solid financial market foundation, its openness to international capital and its concentration of high-quality human resources, said Fred Hu, managing director of Goldman Sachs (Asia).

"Although Shanghai is catching up fast, it is unlikely replace Hong Kong as an international financial centre in the near future," he said.

"Hong Kong has a well-established legal framework. Its soundness and effectiveness are what the mainland's legal system lacks," he added.

Hong Kong also has more internationally competitive financial professionals, which the mainland craves, Hu said.

But the situation is likely to change, as CEPA allows financial professionals in Hong Kong to practice on the mainland, experts said.

"Hongkongers working in the financial industry will be allowed to conduct business on the mainland, if they obtain a few additional qualifications," Han said.

On equal terms, CEPA will also allow financial professionals on the mainland to work in Hong Kong, she said.

The Hong Kong Stock Exchange in November opened its representative office in Beijing to attract more mainland enterprises.

(Business Weekly 01/13/2004 page4)