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THE ROLE OF HONG KONG CAPITAL MARKETS IN FINANCING CHINESE MAINLAND ENTERPRISES
Edward K.Y.Chen
1
and Winnie P.H.Poon
2
Lingnan University,Hong Kong
INTRODUCTION
The Hong Kong equity market was the tenth largest in the world and the 代写留学生毕业论文second largest in Asiaby market capitalization as of September 2000(HKEx 2001b).3 The Hong Kong securitiesmarket was the most active in Asia and the fourth most active in the world by the amount ofnew capital raised during 2000(HKTDC 2001a).The Hong Kong capital markets play a key
role in financing Chinese enterprises in the Chinese mainland(China hereafter),which helps thereform of inefficient state-owned enterprises(SOEs),numerous infrastructure developmentprojects,as well as newly emerging growth enterprises in China.This paper reviews recent developments in the Hong Kong capital market and examinesthe significance of that market in supporting the development of enterprises in China(Chineseenterprises,hereafter).We first present an overview of the financial markets in Hong Kong aswell as a description of the regulatory framework of the capital market.Then we discuss the
listing of Chinese enterprises in the Hong Kong equity market not only as a source of additionalcapital but also as a training ground for their participation in global capital markets,using thecase of Zhejiang Expressway Company,Ltd.to illustrate.
1.President and Chair,Department of Economics.
2.Associate Professor,Department of Accounting and Finance.Corresponding author,
winpoon@LN.edu.hk
3.Japan was the largest Asian equity market in 2000.
2OVERVIEW OF THE FINANCIAL MARKETS IN HONG KONG
This section reviews recent developments in the banking industry and the bond market as wellas the equities market in Hong Kong and compares the relative importance of the bankingindustry and the capital market.
The Banking Industry
The banking industry in Hong Kong has gone through a numberofsignificant reforms since theearly 1960s,moving from laissez-faire to world-class prudential supervision.This was a resultof the government’s timely and determined responses to the banking crises that occurred in theearly 1960s,the mid-1980s,and the early 1990s.In 2000,about 64 percent of banks'liabilitiesin Hong Kong dollars were deposits from customers,while their dominant types of assets duringthe period 1995 to 2000 were loans and advances to customers.The amount due to banksoutside of Hong Kong has the highest percentage of liabilities in foreign currency,but this
category gradually declined from 72.81 percent in 1995 to 42.49 percent in 2000.On the otherhand,the amount due from banks outside of Hong Kong has the highest percentage of assets inforeign currency from 1998 to 2000.This category has increased gradually from 48.15 percentin 1998 to 60.37 percent in 2000.Loans and advances to customers occupy the highest
percentages of assets in foreign currency from 1995 to 1997 and in total assets(both HongKong dollars and foreign currency)from 1995 to 2000.The composition of liabilities changesslightly after 1997.From 1995 to 1997 the amount due to banks outside of Hong Kongdominated total liabilities,and from 1998 to 2000 deposits from customers had the largest shareof total liabilities(HKC&S,2000;and HKMA,2001a).
Bank lending,equity finance,and bond issuance are the major sources of corporatefinancing.It has been well established that financial development is a prerequisite for economicgrowth;all the