China's central government has delivered the biggest package of measures in more than eight years in support of Hong Kong's economy, with a commitment to more two-way share investments and a further opening up of mainland markets to Hong Kong firms.
Vice Premier Li Keqiang announced the measures yesterday. He is in the special administrative region for a three-day visit.
Li said the measures were aimed at taking economic and financial cooperation between the mainland and Hong Kong to a new high.
He said the mainland will take further steps to broaden market access for Hong Kong's traditional and emerging service sectors, including medical services, construction services, legal services, and testing and certification, and will support the region's travel agencies in setting up shop on the Chinese mainland.
The central government has also announced plans to expand the sale of yuan-denominated bonds in Hong Kong and allow more mainland firms to issue debt in the territory.
The Ministry of Finance yesterday sold 20 billion yuan in bonds in Hong Kong, the third and so far largest issue of yuan-denominated debt in the city. The level of such bonds issued in Hong Kong will be raised to 50 billion yuan this year, said Zhou Xiaochuan, governor of the People's Bank of China.
Analysts expected the move to both diversify yuan investment options and boost the yuan bond market. In the long run, with Hong Kong's status of an offshore yuan center confirmed by the central government, its is of highly supportive significance, Xinhua news agency said.
Li also announced a quota of 20 billion yuan for qualified Hong Kong investors to buy yuan-denominated securities, while their mainland counterparts can invest in the city via a planned exchange-traded fund platform linked to Hong Kong stocks.
Li said there will also be pilot projects allowing foreign banks to replenish their yuan reserves and support will be given to Hong Kong firms making direct yuan investments on the mainland.
He added: "The country will continue to encourage more mainland firms to go public in Hong Kong while allowing Hong Kong banks to market ETFs through their mainland outlets."
Hong Kong officials have been lobbying the central government for years to allow investors from the mainland to buy stocks in Hong Kong.
So far this year, Hong Kong's stock market is the second-biggest venue for initial public offerings after the New York Stock Exchange. Funds raised through Hong Kong IPOs reached HK$174.7 billion (US$22.42 billion) in the first six months, up 247 percent from a year ago.
Hong Kong Exchanges and Clearing's net profit jumped to HK$2.58 billion in the first half, 19 percent higher than a year earlier.
Hong Kong's Hang Seng Index rose 0.38 percent yesterday after the announcement of the new measures, with Chinese brokerages among the top gainers.
Li said: "The central government will do all it can to contribute to the prosperity and stability of Hong Kong."
Hong Kong's middle and working classes are feeling squeezed by surging property prices and inflation. Home prices have jumped over the past year, driven by low interest rates and an influx of investors from the mainland, leaving many unable to buy or rent while facing higher prices for food and transport.
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