China’s 11-year ascent to trading powerhouse benefits HK

INTRO:

It's 11 years since China entered the World Trade Organization.

Thanks to its entry, China has become more integrated into the global economy and grown stronger as the world's export powerhouse.

And Hong Kong - long seen as the ideal "first stop" for mainland enterprises looking to explore foreign markets - has also benefitted from China's WTO accession.

From 1993 to 2001 - that was before China entered the WTO - the number of Chinese enterprises listed on the Hong Kong Exchange was only 91.

But in 2011, this figure skyrocketed to 621 -- a four-fold leap.

China's largest bank, Industrial and Commercial Bank of China, raised 19 billion U.S. dollars in 2006. That was the world's biggest initial public offering at that time.

It listed simultaneously - an unprecedented move - on the Hong Kong and Shanghai exchanges.

STANDUP: CHESTER KWOK, CNC correspondent

"Apart from the state owned enterprises, many private enterprises on the Chinese mainland also fastened their paces to enter the Hong Kong market. In 2007, nine real estate developers from the Chinese mainland made their IPO moves in Hong Kong, raising 63 billion Hong Kong dollars. NetDragon, Alibaba, Group, Kingsoft and many other enterprises from different sectors followed the trend, too. By the end of October 2011, there had been 353 Chinese mainland public listed companies in Hong Kong."

Despite a lackluster first half of 2012, by December Hong Kong was placed third globally for the amount of funds raised in IPO bids.

Andre Leung, an international and independent China specialist says Hong Kong's sound regulatory framework, strong infrastructure and legal system are key to the success of its stock exchange.

SOUNDBITE(ENGLISH): ANDREW LEUNG, Int'l & independent China specialist:

"Through the liberalization of all these restrictions, a lot of companies in China are taking advantage of Hong Kong as a place of IPO, the initial public offering, to raise funds, and a lot of these funds are denominated into renminbi. This has made Hong Kong the largest IPO or fund raising center in the world, ahead of London and New York (from 2009-2011)."

When it joined the WTO, China had to comply with special obligations regarding its banking industry.

It had to agree to open its banking sector completely to foreign banks within five years after joining the WTO.

By the end of 2007, 193 banks from 47 countries and regions had set up 242 offices in China.

SOUNDBITE(ENGLISH): ANDREW LEUNG, Int'l & independent China specialist:

"Because of the relaxation of restrictions, anyone can open a renminbi account, and companies can open a renminbi account, and use the money to either invest in China. That includes foreign companies in Hong Kong as well, but also other companies to invest in China, but also use renminbi funds to invest in those accounts, to acquire foreign assets, or to do M & A deals."

As the first cross-border yuan settlement center, Hong Kong has been a direct beneficiary from China dismantling much of its capital controls.

SOUNDBITE(ENGLISH): ANDREW LEUNG, Int'l & independent China specialist:

"Because of the liberalization of all these controls over the flow of renminbi, the overseas direct investment is much easier, and a great deal of amount is passing through Hong Kong as a launching pad as well."

Leung sees that one day the yuan will be fully convertible, but warns that the Chinese government should keep an eye out for the underlying risks of completely opening up China's capital account.

SOUNDBITE(ENGLISH): ANDREW LEUNG, Int'l & independent China specialist:

"Because once it's liberalized, the capital account, the money would flow in and out very rapidly. That would be subject to speculations, speculative inflows, in the hands of large financial institutions in the world. That would cost tremendous disruptions when China's financial system is not fully mature and developed."

STANDUP: CHESTER KWOK, CNC correspondent 1617-1637

"Leung said Hong Kong will not, and cannot stand still. It should imbed itself with the Chinese mainland economy. Given the robust urbanization in the country, Hong Kong entrepreneurs should expand their business not only around the coastal cities, but the inland provinces."

Leung also believes Hong Kong can act as the gateway for the mainland's small and medium-sized enterprises to expand overseas.

SOUNDBITE(ENGLISH): ANDREW LEUNG, Int'l & independent China specialist:

"Going out not only in the region, but also countries in like in Africa, Latin America, and of course in Europe and the United States. Because Hong Kong people and lots of professionals, they are much more experienced, and have linkages in these markets. So I think Hong Kong should really look more closely into the market in China, the development and national policies in China, but also focus on the whole world."

China has been a member of WTO since December 11, 2001.