The Hong Kong dollar and the Renminbi continue to circulate as legal tender in Hong Kong and the mainland respectively. The Hong Kong dollar is treated as a foreign currency in the mainland. Likewise, the Renminbi is treated as a foreign currency in Hong Kong. 15. The Basic Law has provided for the legal status of the Hong Kong dollar. The Renminbi is still not yet freely convertible. However, even if it becomes freely convertible, it will only be one of the many foreign currencies traded in Hong Kong’s forex market. As for the cross-border circulation of the banknotes of the Hong Kong dollar and the Renminbi, this is a natural consequences of the close relationship between the two places. This phenomenon was in existence long before the handover. The legal status of the Hong Kong dollar will not be affected and the Hong Kong dollar will not be replaced as a result. 16. The issuance arrangements for the Hong Kong dollar remain independent. Hong Kong dollar bank notes continue to be issued by the three note-issuing banks under the authorisation of the HKSAR government. Under the linked exchange rate system, the note-issuing banks provide 100% backing in US dollar according to the fixed rate of $ to $ In order to ensure that all the Hong Kong dollar notes and coins in circulation comply with the monetary rule of the Currency Board System, we have improved our coins issuance mechanism so that it operates in exactly the same way as the notes issuance mechanism.
To further enhance the competitiveness of our banks and step up our supervisory efforts, the HKMA commissioned a large-scale consultancy study of the local banking sector. The study was completed in 1998 and the recommendations contained in it are being carefully considered by the HKMA. (E) Hong Kong continues its participation in international financial activities in accordance with the provisions in the Basic Law  BIS Review 39/1999  4  19. The Basic Law provides that the HKSAR may, using the name of “Hong Kong, China”, maintain and develop financial ties with different countries and regions. This includes entering into and implementing multilateral and bilateral financial agreements, setting up overseas official and quasiofficial financial representative offices, and handling external financial relations. 20. Following the handover, Hong Kong has become even more active in the international financial scene. In addition to further developing co-operation with regional central banks, the HKMA has strengthened its ties with multilateral and international financial institutions. In September 1997 the Annual Meetings of the International Monetary Fund/World Bank were staged with great success. As the first major international event in Hong Kong after the handover, the Meetings became an important landmark in Hong Kong’s financial history. In 1996 both HKMA and the PBOC were admitted to the Bank for International Settlements (BIS) in their own right.