As a member of that Focus Group, I am happy to be in a position to contribute to this important and promising cause. I have already outlined elsewhere and in a different context a five-prong strategy developed in the Hong Kong Monetary Authority to further co-operation between the two financial systems, which will have the desirable dual effect of enhancing the effectiveness of financial intermediation on the Mainland and maintaining the status of Hong Kong as an international financial centre 6 . The strategy comprises: First, opening doors through CEPA and other forums so that Hong Kong financial institutions can provide the much needed financial services (and competition) on location in the Mainland; Secondly, sustaining the flow of fund raising activities from the Mainland to Hong Kong, not just in the IPO of H-shares but also in bank syndication and debt issuance, and creating channels, for example through QDII schemes, to facilitate the flow of investment funds from the Mainland; Thirdly, creating a mechanism for the marketing of suitable financial instruments (for example CDR of H-shares) on the Mainland to satisfy the enormous investor demand there;  4  The guidance was given to the Drafting Committee for the Basic Law of the Hong Kong Special Administrative Region when Deng Xiaoping addressed the Committee on 16 April 1987. 5  This principle was explained in the viewpoint article "A Basic Law of Finance", which can be found on the HKMA website. (http://www.info.gov.hk/hkma/eng/viewpt/20060810e.htm).
So, what about the question I raised earlier on about whether the two financial systems of the country have a working relationship that maximises the mutual benefits of the two jurisdictions and therefore is in the best interests of the country? If you want an honest answer from me, it would I am afraid not be one in the affirmative. There seems to me considerable scope for a co-operative, complementary and interactive working relationship between the two financial systems, in which, as I said earlier, relative strengths are exploited and relative weaknesses addressed, and synergies maximised. The further question then is how such a working relationship should best, and realistically, be developed. It is quite natural to think that developing such a relationship between the two financial systems could be left to the market. While this is theoretically possible, it assumes that market forces are allowed to work freely across the two financial systems, which is not always the case. In merchandise trade, this is by and large true, and as a result the two economic systems specialise in areas in which they have respectively comparative advantage in producing. But in the provision of different services, as in the case of financial services, there are restrictions limiting the working of market forces, for example, restrictions on access of service providers to the other system and restrictions on the mobility of the user of services across the two systems.