HONG KONG business strategies need to be overhauled because of the growing integration of the territory economy with China, says Hong Kong stock exchange chairman Edgar Cheng Wai-kin. He said the exchange needed to develop new facilities, products and systems compatible with the mainland so that Hong Kong can meet the needs of capital raisers, financial institutions and investors in China. Hong Kong already was a centre for equity capital raising among international investors in China and for trading China-related stocks. But it probably also would become the main centre from which international bond issues for enterprises and projects in China were managed. 'In this new environment, with China as our hinterland, I believe Hong Kong needs to adopt a more pro-active strategic approach to its development as a financial centre,' Mr Cheng said. Chen Yuan, deputy governor of the People's Bank of China, confirmed that the mainland was planning to make use of the territory's debt market for fund raising as the demand for money continued to grow. Mr Cheng said Hong Kong financiers also could build stronger links with China by drawing on their expertise in securities research and distribution, underwriting and fund management, to help mobilise Chinese savings. 'Relying solely on foreign capital to finance China's enormous and necessary infrastructure developments is neither feasible nor desirable,' he said. 'Mobilising savings through the equity and debt markets is the obvious and right way.' China, for its part, needed to create a legislative framework for its fledgling securities industry, which would put mainland markets on a much more stable foundation. To attract a wider institutional investor base, which would provide greater liquidity and stability, Mr Cheng also suggested that China develop a domestic mutual funds industry. Hong Kong fund managers could give mutual funds, as well as privately managed pension funds and life assurance schemes, the respectability they need to survive in China's immature and volatile markets.