SINGAPORE is unlikely to surpass Hong Kong as the primary source for overseas funding for Chinese enterprises, Frank Wong Kwong-shing, chairman of the Hong Kong Futures Exchange (HKFE), says. This is despite a memorandum of understanding signed between Singapore and China last week strengthening bilateral financial links. Mr Wong said the number of Chinese enterprises listed on the Stock Exchange of Hong Kong would continue to exceed the number listed in Singapore. As of July this year, the HKFE reported 35 China-backed listings in Hong Kong compared to two in Singapore. The 35 Hong Kong issues represented a market capitalisation of US$3 billion. China's signing of the memorandum with Singapore was part of the country's move to go international, Mr Wong said. He said the Hong Kong Monetary Authority also had signed many agreements with overseas markets in order to expand the territory's portfolio and increase financial ties. 'It is inevitable [to internationalise] when China needs so much money to develop its infrastructure. 'It is not because Hong Kong's environment for raising funds is not good,' he said. Lo Ka-shui, Great Eagle Holdings managing director and former chairman of the exchange listing committee, agreed that the territory would remain a hub for Chinese enterprises. Mr Lo said the liquidity in shares of Chinese enterprises was higher in Hong Kong than other overseas markets, and the market had the highest turnover value of 64 per cent, compared to New York and Shanghai. He said Chinese authorities had defined Shanghai as the centre for yuan dealings, and Hong Kong would be the international centre. Mr Wong said Shanghai's progress was impeded by the absence of a fully convertible currency, a free market economy and a mature financial infrastructure on the mainland. Vincent Cheng, executive director of the Hongkong and Shanghai Banking Corp, said recent changes in China's bank laws, while increasing the sector's autonomy and responsibility, also had shortcomings. He said the law retained traces of the centrally planned model, requiring banks to develop under the guidance of state industrial policies and to provide loans for projects approved by the State Council. Commercial bank rates are allowed to fluctuate within a range set by the People's Bank of China, rather than be determined by market forces. 'These remnants of the past are understandable in view of China's need to approach economic reform gradually, but they will undoubtedly slow the required commercial restructuring,' Mr Cheng said. He said that with recent announcement of import tariff cuts and the proposed levelling out of taxation arrangements for foreign and Chinese enterprises, the Chinese authorities had declared that the yuan might become convertible for trade transactions as early as 1996, possibly paving the way for foreign banks to conduct renminbi business.