THE political imbroglio raging between Britain and China over reform in Hongkong is hurting the banking industry, warns Legislative Councillor and Bank of East Asia chief executive David Li Kwok-po. Speaking yesterday after his bank's annual general meeting, Mr Li said trade financing was ''quite seriously'' affected. ''Several companies have told us that they will not open offices in Hongkong or China because they don't understand what is happening here,'' he said. ''I sense that a lot of foreign banks are no longer expanding in Hongkong. In fact quite a number of them have already moved their foreign exchange operations to Singapore. ''Some of the foreign bankers have been telling me that the cost of operating in Hongkong is 30 per cent higher than that of Singapore, and I am concerned about that,'' he said. Also, he hoped the Hongkong Monetary Authority would redress some of the ''unfairnesses'' in the financial system, such as the clearing house being managed by Hongkong Bank and the fact that only foreign banks could issue the territory's currency. ''Government must make certain that they provide a level playing field and I don't think the playing field is level at the moment. I think it is still very much tilted toward certain banks,'' he said. ''Why should no locally incorporated banks be allowed to issue notes?'' he asked. ''I'm not saying that I want to issue bank notes, but those are some of the issues that come straight to mind.'' Mr Li was optimistic that the bank would match last year's 36 per cent jump in profits this year.