Stock market regulators are rapidly becoming one of Hong Kong's top export lines to China. The idea is that seasoned SAR watchdogs will help generate an improved regulatory landscape in China's often lawless share markets, where manipulation and insider trading is standard practice.
Beijing has signalled improved corporate governance as a top priority in its next phase of development. Top policy makers realise that cast-iron rules are needed if stock markets are to develop beyond casinos for the well connected. Mrs Mao in Hunan may have a flutter with spare cash but will never commit her core savings if she is habitually ripped off.
Getting money from China's prodigious savers to companies in need of capital is a pressing priority. A closed capital account has delivered stability but at the cost of a repressive financial system that chokes credit from promising enterprises. Banks remain repositories of deposits and bad loans while bond markets remain rudimentary. As such, developing an equity investing culture has taken on great importance.
The problem is that policing markets to international standards takes more than policy directives from Beijing. Developed markets rely on a comprehensive legal framework and an army of professional workers who are subject to scrutiny and censure. They also require regulators who are not compromised and who police wrongdoing without fear or favour.
Hong Kong got serious about stock market regulation after deficiencies revealed by the 1987 stock market crash. Initially it imported foreign regulators to do the job. They had expertise in the field and were also seen as independent from local business interests.
In recent years, a home-grown crop of SAR regulators has emerged. Those that have recently joined mainland watchdogs are among the best. The formation of such institutional links to the mainland is to be welcomed. In a sense, the SAR imports are playing the same role that 'independent' expatriate regulators continue to have in Hong Kong.
