Closer integration of the Hong Kong and mainland economies is reflected in our stock market as much as anywhere else. Of the 38 companies that listed on the exchange in the first half of the year, 23 were from the mainland. They raised $46 billion and accounted for 83 per cent of the total value raised by new listings. This is a testament to how effectively our markets are functioning as a means for fuelling mainland growth.
The challenge, however, is that when something goes wrong at one of these companies, Hong Kong watchdogs, such as the Securities and Futures Commission, have to jump an extra hurdle in obtaining the information for their investigations.
What is worrying is that the SFC must now deal with a mainland element of one kind or another in most of its cases, whether it is funds disappearing across the border, executives detained by the Public Security Bureau or, in liquidation cases, companies whose assets are largely held across the border. As we reported yesterday, as many as a fifth of the investigations hit dead ends for lack of basic information from across the border, and lengthy, unexplained delays can be common.
By all indications, the will to co-operate is there. Why else would the agency's mainland counterparts agree to meet several times a year? The problem is a lack of formal mechanisms, without which the decision to pass along information or not seems to be made on a case-by-case basis. Seven years after Hong Kong became a Chinese city and many more since mainland-backed red chips began listing on the stock market, shouldn't the procedures for regulatory co-operation already exist?
What is being sought by the SFC is well short of reciprocal recognition of its legal orders or even transfer of suspects and witnesses back to Hong Kong for questioning. In many cases, the co-operation desired can be as basic as information on where factories are located or copies of bank records. In some instances, there may be requests to interview witnesses.
Worries about blurring the distinction between the two systems or compromising investigations by the PSB need not be triggered by such exchanges. Formal mechanisms, in fact, could be set up to assure that this does not happen. Without them, selective and inconsistent co-operation is almost a guaranteed outcome.
