Cross-border clearing and settlement linkages between the Mainland and Hong Kong have been expanding in recent years, both to satisfy growing demand and in anticipation of future liberalisation.

This is the message from Monetary Authority Chief Executive Joseph Yam in his latest Viewpoint column, posted on the authority's website today.

Mr Yam said quiet and rapid developments in the infrastructure linking the financial systems of the Mainland and Hong Kong have not been motivated so much by existing demand but more by foresight.

They were organised ahead of time, in anticipation of, and also in the hope of generating, more traffic of money between the two economies.

"Although there are still many restrictions on the Mainland on cross-border and cross-currency flow of funds, these restrictions are likely to be progressively removed," he said.

"This is the declared intention in the reform and liberalisation of the Mainland, and we can expect free cross-border flow of funds in the fullness of time."

Strategic importance

Mr Yam said it is of strategic importance for Hong Kong, as the international financial centre of China, and hopefully also aspiring to be a domestic financial centre of China, to prepare itself well for attracting the monetary traffic its way.

"Our priority has therefore been to promote and facilitate the use of these well-established payment methods to effect cross-border large-value transactions between the Mainland and Hong Kong, starting modestly with cheque clearing and extending to Hong Kong dollar and US dollar Real-Time Gross Settlement."

In the meantime, the following cheque clearing and Real-Time Gross Settlement linkages have come into effect:

* Hong Kong dollar and US dollar two-way joint cheque clearing between Shenzhen and Hong Kong;

* Hong Kong dollar two-way joint cheque clearing between Guangdong Province and Hong Kong;

* Hong Kong dollar and US dollar two-way Real-Time Gross Settlement linkages between Shenzhen and Hong Kong; and,

* Hong Kong dollar and US dollar two-way Real-Time Gross Settlement linkages between Guangdong Province and Hong Kong.