Secretary for Constitutional Affairs Stephen Lam says the mode of co-operation between Hong Kong and Shenzhen should evolve in step with the economic changes in the two places so that co-operation between the two sides can be diversified.

Speaking at a seminar on Shenzhen-Hong Kong financial co-operation, Mr Lam said a combination of Hong Kong's and Shenzhen's strengths will not only raise the competitiveness of both places, but also enhance the region's financial services.

A recent survey on the competitiveness of Mainland cities said Hong Kong ranked first on overall competitiveness while Shenzhen was the top-ranking city in respect of growth potential, he said.

Technology development

"We have to embark on new modes of co-operation, for example, in the area of innovation technology," Mr Lam said.

"Under the framework of Hong Kong-Guangdong co-operation, the two sides provided a total of $360 million last year to support the research and development of new technology by scientific research institutes and enterprises in the two places.

"This has not only contributed to the advancement of the technological standard of enterprises, but also boosted the development of markets for different products in both places."

The Productivity Council and its Shenzhen counterpart are establishing a joint productivity base to offer services to enterprises in Hong Kong and Shenzhen.

Financial services

In respect of financial services, Mr Lam said in the past few years Hong Kong and Shenzhen had launched Hong Kong dollar and US dollar joint cheque-clearing facilities, as well as the Hong Kong dollar and US dollar cross-boundary Real Time Gross Settlement system links.

Last year, the average daily volume of transactions in Hong Kong dollars was $300 million and US dollars was US$42 million under the cross-boundary Real Time Gross Settlement system links.

Since the commencement of RMB business in Hong Kong in early 2004, the clearing arrangements for RMB business in Hong Kong have been processed via the People's Bank of China's Shenzhen Branch.

"Hong Kong's financial services sector will continue to provide quality services to Shenzhen enterprises," Mr Lam said. "In future, we expect that Shenzhen will become Hong Kong's business partner and we will work together to promote the development of the financial industry."