Beijing / Hong Kong - Hong Kong's many business advantages have attracted a considerable number of mainland enterprises to set up base in the SAR. As one of the world's main money centers, Hong Kong not only meets international standards in its market size, variety of products and depth of experience, but also provides companies with well-regulated financial services.

Dong Dengxin, an economist from Wuhan University of Science and Technology in Hubei province, says the SAR's maturity and its positioning as the mainland's leading offshore centre for renminbi (RMB) makes it a good base for Chinese enterprises wanting to develop an overseas market.

BMI Fund Management's president Patrick Shum agrees. He believes the capital market in Hong Kong is important to mainland companies, providing the platform for them "to reach out to the international financial scene".

"Over the past 14 years since the handover, we have seen various state-owned and private enterprises on the mainland list their shares here. Because Hong Kong has the rule of law, sophisticated accounting practices and stringent corporate governance standards, a listing in the city enhances the international reputation of mainland enterprises," Shum says, adding that the Hong Kong stock market will continue to be the testing ground for mainland companies before they pursue a listing on the foreign bourses.

"As the mainland stock markets, like the one in Shanghai, are not yet completely open to foreign participation, mainland companies will prefer a listing in the Hong Kong stock market to bolster their company images." Companies listing in Hong Kong will also benefit from the abundant market liquidity and fund inflow that H-share trading enjoys, Shum says.

"Because of the yuan appreciation prospect, yuan-denominated bonds issued by mainland companies enjoy more market popularity. I think the mainland factor will be very important in the future development of the local bond market," Shum says.

Chak Wong, professor of finance at Chinese University of Hong Kong, agrees. China is too big for just one capital market and the Hong Kong market can comfortably coexist with the one in Shanghai.

Also, only the Hong Kong capital market lives up to international standards, he adds.

Hong Kong has one advantage found nowhere else in China. It has a plethora of financial expertise with well-honed international perspectives and business networks that can and do enhance corporate governance capabilities for mainland companies before they launch global expansion plans.

The inflow of mainland enterprise also helps diversify the financial market in Hong Kong and enhances the competitiveness of its stock exchange, Dong notes.

Instead of relying on traditional finance and real estate sectors, the stock market in Hong Kong has changed its structure and "attracted more international investors to the city".

In June 2010, new listing rules were issued by the Stock Exchange of Hong Kong Limited to attract more mineral and exploration enterprises. Mainland companies have become an important part of the city's stock market, and the relatively low entry standards and simplified listing process contribute to its popularity.

"Shanghai's growth depends on the internationalization of the RMB and the opening-up of the mainland's financial sector," Dong says. "Before these are realized, establishing an international financial center there will only remain a concept."

As a city that attracts a growing number of international and mainland investors, Dong says Hong Kong "sets a good example for other Chinese cities". As for equity listing, the SAR has remained first worldwide in 2010.

There is no question of Hong Kong's importance to China's trade and economy now - and way into the future.