In a policy address last week, Tsang said that the financial sector is a major pillar of the Hong Kong economy, and observed that China's rapid development and the opening up of its financial sector have presented unprecedented opportunities for Hong Kong's financial-services sector.

"We will continue to promote integration of the financial systems of Hong Kong and the Mainland through complementary development, mutual co-operation and interaction. We are confident that with the strong support of the Central Government, Hong Kong's financial market will be more vibrant. It will become a broader and deeper market, further strengthening our position as a global financial centre," Tsang stated.

Under the initiative, mainland enterprises and investors will be encouraged to participate in Hong Kong's stock market through the Qualified Domestic Institutional Investors Scheme, and the pilot scheme for Mainland individuals to invest directly in securities in Hong Kong.

"We will also upgrade our market infrastructure, promote financial intermediation, encourage financial reform and launch new financial products to attract more overseas enterprises to list in Hong Kong," Tsang announced.

The SAR government is currently discussing with the Chinese authorities proposals to introduce new types of renminbi business in Hong Kong, including settling in RMB the accounts of imports from China.

"We will also strive to expand the scope of business for Hong Kong's financial institutions in the Mainland, and encourage frequent use of Hong Kong as a platform for more outward investment by Mainland funds, investors and financial institutions," the Chief Executive added.

Hong Kong will also seek to develop an Islamic finance market, Tsang revealed, stepping up efforts to promote Hong Kong's financial services to major Islamic countries and regions, while focusing on developing an Islamic bond market.

The Hong Kong Monetary Authority, in conjunction with the financial sector, is studying related issues and will make recommendations for the early introduction of Islamic debt offerings in Hong Kong.

Tsang explained that the Hong Kong government wants to develop Hong Kong into an arbitration centre in the Asia-Pacific region. With increasing demand for arbitration services in Hong Kong and the region, the number of cases handled in the city is on the rise.

"Hong Kong-based arbitral bodies and their arbitrators, with their status well recognised, are committed to promoting the development of arbitration services. An enhanced arbitral environment will help to further develop our arbitration services. To strengthen Hong Kong's competitive advantage, we have been forging closer ties with international arbitral bodies," he said.

"By updating our legal mechanism, we will add to Hong Kong's appeal as a prime jurisdiction for arbitration. We will consult the public on the new Arbitration Bill, which seeks to align local legislation with international laws and make our arbitration legislation and procedures more user-friendly," Tsang added.

According to the Chief Executive, China's National 11th Five-Year Plan states clearly, for the first time, that support will be given to Hong Kong's development in financial services, logistics, tourism and information services, and the maintenance of Hong Kong's status as an international financial, trade and shipping centre.

To maintain a free and competitive business environment, Tsang revealed that the government has reviewed the competition policy, and launched a public consultation exercise on its findings early this year.

"While the public generally supports the introduction of a competition law, there are concerns in the business sector that the new law may adversely affect normal business operations, in particular those of small and medium enterprises. To allay their worries, we will announce the details of the proposed legislation for public discussion and scrutiny before introducing the bill. Our target is to introduce the bill in the 2008-09 legislative session," he stated.

Tsang added that with these large-scale development projects, Hong Kong will need to expand its pool of skilled workers, and will "require talented people from everywhere". Consequently, to help attract more qualified people, the Quality Migrant Admission Scheme's requirements will be relaxed and widely promoted. Last year, 28,000 foreigners came to work in Hong Kong and settled in the jurisdiction, including about 5,500 from the Mainland.