CMU operates under the Hong Kong Monetary Authority (HKMA) as a debt securities clearing and custodian system. The RTGS/ CMU interface will enable customers to open US dollar current bank accounts in Hong Kong with the introduction of a two-day settlement cycle whereby US dollar cheques drawn from Hong Kong banks will be settled on the day following presentation of the cheque. The aim of the system is to eliminate the settlement risk associated with the trading of US dollar debt securities in the expectation of attracting more local and foreign investors.

The first phase of the clearing system introduced the RTGS system in August this year. The second phase, installed a month later, utilised payment versus payment settlement for foreign exchange transactions between the US dollar and Hong Kong dollar.

The HKMA has appointed the Hongkong and Shanghai Banking Corporation Ltd (HSBC) as its settlement institution. HSBC Chairman David Eldon said: 'the US dollar clearing system has been operating very smoothly and the response from local and overseas banks has been enthusiastic. I have every reason to believe that the last phase will be equally successful. The introduction of a US dollar cheque service by local banks will provide individual and corporate customers with an efficient and cost-effective way of making US dollar payments.'

Earlier this week Joseph Yam, Chief Executive of the HKMA, addressed a business summit meeting of the Seventh Annual Hong Kong General Chamber of Commerce where he hailed the system as a step closer in attaining the HKMA's goal of establishing Hong Kong as a major financial hub of Asia.

In a speech entitled "Open and Connected: Scaling New Heights", Mr Yam said Hong Kong must concentrate on three global issues - trade liberalisation, globalisation and technology - in its quest to develop into a logistics, financial and digital hub, with China's entry into the World Trade Organisation (WTO) representing a significant opportunity for Hong Kong to strengthen its business and financial role in the world.

'These trends have been in play for a long time' said Mr Yam. 'But there are clear signs that these mediatory and advisory services are now receiving a boost in anticipation of WTO entry, as companies in the Mainland, in Hong Kong and overseas position themselves for new kinds of commercial relationships.'

With regard to globalisation and free trade, Mr Yam said Hong Kong's history as a free and open market will set the jurisdiction in good stead. However globalisation could also bring challenges for China's financial market as external economic crises can lead to a knock-on effect for the country. Mr Yam explained: 'For small and open economies, such as our own, the challenge is even harder to meet, and the measures necessary to prevent market failures have been even more dramatic.'

On the issue of technology Mr Yam praised Hong Kong's recent advances but said: 'In the field of regulation and supervision, we need to ensure that we keep pace with the rapid development going on, so that anxieties about e-money and e-banking - real or imagined - are properly addressed.'

In conclusion, Mr Yam said that all these processes would develop opportunities and as one of the world's most open and connected of cities Hong Kong was capable of meeting these challenges to strengthen its role as a major international finance centre.