Speaking at a conference on the WTO, co-sponsored by the Cato Institute in the US and the Hong Kong Centre for Economic Research, Mr Yam said Hong Kong companies would continue to be important intermediaries in sourcing products and identifying markets. He conceded the longer-term impact was less clear and it was reasonable to expect some erosion of the territory's role.

However, he said that Hong Kong's role was likely to gradually change from one of intermediary to one of proprietor. He commented: 'The WTO will [spur] a vast and rapid increase in China's external trade. Not all of this additional trade will go through Hong Kong, but nor will it avoid Hong Kong. More important still, the stimulus to liberalisation, globalisation and better corporate governance will expand and deepen Hong Kong's well-established role as a fund of professional expertise, a centre of international experience, and a source and channel of investment.'

Some analysts predict that Hong Kong could be eclipsed by other centres, mainly Shanghai. Mr Yam believes there is a role for both cities, with Hong Kong concentrating on developing as an international financial centre and Shanghai on becoming a domestic finance centre. He added Hong Kong banks stood to benefit greatly from liberalisation, providing they could make the best of the opportunities: 'Given also that about 40 per cent of the mainland's trade is routed through Hong Kong, Hong Kong's banks will have an unrivalled advantage over other banks in capturing the increased demand for trade and related financing services. As the largest source of foreign direct investment in the mainland, and as China's main financial conduit and funding centre, Hong Kong will stand to benefit considerably from the increased demand for banking services in China.'