people ’ s bank of china is prepared to : 1. control money supply. our preliminary proposal is to contain the increase of next year ’ s total money supply ( m2 ) within the range of 23 % to 25 %. 2. adjust the credit structure. the total amount of loans to the agricultural sector will be increased. economic integration and the setting up of conglomerates will be encouraged. efforts will also be made to promote the development and sale of residential property. 3. conduct monetary operations. employ more frequently monetary policy instruments such as interest rate policy, reserve requirements and open market operations to regulate the money supply. 4. deepen financial reforms. reforms of state banks should be stepped up. new commercial banks will be set up. the policy of transforming rural credit co - operatives into co - operative financial institutions will be maintained. direct financing will be developed in a prudent way with better management. in addition, the financial sector will continue to open up. 5. foster risk management. continue the rationalisation of financial order and prevent and eliminate financial risks. it is envisaged that china ’ s economy and society will continue to develop steadily in the coming years and objectives embodied in the “ ninth five - year plan ” can be achieved. china will enter the 21st century with a dynamic economy and society. ii. basic principles and policies governing the financial relationship between mainland china and hong kong after 1997 as china and hong kong have different currencies and financial systems, people from hong kong as well as the international community are very much concerned with how the principle of “ one country, two systems ” can be implemented as regards financial issues. it is because the implementation of this principle has direct bearings on the prosperity and stability of hong kong as well as the status of hong kong as an international financial centre. “ the basic law of the hong kong special administrative region of the people ’ s republic of china ” lays down specific provisions relating to hong kong ’ s status as an international financial centre, its monetary and financial policies, the status of the hong kong dollar and the issuing arrangements, capital flows and the role of the exchange fund. our national leaders have reiterated on different occasions that the people ’ s bank of china, which is the central bank of the people ’ s republic of china, should insist on implementing the “ basic law ” and the principle of “ one country, two systems ”. we should also protect the financial relationship between hong kong and the mainland which can be summarised as “

. 6 billion, accounting for 58 % of total foreign investment in china. in 1995, 90 % of the syndicated loans to china were arranged in hong kong and 90 % of the chinese companies listed on overseas stock markets have their primary listing in hong kong. the volume of import and export trade between the two places amounted to us $ 44. 6 billion last year, accounting for 15. 9 % of china ’ s total external trade. if hong kong ’ s entrepot trade which came from china is also taken into account, the figure reached us $ 124. 1 billion, accounting for 34. 1 % of hong kong ’ s total external trade in that year. the number of mainland financial institutions in hong kong is on the rise and vice versa. these institutions are going to provide a whole range of financial services which are conducive to the continuous and stable development of the economic relationship between the two places. china will further open up its financial markets. this includes the opening up of more districts, the gradual relaxation of renminbi business and the gradual introduction of the investment banking mechanism. the hong kong financial sector will directly benefit from these moves since they will offer numerous business opportunities. in the course of stepping up our pace of financial reforms, we have to keep on learning from advanced international management experience and to provide training to outstanding personnel. we hope that the financial community in hong kong will provide us with assistance and support in these areas. before ending my speech, i would like to point out that the hong kong association of banks has contributed a lot in assisting the hkma to ensure the financial stability of hong kong. i hope all of you will continue to give your support to the hkma and play a more active role in promoting economic and financial developments in hong kong and its smooth transition. i would also like to announce that an association of mainland banks will be formed this year. i hope that the two banking associations will strengthen their exchanges and co - operation and work together for a more prosperous future. a delegation from the hong kong association of banks will visit beijing in a few days. i would like to welcome the delegation on behalf of the people ’ s bank of china. i will meet with some of you again on that occasion. we can further exchange views on the strengthening of co - operation between the banking sectors on the mainland and in hong kong.