Both retail and foreign investors are allowed to invest in Hong Kong, China's bond market. Regulations governing the protection of bondholders are discussed below.

Retail Investors

There are no existing regulations prohibiting retail bond investments in Hong Kong, China. The Hong Kong Mortgage Corporation (HKMC) pioneered the issuance of retail bonds allocated to retail investors. Other retail bond issuers include the Airport Authority, MTR Corporation, and the Hong Kong Monetary Authority (HKMA). Individual investors who want to subscribe to retail notes must open a bank account with one of the issuer's placing banks or have an investor account with the Hong Kong Securities Clearing Company through a securities broker. Each retail bond carries a minimum denomination of HKD50,000. Placing bank lists and general information and guidelines for opening a transaction account are available on the issuers' web sites linked below.

Foreign Investors

Hong Kong, China generally does not limit the amount of direct investment a foreign company may take in a firm, and does not set restrictions on portfolio investments. Foreign investors may place funds directly into the stock and bond markets.

Bondholder Rights

Section 32 of the Companies Ordinance (The Winding-up law) covers a broad range of claims by creditors, including bondholders in Hong Kong, China. Creditors have the right to initiate bankruptcy proceedings when an enterprise suffers losses and is unable to pay its debt obligations. Incurred costs and expenses in liquidating the enterprise shall be costs payable out of the assets, in priority with all other claims. The complete text of the Winding-up law of the Companies Ordinance is provided through the link below.

The Asia-Pacific Restructuring and Insolvency Guide 2006 includes information on creditor rights in Hong Kong, China. A link to the guide is provided below.

There are no restrictions on portfolio investments in Hong Kong, China, either in the equity or bond markets. There are also no restrictions on foreign exchange transactions nor are there reporting requirements on cross-border remittances.

The Hong Kong Monetary Authority (HKMA) is responsible for maintaining currency stability, primarily through monetary operations and the management of the Exchange Fund (the fund holding Hong Kong, China's fiscal and monetary reserves).

The Hong Kong dollar (HKD) has been pegged to the US dollar (USD) at a rate of 7.80HKD to 1.00 USD since 1983 under the Linked Exchange Rate System. The currency system ensures that the entire monetary base is backed by US dollars at a specified exchange rate, through Hong Kong, China's Exchange Fund reserves. Refinements to the Linked Exchange Rate System in 2005 allowed the exchange rate to move within a band of HKD7.75–7.85 to 1.00 USD.

Capital Inflow

Nonresident investors may place funds directly in money market instruments, purchase debt, or participate in the equities market. There are no limits on direct investment or on foreign equity holdings in local firms, with the exception of television broadcasting (foreigners are limited to 10% equity and can represent a maximum 49% of the voting shares).

Capital Outflow

Residents are free to invest abroad, although there are limits for institutional investors (e.g., investments in banks abroad exceeding set limits require regulatory approval). No restrictions apply on capital repatriation or remittance of dividends and profits. Government approval, however, is required to transfer ownership to another nonresident investor.

Import and Export of Currencies

Article 112 of the Basic Law of Hong Kong, China specifies that no foreign exchange control policies be adopted. There are no restrictions on the amount of foreign currency that can be taken in or out of Hong Kong, China.

Domestic and Foreign Currency Accounts

There are no limitations or restrictions on the amount of foreign currency held locally by residents or nonresidents, or held abroad by residents. Banks are allowed to accept Chinese yuan deposits and offer yuan-denominated accounts, provide foreign exchange and remittance services, and issue credit cards for residents. Additional services are offered to certain businesses to convert yuan deposits into Hong Kong dollars. There are no restrictions on the amount of Hong Kong dollars held locally by nonresidents.

Borrowing and Lending

There are no restrictions on or approval required for residents or nonresidents borrowing from abroad. There are also no restrictions on nonresidents borrowing locally.