The debate over Hong Kong's relevance to future economic development on the mainland has continued to rage since the topic was raised a few weeks ago by a number of top government officials and business leaders.

Many politicians and economists have put forward their viewpoints. But the general consensus seems to have shifted in favour of the argument that Hong Kong has nothing to fear as long as it succeeds in strengthening its existing advantages, especially in financial services. As such, Hong Kong's position as an important source of funds to help finance the economic development of the mainland can be assured.

Indeed, Hong Kong people take for granted many of the advantages their city has enjoyed for so long. As a result, they tend to look immediately for new solutions outside the existing system when they are called upon to face real or imagined challenges posed by changes in the economic environment.

This, of course, is not necessarily a bad thing. There are times when relatively more developed economies need to be re-engineered to survive new challenges. But for Hong Kong, this is not such a time.

In fact, Hong Kong has succeeded in transforming itself from a low-cost manufacturing base to a highly sophisticated financial centre since China began to pursue economic reform and an open-door policy. In the process, many businesspeople in Hong Kong have won fame and fortune.

While their success stories may have enthralled many, it is important to bear in mind that the great adventure was underscored by a long-established social, economic and legal system that has remained largely unchanged. In a recent speech, Martin Wheatley, chairman of Hong Kong's Securities and Futures Commission (SFC), a watchdog agency, summed up the importance of such a system to the operation of an efficient capital market:

"Hong Kong has a fair and open market for all. Almost all international securities firms and investment banks are present in Hong Kong.

"Sophisticated and institutional investors have confidence investing in this market ... Much of this can be attributed to the presence of a robust banking system with a free foreign exchange policy that encourages free fund flows and a free market that is able to realize the potential of full market economy.

"Hong Kong is a place that offers a reliable and transparent regulatory and legal system  the legal system here is well-founded and has proven to be dependable and fair. Parties contracting under the Hong Kong laws can have faith that our judicial system fairly and independently administers the law and that property rights of individuals and corporations are well protected."

It is easy to understand why so many mainland enterprises have tapped the Hong Kong stock market for development funds. Over half of the HK$294 billion (US$38.2 billion) raised in the Hong Kong stock market in 2005 was raised by enterprises from the Chinese mainland or companies that have significant mainland operations, according to Wheatley. This includes the mega listing of the China Construction Bank, which was reported to be the world's largest initial public offering (IPO) since 2001.

The task at hand, Wheatley and others agree, is to enhance market transparency and tighten market regulations against fraud to entice an even greater flow of institutional investment funds to the local bourse. The increase in market liquidity will, in turn, attract more mainland enterprises to seek a listing on the Hong Kong stock market.

A centrepiece in the government's efforts to ensure transparency is the proposal to give statutory power to the Hong Kong stock exchange listing rules, including the important disclosure requirements. Statutory backing of the exchange rules should help bring Hong Kong's regulatory regime into line with international standards and practices.

Other initiatives include tighter regulations on sponsors of IPOs and stock analysts. The government is also stepping up measures to control the level of risk that stock brokerages are allowed to take. In addition, the SFC is keeping a close watch on the increased popularity of stock derivatives to see what new regulations need to be introduced to minimize market risks.

And so it seems Hong Kong is moving on the right track to maintain a relevant role in the development of the mainland economy. A lot more needs to be done, of course. But at least we are not standing still.