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China to pilot cross-border wealth management connect in Greater Bay Area for further financial opening-up

July 01, 2020


Abstract : To facilitate cross-boundary investment by individual residents in the Greater Bay Area, the PBOC, the Hong Kong Monetary Authority and the Monetary Authority of Macao have jointly announced the decision to pilot the cross-border wealth management connect in the Greater Bay Area.

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BEIJING, July 1 (Xinhua) -- To facilitate cross-boundary investment by individual residents in the Guangdong-Hong Kong-Macao Greater Bay Area, the People's Bank of China (PBOC), the Hong Kong Monetary Authority and the Monetary Authority of Macao have jointly announced the decision to pilot the cross-border wealth management connect in the Greater Bay Area.

Before launching the pilot, the PBOC will work with financial authorities in Chinese mainland, Hong Kong and Macao to draw up specific rules, strengthen regulatory cooperation and information sharing, ensure investor protection and technical preparations. The inauguration date of the pilot will be separately announced, accoridng to the announcement.

Eddie Yue, chief executive of HKMA, noted that the joint announcement of the overall policy framework of the arrangement marked that the preliminary work had been largely completed and the implementation is drawing close.

-- To further open up financial industry

The cross-border wealth management connect refers to the arrangement under which individual residents in the Greater Bay Area carry out cross-boundary investment in wealth management products distributed by banks in the Greater Bay Area.

The scheme has a southbound and a northbound components, depending on the residency of the investors. Under southbound wealth management connect, residents of cities in Chinese mainland in the Greater Bay Area can invest in eligible investment products distributed by banks in Hong Kong and Macao by opening designated investment accounts with these banks, and vice versa.

The authorities will discuss and agree on the implementation details including investor eligibility, mode of investment, scope of eligible investment products, investor protection, handling of disputes, etc.

Cross-boundary remittances will be carried out in Chinese RMB, with currency conversion conducted in the offshore markets. Cross-boundary fund flows under northbound and southbound wealth management connect will be subject to aggregate and individual investor quota management.

Yue said that the scheme allows retail investors to directly open and operate cross-border investment accounts for the first time and gives them greater freedom to choose wealth management products, and this requires policy innovation.

--To facilitate individual cross-border investment

Wealth management connect is an important measure by the country in support of the Greater Bay Area development and closer financial cooperation between Chinese mainland, and Hong Kong and Macao.

It facilitates cross-boundary investment by individual residents in the Greater Bay Area and promotes the opening-up of the financial markets as well as the mutual social and economic development of Chinese mainland and Hong Kong and Macao, said the announcement.

The pilot program will help meet the needs of residents in the Greater Bay Area for independent individual investment and flexible asset allocation, and facilitate their cross-border investment, the PBOC said.

In Yue's point of view, the arrangement will expand the source of customers and business development space for Hong Kong's financial industry, promote growth of local wealth management business market, drive the development of the whole financial industry chain from product sales, asset management to product development.

"It will expand the hinterland of Hong Kong's wealth management industry, attract more international financial institutions to set up business and allocate more resources in Hong Kong and serve investors, and further strengthen Hong Kong's position as an international financial center and global offshore RMB business hub." Yue  said.

--Promising market

Data suggests that the potential market of the cross-border wealth management connect scheme is large. With the booming economy and growing personal wealth in the Greater Bay Area, residents in Chinese mainland have increasing need in allocating overseas assets to diversify investment.

The Greater Bay Area has a population of more than 70 million, GDP of 1.6 trillion U.S. dollars and a per capita GDP of 23,000 dollars, said Yue.

On the other hand, with the economy developing steadily and the new economy showing great potential, many international investors are continuously increasing the allocation of assets in Chinese mainland, especially RMB assets. The potential returns of wealth management products in Chinese mainland are therefore attractive to Hong Kong investors who are bullish on the economic prospects.

The simultaneous opening of the two-way wealth management connect conforms to the general trend of the residents' demand for cross-border investment and provides a new channel for the efficient flow of funds in the region, noted Yue.

(Edited by Yang Qi with Xinhua Silk Road, kateqiyang@xinhua.org)

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Keyword: Greater Bay Area B&R Weekly cross-border wealth management connect

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