China will launch a long-expected pilot scheme to allow cross-border investment in wealth management products (WMPs) by residents in the semi-autonomous economies of Hong Kong and Macau, the People’s Bank of China (PBOC) said in an online statement Monday.
The scheme will allow residents of the two offshore centres and those in Guangzhou, Shenzhen and seven other cities on the Chinese mainland to buy financial products in each other’s markets.
The PBOC, Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Macau (MAM) issued a joint statement describing only the operating mechanism of the scheme.
The launch date and implementation details of the “Cross-border Wealth Management Connect” will be announced through separate notices, the statement said.
“Cross-border Wealth Management Connect” will be the third cross-border investment programme between the Chinese mainland and Hong Kong following the Stock Connect and Bond Connect schemes.
Similarly to the Stock and Bond connect schemes, the “Cross-border Wealth Management Connect” will involve a mainland-to-Hong Kong and Macau “southbound link” and a Hong Kong and Macau-to-mainland “northbound link.”
The “southbound link”will allow mainland Chinese to invest in Macau and Hong Kong investment products via special investment accounts opened with Macau and Hong Kong banks, while the “northbound link”will permit Macau and Hong Kong residents to purchase mainland Chinese wealth management products by opening special investment account with mainland Chinese banks.
According to the joint statement, cross-boundary remittances will be carried out in renminbi, 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. The aggregate quota will be adjusted through a macro-prudential coefficient.
Welcoming the announcement, Mr Eddie Yue, Chief Executive of the HKMA, said:
“The financial sector has been looking forward to the launch of the scheme to better serve the growing demand for cross-boundary wealth management and investment services by GBA residents. Today’s announcement once again underpins Hong Kong’s strategic importance in the Mainland’s financial open-up process and our unique role in meeting the asset management needs of residents across the boundary.”
In May, China unveiled a financial plan to facilitate cross-border transactions and investments between Hong Kong, Macao and several other cities in mainland China. Elements of the plan include supporting the offshore yuan business in Hong Kong and Macao, setting up a futures exchange in Guangzhou, testing a cross-border cash pool business and supporting cross-border bank lending and payment service providers’ business expansion in Hong Kong and Macao, Caixin Global reported.