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China, Hong Kong, Macau to link wealth management markets

Cross-boundary remittances will be carried out in renminbi, with currency conversion conducted in the offshore markets
posted onJune 30, 2020

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.