China unveils financial plan for Hong Kong, Macau to spur tighter embrace of Greater Bay Area master plan

China unveils financial plan for Hong Kong, Macau to spur tighter embrace of Greater Bay Area master plan

Sourec: SCMP

Date: 15 May 2020

  • Beijing explore wealth management connect, the first in bay area
  • Insurers hope to set up services centre in bay area

 

The Greater Bay Area, with a total population of 70 million people across 11 cities and a projected economy estimated at US$1.5 trillion, is the world’s 13th-largest economy – ahead of Spain and behind South Korea – if it were a stand-alone economic entity.

 
The Chinese government is looking to nurture its development into a hi-tech megapolis, combining the technology, financial services and manufacturing prowess of southern China, to rival the Silicon Valley. After the unveiling of the plan, a plot of residential land at the Qiahai district in Shenzhen sold for a record 11.6 billion yuan (US$1.63 billion), as developers piled in to build homes for the expected influx of financial professionals into the GBA.

 

In all, 2,135 funds authorised by Hong Kong’s Securities and Futures Commission (SFC) stand to benefit if they are made available for sale throughout the GBA, with US$1.78 trillion of assets under investments spanning stocks, bonds and other financial products.

 

“The guidelines shed more light on the way forward, and the fund management industry warmly welcomes this,” said Sally Wong, chief executive of the Hong Kong Investment Funds Association (HKIFA), the industry guild for international funds. “These SFC authorised funds offer a wide array of investment options, are well-regulated and have a very robust investor protection mechanism.”

 

Hong Kong’s insurance companies, which may be allowed to set up service centres in the GBA, are also eyeing the Wealth Management Connect to sell funds across the border.

 

“It will help provide better services to the mainland Chinese customers, and help overcome the inconveniences posed by the entry restrictions [into Hong Kong] during the Covid-19 pandemic,” said Eric Hui Kam-kwai, chairman of the Hong Kong Federation of Insurers (HKFI).

 

Mainland Chinese customers bought HK$72.68 billion (US$9.4 billion) in insurance policies in Hong Kong in 2016 during the height of the cross-border influx, or 39 per cent of all premium collected in the city. This declined to HK$43.4 billion last year as Chinese regulators tightened their currency outflow rules to staunch capital flight, while anti-government protests in Hong Kong deterred Chinese visitors.

 

Other parts of the plan include support for the offshore yuan business in Hong Kong and Macau, and strengthening of  Hong Kong’s role as a global hub for the transaction of offshore yuan. A futures exchange will be set up in Guangzhou, while the fundraising of yuan-denominated funds to support the Belt and Road Initiative (BRI) will be encouraged, including support for cross-border bank loans.
 

“The initiatives will further facilitate cross-border trade and investment, deepen Renminbi (RMB) internationalisation, promote financial connectivity and green finance in the GBA,” HSBC’s Asia-Pacific chief executive Peter Wong Tung-shun said in a written statement. “The GBA has the scale to rival well-known city clusters such as the New York Metropolitan Area, the San Francisco Bay Area, and the Tokyo Bay Area.”