The launch of the cross-border Wealth Management Connect last Friday, Beijing’s first scheme tailor-made for the 11 cities of the Greater Bay Area, marks a further opening up of China’s capital market.
The scheme allows Hong Kong and Macau residents to invest in onshore Chinese fund products through banks in the development zone, while residents in nine mainland Chinese cities in Guangdong province can invest in Hong Kong and Macau wealth products through local lenders.
An initial quota of 300 billion yuan (US$46.5 billion) in fund flows in both directions has been approved by the authorities for the 72 million residents of the Greater Bay Area.
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Banks in Hong Kong like HSBC and Bank of China (Hong Kong) submitted applications on Monday to the Hong Kong Monetary Authority, but the city’s de facto central bank is likely to take some time to approve them. In all probability, the earliest the first products could be launched will be in October.
Hong Kong banks like HSBC are gearing up to launch wealth products catering to mainland investors from the Greater Bay Area. Photo: AFP alt=Hong Kong banks like HSBC are gearing up to launch wealth products catering to mainland investors from the Greater Bay Area. Photo: AFP
Here is what you need to know on how to invest in the new connect scheme:
Who is eligible to invest in the Wealth Management Connect?
To invest in products offered by Hong Kong banks, Chinese investors must have a hukou – or a household registration – in the nine mainland cities of the Greater Bay Area. Alternatively, residents who have paid individual tax or social security in these cities for five years are eligible. Besides, they must also have at least two years of investment experience and a household net worth of 1 million yuan, or total financial assets of 2 million yuan.
For Hong Kong identity card holders, both permanent and non-permanent residents, there is no restriction on their experience or assets.
What are the requirements for Hong Kong residents?
A Hong Kong investor needs to open a remittance account with a Hong Kong bank and an investment account with the local lender’s mainland partner bank. Each individual can only set up one account with one bank on each side. They can use their existing mainland bank account to invest in the scheme, or they have go to the mainland in person to open one.
The HKMA said it was working with the mainland authorities on a pilot plan to allow remote bank account opening as cross-border travel was not possible because of the pandemic.
What are the requirements for mainland investors?
Normally, mainland residents require a valid three-month visa for opening a Hong Kong account. However, this has been waived for those who open an investment bank account with a Hong Kong bank under the Wealth Management Connect scheme. The mainlanders can either come to Hong Kong to open an account in person or they can open account from the mainland remotely by attestation. They will also need to open a remittance account with a mainland bank that is a partner of the Hong Kong lender. Each mainland investor can open one investment account each in Hong Kong and Macau.
Do investors have go to a bank branch to buy the products?
No. After opening the remittance and investment accounts, all investors can trade online or call their bankers to trade the products.
How does the quota affect investors?
Each investor can only trade up to 1 million yuan on a net remittance basis. For example, if a Hong Kong investor remits 800,000 yuan from Hong Kong to the mainland to purchase investment products and later sells some of the products for 200,000 yuan and remits that money back, then he or she will have used 600,000 yuan of the quota. If the 1 million quota is reached, the investment account is suspended and the individual cannot invest more but is only allowed to remit the funds.
What products can investors buy?
The mainland investors can buy mutual funds, bonds and other foreign currency deposits from Hong Kong banks. Both HSBC and BOC(HK) have said they will each offer more than 100 investment funds. Hong Kong residents can invest in low and medium-risk fund products in China.
Can they shift their investments to buy stocks or property?
No. The Wealth Management Connect scheme is a closed loop, which means that after investors trade the products, the funds must be remitted back across the border.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.