China in Focus
GBA Boom for Financial Services
GBA Boom for Financial Services<br/>摩拳擦掌把握大灣區金融服務機遇

GBA Boom for Financial Services<br/>摩拳擦掌把握大灣區金融服務機遇

The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) strategy has been one of the key focus areas of the Financial Services Development Council (FSDC) since the initiative was officially launched in 2017. 

FSDC aims to facilitate the financial services industry to tap the massive potential in the region, and strengthen the ties between the financial markets of Hong Kong and the Mainland, thus reinforcing Hong Kong’s status as an international financial centre.

 

Policy recommendations

In June, the FSDC published a policy paper entitled “Hong Kong’s Unique Role in the Financial Connectivity of the Greater Bay Area.” The paper, prepared by a working group of industry experts and academics, proposes recommendations to enhance the financial connectivity of the GBA. The recommendations focus on the practical needs of GBA residents for cross-boundary transfer payments, bank account services, mortgage financing, insurance and wealth management. Key recommendations include:

  • To connect payment and transfer infrastructure in the GBA, and enhance the efficiency of cross-boundary payment and settlement through establishing an interconnected system, laying a strong foundation for connecting financial services and integrating the living circle in the region; 
  • To enhance the convenience of remote cross-boundary account opening, expanding the scope of participating Hong Kong banks therein, and streamlining account opening procedures; 
  • To foster cross-boundary property-backed mortgage loans in response to growing property purchase demand in the GBA, by coordinating with relevant Mainland authorities to gradually expand the existing pilot programmes and further clarify the implementation procedures, thus standardising mortgage registration by Hong Kong financial institutions across the GBA;
  • To develop cross-boundary insurance business, including establishing insurance service centres in a timely manner, exploring joint development and mutual recognition of cross-boundary insurance products, and enhancing the convenience of currency exchange procedures to answer to the livelihood needs of GBA residents, while accumulating experience for the coordinated development of cross-boundary insurance business in the long term; and
  • To expand two-way wealth management and investment channels, pushing forward the timely launch of the Wealth Management Connect, starting from investment products with simple and transparent structure and adopting closed-loop capital flow and investor suitability requirements.

 

Latest Developments

The Government and relevant regulators have committed to working together to implement the various GBA policy initiatives announced so far, including the highly anticipated Wealth Management Connect. On 30 June 2020, the Hong Kong Monetary Authority (HKMA), together with the People’s Bank of China and the Monetary Authority of Macao, issued a Joint Announcement of the Pilot Scheme, which included further implementation details. These include:

  • Wealth Management Connect is two-way: the scheme has southbound and northbound components depending on the residency of the investor. The Joint Announcement also confirms that investments would be made through designated accounts of the investors with the banks in their resident city. 
  • Use of funds: cross-boundary remittance under the scheme will be conducted and managed in a closed loop through the bundling of designated remittance and investment accounts to ensure that the relevant funds will only be used to invest in eligible investment products.
  • RMB cross-border settlement: cross-boundary remittances will be carried out in RMB, with currency conversion conducted in the offshore markets. 
  • Quota management: cross-boundary fund flows under the 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.

As the policy framework for Wealth Management Connect continues to emerge, revealing more details about implementation, banks and asset managers now have a clearer picture of the strategic direction, and are able to make better decisions in allocating resources in preparation for the scheme. 

In addition to the Wealth Management Connect, progress has been made on other fronts. For example:

  • Cross-boundary mortgage loans: Guangdong has approved the “Action Plan for Implementing Opinions on Financial Support for the Construction of the Greater Bay Area,” in which it states that it “supports Mainland GBA cities to develop cross-boundary real estate mortgage registration, allowing Hong Kong and Macao residents to mortgage their self-owned residential properties purchased in the GBA to offshore banks to facilitate Hong Kong and Macao residents to purchase properties in the Greater Bay Area.” This aligns with our recommendation of establishing clear and unified cross-boundary mortgage financing requirements and procedures across the GBA, which we believe will be conducive to promoting the flow of talent in the GBA and creating an integrated living area.
  • Regarding professional qualifications, the Standing Committee of the National People’s Congress authorised the State Council to launch a pilot scheme in the nine Mainland GBA cities, which allows eligible Hong Kong and Macao legal practitioners to practise in specific areas of Mainland law upon passing a special examination and obtaining the relevant practice qualifications. This is another steady step towards unifying qualifications in accordance with the CEPA Trade in Services Agreement, laying a solid foundation for more integrated professional services to provide support to businesses, including those in the financial services industry.

 

Conclusion

These are just a few examples of the rapidly developing market and policy environment in the GBA, even at a challenging time when the pandemic has hindered most business activities and the physical flow of people across boundaries. This shows the organic momentum that is driving the region to develop and integrate at an unstoppable pace. 

Now that we may be seeing the pandemic easing, we believe that participants in the financial services industry will again be rolling their sleeves up to embrace the US$1.6 trillion market in the GBA, identify the financial needs of the 70 million residents, and capture the tremendous business potential across the region.

 

Dr Rocky Tung, Head (Policy Research), Financial Services Development Council

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