China Set to Start Cross-Border Investment Trial in Greater Bay Area

China will soon plug in a long-awaited cross-border wealth management connect trial in the Greater Bay Area while expanding a bond trading link between mainland and Hong Kong investors in a step to promote economic integration in its southern region.

The cross-boundary wealth management connect program, which was announced in June 2020, will start in the next few days, Pan Gongsheng, deputy governor of the People’s Bank of China and head of the State Administration of Foreign Exchange, said Thursday.

The program will allow residents of Chinese mainland cities in the Guangdong-Hong Kong-Macao Greater Bay Area to invest in certain wealth management products sold by banking institutions in Hong Kong and Macao. Residents of the two special administrative regions will also be able to invest in eligible products distributed by mainland banking institutions in the bay area.

Meanwhile, a Hong Kong-mainland bond connect program, which started in 2017, will soon be expanded, allowing mainland investors to trade offshore bonds in Hong Kong, according to Pan. The program is currently limited to the northbound channel, which allows foreign investors to trade bonds on the mainland through Hong Kong.

Caixin learned from the Guangdong provincial government that a press conference is scheduled Friday concerning the wealth link program. The event will be attended by officials from the central bank, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, Caixin learned.

A spokesperson at the Hong Kong Monetary Authority told Caixin that preparations for the wealth product connect program have entered the final stage and further progress will be announced soon.

A draft regulation for the program was issued in May, but no detailed documents were released on what kinds of wealth management products will be available. China set an initial quota of 150 billion yuan ($23.1 billion) for the pilot program. The cap on an individual’s investment was set at 1 million yuan, according to the draft.

Banks including HSBC Holdings Plc, Standard Chartered Plc and Citigroup Inc. have been beefing up their presence in anticipation of the plan, one of the building blocks in integrating the Greater Bay Area. The program could yield almost $500 million a year in fees for banks, according to Bloomberg Intelligence estimates.

The region of 70 million people has total gross domestic product of about $1.7 trillion, an economy similar in size to Canada’s, according to consulting firm Bain & Co. A survey conducted by HSBC and the Nielson Co. (Hong Kong) found that more than 80% of mainland investors in the area plan to invest through the wealth management connect.

The link will open a northbound channel for Hong Kong and Macau residents to invest in onshore financial products and a southbound channel for eligible mainland residents to invest offshore, both with a closed-loop currency conversion regime. China has strict controls on the outflow of capital.

Mainland residents will need at least two years of investment experience and at least 1 million yuan of net household financial assets in the most recent three months to be qualified.

Bloomberg contributed to this story.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

Get our weekly free Must-Read newsletter.