China steps up Hong Kong’s role in wealth, bonds and green finance (2024)

Beijing’s financial authorities have stepped up their support for Hong Kong as China’s global financial hub, after the nation’s bank regulator promised to open the doors for more wealth management products, bonds and green financing instruments to be issued and traded in the city.

The People’s Bank of China unveiled six policies, including the expansion of a transborder investment channel called Bond Connect between Hong Kong and the mainland’s financial markets, starting on February 26.

It also relaxed the rules for cross-border payment within the Greater Bay Area to make it easier for residents of Hong Kong and Macau to buy homes in southern China, providing a crucial crutch for the nation’s ailing property market. Other measure include an expansion of the e-CNY digital currency pilot in Hong Kong and sharing of cross border credit information among banks, according to Eddie Yue Wai-man, CEO of Hong Kong Kong Monetary Authority.

Residents in the nine Guangdong provincial cities that make up the Greater Bay Area will also be able to invest up to 3 million yuan (US$420,000) each in Hong Kong’s wealth management products, triple the previous limit under the Wealth Management Connect scheme.

The measures are aimed at “enhancing the connection between Hong Kong and the mainland markets,” said Hong Kong’s Financial Secretary Paul Chan Mo-po during a press conference at the Asian Financial Forum (AFF). “The measures will strengthen Hong Kong’s position as a connector between China and the world, and the city as an international financial centre.”

Julia Leung Fung-yee, CEO of the Securities and Futures Commission, said the expanded Wealth Management Connect will allow investors to invest in Greater China stock funds and will allow securities firms to sell the products, instead of banks only.

The policies and incentives followed the pledge made earlier today by Li Yunze, the minister of the National Financial Regulatory Administration (NFRA) in his keynote address to the AFF.

Banks based in Hong Kong and Macau will be allowed a broader business scope on the mainland, including the issuance of bank cards, he said. Financial firms from the two special administrative regions will also be able to enjoy a lower qualification threshold for them to invest in mainland insurers, Li said.

“Hong Kong is a well-known international financial centre with a liquid financial market, big talent pool, and [sound] legal environment,” Li said. “The central government supports the development of Hong Kong as a connector between the mainland and the world.”

Chinese banks and insurers will be encouraged to issue yuan-denominated bonds and other financial instruments related to green financing in Hong Kong, he said.

“These issuances will further support the bond market of Hong Kong and its role as an offshore yuan trading centre,” he said.

The overture appeared to have resonated with Egypt’s finance minister Mohamed Maait, who said the country is exploring opportunities to issue green bonds and other instruments in sustainable finance in multiple currencies.

Egypt, the host nation for the 2022 United Nations Climate Change Conference (COP27), could well consider issuing dim sum bonds, which are yuan-denominated bonds issued in Hong Kong, said Christopher Hui, the Secretary for Financial Services and the Treasury. Hui hosted a panel discussion with financial officials from Thailand, Indonesia, Egypt and Croatia, offering the city as the destination for them to raise capital.

Hong Kong, which has been trying the e-HKD, will also be the testing ground for the Chinese central bank digital currency called the e-CNY, consistent with how the Hong Kong dollar and the renminbi are both used in the city.

Will Greater Bay Area solidify Hong Kong’s role as a fintech hub?

With the theme ‘Multilateral Cooperation for a Shared Tomorrow”, the 17th AFF has attracted more than 3,000 attendees over two days.

“Hong Kong will be at the heart of the continuing eastward shift of economic prospects,” Chief Executive John Lee Ka-chiu said in his welcoming speech to kick off the event. “We are the ‘superconnector’, as well as the ‘super value-adder’ bringing East and West together for rewarding opportunities long down this 21st century road of promise.”

The new policies and measures will support Hong Kong’s integration with the Greater Bay Area, said Tom Chan Pak-lam, permanent honourable ­president of the Institute of Securities Dealers, an industry body for stockbrokers in the city.

“The new measures may also help to improve stock market sentiments in Hong Kong and the mainland, and encourage more investment in the Bond Connect and Wealth Management Connect, which would enhance Hong Kong’s role as an international financial centre,” he said.

China will continue to open its economy and financial system to global investors, said Li, a veteran banker who was nominated last year as the first minister to run the NFRA. The new body is an enlarged version of the China Banking and Insurance Regulatory Commission, the regulatory body for the country’s banks and insurers.

China’s various transborder investment channels, the so-called Connect schemes, will continue to be enhanced and enlarged for more capital to flow from abroad via Hong Kong into the mainland’s bonds, stocks and derivatives, he said. Similarly, mainland capital will be allowed to flow into international issues via Hong Kong.

“The open door policy is a long-term state policy for China, and the driving force for the financial markets in the country,” Li said. “We will support more foreign firms investing in China and will offer them a good business environment, with investor protection. The doors of the financial sector will continue to widen.”