Hong Kong sets $23bn cap under new cross-border wealth management scheme
Private-wealth investments between Hong Kong and the mainland will face a 150 billion yuan ($23bn) cap in each direction, the Hong Kong Monetary Authority has said.
Authorities on both sides of the borders have set an aggregated quota of 300 billion yuan ($45bn) in fund movements in both directions between the nine cities in southern Guangdong province and the two special administrative regions.
A launch date has not yet been established for the Wealth Management Connect program, which will take "an incremental approach starting with a smooth launch with possibilities for enhancements down the road," an HKMA representative shared.
Hong Kong is well positioned to capture this potential growth"
When operational, the scheme will enable Greater Bay Area residents to make cross-border investments worth up to 1 million yuan per person. The Guangdong-Hong Kong-Macao city cluster is home to nine large urban centers and two Special Administrative Regions with a total population of 70 million and a combined gross domestic product of $1.6trn.
"Hong Kong is well positioned to capture this potential growth," Edmond Lau, executive director of the Hong Kong Monetary Authority, said at an event in early October.
For a start, only simple investment products with medium to low risk profiles can be sold through the new scheme, the HKMA said. More details will be available as they are finalised, it said.
The 150 billion yuan one-way quota for the Wealth Management Connect is half the limit of a mutual fund recognition scheme introduced in 2015. It is also lower than the 550 billion yuan quota for the two-way Shanghai-Hong Kong Stock Connect, first announced in 2014 and scrapped two years later.
At more than RMB600 billion, Hong Kong has the world's deepest RMB liquidity pool outside of mainland China - a status maintained by a series of initiatives to strengthen business ties between the two regions, including the latest Wealth Connect program.
In 2002, the Qualified Foreign Institutional Investor scheme launched, allowing licensed foreign investors to participate in mainland stock exchanges. This was extended in 2011 to allow overseas investment via offshore renminbi accounts.
The Wealth Connect scheme was first introduced in June when the HKMA chairperson at the time, Eddie Yue, shared how the authority will be taking an "incremental approach" to design a simple and low risk method for investors in the region to take advantage of opportunities across borders.
"A major breakthrough of the scheme is the considerable degree of flexibility given to individual retail investors to open and operate cross-boundary investment accounts directly," Yue said, according to local media.
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