The launch of the wealth management connect will have to wait until cross-border travel restrictions are relaxed, but the Hong Kong Monetary Authority is working with mainland authorities to get it off the ground as quickly as possible, according to the head of the de facto central bank.
“As the travel restrictions remain in place, it would be hard to launch the wealth management connect at the moment as investors will need to cross the border to open a bank account,” said Eddie Yue Wai-man, chief executive of HKMA. “It is a national requirement for investors to open an investment account in person at financial firms to allow bank staff to explain the products and risks to the investors.”
The wealth management connect scheme was announced by Beijing in June but no launch date has been fixed. It will allow Greater Bay Area’s over 64 million mainland residents to invest in wealth management products through banks in Hong Kong and Macau. Likewise, the combined 8 million residents from Hong Kong and Macau will be able to invest in wealth products offered by mainland Chinese banks.
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The scheme, which will have an aggregate quota of 300 billion yuan (US$45 billion) for fund movement in both directions under the connect scheme, will allow each investor to invest up to 1 million yuan each.
Yue said that the HKMA was working with the mainland authorities to simplify the process, which would require just one cross-border travel to open a bank account. Usually opening an account requires a lot of documents and the process sometimes requires multiple visits to the bank.
Still, even if Beijing accepts the HKMA’s demand, few investors will do so under the current restrictions. Cross-border traffic has come to a standstill since March last year as a mainlander has to spend almost a month to finish two 14-day quarantine periods – one when they arrive in Hong Kong and another when they return home. Hong Kong and Macau residents face the same requirements.
The insurance industry felt the impact of the travel restrictions as local regulation requires mainlanders to come to Hong Kong in person to buy the products. Mainland Chinese – the biggest spenders on Hong Kong insurance policies before the pandemic started early last year – forked out 84 per cent less in 2020 as the outbreak brought cross-border traffic to a standstill.
“If we launch the wealth management connect when the cross-border travel restrictions are still in place, it will not work well,” Yue said. He, however, was confident of the scheme’s success when cross-border travel resumes.
The various connect schemes launched between Hong Kong and the mainland – stock connect and bond connect – have seen strong investor participation. But these schemes do not require investors to undertake travel. Stock trading turnover under the connect schemes more than doubled last year.
Yue said the HKMA will work on the launch of the southbound segment of bond connect in the second half of this year to allow mainlanders to invest in Hong Kong’s bond market. The northbound link of bond connect was introduced in 2017 for international investors to participate in the mainland bond market.
The eight virtual banks that launched operations last year had a combined 420,000 customers and HK$15 billion (US$1.9 billion) of deposits, while the number of accounts using the HKMA faster payment system reached 7.5 million, Yue said.
“Connect schemes, fintech and green finance will be three major focus areas of the HKMA in the next few years,” he said.
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