China Wealth Link With Hong Kong to Start in Next Few Days

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(Bloomberg) — China’s long-awaited plan to allow investments for private wealth between Hong Kong and its increasingly affluent southern region is set to kick off in the next few days.

The start was announced on Thursday at a briefing in Beijing by Pan Gongsheng, deputy governor of the People’s Bank of China and head of the State Administration of Foreign Exchange. A link allowing mainland investors to buy bonds in Hong Kong will also start in the next few days, he said. 

As outlined earlier, Wealth Management Connect will apply to residents of Hong Kong, Macau and major cities in China’s southern Guangdong province. Investments are being capped at 150 billion yuan ($23.2 billion) in each direction with an individual quota of 1 million yuan.

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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, a region of 70 million people. The program could yield almost $500 million a year in fees for banks, according to Bloomberg Intelligence estimates.

Hong Kong’s government has embraced closer ties with China since unrest hit the city in 2019, promoting the Greater Bay Area concept that seeks to create a Silicon Valley-style regional economic zone with the nearby mainland cities of Guangzhou and Shenzhen.

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

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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 2 years investment experience and at least 1 million yuan in net household financial assets in the most recent three months to be qualified. 

The plan was announced without details in June last year, just before China unveiled a sweeping new security law in the city to crack down on pro-democracy protests.

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