Hong Kong banks to open joint venture brokerages in Qianhai economic zone

HSBC, Bank of East Asia and Hang Seng Bank on track to unveil joint ventures in the special economic zone

PUBLISHED : Thursday, 18 February, 2016, 2:43pm
UPDATED : Thursday, 18 February, 2016, 4:49pm

Qianhai, the special economic zone next to Shenzhen, will allow HSBC and Bank of East Asia to set up two joint venture brokerage firms this year targeting mainland clients.

Witman Hung, principal liaison officer of the Hong Kong office of the authority managing Qianhai, said HSBC will hold a majority stake in its joint venture brokerage. Normally foreign firms are only permitted to hold minority stakes in joint ventures.

Bank of East Asia will hold a minority stake in its joint venture brokerage.

Swiss lender Credit Suisse said in November its 33.3 per cent owned securities joint venture Credit Suisse Founder Securities had got approval to expand into offering securities broking services in Qianhai this year.

Hung said Hang Seng Bank will also set up a joint venture fund house in Qianhai this year, which will be the first in the special economic zone.

The brokerage houses and fund companies will bolster the depth of financial companies operating in Qianhai, which is already home to branches for HSBC, Industrial and Commercial Bank of China and others.

“Qianhai seeks to develop financial services and this will continue to be our focus this year,” Hung said in a media briefing on Thursday.

Christopher Cheung Wah-fung, legislator for financial services sector, hopes to see Qianhai allow more Hong Kong brokerage houses to set up majority-owned joint ventures.

“So far, only HSBC has the right to set up a joint venture broker with a majority stake in Qianhai,” he said.

“Hong Kong brokers can bring in their knowledge about stock markets to serve the mainland clients. This would be important when the Shenzhen and Hong Kong stock connect would be launches there,” Cheung said.

He said there were 43,827 companies registered to set up in Qianhai last year, more than double the figure for 2014. In total 67,472 companies will be registered in the zone, representing 3.547 trillion yuan (HK$4.24 trillion) in capital. Among these, 2,439 are Hong Kong companies representing a capital base of 322.7 billion yuan.

More than half the companies registered in Qianhai are financial firms. Information technology ranks No 2 with a 23 per cent share, while logistics companies are third with an 14 per cent share and communications companies make up the fourth spot with a 11 per cent share.

Companies registered in Qianhai which meet certain criteria are assessed preferential tax rates of 15 per cent, compared with the conventional 25 per cent. Qualifying individuals are assessed a 15 per cent rate, compared to the standard 40 per cent.

“The tax benefit is attractive and some multinational firms also consider setting up business there.”

Hung said the cross border loans between Hong Kong and Qianhai last year reached 33.6 billion yuan, up 10 per cent from 2014.

Seven law firms has been set up in Qianhai. Hung however said there were no accounting firms nor insurance companies taking up residence yet.

Hung said accounting firms are wary of requirements that stipulate they must reside in China for 180 days per year in order to qualify for access to Qianhai.

“We want to lobby for the accounting authority to accept Hong Kong is part of China so that the days they stay in Hong Kong to be counted as staying in China,” Hung said.

A recently-opened retail market located within Qianhai received 1.5 million visitors in the three weeks leading up to the Lunary New Year.

“It was popular as this is a new attraction in the area. Many family visited during the weekend,” Hung said.