Hong Kong, China financial watchdogs to give Wealth Management Connect more muscle by adding products, increasing participation: Eddie Yue

Expansion and enhancement of connect schemes crucial to promoting cross-border use of the yuan, HKMA CEO tells summit
Possible new measures could include improved sales arrangements, expansion of product range and participation of more financial institutions

Hong Kong Monetary Authority (HKMA)

Enoch Yiu

Published: 3:00pm, 16 Sep 2022

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Hong Kong is working with mainland Chinese authorities to enhance the one-year-old Wealth Management Connect scheme, the Hong Kong Monetary Authority’s (HKMA) CEO said on Friday.

Possible new measures could include improving sales arrangements, expanding the product scope and allowing more financial institutions to participate, Eddie Yue Wai-man, who leads the city’s de facto central bank, said in a pre-recorded online speech delivered at the annual summit of the Treasury Markets Association.

“The expansion and enhancement of the connect schemes to promote the cross-boundary use of the yuan is crucial,” he said. Yue did not provide a timeline for the new measures, but said the enhancements were important for Hong Kong’s role as a leading offshore yuan trading centre.

The cross-border Wealth Management Connect scheme was introduced on September 10 last year, as Beijing’s first plan tailor-made for the 11 cities of the Greater Bay Area. It allows 24 Hong Kong banks, including HSBC, Standard Chartered and Bank of China (Hong Kong), to sell Hong Kong investment fund products to the residents of Greater Bay Area cities through their mainland banking partners. Mainland investors can also trade Hong Kong and Macau investment fund products through these banks.

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The scheme had attracted about 24,000 investors as of the end of February, who had made investments worth 670 million yuan (US$95.6 million), according to People’s Bank of China (PBOC) data.

A lack of knowledge might have held back some investors, according to industry body Hong Kong Investment Funds Association. Sally Wong, the association’s CEO, said more investor education and enhancement of sales arrangements would be helpful.

‘We will overcome current and future challenges … by constantly evolving to meet the needs of the nation and of the world,’ Eddie Yue says. Photo: Xiaomei Chen

The Hong Kong Federation of Insurers, another industry body, welcomed the participation of more financial institutions in the scheme. “We welcome any measures which open up Hong Kong’s leading insurance products and services to more customers in the mainland,” said Selina Lau Pui-ling, the federation’s CEO. At present, only banks can sell products through the scheme.

Hong Kong will develop more offshore yuan derivative products, such as Chinese government bond futures, to allow global investors to hedge their risks in trading yuan products, Yue said. “These are important steps to allow global investors to conduct hedging for their bond investments on the mainland,” he said.

The China Securities Regulatory Commission would help the city launch futures trading linked to central government bonds, Fang Xinghai, its vice-chairman, said earlier this month.

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He also announced a plan allowing foreign companies listed in Hong Kong to be added to the Stock Connect schemes. Hong Kong is also planning a law change this year to allow mainland investors to trade shares in yuan in the city, in addition to those in Hong Kong dollars.

These new measures came after the PBOC upgraded Hong Kong’s yuan settlement programme into a permanent arrangement in July, and raised the permanent allocation by 60 per cent to 800 billion yuan.

These measures will support Hong Kong in its role as the largest offshore yuan trading centre globally and as a connector between China and the world, Yue said.

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“We have lived through many financial and other crises, we have just come through a pandemic, and we are all aware of the geopolitical challenges across the world,” he said.

“We will overcome current and future challenges, as we’ve done so in the past, by constantly evolving to meet the needs of the nation and of the world.”

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