The long-anticipated mutual fund recognition scheme, which would allow Hong Kong-domiciled funds to be sold on the mainland and vice versa, has completed all preparatory processes and is awaiting final approval from mainland regulators, Securities and Futures Commission deputy chief executive Alexa Lam Cheung Cheuk-wah said yesterday. "I believe the mainland watchdogs have recognised the importance of the scheme and I think they are waiting for the most appropriate time to announce the [start] of the scheme," Lam said. Her comments come after China Securities Regulatory Commission chairman Xiao Gang told the Asia Financial Forum last month that mutual fund recognition would be the next important project to push forward after the Shanghai-Hong Kong Stock Connect scheme. Lam, who will retire at the end of this month after serving with the securities watchdog since 1999, said Hong Kong would remain a reform testing centre for the mainland despite competition from other cities in offshore yuan business and the rapid opening of the mainland market. The SFC and CSRC started discussing mutual recognition for fund products in 2012. Lam said last year the regulators were in the "final stretch" of talks. Lam has said the first batch of funds to be allowed for sale on the mainland could be plain vanilla mutual fund products, such as equity and bond funds, while the second batch would include exchange-traded funds. Eligible products must be domiciled in Hong Kong. Most Western asset management houses only have sales centres in Hong Kong and their funds are not domiciled in the city because of tax and structure issues. Of the 1,700 authorised funds in the city, only about 300 are domiciled as of 2013. "We don't want this Hong Kong structure to be just [like] an email box," Lam said yesterday. "We want Hong Kong to become a real asset management hub, with activities to be played by Hong Kong managers. The activities include portfolio management, foreign exchange management and hedging." According to Z-Ben Advisors, mainland mutual fund market assets totalled US$440 billion last year and are expected to grow to US$1.02 trillion by the end of 2020. Separately, Lam highlighted the central government's New Silk Road plan as a golden chance for Hong Kong, which could act as its core financial centre for capital raising.