Five takeaways from China’s Wealth Management Connect scheme
After a year of testing, China announced the rollout of a ground-breaking wealth management scheme that binds Hong Kong with Guangdong province. It should prove a boon to Hong Kong banks and mainland investors – and to Hong Kong itself.
On Friday, China fired the starting gun on Wealth Management Connect (WMC), which binds Hong Kong more tightly to the southern province of Guangdong.
The cross-border scheme aims to tick a lot of boxes, from promoting the global use of China’s currency, to boosting Hong Kong’s role as a hub for offshore yuan, to allowing millions of mainlanders to buy offshore investment products.
There is a lot of wheat to separate from chaff, so here is our pick of the crop.
1. No surprises
The latest in a series of financial expansion schemes announced by China since Covid, WMC will let residents of Hong Kong and Macau buy mainland investment products sold by banks within the cross-border Greater Bay Area (GBA). In turn, mainlanders in nine Chinese cities, including Shenzhen and Guangzhou, can buy wealth management products (WMPs) sold by banks in the two offshore centres.
At first, WMC will have a total size or quota of Rmb300 billion ($46.5 billion), meaning net cash flows in each direction cannot exceed Rmb150 billion. Investors are limited to an individual quota of Rmb1 million.