Connect scheme for wealth management in GBA set to bloom

Move aims to better serve individual investors' demands for cross-boundary investment

Showing enthusiasm for the official launch of the Cross-boundary Wealth Management Connect Pilot Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area, many domestic and foreign banks in China are making all-out efforts to meet individual investor demands for cross-boundary investment.

The People's Bank of China, the Hong Kong Monetary Authority and the Monetary Authority of Macao promulgated on Friday the respective implementation details for the pilot scheme, which is significant in spurring interconnection in the GBA and will further improve the two-way opening-up of the financial industry.

Individual residents in the GBA will be able to make use of the channel provided by the scheme to invest in diversified wealth management products across the boundary.

With accelerated integration of the GBA, Guangdong, Hong Kong and Macao residents have close contact with one another, and their cross-boundary investment demand has become increasingly stronger.

Many mainland investors are eager to allocate part of their funds to wealth management products offered by banks in Hong Kong and Macao. Individual investors in Hong Kong and Macao also want to purchase WMPs sold by mainland banks as a way to broaden their investments and share in the benefits of the fast growing mainland economy.

"The establishment of a cross-boundary two-way investment mechanism for individual investors in the GBA is a useful exploration in personal financial investment. It will also help build a quality life circle in the GBA and further deepen cooperation in the region," said Wang Jianzhong, executive vice-president of China Merchants Bank, a national joint-stock commercial lender based in Shenzhen, Guangdong province.

The implementation details for the pilot scheme showed the renminbi will be used as the currency for cross-boundary remittance, transfer and settlement in the scheme, and the exchange of funds will be completed in offshore markets. This will enlarge the size and scope of the cross-boundary use of the renminbi, push for the development of offshore renminbi business and promote the construction of offshore renminbi centers, Wang said.

"The pilot scheme is also a great opportunity for banks, as it will provide a new channel for cross-boundary investment, which is an extremely important supplement to the existing wealth management system of banks," he said.

Previously, mainland banks deployed their wealth management services mainly in the Chinese mainland market. As a result, there remains quite a distance for mainland banks to meet mainland investors' increasingly stronger demand for global asset allocation, he said.

China Merchants Bank has basically completed the construction of a business platform for the Cross-boundary Wealth Management Connect to guarantee the safety of clients' money, and ensure transparency and high efficiency of money transfer routes.

Many other commercial lenders, including Bank of China, also made comprehensive preparations for the scheme in terms of system construction, product selection, interconnected services, investor protection and staff training.

The large State-owned commercial bank said it will take this opportunity to provide clients with all-around cross-boundary financial services and to make continuous contributions to deeper opening up of the financial sector through interconnected collaboration within the banking group.

By launching the scheme, a new channel for cross-boundary asset allocation will be made available for GBA residents. It will bring financial institutions new opportunities for development of the wealth management business, further strengthen interconnectivity among financial markets in the region and give a new impetus to the accelerated construction of China's "dual circulation" development paradigm, a strategy that takes domestic circulation as the mainstay, with domestic and international circulations reinforcing each other, Bank of China said.

The GBA is a key strategic priority of some foreign banks, such as Standard Chartered. The bank invested $40 million to set up the Standard Chartered GBA Centre in Guangzhou, Guangdong province, whose first phase of development is already completed and will house over 1,600 people by 2023.

"The launch of the Cross-boundary Wealth Management Connect Pilot Scheme marks a significant milestone in the integration of economies in the region. Not only will the scheme provide huge opportunities to financial institutions in both the Chinese mainland and Hong Kong, it will also offer individual investors a wider selection of investment choices," said Benjamin Hung, Standard Chartered's CEO for Asia.

"With the pioneering launch in the GBA, the scheme is strategically positioned to facilitate and promote two-way capital flows within the region," Hung said.

HSBC also embraced the implementation arrangements of the pilot scheme.

David Liao, co-chief executive of HSBC Asia-Pacific, said: "The range of eligible products and distribution channels stipulated in the rules reflect a pragmatic approach, taking into consideration the market environment and investors' needs. Products allowed under both 'northbound' and 'southbound' schemes will be of low-to-medium risk to ensure a smooth start."

HSBC aims to be among the first batch of banks to launch the cross-boundary WMC investment service, with over 5,000 retail banking staff members in the GBA supporting the service.

"In the initial phase, HSBC plans to provide over 100 selected wealth management products at low to medium risk, covering all asset classes allowed by the rules. Meanwhile, we expect the demand will continue to grow with increasing economic integration among GBA cities, and the scheme will provide Hong Kong investors direct access to a larger variety of RMB products in the longer run," Liao said.