The Chinese government has issued a new directive to advance trials for a wealth management connect initiative linking the mainland market with the markets of Hong Kong and Macau.
The “Memorandum of Understanding Concerning the Guangdong, Hong Kong and Macau Greater Bay Area Undertaking Trials for the Cross-border Wealth Management Connect Initiative” (关于在粤港澳大湾区开展“跨境理财通”业务试点的谅解备忘录) was recently executed by the heads of seven Chinese financial authorities according to an announcement made by the People’s Bank of China (PBOC) on 5 February.
These authorities included PBOC, the Hong Kong Monetary Authority, the Monetary Authority of Macao, the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), the State Administration of Foreign Exchange (SAFE) and the Securities and Futures Commission of Hong Kong.
According to the Memorandum the cross-border wealth management connect trials will be based upon the principle of “regulation in the locality where operations take place,” and abide by laws in relation to wealth management products and sales in the three jurisdictions of Guangdong, Hong Kong and Macau.
Under the trial investors in Hong Kong and Macau will be permitted to engage in “Northbound Connect” operations, and mainland investors will engage in “Southbound Connect” operations. Funds from wealth management products that are redeemed will be remitted across borders in the renminbi, in order to achieve “closed circuit” regulation.
The Memorandum also prohibits the use of funds and wealth management products involved in trials for pledges or guarantees.