The imminent launch of China’s Wealth Management Connect (理财通) initiative is expected to serve as a major driver of cross-border investment in wealth management product and mutual funds in the Greater Bay Area of Guangdong, Hong Kong and Macau.
The Chinese central bank in collaboration with financial regulators in Guangdong Province and Shenzhen recently issued the draft version of the “Trial Implementation Rules for Greater Bay Area Cross-border Wealth Management Connect Operations” (粤港澳大湾区“跨境理财通”业务试点实施细则（征求意见稿）) for the solicitation of opinions from the public, shedding further light on the initiative over two years after regulators first flagged its launch.
Wealth Management Connect is expected to create a “closed circuit funds pipeline” in the Greater Bay Area, which will connect the mainland Chinese market with the markets of Hong Kong and Macau and permit reciprocal cross-border investment in the qualified investment products and wealth management products sold by regional banks.
Wealth Management Connect will be divided into the two legs of “Northbound Connect” and “Southbound Connect” under the provisions of the Trial Implementation Rules.
Northbound Connect will entail Hong Kong and Macau investors opening personal investment accounts with mainland banks in the Greater Bay Area to purchase the investment products they offer, while Southbound Connect will enable mainland investors to open personal investment accounts with banks in Hong Kong in Macau to purchase the investment product that they sell.
Under the Trial Implementation Rules the scope for Northbound investment products will include:
- Non-guaranteed net value wealth management products that are categorised as tier 1 to tier 3 in risk terms and have been issued by mainland wealth management companies, including bank wealth management subsidiaries and joint-venture wealth management companies controlled by foreign investors.
- Publicly offered securities investment funds with risk ratings of R1 to R3.
Official sources say that the trials have set a provisional total quota of 150 billion yuan, with individual investors each permitted an investment quota of up to one million yuan.
Domestic analysts say that Wealth Management Connect will expedite the convenience of individual cross-border investment in the Greater Bay Area, further driving the external opening of China’s financial markets.
The inclusion of R1 to R3-rated publicly offered funds will also further expand the mainland investment options of investors on Hong Kong and Macau, given them access to a broader range of investment vehicles including money funds, fixed income funds and bond-focused hybrid funds.