BUS I N ESS FOC U S
Launch of the cross-boundary Wealth Management Connect Scheme in the Greater Bay Area By Bonn Liu, Partner, Head of Asset Management, ASPAC; Head of Financial Services, Hong Kong, KPMG China & Vivian Chui, Partner, Head of Securities & Asset Management, Hong Kong, KPMG China
T
he Wealth Management Connect Scheme is an initiative that was
processes must meet the regulatory requirements in all three regions.
jointly announced by the People’s Bank of China, the Hong Kong
• The design of the wealth management products (WMPs) must consider
Monetary Authority and the Monetary Authority of Macao. It
the risk tolerance of investors and whether they are qualified investors.
aims to facilitate the seamless delivery of financial services in the Greater
• Before selling WMPs, sales agencies must clearly explain to investors the
Bay Area (GBA), by promoting investment diversification and facilitating
risk management measures, relevant laws and regulations, and relevant
the flow of capital in the GBA, and strengthening Hong Kong’s status as an
provisions for the protection of investors’ rights and interests for WMPs in
international financial centre.
the different regions in the GBA. • Establish and improve their risk management systems to enhance the
The GBA has a combined GDP of USD 1.6 trillion representing a
timeliness and efficiency of risk alerts and reduce their risk levels.
significant growth opportunity for financial institutions. The growing wealth of mainland Chinese residents is leading to increasing demand
Wealth Management Connect is expected to drive greater product
for investment diversification to offshore assets; also, increasingly active
innovation, and may attract more international financial institutions to
northbound trading through Stock Connect and Bond Connect indicates
set up or expand their presence in Hong Kong and the other GBA cities to
that investors in Hong Kong are interested in mainland China’s capital
capitalise on these opportunities. This will likely spur more competition in
markets.
the region, which should raise the bar for product diversity and quality, and robust risk management.
Furthermore, in August 2019, the stock exchanges in Hong Kong, Shanghai and Shenzhen agreed on the criteria for including Hong Kong-listed stocks with weighted voting rights in the Stock Connect schemes, and this has led to an increase in trading volumes. KPMG China is based in 27 offices across 25 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located. KPMG is a global organisation of independent professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG global organisation are affiliated with KPMG International Limited (“KPMG International”), a private English company limited by guarantee. KPMG International and its related entities do not provide services to clients. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.
Under Wealth Management Connect, cross-boundary remittance will be carried out in RMB. Cross-boundary remittance will also be conducted and managed in a closed-loop through the bundling of designated remittance and investment accounts. Through this mechanism, residents of the mainland Chinese cities in the GBA can directly use RMB to invest in eligible investment products distributed by banks in Hong Kong and Macao, and residents in Hong Kong and Macao can use offshore RMB to invest in eligible RMB-denominated assets distributed by mainland Chinese banks in the GBA. The consequence will be the strengthening of Hong Kong’s position as a global offshore RMB hub. Wealth Management Connect is expected to provide investors with greater product diversity and asset allocation options, while also raising the bar for financial institutions in terms of product design, service quality and risk management. The regulatory authorities will introduce measures and establish robust mechanisms for regulatory cooperation, communication and coordination in order to protect the interests of investors. Financial institutions should focus on these elements:
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• Their relevant products’ risk management, compliance and operation 4
