China opens wealth tap to HK amid political crackdown

Beijing

CHINA moved to further deepen its economic ties to Hong Kong, allowing two-way cross-border purchases of wealth products at the same time authorities in Beijing push to quell dissent in the former British colony.

Regulators on Monday announced the kick-off of a long anticipated programme dubbed Wealth Management Connect, which will allow Hong Kong residents and people in Macau and southern China to invest across the border. Flows under the programme will be handled in a "closed loop" through the bundling of designated remittance and investment accounts, the People's Bank of China said in a joint statement with the monetary authorities of Hong Kong and Macau.

Fund flows under the north-bound and south-bound connect will also be subject to aggregate and individual quotas, said the statement. The date of a formal launch and other details, such as what investments will be allowed, will be announced after a consultation.

In the joint statement on Monday, the authorities said the plan "promotes the opening-up of the mainland's financial markets, as well as the mutual social and economic development of the mainland, and Hong Kong and Macau." Hong Kong has been gripped by political turmoil over the past year amid growing calls for democracy.

The wealth connect announcement comes as lawmakers are meeting in Beijing to discuss a new security law, which would bar subversion, secession, terrorism and collusion with foreign forces in the financial hub. A vote could come on Tuesday morning, the day before the anniversary of the city's 1997 handover to China, Now TV News reported.

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Authorities have sought to reassure investors that Hong Kong will remain a stable place to invest amid speculation over capital outflows. While there has been no sign of an exodus, Hong Kong's rich are increasingly hedging their bets amid the worst economic and political crises since the handover.

Beijing has also pledged commitment to the city's status as a finance hub. Mainland investors boosted share purchases over the past months through the so-called stock connect link, while a number of high-profile Chinese firms listed shares in Hong Kong.

The wealth connect plan "has strategic importance, reinforcing Hong Kong's position as a wealth management hub", said Sally Wong, chief executive officer of Hong Kong Investment Funds Association. "It provides important investment channels for mainland investors to achieve diversification."

Chief Executive Carrie Lam has lobbied for more financial integration, telling Chinese officials that the city should become a global hub for private wealth and a more prominent offshore renminbi centre. She said the plan "demonstrates the strong support of the central government and the importance it attaches to financial development in the Greater Bay Area, underlining the solid backing from the country and that Hong Kong continues to play a leading role in the country's economic development and opening up of financial markets".

Companies that could stand to benefit include life insurers in Hong Kong, which have struggled with a choke-off in inflows from Chinese customers due to the protests and Covid-19. BLOOMBERG