Compliance
China Loosens Limits On Wealth Connect Scheme

Policymakers have widened the scope and investment freedoms under a scheme that is designed to foster closer wealth management links and business in the Greater Bay Area. The scheme was originally launched in 2021.
Beijing has reportedly tripled the investment limit for people
investing in the cross-border “Wealth Connect” scheme in the
Greater Bay Area. This has come about when China appears to be
under more pressure to encourage capital inflows amid a slowing
economy.
Residents in the Greater Bay Area can now invest up to RMB3
million ($421,790) in the products included in the scheme,
according to the newly-released rules of the pilot scheme issued
by the Guangdong branch of the People’s Bank of China and the
local bureau of the National Financial Regulatory Administration
this week (source: Yicai, The Business Times
(of Singapore) others). The scheme was originally
launched in September 2021.
“The new circular on Wealth Management Connect is a positive and
much welcome development. There are relaxations on distribution
channels, aggregate and individual quota, eligible products, and
promotion and sales activities,” according to KPMG in an emailed statement to
WealthBriefingAsia.
Reports said that the rules also cut the minimum qualification
threshold for investors, which are allowed for financial
institutions other than banks, such as brokers, to participate,
and include more qualified investment products to attract
more individual investors and institutions.
Wealth Connect is designed to bind various jurisdictions, such as
Hong Kong and Macao, more closely to mainland China, fostering
more investment and wealth management business. It also
highlights how Hong Kong SAR is reinventing its status
as being very much a conduit of capital and ideas for China
as it adapts post-1997 as a former UK colony. The move also comes
as policymakers in Beijing wrestle with how to revive China’s
slowing economic growth. China’s benchmark CSI 300 Index has sunk
40 per cent in the past three years, sparking concerns about the
wider health of the Chinese financial system (source:
Bloomberg, 25 January).
KPMG noted that the aggregate quota for the Southbound Scheme
(flows from China to other jurisdictions under the scheme) is
initially set at RMB150 billion, and residents in the GBA area
will be able to invest up to RMB3 million each in Hong Kong’s
wealth management products, which is 3 times the previous
limit.
“The eligible products will also be widened to include all funds
domiciled in Hong Kong and authorised by the SFC [Securities and
Futures Commission] which are not just `low’ risk but also
`medium-to-high’ risk and `non complex’ but excluding high-yield
bond funds and single emerging market equity funds. The expanded
Wealth Management Connect will also allow securities firms to
sell the products, instead of banks only,” KPMG said.
“This will widen the choices for retail investors in the GBA
area, allowing them to have easier and broader access to
global/offshore markets. This will also support Hong Kong to
thrive as an asset management hub and be one of the drivers in
supporting Hong Kong as a super connector between China and the
world, strengthening its position as a global IFC,” the firm
added.