Developments like these have enticed high-net-worth individuals from the mainland to use Hong Kong as a base to manage their investments and diversify their portfolio.
“I am very impressed by the thoughtful and excellent quality of service provided by financial advisers in Hong Kong,” said a businesswoman from Guangzhou who only wanted to be identified by her surname Li and was equally reluctant to furnish details about her investments. She frequently travels between mainland China and Hong Kong to see her two teenage children studying here.
“I often seek advice from my relationship manager, who is like a friend, on a wide range of matters. And as Hong Kong offers an extensive array of investment products, my relationship manager selects products based on my preferences and explains them to me.”
She is among the multitude of wealthy mainland residents from the Greater Bay Area who use Hong Kong as an investment base. At the same time, a few ultra-rich investors are mulling setting up family offices here.
The inflow of money from the Greater Bay Area is one of the main reasons for a surge in Hong Kong’s wealth management assets, which stood at HK$30.5 trillion (US$3.9 trillion) at the end of 2022 versus HK$23.96 trillion in 2018, before Beijing rolled out the Greater Bay Area development blueprint in February 2019, according to official data. Non-Hong Kong investors accounted for 64 per cent of the funds in 2022.
The demand for wealth management, investment and insurance from the 86 million people in the Greater Bay Area is huge. It is their buying power that has driven the growth of Hong Kong’s wealth sector over the last five years despite three years of interruption caused by the Covid-19 pandemic that brought travel to a near standstill between Hong Kong and the mainland from 2020 to 2022.
Beijing continues to take steps to support capital flow between Hong Kong and the Greater Bay Area.
From February 26, property buyers from Hong Kong or Macau who purchase real estate in the mainland cities of the bay area will be allowed to transfer the entire amount through their banks to settle the deal, bypassing the daily remittance cap of 80,000 yuan (US$11,240) per day.
Users of the enhanced Wealth Management Connect scheme will be allowed to invest up to 3 million yuan annually – three times the original quota, while the investment choices will be expanded to include Greater China funds.
Dubbed the Wealth Management Connect scheme 2.0, the measures “will help Greater Bay Area customers better diversify their investments and manage portfolios, while bringing significantly more new business opportunities to banks”, said Alson Ho, head of wealth management at Standard Chartered Hong Kong.
The scheme, launched in September 2021, was the first plan tailor-made for the development zone. It allows 24 banks to sell Hong Kong investment products to residents in the bay area’s mainland cities through 31 partners.
Hongkongers waking up to bay area potential – but more needed, say experts
Hongkongers waking up to bay area potential – but more needed, say experts
As of December, the scheme had attracted 69,000 investors, who had invested 12.8 billion yuan, according to government data. This represented only 4.3 per cent of the scheme’s total quota of 300 billion yuan.
Covid-19 travel restrictions, restrictive individual quotas and lack of product choice were the reasons for the lacklustre response to the scheme, according to bankers.
The border reopening in January last year helped move things along, with official data showing cross-border remittances related to the Wealth Management Connect scheme rising almost four times year on year to 10.59 billion yuan in 2023.
HSBC, Standard Chartered, Bank of China (Hong Kong) (BOCHK), Hang Seng Bank and BEA have been actively preparing for the augmented wealth connect scheme by upgrading systems, services and product offerings.
“Banking and wealth-management services demand from the mainland Chinese, particularly those from the GBA, has been continuously growing in recent years,” said Maggie Ng, head of wealth and personal banking at HSBC Hong Kong.
“Our goal is to provide investors in the GBA with a wider range of investment options that cater to different wealth planning objectives and market conditions.”
BOCHK has seen cross-border account openings rise fourfold year on year in 2023 and the trend is set to continue after enhancements to the Wealth Management Connect scheme later this month.
Wealth Management Connect enhancements to boost Greater Bay Area sales: banks
Wealth Management Connect enhancements to boost Greater Bay Area sales: banks
“Hong Kong, as an international financial centre, can offer a wide range of investment products and services to the Greater Bay Area residents,” said Arnold Chow, deputy general manager of the personal digital banking product department at BOCHK. “BOCHK is preparing to widen its product choice for the Wealth Management Connect scheme investors.”
Standard Chartered is also expanding its wealth products for mainland investors to 140 from about 100, while Hang Seng Bank is increasing its offerings to 220 from 140.
Ng, a Hongkonger who frequently travels to the mainland for business and leisure, plans to increase his investments via the wealth connect scheme.
“I think the increase in the personal investment quota to 3 million yuan is still insufficient,” Ng said, who only wanted to be identified by his surname. “However, I believe it is prudent to take a gradual approach to enhance the Wealth Management Connect scheme. I may consider buying Greater China funds to diversify my portfolio.”
Apart from the wealth connect scheme, many rich Greater Bay Area residents are keen on setting up family offices in Hong Kong to invest their wealth, handle succession planning and undertake charity work.
Chief Executive John Lee Ka-chiu set a target in 2022 to bring 200 of the largest family offices to Hong Kong by 2025, to add to the nearly 400 already set up in the city.
Tax concessions and the Capital Investment Entrant Scheme (CIES) introduced by the Hong Kong government have drawn the attention of wealthy families from the Greater Bay Area to invest in or establish family offices in the city, according to Jason Fong, global head of FamilyOfficeHK at InvestHK, a government agency tasked with marketing the city as an international financial centre.
The CIES, announced on December 20 and better known as the investment-migration scheme, offers a faster route to residency for individuals who invest at least HK$30 million in the city’s stock market or other assets, excluding residential property.
The scheme, alongside a tax break introduced in May and other incentives such as the creation of art-storage facilities at the Hong Kong International Airport, is aimed at attracting wealthy families from around the world including those in the Greater Bay Area.
“Greater Bay Area families see great value in these incentives as they provide opportunities to optimise their wealth management strategies and enhance their financial position,” Fong said. “Hong Kong serves as a gateway to international opportunities, enabling mainland investors to diversify their portfolios and tap into global markets.”
Travel between Hong Kong and the other Greater Bay Area cities, which takes only one to two hours via high-speed trains, as well as an active capital market and a wide range of investment services, are some of the other reasons rich individuals from the mainland use the city to manage their wealth, he said.
The Hong Kong government’s tax incentives and other measures since travel restrictions were lifted in January last year have attracted wealthy families, according to Kwan Chi-man, co-founder and group CEO of Raffles Family Office, which has operations in Hong Kong and Singapore.
“The intention of wealthy families to invest in Hong Kong has always been there as the city has always been a go-to destination,” Kwan said. “The GBA is one of the wealthiest regions in the world. We have been strengthening our teams and have made some very strategic senior hires last year in this region.”
Investments in various insurance products is also another factor driving Greater Bay Area residents to Hong Kong.
Between January and September 2023, sales of policies to mainland Chinese customers surged to HK$46.8 billion, or 32 per cent of the total, compared with HK$1 billion a year earlier when the border was closed because of Covid restrictions, according to data from the Insurance Authority.
Total new life insurance sales rose 30.6 per cent in the first nine months of last year to HK$146.5 billion, from HK$112.2 billion a year earlier. This was also 4.8 per cent higher than the HK$139.8 billion recorded in the same period of 2019.
“The appeal of [Hong Kong for GBA residents] lies primarily in their trust in Hong Kong’s well-established regulatory framework and reputation as a global financial hub,” said Patrick Graham, CEO for Hong Kong and Macau at Manulife, the largest pension provider in the city.
“Moreover, Hong Kong offers a wide range of insurance products that cater to the diverse needs of mainland GBA residents.”
HSBC Life, which has wholly owned insurance operations in eight of the 11 cities of the Greater Bay Area, has also seen rising demand for insurance products.
Since the end of the pandemic, mainland visitors have been clamouring for products to manage their wealth and health, according to Edward Moncreiffe, CEO for Hong Kong and Macau at HSBC Life.
“Our strategy is to meet the onshore and offshore needs of our customers across Hong Kong, Macau and Guangdong,” Moncreiffe said.
Meanwhile, the outlook for Hong Kong looks as bright as ever. Plans are afoot by the central government to set up two insurance after-sales service centres in Nansha and Qianhai to serve customers who have bought policies in Hong Kong, with an official announcement to come at a later date.
The soon-to-be-launched enhancements to the cross-border Wealth Management Connect scheme are set to boost sales and capital flows between Hong Kong, Macau and the nine mainland Chinese cities in the Greater Bay Area development zone, Hong Kong’s biggest banks said.
The People’s Bank of China’s (PBOC) Guangdong branch completed a 12-day consultation on December 12 on a wide range of relaxations to the scheme, including tripling individual quotas to 3 million yuan (US$420,745) from 1 million yuan. The new measures will also lower the threshold for mainland investors trading under the scheme, widen product choices and allow securities firms to sell products as well instead of just banks.
The new measures will also relax the sales process, allowing banks and securities firms to introduce product information to investors instead of current practice, where these firms can only execute orders and cannot introduce the products.
The city’s three note-issuing banks – HSBC, Standard Chartered and Bank of China (Hong Kong) (BOCHK) – have all strongly welcomed the enhancements, although the PBOC has not yet named a launch date.
“The proposal is expected to attract more participants to the Wealth Management Connect scheme for their cross-boundary investments, thus increasing the scale of the pilot scheme,” said David Liao, the Asia-Pacific co-CEO at HSBC. “We are studying the proposal and are getting prepared to seize potential opportunities.
“The proposed enhancements will allow more residents in the Greater Bay Area to have a greater variety of investment options. This provides investors with greater flexibility to adjust their investment portfolios in response to market conditions and their risk appetite.”
Wealth Management Connect scheme to increase eligibility, product range, limits
Wealth Management Connect scheme to increase eligibility, product range, limits
The scheme, launched in September 2021, is Beijing’s first plan tailor-made for the 11 cities in the development zone. It allows 24 banks, including HSBC and Standard Chartered, to sell Hong Kong investment products to residents in the zone’s mainland cities through 31 partners.
As of the end of October, the scheme had attracted about 62,900 investors, who had invested 8.66 billion yuan, according to government data. This represented only about 3 per cent of the scheme’s total quota of 300 billion yuan.
“There is demand for cross-border sales of fund products, but the scheme currently is too restrictive,” said Alson Ho, Standard Chartered’s head of wealth management in Hong Kong. “A relaxation of the restrictions would help boost sales.”
The devil in Greater Bay Area’s blueprint stunts cross-border wealth plan
The devil in Greater Bay Area’s blueprint stunts cross-border wealth plan
Sun Yu, chairman of the Hong Kong Association of Banks, who is also the vice-chairman and CEO of BOCHK, also welcomed the enhancements to the Wealth Management Scheme.
“Enhancements to the Wealth Management Connect scheme will support the development of cross-boundary trading and promote the cross-border flow of the yuan, paving the way for the development of the financial sector in the Greater Bay Area,” he added.
Greater Bay Area investors’ need to diversify their investments will further boost sales under the scheme, said Sharine Wong, a senior industry analyst at Bloomberg Intelligence.
Hong Kong, mainland China officials plan Wealth Management Connect scheme revamp
Hong Kong, mainland China officials plan Wealth Management Connect scheme revamp
“China’s policies to stimulate economic growth, investors’ diversification needs and a widening interest-rate differential between the US and mainland China should fuel demand for financial products,” Wong said.
The cumulative value of wealth management and fund products held by Hong Kong and Macau investors totalled 227 million yuan at the end of October, largely steady over the past six months. Monthly northbound sales ranged from 15 million yuan to 29 million yuan from the beginning of this year to the end of October, Wong added.
Bank of East Asia’s co-CEO, Adrian Li Man-kiu, said his bank is well prepared to increase sales via the scheme after the relaxations.
“The Greater Bay Area development zone will be a growth engine of our business,” Li said. “After the relaxation of the sales process, increasing the quota and adding more product choices, sales via the Wealth Management Connect scheme are set to increase in future.”
Allowing securities firms to sell scheme products is a positive, said Katerine Kou, chairwoman of the Hong Kong Securities Association.
“However, it is not going to benefit all the about 600 stockbrokers in Hong Kong, as not all of them have the licence to sell mutual funds,” she added. “Only brokers that have asset-management licences will benefit from the move.”