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Report on cross border financing in Guangdong, Hong Kong and Macao From Deloitte & CPA

The following is the Report on cross border financing in Guangdong, Hong Kong and Macao From Deloitte & CPA recommended by And this article belongs to the classification: Deloitte Consulting , Investment & Economy, research report.

Deloitte China and the Australian Society of accountants jointly released the report “ready to go: cross border financial links in Guangdong, Hong Kong and Macao” to explore the potential of wealth management market in Guangdong, Hong Kong and Macao, and to conduct in-depth analysis on relevant major economic data, market positioning of potential participating banks, relevant policy arrangements based on public financial links, as well as potential challenges and opportunities.

The people’s Bank of China, the Hong Kong Monetary Authority and the Macao Monetary Authority issued a joint announcement earlier this year, saying that the “cross border financial link” pilot project in Dawan district is an important measure to support the development of Guangdong, Hong Kong and Macao Dawan district and strengthen financial cooperation in different jurisdictions. On 25 November, the chief executive of the Hong Kong Special Administrative Region, Mrs Carrie Lam, also mentioned in her policy address that the authorities are speeding up the implementation of the “cross border financial link”.

Ou Zhenxing, managing partner of Deloitte in South China, said: “Hong Kong, Shenzhen and Guangzhou are among the top 10 cities with the highest concentration of billionaires in the world. Naturally, financial institutions and investors are very concerned about the business opportunities brought by cross-border wealth management, and are eager to announce more details.”   

Market research shows that there are more than 450000 high net worth families in Guangdong Province, Hong Kong and Macao with investable assets of more than 6 million yuan, and their cumulative investable assets are at least 2.7 trillion yuan, making Guangdong, Hong Kong and Macao the richest region in the world.

“According to the regulations of the regulatory authorities, cross border financial link requires participating banks to be responsible for distributing financial products,” Mr Ou said. According to the current market practice, these banks will also become investment advisers to cross-border wealth management customers. In other words, these banks will be responsible for the search and sale of qualified wealth management products, as well as the processing, recording and reporting of investment transactions, and also act as gatekeepers. ”   

As of August 2020, more than 200 banks have operations in Guangdong Province, and nearly 200 licensed banks in Hong Kong and Macao, respectively. Among them, 21 banking groups provide banking services in all parts of the Greater Bay area, and 16 of them have retail wealth management businesses in Hong Kong and / or Macao and the mainland of the Greater Bay area. With such a large scale of banks, as well as a large number of wealthy savings customers and rich wealth management product distribution experience, they not only have the favorable conditions to seek regulatory approval to join the cross-border financing plan, but also can quickly start business after obtaining approval.

“Participating banks must establish and strengthen functions such as customer account opening to achieve cross-border transactions and comply with additional regulatory requirements,” said Liu Mingyang, President of the Greater China branch of the Australian Society of Accountants in 2020. According to the joint announcement, the cross-border financial link business funds are bound to the designated cross-border financial link investment account through the main bank account of the same customer to achieve closed-loop remittance and closed management, so as to ensure that the relevant funds are only used to purchase qualified investment products. This means that if there is no designated central currency exchange platform, all potential participating banks must have the capability of RMB clearing and exchange services, or provide relevant services through affiliated banks or third-party banks. Banks providing RMB clearing services in Hong Kong and Macao also need to ensure that they have the corresponding workflow and system support. “

Liu Mingyang analyzed that if the same customer holds a cross-border wealth management account and other accounts at the same time, non investment related transactions between the accounts are likely to be prohibited, and the relevant cross-border capital flow management will also be limited by the accumulated amount and individual amount. The announcement does not mention whether customers can open cross-border wealth management accounts in multiple participating banks. If it is allowed, it may be necessary to establish an information sharing platform among participating banks to collect and report the transaction data of shared customers, so quota monitoring will become complicated. In addition, banks will need regulators to provide more guidance on the operation details of cross-border financial link, including remote account opening, investment and sales compliance requirements, clearing process and dispute resolution channels.

To sum up, the report summarizes four key factors for the initial success of cross-border financial link

With the gradual recovery of China’s economy and cross-border investment products after the epidemic, Dawan district’s ability to create wealth has been improved;

A number of banks with appropriate business capabilities and compliance experience in retail wealth management in Dawan district;

Promote the transformation of Macao’s financial market through more opportunities for cross-border financial cooperation; and

New individual tax incentives will be added to provide tax incentives for investment income of North and South investors, so as to promote new cross-border investment activities in Dawan district.

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