China Expands Scope For Wealth Management Services

by Mary Swire, Tax-News.com, Hong Kong

14 May 2007

The China Banking Regulatory Commission (CBRC) announced on Friday that the investment scope for offshore wealth management services provided by commercial banks on mainland China will be expanded to include equity investments, subject to certain conditions.

The Hong Kong Monetary Authority (HKMA) welcomed the expansion and the CBRC’s decision to use the Hong Kong market and Hong Kong authorised and regulated financial products and intermediaries to implement it.

Following the publication of the action agenda on “China’s 11th Five-Year Plan and the Development of Hong Kong” early this year, the Financial Secretary, Henry Tang, has initiated follow-up work in pursuit of the recommendations. In relation to the recommendation by the Focus Group on Financial Services that greater use be made of Hong Kong’s financial platform to facilitate orderly outflows of funds from the Mainland, the HKSAR Government has been actively discussing relevant proposals with the Mainland authorities. It is believed that CBRC’s measures are a concrete response to the recommendation by the Focus Group on Financial Services, and will provide Hong Kong banks and the financial industry with increased business opportunities, while enhancing the co-operation and development of the Mainland and Hong Kong financial institutions and contributing to the maintenance of the status of Hong Kong as an international financial centre.

Effective supervisory co-operation between Mainland and Hong Kong authorities was an important factor supporting the introduction of the new measures by the CBRC. After the launch of offshore wealth management services by banks on the Mainland last year, the CBRC and HKMA, in conjunction with the State Administration of Foreign Exchange and the Hong Kong Securities and Futures Commission, established a four-party working group to discuss related matters including the development of offshore wealth management services by banks, strengthening supervisory co-operation and the training of practitioners.

Commenting on the announcement, Joseph Yam, Chief Executive of the HKMA, stated:

"The introduction of these measures represents a clear policy step towards developing a mutually supportive, complementary and inter-active relationship between the financial systems of the Mainland and Hong Kong. Through very close supervisory co-operation with the Mainland, Hong Kong provides a robust platform for the orderly outflow of funds from the Mainland and helps ensure that the related investment activities will be conducted in a sound manner.

"The HKMA will continue to support the expansion and development of offshore wealth management services by banks on the Mainland through the working group and other co-operative arrangements with the CBRC."

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