Funds Authorized Under HK-China Mutual Recognition

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

22 December 2015

Hong Kong's Government has welcomed the announcement on December 18 of the first batch of authorized funds under the mutual recognition of funds arrangement between Mainland China and Hong Kong.

Hong Kong's Financial Secretary John Tsang said: "The mutual recognition of funds arrangement further deepens the mutual access between the Mainland and Hong Kong capital markets. The successful implementation of the arrangement is of great significance to not only the development of the fund industry of both the Mainland and Hong Kong, but also the promotion of renminbi internationalization."

"For Hong Kong in particular," he added, "this arrangement will not only expand the distribution network for Hong Kong's fund industry but also attract more funds to domicile in Hong Kong, which will help build up Hong Kong's fund manufacturing capabilities and develop it into a full-fledged fund service center."

From July 1, 2015, the Hong Kong Securities and Futures Commission and the China Securities Regulatory Commission have started accepting applications under the mutual recognition of funds arrangement.

According to the arrangement, qualified Mainland and Hong Kong funds may be offered directly to the public in each other's market after obtaining authorization or approval under streamlined procedures. Initially there will be a quota of RMB300m (USD46.3bn) in each direction, and funds would have to have been established for at least one year to take part in the scheme.

Hong Kong has also been introducing tax incentives to encourage the fund management industry to Hong Kong. A profits tax exemption criteria for offshore private equity funds was introduced in July this year, while a recent report from the Financial Services Development Council set out recommendations relating to the tax exemption regime for open-ended fund companies, the introduction of which is currently under review by the Government.

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