Hong Kong Cross-Border Wealth Management Channel 2.0 Version Effective from February 26, Optimizes 5 Major Measures

On February 26th, the Hong Kong Monetary Authority issued a statement stating that the Cross-boundary Wealth Management Connect is an important part of the mutual access mechanism between Mainland China and the capital markets of Hong Kong and Macao, which has attracted the attention of investors from all three regions since its launch. By the end of 2023, a total of 24 banks in Hong Kong had started Cross-boundary Wealth Management Connect with their Mainland partners, with over 69,000 individual investors having opened Cross-boundary Wealth Management Connect accounts and the total amount of cross-border fund transfers exceeding 12.8 billion RMB. To further enrich investment options and promote connectivity in the Greater Bay Area, the revised "Trial Implementation Rules for Cross-Boundary Wealth Management Connect in the Greater Bay Area" officially came into effect on February 26, 2024, providing more investment choices and a better user experience for investors in the Greater Bay Area who are interested in cross-border investments. The optimization measures in these rules include: Expanding the range of eligible investment products to better meet the diverse investment needs of residents in the Greater Bay Area On the effective date, most Hong Kong banks have expanded the range of Southbound products, with the number of funds roughly doubling. It is estimated that the total number of Southbound funds for all Hong Kong banks will increase from around 160 to about 300. The expanded Southbound products include: (1) funds registered and approved by the Hong Kong Securities and Futures Commission, primarily investing in stocks in the Greater China region, and rated by the selling banks in Hong Kong as "non-complex" funds; (2) funds, other than those mentioned in (1), registered and approved in Hong Kong, and rated by the selling banks in Hong Kong as "low" to "medium-high" risk and "non-complex" funds, excluding high-yield bond funds and single emerging market stock funds; (3) bonds rated by the selling banks in Hong Kong as "low" to "medium" risk and "non-complex"; and (4) RMB, HKD, and foreign currency deposits. The expanded Northbound products include: (1) RMB deposit products sold by banks; (2) fixed income and equity public offering wealth management products categorized as "Level 1" to "Level 3" risk (excluding cash management products); and (3) publicly offered securities investment funds categorized as "R1" to "R4" risk (excluding commodity futures funds). Appropriately increasing the investment quota for individual investors The investment quota for individual investors has been increased from 1 million RMB to 3 million RMB. Further optimizing publicity and sales arrangements Starting on the effective date, some Hong Kong banks have optimized their advertising and sales arrangements, introducing products suitable for the risk appetite of individual customers after considering their personal circumstances under the "Wealth Management Connect 2.0" model, besides the existing "execution-only" model, to help investors make informed investment decisions. Additionally, most Hong Kong banks have indicated that they will launch promotions and discounts on the effective date, such as deposit rate discounts, fund subscription fee discounts, cash rebates, and waiver of remittance fees. Optimizing investor access conditions to support more residents in the Greater Bay Area to participate in the pilot program Lowering the investment threshold for Southbound investors: The requirement to continuously pay social security or personal income tax has been reduced from "5 full years" to "2 full years"; and "average annual income not less than 400,000 RMB in the past 3 years" has been added as an alternative condition for family financial asset access. Expanding the range of participating institutions Qualified securities firms have been added as participating entities, and both qualified banks and securities firms can participate in the Wealth Management Connect. If an investor chooses to invest with both a bank and a securities firm, the individual quota for each will be 1.5 million RMB, and Hong Kong banks will adjust the quotas according to the investor's choice.