China loosens rules on fund flows between Greater Bay Area cities, in a partial relaxation of capital controls

The new plan, dubbed Wealth Management Connect, will allow residents of Hong Kong and Macau to buy wealth management products sold by mainland Chinese banks located throughout the Greater Bay Area (GBA). Conversely, residents of nine cities in Guangdong province within the GBA can tap wealth products sold by financial institutions in Hong Kong and Macau, according to a joint statement by the monetary authorities of mainland China, Hong Kong and Macau.

The launch, two days before Hong Kong marks the 23rd anniversary of the return of its sovereignty to China, comes as the Chinese legislature is poised to enact a new national security law in the city to put a lid on more than a year of anti-government protests that drove the local economy into its worst recession on record. The partial liberalisation of China’s capital control could also act as a buffer against the sanctions and censures adopted by the United States and European Union against China’s enactment of the security law, as it cements the role of Hong Kong – the largest financial market, and second-biggest economy – in the 11 cities that make up the GBA.

“Hong Kong can act as a wealth management centre for the many wealthy families living in the bay area," Christopher Hui Ching-yu

, Hong Kong’s Secretary for Financial Services and the Treasury, said in a recent interview. “The GBA will turbocharge Hong Kong's role as a wealth management centre, as we have the banks, the products, the financial infrastructure and the talent pool to serve these wealthy family to manage their wealth."

The scheme adds to the litany of cross-border Connect investment channels since 2014 that have gradually widened two-way investments flows in equities and fixed-income financial products between mainland China and Hong Kong.

It also gives Hong Kong a leg up over other Asia-Pacific urban centres like Tokyo, Seoul, Singapore and Taipei as they vie to tap China’s 25 trillion yuan (US$3.5 trillion) wealth management market. China, ruled by the Communist Party, is home to more dollar-denominated billionaires than the US, producing nearly four in every 10 new ultra-wealthy people, according to the Hurun Report.

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