Guangdong sets wheels in motion

Financial perks to propel the Bay Area's opening-up and cross-boundary cooperation, including easier access to financial and medical services for Hong Kong and Macao residents in Guangdong province, are in the works as experts hail the far-reaching reforms. Zhou Mo reports from Shenzhen.

Guangdong province - home to nine of the 11 cities that make up the Guangdong-Hong Kong-Macao Greater Bay Area - is pulling out all the stops in pursuing the goal of turning the region into a premier economic powerhouse within the next two decades.

The province sees augmented financial opening-up, as well as deeper cross-boundary cooperation with the Hong Kong and Macao special administrative regions, as critical for the region's growth as it pushes ahead with a new round of economic stimulus measures aimed at upgrading itself from a traditional manufacturing center to a world innovation and technology hub. All the ingredients are also being thrown in to make the region a pleasant place for Hong Kong and Macao residents, as well as overseas Chinese, to work and live in.

In late July, the Guangdong authorities set in motion a wide-ranging program to enforce the directives for promoting the Bay Area's financial advancement following a central government document calling for greater reform and opening-up of the southern region's financial industry.

The program involves 80 concrete steps covering five areas: the facilitation of cross-boundary trade, investment and financing; further opening-up of the financial sector; wider connectivity in the financial markets and infrastructure; enhancing the innovation capability of financial services; and keeping cross-boundary financial risks at bay.

Latest government information shows 65 of the measures have been implemented or are being pushed forward. For example, the new policy of giving more support to innovative enterprises and startups by taking advantage of the Chinese mainland's capital market is in force, with a batch of firms having been listed on Shenzhen's tech-heavy ChiNext board under the registration-based initial public offering system. The new system, which did away with regulatory IPO approval, makes it easier for these enterprises to seek equity financing.

At the same time, banks and insurers in eight mainland Bay Area cities, excluding Shenzhen, have been given greater flexibility in their operations, having been exempted from preliminary regulatory approval in setting up new branches, closing down offices or appointing senior executives in the region. They can now deal with these matters through administrative procedures.

Industry players from Hong Kong, Macao and overseas also enjoy easier access to the mainland market under the program, with the first Hong Kong-funded consumer finance company, the first joint-venture consultancy for securities investment and the first Hong Kong-owned fund management firm being set up in the mainland part of the Bay Area.

Analysts and industry insiders say the significance of the new measures lies not only in the benefits they'll create for market players in the financial business, but also in the boon they will bring to the general public in the Bay Area, as all residents in the region will be able to reap the fruits of such a move.

One of the highlights of the Guangdong program is the promotion of a wide range of cross-boundary financial activities. Support will be extended to Hong Kong and Macao residents in making cross-boundary investments in wealth management products distributed by mainland banks in the area and vice versa.

Connecting wealth

The measures followed a series of cross-boundary financial programs linking the mainland and Hong Kong in recent years, such as the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect and the Bond Connect.

Au King-lun, executive director of Hong Kong's Financial Services Development Council, said last month that regulators were working with the industry to start a wealth management program, but it's unclear whether this could get off the ground this year. Investments will be capped at 150 billion yuan ($23 billion) either way, with an individual quota of 1 million yuan, according to the Hong Kong Monetary Authority.

Rannie Lee, Guangdong co-chief executive and head of Pearl River Delta wealth and personal banking at HSBC Bank (China), said that Hong Kong, as a global financial hub, is also an international asset and wealth management center. The city is one of the key venues outside the mainland where mainland investors park their assets.

"With the launch of the cross-boundary wealth management connect pilot program in the Bay Area, financial institutions in Hong Kong will be able to help mainland investors make asset allocations globally, enabling them to better manage their assets," she said.

The coronavirus pandemic has further lowered global interest rates. Widening interest-rate spreads, a relatively stable yuan, and steady growth of the mainland economy have made renminbi-denominated assets more attractive, Lee said. "By investing in mainland wealth management products with stable returns, Hong Kong investors will not only reap the dividends of the nation's economic growth, but also get more diversified investment options."

Lee expects the first products allowed to be traded would be those with a clear structure and relatively low risks given that the document highlights the need to ensure investors' interests and stick to the principle of "safe, orderly and risk-controllable" operation. For instance, southbound products could first include publicly offered funds with medium or low risks and money market funds, while northbound products could cover publicly offered funds and renminbi financial products with medium or low risks, she said.

The Bay Area, with a population of 70 million, is one of the most developed and wealthiest regions in China. According to the Hurun Wealth Report 2019, there were nearly 680,000 families in Guangdong with assets of 6 million yuan, while the number of households with assets of 10 million yuan was 285,000. The figures ranked second in the country, behind Beijing.

Besides opening wider investment channels for Bay Area residents, the financial program aims to create a more favorable environment for cross-boundary living, with incentives to facilitate property purchases and medical care.

According to the document, cross-boundary real estate mortgaging will be allowed in the nine Guangdong cities in the Bay Area cluster. Each Hong Kong or Macao resident will still be restricted to buying just one property in Guangdong cities, but they can use that property as collateral for housing loans from banks in the two SARs. Previously, they couldn't secure such loans without collateral from Hong Kong or Macao lenders. Neither was it possible to borrow from mainland banks that did not have the information concerning their financial and credit standing.

"Previously, due to the lack of information on the mainland in terms of the identity, income and credit status of Hong Kong and Macao residents, it's hard for them to secure housing loans from mainland banks," said Yu Lingqu, deputy director of the Department of Finance and Modern Industries at Shenzhen-based think tank China Development Institute.

Easier housing, insurance

"The launch of the cross-boundary real estate mortgage registration will enable Hong Kong, Macao and other overseas banks to obtain information concerning home purchases by Hong Kong and Macao people on the mainland and grant them housing loans. In this way, they can enjoy the same housing-related financial services as their mainland counterparts," he said.

Bay Area residents can also enjoy more convenient medical services, with insurance organizations in Guangdong, Hong Kong and Macao working together to develop new products, such as cross-boundary medical insurance. Insurers are also encouraged to develop critical illness insurance products tailor-made for residents in the Bay Area using the region's medical data. The authorities have vowed to support market players in setting up a medical insurance service platform to handle insurance claims, health management, illness prevention and other services to enhance the overall level of medical services.

"More and more mainland residents are buying medical insurance in Hong Kong, but consumer experience is not that good because medical resources on the mainland and in Hong Kong are not integrated. Also, the two have different standards in medical services and medical fees. Such problems have hampered the development of the region's insurance industry and could affect cross-boundary flow of people," said Yu.

"By co-developing cross-boundary medical insurance, insurers from Guangdong, Hong Kong and Macao can make breakthroughs in standard unification, share medical resources, and offer integrated services to consumers, thereby enabling the insurance sector to play a bigger role in the Bay Area's development," Yu added.

Tan Yunrui, an insurance practitioner in Hong Kong, said she looks forward to more career opportunities created by the region's financial development.

"Deepening financial cooperation and increasing connectivity in the financial markets between Hong Kong and the mainland will create more job opportunities for us. The future is bright," he said.