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Prof. Wang Jian: Cross-boundary Wealth Management Scheme is Feasible under Certain Restrictions
Release time:2020-05-21Views:

On May 14, the People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, and State Administration of Foreign Exchange issued the "Opinions on Financial Support for Development of Guangdong-Hong Kong-Macao Greater Bay Area" (hereinafter referred to as "The Opinions"), to jointly provide powerful financial support for the development of the Greater Bay Area. Prof. Wang Jian, Assistant Dean (Academic) of the School of Management and Economics, The Chinese University of Hong Kong, Shenzhen and Director of Center for Macro-Financial Stability and Innovation of Shenzhen Finance Institute, said in an interview with the Economic Observer that the cross-boundary wealth management scheme is feasible under certain restrictions.

“The Opinions” are comprised of 26 measures across five areas including: expediting cross-boundary trade and investment and financial convenience in the Greater Bay Area, expanding the openness of financial sector, promoting the connection and integration of financial markets and financial infrastructures, enhancing the innovation level of financial services, and pragmatically preventing cross-boundary financial risks.

With respect to expediting cross-boundary trade and investment and financial convenience, “The Opinions” support residents in the Greater Bay Area to purchase wealth management products sold by Hong Kong and Macau banks and in turn, Hong Kong and Macau residents are also eligible to purchase wealth management products from banks in the Greater Bay Area. To explore the establishment of cross-boundary wealth management connect scheme and provide diversified investment channels for residents living in Guangdong, Hong Kong and Macao are conductive to the development of financial integration among these three regions. However, Prof. Wang Jian pointed out that large amounts of capital input and output are not allowed in a short term as the risk of capital flow still hangs over. Nevertheless, cross-boundary wealth management is feasible under certain restrictions. Specifically, medium and long term investments should be restricted, investment quota should be set if the stability of entire financial market can be ensured, and requirements for compliance with laws and regulations should be set higher. “The biggest problem is still about quota because the quota cannot be completely released. Residents are allowed to make investments by the money circulating within the Greater Bay Area. However, if their relatives and friends who do not live in here also make investments through the channel of the Greater Bay Area, then this channel might cause capital outflows”.

One of the highlights of “The Opinions” is the establishment of the Guangzhou Futures Exchange. The position of the Exchange is featured by innovation, which is closely consistent with the plans for the development of green finance and financial innovation in the Greater Bay Area. As a portal for the financial industry to the world, it is significant to establish a national futures exchange in the Greater Bay Area, which will be beneficial to the internationalization of the futures market of China. Prof. Wang Jian said, Hong Kong's derivatives system has set relatively high standard, which has caused the unwillingness of many financial institutions to trade there, as a result, many futures and financial derivatives had been taken over by Singapore. However, after the establishment of the Guangzhou Futures Exchange, Guangzhou and Hong Kong will be a backup for each other. On one hand, the composite advantages of these three regions can be fully leveraged. On the other hand, the interconnection of institutions can also be improved. For example, the lack of flexibility in Hong Kong could be developed in Guangzhou and in so doing, more investors will be attracted to this futures market.