Chinese and Hong Kongese regulators agree on cross border trade fund scheme

The approval opens a new chapter in the gradual easing of China’s capital controls, with the scheme set to allow cross-border fund sales of up to USD 92 billion (CNY 600 billion; HKD 717.51 billion), scmp.com reports. The Hong Kong’s Securities and Futures Commission (SFC) said it has authorised four mainland Chinese funds to be sold in the city.

These are China AMC Return Securities Investment Fund, GF Industry Leaders Mixed Assets Fund, HSBC Jintrust Large Cap Equity Securities Investment Fund and ICBCCS China Core Value Mixed Fund. The China Securities Regulatory Commission (CSRC) also announced on its website that it has approved three Hong Kong domiciled funds, JPMorgan Asian Total Return Bond Fund, Hang Seng China H-share Index Fund and ZEAL Voyage China Fund, to be sold on the mainland market.

Launched on 1 July 2015, the scheme allows 100 Hong Kong-domiciled funds and 850 mainland Chinese funds to sell up to USD 46 billion (CNY 300 billion) of products in each other’s jurisdiction. The SFC has received applications from 30 mainland funds while the CSRC has received 17 applications from Hong Kong funds wanting to sell on the mainland.

The two regulators had earlier promised fund managers of “speedy approval” in four to six weeks. A spokesman for the SFC said the delay was due to “technical issues”, without elaborating. Fund managers said there were some tax issues that were sorted out only recently, which could have caused the delay.

Christopher Cheung Wah-fung, legislator for financial sector, said the delay was likely due to the stock market slump since mid-June, 2015 as the CSRC has been busy stabilising the market. Hang Seng Bank executive director Andrew Fung, however, said the delay could have been a blessing in disguise, the source cites.

Scott McLaren, head of investor service provider Brown Brothers Harriman, Hong Kong, said: “The successful implementation of mutual recognition fund scheme makes Hong Kong an even more attractive funds domicile centre. We forecast the scheme could raise up to USD 400 billion over the next five to 10 years.” The number of Hong Kong-domiciled funds have grown by 22.5% annually.