Secretary for Financial Services & the Treasury Frederick Ma says the new measures announced under the Mainland's qualified domestic institutional investor (QDII) scheme will enhance Hong Kong's position as an international financial centre and asset-management centre.

In his latest FSTB & You column, posted on the Financial Services & the Treasury website, Mr Ma said the Mainland authorities announced a series of measures to deepen the reform of the foreign-exchange administration regime on April 13.

These measures include allowing Mainland institutions and residents to entrust Mainland commercial banks to invest a certain amount of money in financial products overseas, and allowing insurance institutions to invest part of their assets in overseas fixed-income products and money-market products.

Broadening investment channels

"As far as I see, these measures will, in the long run, further enhance Hong Kong's position as an international financial centre and asset-management centre. Although funds in the Mainland are estimated to be huge, the actual amount involved in the new scheme remains unknown as details of the measures have yet to be announced.

"Regardless of the amount involved at the start, what's most important is that the new measures will broaden the channels for overseas investments of the vast funds in the Mainland. This is expected to have far-reaching and positive effects on our financial markets."

Mr Ma said Hong Kong can benefit in two ways. First, some of the Mainland funds may be invested in the financial products of our markets, thereby increasing the trading volume and liquidity.

Second, Mainland investors can engage our financial institutions which possess rich international experience and professional knowledge to make global investments.

"This will enhance the investment returns and diversify the risks of Mainland investors, while also strengthen the development of our financial services sector."

Focusing on products with fixed returns

The secretary expected that during the initial stage of  implementation, Mainland financial institutions will focus more on products with fixed returns, such as bonds. With the approval of the regulatory bodies, insurance companies may also invest some of their funds in fixed-income markets.

"In view of this, the measures may not have a significant impact on Hong Kong's securities market right away," he noted. 

With streamlined procedures for individual Mainland residents to buy foreign exchange and an increase in the limit, a person can exchange Renminbi for up to US$20,000 each year and deposit it into her domestic foreign-exchange account or use it for recurrent foreign exchange expenditure. It is anticipated that some of these funds may be invested in Hong Kong's securities market.

Under the new measures, Hong Kong's role as the Mainland's global investment platform will grow even more, he said.

HK prepared for new opportunities

"Hong Kong is well prepared in this respect, having put in a lot of efforts on all fronts, including financial infrastructure and tax concessions. The enactment in March of the legislative amendments to exempt offshore funds from profits tax is an example of our efforts."

To capitalise on this opportunity, he suggested to China Insurance Regulatory Commission Vice-chairman Li Kemu that a seminar on this subject be held in Hong Kong at the end of the year and that Mainland insurance industry representatives be invited to attend.

"This will provide an opportunity for them to exchange ideas with our fund-management industry, with a view to enhancing co-operation between Hong Kong and the Mainland and creating business opportunities for both places. We will actively follow up on this proposal."