Source: China Daily    Published: 2019-2-20

Financial ties among Guangdong, Hong Kong and Macao will be further strengthened through promoting cross-area trading connections and financial innovation, said analysts, after the central authorities issued a comprehensive development plan for the Greater Bay Area.

A new connection mechanism for wealth management product investment across financial markets in Guangdong, Hong Kong and Macao will be launched later, which is the subject of a study being led by the People's Bank of China, the central bank, two officials familiar with the matter told China Daily on Tuesday.

The plan will progressively promote cross-boundary transactions of financial products within the Greater Bay Area, to continue expanding the types of financial products and investment channels, said the officials, without disclosing further details.

The central authorities unveiled the full version of the Greater Bay Area development plan on Monday. It aims to turn the area, with a combined GDP of around $1.5 trillion, into a global technology innovation center and build advanced manufacturing and modern services industries. The plan also aims to develop the area into an international financial hub.

Financial integration in the area has improved following China's financial reform measures such as the stock and bond connect schemes, quota expansion for Qualified Foreign Institutional Investors (QFII), Qualified Domestic Institutional Investors (QDII) and Renminbi Qualified Foreign Institutional Investors (RQFII).

"For the next step to consolidate the integrated development, the existing connection channels will face a bottleneck, which needs more bold and specific innovation and breakthrough," said Xing Yujing, head of the PBOC Shenzhen Branch.

The PBOC official referred to the unification of financial regulations in the region. This would mean that each financial product could have a unified prospectus when listing in exchanges in Guangdong, Hong Kong and Macao, and financial institutions would not need to set up special subsidiaries in the mainland to provide services.

"We can learn from the European Union's Markets in Financial Instruments Directive (MIFID) scheme and some financial arrangements in the United Kingdom's Brexit plan," said Xing, who also suggested the development of blockchain technology and cross-boundary third-party payments to explore new methods of financial connection.

Ma Jun, a member of the PBOC monetary policy committee, said that new measures are expected and the plan will be a breakthrough to further open the financial sector for foreign investment and achieving the capital account convertibility.

The development of the Greater Bay Area would also offer more opportunities when the area becomes a focal point for trial schemes, including promoting the rapid development of wealth management services, according to a report issued by global consultancy EY.

Another possible area is the cross-boundary use of customer records in the financial industry, such as accepting credit and identity records issued in Hong Kong for Hong Kong residents to open bank accounts in other parts of the Greater Bay Area. It could also see Hong Kong banks accepting customer records from the mainland, it said.

The development plan also highlighted spot and forward yuan trading and yuan derivatives transactions as well as cross-boundary yuan lending in the area. In addition, companies would be allowed to issue yuan-denominated bonds within the area.

Ma Jun is chairman of the green finance committee of China Society for Finance and Banking, and director of Center for Eco-financial Studies at Renmin University of China.