The Guangdong-Hong Kong-Macao Greater Bay Area, which has a combined population of over 69 million people and a GDP of around US$1.5 trillion (comparable to that of the Tokyo Bay area and the New York metropolitan area), offers a myriad of diverse opportunities for Hong Kong.

In “HK should leverage Bay Area to become a fintech hub like Singapore” (June 19, 2019), I pointed out that, for many analysts, Hong Kong and Singapore have entered a new phase in their rivalry: technology and fintech, a battle which is being won by Singapore, probably, among other reasons, because Singapore takes a simpler regulatory approach to fintech than Hong Kong, which has a multilayered regulatory structure.

Last year was certainly a rough time for many of China’s technology companies being victimized by unintended fallout from the US-China trade war, which threatens to degenerate into a new “Cold War”. It also proved to be one of Hong Kong’s most traumatic periods, which saw some of the most violent street clashes between its security forces and anarchists bent on causing maximum destruction to public infrastructure and private businesses under the pretext of fighting for freedom and democracy. Hong Kong people haven’t had any respite since June last year as the civil unrest was seamlessly followed by the ravages of the COVID-19 pandemic in January. The double whammy seriously dented Hong Kong’s economic growth.

But this international financial center, renowned for its resilience, is primed to grasp a godsend that promises to secure its regional financial dominance. It will come from the proposed Wealth Management Connect scheme — the third mainland-Hong Kong cross-boundary financial arrangement, after the introduction of the Stock Connect scheme in 2014 and the subsequent Bond Connect in 2017.

China’s financial regulators are planning on leveraging it to turn the Bay Area into a hub for wealth management products, boosting Hong Kong’s fund industry and hopefully overtaking Singapore’s. This will not be easy as Singapore is presently benefiting from capital outflows from Hong Kong as a result of the political uncertainty brought on by the months-long violent social unrest. Fortunately, the new National Security Law is expected to help calm the market jitters and reclaim Hong Kong’s reputation as a favored destination for investment, although in the short term, some investors and high-net-worth individuals might transfer their assets elsewhere.

According to official data, the net outflows of financial non-reserve assets hit HK$255.2 billion (US$32.93 billion) last year, higher than the HK$165.9 billion recorded in 2018, highlighting the need for a Wealth Management Connect scheme more than ever.

The Wealth Management Connect scheme, a pilot scheme that will allow people to buy wealth management products easily in the Bay Area, marks another milestone for the mainland’s capital account liberalization and cooperation between Hong Kong and the mainland after the Stock Connect and Bond Connect schemes. The Stock Connect brings together the Hong Kong, Shanghai and Shenzhen stock exchanges, allowing international, Hong Kong and mainland investors to trade securities across the three markets through the trading and clearing facilities of each exchange. The Stock Connect scheme was launched in November 2014. Trading began on the Connect platforms first in the Shanghai and Hong Kong exchanges. Shenzhen joined two years later. In 2017, the Bond Connect was launched. The scheme now covers over 2,000 eligible equities and bonds in Shanghai, Shenzhen and Hong Kong.

After a shaky start, the Stock Connect scheme is now considered a great success, and mainland investors, according to market data, are contributing 5 to 10 percent of daily stock transactions on Hong Kong’s stock exchange.

Since the two previous connect schemes have been successful, experts expect the proposed Wealth Management Connect scheme to follow the same path.

The People’s Bank of China and financial market regulators announced the proposal in 2019 and elaborated on the idea recently, in late June, as part of the Bay Area project. This plan intends to reduce cross-boundary restrictions for nearly 70 million residents in the Bay Area cities to access wealth products such as mutual funds amid an expected increase in the number of millionaires in a region with an estimated US$1.5 trillion in output.

The Wealth Management Connect scheme will greatly boost the assets under management in Hong Kong over the next decade, with global private banks and big players likely to tap into the Bay Area opportunities, according to a Bloomberg Intelligence report.

The Hong Kong Monetary Authority and mainland financial regulators are working on the details of the scheme, but no tentative launch date has been announced yet.

About one-third of Hong Kong-based fund managers expect the assets owned by mainland investors under their management to grow by 30 percent between now and 2025, according to a survey by the Hong Kong Investment Funds Association and KPMG.

Given the current US government’s push to turn this trade war into a new “Cold War”, and given the current tense economic and political situation, the new Wealth Management Connect plan could not have come at a more opportune time, as it is destined to enrich the Bay Area before long.

The author holds a doctorate in urbanism, real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company.

The views do not necessarily reflect those of China Daily.