On Feb 18, 2019, the Central Committee of the Communist Party of China and the State Council unveiled the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, officially kicking off the development of the GBA.
Since the GBA development strategy was put into action, the project has made remarkable progress with the full backing of the central government and the active implementation of the plan.
Going forward, the GBA should seek breakthroughs in its development by seizing the opportunities created by the country’s pursuit of high-quality development. Simultaneously, the GBA should improve the efficiency and convenience of capital flow among GBA cities, and support and facilitate the further reform and opening-up of the Chinese mainland financial market in the following ways.
First is to strengthen financial market connectivity. Hong Kong has been enhancing its listing regime in line with international development to facilitate companies, including those from the GBA, to raise funds in Hong Kong for business expansion. Mainland authorities may encourage more companies based in the GBA to use Hong Kong as an investment, financing and product distribution platform. For instance, they can support companies in the GBA to list and finance their high-quality real estate and infrastructure projects in Hong Kong in the form of Real Estate Investment Trusts, or register as an open-ended fund company or a limited partnership fund to leverage Hong Kong’s platform for financing and overseas business development.
Meanwhile, the existing Stock Connect program can be expanded and enhanced to allow Hong Kong’s diversified financial products to be introduced to the mainland capital market, enrich the asset allocation tools of mainland financial institutions and individuals, and support mainland institutions in the GBA, such as securities firms, to actively take part in different types of connectivity projects.
Second is to enhance the Cross-boundary Wealth Management Connect program. While the program has been running steadily since it came into effect more than a year ago, the disruptions to cross-boundary travel during the COVID-19 pandemic, along with limited investment options and the need for northbound investors to be physically present on the mainland to open an investment account, have made its participation rate less than ideal. To further enhance this program, Hong Kong and mainland financial regulatory authorities have made good progress in their discussion on the possibility of, with proper risk management in place, expanding the scope of eligible investment products and allowing qualified securities firms to take part in the program as distributors. These measures should be rolled out as quickly as possible as they will help investors diversify their financial management options and expand the existing financial services support.
Third is to promote mutual recognition of licenses and qualifications within the GBA. To fully integrate the financial markets in the GBA, it will require not only enhanced collaboration at the financial infrastructure and product levels, but also initiatives to promote integration of financial market regimes at a higher level. Hong Kong and the mainland have already established a foundation for cross-referencing each other’s professional qualifications under the Closer Economic Partnership Arrangement, which simplifies Hong Kong professionals’ application for relevant securities and futures qualifications on the mainland, and vice versa. Building on this arrangement, more channels for financial institutions and operators to access each other’s market can be created. A case in point is the possible introduction of mutual recognition of securities and futures business licenses and qualifications.
Hong Kong’s existing regulatory framework has a temporary licensing system that allows eligible institutions and operators to conduct regulated activities in Hong Kong for a specified period. In view of this, mainland regulatory authorities may consider policies that will facilitate Hong Kong’s institutions and operators to conduct professional practice on the mainland. For instance, mainland authorities may, using the GBA as a pilot zone or specifying a scope of services, allow institutions and operators accredited by the Securities and Futures Commission to obtain temporary licenses for conducting securities or futures business on the mainland.
Fourth is to enhance cooperation in sustainable finance. As the carbon market on the mainland is set to gain greater prominence, Hong Kong can harness its world-class financial platform to link up the mainland and international markets, connecting carbon reduction projects on both sides and investors who support low-carbon transitions to raise funds for green and sustainability projects. The mainland and Hong Kong can work together proactively on carbon trading and related financial products and explore the creation of low-carbon goods befitting the GBA. The two sides can jointly promote the development of China’s carbon markets and uphold the country’s policies of addressing climate change.
Fifth is to facilitate talent flow within the region. The diversified needs arising from the financial development in the GBA are invariably linked to professional services; it is therefore crucial to ensure uninterrupted talent flow within the GBA. Due to the fundamental differences in legal systems, industry development and professional accreditation, the mutual recognition of professional qualifications for individuals between the two sides has been proceeding in a step-by-step manner. Some substantial progress has now been made in some sectors for Hong Kong and Macao residents to attain qualifications and practice their professions on the mainland. Authorities overseeing the relevant industries on both sides should continue to expand the mutual recognition of professional qualifications and remove barriers to the flow of talent and professional services.
Meanwhile, mainland authorities can create more favorable conditions for people from Hong Kong and Macao to start a business or pursue their career aspirations in the mainland cities of the GBA, such as simplifying the approval process, setting up special subsidies, and providing convenient and friendly policies for cross-boundary access, residence, housing and taxation.
The GBA, which is characterized by its unique “one country, two systems, three jurisdictions” framework, should continue to serve to connect the mainland with Hong Kong’s internationalized system and infrastructure, to set up a mechanism for financial systems’ cross-reference and convergence, and to expedite the mainland’s development in aligning with international standards and protocols.
Guangdong province, Hong Kong, and Macao should, for the purpose of expediting China’s alignment with international standards, take the initiative to explore and improve their capability for rule setting for the new economy in situations where international standards are not fully developed, as well as to take a proactive or even a leading role in international standard setting. For example, as international standards and regulations for sustainable finance have yet to be fully worked out, the GBA can potentially seize this window of opportunity to pursue high-quality development for its financial industry. To this end, it should take the lead in collaborating with international organizations and establish leading green-finance professional services such as information disclosure, product certification and rating review to help the country develop a world-leading system for sustainable finance.
The author is the chairman of the Securities and Futures Commission of Hong Kong and a deputy to the 14th National People’s Congress.
The views do not necessarily reflect those of China Daily.
