Wealthy Chinese investors are increasingly turning to Hong Kong investment products, such as insurance and high-yield time deposits, to safeguard their returns from the downturn in China’s economic and property sectors, as well as a weakening currency.
This trend has accelerated since China relaxed investment rules for the ‘wealth connect’ program in February, allowing easier cross-border investments. This surge in demand is benefiting Hong Kong’s status as a wealth hub, which had been previously challenged by pro-democracy protests, tighter Beijing controls, and geopolitical tensions.
Under the ‘wealth connect’ program, investments by mainland investors into Hong Kong and Macau reached a record 13 billion yuan ($1.8 billion) in March, significantly increasing from previous months. The program allows residents of Guangdong province to purchase investment products from banks in Hong Kong and Macau, and vice versa. Wealth managers in Hong Kong, such as HSBC and UBS, are seeing a sharp increase in new account openings and inquiries from Chinese clients, including ultra-rich individuals and family offices, indicating a strong cross-border investment interest.
Despite tight capital controls in China, which limit individuals to remit a maximum of $50,000 per year, the recent tripling of the investment cap to 3 million yuan under the ‘wealth connect’ program has facilitated greater outflows. Hong Kong banks and insurers are capitalizing on this momentum by offering attractive interest rates and investment options compared to those available on the mainland.
Source: Reuters