Hong Kong and China reach guiding principles on mutual recognition

06 December 2013   Category: News, Asia, China, Hong Kong   By Hui Ching-hoo

Hong Kong’s Securities & Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) are in the final stretch of defining the details of a mutual recognition platform between Hong Kong and China, according to Alexa Lam, deputy chief executive officer, executive director – investment products, international & China at the SFC.

Speaking at the Hong Kong Investment Funds Association’s (HKIFA’s) annual conference on December 4, Ms. Lam stated that Hong Kong and Mainland regulators have reached common ground on three guiding principles for the development of the mutual recognition platform. Development must: (1) be built on the principles of mutuality and respect; (2) ensure win-win situations for both China and Hong Kong; and (3) ensure that Hong Kong takes a measured, pragmatic and possibly more conservative approach to market development.

She noted that the pilot scheme will initially apply to plain vanilla-type products, before the product scope is gradually broadened. Such mutual recognition will reinforce Hong Kong’s position as an international financial hub by providing foreign institutions with opportunities to directly distribute their products in China.

In the same meeting, Xu Hao, deputy director-general, department of fund supervision at the CSRC, said the scheme offers investors greater investment choices, and creates additional business opportunities for asset managers. The CSRC has established a special working team within the fund supervision department to develop a working mechanism between the SFC, the CSRC, and the State Administration of Foreign Exchange (Safe) to address outstanding technical issues.

Mr. Xu said the next step is to thrash out details regarding the scale and eligibility of the funds. The CSRC has now approved around 400 mutual funds, taking the total amount of mutual funds in China to 1,446 as of the end of October.

KC Chan, secretary for financial services and the treasury under the Hong Kong government said that the scheme would bring alignment between Hong Kong and China in the context of investor protection and selling processes.