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Hong Kong industry group wants MPF funds opened to China pension investments

By Hui Ching-hoo   
August 3, 2022

Hong Kong’s asset management industry group is calling on the government to open up investments in the city’s Mandatory Provident Fund (MPF) to pension plans from China, and to bolster cross-border investment schemes with the Mainland to help the industry regain competitiveness.

The Hong Kong Investment Funds Association (HKIFA) is hoping that the government will consider the proposals for inclusion into its annual policy paper, which will be delivered on October 19.

The group says in a statement on August 1 that the recommendations will “enable the fund industry to regain its competitiveness and propel it to the next level”.

The MPF is Hong Kong’s largest retirement saving plan, with more than 4.5 million members and HK$1.18 trillion (US$151.2 billion) of assets as of December 2021.

The HKIFA says locally registered funds that are eligible for MPF schemes should be opened to investments from China’s enterprise annuities and occupational annuities.

According to Chinese government figures, the two defined-contribution plans had combined assets of over 3.64 trillion RMB ($537.5 billion) at the end of 2021.

HKIFA says MPF funds are “extremely prudent” and subject to “stringent and robust” regulations.

“If approved, Hong Kong’s MPF fund managers can help to meet the Mainlanders’ need to build the retirement nest eggs by constructing portfolios that diversify across asset classes and markets,” the group says.

It’s also urging the government to strengthen cross-border investment programmes, including the Wealth Management Connect and a recently launched scheme for exchange-traded funds, describing current participation as “underwhelming and muted”.

For example, it says broadening the scope of offerings in the wealth channel to high-risk products and investment advisory services will “unleash their full potential”.

Introduced in September 2021, the Wealth Management Connect allows banks to distribute China or Hong Kong-domiciled wealth products across the Greater Bay Area, a Chinese government masterplan to integrate Hong Kong, Macau and nine cities in the southern Guangdong province into a finance and business hub by 2030.

The area has a population of over 70 million holding around 3 trillion RMB of investable assets.

“If sufficient relaxations are allowed, [the wealth connect] can potentially become the channel of choice for Greater Bay Area investors to access global markets and diversify their investment portfolios,” HKIFA says. “It can also become a key platform in fostering RMB internationalisation.”