Source: Securities Times
Author: Roman

On April 19, the China Securities Regulatory Commission issued 5 measures to further expand and optimize the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, help Hong Kong consolidate and enhance its status as an international financial center, and jointly promote the collaborative development of capital markets between the two places.

5 Major Measures to Deepen Cooperation with Hong Kong

According to information, these five measures include: easing the scope of eligible products for equity-traded open index funds (ETFs) under the Shanghai-Shenzhen-Hong Kong Stock Connect; integrating infrastructure securities investment funds (REITs) into the Shanghai, Shenzhen, and Hong Kong Stock Connect; optimizing mutual fund recognition arrangements; and supporting leading enterprises in the mainland industry to go public in Hong Kong.

Following the announcement of the measures, the Shanghai, Shenzhen and Hong Kong exchanges stated that they had reached a consensus on expanding the scope of the Shanghai, Shenzhen, and Hong Kong Stock Exchange traded open index funds (ETFs).

The optimization of tradable open index funds (ETF) targets this time mainly includes two aspects: one is to reduce the size requirements for tradable open index funds (ETFs); the other is to reduce the index weight requirements for tradable open index funds (ETFs). It is estimated that it will take about 3 months to prepare for the formal implementation of the relevant optimization measures.

It is worth mentioning that these five measures are specifically proposed to support eligible leading enterprises in the mainland industry to go public in Hong Kong. According to information, in the year since the rules of the overseas listing filing management system were issued and implemented, 72 companies have completed initial public offering (IPO) filings in Hong Kong.

Hong Kong Chief Executive Li Ka-chao said, “The announced measures are an important measure to support the further development of Hong Kong's financial market, increase attractive investment products, provide more investment opportunities for domestic and foreign investors, and strengthen Hong Kong's position as an offshore RMB business center. I sincerely thank the Central People's Government and relevant ministries and departments for their strong support for the development of Hong Kong's financial market. This further expansion of financial market connectivity between the two places shows the country's firm support for enhancing Hong Kong's status as an international financial center, fully demonstrating that the country is the greatest backing for the development of Hong Kong's financial industry. The SAR government will continue to enhance the competitiveness of Hong Kong's financial market, actively contribute to the construction of a national financial power, adhere to international characteristics, and continuously increase development momentum.”

Financial Secretary Chan Mao-po said, “Various connectivity expansion measures will further enhance Hong Kong's important role in connecting Chinese and foreign capital markets, allow us to better utilize the unique platform function of two-way introduction of capital and high-quality enterprises, and enrich the asset allocation choices and offshore RMB investment options for mainland and international investors, which will help the steady progress of the internationalization of the RMB. The state supports the listing of leading enterprises in the mainland industry in Hong Kong, which will benefit the Hong Kong IPO market, and the listing of more enterprises with long-term development and return potential in Hong Kong will also drive the development of the secondary market. Further expanding the product coverage connected between the two places will help broaden the investment choices of domestic and foreign investors and benefit their asset allocation. This will attract more capital to flow into the capital markets of the two regions and benefit the long-term development of the market. Allowing mainland investors to trade Hong Kong stocks in RMB through the Hong Kong Stock Connect will enhance the RMB's ability to invest overseas.”

Chen Maobo also said, “We sincerely thank the Central People's Government for their strong support, as well as the cooperation and assistance of relevant mainland ministries and agencies. We will work closely with relevant ministries, departments and agencies to implement relevant measures as soon as possible, and push forward relevant supporting work at full speed, including exempting real estate investment trusts from unit transfer stamp duty, extending the 'Open Fund Company and Real Estate Investment Trust Fund Funding Scheme', optimizing the regulatory system for collective investment plans and real estate investment trusts, etc., while strengthening investment promotion and developing new sources of capital to continuously enhance the development momentum of the Hong Kong financial market.”

Hong Kong is the preferred springboard and platform for mainland companies to enter the international market

On April 21, Chen Maobo stated in his personal blog that many mainland enterprises have applied or are considering applying for listing in Hong Kong. They all see the institutional advantages of the Hong Kong market and the seamless connection with international standards, and believe that overseas financing will accelerate their development in the mainland and international markets. There are also a number of innovation and technology companies based in the Yangtze River Delta, which also focus on the synergy between Hong Kong and other cities in the Greater Bay Area, such as a cooperative platform with Shenzhen in innovation and technology. They hope to make full use of the development strategies of the two major countries, the Yangtze River Delta Economic Zone and the Guangdong-Hong Kong-Macao Greater Bay Area, to push the enterprise's business to a new level through regional collaboration.

According to reports, Chen Maobo visited the two cities of Hangzhou and Suzhou last week, and visited a number of private enterprises in the fields of artificial intelligence, the Internet of Things, biotechnology, new energy, and new materials. Chen Maobo admits that during his trip and exchanges with mainland science and technology enterprises, I was particularly impressed by the fact that many of the entrepreneurs were young and had an international perspective, and they all invested a lot of resources and manpower in R&D and innovation to pursue technological breakthroughs and enhance the competitiveness of products and services.

In the process of speeding up development, these companies are all expanding their sights from the mainland to the international market, and they hope to use Hong Kong as their preferred springboard and platform to enter the international market, including establishing a treasury center in Hong Kong and even an international business headquarters.

Chen Maobo said that for many enterprises, Hong Kong has many advantages, including free flow of capital, goods, data and talent; access to mainland and international financial markets and services; fair and open business environment and simple low tax rates; extensive and close international ties; efficient and high-quality professional services; familiarity with international rules and practices; and recruiting talents from around the world. Furthermore, there are quite a few enterprises wishing to set up research centers in Hong Kong, all pointing out that Hong Kong's perfect intellectual property protection system allows them to develop a new form of “patent operation”; at the same time, Hong Kong also gathers mainland and international data, and is also opening up cross-border data flows with the Greater Bay Area one after another, providing an important basic element for scientific research.

Another purpose of Chen Maobo's visit was to promote to local enterprises how Hong Kong can help them manage their multinational industrial chains and supply chains, as well as finance offshore trade, so that they can better expand their international business.

Chen Maobo said, “During the exchange session on the theme seminar, many companies reported to me that in order to better seize opportunities for international business, whether in logistics and transportation, marketing and sales, investment and establishment of factories, or overseas procurement, they hope to expand into a wider region and make better use of overseas resources to achieve their own better development, and at the same time meet the challenges of geopolitics and unilateralism. In fact, with its various advantages, Hong Kong can create greater value for mainland enterprises in the process of expanding their international business. One-stop services include supply chain management, trade financing, business consulting, and even talent and enterprise training.”

Editor/jayden