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Hong Kong Plugs Pro-Asset Management Policies

by Mary Swire, Lowtax.net, Hong Kong
06 November, 2014

In a recent speech, the Secretary for Financial Services and the Treasury, K C Chan, said that Hong Kong's asset management industry, with the support of the Government, "has been growing from strength to strength."

On November 3, at the Hong Kong Investment Funds Association 8th Annual Conference, he confirmed that the total combined fund-management business in Hong Kong reached a record high at the end of last year at more than HKD16 trillion (USD2 trillion) and showed an annual growth rate of more than 27 percent.

Chan also noted that the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, allowing holders of offshore RMB to invest in Mainland equities and bonds, is now "an integral part" of Hong Kong's asset management industry.

At the end of August, 74 Hong Kong financial institutions were qualified under the scheme, with approved quotas reaching RMB265bn. Some 55 fund products have been approved, including 16 exchange traded funds (ETFs), and, at the end of June, RMB63bn was managed under RQFII products.

Hong Kong, he said, also provides "a competitive tax and regulatory framework to help our asset management industry meet the challenges and opportunities."

In particular, public consultation on the planned introduction of open-ended fund companies, which could attract more funds to Hong Kong, ended in June, and the Government is planning extra support for the private equity industry in the form of a profits tax exemption on transactions in private companies that are incorporated or registered outside Hong Kong. To promote the use of ETFs, the stamp duty for dealing in them will also be waived.

The Government has been working with the Mainland authorities on the proposed mutual recognition and cross-boundary offering of funds, so as to expand significantly the range of fund products available to investors in both the Mainland and Hong Kong, while the Shanghai-Hong Kong Stock Connect will allow Mainland investors to invest directly in stocks listed in the Hong Kong market, and vice versa.

However, he pointed out that, with the objective of protecting the city's status as an asset management center, "Hong Kong has been a supporter of international efforts to promote tax transparency and combat cross-border tax evasion."

"Recently," he continued, "we indicated our support for the new global standard on the automatic exchange of information with appropriate partners on a reciprocal basis. Indeed, we hope to have legislation in place by 2017. With that, we would begin the first information exchanges by the end of 2018."

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