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China and Hong Kong are set to broaden the scope of their cross-border investment initiative, the “wealth connect” scheme, by introducing 10 additional securities firms. These firms include some of the largest brokerages in both regions. The move is aimed at allowing residents to invest more freely across borders, tapping into rising demand from Chinese investors looking for offshore investment opportunities amidst a volatile domestic market.
The first batch of securities companies to be added to the scheme includes notable names such as China CITIC Securities, China International Corporation Company (CICC), Huatai Securities, and GF Securities, all of which are listed on the Hong Kong Stock Exchange. Other firms in the group include China Merchants Securities, PingAn Securities, Guotai Junan Securities, Guosen Securities, Guotou Securities, and Zhongtai Securities, according to sources familiar with the matter. These sources requested anonymity as they were not authorized to speak publicly about the development.
Launched in late 2021, the “wealth connect” scheme was initially designed to enable residents of nine cities in Guangdong province, adjacent to Hong Kong, to purchase investment products from banks in Hong Kong and Macau. Conversely, it also allows residents of these offshore financial centres to access the mainland Chinese market, providing a rare channel under China’s stringent capital controls.
The inclusion of the new securities firms is expected to give China’s more sophisticated investors in Guangdong an expanded range of options for offshore investments. This move comes as mainland assets face challenges from a slowing economy and market volatility, prompting a growing interest among Chinese investors in diversifying their portfolios abroad.
The scheme has seen substantial growth this year, with mainland Chinese clients investing 15.4 billion yuan ($2.16 billion) in offshore products, a stark contrast to the 24.6 million yuan invested northbound by residents of Hong Kong and Macau, according to data from China’s central bank.
As of now, 24 Hong Kong-based banks are authorized to facilitate southbound investments by mainland residents, while 27 mainland banks have received approval to manage northbound investments for Hong Kong and Macau residents.