Government Welcomes Pilot Scheme for Mainland Individuals to Invest Directly in Hong Kong Securities

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Ada Chong at 212-752-3320
Daniel McAtee at 202-238-6360
Wing Yan Tong at 415-835-9315

August 20, 2007 - Hong Kong Financial Secretary John Tsang and the Chief Executive of the Hong Kong Monetary Authority (HKMA), Joseph Yam, have welcomed the pilot scheme announced by the State Administration of Foreign Exchange (SAFE) for Mainland individuals to invest directly in securities in Hong Kong.

Under the scheme, resident individuals can use foreign currency funds of their own or those converted from renminbi to invest in securities listed on the Hong Kong Stock Exchange.

The Action Agenda on "China's 11th Five-Year Plan and the Development of Hong Kong" published early this year has proposed a greater use of Hong Kong's financial platform to facilitate orderly outflows of funds from the Mainland, including the permission of Mainland individuals to remit "self-owned" foreign currency funds out of the Mainland and make investments offshore without going through QDII scheme (Recommendation F2-11, or the "free-walk" scheme for funds in short). The Hong Kong Special Administrative Region Government has been following up with the Mainland authorities since the publication of the Action Agenda. The HKMA has been in discussion with the People's Bank of China (PBoC) and SAFE on the operational details of the "free-walk" scheme. The pilot scheme announced by SAFE is a concrete response to the recommendation.

Mr. Tsang said the pilot scheme was in line with the Mainland's policy objective of allowing orderly outflows of funds. "The use of Hong Kong's financial platform for Mainland individuals to invest in securities offshore is a clear demonstration of the mutually-assisting, complementary and inter-active relationship between the financial systems of the Mainland and Hong Kong. It will help to enhance the status of Hong Kong as an international financial center," said Mr. Tsang.

Mr. Yam said the pilot scheme was conducive to the interaction and the mutual development of the financial markets in Hong Kong and the Mainland. "The HKMA will continue to work with the PBoC, SAFE and other Mainland authorities on measures to strengthen the links and interaction of the financial markets in the two places, thereby increasing their overall size and efficiency," he said.