Financial Planning / Wealth Management

Hong Kong set to access mainland wealth

by Isabella Lee

Edward Chu, director & assistant general manager
Shanghai Commercial Bank Ltd
Photo: Wallace Chan

Local banking institutions good and ready for further expansion

Recent statistics showing quarterly increases in gross domestic production and consumer price inflation hitting their highest rates indicate that the mainland economy is accelerating.

"Strong economic growth, standing way over 10 per cent per annum, plus a world record breaking pool of domestic savings in the financial system reflect that people in China have accumulated abundant wealth over the past years," Edward Chu, director & assistant general manager of Shanghai Commercial Bank Ltd (SCB) explains. "With these resources, a lot of business prospects have been created for the banking and finance sector in Hong Kong."

Recognised as the gateway to China's vast financial resources, Hong Kong holds an envied position in world markets. In 2006, more than two-thirds of the total capitalisation in Hong Kong's exchange was made up of listings of companies whose main operations are based on the mainland. This figure, as well as turnover, is expected to continue to climb.

"The capital market is becoming more diverse as new tools are introduced constantly. For instance, Chinese banks have been offered the right to issue RMB-denominated bonds in Hong Kong. This gives them the ability to access investment capital available in the Hong Kong market," Mr Chu says.

Structured growth

In wealth management, although the existing range of products is relatively limited, Mr Chu is optimistic about future expansion. He believes that China is in the initial stages of its development compared with markets in Europe and North America, and it has the advantage of studying the history of these other markets. A gradually liberalising market, he says, is the result of good work by Chinese policymakers.

"Certainly, they have done a great job in designing and implementing macroeconomic policies. The adjustments the government has made, such as controlling the rise of the RMB, successfully prevent the risks of overheating but at the same time maintain stable growth. Combining such a healthy environment and the well developed local financial infrastructure, investors will continue to have great confidence in Hong Kong," Mr Chu stresses.

Close ties

Local banks also enjoy preferential treatment when entering into the China market through the Closer Economic Partnership Agreement (CEPA). Lately, additional liberalisation measures under CEPA have been agreed on, providing further competitive edges. For example, the minimum asset requirement for a Hong Kong bank to acquire shareholding in a mainland bank was adjusted from US$10 billion to US$6 billion and "green lanes" will be set up for processing applications by Hong Kong banks to open branches in the central western and north-eastern Guangdong. Hong Kong banks will also be encouraged to establish banks in rural areas of the mainland.

Key players from all levels of banking are excited about the potential of the market. According to Mr Chu, however, while large international banks have advantages with respect to their scale and sophistication, Chinese banks have the upper hand in networking and early segmentation of services.

"Basically, banks of considerable size in China can make use of their numerous branches to provide convenient and comprehensive services," he says. "By setting up premium service counters or VIP centres, many of the banks have segregated high net-worth customers from the entire profile. With this segment of top clients, these banks will move one step ahead of others once the green light is on for wealth management services."

Foster development

Shanghai Commercial Bank Ltd is focusing on consolidating its businesses in Hong Kong while keeping an eye on the China market. "With six years of practical experience, our wealth management department has shown substantial growth catering for the demands of our customers," Mr Chu adds.

As one of the best-known local Chinese banks, SCB has served the community since 1950. It provides both retail and commercial banking services, ranging from deposits, loans and credit cards, to foreign exchange, trade finance and securities trading. In all its 41 branches there are designated staff members specialising in an extensive scope of wealth management services.

"To foster a strong wealth management team, professional qualifications such as CFMP are essential. Our employees are encouraged to beef up their knowledge, especially through seminars and training conducted by the Hong Kong Institute of Bankers (HKIB)," Mr Chu says.

As one of the supporting organisations as well as a participating bank, SCB is playing an important role in the HKIB Outstanding Financial Planner Awards, an iconic annual event organised by the HKIB in conjunction with Career Times. The competition is for professionals in wealth management, aiming to raise public awareness of the importance of financial planning, to enhance the competitive edge of practitioners in the banking and financial sectors, to promote ethical selling and provision of suitable products to customers, and to recognise individuals who excel in the financial planning profession.

"The awards symbolise a common goal for the industry and SCB is proud to give its full support to such a meaningful concept," Mr Chu says.


Taken from Career Times 27 July 2007
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