False alarm over China-HK mutual recognition plans
Industry sources have dampened speculation that the eagerly anticipated cross-border mutual fund recognition scheme between Hong Kong and mainland China is set to be introduced any time soon.
An official from the China Securities Regulatory Commission (CSRC) noted during a question-and-answer media session held on the mainland on Friday that it had reached a consensus with Hong Kong’s Securities and Futures Commission (SFC) in terms of policy direction. No time-frame was given.
Asked about the progress of the scheme, including the criteria for funds to be eligible for the programme and the timing of its introduction, the official noted that the two regulatory bodies had been working towards a solution.
“We have come to consensus on the policy direction,” he said. “However, there is still a lot of work to do on the technical side.”
He noted that the type of funds to be included in the scheme and the mechanism for sales and distribution had yet to be finalised. “We do not have a specific time-frame for the programme now,” he added.
The CSRC official simply reaffirmed that the two regulators had been working together closely since the start of this year and that a working group had been set up to discuss the scheme.
AsianInvestor has previously posted 10 key questions that remain to be answered when it comes to the cross-border recognition scheme.
The CSRC comments were picked up by local media in China. However, the Chinese regulator’s statement added no more detail than comments already made towards the end of July by SFC deputy CEO Alexa Lam.
Then she had told Hong Kong's South China Morning Post that the regulators were working on the selection criteria for fund products after concluding a six-month study of the regulatory framework of the two markets.
The previous month Lam had said the discussions with the CSRC were at a technical initial stage involving a mapping of both regimes – with Hong Kong operating under a common law framework and China a civil one.
She had noted that the two regulators were discussing different ways of protecting investors, adding that the regulators would outline parameters and guidelines for qualification over time.
A spokesman for the SFC declined to comment when approached by AsianInvestor.
However, a well-placed source suggested that reports of the imminent approval of the scheme were off the mark.
“There are two stages to the introduction of this scheme,” he noted. “The first is to compare regulatory systems and benchmark the level of investor protection, and this has been completed.
“But this whole process still needs approval from China’s State Council, so it won’t be announced any time soon. There are still a lot of technical issues to be sorted out.
“I have seen people quoted saying that they are hoping that the scheme will be introduced by the end of the year," he added. "This has led to rumours and speculation that it will be. But this response from the CSRC is nothing more than routine.”