What’s going on?
Wealthy Chinese investors are snapping up Hong Kong investment products such as insurance and high-yield fixed deposits to escape a weak yuan and a shaky Chinese property market.
What does this mean?
this tendency Investment in Hong Kong has surged since China relaxed restrictions on its “Wealth Connect” program in February. The surge has made Hong Kong a battleground for financial companies and could help it regain its status as a wealth hub despite recent issues such as pro-democracy protests and Beijing’s tightening control. HSBC, for example, saw a threefold increase in new Hong Kong accounts from mostly mainland Chinese clients in 2023 compared to pre-COVID levels in 2019, and that momentum has continued in the first quarter of this year.
Why should you care?
For markets: Hong Kong’s asset management industry is heating up.
Ultra-rich people from China and Southeast Asia are flocking to Hong Kong in search of better investment opportunities. UBS reported an 85% increase in inquiries from potential family offices last year, with more than 60% of those coming from Chinese investors looking to set up shop in Hong Kong. Given low long-term bond yields, a weak yuan and sluggish returns on stocks and real estate, mainland Chinese investors have few options at home.
Overall picture: The lifeblood of Hong Kong’s financial industry.
The “Wealth Connect” program allows residents of nine cities in Guangdong province to buy products from banks in Hong Kong and Macau. Investments from mainland China reached 13 billion yuan in March, rising to 22.3 billion yuan in April. Some Hong Kong banks are offering attractive interest rates of up to 10% annually on short-term deposits under the program, compared with about 2% in mainland China. Citigroup also reported that it opened a record number of new accounts in Hong Kong in 2023, driven by demand from mainland Chinese customers, and the trend remains strong.
