Shop­ping gets in the zone

With the Qian­hai eco­nomic co­op­er­a­tion zone in Shen­zhen fast tak­ing shape, Hong Kong has been urged to up­grade it­self into a fi­fi­nan­cial shop­ping hub us­ing its rich eco­nomic, ac­count­ing and le­gal ex­per­tise. Chai Hua re­ports in Shen­zhen.

China Daily (Canada) - - HONGKONG -

Jointly build­ing a fi­nan­cial shop­ping cen­ter with the Qian­hai eco­nomic co­op­er­a­tion zone may be a new driver for the Hong Kong econ­omy, ac­cord­ing to Zhou Ying­gang, pro­fes­sor at the Chi­nese Univer­sity of Hong Kong’s Business School. How­ever, the main­land still needs fur­ther fi­nan­cial re­form.

Zhou sug­gests up­grad­ing Hong Kong’s cur­rent sta­tus as a shop­ping des­ti­na­tion to a fi­nan­cial shop­ping des­ti­na­tion. The Qian­hai spe­cial zone in Shen­zhen, as the “front desk”, will pro­vide di­rect ser­vice for main­land cus­tomers, and Hong Kong as the “op­er­at­ing base” will de­sign di­ver­si­fied fi­nance prod­ucts for them.

Qian­hai au­thor­i­ties support the ini­tia­tive be­cause “Qian­hai’s in­dus­try po­si­tion­ing is in ac­cor­dance with that of Hong Kong.” Qian­hai’s po­si­tion is to de­velop mod­ern ser­vice in­dus­tries, in­clud­ing fi­nance, lo­gis­tics, in­for­ma­tion, and tech­nol­ogy sec­tors, while Hong Kong is known for its well-de­vel­oped ser­vice in­dus­try, which is more than 90 per­cent of its gross do­mes­tic prod­uct.

They be­lieve that such a cen­ter will ben­e­fit both sides: “The SAR can have closer ac­cess to the grow­ing main­land do­mes­tic mar­ket, while its rich ex­pe­ri­ences and tal­ent re­sources in the field of in­ter­na­tional le­gal and ac­count­ing ex­per­tise are of great im­por­tance for main­land com­pa­nies to march into the in­ter­na­tional mar­ket,” the Qian­hai au­thor­ity said.

“The ad­van­tage of Qian­hai is in­ter­nal com­mu­ni­ca­tion and that of Hong Kong is ex­ter­nal com­mu­ni­ca­tion,” a Qian­hai of­fi­cial said.

Zhou agreed that the fi­nan­cial shop­ping cen­ter should be con­nected with Hong Kong’s lead­ing po­si­tion of a world fi­nan­cial cen­ter, while still pos­sess­ing its own fea­tures.

“The shop­ping cen­ter should fo­cus more on in­di­vid­ual clients, with bet­ter qual­ity and pro­tec­tion for con­sumer rights.”

Hong Kong is well-known as a lead­ing shop­ping des­ti­na­tion for lux­ury goods and tax-free prod­ucts. How­ever, in re­cent months, the re­tail in­dus­try has seen a de­cline due to var­i­ous fac­tors.

Zhou said that to bet­ter cheer up the re­tail sec­tor, Hong Kong should change its fo­cus from tan­gi­ble goods to other fi­nan­cial ser­vices, such as in­surance and funds.

“The rise of in­vest­ment de­mand in the main­land has brought in a huge mar­ket for Hong Kong. What we should do is grasp the op­por­tu­nity and cre­ate a new growth en­gine.”

Re­search from Bos­ton Con­sult­ing Group and China Con­struc­tion Bank show that as at the end of 2012, dis­pos­able in­vest­ment in­come had reached 7.3 tril­lion yuan ($1.2 tril­lion) on the main­land.

Bos­ton Con­sult­ing Group data show that in 2013, the num­ber of high-net-worth main­land fam­i­lies ex­ceeded those in Ja­pan to take the sec­ond po­si­tion world­wide.

Zhou said that as the in­surance mar­ket in Hong Kong has reached in­ter­na­tional stan­dards, with more in­vest­ment chan­nels and bet­ter in­vest­ment re­turns, con­sumers can get bet­ter ser­vices and re­turns at a cheaper price.

De­mand from both main­land in­di­vid­u­als and cor­po­ra­tions for cross-bor­der Hong Kong bank­ing ser­vices is see­ing strong and steady growth. The Q4 Cross-bor­der Bank­ing De­mand In­dex by China CITIC Bank In­ter­na­tional Limited ap­pears high above the 50-point line that de­mar­cates strength­en­ing and weak­en­ing de­mand.

But Hong Kong in­surance com­pa­nies are find­ing it dif­fi­cult to set up branches in the Qian­hai zone, not to men­tion other ar­eas on the main­land.

So far, Qian­hai has 6,854

fi­nance com­pa­nies, ac­count­ing for more than half of the to­tal com­pa­nies that have regis­tered in the zone. There are a to­tal of 14 in­surance fi­nan­cial in­sti­tu­tions, and they are all main­land com­pa­nies.

Three Hong Kong in­surance com­pa­nies — Asia In­surance, Dah Sing In­surance Company and Blue Cross (Asia-Pa­cific) In­surance Limited — had in­tended to set up branches in Qian­hai, but they have failed to meet the re­quire­ments so far, ac­cord­ing to the Qian­hai ad­min­is­tra­tive of­fice.

Ac­cord­ing to China in­surance reg­u­la­tions, for­eign com­pa­nies are re­quired to have more than $5 bil­lion of to­tal as­sets by the end of the year of ap­pli­ca­tion. In ad­di­tion, their head­quar­ters need have op­er­ated in­surance business for at least 30 years and their rep­re­sen­ta­tive of­fices on the main­land should have been run­ning for more than two years.

“The China In­surance Reg­u­la­tory Com­mis­sion, how­ever, agrees to con­sider fur­ther loos­en­ing some of th­ese re­quire­ments for Hong Kong in­surance com­pa­nies to start business in Qian­hai,” the of­fice said.

As for in­surance, the Qian­hai co­op­er­a­tion zone has also car­ried out some in­no­va­tive ex­per­i­ments with the In­ter­net. The Qian­hai In­surance Ex­change Cen­ter, regis­tered in Au­gust 2013, is the first in­no­va­tive in­surance trans­ac­tion ser­vice plat­form in the main­land.

The cen­ter, based on in­ter­net fi­nanc­ing, is a third-party plat­form for business-to-business, business-to-cus­tomer and on­line-to-off­line in­surance trad­ing. Pol­i­cy­hold­ers can publish their de­mand, se­lect com­pa­nies and buy in­surance prod­ucts with a sin­gle click.

Zhou ad­mits that there are cer­tain threats to banks and fi­nan­cial in­sti­tu­tions in the main­land, as com­pe­ti­tion from Hong Kong ar­rives in Qian­hai.

How­ever, he prefers to call it a process that will “force them to re­form, oth­er­wise th­ese ma­jor play­ers will not think about chang­ing, since they are too com­fort­able with the cur­rent dom­i­nant po­si­tion”.

The cen­tral gov­ern­ment is grad­u­ally push­ing fi­nan­cial re­forms in the spe­cial zone to open the door for Hong Kong and over­seas in­sti­tutes.

The State Ad­min­is­tra­tion of For­eign Ex­change has ap­proved Shen­zhen as a pi­lot for over­seas in­vest­ment un­der the Qual­i­fied Do­mes­tic Limited Part­ner (QDLP) pro­gram. The QDLP pro­gram has been in ef­fect in Qian­hai since early Au­gust.

It al­lows qual­i­fied do­mes­tic in­vestors to raise cap­i­tal of up to $1 bil­lion, which they can use in over­seas in­no­va­tive in­vest­ment, in­clud­ing in tra­di­tional stock mar­kets, as well as in the eq­uity mar­ket and real es­tate.

When it comes to in­di­vid­ual in­vestors, how­ever, the main­land still stays cau­tious. “As for QDII2 (Qual­i­fied Do­mes­tic In­di­vid­ual In­vestors), the cen­tral bank is lead­ing to draft the plan and ar­range pi­lots, where Shen­zhen is in­cluded in the first batch,” Qian­hai ad­min­is­tra­tive of­fi­cials said.

Co­op­er­at­ing with main­land com­pa­nies through cre­ative fi­nanc­ing tools and plat­forms may ac­cel­er­ate the re­al­iza­tion of the Hong Kong-Qian­hai fi­nan­cial shop­ping cen­ter.

The China Bank­ing Reg­u­la­tory Com­mis­sion has agreed to al­low Wing Lung Bank and China Unicom to jointly es­tab­lish a con­sumer fi­nance company, with a regis­tered cap­i­tal of 2 bil­lion yuan. It is the first company of its kind to be­ing set up on the main­land un­der the Closer Eco­nomic Part­ner­ship Ar­range­ment frame­work. Con­tact the writer at grace@chi­nadai­lyhk.com

PRO­VIDED TO CHINA DAILY

Shen­zhen’s Qian­hai spe­cial eco­nomic zone, sched­uled to be com­pleted by 2020, has so far at­tracted more than 14,500 regis­tered com­pa­nies, in­clud­ing more than 730 from Hong Kong alone.

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