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Trade and Industry Department The Government of the Hong Kong Special Administrative Region
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Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

Securities and Futures Services

Liberalisation Measures under CEPA

The Agreement on Trade in Services covers and consolidates commitments relating to liberalisation of trade in services provided in CEPA and its Supplements and also the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong.

Agreement on Trade in Services
Liberalisation Measures under Cross-border Services (Positive List)
Sectors or
Sub-sectors
7. Financial services
  B. Banking and other financial services (excluding insurance)
  1. Acceptance of deposits and other repayable funds from the public (CPC81115-81119)
  2. Lending of all types, including, inter alia, consumer credit, mortgage credit, factoring and financing of commercial transaction (CPC8113)
  3. Financial leasing (CPC8112)
  4. All payment and money transmission services (CPC81339)
  5. Guarantees and commitments (CPC81199)
  6. Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following:
f1.  money market instruments (CPC81339)
f2.  foreign exchange (CPC81333)
f3.  derivative products including, but not limited to, futures and options (CPC81339)
f4.  exchange rate and interest rate instruments, including products such as swaps, forward rate agreements, etc. (CPC81339)
f5.  transferable securities (CPC81321)
f6. other negotiable instruments and financial assets, including bullion (CPC81339)
  1. Participation in issues of all kinds of securities (CPC8132)
  2. Money broking (CPC81339)
  3. Asset management (CPC8119, 81323)
  4. Settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instruments (CPC81339 or 81319)
  5. Advisory and other auxiliary financial services (CPC8131 or 8133)
  6. Provision and transfer of financial information, and financial data processing and related software by providers of other financial services (CPC8131)
Specific
commitments
  1. To simplify the relevant procedures for Hong Kong professionals1 applying in the Mainland for securities and futures industry qualifications. Hong Kong professionals applying to obtain securities and futures industry qualifications of the Mainland need only to undertake training and pass examination on Mainland laws and regulations; and examination on professional knowledge is not required.2
  2. To support qualified Mainland securities companies approved by the China Securities Regulatory Commission or other financial institutions engaged in securities activities to set up subsidiaries in Hong Kong according to relevant requirements and operate businesses in accordance with the laws.  The timeframe for Mainland securities companies to complete registration for their subsidiaries is extended from six months to one year.3
  3. To allow the Hong Kong Exchanges and Clearing Limited to set up a representative office in Beijing.4
  4. To allow Mainland fund management companies approved by the China Securities Regulatory Commission to establish subsidiaries in Hong Kong to operate relevant businesses.5
  5. To allow subsidiaries set up in Hong Kong by qualified Mainland futures companies in developing business in Hong Kong in accordance with the laws.6
  6. To explore further lowering of the eligibility requirements for QDII, QFII and RQFII schemes and to increase relevant investment quotas.7
  7. To deepen the co-operation between the Mainland and Hong Kong in financial services and product development, it is agreed that ETF (open-end index-tracking exchange-traded fund), which portfolios are constituted by Hong Kong listed stocks, will be launched in the Mainland.8
  8. To deepen the cooperation between the Mainland and Hong Kong in financial services and products development, and to allow investments in the Mainland securities market by means of the RMB Qualified Foreign Institutional Investor scheme (RQFII); to allow Hong Kong-funded securities companies to make reference to the securities assets being managed by the respective group when applying for QFII status.9
  9. To explore promoting RMB bond issuances on the Mainland exchanges by eligible Hong Kong companies.10
  10. Support eligible Hong Kong financial institutions to conduct RMB direct investment activities in China (Guangdong) Pilot Free Trade Zone, such as establishing, injecting capital into, or becoming a shareholder of financial institutions in the Pilot Free Trade Zone.11
  11. Allow financial institutions in China (Guangdong) Pilot Free Trade Zone to, in accordance with relevant regulations, provide services to individual investors in the Pilot Free Trade Zone for investing in stocks, bonds and other negotiable securities in Hong Kong's capital market.12
Reserved Restrictive Measures under Commercial Presence (Negative List)
Sector
7. Financial Services
Sub-sector   B. Banking and other financial services (excluding insurance)
  1. Acceptance of deposits and other repayable funds from the public (CPC81115-81119)
  2. Lending of all types, including, inter alia, consumer credit, mortgage credit, factoring and financing of commercial transaction (CPC8113)
  3. Financial leasing (CPC8112)
  4. All payment and money transmission services (CPC81339)
  5. Guarantees and commitments (CPC81199)
  6. Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following:
f1. money market instruments (CPC81339)
f2. foreign exchange (CPC81333)
f3.derivative products including, but not limited to, futures and options (CPC81339)
f4. exchange rate and interest rate instruments, including products such as swaps, forward rate agreements, etc. (CPC81339)
f5. transferable securities (CPC81321)
f6. other negotiable instruments and financial assets, including bullion (CPC81339)
  1. Participation in issues of all kinds of securities (CPC8132)
  2. Money broking (CPC81339)
  3. Asset management (CPC8119, 81323)
  4. Settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instruments (CPC81339 or 81319)
  5. Advisory and other auxiliary financial services (CPC8131 or 8133)
  6. Provision and transfer of financial information, and financial data processing and related software by providers of other financial services (CPC8131)
 
Obligations
concerned
National Treatment
Reserved
Restrictive
Measures
Commercial Presence
  1. Hong Kong service suppliers investing in financial institutions engaging in banking business shall be financial institutions or specialised financial institutions, and the relevant conditions being:
    1) For setting up a wholly foreign-funded bank, the shareholder shall be a financial institution, and the sole or majority shareholder shall be a commercial bank;  for setting up a Chinese-foreign joint venture bank, the Hong Kong shareholder shall be a financial institution, and the sole or majority foreign shareholder shall be a commercial bank;
    2) The foreign founding member or strategic investor of a large commercial bank13, joint stock commercial bank, urban commercial bank or the Postal Savings Bank of China shall be a financial institution;
    3) The foreign founding member or strategic investor of a rural commercial bank, rural cooperative bank, rural credit union or rural bank shall be a bank;
    4) The foreign equity investor of a trust company shall be a financial institution;
    5) The foreign founding member of a financial leasing company shall be a financial institution or financial leasing company;
    6) The major foreign equity investor of a consumer finance company shall be a financial institution;
    7) The foreign investor of a money brokerage company shall be a money brokerage company;
    8) The foreign strategic investor of a financial asset management company shall be a financial institution.

  2. Approval shall be required for investing in financial institutions listed below:
    1) Approval is required for Hong Kong service suppliers to invest in large commercial banks, joint stock commercial banks, the Postal Savings Bank of China or urban commercial banks in the Mainland;
    2) Approval is required for Hong Kong service suppliers to invest in rural commercial banks, rural cooperative banks, rural credit unions, rural banks or credit companies;
    3) Approval is required for Hong Kong service suppliers to invest to establish wholly foreign-funded banks, Chinese-foreign joint venture banks, or foreign bank branches;
    4) Approval is required for foreign banks to change the operating capital of foreign bank branches in the Mainland.
    5) Approval of the state council authority supervising credit information business is required for a credit information institution to provide credit information services.
    6) Approval from the State Internet Information Office, Ministry of Commerce and State Administration for Industry & Commerce shall be required, and the "Licence for foreign institution investing and establishing financial information services company in China" shall be obtained, for establishing a financial information services company.

  3. Hong Kong service suppliers investing in financial institutions engaging in banking business shall meet relevant asset size requirements, specifically:
    1) The sole or majority shareholder of a wholly foreign-funded bank or a Chinese-foreign joint venture bank, and a foreign bank applying to establish a foreign bank branch, shall have total assets of no less than US$6 billion at the end of the year preceding application;
    2) The foreign founding member or strategic investor of a large commercial bank, joint stock commercial bank, urban commercial bank or the Postal Savings Bank of China shall in principle have total assets of no less than US$6 billion at the end of the year immediately before;
    3) The foreign founding member or strategic investor of a rural commercial bank, rural cooperative bank, rural bank or credit company shall in principle have total assets of no less than US$6 billion at the end of the year immediately before; the foreign founding member or strategic investor of a rural credit union shall in principle have total assets of no less than US$1 billion at the end of the year immediately before;
    4) The foreign equity investor of a trust company shall in principle have total assets of no less than US$1 billion at the end of the year immediately before;
    5) The outside strategic investor (which itself is a foreign financial institution) of a financial company of an enterprise group shall in principle have total assets of no less than US$1 billion at the end of the year immediately before;
    6) The foreign founding member of a financial leasing company shall in principle have total assets of no less than US$1 billion at the end of the year immediately before;
    7) The foreign strategic investor of a financial asset management company shall in principle have total assets of no less than US$10 billion at the end of the year immediately before.

  4. Hong Kong service suppliers investing in the following financial institutions engaging in banking business shall be subject to single and aggregate limits on shareholding, specifically:
    1) Any single foreign financial institution and its solely or jointly controlled affiliate, as a founding member or strategic investor, shall have shareholding of not more than 20% in any Chinese commercial bank (including any large  commercial bank, joint-stock commercial bank, urban commercial bank and the Postal Savings Bank of China); all foreign financial institutions and their solely or jointly controlled affiliates, as founding member or strategic investors, shall have shareholding of not more than 25%.  Shareholding as referred in this clause means the shares held by a foreign financial institution as a ratio of the total shares of the Chinese commercial bank.  The shareholding of the affiliate of the foreign financial institution shall be aggregated with the shareholding of the foreign financial institution.
    2) Any single foreign bank and its solely or jointly controlled affiliate, as a founding member or strategic investor, shall have shareholding of not more than 20% in any rural commercial bank, rural cooperative bank or rural credit union; all foreign banks and their solely or jointly controlled affiliates, as founding members or strategic investors, shall have shareholding of not more than 25%.
    3) Any single foreign institution shall have shareholding of not more than 20% in any financial asset management company; all foreign institutions shall have shareholding of not more than 25%.

  5. Foreign bank branches established by Hong Kong service suppliers shall not be allowed to conduct the following foreign currency or RMB businesses: acting as an agent for issuance, payment and underwriting of government bonds; acting as a receiving and paying agent; bank cards services.  Foreign bank branches established by Hong Kong service suppliers shall not be allowed to offer RMB services to Chinese citizens in the Mainland other than accepting time deposits of no less than RMB1 million; shall not be allowed to conduct businesses restricted to wholly foreign-funded banks or joint venture banks; shall not be allowed to conduct securities or insurance businesses.

  6. For a foreign bank branch established by a Hong Kong service supplier, the RMB portion of the total of operating capital and reserves shall be no less than 8% of its RMB risk-weighted assets.  A foreign bank branch shall have operating capital of no less than RMB200 million or convertible foreign currencies provided by its parent bank, and 30% of the operating capital shall be in the form of specified interest-earning assets, and interest-earning assets in the form of time deposits shall be deposited with three or less than three Chinese commercial banks in the Mainland.

  7. Wholly foreign-funded banks, Chinese-foreign joint venture banks and foreign bank branches established by Hong Kong service suppliers shall be required to satisfy prudential requirements and obtain approval for conducting RMB business.
  8. Wholly foreign-funded banks and Chinese-foreign joint venture banks established by Hong Kong service suppliers shall not be allowed to invest to establish, become a shareholder of, or acquire any locally incorporated financial institution. Where the relevant regulations and regulatory instruments provided otherwise, the provisions in such regulations and instruments shall be followed.

  9. Wholly foreign-funded banks, Chinese-foreign joint venture banks or foreign bank branches engaging in interbank lending and borrowing business shall be required to obtain approval of the People's Bank of China for having the qualification to conduct RMB interbank lending and borrowing business.  A wholly foreign-funded bank or Chinese-foreign joint venture bank shall borrow or lend no more than 2 times of its paid-in capital; a foreign bank branch shall borrow or lend no more than 2 times of its RMB operating capital.
  10. Foreign bank branches established by Hong Kong service suppliers shall not be allowed to engage in the business of acting as a receiving and paying agent for the government's treasury.

  11. Hong Kong service suppliers investing in a money brokerage company shall have engaged in money brokerage business for over 20 years, have recorded profit for 2 consecutive years preceding its application, and have global institutional and communication networks necessary for conducting money brokerage business.

  12. Foreign institutions shall not be allowed to participate in the establishment of financial asset management companies.

  13. Investment in securities companies can be made in the following two forms only:
    1) Where investment in securities companies is made in the form of joint venture, which includes: the establishment of joint venture securities companies through joint capital contribution with domestic shareholders in accordance with law; and the conversion of Mainland-funded securities companies into joint venture securities companies according to law by legal transfer and acquisition of shareholding in the Mainland-funded securities companies. (In line with the national treatment, the "participation in one and holding of one principle" is applicable to the number of Mainland-Hong Kong joint venture securities companies that are allowed to be invested in through shareholding acquisition by the same Hong Kong-funded financial institution or by various Hong Kong-funded financial institutions which are effectively controlled by the same entity.)
    2) Investment by overseas investors in listed Mainland-funded securities companies may be done by way of holding shares in a listed Mainland-funded securities company through securities transactions on a stock exchange, or by establishing a strategic partnership with a listed Mainland-funded securities company and obtaining approval of the China Securities Regulatory Commission for holding shares in a listed Mainland-funded securities company with its approved scope of business remaining unchanged (on the premise that the controlling shareholder is a Mainland shareholder, the listed Mainland-funded securities company can be exempted from the requirement that the shareholding percentage of at least one Mainland shareholder being not less than 49%).
Overseas investors hold through securities transactions on a stock exchange in accordance with law, or hold jointly with others under an agreement or other arrangements, more than 5% of the shares of a listed Mainland-funded securities company, shall comply with the qualification requirements for overseas shareholders of joint venture securities companies.
 
The percentage of shareholding held (including those directly held and indirectly controlled) by a single overseas investor in a listed Mainland-funded securities company shall not exceed 20%; the percentage of aggregate shareholding held (including those directly held and indirectly controlled) by all overseas investors in a listed Mainland-funded securities company shall not exceed 25%.
  1. Where investment in securities companies is made in the form of a joint venture, except for the following circumstances, the percentage of shareholding held by overseas shareholders or the percentage of their interests in an overseas-invested securities company shall not exceed 49% in aggregation (including those directly held and indirectly controlled).  Of domestic shareholders, at least one shall be a Mainland-funded securities company with the percentage of its shareholding or interests in the overseas-invested securities company being not less than 49%:
    1) Qualified Hong Kong-funded financial institutions may set up one full-licensed Mainland-Hong Kong joint venture securities company each in Shanghai Municipality, Guangdong Province and Shenzhen Municipality.  The maximum percentage of aggregate shareholding of the Hong Kong-funded institutions is 51%.  The Mainland shareholders are not restricted to securities companies;
    2) Qualified Hong Kong-funded financial institutions may set up one new full-licensed Mainland-Hong Kong joint venture securities company in accordance with relevant Mainland requirements each in certain reform experiment zones for "piloting financial reforms" as approved by the Mainland.  The Mainland shareholders are not restricted to securities companies.  The percentage of aggregate shareholding of the Hong Kong-funded financial institutions in the joint venture shall not exceed 49%, and the requirement for a single Mainland shareholder to hold 49% of shareholding in the joint venture is removed.
  1. Except for the circumstances set forth in paragraphs 14(1) and 14(2), overseas shareholders of a joint venture securities company shall meet the following criteria: at least one being an institution legally qualified for carrying out financial businesses; and having been in operation for more than five consecutive years.
Under the circumstances set forth in paragraphs 14(1) and 14(2), Hong Kong shareholders of a joint venture securities company shall satisfy the qualification requirements for Hong Kong-funded financial institutions specified in the Mainland.
  1. Except for the circumstances set forth in paragraphs 14(1) and 14(2), the scope of business of joint venture securities companies is limited to: underwriting and sponsoring of shares (including RMB ordinary shares and foreign shares) and bonds (including government bonds and corporate bonds); brokerage of foreign shares; brokerage and proprietary trading of bonds (including government bonds and corporate bonds).

  2. Investment in fund management companies by Hong Kong-funded financial institutions can be made only in the form of joint venture (in line with the national treatment, the "participation in one and holding of one principle" is applicable to the number of Mainland-Hong Kong joint venture fund companies that are allowed to be invested in through shareholding acquisition).

  3. Investment in futures companies can be made only in the form of joint venture.  The percentage of shareholding owned by qualified Hong Kong service suppliers in a joint venture futures company shall not exceed 49% (including shareholding of related parties). (In line with the national treatment, the "participation in one and holding of one principle" is applicable to the number of Mainland-Hong Kong joint venture futures companies that are allowed to be invested in through shareholding acquisition by the same Hong Kong-funded financial institution or by various Hong Kong-funded financial institutions which are effectively controlled by the same entity.)
An overseas shareholder holding more than 5% of shareholding in a futures company shall meet the following criteria: being a financial institution established and legally existed under the laws of Hong Kong; all of its financial indicators and regulatory indicators in the preceding three years having met the relevant provisions of the laws of Hong Kong and the requirements of regulatory bodies.
  1. Investment in securities investment advisory companies by Hong Kong-funded financial institutions can be made only in the form of joint venture. (In line with the national treatment, the "participation in one and holding of one principle" is applicable to the number of Mainland-Hong Kong joint venture securities investment advisory companies that are allowed to be invested in through shareholding acquisition by the same Hong Kong-funded financial institution or by various Hong Kong-funded financial institutions which are effectively controlled by the same entity.)
Hong Kong securities companies which satisfy the qualification requirements as overseas shareholders of overseas-invested securities companies, and Mainland securities companies which satisfy the requirements for establishing subsidiaries, are allowed to set up joint venture securities investment advisory companies in the Mainland. The joint venture securities investment advisory company shall be a subsidiary of the Mainland securities company, the scope of business of which shall focus specifically on carrying on securities investment advisory businesses. The percentage of shareholding of the Hong Kong securities company may, at a maximum, reach 49% of the total shareholding of such joint venture securities investment advisory company.
 
In certain reform experiment zones for "piloting financial reforms" as approved by the Mainland, the percentage of shareholding of a Hong Kong-funded securities company which satisfies the relevant requirements for setting up a Mainland-Hong Kong joint venture securities investment advisory company in such company may reach more than 50%.
  1. Where Hong Kong shareholders acquire shareholding in Mainland-Hong Kong joint venture securities companies, fund management companies, futures companies or securities investment advisory institutions, capital contribution shall be made in a currency that is freely convertible.
For clarity and avoidance of doubt, any foreign bank branch established in the Guangdong province by a Hong Kong bank can apply to establish "cross-location" sub-branches (i.e. different from the municipality where the relevant branch is located) within the Guangdong province with reference to the relevant rules in the Mainland for establishing sub-branches.  If a wholly foreign-funded bank established in the Mainland by a Hong Kong bank has already established branches in the Guangdong province, such branches can apply to establish "cross-location" sub-branches (i.e. different from the municipality where the relevant branch is located) within the Guangdong province with reference to the relevant rules in the Mainland for establishing sub-branches.
   
Sector
7. Financial Services
Sub-sector   C. Other
Obligations
concerned
National Treatment
Reserved
Restrictive
Measures
Commercial Presence

Apply national treatment.
1    In this sector, professionals refer to Hong Kong permanent residents who have been licensed by the Securities and Futures Commission of Hong Kong.
2    Covering the liberalisation measures provided in CEPA.
3    Covering the liberalisation measures provided in CEPA Supplement IV.
4    Covering the liberalisation measures provided in CEPA.
5    Covering the liberalisation measures provided in CEPA Supplement IV.
6    Covering the liberalisation measures provided in CEPA Supplement II and Supplement VII.
7    Covering the liberalisation measures provided in Guangdong Agreement.
8    Covering the liberalisation measures provided in CEPA Supplement VII.
9  Covering the liberalisation measures provided in CEPA Supplement VIII, Supplement IX, Supplement X, and Guangdong Agreement.
10  Covering the newly added liberalisation measures in this Agreement.
11  Covering the newly added liberalisation measures in this Agreement.
12  Covering the newly added liberalisation measures in this Agreement.
13  For the purpose of this clause, large commercial banks refer to Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications.

For details about financial cooperation under the Agreement on Economic and Technical Cooperation (Ecotech Agreement), please refer to the Ecotech Agreement.