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The reopening of the border between Hong Kong and the Chinese Mainland has been a major boost for Chinese banks based in the city, allowing the resumption of business travel and other essential cross-border activity – particularly with the Greater Bay Area (GBA).

It is expected that the GBA initiative – which aims to enhance connectivity between Hong Kong and Guangdong Province and Macau – will pick up pace again. Indeed, there has already been action on this front since the travel restrictions eased, with the introduction of a new scheme to allow more Hong Kong people to drive across the border into Guangdong. 

Besides the resumption of physical links, there have been developments in online connectivity. Chinese banks have been working on digital wallets that can be used in all 11 GBA cities including Macau, which will support customers involved in cross-border business. There have also been inroads in other cross-border services, including mortgages for Hong Kong residents to buy property in Mainland cities. 

In another recent development, Hong Kong residents can now open a Mainland bank account without needing to travel across the border or have a Mainland address. Under this pilot scheme, which is being run by Bank of China Hong Kong, customers will be able to link their account with mobile payment platforms in the GBA, making travel in the region more convenient. 

The various “Connect” schemes that facilitate cross-border investment continue to be enhanced, while the physical reopening of the border is expected to drive a resurgence in demand this year. The new Swap Connect was launched in May, which enables investors to conduct RMB interest rate swap trading and clearing in the Chinese Mainland and Hong Kong. Also, enhancements to the Wealth Management Connect scheme have made it easier for investors in the Chinese Mainland to invest in southbound products. 

The financial sector has been asking for enhancements to people flow and capital flow between Hong Kong and the Mainland, so it is a positive development to see that the programme of opening up has resumed now that Covid restrictions have eased. 

Enhancing the links across the GBA is a key policy of both the Central and Hong Kong governments, and Chinese banks have an important role to play across many aspects, including supporting Hong Kong as a financial hub for the nation, encouraging the development of the city’s technology and innovative industries, and promoting the construction of major infrastructure projects such as the Northern Metropolis.  

Looking more globally, Chinese banks in Hong Kong are also increasingly looking at overseas opportunities, especially in Southeast Asia. The banks are taking different approaches to this expansion exercise, with some converting into regional headquarters while others are collaborating with local branches. Some Chinese banks are also actively looking at other locations further afield, including countries in the Middle East and Central Asia that are part of the Belt and Road Initiative. 

Hong Kong also serves as a training hub for talent for the Chinese banks’ overseas operations as part of these plans to expand internationally. 

Technology development

Although the Chinese Mainland is well-known for its advanced technology, especially in customer service and online access, Chinese banks in Hong Kong have often been seen as old-fashioned and offering relatively limited services. This is partly because their client base has largely been focused on Chinese corporates operating in Hong Kong. 

However, Chinese banks are also interested in developing the retail market locally, so a number of them have been making efforts in brand building to develop a more modern look – including upgrading their physical branches as well as refreshing their websites – in a bid to improve their customer experience. 

Attracting more local customers, especially young professionals, does present challenges for Chinese banks. Even though the parent banks are generally very advanced in mobile banking services, they cannot just copy these services as the Hong Kong market has a different customer base with different expectations. However, it is expected that Chinese banks in Hong Kong will continue to put more efforts into marketing and branding to boost their presence in the market.  

In terms of using technology to offer better service to business customers, Chinese banks are active participants in the HKMA’s Commercial Data Interchange platform, which was launched in 2022. This platform uses alternative forms of data to improve the speed and accuracy of decision making. It helps businesses to access credit, particularly SMEs that often struggle to access loans. The use of alternative data to support credit assessment and risk control is already very mature in the Chinese Mainland market, so Chinese banks in Hong Kong have been able to leverage the experience of their parent bank in this area. 

Green opportunities

The Hong Kong government has been working hard to make the city a regional hub for sustainable finance, and the Central government has also ramped up its promotion of green finance in the last year or so. Both governments are keen to encourage investment in green technology and green energy, which will need funding support that banks can provide. 

Chinese banks in Hong Kong are now working to build up their green finance framework and products including green deposits and loans. Internally, they have also been enhancing their sustainable efforts, such as setting up sub-committees under the board level to develop ESG frameworks in line with global practice.

In the Mainland, some Chinese banks have been at the forefront of innovation in green and sustainable financial products, and have already started to launch various innovative products in this area, such as personal carbon accounts. Backed by their domestic parent banks, the Hong Kong subsidiaries can leverage the experience and framework from the parent banks and can build competitive advantages in the following ways:

  • using transition finance to help high-carbon industries transition to low carbon business in the GBA
  • providing green investment and financing services for Chinese companies along the Belt and Road
  • launching innovative carbon financial products and services in light of the progress of Hong Kong’s carbon trading market 
  • developing tokenized green bonds

However, there may be some challenges for Chines banks in terms of adopting their products and services so they are suitable for the Hong Kong market. 

One issue for banks and other businesses is uncertainty about what can be labelled as “green” or “sustainable”. Hong Kong is currently working on a green taxonomy that will create a clear set of expectations. Chinese banks in Hong Kong are quite cautious in terms of regulatory requirements, but once the green taxonomy has been released this will likely give them more confidence to speed up their development of sustainable products and services. 

Talent is an issue that is affecting Chinese banks in Hong Kong, including in the areas of ESG and IT, although the whole financial sector is facing manpower challenges in these areas. In sustainability, there is a general shortage of talent in the market with the relevant expertise. 

For IT, although Chinese banks have struggled to find talent in Hong Kong, they have been able to draw on the high levels of tech talent in the Mainland, especially in Shenzhen. A number of Chinese banks have built up their technology capabilities in Shenzhen recently, due to the widespread availability of skilled staff. 

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