Hong Kong: Revamped cash for residency scheme to be ‘big boost’ for capital markets, family-office push, official says

Source: scmp.com

Published: 8 January 2024

Hong Kong’s revamped investment migration scheme has received an overwhelming response from wealthy families and high-net-worth individuals globally, according to a senior government official.

Many of these wealthy individuals have expressed interest in applying for residency in the city and setting up family offices here to manage their assets, according to the Undersecretary for Financial Services and the Treasury Joseph Chan Ho-lim.

“Since we announced the details of the new Capital Investment Entrant Scheme [CIES] last month, we have received very positive feedback from the intermediaries who found many wealthy clients want to migrate here,” Chan said in an exclusive interview with the Post.

“Many of them expressed interest in applying for residency in Hong Kong alongside their plans to set up family offices here. The trend will be a big boost for the city to develop into a global family office and wealth management hub.”

The new CIES, announced on December 20 and commonly known as the investment-migration scheme, offers a faster route to residency for people who invest at least HK$30 million (US$3.84 million) in the stock market or other assets, excluding residential real estate.

Chan said the previous round of the scheme had about 4,000 applicants every year. If the new scheme can attract a similar number, it could bring in about HK$120 billion per year to the stock, bond, fund and private-equity markets.

“This will be a big boost for the capital market and wealth-management sector,” he said. “It will also enhance Hong Kong’s role as an offshore yuan trading centre, as the new CIES will allow the applicants to invest in yuan-denominated assets.”

InvestHK, the government agency responsible for attracting foreign direct investment to the city, will set up a dedicated team over the next few months that will work with the Immigration Department to handle the applications, Chan said.

The scheme, alongside a tax break introduced in May and other incentives such as the creation of art-storage facilities at Hong Kong International Airport, is part of Chief Executive John Lee Ka-chiu’s pledge, made in his first Policy Address in October 2022, to attract 200 new family offices by 2025, on top of the more than 400 already set up here.

The government has not yet announced when it will start accepting the applications, but Chan said InvestHK, as well as the accountants, lawyers, banks and brokers, have all worked hard to prepare for processing the applications.

The wealthy families who have expressed interest in the scheme are people holding overseas passports from other Asian markets, the Middle East, Europe and the Americas, according to the intermediaries, Chan said.

“The involvement of InvestHK will help provide information and guidance needed to make sure the application process is smooth,” Chan said.

InvestHK set up a family office team in June 2021, so it has the experience to serve wealthy migrants setting up family offices here, Chan said.

Hong Kong originally introduced the CIES after the Sars (severe acute respiratory syndrome) outbreak in 2003, but terminated it in 2015 because of speculation in the property market. The threshold of the previous scheme was initially set at HK$6.5 million and later raised to HK$10 million.

The new scheme’s threshold is three times of the previous one. In addition, the new CIES no longer counts residential property, but does include investments in yuan-denominated bonds and stocks, as well as private-equity funds.

Hong Kong is facing competition from Singapore as a regional family-office hub. Singapore’s population of family offices rose to 700 in 2021 from 400 in 2020 because of favourable incentives offered by the city state’s government, according to the latest government data.

The HK$30 million threshold in Hong Kong’s new investment-migration scheme is lower than Singapore’s, which requires a minimum investment ranging from S$10 million (about HK$59 million) to S$50 million.

“Hong Kong can compete with Singapore for wealthy families to set up here,” Chan said. “Hong Kong has the advantage of ‘One Country, Two Systems’, rule of law, free flow of capital and free convertibility of our local currency, as well as the scale of our capital markets.”

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