To support the linked development of Shenzhen and Hong Kong venture capital (VC) investments,
promote Shenzhen-Hong Kong co-operation on innovation and technology (I&T), and leverage finance to foster the development of an international I&T hub in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), the Financial Services and the Treasury Bureau (FSTB) and the Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen Municipality (Qianhai Authority) jointly promulgated 18 measures for Supporting the Linked Development of Shenzhen and Hong Kong Venture Capital Investments in Qianhai today (September 2).
The wide scope of the 18 measures will provide facilitation and preferential policies for the Hong Kong private equity industry and promote the development of a mechanism that links Shenzhen and Hong Kong VC.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, “The promulgation of a joint policy package by the FSTB and the Qianhai Authority is a breakthrough and an innovation in the mechanism. Through close communication and consultation, Hong Kong and Shenzhen have jointly promulgated measures for supporting the linked development of Shenzhen and Hong Kong VC in Qianhai. I would like to express my heartfelt gratitude to the Qianhai Authority for its hard work in promoting financial and technological development and talents exchange with us.
“Going forward, we will explore with Qianhai more opportunities for financial development and promote Shenzhen-Hong Kong co-operation at a higher level under which the two cities can serve as dual engines in the GBA.”
The 18 measures complement the three-step strategy implemented by Hong Kong for developing the private equity fund market, i.e. 1) introducing the limited partnership fund (LPF) regime; 2) offering tax concessions for carried interest distributed by eligible private equity funds; and 3) establishing a mechanism to attract foreign funds to re-domicile in Hong Kong, thereby providing clear support for the convergence of rules between Hong Kong LPFs and Qianhai Qualified Foreign Limited Partnerships (QFLPs).
The Qianhai Authority will support eligible Hong Kong LPFs to set up qualified investment entities in Qianhai to commence onshore investment. The Qianhai Authority will also enhance the QFLP pilot scheme, including introducing enhancements to the entry threshold and application procedures, expanding the investment scope, and reducing the processing time. In addition, Qianhai and Hong Kong will explore making use of a cross-boundary supervisory sandbox mechanism to promote the linked development of Shenzhen and Hong Kong private equity markets.
A QFLP is an enterprise that is set up in the Mainland in accordance with the law with participation of foreign investors, raises capital from investors non-publicly, and carries out equity investment activities in the interests of investors. The scope of business a QFLP is allowed to conduct includes:
* Invest in equity of non-listed companies;
* Invest in ordinary shares that are issued and traded non-publicly of listed companies, including private placements, block trades and transfer agreements;
* Participate in shares allotment as an existing shareholder of listed companies;
* Provide management consulting for enterprises it invested in; and
* Other businesses allowed by the China Securities Regulatory Commission or the Asset Management Association of China.
In addition, the Qianhai Authority will collaborate with Hong Kong to promote financial and technological development and talents exchange through providing rewards and subsidies. Major measures include:
* For Qianhai Qualified Domestic Investment Enterprises (QDIEs) investing in eligible Hong Kong I&T enterprises or projects, a reward based on 2 per cent of the actual amount of investment and up to RMB500,000 per investment will be provided. Each enterprise may receive accumulated rewards of up to RMB2 million per year.
* Encourage Qianhai institutions to expand financing channels in Hong Kong capital markets by providing various rewards:
– A one-off reward of RMB2 million will be provided to Qianhai VC institutions listed on the Stock Exchange of Hong Kong (HKEX).
– For Qianhai VC institutions and their fully owned Hong Kong subsidiaries which act as promoters to set up Special Purpose Acquisition Companies (SPACs) and whose SPACs are allowed to be listed on the HKEX, a one-off reward of RMB1 million will be provided to the Qianhai VC institutions.
– For Qianhai high-quality infrastructure projects which are listed on the HKEX in the form of real estate investment trusts (REITs), a one-off reward of RMB1 million will be provided to the owner(s) of the projects.
* Support Hong Kong private equity industry associations to set up service counters, representative offices etc. in Qianhai. A one-off reward of up to RMB1 million will be provided to eligible industry associations for settling in Qianhai.
The full text of the 18 measures for Supporting the Linked Development of Shenzhen and Hong Kong Venture Capital Investments in Qianhai can be accessed at www.fstb.gov.hk/en/financial_ser/financial-co-operation-with-the-mainland_Full-document.html.