Shenzhen investors offered cash handouts for Hong Kong IPOs

These feature in a package of 18 VC-focused measures intended to promote cooperation between Shenzhen and Hong Kong on technology and innovation, and to support the development of the Greater Bay Area (GBA). They are based on proposals made by the Financial Services and the Treasury Bureau (FSTB), a Hong Kong government advisory group, and mainland authorities.

Pay-outs for IPOs and SPAC listings in Hong Kong are CNY 2m and CNY 1m, respectively, while listings of real estate investment trusts (REITs) also trigger rewards of CNY 1m.

In addition, qualified investors based in Qianhai – a development zone in Shenzhen designated a laboratory for financial innovation – that back innovation and technology-related companies in Hong Kong will get back 2% of their commitments. This is subject to caps of CNY 500,000 per investment and CNY 2m per investor over the course of a year.

"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,” said Christopher Hui, secretary for Financial Services and the Treasury.

The measures are being positioned as a complementary policy to steps already taken in Hong Kong to promote private equity and venture capital. These include the introduction of a locally incorporated funds regime, certainty as to how carried interest is treated from a tax perspective, and the creation of a mechanism that allows offshore funds to redomicile in the territory.

Hong Kong-domiciled funds will be able to set up qualified foreign limited partnerships (QFLPs) in Qianhai with a view to making investments in the mainland. To this end, authorities in Qianhai are planning improvements to the QFLP pilot scheme, including smoother application procedures, reduced processing time, and a wider permitted scope of investment.

According to a statement, Hong Kong-based investors account for nearly 70% of all foreign-invested equity investment management enterprises in Shenzhen. In addition, 80% of funds participating in QFLP pilot schemes come from Hong Kong.

The 18 measures also include proposals for a Qianhai-Hong Kong international VC cluster, allowing Hong Kong VCs to set up free trade accounts in Shenzhen, subsidies for office space and management teams, and incentives for early-stage investment in Shenzhen.

Attracting large-scale funds is a priority. Funds with more than CNY 3bn in assets under management (AUM) that register or relocate to Shenzhen would receive one-off payments of 1% of AUM up to a limit of CNY 5m. Funds in the CNY 100m to CNY 3bn bracket stand to receive 5% of AUM, or up to CNY 2m. Additional payments would be made to investors that choose Qianhai as a base of operations.

The proposals also envisage more support for exits. This includes helping eligible investors set up platforms to execute share transfers – in Qianhai and potentially cross-boundary – and promoting the creation of secondary funds by asset managers and wealth managers.

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• Topics
• Greater China
• Regulation
• IPO
• Fundraising
• Renminbi fund
• Hong Kong (China)
• Greater Bay Area
• regulation