Enhancements to the Mutual Recognition of Funds (MRF) scheme between the Chinese Mainland and Hong Kong SAR

January 2025

On 17 December 2024, the China Securities Regulatory Commission (CSRC) announced enhancements to the Mutual Recognition of Funds (MRF) scheme between the Chinese Mainland and Hong Kong in the revised Provisions on the Administration of Recognised Hong Kong Funds which became effective on 1 January 2025. Following this announcement, the Securities and Futures Commission (SFC) also published a revised Circular on MRF between the Mainland and Hong Kong.

To recap, the MRF scheme between the Chinese Mainland and Hong Kong was jointly launched in 2015, by the CSRC and the SFC. The scheme enables eligible Hong Kong domiciled funds to be distributed in the Chinese Mainland (Northbound) and eligible Chinese domiciled funds to be distributed in Hong Kong (Southbound). The MRF scheme has established a framework for regulatory cooperation on cross-border fund offerings, broadening investment channels and choices for investors in the Chinese Mainland and Hong Kong. Additionally, the MRF scheme has empowered asset managers to expand their distribution reach and broaden their addressable market.

Recent enhancements to the MRF include the following:

• The relaxation of a sales cap for Hong Kong domiciled funds sold in the Chinese Mainland from 50% to 80% (effectively an additional 300%) and vice versa.
• Asset Managers are now able to delegate the investment management function of the funds to overseas affiliates in the same group.
• Additional categories of mutual funds may be considered for inclusion within the scheme's scope.