The proposed Hong Kong-China mutual recognition scheme for funds has sparked huge attention and debate in the investment industry, but asset managers stress that more clarity is needed to help them plan ahead.

There are three issues that Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) need to address as a priority, says Lieven Debruyne, Hong Kong chief executive and Asia-Pacific head of intermediaries at Schroder Investment Management.

Debruyne, also chairman of the Hong Kong Investment Funds Association, was speaking on a panel at the Treasury Markets Summit in Hong Kong on Friday alongside other fund executives and regulatory officials.

First and foremost, he raises the issue of whether foreign fund houses' representative offices in China will have the legal right to provide sales support to mainland distributors.

The two other concerns Debruyne raises involve the question of whether both foreign and Chinese fund managers will be on a level playing field in terms of access to the other market.

For one thing, how will investment into and out of China work, given the country's capital controls, under the mutual recognition scheme? (Chinese individuals are limited to moving $50,000 beyond domestic borders each year.)

Debruyne's third concern was over the transparency of the fund approval process and whether the Chinese approval process for the Hong Kong market will be on a par with that of Hong Kong's for the mainland.

Despite such issues, he is upbeat about the development of the scheme so far, suggesting that it has “completely captivated the Hong Kong funds industry, and it is clearly the topic that is most in front of mind at the moment”.

To the laughter of the panel and audience, Andrew Fung, head of global banking and markets at Hong Kong's Hang Seng Bank, framed a plea to fellow panelist Xu Hao, the CSRC's deputy director of fund supervision, for more clarification on the proposals.

Fung raises the issues of which asset classes Chinese individuals will be allowed to invest in (and what the limits on those will be) and how long it will take to obtain approval for a Hong Kong product to enter the mainland market.

Most asset managers in Hong Kong tend to be focused largely on Greater China equities, he adds, so clarification on asset classes or markets permitted for Chinese investors could help broaden the the industry in Hong Kong.

If, say, European and US markets were open to mainland investors under the scheme, that would help boost Hong Kong's importance as a hub for global asset allocation, notes Fung.

Another panelist, Mark McCombe, Asia-Pacific chairman of BlackRock, makes a similar point in terms of asset types with regard to the renminbi qualified foreign institutional investor (QFII) scheme. (This allows holders of RMB funds raised in Hong Kong to use them to buy mainland securities.)

"You can almost argue that it was the lifting of the restrictions on the use of RQFII that in some ways points to the right direction [in terms] of broadening the capital markets rather than [deciding] who can get an RQFII quota," he says.

McCombe was presumably referring to the decision earlier this year to remove most of the restrictions on the types of assets RQFII funds can be used to buy.

Also on the panel were Ding Chen, CEO and chief investment officer at Hong Kong-based CSOP Asset Management, and SFC deputy CEO Alexa Lam, who chaired the discussion.