Wealthy Kazakhs present growth potential for Hong Kong's premier wealth management industry, but unfavorable tax policies hinder many of them from accessing the city's market, a well-established lender in Kazakhstan told The Standard in an exclusive interview.
"The oil-rich country's (Kazakhstan) per capita gross domestic product has surpassed that of China at more than US$15,000 (HK117,500), and its high-net-worth individuals, mainly from finance and natural resources, have shown strong demand for wealth management and asset allocation," said Chen Xiao, chief representative of China CITIC Bank (0998) and proposed member of the management board of Altyn Bank.
Hong Kong and Kazakhstan have not signed a Comprehensive Avoidance of Double Taxation Agreement, resulting in higher tax costs for cross-border investment between the two places, said Yu Yousheng, deputy chairman of the management board and chief financial officer of Altyn Bank.
The comments came days before Hong Kong Chief Executive John Lee Ka-chiu leads the government's largest-ever trade delegation to Kazakhstan and Uzbekistan – a visit that Yu hoped could open talks on removing the tax barrier.
Altyn Bank, controlled by China CITIC Bank Corporation and backed by Kazakhstan's largest lender Halyk Bank of Kazakhstan, is also looking to develop private banking services.
"With powerful shareholders from both China and Kazakhstan, Altyn Bank wants to leverage products and services from both the Chinese mainland and Hong Kong markets as a backbone to build our private banking brand and services in Kazakhstan," Yu noted.
The lender has also built a strong commercial base, underpinned by an expanding bilateral trade between China and Kazakhstan.
Last year, China-Kazakhstan two-way trade hit a record high at US$48.7 billion, up 11 percent from a year ago.
Not just in volume, the pattern of China-Kazakhstan cooperation has shifted.
"The mining powerhouse, home to 99 of the 110 elements of the periodic table, is no longer just a resource exporter," Chen noted.
The two sides have recently explored areas in sustainable energy transition, infrastructure upgrades, modern agriculture, and new energy vehicles, Chen added.
Many Chinese companies ride the global wave and head to Kazakhstan, with more than 160 of them clients of Altyn Bank, Chen said.
Besides, he revealed that a challenge for Chinese firms in Kazakhstan was that project financing required coverage by a local insurer, which became a barrier to many Sinosure-backed projects.
The insurance law was amended in March following a push led by Altyn Bank, which now allows overseas insurers to participate, Chen added.
Expanding bilateral cooperation has been accompanied by the accelerating internationalization of the yuan. Last year, the amount of cross-border yuan settlements by Altyn Bank surged 88 percent year on year to US$3.2 billion.
Given Kazakhstan's 18 percent interest rate, the yuan emerges as a low-cost funding choice offering stable value and favorable rates for Kazakh firms, Chen noted.
“This presents an opportunity for Hong Kong, as the world's largest offshore yuan financial hub, to facilitate yuan-denominated bond issuance for Kazakh companies,” he added.
